MEMORANDUM

TO: Sahyog India Private Limited

From: A.B.C. Associates, Bengaluru
Date- 28/09/2023
Re: Legal advice on Commercial points and drafting of agreement

The Issues raised by the client are addressed below-

1. Detailed terms and conditions of CCD’s
a) It is essential to include detailed terms and conditions of CCDs to protect your interests.
Instead of specifying a fixed number of shares, establish a formula based on Upright’s CCD
holding as a percentage of total equity. This formula can be calculated at each Shareholders'
meeting, ensuring proportionate representation without locking in a static number.
b) Upon the occurrence of a Conversion Trigger event, each CCD shall be converted into
equity shares of the Company at the Conversion Price. The nominal number of equity shares
issued to the Investor upon conversion of each CCD shall be calculated using the following
formula: Nominal Number of Equity Shares = Face Value of CCD / Conversion Price
-Face Value of CCD = INR 100 (Indian Rupees One Hundred)
c) In case the above calculation results in a fractional share, the Company shall round down
to the nearest whole number of equity shares. In the event of any adjustments to the
Conversion Price due to anti-dilution provisions or other factors, the nominal number of
equity shares issued upon conversion shall be adjusted accordingly, in accordance with the
applicable provisions of this Agreement.
d) The CCD holders shall be entitled to receive dividends, if declared, on an as-converted
basis, along with the holders of equity shares.
2. Commitment for additional Investment
Create a "Right of First Refusal" (ROFR) for Upright, allowing them the first opportunity to
provide additional funding at a mutually agreed valuation. If Upright declines or cannot meet
this obligation, the Promoters can seek other investors. This approach maintains Upright's
stake but ensures Sahyog's access to necessary funding. It incentivizes Upright to participate
while providing flexibility to the Promoters.
3. Limiting Information disclosure and safeguarding sensitive Information:
Upright can only access information directly related to its investment, such as financial report
and updates on company’s financial health. To address concerns about clients, technology
and projects, a mechanism can be implemented that allows Sahyog to provide Upright with
sanitized and high level information. This summary excludes specific details and sensitive
data. If Upright requires a more detailed access to such information for any reason, prior
permission of Sahyog has to be taken.
4. Preventing employee and client poaching
Specifying the consequences of violating these clauses, such as financial penalties or
injunctive relief. To address this issue innovatively, consider implementing a collaborative
approach. Establish a talent exchange program where Sahyog and Upright can mutually
benefit from sharing human resources. This program would allow for the temporary
assignment of key employees between the two entities for specific projects, promoting
knowledge sharing and collaboration. It ensures Upright's involvement is productive and not
disruptive.
5. Limitation of liability and damages
By stating that Sahyog/Promoters' liability won't exceed Upright's investment, covering all
forms of damages. A dispute resolution panel of impartial experts can be appointed to
evaluate claims beyond investment amount, preventing double recovery.
6. Nomination:
To ensure collaboration, consider establishing an "Executive Advisory Board" where
Upright's input is valued, fostering a positive working relationship without compromising
your client's ultimate decision-making authority.
7. Unwested shares of promoters:
To protect Promoters' interests in leaver situations. For a "good leaver," offer Promoters a
right of first refusal to purchase Upright's shares at fair market value determined by an
independent appraiser. In a "bad leaver" scenario, design clauses allow Promoters to buy
Upright's shares at a discounted price, encouraging Upright's compliance. Consider a creative
"Leaver Resolution Committee" comprising both parties to fairly assess situations, ensuring
balanced resolutions.
8. Additional clauses
To make the agreement more effective certain clauses can be added such as, Drag- Along
and Tag- Along rights, Force Majeure clauses, Notice clauses, Severability, Amendment, and
Waiver clauses etc.
9. Conclusion
Therefore, these recommendations might be followed in order to address all the issues that
concern the client.