Letter of Intent (Acquisition) - LeapLaw

Letter of Intent (Acquisition)

Document 1355A



Access to this document and the LeapLaw web site is provided with the understanding that neither LeapLaw, Inc. nor any of the providers of information that appear on the web site is engaged in rendering legal, accounting or other professional services. If you require legal advice or other expert assistance, you agree that you will obtain the services of a competent, professional person and will not rely on information provided on the web site as a substitute for such advice or assistance. Neither the presentation of this document to you nor your receipt of this document creates an attorney-client relationship.

Letter of Intent



LETTER OF INTENT

[COMPANY NAME] [Address]

VIA FACSIMILE

[NAME OF SELLER] [ADDRESS]

Re: Acquisition of [COMPANY NAME]

Dear Sir or Madam:

This will confirm our discussions regarding the acquisition (the "Acquisition") of [COMPANY NAME], a _________ corporation ("the Company") by [PURCHASER NAME], a _________ corporation and/or one of its subsidiaries (the "Buyer"). We propose that the Acquisition be effected substantially on the terms and subject to the conditions outlined below.

1. Form of Acquisition; Purchase Price. We contemplate that the Acquisition will be in the form of a purchase by Buyer of all of the outstanding shares of the Company from its Stockholders (the "Stockholders"), for an initial purchase price of $________ based upon the pro forma [DATE], balance sheet attached hereto. [STATE ANY SPECIFIC CONDITIONS]. At the closing, if the book value of the assets purchased, other than good will, less the book value of the liabilities assumed at the close of business on the date of the closing is less than $_______, then the purchase price will be reduced by the difference, and if book value of the assets purchased, other than good will, less the book value of the liabilities assumed at the close of business on the date of the Closing, is more than $_______, then the cash paid at Closing will be increased by the difference.

2. Escrow. Of the Closing Purchase Price, $______ shall be paid into an escrow account by the Stockholders. The Escrow will be used to secure to the Buyer the Stockholders' obligations under the calculation of the final purchase price based upon the Closing Date balance sheet and the representations and warranties as well as indemnification of the Stockholders. Of the Escrow, $______ will be released upon the certification of the final closing balance sheet, with the payment from the Escrow to the Buyer if any reduction in the Purchase Price from the estimated closing balance sheet delivered two days prior to the date of Closing. The balance of the escrow account in excess of $______ will be released one year after the date of Closing and the balance of the escrow account will be distributed three years after the date of Closing. All interest earned on the escrow account will belong to the Stockholders. The parties will execute a definitive Escrow Agreement at the Closing.

3. Basis of Proposal. The proposal to acquire the Company is based, among other things, on the accuracy of financial and other information heretofore provided to Buyer; including the [DATES] audited financial statements and the projected [DATE] financial results; on the

Letter of Intent



absence of any material adverse change in the affairs, condition or prospects of the Company; on the Company's not having effected any material change in the assets, liabilities, personnel and compensation procedures and accounting practices; and on the Company continuing to conduct its business in the ordinary course consistent with past practice. Notwithstanding the foregoing, we acknowledge that the Company may distribute cash to its Stockholders before the Closing in an amount equal to their combined basis in their stock, and that the Company may pay at the Closing or immediately prior to the Closing, bonuses to key employees to reflect their long service to the Company.

4. Definitive Agreement. The Stockholders, the Buyer and the Company will as promptly as practicable commence negotiation of a definitive agreement (the "Agreement") pursuant to which the Acquisition is to be made. The Buyer contemplates that the Agreement will be finally and fully executed on [DATE]. The Agreement will contain such representations, warranties, covenants, conditions, indemnities and other terms and provisions as are usual and customary for an agreement of the type contemplated. However, Buyer will make no claim for indemnification unless and until the total claims amount to $______. Once the total of all countable claims exceeds $______, then all claims above $_____ will be indemnified. The parties will use their best efforts to execute the Agreement on or before [DATE], and to schedule the Closing Date on or before [DATE].

5. Due Diligence. The Buyer shall commence the due diligence upon the signing of this letter of intent and will complete such due diligence no later than [DATE], upon the signing of a final acquisition agreement. The non-disclosure agreement previously entered into by the parties on [DATE], will continue to be in full force and effect and will continue to cover all of the information furnished pursuant to this Letter of Intent during the due diligence period. The parties acknowledge that all information furnished hereafter in connection with the due diligence shall be deemed to be proprietary and confidential in accordance with paragraph 2 of the mutual non-disclosure agreement dated as of [DATE].

6. Conditions to Consummation of Acquisition. The following are the major conditions to consummation of the Acquisition:

(a) Definitive Agreement. The definitive Agreement shall have been duly executed and delivered by the parties thereto;

(b) Review and Investigations. The Buyer and its respective agents shall have made such due diligence reviews and investigations as they shall desire. The results of such reviews and investigations shall be satisfactory to the Buyer;

(c) Approvals. All necessary regulatory, corporate and other approvals for the Acquisition, and all necessary consents of third parties, shall have been obtained, including a Hart-Scott-Rodino premerger notification filing, thirty (30) day waiting period and subsequent approval, if necessary;

(d) Employment. The Company and its officers will use their best efforts to have all the employees of the Company continue to work for the Company after the Acquisition;

Letter of Intent

3



(e) Third Parties. Prior to executing the Agreement, the Buyer must be satisfied that it has or will be able to enter into satisfactory continuing relationships with the Company's customers and suppliers. The Company will assist Buyer to this end; and

(f) Employment Agreements. The Company will enter into [NUMBER] year Employment Agreement with each of [EMPLOYEE]. These agreements will provide for a total of _______________ Dollars ($_______________) to be paid as compensation, with ____________________ to be paid to [EMPLOYEE(S)]. The employees shall be eligible to participate in the Buyer's bonus plan and stock option plan. The employment agreements will also provide for medical plan plus maximum extension under COBRA in the event of termination of their employment, use of cars, continued group term insurance and disability insurance, and vacations that are consistent with prior practices, which have averaged [NUMBER] weeks.

(g)

Continued Employment and Benefits for the Company Employees. Buyer

will agree to continue to offer employment to all of the Company's employees on substantially

the same terms as their current employment and will furnish benefits after the Closing equivalent

to benefits currently being furnished.

(h) Relocation Freeze. For the [NUMBER]-year period after the Closing, Buyer will not require any current employees of the Company to relocate to any other location other than in [LOCATION].

7. Approvals. The parties will determine as promptly as practicable what regulatory and other approvals and filings, and what consents of third parties, are required in connection with the Acquisition and will cooperate in obtaining or making the same (it being understood that the Company will bear primary responsibility for obtaining third-party consents).

8. Review. Upon the execution of this letter, the Company will permit the Buyer (including, for purposes of this paragraph, its counsel, accountants, bankers and selected employees and advisors) to make a full and complete investigation of the business, properties, financial condition and affairs of the Company, and will give the Buyer full access to such information, books, minute books, records, and contracts, and such other documentation as the Buyer may require in connection with such investigation. Buyer will be provided access to certain of the Company's personnel, its vendors and customers with the written consent of the Company, which consent will not be unreasonably withheld.

9. Third Party Dealings. During the period from the date hereof through [DATE], neither of you nor the Company nor any of the Company's agents will solicit or enter into any discussions, negotiations or agreement with any person other than the Buyer pertaining to any stock sale, asset sale or other form of direct or indirect disposition or change in ownership or control of the Company or any component thereof. Upon execution of this letter you and the Company will cease all such discussions and negotiations previously commenced with any person other than the Buyer. The Stockholders and the Company will promptly advise the Buyer of any proposals any of them receive during such period to which they respond in any manner other than negatively.

Letter of Intent

4



10. Costs and Expenses. If an agreement is not entered into by [DATE], the Buyer will be responsible for the costs and expenses incurred by it in connection with the transactions contemplated hereby, and the Stockholders and the Company will be responsible for the costs and expenses incurred by it in connection therewith; provided, however, under the terms of the [NAME OF ACQUISITION AGREEMENT] there will be an appropriate deposit and if the acquisition is not completed for any reason thereafter, then the Stockholders shall retain the deposit as liquidated damages and each party shall thereafter be responsible for its own costs incurred in connection therewith.

11. Public Announcement. The text of any public announcement relating to the transactions contemplated hereby will require the approval of the Buyer and the Company, such approval not to be unreasonably withheld.

12. Binding Effect. Paragraphs 5, 8, 9 and 10 of this letter constitute legally binding and enforceable agreements of the parties signing below (in consideration of the significant costs borne by each party and their mutual undertakings) with respect to the matters set forth therein. Except for those four paragraphs, it is understood that this letter constitutes a statement of our mutual intentions, but does not constitute a legally binding or enforceable agreement, and does not impose any enforceable duty or obligation binding on any party, and creates no rights in favor any party. Except as stated, any binding agreement will result only from execution and delivery of the definitive Agreement.

13. Lease. At the time of the Closing the Buyer will enter into a lease with [NAME OF COMPANY], the owner of the real estate in which the Company operates its business in [LOCATION]. The term of the lease will be for [NUMBER] years at $____ triple net per square foot for approximately _____ square feet, with [____ options] to be held by the Buyer at fair market value but with no reduction in the amount of the rent from the previous period.

As indicated above, we would expect to go forward immediately to prepare and negotiate a mutually satisfactory Agreement while at the same time the Buyer concludes the necessary due diligence investigations. If the foregoing is acceptable to the Company and the Stockholders, please so indicate in the space provided below and return one signed original to us.

[Signature page follows.]

Letter of Intent

5



 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download