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Termsheet For Investment - Nishvitha Inputs 02.01.2023

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Termsheet For Investment - Nishvitha Inputs 02.01.2023

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Indicative draft for discussion purposes only

[●],2012

GENERAL INFORMATION

1. What is term sheet?


- Main points for negotiation
- Non-binding/Binding (confidentiality, exclusivity)
- Preliminary document prior to execution of main agreement (SPA,
SHA)/financial document
- Used in investment transactions/ Pre-transactional document

2. Difference between Letter of Intent (LOI) and Term Sheet?

LOI Term Sheet


All business transactions (Lease Only investment proposals
deed, purchase, business etc)
Unilateral/ proposal Bilateral discussion
Primary intent is captured Major points are negotiated

TERM SHEET FOR INVESTMENT IN

[●] [INSERT NAME OF COMPANY]

Date: [●]

This “Term Sheet” relates to the investor’s proposed investment in the company.
This Term Sheet is non-binding and for discussion purposes only among the
company, its promoters and the investor. The investor will only invest upon
[approval of the investment by the investor’s Investment Committee and]
execution of transaction documents in a form and manner as agreed to between
the company, promoters and the investor. This Term Sheet may be altered or
amended by the investor for any reason, including as a consequence of findings
arising from the investor’s business and legal due diligence on the company. This
Term Sheet is confidential and should not be shared with anyone other than
company and its representatives without the investor’s prior written consent.

The Proposed Investment

Company: “Company” is Your Dream Pvt. Ltd., a private limited


company organized under the laws of India and
having its registered office at [●], India.

Promoters: “Promoters” are [●] ‘and [●] (basically, ‘You’ and


‘Your Business Partner’).

Investor: “Investor” is [●].

Aggregate amount of “Investment” is INR [●]/- (Indian Rupees [●] only).


investor’s investment:

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Classification: Public
Indicative draft for discussion purposes only
[●],2012

Shares to be issued and pre- Investor will purchase 1000 INR 10/- ([●] only)
money valuation: Preference Shares and 1000 INR 10/- Equity Shares
(“Investor Shares”) at a pre-money valuation of [●]
(Indian Rupees [●] only).

Price per share: “Purchase Price” is INR 150/- (Indian Rupees [●]
only) per Investor Share.

Closing/Disbursement(s): One disbursement of INR 3,00,000/- (Indian Rupees


[●] only) will occur on the “Closing Date”, subject to
the satisfaction of the Conditions Precedent
(described below). The target Closing Date is [●],
2012.

Use of proceeds: Proceeds from the Investment shall be used for the
Company’s business.

Company capitalization: Post Investment, the share capitalization structure of


the Company is set forth as Annexure A hereto.

Terms of the Investor Shares

Dividends: Investor shares will pay a preferential cumulative


dividend of 15% per year. After preferential
dividends have been paid to the holders of Investor
Shares, the Investor Shares will participate pro rata
in any other dividends or distributions payable to
holders of equity shares.

Liquidation preference: On liquidation, winding up or dissolution of the


Company or a sale of the Company through a
merger, sale of shares, sale of assets or other
acquisition or change in control of the Company, the
holders of Investor Shares will be entitled to receive
before any return to holders of equity shares, a
“Liquidation preference” equal to:

(a) 3X the Purchase price; and


(b) any accrued but unpaid dividends.

After the payment of the Liquidation preference, the


liquidation proceeds shall be distributed pari passu
among all holders of equity shares (including the
Investor) on a pro-rata as-if-converted basis, and the
holders of the Investor Shares will participate in
distributions of the remaining liquidation proceeds
pro rata with the holders of equity shares.

Voting rights: The Investor Shares will be entitled to that number


of votes on all matters presented to the holders of
equity shares as if the Investor Shares had already

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Classification: Public
Indicative draft for discussion purposes only
[●],2012

been converted to equity shares according to the


“Conversion Rate” (see “Conversion Rate” below).

Automatic conversion: Each Investor Share will automatically, mandatorily


and fully convert to equity shares, at the then
applicable Conversion Rate:

(a) Immediately prior to an initial public offering


("IPO") of the equity shares;

(b) Upon the expiry of twenty (20) years from the


date of issuance.

Conversion rate: Investor Shares will initially be convertible into


equity shares at a "Conversion Rate" equalling, if
fully converted, [●]% ([●] per cent.) of the
Company's issued and paid up equity share capital
(subject to the Company's organizational documents,
including adjustments upon a recapitalisation event
and anti-dilution adjustments as described below).

Anti-dilution adjustment: The Conversion Rate of Investor Shares will be


subject to adjustment on a broad-based weighted
average basis, if the Company issues additional
securities at a price per share less than the then
applicable conversion price (after adjusting for any
Recapitalisation Events) other than:

● shares issued pursuant to the Employee Share


Option Plan (ESOP) approved by Investor;
● shares issued to Investor as a result of
Investor electing to convert their Investor
Shares into equity shares; and
● other standard exceptions.

Protective Affirmative consent of Investor will be required for


provisions/Affirmative right: significant events, including but not limited to:

(a) amending the Company’s organizational


documents;

(b) changing the Company’s share capital


including issuing shares or creating new
classes/series of shares or issuing ESOPs;

(c) paying dividends;

(d) any fresh issue of shares or other


instruments;

(e) approving any merger, asset sale,


reorganization, acquisition or any change of
control transaction;

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Classification: Public
Indicative draft for discussion purposes only
[●],2012

(f) approving the Company’s liquidation or


dissolution;

(g) changing the Company’s name, business,


marketing strategies or mission;

(h) approving the Company’s annual budget


(including approval of the business plan,
annual operating plans and material
deviations from such plans);

(i) capital expenditures or incurrence of


indebtedness greater than INR [●]/- (Indian
Rupees [●] only), including investments in
other entities, the creation of joint ventures or
the acquisition of any company or business
and any strategic, financial or alliance with a
third party, except business, strategic or
financial alliance with third parties including
vendors in the ordinary course of business;

(j) any related party transaction;

(k) change in the remuneration or material terms


of employment of key officers of the Company
including Promoters;

(l) change of the management or control of the


Company, including any change in the board
of directors and any reconstitution, including
appointment of independent directors, or
appointment of the key management
personnel of the Company;

(m) Other items agreed upon between the parties


in the Transaction Documents.

Transfer restrictions on Transfer of Investor Shares by the Investor shall be


Investor Shares: subject to a right of first offer extended to the
Promoters (as set out in Transaction Documents).
The Investor shall not transfer the Investor Shares to
a competitor of the Company’s business, except with
the prior written approval of the majority of the
shareholders of the Company.

Investor rights
IPO: If the Company seeks to or becomes listed on any
stock exchange, the Investor will have the right (but
not the obligation) to offer for sale in priority to
other shareholders, the Investor Shares, any equity

4
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Classification: Public
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[●],2012

shares that are issued on their conversion and any


other shares in the Company held by Investor. The
Investor shall not be designated as a “promoter” nor
shall any declaration or statement be made, either
directly or indirectly, in filings with regulatory
authorities, offer documents or otherwise. The
Promoters shall ensure that prescribed lock-in
requirements are met out of the equity shares held
by the Promoters and the Investor shall not be
subject to lock-in restrictions.

Exit rights: The Company, Promoters and the Investor will work
together in good faith to ensure an exit for the
Investor in a timely manner and shall assist the
Investor in selling a part or whole of their shares, at
the Investor’s option.

Tag-Along: Except for a Permitted Sale (as defined hereinafter),


in the event of a sale or transfer of any shares
whatsoever by any shareholder other than Investor,
or of a change of control of any of the shareholders
other than Investor, the Investor will have tag-along
rights to sell all its Investor Shares to such third
party or person obtaining control.

All transfers of shareholding shall require the


transferee to sign a deed of adherence to be bound
by the provisions of the Transaction Documents.

Issuance of new securities: Investor will have the right (but not the obligation) to
purchase pro rata shares of any offering of new
securities by the Company on terms at least as
favorable to those offered to any third party. The pro
rata share will be based on the ratio of:
(x) the number of Investor Shares held by such
holder (on an as - converted basis) to (y) the
Company’s outstanding shares (on an as - converted
basis).

Right of First Refusal: If any of the Company’s shareholders other than


Investor proposes to transfer any of their Company
shares to a third party, then Investor will have a
right of first refusal to purchase those shares on the
same terms as the proposed transferee.

Management Lock-in, ESOP For ([●]) years following the Closing, Promoters and
and Promoter Vesting: other key employees will not be permitted to
transfer any of their Company shares without the
permission of the Investor.

Upon the expiry of 4 ([●]) years from the Closing


Date, each Promoter shall have the right to
individually transfer (subject only to the Right of First

5
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Classification: Public
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[●],2012

Refusal and the transferee executing a deed of


adherence) up to 5% ([●] per cent.) of their
respective fully diluted shareholding in the Company
(as calculated on the date of sale of such shares),
every year, provided there is a minimum gap of 12
(twelve) months between each sale transaction by
the said Promoter (“Permitted Sale”).

Promoters and ESOP plan shall have a monthly


vesting spread over ([●]) years commencing from
the Closing Date. If any Promoter’s employment with
the Company is terminated for any reason, all
unvested shares will be transferred to a company
managed trust at par value or bought back by the
Company at par value within 30 (thirty) days of
termination of employment. Vested shares of
Promoters will be subject to all share transfer
restrictions as applicable to shares held by the
Promoter.

Board of Directors: The “Board” will consist of [●] directors who will
meet at least quarterly, unless otherwise agreed by
a vote of the majority of the Board. The Investor will
have the right to elect 1 (one) member of the Board.
The Promoters will have the right to appoint ([●])
director, the Investor shall appoint [●] director and
the Board shall collectively appoint ([●])
independent directors. The Company will provide
standard directors’ and officers’ insurance,
satisfactory to Investor. The chairman of the Board
shall be appointed by the Board and shall not have a
casting vote.

The Board shall have the right to approve the annual


operating plans, the annual business plan, and the
corporate strategic direction. The Chief Executive
Officer (CEO) will be appointed by the Board of the
Company. The CEO reports in all respects to the
Board. Provisions relating to holding of meetings of
the Board, quorum and other provisions shall be as
set forth in the Transaction Documents.

Board observer rights: Investor shall be entitled to Board observer rights


and will be entitled to participate as an observer at
all Board meetings and to receive copies of all
materials distributed to the Board.

Information and inspection Investor will be provided with standard audited


rights: annual and unaudited quarterly financial statements,
unaudited monthly financial statements, annual
business plans and budgets of the Company, and
any other information, including a series of
measures of social impact as agreed by the

6
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Classification: Public
Indicative draft for discussion purposes only
[●],2012

Company and Investor, as Investor may reasonably


request. Investor will be entitled to inspection rights
of the books and registers maintained by the
Company.

Other terms

Share Subscription The Investment will be made pursuant to a


Agreement and “Subscription Agreement” and a “Shareholders’
Shareholders' Agreement: Agreement”.

The Share Subscription Agreement will contain,


among other things, representations and warranties
of the Company and Promoters, Investor
indemnification rights and conditions precedent to
be met prior to the Closing.

The Shareholders’ Agreement will contain, among


other things, the privileges, rights and obligations
discussed above, a description of international best
practices and corporate governance, and other
customary provisions.

Conditions Precedent to The Investment will be subject to customary


Closing: “Conditions Precedent”, including, but not limited to:

● completion of business and legal due diligence to


the satisfaction of Investor;
● negotiation and execution of definitive
agreements;
● receipt of all required authorizations, approvals
and consents;
● delivery of a final share certificate for the
Investor Shares;
● delivery of an opinion of counsel for the
Company; and
● the absence of material adverse changes of the
Company.

Fees and expenses: Upon Closing, the Promoters will pay a fee of INR
20,000 for due diligence expenses and fees of
counsel incurred in connection with the Investment.

Non-Competition, Non- Each of the Promoters and key management


Solicitation and Employment personnel shall enter into a ([●]) year non-
Agreements: competition, non-solicitation and employment
agreement in a form acceptable to Investor.

Employee Share Option Plan: The Company will establish an Employee Share
Option Plan (“ESOP”) constituting [●] per cent of the
fully diluted share capital of the Company. All
employee options will vest in accordance with the
ESOP, which will be administered by the Board of

7
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Classification: Public
Indicative draft for discussion purposes only
[●],2012

Directors of the Company. Immediately prior to the


Investment, [●]/- ([●] only) equity shares will be
added to the option pool for creation of an
unallocated option pool of the Company.

Key Person Insurance: The Company is to acquire key person insurance for
each promoter and key employee in an amount
satisfactory to the Board. Proceeds are payable to
the Company.

Auditor: Investor has the right to approve the appointment


and any change in the Company’s statutory auditors
and accountants.

Governing Law: The laws of India.

Arbitration: All disputes which cannot be resolved amicably will


be resolved by arbitration under the Indian
Arbitration and Conciliation Act, 1996 under a
mechanism to be set forth in the Transaction
Documents. The place of arbitration shall be New
Delhi, India.

ACCEPTED AND AGREED ACCEPTED AND AGREED

[●] [●]

Name: Name:

Title: Title:

Date: Date:

8
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Classification: Public
Indicative draft for discussion purposes only
[●],2012

ANNEXURE A

Share capitalization structure of the Company

Company Capitalization: The Company's capitalization

Pre-Closing Post-Closing (Undiluted)


Capital Amount % Amount %
Equity Shares – Promoters [●] 100% [●] [●]
Equity Shares - Investor 0 0% [●] [●]
Equity Shares – Employee
Share Option Plan
Issued 0 0 0 0%
Un-issued 0 0% [●] 16.67%
TOTAL EQUITY SHARES [●] 100% [●] 100%
TOTAL SERIES A 0 0 1000 100%
PREFERENCE SHARES

Fully Diluted Ownership of the


Company: No. of
equity
shares % stake
Promoter 1 [●] [●]
Promoter 2 [●] [●]
Investor [●] [●]
Employee stock options [●] [●]
TOTAL: [●] 100.00%

9
© Addictive Learning Technology Pvt. Ltd. Any unauthorized use, circulation or reproduction shall attract suitable action under
applicable law.

Classification: Public
Indicative draft for discussion purposes only
[●],2012

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Classification: Public

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