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:
“As the term of my relief from this place [Washington, D.C.] approaches, its drudgery becomes more nauseating and intolerable, and my impatience to be with you at Monticello increases daily.”
—Thomas Jefferson (17431826)
“No Time, spoke the clocks, no God, rang the bells,
I drew the white sheet over the islands
And the coins on my eyelids sang like shells.”
—Dylan Thomas (19141953)