Non-Binding Letter of Intent

Subject To Contract

[Date]

[Promoter Names]

[Company Name]

[Company Address]

Dear [Promoter Names],

The purpose of this letter is to confirm our interest regarding an investment by The Chennai Angels (TCA), referred to as the ‘Investor’, in [Instrument] of [Company Name] (‘Company’ or ‘[Company Short Name]’). We would like to thank you for inviting us to consider an investment in the Company.

The structure and key terms of a proposed investment by TCA in the Company are presented in the attached Non-Binding Indicative Term Sheet (‘Term Sheet’), which is deemed to be incorporated in, and forms part of, this letter.

We strongly believe that [Company Name] and we have the potential to forge a strong and productive relationship.

If you have any questions regarding this letter, please do not hesitate to contact us.

Very truly yours,

 

[Deal Champion]

Authorized signatories

The Chennai Angels

 

Termsheet

We are pleased to submit for your consideration this Term Sheet, which intends to describe, for purposes of discussion, the key terms of the proposed investment (hereinafter referred to as the “Investment”) in the company by The Chennai Angels. TCA is considering an investment of [INR/USD] as described below.

The following is a summary of the principal terms with respect to the proposed Investment.  This summary does not constitute a legally binding obligation.  Any legally binding obligation will only be made pursuant to definitive agreements to be negotiated and executed by the parties.

“COMPANY” AND “INVESTOR” “Company”: [Details of Company, Founders/Promoters, Product/Service]

Investor: The Chennai Angels (TCA) shall include all the Investors proposing to invest in the Company through the current transaction. The details of each individual Investor collectively forming part of this investment will be provided at the time of the final documentation.

INVESTMENT Investment in XXXXX shares at a fully diluted Price per share of YY in Preference Shares based on a pre-money valuation of Rs [Total Investment INR/USD] for Y shares, fully diluted, including unallocated 5% option pool.
FOUNDER MATTERS Vesting of Founder / Promoter existing shareholding over [4] years of continuous service from the investment completion date.

Founder / Promoters shall not enter into any competing business of the Company as long as TCA remains invested.

Each Founder / Promoter shall have assigned all relevant intellectual property to the Company prior to closing.

The Company shall enter into suitable employment and non-compete agreement with founders/promoters and other key management to the satisfaction of the Investor. Promoters shall be full time and shall execute a suitable agreement inter-se..

BOARD OF DIRECTORS TCA will have the right to appoint (and replace at its option) One Director and One Observer, to be chosen by TCA investors. TCA Director shall enjoy certain consent rights, be non-executive, and shall be on all the Committees. The company will provide D&O liability insurance for [3] Crores to the TCA director.
RIGHTS The Series Seed will be given information, inspection, and economic rights including Drag, Tag, ROFR, Anti-Dilution, Pre-Emption, and pro-rata subscription to the new issue of shares. TCA would enjoy certain rights as a block and other rights on an individual basis as will be laid out in the SHA.
ANTI DILUTION At any time after the Investment, if the Company proposes to issue any equity or equity-related securities to any person(s) other than the Investors at a price lower than that paid by the Investor, the Investor shall be entitled to receive corresponding additional equity on an as-converted basis from the Company based on a weighted average anti-dilution protection basis.
LIQUIDATION PREFERENCE One times the Original Issue Price plus declared but unpaid dividends on each share of Series Seed, or pro-rata whichever is higher. A merger, reorganization, or similar transaction will be treated as liquidation.
EXIT OPTIONS By the 5th Anniversary of the Investment, the Company and Promoters shall provide a complete exit to the Investor via a secondary sale, strategic sale, Company/ Promoter buyback, or IPO. Post the 5th Anniversary, investors shall have the right to sell their shares to any financial/strategic investors, cause an IPO, or affect a drag on the shareholders to facilitate a complete exit.
CONDITIONS PRECEDENT & CONDITIONS SUBSEQUENT The investment is subject to a satisfactory outcome of the detailed financial, legal and business due diligence, agreement on contractual terms, the fulfillment of conditions precedent and subsequent as laid out in the share sale and holding agreement, and receipt of statutory and company shareholder approvals.
EXPENSES The Company shall bear the cost of conducting financial/legal/business due diligence and drafting of definitive agreements subject to the cap of 2% of the investment.

The Company shall pay Chennai Angels Network Association an amount equal to 1% of the total investment amount for facilitating the investment.

The Company shall bear the costs of quarterly audit post-investment and costs relating to investor attendance at board meetings.

 

The terms of the proposed investment as set out in this Term Sheet (which supersedes all other correspondence between the Company, Promoters, and the Investor) are indicative only and may require amendments as the Investor learns more about the business of the Company.  This Term Sheet is not intended to be legally binding.

If you wish to accept the terms of this Letter, please sign the enclosed copy of the Term Sheet and return it to us by close of business on [ ], failing which this Term Sheet will automatically cease to be valid and effective.

 

AGREED, ACCEPTED, AND ACKNOWLEDGED BY

For and on behalf of The Chennai Angels

By: ____________________

Name: [Deal Champion Name]

Title: Deal Champion

____________________

Name: [Deal Champion Name]

Title: Deal Champion

 

 

For and on behalf of [Company Name] and Promoters

By: ____________________

Name: [Promoter 1 Name]

Title: Deal Champion

By: ____________________

Name: [Promoter 2 Name]

Title: Deal Champion