TERM SHEET
This term sheet (“Term Sheet”) is entered into between xxx, a company incorporated under
the Companies Act 2013, with its registered office at XYZ,XYZ,XYZ,XYZ-1111 (the “Company”)
and AAAA And BBBB, (collectively the “Promoters”) and a consortium of investors detailed
in Annexure B, (“consortium” or “seed investors”),on this date 21st day of June, 2016 in
respect of the proposed investment of around Rs. ------/- (Rupees IN WORDS). In this Term
Sheet, each of the Company, the Promoters, and the Investor would be referred to as a
“Party” and together as the “Parties”.
I. Confidentiality
Each of the Parties hereby agree to treat the negotiation and execution of this Term Sheet,
the transactions contemplated herein and any information given to it by the other Party
(which is not, on the date it is so given, already in the public domain) for the purpose of the
negotiation or execution of this Term Sheet (“Confidential Information”) as confidential.
Each of the Parties agree that it shall not disclose any Confidential Information to any
person except its employees, agents, shareholders and advisors on a strictly need-to-know
basis, and upon such persons executing a non-disclosure undertaking in respect of the
Confidential Information in a format satisfactory to both Parties, for the purpose of
enabling the execution or effective negotiation of the Term Sheet. Each of the Parties
further agree that it shall not, except with the prior written consent of the other Parties,
make a public announcement or any other disclosure of the Confidential Information
except to the extent required by any legal stipulation applicable to it or its affiliates. In the
case of such disclosure required by legal stipulation, a Party which is required to make
such disclosure shall, as soon as practicable after it is made aware of the requirement to
make such disclosure, inform the other Party of the need to disclose such Confidential
Information and the legal stipulation which requires disclosure of such Confidential
Information.
II. Binding Notice
This Term Sheet represents the intention of the Parties at the date hereof only and is not
legally binding upon the Parties, except that the obligations set forth in Clauses I, III, 17
herein are legally binding and enforceable against the Parties till the expiry of this term
sheet.
III. Exclusivity
From the date of execution hereof and until this Term Sheet remains valid, the Company,
its subsidiaries, affiliates, the Company’s agents, directors, officers, employees,
shareholders and the Promoters shall not enter into, propose to, engage in, cooperate or
negotiate with, or conduct any discussions, directly or indirectly, with any person other
than the Investors and their designated officers and advisors, for the purpose of selling or
issuing securities of the Company at terms different than covered by this document, its
subsidiaries or its affiliates or for the purpose of selling or disposing in any manner
whatsoever their respective businesses, including, without limitation, any asset sale,
technology license, merger, reorganization or other form of business combination outside
of the ordinary course of the Company’s and its subsidiaries’ business. Notwithstanding
the aforesaid, Promoters shall have the right to add more investors at the terms covered
by this document.
S. NO. TERMS DESCRIPTION
THE INVESTMENT
1. Total A. Subject to successful due-diligence and fulfillment of conditions
Investment & precedent, the Investor Group are considering an investment of
Use of around Rs. 70,11,200/- (Rupees Seventy Lacs Eleven
Proceeds
Thousands and two hundred Only). in one tranche, the details
of which will be captured in the Definitive Agreement.
B. The funds will be used for the purpose of product development,
working capital, team building and expansion of operations.
C. The Company shall, upon written request made to it by the
Investors, furnish, from time to time, certificates confirming that
the amount invested by the Investors is being used for the
purposes authorized hereinabove.
2. Instrument Equity Shares (“Seed Round Shares”)
Seed Round Equity Shares allocation will be based on the Valuation
and percentage of paid up capital attributable to the Investors as
outlined in Term Sheet.
3. Investors Listed in Appendix B
4. Valuation The pre money valuation of the Company is 7, 00, 00,000 (Rupees
Seven Crore Only) (on a fully diluted basis) and the post money
valuation of the Company shall be 7,70,11,200 (Rupees Seven
Crore seventy Lacs eleven thousand and two hundred Only).
5. Investment All valuation and funding amounts specified in this Term Sheet are
Denomination denominated in Rupees (“Rs”).
TERMS OF INVESTMENT
6. General The terms, preferences, rights and privileges of the Seed Round
Terms Shares shall be broadly based on this Term Sheet.
7. Liquidation In the event of liquidation, dissolution or winding up of the
Preference Company, the holders of Seed Round Shares, subject to the
provisions Companies Act, will be entitled to first receive, as
permitted by law, and in preference to the other equity shareholders
of the Company, 100% of the total investment amount by the
Investors along with returns calculated as per minimum IRR of 20%.
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A merger or consolidation of the Company in which its
shareholders do not retain a majority of the voting power of the
surviving corporation, or sale, conveyance, lease or other
disposition (by license or otherwise) of all or substantially all the
Company’s assets and/or stock and/or intellectual property
would each be deemed to be a liquidation of the Company
(“Deemed Liquidation”) and in such instances, the liquidation
preference set out above will apply.
8. Valuation Any further issue of equity or preference shares shall not happen at
Protection lesser than the current valuation of the Company without the
written consent of the Seed Round Investor. In case of lower
valuation, the Seed Round Conversion Factor shall be adjusted on a
full-ratchet anti-dilution basis.
8A. Pro-rata If the Company proposes to offer equity securities to any person
rights for (excluding issuance of un-issued equity shares to the ESOP Trust
future pursuant to an ESOP Scheme approved by the Board and any
financings
securities issued in connection with any share split, capitalization
of dividend or recapitalization by the Company), then the Investors
and/or their nominees, shall have the right to purchase / subscribe
to additional equity shares at the same price paid by that person
(“New Investor”) and on the same terms offered to the New
Investor. The Investors and/or their nominee shall have 30 (thirty)
business days after delivery of a notice from the Company
describing such offering to elect to purchase / subscribe to such
additional shares and another 15 (fifteen) business days to close
the purchase transaction. The Investors and/or their nominees
shall invest simultaneously with the closing of the financing with
the new Investor. Current Investors rights will be upgraded to
those accorded to any new investor as they come in, if they are
deemed to be better than what current investors have.
A similar right shall also be available to the Promoters, to enable
them to maintain their present shareholding percentage in the paid
up share capital of the Company (on a fully diluted basis).
9. Lock in The Promoters shall not be permitted to transfer any of their
Period securities to any third party (except an affiliate on the execution of
an appropriate deed of adherence), unless and until the Investors
have been provided a complete Exit under the terms of the
Definitive Agreements in terms of Clause 12 below.
Additionally, any Promoter who ceases to be an active full-time
employee of the Company within 2 years will be required to sell
their shares back to the other shareholders of the Company on a
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pro-rate basis on a agreed schedule.
9A. Right of First The Investors shall have the right to participate in transfers of the
Refusal and shares by each existing shareholder (with customary exceptions for
First Right of transfers to identified Affiliates) on the same terms and conditions
Offer on
offered to such prospective purchaser. The exact mechanism for
Share
Transfers exercise of the right of first refusal shall be set forth in the
Definitive Agreements.
10. Transfer The Company will not, without approval of the Board of Directors
Restrictions of the Company (i) permit any transfer on its books of any
securities of the Company held by the Promoters except to their
affiliate; or (ii) accord any right to vote as an owner; or (iii) pay
dividends to any transferee to whom Company securities have been
transferred in violation of such rights. All transfer restrictions
contained in the Definitive Agreements shall be incorporated in the
Articles of Association of the Company.
11. Tag Along & The Investors shall have customary tag along rights in relation to
Drag Along any proposed sale or transfer of shares held by the Promoters with
Rights standard exceptions for transfers to Affiliates.
No shareholder of any class of shares shall be permitted to create
an encumbrance on their shares without the approval of the Board
of Directors of the Company.
12. Exit EXIT AT THE TIME OF QUALIFIED IPO OR TRADE SALE
Within 5 (Five) years from date of execution of the Definitive
Agreements, the Company, the Investors and the Promoter(s) will
use their commercially reasonable best efforts to realize the: (i)
closing of an initial public offering of Company Equity
Shares(“Qualified IPO”); or (ii) a Trade Sale (to be defined under
the Definitive Agreement).The said Qualified IPO or Trade Sale shall
be at such price, as the Investors and the Promoters, may mutually
agree. In the event that inspite of the best efforts of the Parties, the
Company is unable to realize a Qualified IPO or the Parties are
unable to consummate the Trade Sale, as aforesaid, before expiry of
1 (One) year from date of execution of Definitive Agreements, then,
after a period of 60 (sixty) days from the expiry of the aforesaid
5(Five) years (‘Alternate Exit Date’), the following provisions shall
be applicable:
(i) The Promoters shall first have the option to purchase the
shares of the Investors, at the fair market value (as
determined by an independent chartered accountant/
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merchant banker appointed by both the Investors and the
Promoters) or can arrange for a third party to purchase the
(ii) Investors Shares at the Fair Market Value (on such terms as
acceptable to Investors);
(iii) If the Promoters do not exercise the aforesaid option, the
Company may thereafter seek to buy-back the shares of the
Investors at the fair market value (as determined by an
independent chartered accountant / merchant banker
appointed by both the Investors and the Company). The
Promoters shall not participate in the said buy-back;
(iv) If the above two options are not exercised within 60(sixty)
days from the Alternate Exit Date, the Investors may
thereafter, at their sole discretion, either –
a) exercise their Drag Along Rights, whereby, they may
cause the Promoters to also sell their entire
shareholding in the Company to any third party,
along with that of the Investors. The sale of shares
of the Promoters, to such third party, shall be on the
same commercial terms and conditions and at the
same price, as is agreed upon by the Investors, for
sale of their shares to such third party purchaser.
Also, the Promoters shall be entitled to receive the
sale consideration for the sale of their respective
shares to such third party purchaser; or
b) sell all the assets of the Company to any third party
at a price and on terms agreed between the
Investors and the third party.
It is hereby clarified that the Promoters and the Company shall not
be liable to ensure that the Investors derive any specific return on
the Investor’s investment in the Company unless specifically
provided for. Notwithstanding the above, the Promoters shall at all
times act in good faith and put forth their best efforts in improving
the business of the Company and thereby derive better benefit to
the Investors.
EXIT BY WAY OF BUY BACK OF SHARES
Company shall make a one time offer to Seed investors after
achieving the cumulative Profit after Tax(PAT) of INR 5 Crores, and
subject to the availability of cash position, to buy back their shares,
in accordance with the Companies Act, 2013 and rules made
thereunder, at a mutually agreed price subject to the price
calculated at a minimum annual IRR of 30%. Seed Investors shall
have a right to accept or reject this one time offer.
CLOSING
13. Closing Date Within30 days of this agreement or such other date as the Parties
mutually decide in writing, on which date the Parties will sign the
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Definitive Agreements.
The Investors will complete the transfer of their respective
investments into the company account immediately after signing
the term sheet by submitting an application for allotment of shares.
DOCUMENTATION
14. Definitive On or before the date of Closing, definitive agreements customary
Agreements for transactions similar to the one contemplated herein would be
executed, including the Share subscription Cum Shareholders
Agreement (“SSHA”)
MISCELLANEOUS
15. Governing The laws of India shall govern this Term Sheet and the Definitive
Law and Agreements executed pursuant to it.
Dispute
Resolution All disputes, differences between parties, arising out of or in
relation to the Definitive Agreements shall be resolved by
Arbitration in accordance with the Arbitration & Conciliation Act,
1996 by 3 (three) arbitrators. The Promoters and the Company
shall jointly appoint 1 (one) arbitrator and the Investors shall
jointly appoint 1 (one) arbitrator respectively. The two arbitrators
so appointed shall thereafter appoint a third arbitrator. The
arbitration shall be in English and shall be held in Mumbai.
16. Non-compete So long as Investors holds any shares in the Company, the
Promoters shall not be involved in any business or operation
whether as principal, shareholder, investor, consultant, director or
otherwise in any business that competes with the business of the
Company as is currently carried on.
17. Dilution on Company has created a pool of 1251 Shares for Employees Stock
future ESOPs Options Plan (ESOPs) and retains the complete right, without
prejudice to company, to create the further pool for ESOPs in
future, subject to Companies Act 2013 and rules framed
thereunder, with a equal prorated dilution in the shareholding of
Promoters, shareholders, Seed investors or any other future
shareholders.
18. Expiry of This Term Sheet will expire in 15 days from the date of signing
Term Sheet unless the Definitive Agreements are signed and executed by the
Parties prior thereto or unless the Parties by mutual consent in
writing extend the tenure of this Term Sheet.
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Annexure A
Pre Money Capital Table
Name of Type of Number Shareholding Face Value
Shareholder Security of Shares Percentage per Share
(INR)
- - - - -
- - - - --
- - - - -
- -- - - -
- -
Post Money Capital Table
Name of Type of Number Shareholding Face Share Funds
Shareholder Security of Percentage Value Premium Infusion
Shares per
Share
(INR)
----- - - - - - --
- - - - - - -
- - - - -- - -
- - - -- - - -
- -- - - - -- -
- - -- - - -- -
-- - - -- - - -
- - - - -- - -
- - - - - - -
-- - - - - - -
-- - - - -- - -
Total - 100% -
Annexure B
Percentage of paid up capital on a fully
Aggregate
Investors Instrument to be issued diluted basis(post issue of 20% shares under
Investment
ESOP, other than already issued )
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-= - - -
- - - -
- - - -
- - - -
- - - --
- - - -
- - -- -
- - - -
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