A term sheet is a bullet-point document outlining the material terms and conditions of a business agreement. After a term sheet has been "executed", it guides legal counsel in the preparation of a proposed "final agreement". It then guides, but is not necessarily binding, as the signatories negotiate, usually with legal counsel, the final terms of their agreement.
A term sheet implies the conditions of a business transaction, as proposed by a party. It may be either binding or non-binding.
Term sheets are very similar to "letters of intent" (LOI) in that they are both preliminary, mostly non-binding documents meant to record two or more parties' intentions to enter into a future agreement based on specified (but incomplete or preliminary) terms. The difference between the two is slight and mostly a matter of style: an LOI is typically written in letter form and focuses on the parties' intentions; a term sheet skips most of the formalities and lists deal terms in bullet-point or similar format. There is an implication that an LOI only refers to the final form. A term sheet may be a proposal, not an agreed-to document.
Within the context of venture capital financing, a term sheet typically includes conditions for financing a startup company. The key offering terms in such a term sheet include (a) amount raised, (b) price per share, (c) pre-money valuation, (d) liquidation preference, (e) voting rights, (f) anti-dilution provisions, and (g) registration rights
Famous quotes containing the words term and/or sheet:
“Punks in their silly leather jackets are a cliché. I have never liked the term and have never discussed it. I just got on with it and got out of it when it became a competition.”
—John Lydon (formerly Johnny Rotten)
“A speck that would have been beneath my sight
On any but a paper sheet so white
Set off across what I had written there.”
—Robert Frost (1874–1963)