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This is how a standard term-sheet looks like


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This is a standard term-sheet that looks very closer to the one we ( signed in our previous funding round.

This is a standard term-sheet that looks very closer to the one we ( signed in our previous funding round.

Published in: Economy & Finance
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  • 1. INDICATIVE HEADS OF TERMS: EQUITY INVESTMENT Strictly private and confidential Not to be disclosed or distributed to third parties NOTES: 1. The provisions of this term sheet assume that the Investors: (a) will be issued ordinary shares in the Company and not a separate class of shares; and (b) where there is more than one Investor they are proposing to invest on materially the same terms and be parties to the same term sheet. Non-legally binding: This term sheet is indicative only, not exhaustive and not legally binding unless specifically stated within a certain paragraph. It sets out the proposed key terms and conditions upon which the Investors are willing to invest in the Company. 1. Issuer: 2. Investor[s]: XXXX ltd(the Company). Investor 1(Lead Investor) Investor 2 4. Existing Shareholders of the Company and pre-investment equity stake: 1. Co-founder 1- [Equity stake = % pre-investment] 2. Co-founder 2- [Equity position = % pre-investment] 3. Early investor 1 4. The CoFounders: Abdullah Al-YYYY and JoseXXXX 5. Estimated Closing Date: The investment is intended to be closed by Mid-Nov 2013. 6. Amount of the Investment: USD [XXX] [Investor 1] USD[ XXX] [Investor 2] Target: USD XXX,XXX 7.Postcompletion issued share capital of the Company: [Co-founder 1] [XX]% [Co-Founder 2] [XX]% [Early investor 1] [XX]% [Investor 1] [XX]% [Investor 2] [XX]% TOTAL 100% 8. Company Obligations: The Company shall carry out (or procure the carrying out) certain key governance matters, including those set out in Part 1
  • 2. of the Schedule. 9. Investor Consent: Investor Consent shall be capable of being granted by Investors holding more than 50% of the aggregate number of ordinary shares held by all Investors. 10. Matters requiring Investor Consent: The Company shall not carry out certain key operational andconstitutional matters, including those set out in Part 2 of the Schedule without Investor Consent. The Investors shall not withhold consent unreasonably. 11. The Board: After Completion, the Board will consist of one Director, XX board members and YYObservers: Directors- (write the name of director) Board member - (write the names of board members) Observers – (write the name of board observers, can be one or two or more) 12. Board Observer: The Board Observer’s consent is needed for certain material business decisions, including: (a) Incur capital expenditure exceeding US$30,000; (b) Appoint an employee or consultant or vary terms where emoluments and/or commissions or bonuses are likely to exceed US$50,000; (c) Agree any borrowings, loans, advances or credit outside the ordinary course of business; and (d) Enter into or vary any unusual or onerous agreement or any material or major or long-term contract. 13. Pre-emption rights: (New Share Issue) Any issue of new shares in the Company shall first be issued to allholders of shares pro-rata (according to the number of shares held by each of the legal and beneficial holders). Any such offer shall remain open for at least 14 days (the Pre-Emption Period). To the extent that any holder does not wish to subscribe for his pro-rata amount, then the remaining new shares shall be issued to any other holders wishing to subscribe for additional shares. To the extent that any remaining new shares are not taken up by the existing holders, then the Company shall be free to issue all or some of these shares to any other person at any time during the period of one month after the end of the Pre-Emption Period. 14. Tag Along (Right of Minority Shareholders to Sell with Majority Shareholders) In the event of a proposed sale of 50% or more of the shares of theCompany by any shareholders, the selling shareholders shall be required to procure that the purchaser also makes an offer for all of the remaining shares at the same price and on the same terms as the selling shareholders shares are being purchased. 15. Drag Along (Right of Majority Shareholders to Force Minority Shareholders to In the event of a proposed sale of 70% or more of the shares of theCompany by any shareholder(s), the selling shareholder(s) shall be entitled to require all of the remaining minority shareholders (and option holders) to sell their shares to the third party at the same price and on the same terms as the selling
  • 3. Sell) shareholder(s) shares are being purchased. 16. Founder Vesting and Leaver Provisions: The Founder(s) shares shall vest as follows:  50%immediately; and  50% in equal quarterly installments over the following twelve months after closing. If any percentage of the shares held by the Founder have 'vested' this means that the Founder will then be entitled to retain those shares even after ceasing to be employed by the Company. He shall only be required to offer to sell the 'unvested' percentage of his shares to the other shareholders on leaving. If the Founder is a Good Leaver, they will be required to offer their shares to the Company and/or the other shareholders at the higher of (i) fair market value and (ii) the price originally paid for the shares. If the Founder is a Bad Leaver, he will be required to offer their shares to the other shareholders at the lower of (i) fair market value and (ii) the nominal value of the shares. Good Leaver – death; long term critical illness, permanent disablement, retirement at normal retirement age (being 65), unfair dismissal (other than for reasons of procedural irregularity) or for any other reason with Investor Consent, such Investor Consent not to be unreasonably withheld. Bad Leaver – any leaver who within 1 year of completion ceases to be an employee or consultant of the Company by reason of voluntarily resigning or dismissal by the Company due to breach of contract. The Board and an Investor Majority can determine whether any of these provisions shall not apply to the Founder. Upon the Founder ceasing to be an employee or consultant, the voting rights of the unvested shares shall be suspended until such shares are transferred in accordance with the articles of association. 17. Deed of Adherence: All new shareholders shall be required to sign a deed of adherencewhereby they consent to be bound by the terms of the InvestmentAgreement. 18. Options: The Company may grant one or more options, warrants or similar rights to purchase its Shares at a later date (in each case, an “Option”) to its employees, agents and others as the Board, with Board Observer consent, deems fit and in accordance with the Articles and applicable law, subject to a maximum option pool size of X% of the post-founding round capitalization of the Company. If at any time the Company proposes to grant one or more Options, the exercise price per Share shall not be less than the then current market price per Share, such market price being determined by dividing the valuation of the Company by the number of Shares in issue immediately prior to the issue of the Option. The valuation of the Company shall be deemed to be the valuation set by the most recent fundraising round prior to the grant of the Option (the “Fundraising Valuation Date”), provided that if there has been an independent valuation of the Company after the
  • 4. Fundraising Valuation Date, then such independent valuation may be used instead. 19. Expiry of Offer: The Investors are requested to confirm their acceptance of the terms of this proposal within 14 days of the date of this termsheet, failing which this proposal will lapse. 20.Confidentiality: This paragraph 21 is intended by the parties to be legally binding. The terms of the investment (including any matter contained within this term sheet) shall be strictly confidential to the Investors, the Founder, the Company and the existing shareholders of the Company. 21. Legal Expenses: This paragraph 22 is intended by the parties to be legally binding. Each of the Angel Investors and the Company shall bear their own costs and expenses incurred in connection with the preparation and negotiation of the Investment Agreement 22. Governing Law and Jurisdiction: This paragraph 23 is intended by the parties to be legally binding. UAE law and the exclusive jurisdiction of the courts of the UAE shall apply. 23. Information Rights The Lead Investor shall receive normal financial and operational information about the Company. This Term Sheet may be executed in any number of counterparts, which together shall constitute one document. Facsimile signatures shall have the same legal effect as original signatures. ___________________________ Signed for and on behalf of Company name Date: ______________________ ___________________________ XXXXXX Co-Founder Date: ______________________ ___________________________ YYYYYY Co-Founder Date: ______________________ ___________________________ ZZZZZZZ Investor Date: ______________________ Date: ______________________
  • 5. SCHEDULE Part 1: Company Obligations 1. As soon as practicable implement the proposals or recommendations contained in the Business Plan. 2. Carry on and conduct its business and affairs in a proper and efficient manner and for its own benefit. 3. Procure that the expansion; development or evolution of its business is effected only through the Company or a wholly owned subsidiary of the Company or joint ventures. 4. Transact all its business on arm's-length (normal unrelated parties commercial) terms. 5. Procure that a meeting of the Board is held at least once every three months. 6. Observe and comply in all material respects with all legislation from time to time in force and applicable to the Company or its business. 7. Maintain proper, usual and up-to-date accounting and financial records in relation to its business and affairs. 8. Provide to the Lead Investor a report, on the Company’s activities and progress no less often than every quarter.
  • 6. Part 2: Matters Requiring Investor Consent 1. Alter rights attaching to its shares. 2. Change share capital 3. Amend articles of association. 4. Declare dividends. 5. Acquire or dispose of any shares of any other company. 6. Acquire or dispose of the undertaking of any other person or merge with any undertaking. 7. Wind up the Company. 8. Pursue a different line of business.