Term Sheet

The Memorandum of Offering Terms (aka “Term Sheet”) outlines the fundamental aspects of the deal and the expectations of the Company and the Investors for discussion and negotiation purposes. The Term Sheet is non-binding in that it doesn’t create an enforceable contract between the parties. The Term Sheet establishes the security offered, the overall investment amount, the expectations of the parties and the rights, privileges and conditions of the shares to be purchased by Investors.

Usually the lead investor (the investor putting the most money into the deal) serves up the initial draft of the term sheet, but the Company can do the first draft too, especially if there might be competition among Investors.

Absent extraordinary circumstances or passage of time past the Expiration Date (see Expiration Date below), it is hard for the Company or Investors to re-negotiate the terms in the Term Sheet, and any attempt to do so will be heavily scrutinized. So although the Term Sheet is non-binding, it needs to be drafted and reviewed very carefully.