A letter of intent is used for a variety of reasons including, but not limited to, the following reasons: protect confidential information, outline terms, and have the parties manifest interest in the transaction – all before incurring significant legal expense or wasting effort in preparation.

Sample Letter of Intent:


 

LETTER OF INTENT TO BUY & SELL

Dear Owner’s Name, as owner of Name of the Business (“Seller”);

This letter is to inform you of Buyer’s Name (hereinafter “Buyer”), intent to buy all of Seller’s assets or corporate structure in its entirety, as he may choose (the “Contemplated Transaction”). As used in this letter, each of Seller Personally, Seller’s Business and Buyer is a Party; collectively, they may be referred to as the “Parties.”

By signing and returning this letter, you consent and agree that the following provisions will govern this Contemplated Transaction:

Binding Provisions

Binding Provisions of this letter of intent shall govern the Contemplated Transaction—but only in the event the Parties choose to consummate such transaction—unless both Parties agree in writing to the contrary. The binding provisions of this letter are denoted by the following titles: Confidentiality, No-Shop, Good Faith, Covenants, and Representations and Warranties. Binding provisions shall survive the No-Shop period indicated below when applicable. Nothing in this Letter of Intent shall obligate (or be construed to obligate) Seller to sell any or all of the assets or securities of Seller to Buyer. Nothing in this Letter of Intent shall obligate (or be construed to obligate) Buyer to purchase any or all of the assets or securities of Seller. This Letter of Intent merely sets forth the terms and conditions under which the Parties agree to negotiate and review the Contemplated Transaction. If the Contemplated Transaction does not close within ninety (90) days of the date of this letter, this letter shall have no further legal force or effect except as to the section titled “Confidentiality” (which shall survive thereafter for a period of five (5) years). In the event of any dispute arising under this letter, the Parties agree that Texas law controls. In the event the Parties intend to consummate the Contemplated Transaction, the Parties shall reduce their full understanding of the terms and conditions of such transaction into a full purchase agreement (whether asset purchase or membership interest purchase agreement), which such agreement shall wholly replace this letter; at such time, this letter shall have no further legal force or effect.

Binding Provisions:

Confidentiality

Both Parties agree to hold all communications—whether electronic, written, verbal, or otherwise—concerning the Contemplated Transaction in strict confidence. Both Parties shall take the same precautions that a reasonable, prudent person would take in order to maintain said confidence. Further, both Parties agree that this Contemplated Transaction (and any details relating thereto) only shall be made known to their respective attorneys, accountants, appraisers, and advisors.

No-Shop

Seller agrees that beginning on the date this letter is signed until (Choose Appropriate Date), it shall not advertise its business as being for sale, nor shall it accept or entertain offers for the same.

As consideration for this no-shop period, Buyer shall pay to Seller Personally (Some appropriate amount of consideration), which sum shall be non-fundable under any circumstance except in the event (1) that Seller causes the Contemplated Transaction not to close despite a bona fide, firm offer by Buyer, the contents of which offer include both (a) applicable term one (b) applicable condition to term one; or (2) that Seller is in material breach of any of the binding provisions of this letter. Buyer shall pay the aforementioned $consideration for the no-shop period by (describe how the money will be delivered).

Buyer shall have the option to extend this no-shop period for up to (some period of time), as he sees fit, in his sole discretion. To effectuate this extension, Buyer shall, on or before (appropriate date), indicate in writing to Seller, by and through each party’s respective legal representation, his intention to do so. In the event of extension, Buyer shall indicate the number of days he would like the extension to be (with a reasonable limitation), and multiply that number by $proposed extension payment amount, the product of which shall be due in the same manner and subject to the same conditions as the original sum of  $X described above. Neither Seller nor Buyer shall have any obligation to grant any further no-shop period (or any additional extension thereto) except as described in this letter.

Good Faith

Both Parties agree that they shall make a good-faith and genuine effort to provide the other Party with any and all documents or pieces of information as may be reasonably requested in order to conduct their respective due-diligence into the other’s ability to effectuate this contemplated transaction.

Buyer shall conduct, and Seller shall reasonably aid in, an independent investigation by Buyer into all aspects of Seller to validate the proposed purchase price, including (but not limited to) investigation and review of the following items of Seller: (Include things necessary to validate a purchase price and give comfort to the buyer).

  • Previous tax returns, license(s)
  • franchise tax reports, issued or received tax statements of various natures
  • banking transactions
  • contract rights and obligations
  • corporate filings with the Secretary of State
  • insurance policies
  • potential outstanding
  • etc.

Buyer explicitly recognizes and agrees that Seller may not readily possess or have access to some of the aforementioned documents; in such cases, Seller shall request copies of the desired document(s) from such persons (including, by way of example only, attorneys and accountants of Seller) in a timely manner but shall not be responsible or liable to Buyer for any undue delay on the part of such other persons in procuring or providing the requested document.

Covenants

In the event of reaching a signed agreement as to terms and price, executed by both Parties, Seller promises and covenants:

  1. To sign a noncompete agreement (and include the basic, legal, terms of which).
  2. To continue to transact business as is standard and in the normal course of business (and include the terms that appropriate for the type of business the buyer is hoping to buy).
  3. To train the buyer, or continue for working for the buyer (and define capacity), and on the following basic terms (define price, define expectations, define time frame).

Representations and Warranties

Seller represents and warrants that:

  1. it has full corporate power and authority to consummate this contemplated transaction;
  2. Seller Personally has the requisite power and control over Seller’s Business to negotiate and deal on its behalf.
  3. Seller is not in default and can otherwise pay its bills as they become due (you man enumerate different bills of concern, including tax and payroll, vender contracts, etc);
  4. there are no known outstanding claims, potential claims, or grievances against Seller that are outside the normal course of business or which have not been fully disclosed;
  5. Seller is entering into this contemplated transaction in good faith and with full intentions of selling its company or company assets to Buyer; AND
  6. it has soundly and diligently conducted its business in accordance with industry and legal standards at all times, except during instances of unintentional negligence, and on those instances, if any, has promptly and duly corrected its mistake to conform to said industry and legal standards.

Valuation

The purchase price shall be (Define the purchase price plus include any variable that may affect the purchase price). This purchase price is a number proposed by Buyer and is neither accepted nor rejected by Either Party, it is a subject of negotiation, and is subject to Buyer’s findings in accordance with the provisions of this letter.

Legal & Accounting Fees

Both Parties are responsible for their respective legal, accounting, and appraisal fees in connection with the Contemplated Transaction. Neither Party shall be responsible in any way or amount to the other Party for any legal, accounting, or appraisal fee in connection with the Contemplated Transaction.

This letter of intent will be executed in (indicate number of copies desired), with each respective copy serving as an original.

Date Signed

SELLER

_______________________________

 

Seller in their various capacities 

 

BUYER

 

_______________________________

Buyer in his/her appropriate capacities 


 

I highly encourage you to have an attorney help you write a letter of intent prior to engaging in substantive negotiations as it will set the tone for the entire transaction.

 

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