Letter of Intent
This letter of intent (this "Letter"), dated [Date of this letter], sets out the principal terms on which [Buyer (you or your acquisition entity)] ("Buyer") proposes to acquire the business known as [Business being purchased], operated by [Legal entity that owns the business] at [Business address] (the "Business"), from [Seller (owner or entity that owns the business)] ("Seller"). Buyer and Seller are each a "Party" and together the "Parties". Part A of this Letter describes the proposed transaction and is not binding. Part B contains the only binding obligations of the Parties.
Part A. Proposed Transaction (Non-Binding)
The Parties intend to negotiate in good faith a definitive purchase agreement and related documents (the "Definitive Agreement") reflecting the terms in this Part A and other customary terms. Nothing in this Part A creates any obligation to sell, to buy, or to enter into the Definitive Agreement, and either Party may end negotiations at any time for any reason without liability, subject only to Part B.
1. Structure
The transaction is proposed to be structured as follows: [Transaction structure]. If the transaction is an asset purchase, Buyer would acquire the assets of the Business free and clear of liens and would assume only those liabilities expressly identified in the Definitive Agreement. If the transaction is a stock or membership interest purchase, Buyer would acquire one hundred percent (100%) of the equity of the entity that owns the Business, and Seller would deliver the entity free of undisclosed liabilities, with indemnification for pre-closing liabilities as set out in the Definitive Agreement.
2. Purchase Price
The proposed purchase price is [Proposed purchase price] (the "Purchase Price"), of which [Cash paid at closing] would be paid in cash at closing. The balance, if any, would be paid as follows: [Seller note, earn-out or escrow (or “None”)]. The Purchase Price assumes that the Business is delivered with a normalized level of working capital and inventory consistent with its historical operations, and would be subject to adjustment in the Definitive Agreement for any shortfall or excess as of closing. The Parties would agree on an allocation of the Purchase Price among the acquired assets for tax purposes in the Definitive Agreement.
3. Included and Excluded Items
The transaction would include: [What is included]. Unless stated otherwise above, the Business would be transferred with all tangible and intangible assets used in its operation, including equipment, inventory, intellectual property, customer and supplier relationships, records, permits to the extent transferable, and goodwill, and Seller would retain cash, personal items and any assets identified as excluded in the Definitive Agreement. Buyer would offer employment to the employees of the Business on terms to be determined, and Seller would be responsible for all wages, accrued leave and benefits through closing.
4. Due Diligence
Buyer would have [Due diligence period (days)] days after both Parties sign this Letter (the "Diligence Period") to complete its investigation of the Business. During the Diligence Period Seller would give Buyer and its advisers reasonable access, on reasonable notice and in a manner coordinated with Seller to avoid disruption, to the Business’s financial statements, tax returns, bank records, contracts, leases, employee and payroll records, equipment, inventory, permits, insurance, litigation files and key personnel, and would respond promptly to reasonable information requests. Buyer’s obligation to proceed would be conditioned on Buyer being satisfied with the results of its diligence in its sole discretion.
5. Conditions to Closing
The closing of the transaction is expected to be subject to customary conditions, including: (a) execution of a Definitive Agreement acceptable to both Parties, containing customary representations, warranties, covenants and indemnification; (b) Buyer obtaining financing on terms acceptable to it, if Buyer requires financing; (c) assignment of the premises lease to Buyer, or a new lease, on terms acceptable to Buyer and the landlord’s consent where required; (d) assignment or renewal of material customer, supplier and licence agreements; (e) Seller and its principal owners entering into a non-competition and non-solicitation agreement for [Seller non-compete (years)] years covering a reasonable geographic area; (f) Seller providing transition assistance for a period after closing to be agreed; and (g) no material adverse change in the Business before closing. The Parties would target a closing on or about [Target closing date].
6. Conduct of the Business
Until the Definitive Agreement is signed or negotiations end, Seller intends to operate the Business in the ordinary course consistent with past practice, to maintain its assets, relationships and staff, and not to enter into any unusual commitment, increase compensation, distribute assets other than cash, or take any other action outside the ordinary course without informing Buyer.
Part B. Binding Provisions
The following Sections 7 through 11 are binding on the Parties from the date both Parties sign this Letter, whether or not a Definitive Agreement is ever signed.
7. Exclusivity
For [Exclusivity period (days)] days after both Parties sign this Letter (the "Exclusivity Period"), Seller shall not, and shall cause its owners, officers, employees, brokers and advisers not to, directly or indirectly solicit, initiate, encourage, negotiate, accept or discuss any offer or proposal from any person other than Buyer for the sale of the Business, its assets or its equity, or any merger, financing or other transaction that would be inconsistent with the transaction described in this Letter, and shall promptly notify Buyer of any such unsolicited approach and its terms. The Exclusivity Period ends earlier if Buyer notifies Seller in writing that it has ended negotiations.
8. Confidentiality
Each Party shall keep confidential the existence and terms of this Letter, the fact that the Parties are in discussions, and all non-public information about the other Party or the Business received in connection with the proposed transaction, and shall use that information only to evaluate and negotiate the transaction. Each Party may disclose that information to its owners, lenders, attorneys, accountants and advisers who need to know it and are bound to keep it confidential, and as required by law. If negotiations end, each Party shall return or destroy the other Party’s information on request. Any non-disclosure agreement already signed by the Parties continues to apply, and this Section supplements it. This Section survives for two (2) years after the date of this Letter.
9. Expenses; Brokers
Each Party shall bear its own costs and expenses, including fees of attorneys, accountants, lenders and other advisers, in connection with this Letter and the proposed transaction, whether or not it closes. Each Party represents that it has not engaged any broker, finder or intermediary entitled to a fee in connection with the transaction, except: [Broker involved (or “None”)]. Any fee payable to that broker shall be paid by the Party that engaged it, and each Party shall indemnify the other against any claim by a broker asserting an engagement by the indemnifying Party.
10. Non-Binding Effect
Except for Sections 7 through 11, this Letter is a non-binding expression of the Parties’ present intentions and does not create any legal obligation to complete the transaction or to enter into the Definitive Agreement. No obligation to buy or sell arises unless and until a Definitive Agreement is signed and delivered by both Parties, and then only on the terms of that agreement. Neither Party may rely on any oral statement, course of dealing or partial performance as creating such an obligation. This Letter does not create any obligation to negotiate for any particular period or to reach agreement.
11. Governing Law; General
This Letter is governed by the laws of the State of [Governing law (state)], without regard to its conflict of laws rules. Sections 7 through 11 may be enforced by injunction as well as by any other remedy, and the prevailing Party in any action to enforce them is entitled to reasonable attorney fees and costs. This Letter may be amended only in a writing signed by both Parties, may not be assigned without the other Party’s consent except by Buyer to an entity it controls formed to complete the acquisition, and may be signed electronically and in counterparts, and the electronic execution record, timestamps and document fingerprints kept by the signing platform are conclusive evidence of its execution. If Seller agrees to the terms of this Letter, please sign where indicated. This Letter expires if not signed by Seller within ten (10) days after the date first written above.
Signatures
Buyer · Seller