Last Updated on July 3, 2025 by Bertrand Clarke

Free, detailed, and comprehensive stock purchase and sale term sheet template that demonstrates sophisticated deal structuring and addresses key concerns C-level executives would have in M&A transactions.

STOCK PURCHASE AND SALE TERM SHEET

CONFIDENTIAL & NON-BINDING

TRANSACTION OVERVIEW

Target Company: [Target Company Name], a [State] corporation
Buyer: [Buyer Entity Name], a [State] [entity type]
Transaction Type: Asset Purchase / Stock Purchase / Merger (circle one)
Date: [Date]
Expiration: This term sheet expires at 11:59 PM EST on [Date] unless extended in writing

PURCHASE PRICE & STRUCTURE

Base Purchase Price

Total Enterprise Value: $[Amount]
Equity Value: $[Amount]
Price per Share: $[Amount] per [class] share

Purchase Price Allocation

Cash at Closing: $[Amount] ([%]%)
Seller Financing: $[Amount] ([%]%)
Earn-Out Consideration: $[Amount] ([%]%)
Equity Rollover: $[Amount] ([%]%)

Working Capital Adjustment

Target Working Capital: $[Amount] (based on [methodology])
Adjustment Mechanism: Dollar-for-dollar adjustment for amounts above/below target
Calculation Period: [Number] days post-closing
Dispute Resolution: Independent accounting firm determination

Debt Treatment

Assumed Debt: $[Amount]
Debt to be Retired: $[Amount]
Net Debt Adjustment: Purchase price reduced dollar-for-dollar for net debt above $[Amount]

EARN-OUT PROVISIONS

Performance Metrics

Measurement Period: [Time period, e.g., 24 months post-closing]
Metrics: [Revenue/EBITDA/Other specific metrics]
Targets:
- Year 1: $[Amount] → Earn-out: $[Amount]
- Year 2: $[Amount] → Earn-out: $[Amount]

Earn-Out Terms

Maximum Earn-Out: $[Amount]
Minimum Threshold: [%] of target required for any earn-out payment
Calculation Method: [Detailed methodology]
Payment Schedule: Annual payments within [number] days of year-end
Acceleration Events: Change of control, asset sale, etc.

FINANCING & CLOSING CONDITIONS

Buyer Financing

Financing Contingency: [Yes/No]
Financing Sources: [Debt/Equity/Internal funds]
Financing Amount: $[Amount]
Commitment Letters: Required by [Date]

Material Closing Conditions

Buyer Conditions:

Completion of satisfactory due diligence
No material adverse change in Target’s business
Delivery of audited financial statements for [years]
Key employee retention agreements executed
Third-party consents obtained (list material contracts)
Title insurance and environmental assessments satisfactory
Regulatory approvals obtained

Seller Conditions:

Buyer financing confirmed and funded
Representations and warranties accurate as of closing
Buyer board/shareholder approvals obtained
Completion of Buyer’s due diligence on Seller

DUE DILIGENCE

Scope and Timeline

Due Diligence Period: [Number] days from execution
Data Room Access: Electronic data room established within [number] days
Management Presentations: [Number] sessions with key executives
Site Visits: Access to [number] primary facilities
Key Areas: Financial, legal, operational, environmental, IT/cybersecurity, tax, insurance

Due Diligence Materials

3 years audited financials and monthly financials for current year
Material contracts, leases, and agreements
Intellectual property portfolio and registrations
Employee agreements, benefit plans, and compensation structures
Compliance and regulatory documentation
Insurance policies and claims history
Environmental assessments and permits

REPRESENTATIONS, WARRANTIES & INDEMNIFICATION

Survival Periods

General Representations: [Number] months post-closing
Fundamental Representations: [Number] years post-closing
Tax Representations: Applicable statute of limitations plus [number] days
Environmental Representations: [Number] years post-closing

Indemnification Structure

Seller Indemnification Cap: [%]% of purchase price
Buyer Indemnification Cap: [%]% of purchase price
Basket/Deductible: $[Amount] (first-dollar coverage for fundamental reps)
Survival Period: As specified above for each category

Escrow/Holdback

Escrow Amount: $[Amount] ([%]% of purchase price)
Escrow Period: [Number] months
Escrow Agent: [Name of institution]
Release Schedule: [Percentage] released after [time periods]

EMPLOYEE MATTERS

Key Employee Retention

Key Employees: [List names and positions]
Retention Agreements: [Number] year terms with [incentive structure]
Non-Compete Periods: [Number] years post-termination
Severance Arrangements: [Detailed terms]

Employee Benefits

Benefit Continuation: [Number] months of equivalent benefits
Pension/401(k) Treatment: [Transfer/assumption terms]
Vacation/PTO: Accrued amounts honored
COBRA Obligations: Assumed by Buyer

Workforce Adjustments

Planned Reductions: [Estimated percentage and timeline]
Severance Costs: [Allocation between Buyer and Seller]
WARN Act Compliance: [Responsibility allocation]

OPERATIONAL MATTERS

Management and Governance

Board Composition: [Number] directors, [allocation between parties]
Management Team: Current CEO/CFO/COO to remain for [time period]
Operational Authority: [Decision-making thresholds and approvals]
Reporting Requirements: Monthly financial reporting to Buyer

Non-Compete and Non-Solicitation

Seller Non-Compete: [Number] years in [geographic scope]
Non-Solicitation: [Number] years for employees and customers
Exceptions: [Specific carve-outs if applicable]

REGULATORY AND COMPLIANCE

Required Approvals

Antitrust: Hart-Scott-Rodino filing required (if applicable)
Industry Regulatory: [Specific regulatory bodies and approvals]
Foreign Investment: CFIUS review required (if applicable)
State Regulatory: [State-specific approvals]

Compliance Representations

Environmental Compliance: No material violations or liabilities
Employment Law: Compliance with wage/hour and discrimination laws
Data Privacy: GDPR, CCPA, and other privacy law compliance
Industry-Specific: [Relevant industry regulations]

TAX MATTERS

Tax Structure

Transaction Structure: [Asset vs. Stock implications]
Tax Elections: [338(h)(10) or other relevant elections]
Tax Sharing: [Allocation of pre-closing tax liabilities]

Tax Indemnification

Pre-Closing Taxes: Seller responsibility
Post-Closing Taxes: Buyer responsibility
Tax Audit Defense: [Responsibility and cost allocation]
Tax Refunds: [Allocation methodology]

EXCLUSIVITY AND CONFIDENTIALITY

Exclusivity Period

Duration: [Number] days from execution
Scope: No solicitation, negotiation, or acceptance of competing offers
Exceptions: Fiduciary duty obligations (if applicable)
Standstill: Buyer prohibited from direct stockholder contact

Confidentiality

Existing NDA: [Reference to existing agreement]
Information Handling: All due diligence materials confidential
Public Announcements: Joint approval required for any public statements
Return of Information: Within [number] days if transaction terminates

RISK ALLOCATION

Material Adverse Change

Definition: Any change that has a material adverse effect on the business, operations, financial condition, or prospects of the Target, excluding:

Changes in general economic conditions
Changes affecting the industry generally
Changes in law or regulation
Natural disasters (unless disproportionately affecting Target)

Insurance

D&O Insurance: [Coverage amount] tail policy for [number] years
General Liability: Current policies maintained through closing
Key Person Insurance: [Coverage for key executives]
Transaction Insurance: [R&W insurance consideration]

TERMINATION PROVISIONS

Termination Events

Expiration of exclusivity period
Failure to satisfy closing conditions by [Outside Date]
Material breach of term sheet by either party
Adverse due diligence findings deemed material by Buyer
Failure to obtain required regulatory approvals

Termination Fees

Buyer Termination Fee: $[Amount] if financing fails
Seller Termination Fee: $[Amount] if accepts competing offer
Mutual Termination: No fees if terminated by mutual consent
Expense Reimbursement: [Allocation of transaction costs]

DEFINITIVE DOCUMENTATION

Required Agreements

Purchase Agreement: Comprehensive stock/asset purchase agreement
Disclosure Letter: Detailed disclosure of exceptions to representations
Employment Agreements: Key employee retention agreements
Non-Compete Agreements: Seller and key employee non-competes
Transition Services Agreement: [If applicable for shared services]

Documentation Timeline

First Draft: [Number] days after execution of term sheet
Negotiation Period: [Number] days for definitive agreement negotiation
Execution Target: [Target date for definitive agreement signing]
Closing Target: [Target closing date]

DISPUTE RESOLUTION

Governing Law

Governing Law: [State] law
Jurisdiction: [Specific courts or arbitration]
Venue: [City, State]

Dispute Procedures

Negotiation Period: [Number] days of good faith negotiation
Mediation: [Number] days of mediation before arbitration
Arbitration: [AAA/JAMS rules] with [number] arbitrators
Interim Relief: Courts may grant injunctive relief

SIGNATURES

This term sheet represents the current understanding between the parties but creates no binding obligations except for the confidentiality, exclusivity, and expense provisions noted above. Binding obligations will only arise upon execution of definitive agreements.

BUYER:

[Buyer Entity Name]

By: _________________________
Name: [Name]
Title: [Title]
Date: _______________

SELLER:

[Seller Entity Name]