Term sheet

A term sheet is a document that outlines the basic terms and conditions of a proposed business transaction. It is a non-binding agreement that sets out the key terms and conditions of a proposed investment, acquisition, or other business transaction, such as a joint venture, partnership, or loan. A term sheet is typically used as a precursor to a definitive agreement, such as a stock purchase agreement or a loan agreement.

A term sheet typically includes the following key elements:

• Description of the transaction: A summary of the proposed transaction, including the parties involved and the nature of the deal.
• Economic terms: The key financial terms of the transaction, including the purchase price, financing terms, and any contingencies.
• Governance terms: The terms of the governance of the company, such as the number of board seats, information rights, and restrictions on the actions of the company.
• Closing conditions: The conditions that must be met before the transaction can close, such as regulatory approvals, financing, and due diligence.
• Representations and warranties: Statements made by the parties regarding the accuracy of information provided and the condition of the company.
• Exclusivity: The terms of exclusivity, such as the period during which the parties will negotiate exclusively.
• Termination: The terms of termination, such as the conditions under which the parties can terminate the negotiations.

It is important to note that a term sheet is a non-binding agreement, meaning that the parties are not legally obligated to complete the transaction. However, it serves as a guide for the parties to follow when drafting a definitive agreement and it is a good indication of the parties’ intent to move forward with the transaction.