Framework
1. Parties and background
THIS SHARE PURCHASE AGREEMENT is made on 15 March 2029 at Mumbai among: (1) Ananya Rao and Vikram Menon (together the "Promoters"); (2) Marigold Capital Partners Fund II, a SEBI-registered Category II alternative investment fund acting through its investment manager Marigold Investment Advisors LLP (the "Investor"); (3) Ritika Iyer and Arjun Nair (together the "Existing Investors", and with the Promoters and the Investor, the "Sellers"); (4) Kaveri Industrial Software Limited, a company listed on the National Stock Exchange of India with its registered office at Mumbai (the "Purchaser"); and (5) Saffron Labs Private Limited, CIN U72900KA2023PTC171234 (the "Company"). WHEREAS: (A) the Company carries on the Business; (B) the Sellers are, or shall at Completion be, the legal and beneficial owners of the entire issued share capital of the Company following conversion of the Series A CCPS and the Seed CCPS and the cash-out of all Options under the Plan; (C) the Sellers have agreed to sell and the Purchaser has agreed to purchase the Sale Shares on the terms of this Agreement; and (D) the Company is a party to give the covenants expressed to be given by it. NOW THEREFORE the Parties agree as follows.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The opening page names everyone who signs: the two founders, the Series A fund (acting through its manager, because an AIF is a trust and cannot sign for itself), the two angels, the listed buyer and the company itself. The recitals tell the story in four lines: the company runs the business, the sellers will own every share once the preference shares convert and the options are cashed out, the sellers sell and the buyer buys, and the company signs only to give the promises that only a company can give.
What it means for you
Read the parties clause twice. If you are described as a seller, you are bound by every seller obligation in the document, including the warranties and the non-compete, and the schedule will put a rupee figure against your name. The company is a party so that it can procure the ESOP cash-out, register the transfer and hand over the books; it should not be giving warranties about itself, because after completion the buyer owns it and would be suing its own subsidiary. The recital on conversion matters: the buyer wants equity shares only, so the CCPS must become equity before the money moves.
What is normal
Every shareholder sells in a 100 percent sale; a buyer rarely accepts a stake below 90 to 95 percent from a strategic acquisition. The company is a party in roughly four out of five Indian SPAs, almost always for covenants only. A fund signs through its manager or trustee; expect its counsel to insist on wording that limits recourse to the fund's assets, not the manager's. Signing in the buyer's city is common when the buyer is listed, because its board approval and disclosure happen there.
How to negotiate it
Ask for the company to be a party only for the covenants in Clause 10 and Clause 23, with an express statement that it gives no warranties. Ask that the recital on conversion be matched by a condition precedent, so that you are not in breach if a CCPS holder delays its conversion notice. Ask for the Sellers' Representative (Clause 30) to be named here so that notices to one person bind all sellers only for the procedural matters listed.
2. Definitions and interpretation
In this Agreement: "Allocation Percentages" and "Optionholders" have the meanings in Clause 4.2; "Business" means the development, licensing and support of workflow software for manufacturers as carried on by the Company at Completion; "Completion" means completion of the sale and purchase of the Sale Shares under Clause 10; "Completion Accounts" means the statement of Net Debt and Working Capital of the Company as at the Completion Date prepared under Clause 5; "Earn-out" means the further consideration payable under Clause 7; "Equity Value" means ₹450,00,00,000; "Escrow Amount" means ₹45,00,00,000; "Fundamental Warranties" means the Warranties in Part A of Schedule 4 (title, capacity and the share capital); "Leakage" has the meaning in Clause 9; "Net Debt" means the Financial Debt of the Company less its Cash, each as defined in Schedule 3; "Sale Shares" means all 9,00,000 Equity Shares held by the Sellers at Completion; "Tax Warranties" means the Warranties in Part C of Schedule 4; "Working Capital Target" means ₹9,00,00,000; and "Warranties" means the Fundamental Warranties, the Business Warranties and the Tax Warranties. Headings do not affect interpretation; references to a statute include its re-enactment; "including" is without limitation; and the Schedules form part of this Agreement.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The dictionary of the agreement. Every capitalised word used later is pinned down here or in a schedule, including the ones that carry money: equity value (₹450 crore), escrow (₹45 crore), net debt, working capital target (₹9 crore) and the three families of warranties. The interpretation rules at the end stop arguments about headings, lists and statutes that have been renumbered since signing.
What it means for you
Most of the price fights in an Indian SPA are fought inside this clause and Schedule 3, not in the price clause. Whether an unpaid bonus, deferred revenue or a GST demand counts as debt decides how much of the ₹450 crore you actually receive. Read the definitions of Financial Debt, Cash and Working Capital line by line with your accountant, and check that the Business is defined no wider than what you actually do, because the same definition drives your non-compete in Clause 21.
What is normal
Thirty to sixty defined terms in a mid-market SPA, with Net Debt and Working Capital running to two or three pages of line items each. Debt-like items usually include unpaid tax, declared dividends, transaction bonuses, overdue creditors beyond 90 days and customer deposits; a reasonable buyer accepts that deferred revenue of a software company is a working capital item, not debt. Three families of warranties (fundamental, business, tax) is standard; two (fundamental and business) is seller-friendly.
How to negotiate it
Ask for Net Debt and Working Capital to be defined by reference to an agreed illustrative calculation attached as a schedule, using the last audited balance sheet, so that the buyer cannot add categories later. Ask that the Business be defined as carried on at Completion, not as contemplated in any plan. Ask that "Cash" include cash in transit and deposits with GST and customs authorities, and that deferred subscription revenue be listed as working capital, not debt.
3. Sale and purchase of the Sale Shares
3.1 On and subject to the terms of this Agreement, each Seller shall sell, and the Purchaser shall purchase, the Sale Shares set against that Seller's name in Schedule 2 with full title guarantee, free from all Encumbrances and together with all rights attaching to them at Completion, including the right to all dividends and distributions declared, made or paid on or after the Completion Date. 3.2 The Purchaser shall not be obliged to complete the purchase of any of the Sale Shares unless the purchase of all the Sale Shares is completed simultaneously. 3.3 Each Seller irrevocably waives, and shall procure the waiver of, every right of first refusal, right of first offer, tag-along right, pre-emption right and other restriction on transfer conferred on it by the Shareholders' Agreement dated 27 November 2026, the Seed Shareholders' Agreement dated 12 March 2024 or the Articles, in each case in respect of the transfer of the Sale Shares to the Purchaser (the Waivers). 3.4 The Sellers shall procure that the Board approves the registration of the transfer of the Sale Shares at Completion and does not exercise any power to refuse registration under the Articles or Section 58(2) of the Companies Act 2013.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The core promise: each seller sells its own shares, clean of any pledge, lien or option, with the dividends that come after completion going to the buyer. The buyer only has to complete if it gets every share at once, so no seller can hold out. Every seller gives up the transfer rights it holds under the two shareholders' agreements and the Articles for this one sale, and the sellers promise that the board will register the transfer rather than refuse it.
What it means for you
Nothing in this clause is negotiable in substance, but two things in it protect you. The all-or-nothing rule in 3.2 means an angel who goes quiet cannot leave you selling alone; it also means you need every signature, so start chasing the angels early. The waiver in 3.3 is the reason the Series A SHA's right of first refusal and tag-along do not fire on this sale; without it, Marigold could demand to buy your shares at the buyer's price and the board could refuse to register the transfer under the Articles.
What is normal
Full title guarantee and freedom from encumbrances is universal. Simultaneous completion of all shares is standard in a 100 percent sale; in a majority sale the buyer instead takes a drag-along from the SHA to force the minority. A standalone waiver deed signed before the SPA is more common than a waiver inside the SPA, because the buyer's diligence wants to see it done before it commits; roughly 80 to 90 percent of deals we see use the separate deed and repeat the waiver here.
How to negotiate it
Ask for 3.2 to cut both ways: no seller is obliged to complete unless the buyer pays every seller at the same time. Ask for the dividend cut-off to exclude any dividend declared before signing and paid after, if the company has one planned (it then becomes Permitted Leakage in Clause 9). Ask that any pledge over a founder's shares securing a personal loan is released against payment at completion rather than being a condition you must satisfy beforehand.
4. Consideration and allocation among the Sellers
4.1 The consideration payable by the Purchaser shall be the Equity Value, as adjusted under Clause 5 (the "Purchase Price"), together with the Earn-out, if any, under Clause 7. 4.2 The Purchase Price, the Escrow Amount and any Earn-out shall be shared in these percentages of the Fully Diluted Share Capital of 10,00,000 Equity Shares (the "Allocation Percentages"): Ananya Rao 29.75 percent; Vikram Menon 27.75 percent; the Investor 22 percent; Ritika Iyer and Arjun Nair 10.5 percent together, as set out in Schedule 2; and the holders of Options under the Plan (the "Optionholders") 10 percent. The Sellers confirm that these accord with Article 12 of the Articles, the Series A CCPS and the Seed CCPS having converted because their as-converted entitlement exceeds their liquidation preferences. 4.3 Each Seller's Allocation Percentage of the Purchase Price and of any Earn-out is the consideration for its Sale Shares. The Optionholders' Allocation Percentage of the Purchase Price, less the aggregate exercise price of ₹1,00,00,000 and their share of the Escrow Amount, shall be paid by the Purchaser to the Company at Completion, and their share of each escrow release and of any Earn-out shall likewise be paid to the Company, in each case for payment under Clause 23; no such amount shall be included in Net Debt. 4.4 No Seller shall have any claim against another Seller or the Purchaser in respect of the allocation. 4.5 All payments under this Agreement shall be made in Indian Rupees by electronic transfer to the accounts notified in Schedule 2.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The price is ₹450 crore adjusted by the completion accounts, plus whatever the earn-out produces, and the price, the escrow and the earn-out are all shared in fixed allocation percentages of the fully diluted capital: Ananya 29.75, Vikram 27.75, Marigold 22, the angels 10.5 together and the option holders 10. That is what the Articles' waterfall gives, because the as-converted value of each class of preference shares (Marigold's ₹90 crore against its ₹20 crore preference; the angels' ₹47.25 crore against a seed preference of no more than about ₹3 crore) is more than its preference, so every holder converts. The option holders' 10 percent, less the ₹1 crore of exercise price, is paid to the company to pass on to them.
What it means for you
At ₹450 crore the preference stack is irrelevant: every class is better off converting, so everything is shared pro rata of the fully diluted capital, the 10 percent option pool included. At a lower price that is not true. If the offer had been ₹90 crore, Marigold's ₹20 crore preference would have been worth more than its 20 percent, and the founders' share would have fallen below pro rata. Model the waterfall at three prices before you accept any headline number. Then check the option money: the option holders' 10 percent of the price funds their cash-out, so the same payout must not appear again in net debt, or the sellers pay for it twice.
What is normal
Allocation strictly per the Articles' waterfall, confirmed by the company's auditors, is standard; the buyer wants it in a schedule so that it pays one number per holder and is never caught between them. Marigold's 1x non-participating preference converts at any price above ₹100 crore, so a sale at 4.5x the Series A post-money is comfortably in conversion territory. Paying option holders through the company's payroll, with TDS, is the norm; where every option is cashed out, the holders usually share the escrow and earn-out pro rata, as here, and deducting the same payout as a debt-like item as well is the double count to watch for.
How to negotiate it
Ask for the auditors' certificate on the allocation percentages to be a completion deliverable from the company, not a seller warranty. Ask for Schedule 3 to list the option payments funded under Clause 4.3 as excluded items, so that no version of the completion accounts can deduct them again. Check that Clause 5.5 shares any change in the price in the same percentages, option holders included, rather than leaving it with the founders first. And ask Kaveri to pay the option holders' money to the company on the day it pays you, so that their payroll run is not left waiting.
5. Price adjustments: cash-free debt-free and Completion Accounts
5.1 The Equity Value has been agreed on the basis that the Company has no Cash and no Financial Debt at Completion and that its Working Capital equals the Working Capital Target (a cash-free, debt-free basis). 5.2 Within 60 days after the Completion Date the Purchaser shall procure that the Company prepares and delivers to the Sellers' Representative draft Completion Accounts stating the Net Debt and the Working Capital as at the Completion Date, prepared in accordance with the accounting policies in Schedule 3 applied consistently with the audited accounts for FY 2027-28. 5.3 The Purchase Price shall be the Equity Value less Net Debt (or plus Net Cash) and plus the amount by which Working Capital exceeds the Working Capital Target or less the amount by which it falls short. 5.4 The Sellers' Representative may dispute the draft within 30 days of receipt; a dispute not resolved within 20 Business Days thereafter shall be referred to an independent chartered accountant nominated by agreement or, failing agreement, by the President of the Institute of Chartered Accountants of India, who shall act as expert and not as arbitrator and whose determination shall be final save for manifest error. 5.5 Any adjustment shall be paid within 10 Business Days of the Completion Accounts becoming final and shared in the Allocation Percentages: to or by each Seller for its own share and, for the Optionholders' share, to the Company under Clause 4.3 or, for a reduction, out of their share of the Escrow Amount.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The headline ₹450 crore assumes a company with no cash, no debt and a normal level of working capital (₹9 crore). After completion the buyer, who now controls the company, draws up accounts as at the completion date. Debt reduces the price rupee for rupee; cash increases it; working capital above or below the target moves it either way. You have 30 days to object, and a disagreement goes to an independent chartered accountant acting as an expert, whose number is final.
What it means for you
This clause is where ₹450 crore becomes, say, ₹441 crore. The risk for you is that the buyer prepares the accounts, so every judgement (a doubtful debtor, an accrued bonus, a provision for the GST demand) goes against you unless the accounting policies in Schedule 3 pin it down. A locked box is the seller-friendly alternative: the price is fixed on a recent balance sheet, say 31 December 2028 reviewed by the auditors, nothing is adjusted later, and the buyer is protected by a no-leakage promise running from that date, a wider version of the one in Clause 9. Ask your accountant to run both mechanisms against last year's numbers before you choose.
What is normal
Completion accounts in 60 to 90 days with a 30-day review window is the Indian norm; locked boxes appear in perhaps a quarter of mid-market deals, more often when a fund is the main seller. A working capital target set at the 12-month average, not the year-end peak, is the fair position. Expert determination by a chartered accountant nominated by the ICAI president, acting as expert not arbitrator, is the standard fallback. A collar (no adjustment within plus or minus 2 to 5 percent of the target) appears in about a third of deals.
How to negotiate it
Ask for a locked box on a 31 December 2028 balance sheet reviewed by the auditors, with a daily ticking fee of 6 to 8 percent a year on the equity value from the box date, which pays you for the cash the business generates until completion. If the buyer insists on completion accounts, ask for a 5 percent collar on the working capital adjustment, a ban on new provisions that the FY 2027-28 auditors did not require, and a rule that the accounting policies in Schedule 3 override Ind AS where they conflict.
6. Escrow
6.1 At Completion the Purchaser shall deposit the Escrow Amount of ₹45,00,00,000 with the Escrow Agent under the Escrow Agreement, to be held as security for Claims against the Sellers under this Agreement and for any reduction of the Purchase Price under Clause 5.5. 6.2 The Escrow Amount shall be borne by each Seller and by the Optionholders in their Allocation Percentages, Ananya Rao's share being ₹13,38,75,000, and each release shall be made in the same percentages, the Optionholders' share being paid to the Company under Clause 4.3 and any amount held back for a Claim being held back only from the share that bears it. 6.3 The Escrow Agent shall release: (a) on the date falling 12 months after the Completion Date, 50 percent of the Escrow Amount less the amount of any Claims notified in writing to the Sellers' Representative before that date and not yet resolved; and (b) on the date falling 18 months after the Completion Date, the balance less the amount of any such unresolved Claims, which shall be released on resolution of the relevant Claim. 6.4 Releases shall be made against joint written instructions of the Purchaser and the Sellers' Representative, which each shall give within 5 Business Days of the relevant date, failing which the Escrow Agent shall act on a final arbitral award or court order. 6.5 Interest accruing on the Escrow Amount shall follow the principal. 6.6 A Seller's share of the Escrow Amount shall be the first recourse of the Purchaser for any Claim against that Seller, and no Seller shall pay any amount for a Claim until its share is exhausted or released; the Optionholders' share shall answer only for the Specific Indemnities and any reduction under Clause 5.5.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
₹45 crore of the price, 10 percent, goes to a bank acting as escrow agent instead of to the sellers, and every holder funds it pro rata, the option holders' 10 percent included. Half comes out after 12 months and the rest after 18, in each case minus any claims the buyer has notified but not yet settled; the held-back part is released when the claim is resolved. Both sides must sign the release instruction, and if one refuses, the agent acts on an award or court order. Interest follows the money, and the buyer must use a seller's own escrow share before it can ask that seller to pay.
What it means for you
Escrow is the buyer's insurance that its warranty claims are paid without a lawsuit. For you it is ₹13.39 crore (Ananya's share) that you will not see for up to 18 months, on which you still pay capital gains tax for FY 2029-30, the year of completion. The two clauses that protect you are 6.3 (release is automatic except for notified claims, so the buyer cannot simply sit on the money) and 6.6 (your escrow share is the first recourse, so the buyer cannot keep it intact and sue you personally). Watch for "notified claims" turning into a long list of vague notices days before each release date.
What is normal
Escrow of 5 to 15 percent of the price for 12 to 24 months is the Indian range; 10 percent for 18 months is the mid-point. A split release at 12 and 18 months, or at 12 and 24 months, is standard. First-recourse language appears in most seller-friendly drafts and about half of all deals. Where the buyer or any seller is non-resident, Rule 9 of the FEMA (Non-debt Instruments) Rules 2019 caps escrow and deferred consideration at 25 percent of the total consideration for up to 18 months from the date of the transfer agreement, not from completion: this escrow would then have to be released by 15 September 2030, 18 months after signing, not on 30 October 2030.
How to negotiate it
Ask for claims that count against a release to be ones notified with reasonable detail and a good-faith estimate of the amount, and for any claim not pursued by arbitration within 6 months of notice to drop out. Ask for the agent to release on the written instruction of either party once an award is final, so that the buyer cannot stall. Ask for the escrow to be the sole recourse for business warranty claims, so your personal exposure after escrow is limited to title, tax and fraud, and for the escrow to be invested in a fixed deposit so interest is not lost.
7. Earn-out
7.1 The Purchaser shall pay an Earn-out equal to ₹2.50 for every ₹1 by which the annual recurring revenue of the Business for FY 2029-30 (the "ARR", computed as set out in Schedule 5) exceeds ₹60,00,00,000, subject to a maximum Earn-out of ₹50,00,00,000, in the Allocation Percentages to each Seller and, for the Optionholders' share, to the Company under Clause 4.3. 7.2 During the period from Completion to 31 March 2030 (the "Earn-out Period") the Purchaser shall, and shall procure that the Company shall: (a) carry on the Business in the ordinary course as a separately identifiable unit and maintain separate management accounts for it; (b) not divert customers, contracts or revenue of the Business to any other member of the Purchaser's group; (c) fund the Business in accordance with the budget in Schedule 5; and (d) not change the pricing of the Business's software other than in the ordinary course (together the Conduct Covenants). 7.3 If during the Earn-out Period the Purchaser materially breaches a Conduct Covenant and does not remedy the breach within 30 days of notice, or disposes of or ceases to carry on the Business, the maximum Earn-out shall become immediately payable. 7.4 The Purchaser shall deliver an ARR statement with the Company's audited accounts for FY 2029-30 and in any event by 30 June 2030; any dispute shall be determined under the mechanism in Clause 5.4; and the Earn-out shall be paid by 31 July 2030.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
A further payment of up to ₹50 crore, shared like the price with the option holders included, if recurring revenue in the first full year after the sale beats ₹60 crore: ₹2.50 for every ₹1 above that, so the cap is reached at ₹80 crore of ARR. In exchange the buyer promises to run the business as a separate unit, not to move customers to its own products, to fund the budget and not to change pricing. If it breaks those promises or sells the business, the full ₹50 crore falls due at once. The ARR figure comes with the audited accounts, disputes go to the independent accountant, and payment is due by 31 July 2030.
What it means for you
An earn-out is a bet on numbers you will no longer control. The buyer owns the company from 30 April 2029; you are an employee. Without the conduct covenants in 7.2 the buyer could fold your product into its own suite, book the revenue elsewhere and pay nothing. The acceleration in 7.3 is the real protection: the cost of breaking the covenants is the full ₹50 crore. Also check how ARR is defined in Schedule 5 (contracted monthly recurring revenue multiplied by 12 at 31 March 2030, excluding one-off implementation fees) and that the earn-out is taxed as capital gains, which this page treats as arising in the year of transfer.
What is normal
Earn-outs of 10 to 30 percent of total value over 12 to 36 months are the Indian norm; one year on a revenue metric is the simplest and the least open to manipulation. A linear formula above a threshold, with a cap, is standard. Conduct covenants appear in most well-advised deals but acceleration on breach in fewer than half; the buyer's usual counter is a right to pay the cap early and be released. Revenue metrics favour sellers; EBITDA metrics favour buyers because costs can be allocated to the unit.
How to negotiate it
Ask for revenue, not EBITDA, as the metric, and for the ARR definition to count contracts signed by 31 March 2030 even if billing starts later. Ask for acceleration if either founder is dismissed without cause or if the buyer changes the business's reporting line. Ask for a catch-up: if ARR is between ₹55 crore and ₹60 crore, a proportion of the earn-out is still paid. Ask that the Purchaser cannot set off business warranty claims against the earn-out (Clause 19) and that disputes go to the expert, not to a three-member tribunal.
Conditions and completion
8. Conditions precedent
8.1 Completion is conditional on (the "Conditions"): (a) the written consent of each counterparty to a change-of-control contract listed in Part A of Schedule 6, including the agreement with Tungabhadra Forge Industries Limited (the Change of Control Consents); (b) delivery of the Waivers signed by each Seller; (c) the conversion of all Series A CCPS and Seed CCPS into Equity Shares credited to the demat accounts of their holders; (d) execution of a deed terminating, with effect from Completion, the Shareholders' Agreement and the Seed Shareholders' Agreement referred to in Clause 3.3 (the SHA Termination Deed); (e) if Section 186 of the Companies Act 2013 so requires, approval of the purchase by a special resolution of the shareholders of the Purchaser, whose board approved this Agreement at its meeting on the date of this Agreement; (f) execution by each Promoter of an Employment Agreement in the agreed form under Clause 22; and (g) no Material Adverse Change (as defined in Schedule 6) having occurred. 8.2 No notification to the Competition Commission of India is required, and no such approval is a Condition. 8.3 The Sellers shall use reasonable endeavours to satisfy Conditions (a) to (d) and (f), and the Purchaser Condition (e), by 30 June 2029 (the "Long Stop Date"). 8.4 The Purchaser may waive any Condition other than (e); if any Condition is not satisfied or waived by the Long Stop Date, the Purchaser or the Sellers' Representative may terminate this Agreement by notice.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Completion happens only when seven things are true: the customers whose contracts can be ended on a change of control, Tungabhadra Forge among them, have consented; every seller has signed the waivers; all the preference shares have converted into equity; both shareholders' agreements are terminated from completion; Kaveri's shareholders have passed a special resolution, if Section 186 requires one, its board having approved at signing; both founders have signed their new employment agreements; and no material adverse change has happened. No competition filing is needed. If any condition is still open on 30 June 2029, either side can walk away.
What it means for you
The six weeks between signing on 15 March and completion on 30 April are your most exposed period: you are bound, and the buyer has conditions. Close the ones you control (the waivers, the conversion, the SHA termination deed, your employment agreements) at signing, signed and held by counsel, so that only customer consents and Kaveri's approvals remain. Then read condition (e): Kaveri's board approved at signing, but if the purchase takes Kaveri past its Section 186 investment limits, a shareholder vote still stands between you and the money, and a listed company needs weeks to hold one. And read the MAC in Schedule 6: here it is a fall of 15 percent or more in recurring revenue against 28 February 2029, not anything the buyer dislikes.
What is normal
A gap of 4 to 12 weeks between signing and completion is typical for an Indian private-company sale with no CCI filing, and 3 to 6 months where CCI approval is needed. Long stop dates sit 2 to 4 months after the target completion date. Change-of-control consents are usually limited to the top 5 to 15 contracts by revenue. A MAC defined by an objective test (a fall of 10 to 20 percent in revenue or ARR) is the seller-friendly form; a general "material adverse effect" is the buyer's. The small-target exemption notification runs to March 2027, so confirm it has been renewed before relying on it in 2029.
How to negotiate it
Ask Kaveri to show you from its last audited balance sheet whether the ₹500 crore commitment needs a special resolution under Section 186 at all; if it does, ask for the notice of the meeting to go out within a week of signing, so that the vote falls well inside the long stop date. Ask that a customer consent counts as given if the counterparty has not objected within 15 Business Days of notice. Ask that the MAC be tested only at completion and only on the objective revenue test. Ask for one extension of the long stop date, of 30 days at most, available only if a customer consent is the sole missing condition.
9. Pre-completion conduct and Leakage
9.1 From the date of this Agreement until Completion the Promoters shall procure that the Company carries on the Business in the ordinary course and does not, without the Purchaser's prior written consent (not to be unreasonably withheld): (a) issue, redeem or buy back any security, other than on conversion of the Series A CCPS and Seed CCPS; (b) incur borrowings or capital expenditure exceeding ₹1,00,00,000 in aggregate; (c) enter into, vary or terminate any contract with an annual value exceeding ₹2,00,00,000 or any contract with a Seller; (d) grant any Option or change the remuneration of any employee earning more than ₹50,00,000 a year; or (e) commence or settle any proceeding. 9.2 Each Seller undertakes that from the date of this Agreement until Completion there shall be no Leakage to it or its Affiliates other than Permitted Leakage. "Leakage" means any dividend or distribution, bonus, transaction fee, payment, waiver or transfer of assets by the Company for the benefit of a Seller or its Affiliates, and any tax payable on it; "Permitted Leakage" means the remuneration and expense reimbursements of the Promoters at the rates in force on the date of this Agreement and any payment approved in writing by the Purchaser. 9.3 Each Seller shall repay to the Purchaser, rupee for rupee, any Leakage received by it or its Affiliates and not reflected in the Completion Accounts, if notified within 6 months after Completion.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Two sets of promises for the six weeks from signing to completion. First, the founders keep the company running normally and ask Kaveri before any big step: new shares, borrowing or capex above ₹1 crore, contracts above ₹2 crore a year or with a seller, option grants, pay changes above ₹50 lakh, or lawsuits. Second, every seller promises that no value leaks from the company to it between signing and completion, other than the founders' normal pay and anything Kaveri approves, and must repay rupee for rupee any leakage it received that the completion accounts do not already catch, if Kaveri claims within 6 months of completion.
What it means for you
The conduct list freezes the company for six weeks, so list what is coming before you sign: a big customer renewal, a senior hire, the April increments, and get each one approved in the agreement. The leakage promise still matters in a completion accounts deal: a dividend or a fee paid in cash shows up in net debt, but a fleet of laptops sold to a founder's company at book value or an angel's loan waived does not. In a locked-box deal the same promise would run from the box date, months before signing; here it starts at signing. Check your own pay: permitted leakage fixes it at the rates on the signing date, so an April increase needs Kaveri's written approval.
What is normal
A conduct list of 10 to 20 restricted actions is standard, with rupee thresholds of ₹50 lakh to ₹2 crore for a company of this size, and consent "not to be unreasonably withheld" in most well-advised drafts. Leakage claims must usually be notified within 6 to 12 months of completion, are always rupee for rupee, and sit outside the de minimis, basket and warranty cap; each seller repays only what it received. Permitted leakage schedules typically list 3 to 8 items: salaries, reimbursements, agreed bonuses and disclosed deal costs.
How to negotiate it
Ask for deemed consent: if Kaveri has not replied within 5 Business Days of a written request, the step is approved. Ask for a list of pre-approved actions attached at signing, covering the renewals in the pipeline, the planned hires and the annual increments. Ask that permitted leakage include the founders' pay at current rates, the budgeted FY 2028-29 bonuses and the company's share of the deal costs disclosed at signing. Ask that a leakage claim be limited to the amount actually received, net of any tax the recipient paid on it.
10. Completion
10.1 Completion shall take place at Mumbai on 30 April 2029 or, if later, on the fifth Business Day after the last Condition is satisfied or waived, but not after the Long Stop Date (the "Completion Date"). 10.2 At Completion: (a) the Purchaser shall pay each Seller its Allocation Percentage of the Purchase Price as estimated under Schedule 3, less its share of the Escrow Amount, to its account in Schedule 2, the amount due to the Company at Completion under Clause 4.3, and the Escrow Amount to the Escrow Agent; (b) the Purchaser shall procure the repayment of the Company's bank facility and the release of the personal guarantees given for it by the Promoters; (c) each Seller shall deliver to its depository participant a delivery instruction slip for the transfer of its Sale Shares to the Purchaser's demat account, together with the SHA Termination Deed; (d) the Board shall meet to approve and register the transfer of the Sale Shares, appoint the Purchaser's nominees as directors and accept the resignations of the directors named by the Purchaser; and (e) the Promoters shall hand over the statutory registers, the books of account and the credentials for the Company's bank, tax and MCA portal accounts. 10.3 The Company shall file Form DIR-12 for each change of director within 30 days. 10.4 The steps in Clause 10.2 are interdependent and shall be treated as simultaneous, and Completion shall be recorded in a closing memorandum signed by the Purchaser and the Sellers' Representative.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Completion is the day the money and the shares move, set for 30 April 2029 at Mumbai, or five Business Days after the last condition if later, but never after the long stop date. Kaveri pays each seller its share of the estimated price less its escrow share, sends the company the option holders' money for the payroll, pays ₹45 crore to the escrow agent and clears the company's bank loan so that the founders' guarantees are released. Each seller signs a delivery instruction slip moving its shares to Kaveri's demat account. The board registers the transfer and changes the directors, the books and passwords are handed over, and a closing memorandum records it all.
What it means for you
Agree the order on paper. Your counsel should hold the signed delivery instruction slips and release them only when the bank confirms the money is in every seller's account, because once the depository moves the shares there is nothing left to hold back. The shares are dematerialised, so no transfer deed in Form SH-4 is needed; the depository collects stamp duty of 0.015 percent of the consideration (roughly ₹6 lakh to ₹7 lakh here), which Clause 25 puts on Kaveri. The guarantee release is your item: until the bank signs it, you guarantee a loan of a company you no longer own.
What is normal
Completion 4 to 8 weeks after signing is typical, and a virtual completion by exchange of signed documents and payment confirmations, with the board meeting by video conference, is now common. Delivery instruction slips are processed by the depository participants within 1 to 2 days. Form DIR-12 is filed within 30 days of each appointment and resignation. A funds-flow statement agreed 2 to 3 Business Days ahead, and a closing memorandum signed by both sides' counsel, are standard in deals above ₹100 crore.
How to negotiate it
Ask for the funds-flow statement (every payee, amount and bank account) to be agreed 3 Business Days before completion and attached to the closing memorandum. Ask that your counsel releases the delivery instruction slips only against the bank's confirmation of credit. Ask for the bank's guarantee release letter to be a completion deliverable of Kaveri, with an indemnity under Clause 11 for any guarantee not released. Ask that each resigning director receives a letter from the company confirming that it has no claim against them.
11. Post-completion covenants
11.1 The Purchaser shall procure that the Company makes, within the prescribed time, every filing consequent on Completion, including the Form DIR-12 filings under Clause 10.3, the amendment of its GST registration within 15 days and, if its registered office is moved out of Karnataka, the approvals required under Section 13 of the Companies Act 2013; and the Sellers shall sign any document reasonably required for those filings. 11.2 Until the end of the Earn-out Period the Purchaser may re-brand the products of the Business only in a manner that keeps them separately identifiable for the purposes of Clause 7.2. 11.3 Within 30 days after Completion each Promoter shall assign to the Company, without further consideration, every domain name, social media account and trade mark application relating to the Business that is held in its own name. 11.4 For 7 years after Completion the Purchaser shall procure that the Company preserves its books and records for periods before Completion and gives each Seller reasonable access to them, on reasonable notice, for its own tax and regulatory purposes. 11.5 If any guarantee, indemnity or security given by a Seller for the obligations of the Company has not been released at Completion, the Purchaser shall procure its release within 30 days and shall indemnify that Seller against all liability under it until it is released.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
After completion Kaveri makes sure the company files everything the change of ownership triggers: the director changes on Form DIR-12 within 30 days, the GST registration update within 15 days, and the Regional Director route if the registered office moves out of Karnataka. Until 31 March 2030 Kaveri can re-brand Saffron's products only in a way that keeps them separately identifiable for the earn-out. The founders hand over any domains, social handles or trade mark applications held in their own names. You get access to the old books for 7 years, and any guarantee missed at completion must be released within 30 days.
What it means for you
Most of this is Kaveri's housekeeping, but three items are yours. The re-branding limit protects the earn-out: once Saffron's products are folded into Kaveri's suite, nobody can measure the revenue the earn-out is paid on. Records access protects your tax position: you will answer questions on your FY 2029-30 capital gains, and the evidence sits in the company's books. The guarantee clause protects your personal assets: a guarantee missed at completion, to a landlord or for a customer's performance bond, survives the sale of your shares, so Kaveri must release it or stand behind you until it does.
What is normal
Records access of 6 to 8 years is standard, matching the tax survival period and the rule in Section 128(5) of the Companies Act 2013 that books of account are kept for 8 financial years. Release of seller guarantees within 30 to 90 days, with an indemnity until then, is the norm. Earn-out deals commonly limit re-branding or integration until the earn-out period ends; buyers usually accept a separately identifiable test rather than a ban. A founders' IP clean-up within 15 to 30 days is standard. No Form FC-TRS is needed here because every party is resident.
How to negotiate it
Ask for a list of every guarantee you have given for the company (bank, landlord, customer) to be attached at signing, so that none is missed. Ask that the records clause cover the company's tax assessment files and survive any merger of the company into Kaveri. Ask that any re-branding before 31 March 2030 need the consent of the sellers' representative, not merely keep the products identifiable. Ask to keep the right to file Form DIR-11 yourself if you resign as a director, so that the MCA record does not depend on Kaveri's filing.
Warranties
12. Sellers' Warranties
12.1 Each Seller severally warrants to the Purchaser, in respect of itself and its own Sale Shares only, that each of the Fundamental Warranties in paragraphs 1 (title) and 2 (capacity) of Part A of Schedule 4 is true and accurate. 12.2 The Promoters warrant to the Purchaser that each of the warranties in paragraph 3 (share capital) of Part A and in Part B of Schedule 4 (the Business Warranties) is true and accurate. The Business Warranties cover the accounts, material contracts, intellectual property, data protection (including the Digital Personal Data Protection Act 2023), employees (including the Labour Codes), litigation, regulatory compliance, insurance, related-party transactions and solvency; the Tax Warranties are given under Clause 13. 12.3 The Warranties are given on the date of this Agreement and shall be deemed repeated immediately before Completion by reference to the facts then subsisting. 12.4 The Warranties are qualified by the matters fairly disclosed under Clause 14 and limited by Clauses 16 and 20. 12.5 Neither the Investor nor any Existing Investor gives any warranty other than under Clause 12.1. 12.6 The Purchaser acknowledges that it has not relied on any representation, warranty or statement not set out in this Agreement, save in the case of fraud.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Two layers of promises about the facts. Every seller promises, for its own shares only, that it owns them cleanly and has the power to sell. Only the two founders promise the facts about the company: its share capital, and a long schedule on the accounts, contracts, IP, data protection, employees, litigation, compliance, insurance, related parties and solvency. The promises are made at signing and repeated just before completion. Marigold and the angels promise nothing more, and Kaveri confirms that it relied only on what is written in the agreement.
What it means for you
This clause decides whose money is at risk. The business warranties make the two of you the insurers of six years of company history, up to the ₹51.75 crore cap between you, so read Schedule 4 line by line against what you know. Marigold will not sign business warranties: a fund cannot leave its investors' money exposed to a company it did not run, and buyers accept that. The repetition at completion is the trap: anything that goes wrong between 15 March and 30 April becomes a breach unless you disclose it, which is why the update right in Clause 14 matters.
What is normal
Title and capacity from every seller, and business warranties only from the founders and management, is the Indian norm when a fund sells; funds give business warranties only rarely, and then usually through warranty and indemnity insurance. A warranty schedule of 15 to 30 pages and 100 to 200 paragraphs is typical for a ₹300 crore to ₹500 crore software company. Repetition at completion is standard; seller-friendly deals limit it to the fundamental warranties. A non-reliance clause like 12.6 appears in almost every SPA.
How to negotiate it
Ask for a knowledge qualifier on the warranties about things you cannot control: customers' own compliance, third-party IP claims, employees' past conduct. Ask that the repetition at completion be read against the disclosure letter as updated for matters arising after signing. Ask for W&I insurance if Kaveri wants a business warranty cap above 20 percent; a policy costs roughly 1 to 2 percent of the cover. Ask that the share capital warranty be supported by a certificate from your company secretary, so that you are not warranting six years of filings from memory.
13. Tax Warranties and Tax Covenant
13.1 The Promoters warrant to the Purchaser that each of the warranties in Part C of Schedule 4 (the Tax Warranties) is true and accurate, including that the Company has filed every return, and paid every Tax (as defined in that Part) and every amount of tax deducted at source, when due. 13.2 The Promoters shall pay to the Purchaser an amount equal to any Tax of the Company arising from any income, transaction or event on or before Completion, except to the extent provided for in the Completion Accounts or covered by Clause 17 (the Tax Covenant). 13.3 No claim shall lie under this Clause for Tax arising from a change in law after Completion, from a voluntary act of the Purchaser or the Company after Completion outside the ordinary course, or from the lapse of carried-forward losses under Section 79 of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026), which is governed by Clause 26. 13.4 The Purchaser shall procure that the Company notifies the Sellers' Representative of any notice, assessment or demand relating to a period before Completion within 10 Business Days, allows the Promoters at their cost to conduct the response and any appeal, and does not settle, concede or withdraw it without the consent of the Sellers' Representative. 13.5 Claims under this Clause shall be notified within 7 years after the Completion Date.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The founders promise that the company's tax affairs are clean: every return filed, every tax paid and every rupee of TDS deposited on time, across income-tax and GST. Separately, they promise to pay Kaveri for any tax for the period up to completion that was not provided for in the completion accounts or covered by the specific indemnities. Changes in law, Kaveri's own later actions and the lapse of losses under Section 79 are excluded. Kaveri must send you any tax notice within 10 Business Days and let you run the defence. Claims can be made for 7 years.
What it means for you
The tax covenant is a rupee-for-rupee promise, not a warranty: Kaveri does not have to show that the price was affected, only that tax for a period before completion has become payable. That makes 13.4 the clause that matters. A reassessment notice for FY 2026-27 will land with Kaveri's tax team, who have no reason to fight a demand you will pay; you need control of the reply, the appeal and any settlement. Seven years covers the reopening window under Section 149 of the Income-tax Act 1961: up to five years and three months from the end of the assessment year where the escaped income is ₹50 lakh or more. The Income-tax Act 2025 keeps the same reach, counted from the end of the tax year.
What is normal
Tax warranties and a tax covenant surviving 6 to 8 years, 7 being the most common, is the Indian norm, because income-tax reopening runs up to five years and three months and a GST notice under Section 74A of the Central Goods and Services Tax Act 2017 can issue up to 42 months after the annual return is due. Tax claims usually share the business warranty cap; a separate tax cap of 30 to 50 percent of proceeds appears where diligence found real tax risk. Seller conduct of pre-completion disputes is standard where the seller pays.
How to negotiate it
Ask that refunds and tax credits for periods before completion that the company receives later be paid to the sellers, or at least set against tax covenant claims. Ask to conduct every pre-completion dispute you fund, including paying the pre-deposit for a first GST appeal (10 percent of the disputed tax under Section 107(6) of the CGST Act), with any refund of it coming back to you. Ask that the covenant exclude tax caused by Kaveri's post-completion restructuring, such as merging the company into Kaveri. Ask that any later tax saving from the same item reduce the claim.
14. Disclosure and knowledge
14.1 The Warranties, other than the Fundamental Warranties, are qualified by the matters fairly disclosed in the Sellers' letter to the Purchaser of the date of this Agreement (the Disclosure Letter). A matter is fairly disclosed only if disclosed in enough detail for a reasonable purchaser to identify its nature, scope and effect. 14.2 The general disclosures shall be limited to the data room as indexed on 10 March 2029, a copy of which was delivered to the Purchaser at signing, and the Company's public records on the Ministry of Corporate Affairs portal on that date. 14.3 Before Completion the Sellers' Representative may deliver a supplementary disclosure letter in respect of matters first arising after the date of this Agreement and not resulting from a breach of Clause 9; it shall qualify only the Warranties as repeated at Completion, and the Purchaser may terminate this Agreement if any matter so disclosed is a Material Adverse Change. 14.4 Where a Warranty is qualified by the awareness of the Promoters, they shall be treated as aware of what they would have known after due and careful enquiry of the Company's heads of finance, sales and people. 14.5 The rights of the Purchaser shall not be affected by any investigation made by or for it, or by any information of which it has knowledge, other than matters fairly disclosed in the Disclosure Letter.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The founders' warranties are read subject to what the sellers tell Kaveri in the disclosure letter, but only where a disclosure is specific enough for a reasonable buyer to see the problem and its size. The general disclosures are the data room as indexed on 10 March 2029 and the company's public MCA records. Matters arising after signing can be disclosed before completion; they qualify only the repeated warranties, and Kaveri can walk away if one is a MAC. 'Aware' means what you would know after asking your heads of finance, sales and people. Kaveri's own diligence never reduces its claims.
What it means for you
The disclosure letter is the most valuable document you will write in this deal, and the one founders rush. Every matter disclosed properly is a claim that cannot be brought. Fair disclosure means specific: "GST demand of ₹42 lakh for FY 2026-27, appeal pending, papers in folder 6.3" works; "see the data room" does not. Clause 14.5 protects the buyer: Kaveri can sue on a problem its own diligence found unless it is in the letter. Indian buyers want this in writing because the exception to Section 19 of the Indian Contract Act 1872 can deny a remedy to a party that could have found the truth with ordinary diligence.
What is normal
Specific disclosures against numbered warranties, plus general disclosure of the data room and public records, is the Indian norm; buyers often resist the whole data room as a general disclosure, and sellers in competitive auctions usually win the point. Supplementary disclosure that qualifies the repeated warranties is negotiated deal by deal, usually paired with a termination right for material matters. Knowledge qualifiers on 10 to 20 percent of the business warranties, tied to 2 to 4 named people, are typical. Express pro-sandbagging wording like 14.5 appears in most buyer first drafts.
How to negotiate it
Ask for the whole data room, and any vendor due diligence report given to Kaveri, to count as disclosed. Ask to replace 14.5 with an anti-sandbagging rule: no claim for a matter Kaveri's deal team actually knew at signing. Ask that the supplementary letter qualify the repeated warranties for any matter arising after signing that you did not cause, with termination as Kaveri's only remedy for a MAC. Ask that awareness mean your own knowledge after asking those three heads, with nothing imputed from the rest of the organisation.
15. Purchaser Warranties
15.1 The Purchaser warrants to each Seller, on the date of this Agreement and at Completion, that: (a) it is duly incorporated and listed on the National Stock Exchange of India, its board has approved this Agreement, it shall before Completion obtain any special resolution required under Section 186 of the Companies Act 2013, and it is validly bound by this Agreement; (b) it has, and shall have at Completion and on 31 July 2030, immediately available funds sufficient to pay the Purchase Price and the maximum Earn-out, without any financing condition; (c) no approval of any stock exchange or of the Securities and Exchange Board of India is required, other than the disclosures under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015; (d) it has entered each Seller and its advisers in its structured digital database and has complied with the SEBI (Prohibition of Insider Trading) Regulations 2015 in respect of the unpublished price sensitive information relating to this Agreement; (e) no notification to the Competition Commission of India is required, the Company being within the exemption for small targets in force on the date of this Agreement and the value of the transaction being below ₹2,000 crore; and (f) it is owned and controlled by resident Indian citizens within the meaning of the FEMA (Non-debt Instruments) Rules 2019, so that the purchase is not an indirect foreign investment.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Kaveri's promises to the sellers, given at signing and again at completion: it exists, is listed and has its board's approval, with a shareholders' special resolution to follow before completion if the investment limits in Section 186 require one; it has the cash for the price and the full ₹50 crore earn-out, with no financing condition; no SEBI or stock exchange approval is needed beyond its Regulation 30 disclosure; it has handled the inside information on the deal properly; no CCI filing is needed; and it is Indian-owned and controlled, so the foreign investment rules do not apply.
What it means for you
Buyer warranties are short, but with a listed buyer three of them do real work for you. The funds warranty runs to 31 July 2030, so a Kaveri short of cash when the earn-out falls due is in breach, not merely late. The insider-trading warranty protects you too: from the day you learn of the deal you hold price-sensitive information about Kaveri, and you must not deal in its shares until the announcement. The FEMA warranty matters if Kaveri is foreign-owned or controlled: the purchase would then be indirect foreign investment, with pricing rules and a filing in Form DI within 30 days.
What is normal
Purchaser warranties run to 1 to 2 pages in India: capacity, authority, funds and, for a listed buyer, insider-trading compliance. A certain-funds confirmation backed by a bank comfort letter is standard for cash deals above ₹100 crore. Reverse break fees are uncommon in Indian mid-market deals; where agreed they are 1 to 3 percent of the equity value. The ₹450 crore asset test in the small-target exemption is measured on the book value of the target's assets in India, not on the price, which is why a ₹450 crore deal can be exempt.
How to negotiate it
Ask for a bank comfort letter or a funding confirmation for ₹500 crore, the price plus the maximum earn-out, delivered at signing. Ask for interest at 12 percent a year on any part of the price or the earn-out paid late. Ask for a reverse break fee of 2 percent of the equity value (₹9 crore) if completion fails because Kaveri's own approvals are not obtained by the long stop date. Ask that Kaveri's warranties survive for 24 months, the same period as your business warranties.
Indemnities and limits
16. Indemnity and limitations
16.1 Subject to this Clause 16 and Clause 20, each Seller shall indemnify the Purchaser against all losses, liabilities and costs ("Losses") arising from any breach by that Seller of its Warranties or its obligations under this Agreement (each, a "Claim"). 16.2 No Seller shall be liable for a Claim under the Business Warranties or the Tax Warranties: (a) if the Claim, or a series of related Claims, is below ₹10,00,000 (the de minimis); or (b) unless all such Claims above the de minimis together exceed ₹1,00,00,000, in which case it shall be liable from the first rupee (a tipping basket). 16.3 The aggregate liability of each Promoter for Claims under the Business Warranties, the Tax Warranties and the Tax Covenant shall not exceed 20 percent of its Schedule 2 share of the Purchase Price, and of each Seller for all Claims 100 percent of the consideration received by it, including any Earn-out. 16.4 No Claim may be brought unless notified with reasonable detail: (a) for the Business Warranties, within 24 months, and (b) for the Tax Warranties and the Tax Covenant, within 7 years, after the Completion Date; and (c) for the Fundamental Warranties, at any time, subject only to the law of limitation. 16.5 None of these limitations applies to a Claim arising from the fraud or wilful concealment of the Seller concerned, and no Seller shall be liable for indirect or consequential loss.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Each seller compensates Kaveri for losses from a breach of its own warranties and promises, within limits. For the business and tax warranties, which only the founders give: a claim under ₹10 lakh is ignored; nothing is payable until valid claims together pass ₹1 crore, and then everything from the first rupee; and each founder's total for business and tax claims is capped at 20 percent of that founder's share of the price. Every seller's overall liability is capped at what it received. Business claims must be notified within 24 months, tax within 7 years, title at any time. Fraud removes every limit.
What it means for you
Put rupees on it. Ananya's 20 percent cap is about ₹26.78 crore and Vikram's about ₹24.98 crore, together the ₹51.75 crore on the deal card. Marigold's only exposure is title and capacity, up to the ₹99 crore it receives plus its share of any earn-out. The tipping basket is the clause to understand: if Kaveri proves ₹1.2 crore of valid claims, you pay the whole ₹1.2 crore, not ₹20 lakh. Fraud is personal: if one seller lies, only that seller loses its caps. And "at any time" for title still means within the limitation period, not forever.
What is normal
Seller caps of 10 to 30 percent of the price for business warranties and 100 percent for title are the Indian range in 2026; 20 percent is the middle. De minimis thresholds of 0.01 to 0.05 percent of the price (₹4.5 lakh to ₹22.5 lakh here) and baskets of 0.2 to 1 percent (₹90 lakh to ₹4.5 crore) are common. Business warranties survive 18 to 24 months, tax 6 to 8 years and title until the limitation period ends. Tipping baskets are more common than deductibles in India, and fraud is never capped.
How to negotiate it
Ask for a deductible instead of a tipping basket, so that only the excess over ₹1 crore is paid. Ask that losses not be computed by applying a revenue or earnings multiple to a one-off loss, which can turn a ₹50 lakh problem into a claim several times larger. Ask for the business warranty cap to fall from 20 percent to 10 percent after the first escrow release at 12 months. Ask that payments under the specific indemnities count towards your 20 percent cap.
17. Specific indemnities
17.1 The Sellers shall severally, each in its Allocation Percentage, indemnify the Purchaser rupee for rupee against all Losses suffered by it or the Company arising from: (a) the demand of ₹42,00,000 of goods and services tax for FY 2026-27, with interest and penalty, described in the Disclosure Letter (the "GST Demand"); (b) the wrongful termination claim of a former employee described in the Disclosure Letter (the "Employment Claim"); and (c) any stamp duty, penalty and other amount payable under the Karnataka Stamp Act 1957 because the leave and licence agreement for the Company's Bengaluru office was inadequately stamped (the "Office Licence Matter"), each a Specific Indemnity. 17.2 The Specific Indemnities shall apply notwithstanding any disclosure or knowledge of the Purchaser, and Clauses 14 and 16.2 shall not apply to them. 17.3 Recovery under the Specific Indemnities, from the Escrow Amount or otherwise, shall not exceed ₹75,00,000 for the GST Demand, ₹40,00,000 for the Employment Claim and ₹10,00,000 for the Office Licence Matter, and shall exclude any amount provided for in the Completion Accounts. 17.4 Every amount due under this Clause shall be paid first from the Escrow Amount, each holder's share bearing its Allocation Percentage, and by a Seller directly only once its own share has been released or exhausted. 17.5 Each Specific Indemnity shall lapse 6 months after the matter to which it relates is finally resolved, and the Sellers' Representative shall be entitled to conduct each such matter under Clause 18.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Three problems found in diligence are taken out of the normal limits and paid rupee for rupee by every holder in proportion to its share, the option holders through their escrow share: the ₹42 lakh GST demand for FY 2026-27 with interest and penalty, a former employee's wrongful termination claim, and the duty and penalty on the under-stamped leave and licence agreement for the Bengaluru office. Disclosure does not help, and the de minimis and basket do not apply. Each has its own cap (₹75 lakh, ₹40 lakh and ₹10 lakh), is paid first from the escrow, excludes anything already in the completion accounts, and lapses 6 months after the matter ends.
What it means for you
A specific indemnity is the price of disclosing a known problem: once it is in the disclosure letter, Kaveri cannot claim for it as a warranty breach, so it asks you to pay for it directly. Because every holder bears it in its allocation percentage and it comes out of the escrow first, the founders, Marigold, the angels and the option holders all bear it, which is fair: these are company liabilities that would have cut everyone's price. The check that saves real money is the double count: if the ₹42 lakh is already a debt-like item in net debt, the price has paid for it, and 17.3 stops Kaveri being paid twice.
What is normal
Specific indemnities for 2 to 6 known items are standard in Indian deals, each capped at 100 to 150 percent of the quantified exposure including interest and penalty, and lasting until the matter is finally resolved plus 3 to 6 months. They sit outside the de minimis, basket and business warranty cap, and are funded from the escrow or a separate holdback. Where an exposure is large and close to certain, buyers prefer a price reduction instead, and sellers often should too.
How to negotiate it
Ask that each cap be built from the real exposure: for the GST demand, ₹42 lakh plus interest at 18 percent a year under Section 50 of the Central Goods and Services Tax Act 2017 and the penalty, roughly ₹65 lakh to ₹70 lakh by 2029, rather than a round number. Ask to run the GST appeal yourselves, funding the 10 percent pre-deposit, with any refund coming back to you. Ask that an indemnity falls away if Kaveri settles without your consent. Ask to settle the employment claim before completion if the employee will accept a few months' salary, and to pay the deficit duty and penalty on the office licence before completion, so that both indemnities fall away.
18. Conduct of claims
18.1 The Purchaser shall notify any Claim to the Sellers' Representative and each Seller concerned within 20 Business Days after becoming aware of it, with reasonable detail and a good-faith estimate of the amount; a delay shall reduce the Claim only to the extent that the Sellers are prejudiced by it. 18.2 Where a Claim arises from a claim by a third party, including any authority (a "Third Party Claim"), the Purchaser shall procure that the Company: (a) makes no admission, settlement or compromise without the consent of the Sellers' Representative, not to be unreasonably withheld; (b) allows the Sellers' Representative, on notice within 10 Business Days and at the Sellers' cost, to take over the defence, keeping the Purchaser informed; (c) gives the Sellers and their advisers reasonable access to its documents, premises and personnel; and (d) takes reasonable steps to mitigate its Losses. 18.3 The Purchaser may retain conduct of a Third Party Claim brought by any of the Company's ten largest customers or involving criminal proceedings against the Company or a director. 18.4 Any later recovery by the Purchaser or the Company from a third party or an insurer for a Loss shall be repaid to the Sellers to the extent they paid for it. 18.5 A Claim shall be deemed withdrawn unless arbitral proceedings are commenced within 6 months after it is notified.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
How a claim is made and run. Kaveri must notify a claim within 20 Business Days of learning of it, with detail and an estimate; lateness cuts the claim only if it hurt the sellers. Where the claim starts with someone else, such as a tax officer, a customer or an employee, the company cannot admit or settle without the sellers' representative, who can take over the defence at the sellers' cost with access to the papers and people. Kaveri keeps control of claims by the company's ten largest customers and of criminal matters. Later recoveries come back to you, and a claim not taken to arbitration within 6 months lapses.
What it means for you
Caps decide how much you can lose; this clause decides whether you get a fair fight. A tax officer's notice or an employee's suit lands with Kaveri, whose team has no reason to defend a claim you will pay for. The right to take over the defence, with access to the people and papers, is what turns an indemnity into a risk you can manage. The 6-month time bar protects the escrow: without it, a vague notice served just before the 12-month release on 30 April 2030 could hold back part of your money for years.
What is normal
Notice within 15 to 30 Business Days of awareness, with detail and an estimate, is standard, and a late notice usually bars a claim only if it arrives after the survival period. Sellers who fund the loss take over third-party defence in most Indian deals, subject to the buyer keeping customer, regulatory and criminal matters. A time bar of 6 to 12 months after notice to start proceedings is common, and recoveries from insurers or third parties are always credited back.
How to negotiate it
Ask for the right to take over every third-party claim you are funding, including tax proceedings, with Kaveri's consent needed only for a settlement that binds the company's future conduct. Ask that Kaveri's own costs of running a claim be recoverable only if you declined to take it over. Ask for a duty to claim under the company's insurance before claiming against you. Ask that a notice without a reasonable estimate of the amount does not hold back any part of an escrow release.
19. Set-off against Escrow and Earn-out
19.1 The Purchaser may set off against the Escrow Amount, or against any Earn-out payable under Clause 7, only an amount that has been agreed in writing by the Sellers' Representative or finally determined by an arbitral award or by the independent accountant under Clause 5.4 (an "Agreed or Determined Amount"). 19.2 No Claim under the Business Warranties shall be set off against, or delay the payment of, any Earn-out. 19.3 Any amount set off in respect of a Claim against a Seller shall be taken only from that Seller's share of the Escrow Amount or of the Earn-out, and not from the share of any other Seller. 19.4 If a Claim, other than a Claim under the Business Warranties, has been notified but is not an Agreed or Determined Amount when the Earn-out falls due, the Purchaser shall pay the Earn-out less its good-faith estimate of that Claim, which it shall deposit with the Escrow Agent pending resolution of the Claim. 19.5 Save as provided in this Clause 19 and for any withholding required by law under Clause 25, all payments by the Purchaser under this Agreement shall be made in full without set-off, counterclaim or deduction.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Kaveri can take money from the escrow or the earn-out only for amounts you have agreed or that an arbitrator or the independent accountant has decided. It can never hold back the earn-out for a business warranty claim. A claim against one seller comes only out of that seller's share. If another kind of claim is still open when the earn-out is due on 31 July 2030, Kaveri pays the rest and puts its good-faith estimate of the claim into escrow until the claim is decided. Every other payment is made in full, without deductions.
What it means for you
Without this clause the earn-out becomes the buyer's reserve fund: a warranty claim, however weak, could justify holding back up to ₹50 crore until an arbitration ends years later. The ban on setting business warranty claims against the earn-out keeps two questions apart: the earn-out depends on how the business performs after completion, the warranties on what was true at completion. The several-shares rule in 19.3 is what keeps Marigold and the angels on board: their escrow shares, about ₹9.9 crore and ₹4.73 crore, cannot be used to pay for a founder's business warranty.
What is normal
Set-off only for agreed or finally determined amounts is the seller position and the usual outcome in Indian deals with an escrow; buyers open by asking to set off any claim notified in good faith. Set-off against the earn-out is the most negotiated point: a ban for warranty claims is the seller's position, and depositing the disputed sum in escrow is the usual compromise. Interest at 9 to 12 percent a year on amounts wrongly withheld is common, and a cap on the amount withheld of 10 to 20 percent of the earn-out appears in seller-friendly drafts.
How to negotiate it
Ask that 19.4 apply only to claims notified with a reasonable estimate, and that the amount held back be capped at ₹5 crore unless a larger claim is agreed. Ask for interest at 12 percent a year on any amount withheld for a claim that fails. Ask that the claiming seller's escrow share be used before its earn-out share, so that the earn-out is touched only when the escrow is exhausted. Ask that all set-off rights end once the earn-out has been paid.
20. Several liability
20.1 The liability of the Sellers under this Agreement is several, and not joint or joint and several. 20.2 Each Seller shall be liable only: (a) for a breach of its own Fundamental Warranties or of its own obligations; (b) in the case of each Promoter, for that proportion of any Claim under paragraph 3 of Part A of Schedule 4, the Business Warranties, the Tax Warranties or the Tax Covenant which its Sale Shares bear to the Sale Shares of both Promoters; (c) for its Allocation Percentage of any Claim under Clause 17; and (d) for Leakage received by it or its Affiliates. 20.3 No Seller shall be liable for the breach, fraud or wilful concealment of any other Seller, and a release of or compromise with any Seller shall not affect the liability of any other Seller. 20.4 The Purchaser shall not recover more than once in respect of the same Loss, whether under the Warranties, the Tax Covenant, Clause 9 or Clause 17 or through the Completion Accounts (no double recovery). 20.5 The liability of the Investor shall be limited to the assets of Marigold Capital Partners Fund II, and no Claim shall lie against its investment manager, trustee or contributors.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Each seller answers only for itself. Every seller is liable for its own title, capacity and promises; the two founders split business and tax claims in proportion to their shares, about 51.7 percent Ananya and 48.3 percent Vikram; the specific indemnities are shared by all sellers pro rata; and leakage is repaid by whoever received it. Nobody pays for another seller's breach or fraud, and a settlement with one seller does not release the others. Kaveri cannot recover the same loss twice, and Marigold's liability is limited to the fund's assets.
What it means for you
Joint and several liability would let Kaveri collect a whole claim from whichever seller is easiest to reach, usually the founder still working in the business, and leave that founder to chase the others. Several liability makes your worst case your own number: on a ₹10 crore business warranty claim, Ananya pays about ₹5.17 crore and Vikram about ₹4.83 crore, each within their own 20 percent cap. Marigold's limited recourse is normal for a fund, but a fund has a fixed life and passes sale proceeds to its own investors quickly, so its escrow share is the real security behind its title warranty.
What is normal
Several liability is the near-universal position when an institutional investor sells. Buyers sometimes ask founders to be jointly and severally liable between themselves for business warranties; founders usually trade that away for a lower cap. A split in proportion to proceeds, here about 52 to 48 between the founders, is the default. Limited-recourse wording for a fund seller appears in almost every Indian deal, and no-double-recovery wording is standard wherever completion accounts, warranties and indemnities overlap.
How to negotiate it
Resist any request that the two of you be jointly and severally liable; if you must concede it, cap the joint exposure at the lower of your two 20 percent caps. Ask that business warranty claims up to the escrow be met from the sellers' whole ₹40.5 crore share of the escrow pro rata, so that Marigold and the angels share the risk of the company they owned in proportion to their proceeds, with personal liability above that resting on the founders. Ask for a contribution agreement between the two founders, so that whoever pays more than the agreed split is reimbursed by the other.
Founder terms
21. Non-compete and non-solicitation tied to the sale of goodwill
21.1 Each Promoter acknowledges that a substantial part of the Purchase Price is paid for the goodwill of the Business, in which the Promoter shares as a Seller, and that this Clause is reasonable and necessary to protect that goodwill for the Purchaser, which shall carry on the Business. 21.2 For 3 years from the Completion Date (the "Restricted Period") no Promoter shall, in any capacity, carry on or be engaged or interested in any business in India that competes with the Business as carried on at the Completion Date (the Non-compete). 21.3 During the Restricted Period no Promoter shall, directly or indirectly, solicit or deal with any person who was a customer of the Company in the 12 months before Completion, for products competing with the Business, or solicit or employ any of its employees of manager level or above. 21.4 Nothing in this Clause prevents a Promoter from passively holding up to 2 percent of a listed company or acting for the Purchaser's group. 21.5 These restrictions are given by each Promoter as a seller of goodwill under Exception 1 to Section 27 of the Indian Contract Act 1872, not as an employee, and apply whether or not the Promoter remains employed in the Purchaser's group. Each is a separate covenant, severable from the others.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
For three years from completion, neither founder may run, work for, advise or invest in a business in India that competes with Saffron's business as it stands on 30 April 2029, deal with its customers of the last 12 months for competing products, or hire its managers. The founders accept in writing that the restriction protects the goodwill Kaveri is paying for, which is what brings it within the exception to Section 27 for a seller of goodwill. A passive stake of up to 2 percent in a listed company is allowed. The restriction runs whether or not the founders stay employed, and each part stands on its own.
What it means for you
Most of the ₹258.75 crore the two of you receive is paid for goodwill: customers, code, reputation and team. This clause is how Kaveri protects it, and it is enforceable only because it is tied to the sale; a post-employment non-compete in your employment contract would be void under Section 27. It replaces the Series A SHA's non-compete (your shareholding plus 24 months), which ends with the SHA at completion, and it runs from completion, so if you leave Kaveri after a year you still have two years to go. What you cannot do is fixed by the definition of the business in Clause 2: workflow software for manufacturers. Workflow software for hospitals is outside it.
What is normal
Two to five years tied to the goodwill sold is the Indian range for selling founders, with three years the middle. Exception 1 speaks of specified local limits that a court finds reasonable: India-wide is defensible for software sold across the country, while a worldwide restraint is hard to justify unless the business already sells abroad. Customer restrictions usually look back 12 to 24 months, and employee non-solicits cover managers and above. A carve-out for passive listed holdings of 1 to 5 percent is standard. Financial sellers such as Marigold and the angels give no non-compete at all; at most a 12-month non-solicit of senior staff.
How to negotiate it
Ask that the restriction end early if Kaveri stops carrying on the business or fails to pay the earn-out or an escrow release when due, since the goodwill exception assumes the buyer carries on a like business. Ask for carve-outs for angel cheques of up to ₹25 lakh in non-competing startups and for teaching, writing and board roles outside the business. Ask that the employee non-solicit cover only people you managed and exclude replies to general advertisements. And ask that no part of the price be allocated to the non-compete: a separate non-compete fee is business income under Section 28(va) of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026), taxed at slab rates, and may attract GST.
22. Employment, retention and earn-out alignment
22.1 Each Promoter has, on the date of this Agreement, entered into an employment agreement in the agreed form with the Company, a wholly owned subsidiary of the Purchaser from Completion, conditional on Completion and for an initial term of 24 months, Ananya Rao as Chief Executive Officer and Vikram Menon as Chief Technology Officer (the "Employment Agreements"). 22.2 The Purchaser shall procure that the Company pays each Promoter a retention bonus of ₹2,00,00,000, as salary subject to deduction of tax at source, within 30 days after the second anniversary of the Completion Date if the Promoter is then so employed, or within 30 days after an earlier cessation as a Good Leaver; a Promoter who earlier ceases as a Bad Leaver shall forfeit it. 22.3 A Promoter who ceases to be so employed during the Earn-out Period as a Good Leaver shall keep his or her share of the Earn-out in full; the share of a Promoter who so ceases as a Bad Leaver shall be reduced by 50 percent, and the reduction shall not be payable. 22.4 "Good Leaver" means a Promoter who so ceases by reason of death, permanent incapacity, dismissal other than for Cause or resignation for Good Reason, each as defined in the Employment Agreements; any other Promoter who so ceases is a "Bad Leaver".
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Both founders sign new employment agreements with Saffron, which becomes Kaveri's wholly owned subsidiary at completion, for an initial 24 months: Ananya as chief executive, Vikram as chief technology officer. Each gets a retention bonus of ₹2 crore, paid as salary, if still employed two years after completion or on leaving earlier as a good leaver (death, incapacity, dismissal without cause, resignation for good reason). A bad leaver forfeits the bonus. A good leaver also keeps a full share of the earn-out; a bad leaver who goes before 31 March 2030 loses half of his or her earn-out share.
What it means for you
This clause separates two kinds of money, and the separation matters for tax. The ₹2 crore bonus, about 1.5 percent of each founder's proceeds, is pay for staying: salary under Section 17 of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026), taxed at your slab rate with TDS. The earn-out is meant to be sale price, taxed as capital gains at 12.5 percent. But the half you lose as a bad leaver looks like pay: the tax department can argue that it is salary, and Kaveri, reporting under Ind AS 103, has to treat a forfeitable earn-out as remuneration and charge it to profit. That is why both sides prefer the link to be small.
What is normal
Founders of an acquired startup usually sign 18 to 36 month employment terms, with retention paid in one or two instalments over 12 to 36 months. Good-leaver definitions covering death, incapacity, dismissal without cause and resignation for good reason are standard; buyers try to narrow good reason to a pay cut, a demotion or a forced relocation. Linking the whole earn-out to employment is common in acqui-hires but rare where institutional sellers share the earn-out, as Marigold and the angels do here; a partial link of 25 to 50 percent of the founders' share is a common compromise.
How to negotiate it
Ask that good reason include a pay cut, a change of role or reporting line, and relocation outside Bengaluru, so that Kaveri cannot push you out and call it a resignation. Ask that dismissal without cause during the earn-out period accelerate the full earn-out under Clause 7.3. Ask that the bad-leaver reduction fall away after 12 months, or apply only to resignation and not to dismissal for a minor breach. And ask for the bonus to be paid in two halves, at 12 and 24 months, so that less is at risk if the relationship sours early.
23. Treatment of the ESOP
23.1 Before Completion the Company shall, and the Promoters shall procure that the compensation committee of the Board (the Committee) shall, with the consent of the Investor Director, pass every resolution required under the Saffron Labs Employee Stock Option Plan 2026 (the "Plan") to accelerate the vesting of every unvested Option with effect immediately before Completion, every Option having been granted more than one year before the Completion Date as Rule 12(6)(a) of the Companies (Share Capital and Debentures) Rules 2014 requires. 23.2 Every Option shall be cancelled at Completion in consideration of ₹4,400, being ₹4,500 per Equity Share less the exercise price of ₹100 (the Cash-out), together with the Optionholder's share of any adjustment under Clause 5.5 and of any Earn-out. 23.3 The Company shall pay each Optionholder, through payroll as salary subject to deduction of tax at source and whether or not the Optionholder is then employed: (a) within 30 days after Completion, the Cash-out less ₹450 per Option, being its share of the Escrow Amount; and (b) within 30 days after the Company receives it under Clause 4.3, its share of each escrow release, of any increase under Clause 5.5 and of any Earn-out. 23.4 The Purchaser shall fund every payment under Clause 23.3 under Clause 4.3, and no such payment shall be included in Net Debt. 23.5 The Plan shall terminate at Completion, and no Option shall survive it.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Options are not shares, so the option holders are not sellers, but they share the price as if they were: 10 percent of it. Just before completion the committee, with the investor director's consent, accelerates every unvested option, which Rule 12 allows because every grant is more than a year old. At completion every option is cancelled for ₹4,400: the ₹4,500 a share the deal implies, less the ₹100 exercise price. The company pays it through payroll with tax deducted, holding back ₹450 an option as the option holders' share of the escrow, and pays that share and their share of any earn-out as it comes in. Kaveri funds all of it, none of it goes through net debt, and the plan ends.
What it means for you
This is the payday your ESOP promised, and it comes out of the ₹450 crore, not on top of it: ₹44 crore for the full pool of 1,00,000 options, of which ₹4.5 crore waits in escrow, plus up to ₹5 crore of earn-out. Priya Nambiar, granted 5,000 options on 1 December 2026, has about 2,917 vested by 30 April 2029 and the other 2,083 accelerated: about ₹1.98 crore before tax within 30 days, ₹22.5 lakh as the escrow is released and up to ₹25 lakh of earn-out. All of it is salary under Section 17 of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026), taxed at her slab rate with TDS. The startup deferral in Section 192(1C) does not help: it covers shares allotted on exercise, and a cash-out allots none.
What is normal
Cashing out vested options at the deal price less the exercise price is the norm in a 100 percent sale of an Indian startup. Unvested options vary: full acceleration in founder-friendly plans, partial acceleration of 25 to 50 percent, or a roll-over into the buyer's RSUs on the original schedule, which listed buyers prefer because it keeps the team. Double-trigger protection, full vesting if an employee is let go within 12 months, is common with roll-overs. Payment through payroll within 30 to 45 days of completion, with TDS, is standard, and where every option is cashed out the holders usually bear their pro rata share of the escrow, as here.
How to negotiate it
Your team will ask you, so settle four things with Kaveri: that the option holders' escrow share answers only for the specific indemnities and price adjustments, never for a founder's warranty breach, as Clause 6.6 provides; that their escrow and earn-out shares are paid even if they have left by then, so the money cannot be recast as a retention payment; a cash-out letter that each holder signs, agreeing to the ₹450 hold-back and explaining the payment and the TDS, because the Plan itself says nothing about a hold-back; and a line in the SPA recording what the company receives Kaveri's funding as, so that its tax treatment is settled before completion. Get the committee resolution, with Rohan Kapoor's consent as Investor Director to the acceleration, before signing, send every option holder the notice of treatment that Clause 21 of the Plan requires at least 30 days before completion, and confirm from the register in Form SH-6 that no option was granted within a year of completion.
24. Release of claims
24.1 With effect from Completion, each Seller irrevocably releases the Company and every present or former director or officer of it from all its claims arising on or before Completion, whether under the Shareholders' Agreement dated 27 November 2026, the share subscription agreement dated 30 October 2026, the Seed Shareholders' Agreement dated 12 March 2024, the Articles or otherwise, save for claims under this Agreement and the documents entered into under it, a Promoter's accrued salary and reimbursements, and a director's rights to indemnity and insurance. 24.2 The Purchaser shall procure that, with effect from Completion, the Company releases every person who was a director or officer of the Company before Completion from all claims in respect of acts or omissions in good faith before Completion, save for fraud or wilful misconduct, without limiting any Claim of the Purchaser against a Seller under this Agreement. 24.3 The Purchaser shall procure that the Company maintains, for 6 years from Completion, run-off cover under a directors' and officers' liability policy for every person who was a director or officer of the Company before Completion, for acts and omissions before Completion, with a limit of indemnity no lower than under the existing policy; the single premium shall be paid before Completion and included in Net Debt.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
A clean break at completion, both ways. Each seller gives up any claim it has against the company and anyone who was a director or officer, under the Series A and seed agreements, the Articles or anything else, keeping only claims under the SPA, a founder's unpaid salary and expenses, and directors' rights to indemnity and insurance. Kaveri makes the company release every former director and officer for anything done in good faith before completion, except fraud and wilful misconduct, without touching Kaveri's own SPA claims. And the company keeps six years of run-off D&O cover for everyone who served before completion, with the premium paid out of the price.
What it means for you
Two doors close here. Marigold's: its 2026 subscription agreement gave it warranty claims against the company and the two of you, with tax warranties running seven years, to November 2033, and fundamental ones without limit; 24.1 ends them, so the SPA is the only place a claim can come from. And Kaveri's: once it owns the company, it could make the company sue you as a former director for a pre-sale decision, outside every cap and time limit in the SPA. 24.2 shuts that unless there was fraud or wilful misconduct. Run-off cover then protects you against the people a release cannot bind: regulators, employees, customers and any future liquidator.
What is normal
Seller releases at completion are standard, with carve-outs for the SPA, accrued pay and directors' indemnities. A company release of former directors is common where founders stay on, and always excludes fraud and wilful misconduct. Run-off D&O cover of 6 years is the norm, with 3 to 7 years seen; it is bought as a single premium at completion and is usually a seller cost through net debt, sometimes split 50:50. The limit normally matches the existing policy; Saffron took ₹5 crore of cover at the Series A.
How to negotiate it
Ask Kaveri to pay the run-off premium, or split it 50:50, instead of taking it through net debt. Ask for a copy of the run-off policy schedule as a completion deliverable, with Kaveri's promise not to cancel or vary the policy. Ask Kaveri to keep the Articles' indemnity for former directors unchanged for six years and to add you to its group D&O policy from completion as officers of a subsidiary. And ask that wilful misconduct must be finally determined by a court or tribunal before the release falls away.
Tax and regulatory
25. Withholding and tax
25.1 Each Seller is resident in India, and the Purchaser shall accordingly pay the Purchase Price and any Earn-out without deduction, save any deduction of 0.1 percent it is required to make under Section 194Q of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026), for which it shall issue the certificate of deduction within the prescribed time. 25.2 If a Seller is non-resident when a payment is made, the Purchaser shall withhold tax under Section 195 on the income chargeable to tax, at the rate in any certificate under Section 197 produced by that Seller or, failing one, at the rates in force, and the amount withheld shall be treated as paid to that Seller. 25.3 Each Seller shall bear its own tax on the capital gains from its Sale Shares. 25.4 The Parties acknowledge that the consideration for each Sale Share exceeds its fair market value as at the Completion Date determined under Rule 11UA(1)(c)(b) and certified by a chartered accountant, so that no adjustment arises under Section 50CA for any Seller or under Section 56(2)(x) for the Purchaser. 25.5 The stamp duty of 0.015 percent on the transfer of the Sale Shares, collected through the depository, shall be borne by the Purchaser, which shall reimburse any amount collected from a Seller.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Every seller is resident, so Section 195 does not apply. The one deduction is 0.1 percent under Section 194Q (Section 393(1) of the Income-tax Act 2025) on the amount above ₹50 lakh paid to each seller in the year: unlisted shares count as goods, and the only carve-out in the CBDT's guidance is for trades on a stock exchange, so Kaveri, with turnover far above ₹10 crore, will deduct it and you take credit for it against your own tax. If a seller were non-resident, Kaveri would withhold under Section 195 on the taxable gain, at the rate in a Section 197 certificate or at full rates. Each seller pays its own capital gains tax. Everyone confirms the price is above the Rule 11UA value, so neither Section 50CA nor Section 56(2)(x) applies. Kaveri bears the 0.015 percent stamp duty, about ₹6 lakh.
What it means for you
Your tax is your own, and it arrives early. Ananya's ₹133.88 crore at the headline price, against a cost of ₹10 a share held since 2023, is almost all long-term gain: 12.5 percent, plus a surcharge capped at 15 percent and 4 percent cess, an effective 14.95 percent at the rates in force for 2026-27, about ₹19.97 crore. It falls in FY 2029-30 on the full price, including her ₹13.39 crore in escrow, with the first advance tax instalment, 15 percent, due by 15 June 2029. Marigold, a Category II AIF, is a pass-through under Section 115UB, so its unitholders pay. A Rule 11UA net-asset value is far below ₹4,500 for a software company, so Section 50CA cannot bite at this price.
What is normal
Between residents there is no Section 195 withholding; a buyer with turnover above ₹10 crore should deduct 0.1 percent under Section 194Q on an off-market purchase of shares, on the amount above ₹50 lakh from each seller in the year. With a non-resident seller, buyers withhold on the gain under Section 195, want a Section 197 certificate or a chartered accountant's computation, and take a tax indemnity; FEMA then adds Form FC-TRS within 60 days and caps the price at fair value. A Rule 11UA certificate dated at or near completion is a standard deliverable, and transfer stamp duty of 0.015 percent is usually the buyer's cost.
How to negotiate it
Ask Kaveri to confirm before signing the amount it will deduct under Section 194Q, and to issue the TDS certificate on time so the credit shows in your annual tax statement. Ask for the Rule 11UA certificate to be a completion deliverable from the company's chartered accountant, so the Section 50CA position is closed on the day. Ask that stamp duty on the transfer and on the SPA be Kaveri's cost, grossed up if collected from you. If an angel may move abroad before completion, start the Section 197 application at signing, so that any withholding is on the gain, not the price.
26. Carried-forward losses and Section 79
26.1 The Parties acknowledge that the Company has losses carried forward under the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from 1 April 2026) and that, because the persons who held the shares carrying voting power in the Company on the last day of each year in which those losses were incurred will cease at Completion to hold any of them, Section 79 will prevent those losses from being carried forward and set off against the income of the Company for FY 2029-30 or any later year. 26.2 The relaxation in Section 79 for an eligible start-up within the meaning of Section 80-IAC is not available, because it requires every such shareholder to continue to hold its shares. 26.3 The Equity Value has been agreed without attributing any value to those losses or to any deferred tax asset relating to them, and the Completion Accounts shall include no amount in respect of them. 26.4 No Seller gives any Warranty, and neither the Tax Warranties nor the Tax Covenant shall apply, in respect of the amount, availability or use of any loss, unabsorbed depreciation or other relief of the Company, and the Purchaser shall not, and shall procure that the Company shall not, make any claim against a Seller arising from the lapse or reduction of any such relief.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Saffron has tax losses from its early years. Section 79 lets a closely held company carry losses forward only if the people who held at least 51 percent of the votes at the end of the loss year still hold 51 percent; in a 100 percent sale nobody stays. The startup relaxation needs every loss-year shareholder to keep its shares, so it does not help either. The parties therefore record that the losses lapse, the price gives them no value, the completion accounts ignore them, and no seller warrants or indemnifies anything about losses.
What it means for you
This clause protects you. Without it, a buyer that modelled the losses as a future tax saving could argue that the tax warranties, or a warranty on the accounts, promised usable losses, and claim when the assessing officer refuses the set-off. Here the point is settled before signing: Kaveri is not paying for the losses, so it cannot claim for them. Unabsorbed depreciation is generally treated as outside Section 79 and survives, but in a software company it is small. Compare the 2027 founder secondary: Vikram's 2 percent transfer was nowhere near breaking the 51 percent test.
What is normal
In a sale of 51 percent or more of a closely held Indian company, buyers do not pay for carried-forward losses and sellers give no warranty that they survive. A warranty that returns were filed on time and show the losses as filed is the usual compromise. The startup relaxation applies only where every loss-year shareholder still holds its shares and the loss arose within 10 years of incorporation, which protects a startup diluted by new rounds, not one whose shareholders sell. Deferred tax assets on losses are excluded from completion accounts in nearly all deals.
How to negotiate it
Refuse any warranty on the amount or availability of losses; offer instead that the returns were filed on time and show the losses as filed. Ask that the losses and any deferred tax asset be listed as excluded items in the completion accounts policies in Schedule 3, so they cannot reappear as working capital. Keep the words "or reduction" in 26.4: a disallowance in a pre-completion assessment that only shrinks a loss, without creating tax to pay, should never be a claim. And get a year-wise schedule of the losses from your tax expert before signing.
27. Announcements and listed-company disclosures
27.1 The Purchaser shall disclose the execution of this Agreement to the National Stock Exchange of India as required by Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 within the time prescribed after the meeting of its board approving this Agreement, shall disclose Completion in the same manner, and shall consult the Sellers' Representative in advance on any statement in a disclosure about the Company or the Sellers. 27.2 Each Seller acknowledges that, until the disclosure under Clause 27.1 is made, the existence and terms of this Agreement are unpublished price sensitive information relating to the Purchaser, that it has been entered in the Purchaser's structured digital database under the SEBI (Prohibition of Insider Trading) Regulations 2015, and that it shall not, and shall procure that its directors, employees and advisers shall not, deal in the securities of the Purchaser or communicate that information except as those Regulations permit. 27.3 No Seller shall make any announcement concerning this Agreement except (a) a joint announcement in the agreed form issued after the disclosure under Clause 27.1; (b) as required by law, a court or a regulator, after consulting the Purchaser where lawful; and (c) by the Investor, in confidence, to its investment manager, its contributors and SEBI in the ordinary course of its reporting.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Kaveri is listed, so the deal is price-sensitive news for its shareholders. It must tell the National Stock Exchange within the time Regulation 30 allows after its board approves the SPA, and again at completion, consulting the sellers' representative on what it says about Saffron. Until that disclosure, the deal is unpublished price sensitive information about Kaveri: every seller is an insider, is logged in Kaveri's database of people who hold it, and must not trade in Kaveri shares or pass the news on. The sellers announce nothing themselves, apart from a joint release afterwards, anything the law requires and Marigold's routine reporting.
What it means for you
From the first meeting with Kaveri, you, your co-founder, your finance head and your advisers hold price-sensitive information about a listed company. Buying Kaveri shares, or letting a friend do so, is insider trading: penalties under Section 15G of the SEBI Act 1992 run up to ₹25 crore or three times the profit, whichever is higher. The disclosure will go out within minutes of Kaveri's board meeting, so plan the team town hall and the calls to customers such as Tungabhadra Forge for the same hour. Your team should hear the news from you, not from the exchange website.
What is normal
Regulation 30 sets three clocks: 30 minutes from the close of a board meeting that decides the matter, 12 hours for other events arising within the listed company, and 24 hours for events from outside it. An agreement to acquire control of a company is deemed material, so no threshold test applies, and the SEBI format asks for details such as the target's turnover for the last three years and the cost of acquisition. A joint release after the buyer's disclosure is standard, and carve-outs for a fund's reporting to its investors are universal.
How to negotiate it
Ask to see the draft disclosure and press release at least 48 hours before signing, since they will quote your turnover and describe your team. Ask for an agreed script and timetable for telling employees, customers and lenders straight after the disclosure. Ask Kaveri to explain its insider trading code before you sign: after completion, as senior employees of a subsidiary, you may become designated persons, with pre-clearance and trading windows for any dealing in Kaveri shares. And ask that Marigold's carve-out stop short of public portfolio announcements until the joint release.
Other
28. Governing law and dispute resolution
28.1 This Agreement and any dispute arising out of or in connection with it shall be governed by the laws of India. 28.2 Any dispute arising out of or in connection with this Agreement, including its existence, validity or termination, other than a matter for the independent chartered accountant under Clause 5.4 or Clause 7.4, shall be finally resolved by arbitration under the Arbitration and Conciliation Act 1996, administered by the Mumbai Centre for International Arbitration under its rules then in force. 28.3 The seat and venue of the arbitration shall be Mumbai and its language English. 28.4 The tribunal shall consist of three arbitrators: one nominated by the Sellers' Representative on behalf of all the Sellers, one by the Purchaser, and the presiding arbitrator by the two so nominated within 30 days of the second nomination, failing which by the Mumbai Centre for International Arbitration. 28.5 The award shall be final and binding on the Parties. 28.6 Nothing in this Clause shall prevent a Party from seeking interim relief under Section 9 of the Arbitration and Conciliation Act 1996 from the courts at Mumbai, which shall have exclusive jurisdiction for that purpose.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
Indian law governs. Any dispute, other than the completion accounts and earn-out figures that go to the independent accountant, goes to arbitration in Mumbai under the rules of the Mumbai Centre for International Arbitration, in English, before three arbitrators: the sellers' representative nominates one for all the sellers, Kaveri nominates one, and those two choose the presiding arbitrator. The award is final. Either side can still ask the Mumbai courts for urgent interim orders under Section 9 of the Arbitration and Conciliation Act 1996.
What it means for you
This is where an escrow fight or a warranty claim ends up, so the choice is about cost and speed. Three arbitrators cost roughly 2 to 3 times the arbitrators' fees of one (about 2.4 times on the Fourth Schedule's model fees), and finding hearing dates for three senior people slows everything down. On a ₹5 crore claim against the escrow, the cost of a three-member tribunal can be a large part of what is in dispute, which favours the side with deeper pockets: Kaveri. Section 9 matters to you too: if an earn-out dispute is running and Kaveri moves to sell the business, you can ask the court to secure the amount in dispute while the arbitration runs. Contrast the Series A SHA: Bengaluru seat, sole arbitrator.
What is normal
Indian law with an Indian seat is standard when every party is resident, and the buyer's city is a common seat for a listed buyer. A sole arbitrator is common for disputes up to about ₹25 crore and three for larger M&A disputes, and many SPAs split by value. Institutional rules are increasingly the default. Section 29A expects an award within 12 months of the close of pleadings, extendable by 6 months by consent, so 18 to 24 months from appointment to award is realistic.
How to negotiate it
Ask for a value split: a sole arbitrator for claims below ₹25 crore, three above. Ask for the fast-track procedure under Section 29B, a sole arbitrator deciding on documents within 6 months, for claims below ₹5 crore. Ask that hearings may be held in Bengaluru or by video while Mumbai stays the seat. And ask that costs follow the event, as Section 31A allows, so that a buyer who makes weak claims to delay an escrow release pays your costs.
29. Confidentiality and non-disparagement
29.1 Each Seller shall keep confidential, and shall not use or disclose, any information relating to the Company, the Business or the Purchaser's group, or to the negotiation or terms of this Agreement (Confidential Information), except (a) as required by law, a court, a regulator or a stock exchange; (b) to its professional advisers and auditors and, for the Investor, its investment manager and contributors, each under a duty of confidence; (c) information that is or becomes public other than through a breach of this Clause; and (d) by a Promoter in the proper performance of his or her duties to the Company. 29.2 The non-disclosure agreement dated 10 January 2029 between the Company and the Purchaser shall continue until Completion and then terminate, but shall continue on its terms if this Agreement terminates before Completion. 29.3 For 3 years from Completion no Seller shall make any statement intended or likely to disparage the Company, the Purchaser or their directors, products or services, and the Purchaser shall procure that neither the Company nor any of its directors makes any such statement about a Seller. 29.4 Nothing in this Clause restricts any statement required by law, made in legal or arbitral proceedings, or made to a regulator. 29.5 This Clause survives termination of this Agreement.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The sellers keep the company's information, Kaveri's information and the deal terms confidential, subject to the usual exceptions: the law, regulators and the stock exchange, advisers bound by confidence, Marigold's reporting to its investors, information already public, and the founders doing their jobs. The January 2029 NDA keeps protecting Saffron until completion and ends then, but survives if the deal fails. For three years the sellers must not run down the company or Kaveri, and Kaveri must stop the company and its directors from running down the sellers. Statements required by law, evidence in proceedings and statements to regulators are always allowed.
What it means for you
Confidentiality here has no end date, and unlike the non-compete it needs no special exception: Section 27 does not touch a duty of confidence, so it binds you as written. Non-disparagement bites where founders talk most: podcasts, LinkedIn posts about the exit, interviews about life after the acquisition. If the earn-out turns into a dispute, you cannot argue it in public; you take it to the independent accountant or the tribunal under Clause 28. Notice the imbalance in 29.3: Kaveri promises only for the company and its directors, not for itself or its own senior management.
What is normal
Confidentiality of the target's information without limit of time, and of the deal terms for 3 to 5 years or until the buyer discloses them, is standard. Non-disparagement for 2 to 5 years is common in founder exits and increasingly mutual. Carve-outs for legal process, regulators and statutory whistle-blowing are universal. The diligence NDA usually ends at completion and survives a failed deal on its own terms, including any employee non-solicit.
How to negotiate it
Ask for Kaveri itself, its directors and its senior management to be bound by the non-disparagement promise, not just the company. Ask for a list of permitted statements, covering your role, the fact of the sale and anything in Kaveri's own disclosures, so you can tell your story in public. Ask for the deal terms to stop being confidential after 3 years. And ask for an express carve-out for disclosure to your tax advisers, bankers and family members who need to know, under a duty of confidence.
30. Miscellaneous
30.1 This Agreement, the Escrow Agreement, the Employment Agreements and the Disclosure Letter constitute the entire agreement between the Parties and supersede every prior term sheet, letter and understanding, but do not limit liability for fraud. 30.2 No Party may assign its rights, save that the Purchaser may assign its benefit to an Affiliate holding the Sale Shares without increasing any Seller's liability, and shall remain liable for its obligations. 30.3 Notices shall be in writing, by hand, courier or e-mail to the addresses in Schedule 2, and notice to the Sellers' Representative is notice to every Seller. 30.4 This Agreement may be signed in counterparts and by electronic signature under the Information Technology Act 2000. 30.5 Each Party shall bear its own costs, the Company none of a Seller's, and the Purchaser the stamp duty on this Agreement. 30.6 Each Party shall do all things reasonably required to give effect to this Agreement. 30.7 Each Seller irrevocably appoints Ananya Rao as Sellers' Representative to give and receive notices, agree or dispute the Completion Accounts and the ARR statement, instruct the Escrow Agent, settle Claims to be met from the Escrow Amount and nominate an arbitrator for it; the Purchaser may rely on her acts without enquiry, and Sellers holding most of the Sale Shares may replace her by notice.
Click for the notes: what it says, what it means for you, what is normal, how to negotiate it
What it says
The boilerplate, plus one clause that moves money. The SPA and the documents signed with it replace the term sheet and every earlier promise, but fraud is never excluded. Kaveri may pass the benefit to a group company that holds the shares, without increasing what any seller owes. Notices go to the addresses in the schedule, and notice to the sellers' representative is notice to all. Signing can be in counterparts and electronic. Each side pays its own advisers, the company pays none of the sellers' costs, and Kaveri pays the stamp duty. Ananya is appointed sellers' representative, with authority to act for every seller after completion.
What it means for you
Read 30.7 like a price clause. The representative decides whether to accept Kaveri's completion accounts, whether to dispute the earn-out figure, when to instruct the escrow agent and whether to settle a claim against the escrow, and Kaveri can rely on what she does without asking anyone else. That is efficient, but from 30 April 2029 Ananya is also Kaveri's employee, arguing against her own employer. The entire agreement clause matters too: a promise in the term sheet or an email that is not repeated in these documents, such as a hiring budget or a seat on Kaveri's leadership team, is gone.
What is normal
A sellers' representative appears in almost every SPA with more than three or four sellers: a lead founder, a sellers' committee or a paid professional. Replacement by a majority of 50 to 75 percent of the sellers by value is typical. Assignment to group companies, with no increase in liability, is standard, and the buyer stays liable for payment obligations such as the earn-out. Each side bearing its own costs, with the buyer paying stamp duty, is the norm; a 50:50 split of stamp duty is also seen.
How to negotiate it
Ask for a sellers' committee, Ananya plus a Marigold nominee, for any decision that moves more than ₹2 crore: accepting completion accounts, settling a claim or agreeing the earn-out figure. Ask for a fund of about ₹50 lakh held back from the price for the representative's costs, with the sellers indemnifying her pro rata. Ask that Kaveri may assign only to a wholly owned subsidiary. And ask that the representative may not settle a claim against one seller alone, such as a title claim, without that seller's consent.
