The Term Sheet Share Purchase Agreement is a crucial preliminary document used in South African corporate transactions to establish the framework for share acquisitions. It serves as a roadmap for the final agreement, capturing key commercial terms and conditions while maintaining flexibility for detailed negotiations. This document type is particularly important in the South African context, where considerations such as B-BBEE requirements, exchange control regulations, and Companies Act compliance must be addressed early in the transaction process. The term sheet typically precedes the due diligence phase and helps parties align on fundamental terms before incurring significant transaction costs. While mostly non-binding (except for specific provisions like confidentiality and exclusivity), it forms the basis for drafting the definitive Share Purchase Agreement and related transaction documents.
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1. Parties: Identification of the seller(s), purchaser(s), and the target company
2. Background: Brief context of the transaction and current shareholding structure
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Overview of the proposed share purchase transaction
5. Purchase Price: Amount, currency, and payment structure for the shares
6. Payment Terms: Timing and method of payment, including any escrow arrangements
7. Conditions Precedent: Key conditions that must be met before the transaction becomes binding
8. Timeline: Key dates and deadlines for the transaction
9. Due Diligence: Scope and process of the due diligence investigation
10. Exclusivity: Period during which the seller cannot negotiate with other parties
11. Confidentiality: Obligations regarding transaction confidentiality
12. Costs: Allocation of transaction costs between parties
13. Binding Effect: Which terms are binding and which are subject to negotiation
1. Purchase Price Adjustment: Include when price may be adjusted based on completion accounts or other metrics
2. Earn-out Provisions: Include when part of purchase price is contingent on future performance
3. B-BBEE Considerations: Include when transaction affects B-BBEE status or compliance
4. Management Arrangements: Include when existing management will have ongoing roles or restrictions
5. Regulatory Approvals: Include when transaction requires competition or other regulatory clearances
6. Warranties and Indemnities: Include high-level scope when significant warranty protection is contemplated
7. Post-Completion Covenants: Include when specific post-sale obligations are required
8. Break Fee: Include when parties agree to compensation if transaction fails under specific circumstances
1. Share Capital Structure: Details of target company's current shareholding
2. Purchase Price Calculation: Formula or methodology for calculating final purchase price
3. Key Terms Definition: Detailed definitions of important commercial or technical terms
4. Transaction Timeline: Detailed schedule of key dates and milestones
5. Due Diligence Scope: List of areas to be covered in due diligence investigation
6. Required Consents: List of third-party and regulatory consents required
7. Material Contracts: List of key contracts requiring review or assignment
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