Privileged & Confidential
Binding Term Sheet
This binding term sheet (“Term Sheet”) dated ______ (“Execution Date”), summarises the terms of
investment for the proposed investment (“Proposed Transaction”) in ABC (“Company”),a company
duly incorporated under the Companies Act, 2013 and having its registered office at ___________ by
the persons whose names are set out in Schedule 1 (“Investors”). The Company is managed and run
by its promoters, Promoter A and Promoter B (individually “Promoter” and collectively
“Promoters”).
The Company, the Promoters and the Investor are collectively referred to as “Parties” and individually
as “Party”.
Definitions “Equity Securities” means the Equity Shares, or any other shares, securities,
rights, options, warrants, appreciation rights or instruments which are convertible
into or entitle the holder to acquire or receive any Equity Shares, or any options to
purchase rights to subscribe to securities which by their terms are convertible into
or exchangeable for Equity Shares, or securities with voting rights or economic
rights.
“Equity Share” means the ordinary equity shares of the Company having a face
value of INR _ (Rupees ___ only) each.
“Shareholders” mean all the shareholders of the Company holding Equity
Securities as on the Execution Date.
“Transfer” means to transfer, sell, gift, assign, pledge, hypothecate, mortgage,
create a security interest in or lien on, tender for buyback, encumber, place in trust
(voting or otherwise), transfer by operation of law or in any other way subject to
any encumbrance or dispose of, whether voluntarily or involuntarily including,
without limitation, any attachment, assignment for the benefit of creditors, and
with respect to a company, the appointment of a custodian, liquidator or receiver
of any of its properties, business or undertaking.
Business The company is in the business of ‘Software as a Product & Service’ (SAP SAS)
Instruments CCPS.
Investment The Investors will subscribe to X equity stocks at a unit price of
Amount INR XXX/- (Rupees XXX in words), aggregating to INR X (“Investment
Amount”).
For the purpose of the Proposed Transaction the pre-money valuation of the
Company is INR X (X in words)
Issue of Equity The equity stocks will be issued to the Investor by way of a right issue allotment
Stock and as per applicable law. The Company and Promoters will obtain the required
consent from the promoter and other shareholders for the proposed investment.
End Use The Investment Amount will be utilised in the manner set forth in the business
plan of the Company.
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Statutory filings The Company will undertake all corporate actions and make all filings with the
and corporate regulatory authorities in relation to the issuance of the Common Stock as may be
compliances required under applicable law. The Investor will cooperate and provide the
necessary assistance for such filings.
Promoter’s Lock The Promoters shall not be entitled to transfer the shares held by them in the
In Company, directly or indirectly, for a period of 4 (four) years from the date of First
Closing (“Lock-in Period”). The Promoters may however transfer their shares to a
third party during the Lock-in Period subject to the prior written approval of the
Investors and right of first refusal or tag along right.
Vesting of
20% of the shares held by each Promoter shall be deemed to have vested on the
Promoters’ Shares
date hereof, and the remaining 80% of the shares held by each Promoter
(“Restricted Shares”) will be vested over 4 (four) year period starting from the date
of First Closing (“Restricted Period”). Starting with the completion of the 1st year,
the Restricted Shares will be released in equal instalments, at monthly intervals
over the next 3 (three) years.
In the event of a termination of any of the Promoters’ employment with the
Company or in lieu of transfer to the company, during the 2nd, 3rd or 4th year, the
Restricted Shares that are not vested shall be treated in the manner and the price
as may be determined by the Board with the approval of the Investors.
Rights of First Subject to the Promoter’s lock-In, in the event any of the Promoters or any other
Refusal shareholders intend to sell all or part of their shareholding in the Company to a
third party (“Selling Shareholder”), then such Selling Shareholder(s) shall first
offer their shares, to the Investors (“Non-Selling Shareholders”) at the same price
as they have offered to the third party. The Non-Selling Shareholders, including
the founders, at their sole discretion, shall have the right to purchase shares in
proportion to their inter se shareholding in the Company.
Tag Along Right Subject to the lock-in provisions herein contained, in the event the Founders sell
their shares to a third party, Investors would have a right to sell its shares on the
same terms to the same party. The Tag Along Right shall be a pro-rata right so
long as the total number of shares transferred by the Founders is less than 25% of
their shareholding in the company. If any shares in addition to the above are
proposed to be transferred, the investors shall have the first option to sell their
shares to the proposed purchaser.
Pre-emptive rights The Investors shall have pro-rata rights, based on their respective percentage
equity ownership on a fully diluted basis, to participate in subsequent equity
financings of the Company on the same terms as that of the new investment as
shall enable the Investor to maintain its equity shareholding except that in the event
the Investor fails to provide equity capital to the Company, the Investor’s
shareholding in the Company shall be diluted.
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Free Investors shall be required to give a right of first offer to other non-selling investors
Transferability or Founders as and when such Investor desires to sell his/its shares in the
Company. Subject to right of first offer to the other Investors and Founders and
provided that the Investors will not sell their shares to any competitor of the
Company, the shares held by the Investors in the Company shall be freely
transferable at any point of time.
Exit In case the company is not able to turn profitable or unable to raise next round of
funding within 5 years from the date of closing then the founders/company will
provide exit to the Investor in the best possible manner within the applicable law
and a price as may be mutually decided between the founders and Investors.
Board On and from the date of Closing, the Board shall comprise 3 (three) directors – 3
Composition And directors representing the company. The investors shall also be entitled to
Incidental Matters nominate 1 (one) observer on the Board, at the time of Closing, who will be entitled
to attend all meetings of the Board and participate in discussions, but shall not be
entitled to vote at the Board meetings.
Affirmative The Company and its shareholders shall not be permitted to take any decisions
Voting Rights on certain matters without such matters having first received the approval of the
Investor Directors at a Board meeting. The affirmative rights schedule will be
decided collectively in the first Board meeting post the investment.
Conditions The subscription by the Investors is subject to the fulfilment of the following
Precedent conditions precedent:
(i) Completion of legal, financial and business due diligence
(ii) Resolution of any other material issues that may arise from the business,
financial and legal diligence.
(iii) Completion of all secretarial duties as required by the Indian Companies
Act
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Representations Each Party represents and warrants that:
and Warranties
(iv) Such Party has the full power and authority to enter into, execute and deliver
this Term Sheet and to perform its obligations and the transactions
contemplated hereunder and, if such Party is not a natural person, such Party
is duly incorporated or organised with limited liability and is validly
existing under the laws of the jurisdiction of its incorporation or
organization, having full corporate power and authority to enter into and
perform its obligations under this Term Sheet.
(v) The execution and delivery by such Party of this Term Sheet and the
performance by such Party of its obligations and the transactions
contemplated hereunder have been duly authorised by all necessary
corporate or other action of such Party.
The Investors represents and warrants that:
(i) The execution and delivery of this Term Sheet by him, and the performance
by him of his obligations hereunder and the consummation by him of the
transactions contemplated hereby, have been duly authorized by all
necessary corporate, statutory, contractual or other actions.
(ii) The execution, delivery and performance of this Term Sheet does not and
will not conflict with, or result in a breach of, or constitute a default under
or result in the creation of any encumbrance under, any instrument or
document or agreement to which he is a party or to which he is bound and
will fully constitute the legal, valid and binding obligation upon him,
enforceable against him in accordance with the provisions of this Term
Sheet.
(iii) The execution, delivery and performance of this Term Sheet by him shall
not violate any order, judgment or decree against, or binding upon him or
upon his respective securities, properties or businesses, or violate any law
or regulation of India or any other country (if applicable).
Further funding The Investor acknowledges and agrees that the Company may in future raise a new
round of funding (other than from the Shareholders) for the business (“New
Investment”) and that the terms of the New Investment will supersede the terms
of his investment in the preferred stock as agreed herein.
Expenses All cost and expenses in connection with the finalization and performance of this
Term Sheet including stamp duties payable on the Term Sheet and on the issue
and allotment of the Common Stock shall be borne by the Company in full.
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Confidentiality (i) Each Party undertakes with each other Party that it will treat as strictly
confidential the provisions of this Term Sheet and all information received
or obtained by it or its representatives as a result of entering into or
performing this Term Sheet or the business or affairs of a Part.
Applicable Law (i) The laws of India will apply to this Term Sheet. The courts of Mumbai will
and Dispute have exclusive jurisdiction over any matters arising hereunder.
Resolution
(ii) Any dispute, controversy or claim arising out of or in connection with this
Term Sheet, will be referred to and finally resolved by arbitration under the
Indian Arbitration and Conciliation Act, 1996, as amended from time to
time. The place of arbitration will be Mumbai. The language to be used in
the arbitration will be English. The arbitration will be conducted by a sole
arbitrator appointed mutually by the Parties.
23. M Miscellaneous (i) This Term Sheet may be executed in any number of originals or
i counterparts, each in the like form and all of which when taken together
s will constitute one and the same document, and any Party may execute this
c Term Sheet by signing any one or more of such originals or counterparts.
e
s (ii) No amendment to or variation of this Term Sheet will be binding on any
s Party unless such amendment / variation is in writing and duly signed by
l all the Parties.
a
n (iii) This Term Sheet is personal to the Parties and will not be capable of
e assignment by the Parties.
o
u (iv) No waiver of any breach of any provision of this Term Sheet will constitute
s a waiver of any prior, concurrent or subsequent breach of the same or any
other provisions hereof, and no waiver will be effective unless made in
writing and signed by an authorized representative of the waiving Party.
(v) The Investor will at any time and from time to time upon the written request
of the Company or Promoters promptly and duly execute and deliver all
such further instruments and documents, and do or procure to be done all
such acts or things, as the Company or Promoters may reasonably deem
necessary or desirable in obtaining the full benefits or in carrying out the
provisions of this Term Sheet or in furtherance of the New Investment.
(vi) Each and every obligation under this Term Sheet will be treated as a
separate obligation and will be severally enforceable as such in the event
of any obligation or obligations being or becoming unenforceable in whole
or in part.
(vii) This Term Sheet constitutes the whole agreement between the Parties
relating to the subject matter hereof and supersedes any prior arrangements
whether oral or written, relating to such subject matter.
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Privileged & Confidential
[The remainder of this page is left blank intentionally. Signature page follows.]
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Privileged & Confidential
For ABC For Investor Name
_______________________________________
_______________________________________
Name:
Name:
Designation: Director, CEO
Designation:
Authorised as per board resolution dated ____
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Privileged & Confidential
Schedule 1
Capitalization Table Pre-financing
Founders and others Number of % shareholding on fully diluted
share basis
s
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Privileged & Confidential
Capitalization Table Post-financing
Amount to be Number of Shareholding
invested in shares percentage on a
Rupees (only in fully diluted
respect of basis
investors)
Equity Share Holders
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