Equity Investment Term Sheet
I. Introduction
Investment Opportunity:
Our company, [Your Company Name], a leading provider of innovative software solutions in the healthcare industry, seeks to raise $2 million in equity financing to accelerate product development and market expansion.
Investment Amount:
The total investment amount is $2 million, in exchange for a 20% equity stake in [Your Company Name].
Parties Involved:
II. Investment Terms
Valuation:
The pre-money valuation of [Your Company Name] is $8 million.
Equity Stake:
[Investor Name] will receive a 20% equity stake in [Your Company Name].
Investment Structure:
The investment will be structured as a preferred stock with standard liquidation preferences.
Founder Vesting:
Founders' shares will vest over four years, with a one-year cliff.
Anti-Dilution Protection:
[Investor Name] will have standard weighted-average anti-dilution protection.
III. Investor Rights
Board Representation: [Investor Name] will have the right to appoint one member to the board of directors.
Information Rights: Quarterly financial reports and annual operating plans will be provided to [Investor Name].
Exit Rights: [Investor Name] will have tag-along rights in the event of a sale of [Your Company Name].
Liquidation Preference: [Investor Name] will have a 1x non-participating liquidation preference.
IV. Company Representation and Warranties
Ownership and Title: The company represents that it owns all assets and properties free and clear of any liens or encumbrances.
Intellectual Property: The Company represents that it owns or has licensed all intellectual property necessary for its business operations.
Compliance with Laws: The company represents that it complies with all applicable laws and regulations.
V. Conditions Precedent
Legal Due Diligence: The investor's legal due diligence must be completed to its satisfaction.
Approval of Governing Authorities: The investment must receive approval from the board of directors and any other required governing authorities.
Execution of Agreements: The parties must execute the investment agreement and any related documents.
VI. Indemnification
Company Indemnification: The company agrees to indemnify and hold harmless the investor from any losses or damages resulting from the company's breach of its representations and warranties.
Investor Indemnification: The investor agrees to indemnify and hold harmless the company from any losses or damages resulting from the investor's breach of its obligations under the term sheet.
VII. Termination
Mutual Agreement: The term sheet may be terminated by mutual agreement of the parties.
Material Breach: Either party may terminate the term sheet in the event of a material breach by the other party.
Failure to Close: If the closing conditions are not satisfied within the specified timeframe, either party may terminate the term sheet.
VIII. Miscellaneous
Expenses: Each party will be responsible for its expenses incurred in connection with the transaction.
Confidentiality: The parties agree to keep confidential all information relating to the transaction and the term sheet.
Governing Law: This term sheet will be governed by and construed under the laws of the State of [State].
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