Glossary

No-Shop/Confidentiality

No-Shop Provision: A binding term where the Company agrees to not negotiate a financing with other potential investor (or buyer) for a certain amount of time. The shorter the amount of time, the better for the Company. The Investor could also require disclosure if any third party approaches the Company and is interested in a similar deal. This term prevents Companies from leveraging an Investor’s offer to get a better offer from someone else.

Confidentiality Provision: A binding term where the seller/Company promises not to disclose term sheet provisions to anyone outside the Company’s officers, directors, accountants, attorneys, and certain other Investors without the Investor’s consent.

Both provisions are present in most term sheets. One point of negotiation the Company should pay attention to is how long the no-shop agreement lasts, as that will affect its ability to find other Investors if issues with its prospective buyer arise.

Term Sheet Language: The Company and the Investors agree to work in good faith expeditiously towards the Closing. The Company and the founders agree that they will not, for a period of [______] days from the date these terms are accepted, take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than the Investors relating to the sale or issuance, of any of the capital stock of the Company [or the acquisition, sale, lease, license or other disposition of the Company or any material part of the stock or assets of the Company] and shall notify the Investors promptly of any inquiries by any third parties in regards to the foregoing. The Company will not disclose the terms of this Term Sheet to any person other than employees, stockholders, members of the Board of Directors and the Company’s accountants and attorneys and other potential Investors acceptable to [_________], as lead Investor, without the written consent of the Investors (which shall not be unreasonably withheld, conditioned or delayed).