Private Equity Term Sheet

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I. Overview

This Term Sheet summarizes the initial agreement between [Private Equity Firm Name] and [Your Company Name] for a potential investment. It details crucial terms and anticipated steps leading to a detailed investment agreement, aiming to facilitate understanding and align expectations during the early phases of the investment process.

This document is not legally binding, except for the confidentiality and exclusivity clauses outlined herein. Both parties agree to negotiate in good faith based on the terms stipulated in this Term Sheet. Final terms will be detailed in the definitive agreement to be drafted following the mutual acceptance of this Term Sheet.

II. Investment Details

The subsequent list comprises vital terminology related to the proposed investment:

• Total Investment Amount: $5,000,000

• Type of Security: Equity

• Valuation of [Your Company Name]: Pre-money valuation at $15,000,000

• Ownership Percentage: Following the investment, the percentage of ownership held in [Your Company Name] will be approximately 25%.

• Use of Funds: Funds will be utilized as per the outlined plan: Expansion of production facilities, hiring key personnel for marketing and sales, and further development of proprietary technology platforms.

III. Terms of the Agreement

The proposed transaction includes several key clauses and covenants that are pertinent to its structure and execution:

• Right of First Refusal: The investor shall be granted the right to have the first opportunity to purchase any new shares that the company issues before these shares are offered to anyone else.

• Drag-Along Rights: Drag-along rights for major shareholders to ensure that minority holders must follow the decision of the majority in the sale of the company.

• Anti-dilution Provisions: Protection against the decrease in ownership percentage when new shares are distributed during subsequent rounds of financing.

• Voting Rights: Detailed information concerning the voting rights that are attached to the shares in which investments have been made is available upon request.

• Board Representation: Comprehensive Guidelines and Essential Qualifications for the Selection and Appointment of Board Representatives by [Private Equity Firm Name]

IV. Conditions Precedent

Before proceeding with the final investment, certain specific requirements must be adequately met:

1. Completion of satisfactory due diligence by [Private Equity Firm Name]: This includes a comprehensive review of financial records, operations, legal matters, and any other relevant aspects of your company to ensure transparency and mitigate risks.

2. Approval of the investment by the board of directors of both [Private Equity Firm Name] and [Your Company Name]: This step ensures that key decision-makers on both sides agree to move forward with the investment based on the terms negotiated.

3. Legal and regulatory approvals, as required: Depending on the jurisdiction and industry regulations, there may be specific approvals or filings needed before the investment can proceed legally.

4. Finalization and signing of all definitive legal documents and agreements: This includes drafting and executing the investment agreement, shareholders' agreement, and any other legal documents necessary to formalize the investment and define the rights and obligations of each party.

V. Confidentiality

Both parties agree to maintain confidentiality concerning the investment terms and any disclosed information during the due diligence process. This obligation will persist unless disclosure is required by law or with the written consent of the originating party.

VI. Exclusivity

[Your Company Name] agrees not to solicit or entertain investment proposals from other parties for a duration of [Duration], starting from the date of signing this Term Sheet. This term is binding and aims to ensure a focus on completing the transaction with [Private Equity Firm Name].

VII. Governing Law and Dispute Resolution

• Governing Law: This agreement shall be subject and adherent to the governance and interpretation by the laws of [Jurisdiction]. This will be done by excluding any of [Jurisdiction]'s provisions that could cause a conflict of laws.

• Dispute Resolution: Any disputes or disagreements arising out of or connected with this agreement shall be resolved through arbitration in [City, State/Country], under the rules established by [Arbitration Institution], and the decision rendered by the arbitrator(s) shall be final and binding upon both parties.

VIII. Termination

• Mutual Termination: Either party involved in this agreement reserves the right to terminate the agreement provided that there is mutual consent, which must be expressed through a written document signed by both parties.

• Breach: In the event of a material breach of this agreement by either party, the non-breaching party may terminate this agreement upon written notice to the breaching party if such breach remains uncured after a specified cure period.

IX. Miscellaneous

• Entire Agreement: This Term Sheet and any subsequent definitive agreements represent the complete agreement between the parties on this subject, superseding all prior agreements, whether written or oral.

• Amendments: Any amendments or modifications to this agreement must be made in writing and signed by both parties.

• Severability: If any provision of this agreement is found to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

• Waiver: The failure of either party to enforce any provision of this agreement shall not be construed as a waiver of such provision or the right to enforce it.

• Counterparts: This agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument.

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