Letter of Intent
This letter of intent (the "LOI") is made on Letter date between Buyer (organisation), of Buyer address ("Buyer"), and Seller (organisation), of Seller address ("Seller").
1. Binding and non-binding parts (binding)
This LOI has two parts:
- Part A (sections 2 to 6) describes the deal that the parties plan to make. Part A is not legally binding.
- Part B (sections 7 to 14) sets out promises that bind the parties from the date both parties sign.
Only sections 1 and 7 to 14 are legally binding. No other section binds the parties. Words such as "will" or "plans to" in Part A describe present intentions, not promises.
A binding deal arises only when both parties sign a definitive agreement. Starting due diligence, spending money, or acting on Part A does not make Part A binding.
2. The deal (non-binding)
Buyer plans to buy, and Seller plans to sell: Business, shares, or assets to be sold.
The parties plan to structure the deal as: Structure (asset purchase, share purchase, or merger).
3. Price and payment (non-binding)
Buyer proposes a price of Proposed price (with currency). Buyer plans to pay it as follows: How the price is paid (e.g. 80% at closing, 20% after 12 months).
The price assumes these adjustments: Price adjustments (e.g. working capital, debt, stock).
The price rests on the information that Seller has given Buyer so far. Buyer may change it if due diligence shows that the information was wrong or incomplete.
4. Due diligence (non-binding)
Buyer plans to complete its due diligence within Days for Buyer's due diligence days after the date of this LOI. It plans to review:
- financial statements, tax records, and debts
- customer and supplier contracts
- employees and key staff terms
- property, equipment, and other assets
- intellectual property, licences, and permits
- disputes and legal claims
5. Conditions to closing (non-binding)
Buyer's plan to close depends on these conditions: Conditions to closing (e.g. financing, key customer consents).
The parties also expect these conditions:
- a satisfactory result of due diligence
- approval by each party's board or owners
- any government approvals and third-party consents that apply
- no major harm to the business before closing
6. Timeline and definitive agreement (non-binding)
The parties plan to sign a definitive agreement by Target date to sign the definitive agreement and to close the deal by Target closing date. They expect the definitive agreement to cover:
- the final price, payment, and adjustments
- promises and statements about the business (warranties)
- compensation for losses (indemnity), limits, and any amount held back
- what Seller does between signing and closing
- employees, transition help, and any non-compete terms
- how the parties end the deal before closing
Until both parties sign the definitive agreement, each party may decide not to go ahead, for any reason, without liability to the other. Only Part B applies to that decision.
7. Binding terms (binding)
Part B means sections 7 to 14. Part B and section 1 are legally binding from the date both parties sign this LOI.
Each party makes the promises in Part B in return for the other party's promises in Part B. Buyer also gives value by spending time and money on due diligence.
8. Confidentiality (binding)
Confidential information means non-public information that one party gives the other in connection with this LOI, if it is marked confidential or a reasonable person would treat it as confidential. The terms of this LOI and the fact of the talks are also confidential.
The party that receives confidential information will:
- use it only to assess and plan the deal
- share it only with its staff, owners, lenders, and advisers who need it and who have similar duties of confidentiality
- protect it with at least reasonable care
These duties do not apply to information that is public through no fault of the receiving party, that it already had or develops independently, or that it receives lawfully from a third party. A party may disclose information that the law or a court requires, after it tells the other party where the law allows.
On request, and when this LOI ends, each party returns or destroys the other party's confidential information. These duties continue for Confidentiality period after this LOI ends (years) years after this LOI ends.
9. Exclusivity (binding)
From the date of this LOI until Exclusivity ends on (the "Exclusivity Period"), Seller will not, directly or through others:
- offer or market the business or assets described in section 2 to a third party
- negotiate with a third party, or accept a proposal from a third party, to buy, merge with, or invest in the business or assets
- give a third party information for that purpose
Seller will make sure that its owners, directors, employees, and advisers follow this section. Seller may tell a third party that it cannot talk.
The Exclusivity Period ends earlier if this LOI ends under section 12, or if Buyer proposes a lower price or any other term that is worse for Seller than Part A. Buyer may not rely on the Exclusivity Period after it ends.
10. Access for due diligence (binding)
During the Exclusivity Period, Seller will give Buyer and its advisers reasonable access to the information, premises, and staff that Buyer needs for due diligence, in business hours and with notice. Seller does not have to give information that is legally privileged or that the law bars it from sharing.
11. Costs and announcements (binding)
Each party pays its own costs of the talks, due diligence, and this LOI, including adviser fees. This applies even if the parties never sign a definitive agreement.
Neither party will make a public announcement about the deal, or talk to the other party's customers, suppliers, or staff about it, without the other party's written consent.
12. Term and ending (binding)
This LOI starts on the date of this LOI. It ends on the earliest of these dates:
- the date both parties sign the definitive agreement
- Latest date this LOI ends
- the date either party tells the other in writing that it will not go ahead
When this LOI ends, sections 1, 8, 11, 13, and 14 continue. Ending this LOI does not affect a claim for an earlier breach of Part B.
13. General (binding)
- Changes to this LOI are valid only in writing signed by both parties.
- This LOI replaces earlier discussions and drafts on its subject.
- Neither party may transfer its rights under Part B without the other party's written consent.
- Notices are in writing and go to the addresses above, or to an email address that a party gives for notices.
- The parties may sign this LOI electronically and in counterparts.
- Each person who signs confirms that they may sign for their organisation.
14. Governing law and disputes (binding)
This LOI is governed by the laws of Governing law (country or state). The parties will first try to settle any dispute by talks between senior managers for 15 days. After that, the courts of Governing law (country or state) may decide the dispute.
Either party may ask a court at once for an order to stop a breach of section 8 or 9.
Signatures
Buyer (organisation)
Signature: ____________________________
Date: ______________
Seller (organisation)
Signature: ____________________________
Date: ______________