Letter of Intent for Investment Template: Funding Terms

Letter of Intent for Investment Template

[Investor Letterhead or Investor Name and Address]

[Date]

[Company Name]

[Company Address Line 1]

[Company Address Line 2]

[City, State/Province, ZIP/Postal Code, Country]

Re: Letter of Intent Regarding Proposed Investment in [Company Name]

Dear [Company Contact Name or “Sir/Madam”],

This Letter of Intent (“LOI”) sets forth certain preliminary terms and conditions under which [Investor Legal Name], a [Jurisdiction] [entity type] (“Investor”), proposes to make an investment in [Company Legal Name], a [Jurisdiction] [entity type] (“Company”).

Except as expressly stated in Section 12 (Binding and Non-Binding Provisions), this LOI is intended as a framework for further discussion and negotiation rather than a binding agreement to complete the investment.

1. Parties and Purpose of Investment

1.1 Investor Details

Legal Name: [Investor Legal Name]

Entity Type: [Corporation / Fund / LLC / Individual / Other]

Jurisdiction of Organization or Residence: [Jurisdiction]

Principal Address: [Investor Address]

1.2 Company Details

Legal Name: [Company Legal Name]

Entity Type: [Corporation / LLC / Other]

Jurisdiction of Organization: [Jurisdiction]

Principal Address: [Company Address]

1.3 Purpose of Investment

The overall purpose of the investment is to provide growth capital for [brief description of intended use, such as product development, hiring, marketing, expansion, working capital, or project funding] and to allow Investor to acquire an ownership or financial interest in Company on the terms summarized below.

2. Proposed Investment Structure

2.1 Type of Investment

The proposed investment (the “Investment”) is expected to take the form of:

• [Preferred equity / Common equity]; or

• [Convertible note / Convertible instrument]; or

• [Straight debt / Loan]; or

• [Other structure].

[Preferred equity / Common equity]; or

[Convertible note / Convertible instrument]; or

[Straight debt / Loan]; or

[Other structure].

2.2 Investment Amount

Total Investment Amount: [Currency and Amount]

2.3 Number and Type of Securities

If the Investment is in equity or equity-linked securities, Investor will acquire:

• Security Type: [Preferred Stock / Common Stock / Units / Other]

• Number of Securities: [Number or formula]

• Class / Series: [Class / Series designation, if any]

Security Type: [Preferred Stock / Common Stock / Units / Other]

Number of Securities: [Number or formula]

Class / Series: [Class / Series designation, if any]

3. Valuation and Capitalization (For Equity or Convertible Investment)

3.1 Valuation

The parties currently anticipate the following valuation metrics, subject to due diligence and final negotiation:

• Pre-Money Valuation: [Currency and Amount]

• Post-Money Valuation: [Currency and Amount]

Pre-Money Valuation: [Currency and Amount]

Post-Money Valuation: [Currency and Amount]

3.2 Ownership Percentage (Indicative)

Based on the above valuation and fully diluted capitalization at closing, Investor is expected to hold approximately:

• Ownership Percentage: [Percentage]% of the fully diluted equity of Company following the closing of the Investment.

3.3 Capitalization Table

A detailed capitalization table, including all existing and proposed securities, options, warrants, and convertible instruments, will be attached to the definitive investment documents and used to confirm the final ownership percentages.

4. Key Economic Terms (Indicative)

Depending on the type of Investment, the definitive documents may include some or all of the following terms:

4.1 Preferred Equity Terms (If Applicable)

• Liquidation Preference: [Multiple and type, such as “1x non-participating” or “1x participating”]

• Dividend Provisions: [Dividend rate and whether cumulative or non-cumulative]

• Conversion Rights: [Conversion into common stock, ratio, and conditions]

• Anti-Dilution Protection: [Full ratchet, weighted average, or none]

Liquidation Preference: [Multiple and type, such as “1x non-participating” or “1x participating”]

Dividend Provisions: [Dividend rate and whether cumulative or non-cumulative]

Conversion Rights: [Conversion into common stock, ratio, and conditions]

Anti-Dilution Protection: [Full ratchet, weighted average, or none]

4.2 Convertible Instrument Terms (If Applicable)

• Conversion into Equity: [Trigger events such as next equity financing or maturity]

• Conversion Discount: [Percentage]

• Valuation Cap: [Currency and Amount]

• Interest Rate (if any): [Percentage]% per year

• Maturity Date: [Date]

Conversion into Equity: [Trigger events such as next equity financing or maturity]

Conversion Discount: [Percentage]

Valuation Cap: [Currency and Amount]

Interest Rate (if any): [Percentage]% per year

Maturity Date: [Date]

4.3 Debt / Loan Terms (If Applicable)

• Principal Amount: [Currency and Amount]

• Interest Rate: [Percentage]% per year

• Repayment Schedule: [Summary of repayment or amortization]

• Maturity Date: [Date]

• Security / Collateral (if any): [Description]

Principal Amount: [Currency and Amount]

Interest Rate: [Percentage]% per year

Repayment Schedule: [Summary of repayment or amortization]

Security / Collateral (if any): [Description]

5. Use of Proceeds

Company intends to use the net proceeds from the Investment for the following purposes:

• [Use 1]

• [Use 2]

• [Use 3]

[Use 1]

[Use 2]

[Use 3]

Details of permitted and restricted uses of proceeds will be set out in the definitive agreements.

6. Governance and Investor Rights (Indicative)

6.1 Board Representation (If Applicable)

Subject to applicable law and Company’s governing documents, Investor may be entitled to:

• Appointment of [Number] member(s) to the Company’s board of directors or equivalent governing body; or

• Observer rights at board meetings without voting authority.

Appointment of [Number] member(s) to the Company’s board of directors or equivalent governing body; or

Observer rights at board meetings without voting authority.

6.2 Information Rights

Investor may be granted rights to receive periodic financial and operational information, which may include:

• Annual audited financial statements;

• Quarterly or monthly management accounts;

• Annual budgets and business plans;

• Other reports or metrics as agreed.

Annual audited financial statements;

Quarterly or monthly management accounts;

Annual budgets and business plans;

Other reports or metrics as agreed.

6.3 Protective Provisions (If Applicable)

The definitive agreements may provide that certain actions by Company require consent of Investor or the Investor-appointed director(s), including:

• Changes to share capital or rights of Investor’s securities;

• Significant indebtedness or asset sales;

• Mergers, acquisitions, or liquidation events;

• Amendments to governing documents that adversely affect Investor’s rights.

Changes to share capital or rights of Investor’s securities;

Significant indebtedness or asset sales;

Mergers, acquisitions, or liquidation events;

Amendments to governing documents that adversely affect Investor’s rights.

7. Conditions to Closing

The closing of the Investment (“Closing”) will be subject to customary conditions for a transaction of this type, which may include:

• Completion of financial, legal, tax, operational, and commercial due diligence to Investor’s satisfaction;

• Negotiation, approval, and execution of definitive investment documents;

• Receipt of any required corporate, board, shareholder, or regulatory approvals;

• Absence of a material adverse change in Company’s business, assets, or prospects;

• Accuracy of representations and warranties at Closing and compliance with covenants.

Completion of financial, legal, tax, operational, and commercial due diligence to Investor’s satisfaction;

Negotiation, approval, and execution of definitive investment documents;

Receipt of any required corporate, board, shareholder, or regulatory approvals;

Absence of a material adverse change in Company’s business, assets, or prospects;

Accuracy of representations and warranties at Closing and compliance with covenants.

8. Due Diligence

8.1 Scope

Following execution of this LOI, Investor and its advisors will conduct due diligence on Company, including review of:

• Financial statements and internal financial reports;

• Material contracts, customer and supplier arrangements;

• Corporate governance and capitalization records;

• Intellectual property and technology;

• Employment, benefits, and labor matters;

• Litigation, regulatory, and compliance matters.

Financial statements and internal financial reports;

Material contracts, customer and supplier arrangements;

Corporate governance and capitalization records;

Intellectual property and technology;

Employment, benefits, and labor matters;

Litigation, regulatory, and compliance matters.

8.2 Company Cooperation

Company will provide Investor with reasonable access, during normal business hours and upon reasonable notice, to relevant information, facilities, and key personnel, subject to confidentiality obligations and applicable law.

9. Timeline and Process

9.1 Indicative Timeline

Subject to the conditions described in this LOI, the parties currently anticipate the following non-binding timeline:

• Execution of this LOI: on or about [Date]

• Completion of primary due diligence: by [Date]

• Delivery of initial drafts of definitive agreements: by [Date]

• Execution of definitive agreements: by [Date]

• Target Closing Date: on or about [Date]

Execution of this LOI: on or about [Date]

Completion of primary due diligence: by [Date]

Delivery of initial drafts of definitive agreements: by [Date]

Execution of definitive agreements: by [Date]

Target Closing Date: on or about [Date]

9.2 Good-Faith Negotiations

While the commercial terms in this LOI are generally non-binding, the parties intend to work in good faith and with commercially reasonable efforts to negotiate and finalize definitive agreements reflecting the terms described in this LOI, as they may be updated during negotiations.

10. Confidentiality and Public Announcements

10.1 Confidentiality

If the parties have already entered into a separate non-disclosure or confidentiality agreement (the “NDA”), that NDA will govern all non-public information exchanged in connection with this LOI and the proposed Investment. If no NDA exists, the parties agree to keep non-public information confidential, use it only for evaluating and implementing the Investment, and disclose it only to personnel and advisors who have a need to know and are under comparable confidentiality obligations.

10.2 Public Announcements

Unless otherwise required by law or stock exchange rules, neither party will issue any public announcement or press release regarding this LOI or the proposed Investment without the prior written consent of the other party.

11. Exclusivity / No-Shop (If Desired)

11.1 Exclusivity Period

In consideration of Investor’s time and expense in pursuing this Investment, Company agrees that for the period beginning on the date of Company’s countersignature of this LOI and ending on [End Date or Number of Days] (the “Exclusivity Period”), Company will not, directly or indirectly:

• Solicit or initiate discussions with any third party regarding any equity or debt financing, sale of securities, or similar transaction that would conflict with the proposed Investment;

• Provide non-public information to any third party for such purposes; or

• Enter into any letter of intent, term sheet, or agreement for any competing transaction.

Solicit or initiate discussions with any third party regarding any equity or debt financing, sale of securities, or similar transaction that would conflict with the proposed Investment;

Provide non-public information to any third party for such purposes; or

Enter into any letter of intent, term sheet, or agreement for any competing transaction.

11.2 Notice of Unsolicited Contacts

If Company receives any unsolicited inquiry, proposal, or expression of interest regarding a competing transaction during the Exclusivity Period, Company shall promptly notify Investor of such contact, subject to any legal restrictions on disclosure.

12. Binding and Non-Binding Provisions

12.1 Non-Binding Business Terms

The parties acknowledge and agree that, except as expressly stated in Section 12.2, this LOI is intended to be non-binding with respect to the completion of the Investment. Neither party is obligated to proceed with the Investment or to execute definitive agreements, and either party may discontinue discussions at any time, subject to the Binding Provisions.

12.2 Binding Provisions

The following provisions of this LOI are intended to be legally binding upon the parties when this LOI is signed and delivered by both parties:

• Section 8.2 (Company Cooperation) to the extent it relates to due diligence during the term of this LOI;

• Section 9.2 (Good-Faith Negotiations), but only to the limited extent permitted or required by applicable law;

• Section 10 (Confidentiality and Public Announcements);

• Section 11 (Exclusivity / No-Shop), if included;

• Section 13 (Governing Law and Dispute Resolution);

• This Section 12.2 (Binding Provisions); and

• Any additional clauses expressly designated as binding here: [Additional Binding Clauses, if any].

Section 8.2 (Company Cooperation) to the extent it relates to due diligence during the term of this LOI;

Section 9.2 (Good-Faith Negotiations), but only to the limited extent permitted or required by applicable law;

Section 10 (Confidentiality and Public Announcements);

Section 11 (Exclusivity / No-Shop), if included;

Section 13 (Governing Law and Dispute Resolution);

This Section 12.2 (Binding Provisions); and

Any additional clauses expressly designated as binding here: [Additional Binding Clauses, if any].

All other provisions are non-binding and are intended solely as a basis for further discussion and negotiation.

13. Governing Law and Dispute Resolution

13.1 Governing Law

This LOI (including the Binding Provisions) shall be governed by and construed in accordance with the laws of [State/Province, Country], without regard to its conflict-of-law rules.

13.2 Dispute Resolution

Any disputes arising out of or relating to the Binding Provisions of this LOI shall be resolved by [specified court jurisdiction / arbitration forum] located in [City, State/Province, Country], unless the parties later agree otherwise in the definitive agreements.

14. Expiration and Counterparts

14.1 Expiration

If this LOI is not signed by both parties on or before [Expiration Date], it shall be of no further force or effect, unless the parties agree in writing to extend this deadline.

14.2 Counterparts and Electronic Signatures

This LOI may be executed in counterparts, including by electronic or facsimile signature. Each counterpart shall be deemed an original, and all counterparts together shall constitute one and the same instrument. Electronic delivery of a signed counterpart shall be as effective as delivery of a manually signed original.

15. Signatures

If the terms of this LOI are acceptable, please sign below to indicate your agreement to the Binding Provisions and your agreement in principle to the non-binding business terms described above.

Investor

[Investor Legal Name]

By: _______________________________

Name: [Authorized Signatory Name]

Title: [Title]

Date: [Date]

Company

[Company Legal Name]