Term Sheet for Private Equity Financing

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									This is a document that outlines a potential agreement between an investor and a
company. The investor agrees to invest private equity in the company in return for
preferred stock. This document does not create a binding agreement between the
parties. Rather, this document sets forth the terms that are already agreed upon and
shows the parties good faith intent to enter into a binding agreement. This document
can be used by small businesses or other entities that want to memorialize agreed upon
terms with a potential investor.
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           TERM SHEET FOR PRIVATE EQUITY FINANCING                                              y
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Issuance                        _____________(“Investor”)            shall       purchase       g
                                _____________ shares of Preferred Convertible Preferred         h
                                Stock ("Preferred Stock") to be issued by _____________         t
                                (the "Company") at a price per share of $______ (the
                                "Purchase Price"). In addition, Investor acknowledges that      B
                                other investors will purchase at least _____________ ( )        i
                                shares but not more than _____________ ( ) shares of            z
                                Preferred Stock at the Purchase Price.                          T
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                                The Preferred Stock shall be convertible on a one-for-one       e
                                exchange basis (adjusted for future stock splits) into          e
                                common stock of the Company ("Common Stock") at any             .
                                time at the option of the stock holder.
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                                The Purchase Price shall be equivalent to a pre-investment      0
                                valuation of the Company of $_____. The calculation is          0
                                based on ____ ( ) shares of Common Stock. If the number         6
                                of shares issued increases before the close of this             .
                                transaction, the price per share for Preferred Stock will be
                                reduced so as to maintain the pre-investment valuation of       A
                                the Company.                                                    l
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Use of Proceeds                 The funds raised from the sale of Preferred Stock shall be
                                used for working capital purposes.                              r
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Dividend                        The Preferred Stock is entitled receive to an annual            g
                                $______ per share dividend distribution, in all cases           h
                                payable when and if such distribution is declared by the        t
                                Board of Directors. In the event of a dividend distribution,    s
                                Preferred Stock holders shall receive such distribution prior
                                to any payment on Common Stock. Dividends are not               r
                                cumulative.                                                     e
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Pre-emptive Rights              Preferred Stock shall have the right to participate in future   e
                                rounds of equity financing based upon their pro-rata, if-       r
                                converted, ownership of the Company.                            v
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Voting Rights                   The Preferred Stock shall have the right to vote with the       d
                                Common Stock on an as-if-converted basis.                       .

Liquidation Preference          The Preferred Stock shall have a liquidation preference.        P
                                The proceeds of a merger, sale or liquidation will be paid      r
                                first to the Preferred Stock and shall include an additional    o
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                                ____ % return, compounded annually, calculated based on
                                the total amount invested. Upon completion of this round of
                                funding, the additional ____ % return element will expire
                                and will not be offered in any subsequent rounds of
                                funding.

Automatic Conversion            The Preferred Stock shall be converted automatically into
                                Common Stock at the applicable conversion rate (1:1
                                assuming no stock splits) in the event of a public offering at
                                a total offering of not less than $______ and at a per share
                                public offering price of no less than three times the
                                Purchase Price per share, adjusted for splits.

Redemption                      If not previously converted, Preferred Stock shall be
                                redeemed in five equal, consecutive annual installments
                                beginning _____________, 20___. Redemption will be at
                                the Purchase Price plus a ____ % per annum.

Anti-Dilution                   The conversion price of the Preferred Stock will be subject
                                to adjustment to prevent dilution in the event that the
                                Company issues additional shares. The conversion price
                                will be subject to adjustment on a weighted basis which
                                takes into account issuances of additional shares at prices
                                below the applicable conversion price. Preferred Stock
                                shall have weighted average anti-dilution, based on a
                                weighted average formula to be agreed, for all shares
                                purchased as part of this transaction.

Rights of First Refusal         The Company and the Investors shall have a right of first
                                refusal in respect of any employee's shares proposed to be
                                resold.

Rights of First Refusal         The Company will timely furnish the Investors with annual,
                                quarterly     and     monthly      financial     statements.
                                Representatives of the Investors will have the right to
                                inspect the books of account and records of the Company.

Covenants:                      Preferred Stock shall have the right to approve changes
                                outside normal course of business and any sale, liquidation
                                or merger, any increase in seats on the Board of Directors,
                                and any change election procedures.

Board of Directors:             The Board of Directors shall consist of ________ ( )
                                members. The holders of the Preferred Stock shall have the
                                right to designate _________ ( ) directors, the holders of
                                the Common Stock shall have the right to designate



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                                ________ ( ) directors, and the remaining _________ ( )
                                directors will be unaffiliated persons elected by the
                                Common Stock and the Preferred Stock voting as a single
                                class.




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Stock Restriction Agreement        All present holders of Common Stock of the Company who
                                   are employees of the Company shall execute a Stock
                                   Restriction Agreement with the Company pursuant to
                                   which the Company will have the option to buy back at
                                   cost a portion of the shares of Common stock held by such
                                   person in the event that such stockholder's employment
                                   with the Company is terminated prior to expiration of
                                   ____________ ( ) months from the date of employment.

Information and Inventions         Each officer and key employee of the Company designate
                                   by the Investors shall enter into a non-competition
                                   proprietary by information and inventions agreement in a
                                   form reasonably satisfactory to the Investors.

Expenses:                          The Company will bear legal fees and other out-of-pocket
                                   expenses of the Investor with respect to this transaction.

Closing:                           The Company and Investor agree to use their best efforts to
                                   close the transaction on or about ____________, 20__.


The undersigned acknowledge that this term sheet is not a binding agreement, but expresses an
agreement covering the principal terms of a private equity financing, and as such, the
undersigned shall proceed in good faith to negotiate a final, binding agreement.

This proposal remains open until __________, 20___, at which point it shall expire and can no
longer be accepted,




                                                                                      ______
Company                                                  Investor




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