Term Sheet For Investment In)

Indicative draft for discussion purposes only
[●],2012
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 investor’s “Investment” is INR [●]/- (Indian Rupees [●] only).
investment:
Shares to be issued and Investor will purchase 1000 INR 10/- ([●] only) Preference
pre-money valuation: 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.
1
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applicable law.
[●],2012
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 been converted to equity
shares according to the “Conversion Rate” (see “Conversion
Rate” below).
Optional conversion: The Investor Shares are convertible at any time at Investor’s
option into an equivalent number of equity shares, subject
to any adjustment to the conversion rate following an
increase, repayment, subdivision, consolidation,
capitalisation or variation of share capital or other similar
event (the “Recapitalisation Event”) and to the operation of
any anti-dilution adjustment (described 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
2
applicable law.
[●],2012
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 provisions/Affirmative Affirmative consent of Investor will be required for

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;
(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),
3
applicable law.
[●],2012
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 Investor
Shares: Transfer of Investor Shares by the Investor shall be 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 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
4
applicable law.
[●],2012
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 and For ([●]) years following the Closing, Promoters and other key
Promoter Vesting: 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 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
5
applicable law.
[●],2012
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 annual and
rights: 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 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 Agreement The Investment will be made pursuant to a “Subscription

and Shareholders' Agreement: Agreement” and a “Shareholders’ 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.
6
applicable law.
[●],2012
Conditions Precedent to Closing: The Investment will be subject to customary “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, Each of the Promoters and key management personnel shall

Non-Solicitation and Employmententer into a ([●]) year non-competition, non-solicitation and
Agreements: 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 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
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applicable law.
[●],2012
[●] [●]
Name: Name:
Title: Title:
Date: Date:
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%
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applicable law.
[●],2012
Un-issued 0 0% [●] 16.67%

TOTAL EQUITY SHARES [●] 100% [●] 100%
TOTAL SERIES A PREFERENCE 0 0 1000 100%
SHARES
Fully Diluted Ownership of the

Company: No. of equity
shares % stake
Promoter 1 [●] [●]
Promoter 2 [●] [●]
Investor [●] [●]
Employee stock options [●] [●]
TOTAL: [●] 100.00%
9
applicable law.

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Indicative draft for discussion purposes only

TERM SHEET FOR INVESTMENT IN

The Proposed Investment

Investor: “Investor” is [●].

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

Company capitalization: Post Investment, the share capitalization structure of the

Terms of the Investor Shares

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

(a) 3X the Purchase price; and

After the payment of the Liquidation preference, the

Automatic conversion: Each Investor Share will automatically, mandatorily and

(a) Immediately prior to an initial public offering ("IPO")

Conversion rate: Investor Shares will initially be convertible into equity

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

● shares issued pursuant to the Employee Share

Protective provisions/Affirmative Affirmative consent of Investor will be required for

(a) amending the Company’s organizational documents;

(b) changing the Company’s share capital including

(c) paying dividends;

(d) any fresh issue of shares or other instruments;

(e) approving any merger, asset sale, reorganization,

(f) approving the Company’s liquidation or dissolution;

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

(h) approving the Company’s annual budget (including

(i) capital expenditures or incurrence of indebtedness

including investments in other entities, the creation of

(j) any related party transaction;

(k) change in the remuneration or material terms of

(l) change of the management or control of the

(m) Other items agreed upon between the parties in the

IPO: If the Company seeks to or becomes listed on any stock

together in good faith to ensure an exit for the Investor in a

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

All transfers of shareholding shall require the transferee to

Promoters and ESOP plan shall have a monthly vesting

to all share transfer restrictions as applicable to shares held

The Board shall have the right to approve the annual

Share Subscription Agreement The Investment will be made pursuant to a “Subscription

Conditions Precedent to Closing: The Investment will be subject to customary “Conditions

● completion of business and legal due diligence to the

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

Governing Law: The laws of India.

Arbitration: All disputes which cannot be resolved amicably will be

ACCEPTED AND AGREED ACCEPTED AND AGREED

Share capitalization structure of the Company

Company Capitalization: The Company's capitalization

Pre-Closing Post-Closing (Undiluted)

Un-issued 0 0% [●] 16.67%

Fully Diluted Ownership of the

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