VIEWS: 8,927 PAGES: 11 CATEGORY: Mergers and Acquisitions POSTED ON: 11/6/2009
This Merger and Acquisition (M&A) Term Sheet is a non-binding document which outlines the understanding between two or more parties regarding a proposed transaction. This document sets forth general terms and conditions and outlines the components of the transaction and requires the parties to use reasonable diligence to commence good faith negotiations in order to execute a definitive purchase and sale agreement. Although the term sheet is generally intended to be non-binding, the confidentiality, dispute resolution, exclusivity, expenses, and governing law provisions are intended to create legally binding obligations. This template term sheet can be modified to best fit the needs of the drafting parties.
This Merger and Acquisition (M&A) Term Sheet is a non-binding document which outlines the understanding between two or more parties regarding a proposed transaction. This document sets forth general terms and conditions and outlines the components of the transaction and requires the parties to use reasonable diligence to commence good faith negotiations in order to execute a definitive purchase and sale agreement. Although the term sheet is generally intended to be non-binding, the confidentiality, dispute resolution, exclusivity, expenses, and governing law provisions are intended to create legally binding obligations. This template term sheet can be modified to best fit the needs of the drafting parties. Merger and Acquisition Term Sheet This Term Sheet (the “Term Sheet”) is intended to describe the understanding between the Parties to and the general terms and conditions of the proposed acquisition (“Acquisition”) of XYZ, a __________ organized under the laws of the State of ___________ (“XYZ”), and certain of its affiliates, by ABC, a ______________ organized under the laws of the State of ______________ (“ABC”) and is subject to the negotiation and execution of a definitive purchase and sale agreement, a definitive escrow agreement, and any other agreement that may be necessary to effect the Acquisition (together referred to herein as the “Acquisition Documents”). This Term Sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation except as provided for in the “Confidentiality,” “Dispute Resolution,” “Exclusivity,” “Expenses,” and “Governing Law” provisions herein and below. No other legally binding obligations shall be created, implied, or inferred until a definitive Purchase and Sale Agreement (“Purchase Agreement”) is executed and delivered by all Parties. Without limiting the generality of the foregoing, it is the Party intent that, until such execution and delivery occurs, no agreement shall exist between them and no obligations shall arise whatsoever based on such things as parol evidence, extended negotiations, “handshakes,” oral understandings, or courses of conduct (including reliance and changes of position), except as provided for in the “Confidentiality,” “Dispute Resolution,” “Exclusivity,” “Expenses,” and “Governing Law” provisions herein and below. 1. Party and Parties The Parties to this Term Sheet (collectively “Parties” and individually “Party”) and, therefore, to this Acquisition, are ABC and, collectively, the individual shareholders of XYZ (“Existing Shareholders”), with their respective shareholding of ________________________________________. The obligations of the Existing Shareholders herein and in the Acquisition Documents shall be joint and several. 2. Acquisition (a) Purchase of Stock At Closing (“Closing”), subject to the satisfaction of all conditions precedent contained in the Purchase Agreement, ABC shall purchase from the Existing Shareholders and the Existing Shareholders shall sell to ABC, all of the outstanding ownership interests of XYZ, free and clear of any liens, charges, restrictions, or encumbrances thereon (the “Existing Shareholders Shares”). ABC may assign some or all of its rights hereunder, prior to Closing, to one or more of its subsidiaries. ABC may, at its election, modify the Acquisition so as to create a Merger (“Merger”) by the purchase of the “Shares” by ABC or one of its subsidiaries. (b) Purchase of Assets © 2011 by Docstoc®, Inc. registered document proprietary, copy not 2 At Closing, and subject to the satisfaction of all conditions precedent contained in the Purchase Agreement, ABC shall purchase from the Existing Shareholders and the Existing Shareholders shall sell to the ABC, all other Assets owned by the Existing Shareholders that are used in, related to, or necessary for the business that is conducted by XYZ, including associated trademarks, trade names, brand names (such as _________________________), goodwill, customer lists, contracts, warranties, leases, rights, arrangements, and other assets, free and clear of any liens, charges, restrictions, or encumbrances thereon. “Assets” is more particularly described by the list provided in Schedule “1” attached hereto and incorporated herein by reference. 3. Purchase Price The Purchase Price ( “Purchase Price”) to be paid by ABC to the Existing Shareholders (pro rata based on each such Shareholder’s interest in XYZ as of Closing) shall be _______ dollars ($___). This Purchase Price shall be paid in the following manner: ____________________________________________________________ (Mention how the Purchase Price will be paid in parts at Closing and in the escrow and any reductions or adjustments; non cash components; what kind of financing ABC is securing etc.). The Parties agree that they shall structure the payments of the Purchase Price in a tax efficient manner and that such structure shall be subject to the mutual agreement of both Parties. Similarly, although the Parties currently intend to structure the Acquisition as a purchase of the stock of XYZ, the Parties may consider structuring the Acquisition in a different manner, such as a purchase of all of the assets of XYZ, subject to tax, legal, and other considerations. 4. Escrow _________________ dollars ($_____) of the Purchase Price shall be placed in a bank account in the names of the Existing Shareholders and an independent escrow agent (satisfactory to both Party) shall release funds in such bank account, including any interest earned thereon, to the Existing Shareholders as follows: (Mention how the portion in the Escrow shall be released at different stages after Closing subject to satisfactory due diligence). 5. Definitive Agreement ABC and the Existing Shareholders hereby agree to use reasonable diligence to commence good faith negotiations in order to execute and deliver the definitive Purchase Agreement relating to the Acquisition along with a definitive Escrow Agreement and any other related agreements and documents (together referred to herein as the “Acquisition Agreement”) that may be necessary to cause the Acquisition acceptable to both Parties hereto on or prior to the Closing Date (“Closing Date”). All terms and conditions concerning the Acquisition shall be stated in the Purchase Agreement, including without limitation, representations, warranties, covenants, and indemnities that are usual and customary in a transaction of this nature and as are mutually agreed upon between the Parties. Subject to the satisfaction of all conditions precedent contained in the Purchase Agreement, Closing is anticipated to take place no later than Closing Date or as soon thereafter as possible. © 2011 by Docstoc®, Inc. registered document proprietary, copy not 3 6. Non-Compete The Existing Shareholders shall agree not to directly or indirectly enter into, encourage, assist, work, consult, or own any interest in a competing business involving the __________________________ in ______________ for a period of _____ (__) years following the Closing Date without the written consent of ABC. The Existing Shareholders shall also agree not to solicit any employee, customer, or vendor of XYZ for such _____ (__)-year period. 7. Due Diligence The Existing Shareholders shall give, and shall cause XYZ to give, ABC and ABC’s accountants, attorneys, partners, consultants, financing sources, and all other representatives and agents of ABC full access to XYZ’s management, consultants, accountants, advisors, and all other representatives, and to all properties, operating and financial data, records, agreements, and other information relating to the Acquisition, to the extent reasonably requested by ABC. The Existing Shareholders shall use their best efforts to keep ABC informed of any material changes that have occurred or may occur affecting the business, results of operations, condition (financial or otherwise), or prospects of XYZ. 8. Termination If any Party fails to negotiate in good faith or fails to enter into the Purchase Agreement by the Closing Date, then any obligation to negotiate and prepare the Purchase Agreement or otherwise deal with any other Party to this Term Sheet, including the provisions of Section 11, shall immediately terminate. 9. Confidentiality Because the Parties confirm and agree that they would not disclose any information to each other if they were not anticipating entering into the Acquisition: (a) “Confidential Information” shall mean any and all information delivered orally, in writing, or by any other means, by one Party to the other and specifically includes, without limitation: information related to product or service concepts, designs, or plans; business plans; product, market, technical, or other research; the identities of actual or potential employees, consultants, or other persons providing services to the disclosing Party; the identities of actual or potential customers, financing sources, joint venture partners, suppliers/licensors/ or other persons or entities associated or affiliated with the disclosing Party; the nature of expected or existing markets for the products or services; and any other marketing, financial, or other confidential information of the disclosing Party. Confidential Information shall not include: (i) any information that becomes part of the public knowledge or literature, prior to or after the time of disclosure, other than as a result of any breach of this Term Sheet by the receiving Party; (ii) is in the possession of the receiving Party at the time of disclosure as shown by the receiving Party’s records prior to the time of disclosure; or (iii) is agreed by the disclosing Party, in writing, not to constitute Confidential Information for purposes of this Term Sheet. © 2011 by Docstoc®, Inc. registered document proprietary, copy not 4 (b) Each Party agrees not to use any Confidential Information disclosed to it by the other Party for any purpose other than to carry out discussions concerning, and the undertaking of, the Acquisition and not for its separate purposes. Neither Party shall disclose any Confidential Information of the other Party to any third party or to any employees of the receiving Party who is not required to have the Confidential Information in order to proceed with discussions regarding the proposed business relationship. Each Party agrees to require their employees to whom Confidential Information of the other Party is disclosed, to sign a nondisclosure agreement providing no less protection to the disclosing Party than is provided, directly, by this Term Sheet. Each Party agrees that it shall take all reasonable measures to protect the secrecy of and avoid disclosure or use of Confidential Information of the other Party in order to prevent it from falling into the public domain or the possession of persons other than those authorized under this Term Sheet to have any such information. Such measures shall include, but are not limited to, the highest degree of care that the receiving Party utilizes to protect its own Confidential Information. Each Party agrees to notify the other in writing of any misuse or misappropriation of Confidential Information of the disclosing Party that may come to the receiving Party’s attention. In the event that either Party is required to disclose the Confidential Information of the other pursuant to a court order or other legal requirement, such disclosure may only be made if the other Party is notified sufficiently in advance of such disclosure so that it may seek a protective order (or equivalent) with respect to such disclosure with which the other Party shall fully comply. (c) Return of Materials Any media containing Confidential Information furnished by one Party to the other shall be promptly returned by the receiving Party, accompanied by all copies thereof (together referred to herein as the “Materials”), within ___ (___) days after discussions regarding the proposed Acquisition have terminated OR The Parties agree to execute a separate Confidentiality Agreement attached hereto as Schedule “2” to observe their respective confidentiality obligations. 10. Exclusivity During the period beginning on the date this Term Sheet is executed and ending on the first of either the Closing Date or ______________, neither the Existing Shareholders nor XYZ shall cause to, directly or indirectly, other than in the ordinary course of business, or as contemplated by this Term Sheet: (a) solicit, initiate, or encourage any inquiries, discussions, or proposals from any other person or entity relating to a possible acquisition of any part of the business or of the capital stock, securities, or assets of any of XYZ; (ii) continue, solicit, encourage, or enter into negotiations or discussions relating to any such possible acquisition; (iii) furnish to any other person or entity any information (not already in the public domain) relating to XYZ or the Acquisition contemplated hereby, except as required by applicable law; or (iv) enter into or consummate any agreement or understanding providing for any such possible acquisition. ABC agrees to inform XYZ within a reasonable period of time following its failure to obtain the necessary acquisition financing or the necessary approvals of ABC’s investment committee, if any, and such notice shall terminate the exclusivity period described herein. © 2011 by Docstoc®, Inc. registered document proprietary, copy not 5 11. Conditions to Consummation of the Acquisition It is anticipated that the respective obligations of the Parties with respect to the Acquisition shall be subject to satisfaction of the following pre closing conditions: (a) Execution of the Purchase and Sale Agreement by all Parties; (b) The obtaining of all requisite authorizations and consents; (c) Absence of a material adverse change in the condition (financial or otherwise), business, properties, assets or prospects of XYZ; (d) Absence of pending or threatened litigation, investigations, or other matters affecting the Existing Shareholders (if applicable), XYZ, or the Acquisition; (e) Satisfactory completion by ABC of a due diligence investigation of XYZ; (f) True and correct representations and warranties as of the Closing Date; (g) Employment contracts with key managers of XYZ satisfactory to ABC as of the Closing Date; (h) No indebtedness outstanding in any form, other than the Acquisition Financing and as agreed between the Parties hereto as of the close of business on the business day before the Closing Date; (i) Working capital of XYZ sufficient to continue the business as contemplated by the business plans of the Existing Shareholders as determined by ABC in its sole discretion; (j) The preparation, in accordance with Generally Accepted Accounting Principles, of financial statements, which shall be current as of the last completed quarter, and any audit of financial statements of XYZ that may be required in order that the Acquisition may be completed in accordance with applicable law; and (k) _____________________________________________________ (Add other specific conditions) 12. Access to XYZ and ABC XYZ shall give ABC and its representatives full access to any personnel and all properties, documents, contracts, books, records, and operations of XYZ relating to its business. XYZ shall furnish ABC with copies of documents and with such other information as ABC may request including, but not limited to, documents and information regarding: (a) Royalties paid to or paid by XYZ and royalties payable to or payable by XYZ; © 2011 by Docstoc®, Inc. registered document proprietary, copy not 6 (b) Compensation paid or payable by XYZ to its directors and officers; (c) All documentation and information regarding intellectual property (including, but not limited to, pending patents and trade secrets) belonging to XYZ and the regulatory and ownership status thereof, including any Office Actions by the U.S. Patent and Trademark Office; (d) All agreements (including employment and consulting) to which XYZ is party; (e) All financial statements, budgets, and/or forecasts prepared by XYZ; (f) All accounting records of XYZ including books of original entry and any supporting documentation. 13. Governing Law The Acquisition Documents and this Term Sheet shall be governed by the laws of the State of __________. 14. Dispute Resolution Any controversy, conflict, or dispute of any nature arising out of or relating to the Acquisition contemplated herein shall be settled exclusively and finally by arbitration governed by __________ rules carried out in _______________. The Existing Shareholders and ABC shall each select one arbitrator to represent them, and the two arbitrators together shall select a third arbitrator for the proceedings. 15. Expenses Each Party shall bear its own expenses, however, if ABC advises the Existing Shareholders prior to __________ that it has received all necessary approvals, but the Closing does not occur by _____________, then the Existing Shareholders shall reimburse ABC for its reasonable documented out-of-pocket expenses up to a total of __________ dollars ($__). 16. DISCLAIMER OF LIABILITIES EXCEPT FOR BREACH OF ANY CONFIDENTIALITY, NON COMPETE, OR EXCLUSIVITY PROVISIONS AND/OR OF THE REPRESENTATIONS AND WARRANTIES MADE HEREIN, NO PARTY TO THIS TERM SHEET SHALL HAVE ANY LIABILITY TO ANY OTHER PARTY FOR ANY LIABILITIES, LOSSES, DAMAGES (WHETHER SPECIAL, INCIDENTAL, OR CONSEQUENTIAL), COSTS, OR EXPENSES INCURRED BY THE PARTY IN THE EVENT THE NEGOTIATIONS AMONG THE PARTIES ARE TERMINATED AS PROVIDED IN SECTION 8 ABOVE. EXCEPT TO THE EXTENT OTHERWISE PROVIDED IN ANY DEFINITIVE AGREEMENT ENTERED INTO BY THE PARTIES, EACH PARTY SHALL BE SOLELY RESPONSIBLE FOR ITS OWN EXPENSES, LEGAL FEES, AND CONSULTING FEES RELATED TO THE NEGOTIATIONS DESCRIBED IN THIS TERM SHEET, WHETHER OR NOT ANY OF THE © 2011 by Docstoc®, Inc. registered document proprietary, copy not 7 TRANSACTIONS CONTEMPLATED IN THIS TERM SHEET ARE CONSUMMATED. SIGNATURES: ABC [________] By: _____________________ Title:____________________ Existing Shareholders 1. By: _____________________ Title: ____________________ 2. By: _____________________ Title: ____________________ 3. By: _____________________ Title: ____________________ © 2011 by Docstoc®, Inc. registered document proprietary, copy not 8 SCHEDULE “1” ASSETS Assets include: 1. 2. 3. 4. 5. The following shall be excluded from the Acquisition: 1. 2. 3. 4. 5. © 2011 by Docstoc®, Inc. registered document proprietary, copy not 9 SCHEDULE “2” (Optional) Confidentiality Agreement © 2011 by Docstoc®, Inc. registered document proprietary, copy not 10
Pages to are hidden for
"Merger & Acquisition Term Sheet"Please download to view full document