Glossary

Term Sheet

Definition

A term sheet is a non-binding agreement that outlines the fundamental terms and conditions governing an investment. It serves as a preliminary document that sets the foundation for further negotiation and the creation of a more detailed and binding contract.

What is the purpose of a term sheet?‍

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The primary purpose of a term sheet is to establish the key terms and conditions of an investment in a concise and non-binding manner. It provides a framework for negotiations and serves as a reference point for both parties involved.

Is a term sheet legally binding?‍

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No, a term sheet is generally not legally binding. It is intended to be a preliminary document that outlines the basic agreement between the parties involved. However, certain provisions within a term sheet, such as confidentiality or exclusivity agreements, may be legally binding.

What information is typically included in a term sheet?‍

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A term sheet typically includes key information such as the names of the parties involved, the type and amount of investment, valuation of the company, ownership percentages, key terms of the investment (e.g., preferred stock, convertible notes), and any specific conditions or requirements.

Can a term sheet be modified?‍

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Yes, a term sheet can be modified through negotiation between the parties involved. It is common for term sheets to undergo revisions and amendments as the parties work towards reaching a mutually acceptable agreement.

What happens after a term sheet is signed?‍

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After a term sheet is signed, it serves as the foundation for drafting a more detailed and binding agreement, such as a definitive agreement or a purchase agreement. The parties involved will further negotiate and finalize the terms and conditions outlined in the term sheet.

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