TERM SHEET
This indicative term sheet (“Term Sheet”) summarizes the terms with respect to a potential investment by [ABC Capital] (“Investor”) in [XYZ Pvt. Ltd] (“Company”). The Company is managed and run by its founder [PQR] (“Founder”). The Company, the Founder and the Investor are collectively referred to as “Parties” and individually as “Party”.
The intent of this Term Sheet (which is non-binding, except as expressly set forth herein) is to describe, for negotiation purposes only, some key terms of the proposed agreement amongst the Parties. Nothing herein contained constitutes an offer to buy, sell or subscribe to the securities described in this Term Sheet. The detailed terms of the investment will be set forth in the definitive agreements relating to the investment (“Definitive Agreements”).
Business
[Business Description] [Example – Design, manufacture, branding and retailing and exporting of PQR products]
The Promoters
- Promoter 1 – Role in the Company
- Promoter 2 – Role in the Company
- Promoter 3 – Role in the Company
The Investor
Put details of The Investor – Name of the Investor and Address
Proposed Investment
The Investor is seeking to invest Rs. [X.X Cr] (“Investment Amount”) in the Company in the form of Compulsorily Convertible Preference Shares (CCPS) and a nominal number of Equity Shares.
The proposed ownership % in the Company on a fully diluted basis is [X.X %]
End Use
The Investment Amount will be used for working capital, brand building, marketing both offline and online, capital expenditure and hiring
Closing and Closing Date
The Parties will work towards achieving completion of the investment (“Closing”) within 90 days from the execution of the Term Sheet. Actual Closing will be subject to satisfactorily completion of Due-Diligence process
Shareholding pattern pre-investment
- Founder 1 – x.x%
- Founder 2 – x.x%
- Founder 3 – x.x%
Shareholding pattern post investment
- Founder 1 – x.x%
- Founder 2 – x.x%
- Founder 3 – x.x%
- Investor – x.x%
Pari Passu Rights
All common equity shares which are purchased by the Investor shall rank pari passu (equal) with other common equity shares of the Company except otherwise stated
Information Rights
The Company shall provide to the Investor following information
- Annual Business Plan
- Annual Audited Financials within 60 days of the end of financial year
- Monthly and Quarterly MIS
Voting Rights
The Investor will have voting rights as on converted basis
Pre-emptive Right
The Investor shall have the right to participate pro-rata in any issuance of equity by the company on the same terms on which such equity shares are proposed to be issued.
Board Observer Right
Investor will be entitled to Board observer rights and will be entitled to participate as an observer at all the Board meetings and to receive copies of all material distributed to the Board
Exit Right
Founders will make best effort within [5 years] from Closing Date (“Exit Period”) to bring in a financial / strategic investor to acquire the shares of the Investor.
Right of First Refusal
If any of the Founders or any other shareholder of the Company proposes to transfer any shares of the Company, the Investor will have a right of first refusal to purchase all or portion of such shares.
Tag Along Right
In the event the Investor do not exercise its right of first refusal (as set forth above), the Investor will have pro rata “Tag Along” rights in any sale of shares by the Founders.
Definitive Agreements
- Share Subscription and Shareholders Agreement
- Amended and Restated Articles of Association of the Company
Condition Precedent
The investment by the Investor will be subject to fulfilment of the following conditions
- Execution of Definitive Agreements
- All regulatory filings related to investment and Government consents
Exclusivity
After signing this Term Sheet, the Company and Founders undertake that they shall not, for a period of 60 days, severally or jointly, directly or indirectly, approach other investors, engage in any discussions, or enter into any agreements with respect to equity investment in the Company that does not involve the Investor.
Confidentiality
The terms and conditions of this Term Sheet shall be confidential information and the Investor, Company or Founders shall not disclose the same to any third party
For and on behalf of [Company]
Signature:
Name:
Title:
Date:
For and on behalf of [Investor]
Signature:
Name:
Title:
Date: