Purpose of Sweat equity options / Advisory Agreement and drafting instructions

Purpose of the Agreement

The purpose of this Sweat equity options / Advisory Agreement is to agree on the terms and
conditions upon which an angel investor can offer advisory services to a company in exchange
for options in that company.
The Agreement sets out the types of services and level of commitment expected by the angel
investor and the remuneration granted in exchange.
The signature block
Carefully fill in the signing date, names of the parties and the name and title of each signatory.
Option Entitlement
Tick the corresponding box in the table to designate the option entitlement of the angel investor.
Furthermore, fill in the amount of options that the angel investor shall be entitled to subscribe
and fill in the percentage of the company’s fully diluted share capital that the options entitle to
(this percentage is the same as the percentage designating the option entitlement).
General Provisions
Delete this instruction page and make sure that all the square brackets have been deleted and
[all sections highlighted in grey have been filled with information in due form]. Read the
Agreement with thought and make sure it is by all parts applicable to the case in question.
Fondia is happy to help you, in case more information on the content or the case-specific
applicability of the Agreement is needed.

Reminder:
This document has been drawn up by Fondia and FIBAN together. The document is a general and exemplified proposal of the
terms upon which an angel investors could agree to advice a company on a sweat equity basis. This document is not an offer or
request to sell or subscribe securities of any corporation. Fondia and FIBAN are not in any way responsible for using this general
proposal in a specific case. Fondia and FIBAN do not guarantee the applicability of this document to individual cases. Sweat
equity options may lead to material taxational consequences and these, among other things, should be carefully considered before
entering into sweat equity option advisory agreements.
Advisory Agreement
This advisory agreement (“Agreement”) has been entered into on the day it has been duly signed
by both Parties as set out on the signature page below (“Effective Date”) by and between the
undersigned advisor (”Advisor”) and the undersigned company (“Company”). The Advisor and
the Company also jointly referred to as the “Parties” or individually as a “Party”.

1 Background and purpose of the Agreement

The Company is a start-up company. The Advisor has certain business expertise and has agreed
to provide advice and recommendations to the Company. The purpose of this Agreement is to
specify the conditions under which the Advisor renders to the Company the Advisory Services (as
defined in section 3 (Description of the Advisory Services) below).

2 Term of the Agreement

This Agreement shall become effective on the Effective Date and shall remain in force until further
notice, except as provided below (“Term”).
Each Party may terminate this Agreement without cause with one (1) month’s prior written notice.
In the event of termination of this Agreement, the Advisor shall, prior to the effective date of the
termination, deliver to the Company all books, records, or other information in its possession
pertaining to the Company’s business.

3 Description of the Advisory Services

The Company hereby appoints and retains the Advisor, on a non-exclusive basis, during the Term
to provide advisory services defined in in Appendix 1 hereto (“Advisory Services”), and the
Advisor hereby agrees to provide diligently the Advisory Services. In providing the Advisory
Services, the Advisor will have an advisory role only and report directly to and take direction from
the board of directors of the Company (“Board”).

4 Remuneration

For the performance of the Advisory Services, the Advisor shall be entitled to subscribe options
of the Company, as set out on the signature page below and Appendix 1 hereto and as further
separately agreed in a stock option agreement between the Parties. The Company undertakes to
pass any corporate resolutions necessary to issue the options to the Advisor within ninety (90)
days of the Effective Date.
The subscription of the Company’s shares requires that the Advisor adheres to the shareholders’
agreement or to a separate minority shareholders' agreement regarding the Company as in force
at the time of the share subscription.
Any remuneration of direct expenses (such as travel and accommodation costs) related to the
provision of the Advisory Services shall be agreed between the Parties prior to any accrual of such
expenses.
Unless otherwise agreed in writing between the Parties, the Company shall be under no obligation
to pay any fee, compensation or other monies whatsoever to the Advisor, which are not specifically
defined in this Agreement, irrespective whether they relate to the term or post-term of this
Agreement.
The Advisor shall be liable for any taxes, such as income or capital gain taxes, as well as any social
security contributions related to the Advisory Services.

5 Disclosure of the Advisor

During the Term the Advisor shall:

 (a) disclose to the Company all of its interests in any transaction or agreement contemplated by
the Company, any matter which may taint the Advisor’s objectivity when performing its role
as an Advisor hereunder or any potential, actual, direct or indirect conflict of interest that
exists or may arise as a result of the Advisor’s relationship with the Company;
(b) inform the Company of any business opportunities made available to the Advisor as a result
of the Advisor’s involvement with the Company or otherwise through the performance of the
Advisory Services; and
(c) not serve as an advisor, or consent to an appointment as a member of the board of directors,
of a company which competes, directly or indirectly, with the Company.

6 Intellectual Property Rights

All right, title and interest in and to all trade secrets and any other intellectual property rights
arising out of or related to the results of the Advisory Services shall vest in the Company.

7 Damages, Limitation of Liability

In no event will either Party be liable for any indirect, incidental or consequential damages or
expenses, including but not limited to loss of profits and lost savings, even if the Party has been
advised of the possibility of such damages.
The limitation of liability shall not apply to damages caused by gross negligence or wilful
misconduct or a breach of section 8 (Confidentiality).

8 Confidentiality

The Advisor shall, unless specifically consented to in writing by the Company, keep in confidence
all material and information of the Company whether or not marked as confidential. The Advisor
shall have the right to use and copy such material and information only for the purposes set forth
in this Agreement. The confidentiality obligation shall, however, not be applied to material and
information that: (a) is generally available or otherwise public; (b) the Party has received from a
third party without any obligation of confidentiality; (c) was in the possession of the Advisor prior
to receipt of the same from the Company without any obligation of confidentiality related thereto;
(d) the Advisor has developed independently without using material or information received from
the Company; or (e) the Advisor must disclose pursuant to a law, decree, or other order issued by
the competent authorities or judicial order.
Each Party is entitled to use the expertise and experience acquired in connection with the
performance of the Advisory Services.
The rights and obligations pursuant to this section 8 shall remain in force for three (3) years after
the termination of this Agreement.

9 Applicable Law, Disputes and Settlement

This Agreement shall be governed by the laws of Finland excluding its choice of law provisions.
Any dispute, controversy or claim arising out of or relating to this contract, or the breach,
termination or validity thereof, shall be finally settled by arbitration in accordance with the Rules
for Expedited Arbitration of the Finland Chamber of Commerce. The place of arbitration shall be
Helsinki, Finland, and the arbitration proceedings shall be conducted in the English language
unless all parties of the arbitration are Finnish in which case the arbitration proceedings shall be
conducted in Finnish language.

10 Other Terms

The Advisor shall personally render the Advisory Services under this Agreement and may not use
any other persons or subcontractors for the provision of the Advisory Services. Neither Party shall
 have the right to assign this Agreement or the rights or obligations under this Agreement to any
third party without the prior written consent of the other Party.
This Agreement shall not constitute an employee-employer relationship nor shall it create a
partnership or joint-venture relationship between the Parties.
All changes and amendments to this Agreement shall only be valid if agreed in writing by both
Parties.
__________________

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
respective duly authorized representatives as of the Effective Date.

Date: Date:

[ADVISOR] [COMPANY] OY

___________________ ___________________
Name: Name:
Title: Title:

[The below constitutes an example and shall be amended to correspond to the actual situation agreed]
Option Entitlement
The option entitlement of the Advisor is based on the performance level of the Advisor and the development
phase of Company as set out in the table below. See Appendix 2 for definitions of the performance level of
the Advisor and the development phase of Company.

Performance Level of Phase

Advisor
Idea Phase Start-up Phase Growth Phase
Basic 1% 0.8 % 0.6 %
Intermediate 2% 1.60 % 1.20 %
Expert 4% 3.20 % 2.40 %
Tick the corresponding box in the table above to designate the option entitlement
The Company and the Advisor have defined the performance level of the Advisor and the development
phase of Company and, consequently, the Advisor shall be entitled to subscribe ______ options, each
entitling, when vested, to subscribe one (1) common share of the Company, equal to ______ % of the
Company’s fully diluted share capital as of the date of this Agreement.
1. Appendix 1 – Advisory Services and Vesting

Advisory Services
The Advisor shall provide Advisory Services to the Board which shall include:
(a) identifying and making introductions to potential investors;
(b) assisting and supporting the Company in the fundraising process;
(c) identifying and making introductions to potential co-operation partners;
(d) increasing sales the Company’s goods and/or services through promotion and lead generation;
(e) hands-on support in sales of the Company’s goods and/or services (i.e. part-time sales director role);
(f) assisting the Board and the management of Company in various administrative tasks;
(g) critiquing the managements’ and directors’ actions and making suggestions to strengthen the
management structures, processes and operations;
(h) making recommendations for both the short term and the long term business, marketing and product
strategies to be employed by Company;
(i) monitoring and assessing the market for the Company’s business and to advise the Board with
respect to such markets and internationalization;
(j) commenting on proposed corporate decisions and identifying and evaluating alternative courses of
action;
(k) providing an objective evaluation of the performance of the Company and its management in relation
to competitors within the industry;
(l) identifying and evaluating external threats and opportunities to the Company;
(m) evaluating and making ongoing recommendations to the Board with respect to the required
management personnel and job functions for the efficient operation of the Company’s business;
(n) assisting the Company in finding additional, potential founding team members and employees.

Vesting
The first 25 % of the options will vest after the first six-month period of service under this Agreement. The
remaining options will vest in equal installments of 1/18 after each one-month period of service under this
Agreement thereafter, i.e. all options will have vested after two (2) years of service under this Agreement.
In case the amount of vested options is not a whole number, the amount of vested options shall be adjusted
down to the nearest whole number of options.
2. Appendix 2 – Performance Level of Advisor and Phase of Company 1

Basic Performance Level

Commitment Services Compensation

Attend quarterly meetings to Providing at least three (3) of

provide feedback on the services (a)-(n) identified Idea Phase is 1%
Company’s strategy for at least under “Advisory Services”
one hour. above.
Attend quarterly meetings of Start-up Phase is 0.8%
the Company’s Advisory
board.
Provide reasonable response Growth Phase is 0.6%
to email requests by Company.

Intermediate Performance Level

Commitment Services Compensation

Basic Performance plus: Providing at least six (6) of the

Attend monthly meetings to services (a)-(n) identified Idea Phase is 2%
provide feedback on under “Advisory Services”
Company’s strategy for at least above.
one hour.
Start-up Phase is 1.6%
Attend one additional monthly
meeting for up to one hour
with a potential customer,
investor, strategic partner, Growth Phase is 1.2%
vendor or employee.

Expert Performance Level

Commitment Services Compensation

Intermediate Performance Providing at least nine (9) of

Idea Phase is 4%
plus: the services (a)-(n) identified
Twice monthly meetings to under “Advisory Services”
provide feedback on above.
Start-up Phase is 3.2%
Company’s strategy for at least
two hours each.
Growth Phase is 2.4%

1 The definitions of
the performance level of the Advisor and the development phase of Company are partly based on the Founder/
Advisor Standard Template developed by Founder Institute, Inc.
Phase Characteristics

Idea Team: The team consists of only part-time founder(s).

Customers: The company is in discussions with potential customers to determine
demand in the market. The pricing/revenue structure has been developed, but needs
market validation.
Revenue: The company has no revenue.
Investors: At least one group consisting of the founder(s), their friends or family has
invested.
Product: The specifications for a minimum viable product including wireframes and
system designs are complete.

Start-up Team: The team consists of full-time founder(s) and is in the process of hiring initial
employees as needed.
Customers: The company has received letters of intent or customer commitments and
the market need has been validated.
Revenue: The company may be collecting revenue.
Investors: Investment may have been raised via friends/family or professional investors
(angel, venture capital, etc.).
Product: The launch of the minimum viable product is imminent.

Growth Team: The team consists of full time founder(s) and is in the process of hiring employees
as needed.
Customers: The company has achieved significant traction and user-based growth.
Revenue: The company is collecting revenue.
Investors: Prior investment may have been raised and the founders are prepared to pitch
to professional investors if additional capital is needed.
Product: The product has been launched and is periodically refined based on customer
feedback.