Term Sheet
A non-binding document that outlines the key terms of a proposed investment, acquisition, or other business transaction before a formal agreement is drafted.
Term sheets — also called letters of intent or memoranda of understanding — are used in venture financing, M&A, real estate, and commercial agreements to establish the framework for a deal before legal costs are incurred drafting the definitive agreements. Most provisions are non-binding, but some (exclusivity periods, confidentiality, expense provisions) are typically made binding at term sheet stage.
The key terms in a financing term sheet include: pre-money valuation and investment amount, security type and price per share, liquidation preference, participation rights, anti-dilution protection, board seat requirements, pro rata rights, and drag-along provisions. In an M&A term sheet, the key terms include purchase price and structure, representations and warranties scope, escrow or holdback provisions, employee retention, and exclusivity period. Document intelligence can analyze and compare term sheets across multiple counterparties in competitive processes, surfacing the key differences that should drive the final selection.
More legal Terms
Non-Disclosure Agreement (NDA)
A legally binding contract that establishes confidentiality obligations between parties sharing sensitive information.
Service Level Agreement (SLA)
A contract defining the expected performance standards, uptime guarantees, and remedies for a service provider.
Indemnification
A contractual obligation where one party agrees to compensate the other for specified losses or damages.
Force Majeure
A contract clause that frees parties from obligations when extraordinary events beyond their control prevent performance.
Arbitration
A private dispute resolution process where an independent arbitrator makes a binding decision instead of a court.
Contract
A legally enforceable agreement between two or more parties that creates mutual obligations.
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