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Merger & Acquisition Term Sheet

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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.

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									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




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       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.




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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.




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        (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.




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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;




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         (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



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TRANSACTIONS CONTEMPLATED IN THIS TERM SHEET ARE CONSUMMATED.

SIGNATURES:

ABC [________]
By: _____________________
Title:____________________

Existing Shareholders
1.     By: _____________________

         Title: ____________________
2.       By: _____________________

         Title: ____________________
3.       By: _____________________

         Title: ____________________




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                                                SCHEDULE “1”
ASSETS

Assets include:

1.
2.
3.
4.
5.


The following shall be excluded from the Acquisition:

1.
2.
3.
4.
5.




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                                        SCHEDULE “2” (Optional)
Confidentiality Agreement




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