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josh-loi-draft-v1

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NON-BINDING LETTER OF INTENT (DRAFT)

Date: [TBD]
Buyer: Brainforge Labs, Inc. (or affiliate, “Buyer”)
Seller: [Olivo legal entity name] (“Seller”)
Transaction: Product analytics client-book transfer and related transition services

Status: Draft for business discussion only. Not legal advice. Subject to legal counsel review.

1) Transaction overview

Buyer proposes to acquire defined economic rights and transition ownership of Seller’s eligible product analytics client book (the “Transferred Book”), subject to diligence and definitive agreements.

This transaction is designed as a structured transfer with performance-based consideration and no required buyer cash payment at signing unless otherwise agreed in final documents.

2) Scope of transferred book

Transferred Book includes:

  • named in-scope client accounts listed in Schedule A
  • related recurring and project revenue tied to those accounts
  • account history and transition documentation necessary to service those accounts

Excluded:

  • accounts not listed in Schedule A
  • any IP/tools not explicitly assigned in definitive agreements
  • non-transferable rights prohibited by client contract terms

3) Consideration framework (3 scenarios)

Final scenario selection and economics are subject to diligence validation.

3.1 Valuation methodology

Primary method:

  • Enterprise Value (“EV”) = Adjusted TTM EBITDA x Scenario Multiple

Adjusted TTM EBITDA for valuation:

  • based on transferred-book economics only
  • includes normalized owner compensation and agreed adjustments

3.2 Scenario grid (initial proposal)

ScenarioThesisMultipleEV Formula
1 - Defensivehigher concentration/founder dependency risk2.75xAdjusted TTM EBITDA x 2.75
2 - Basemoderate risk, expected transferability3.25xAdjusted TTM EBITDA x 3.25
3 - Outperformstrong transferability + low concentration + robust retention evidence3.75xAdjusted TTM EBITDA x 3.75

3.3 Illustrative values (placeholder assumptions)

Illustrative only, pending your confirmation:

  • transferred annual revenue baseline: $500,000
  • adjusted EBITDA margin: 35%
  • adjusted TTM EBITDA: $175,000

Illustrative EV outputs:

  • Scenario 1 (2.75x): $481,250
  • Scenario 2 (3.25x): $568,750
  • Scenario 3 (3.75x): $656,250

4) Consideration mix by scenario (initial)

Scenario 1 - Defensive

  • Performance note: 55% of EV
  • Growth/retention earnout: 40% of EV
  • Holdco equity (optional): 5% of EV equivalent

Scenario 2 - Base

  • Performance note: 50% of EV
  • Growth/retention earnout: 40% of EV
  • Holdco equity (optional): 10% of EV equivalent

Scenario 3 - Outperform

  • Performance note: 40% of EV
  • Growth/retention earnout: 45% of EV
  • Holdco equity (optional): 15% of EV equivalent

All scenarios:

  • no guaranteed payout at close unless otherwise specified in definitive agreements
  • payments made monthly in arrears on collected revenue basis

5) Performance note and earnout mechanics

Term:

  • target: 12-18 months
  • hard stop: 24 months

Base payout reference:

  • 22%-28% of retained transferred-account revenue (collected cash basis)

Growth kicker reference:

  • 10%-15% of incremental transferred-account revenue above baseline

Retention gates (cohort GRR):

  • <85%: payout pause
  • 85%-89%: partial payout band (default 70%)
  • >=90%: full payout eligibility

Margin protection:

  • monthly seller payout cannot exceed 55% of monthly gross profit from transferred accounts
  • any excess defers to next true-up period, subject to gate compliance

6) Seller transition role and authority

Parties intend to define one of the following in definitive agreements:

Option A - Transition-only scope:

  • Seller supports structured account transfer and transition milestones for agreed period

Option B - Operating leadership scope:

  • Seller joins Buyer in defined leadership role with explicit authority matrix

Important:

  • employment/services compensation is separate from acquisition consideration unless explicitly included
  • “employee while keeping separate external book” model is not assumed and requires explicit conflict-management terms if pursued

6.1 Workflow C delivery integration covenant (binding)

Seller agrees to commercially reasonable cooperation on delivery integration during the transition period, including:

  • participation in named account handoff plan for in-scope accounts
  • support for operator/GM lane activation in Brainforge’s existing product analytics service line
  • participation in client continuity and expansion planning sessions for transferred accounts
  • provision of account context necessary to map transferred accounts into Brainforge delivery coverage model

Milestone-linked contingent consideration:

  • a defined portion of contingent consideration (to be set in definitive agreements) will be tied to objective Workflow C milestones, including:
    • Tier A/B account handoff completion
    • GM lane activation
    • service-line expansion motion launch

Milestone measurement and dispute resolution mechanics will be defined in definitive agreements.

7) Diligence and data requirements

LOI remains subject to completion of:

  • account-level trailing 12-month monthly revenue
  • account-level retention/churn and concentration table
  • contract assignability/consent analysis for in-scope accounts
  • founder dependency and key relationship map
  • Day 1 and Day 100 integration plan with owners

8) Working capital, debt, and adjustments

Definitive agreements will include:

  • working capital adjustment methodology and peg (if applicable)
  • treatment of deferred revenue and owner add-backs
  • treatment of known liabilities tied to transferred accounts

9) Exclusivity and timeline

Upon execution of this LOI, Seller agrees to negotiate exclusively with Buyer for 45-60 days, subject to mutually agreed diligence cooperation timelines.

Target timeline:

  • LOI sign: [TBD]
  • confirmatory diligence complete: [TBD]
  • definitive agreements execution: [TBD]
  • close/effective transfer date: [TBD]

10) Binding and non-binding terms

Binding sections (subject to final drafting):

  • confidentiality confirmation
  • exclusivity
  • governing law and venue
  • expenses

All other sections are non-binding statements of present intent and are subject to definitive agreements.

11) Conditions to close

Closing is conditioned on:

  • satisfactory diligence results
  • final agreement on economics and legal terms
  • required internal approvals by each party
  • executed definitive agreements

12) Signature blocks (non-binding intent)

Accepted and agreed as a non-binding expression of intent:

Buyer: ____________________ Date: __________
Name/Title: ________________________________

Seller: ____________________ Date: __________
Name/Title: ________________________________

Schedule A (to be attached)

In-scope transferred accounts and baseline metrics:

  • account name
  • trailing 12-month revenue
  • gross margin
  • account owner
  • contract term and assignability flag

Graph View