Term Sheet

·	Issue

·	Dividend

·	Liquidation Preference

·	Use of Proceeds

·	Voting Rights

·	Redemption

·	Pre-emptive Rights

·	Automatic Conversion

·	Anti-Dilution

·	Management Options

·	Rights of First Offer; Tag-Along

·	Information Rights

·	Negative Covenants

·	Board of Directors

·	Stock Restriction Agreement

·	Non-competition, Proprietary Information & Inventions

·	Expenses

·	Definitive Purchase & Due Diligence

·	Closing

Document Description:

A Term Sheet is a document summarizing a proposal from a Venture Capitalist to invest in a Company. Generally, this is submitted to the Company after the investor has reviewed the Company’s Business Plan. The Term Sheet outlines the initial offering and terms upon which the investment will be made. This is a very important document, as if it is successfully negotiated, it will be used to develop the official legal documents for the investment.

The Term Sheet stipulates the important details of the investment including price, board positions, conditions precedent, negative covenants, adverse trading, etc. Although this is a non-binding agreement, it is essential that this document is thorough and well thought out, as it could make or break a potentially lucrative investment opportunity.