LETTER
OF INTENT
Date: __________
CONFIDENTIAL
____________________
____________________
____________________
Re: Letter of Intent
Dear
__________:
This letter is intended to set
forth a letter of intent by xyz Corporation (“xyz”), a
1. Overall Structure. Our goal is to establish a joint venture
through formation of a new entity (“Newco”) to be
jointly owned by xyz and XXX . Our initial belief as to the overall
structure and purpose of the venture is set forth in the attached Term Sheet,
which would need to be properly documented in definitive agreements.
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IL DOCUMENTO È INCOMPLETO, A RICHIESTA
SARÀ INVIATA UNA COPIA COMPLETA (artt.17
ss Cod.Deont.) STUDIO
MISURACA &
Associati/Associates
Studio Legale Law Firm Il documento manca di molte parti, lo studio legale SMAF invia su
gentile richiesta una completa copia a titolo di prestazione professionale a
pagamento ex artt.17 ss. Cod. Deont.
Forense / The
document has missing parts; please, consider SMAF law firm allowed to send a
you a payable copy according to Italian Forensic Deontology Code. |
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2. Negotiations. We agree to negotiate to determine if the
joint venture will be appropriate for the parties[, provided, however, that
either party may terminate negotiations at any time for any reason].[1] [You agree to not negotiate or enter into or
continue discussions with any other person or company or solicit or encourage,
directly or indirectly, or furnish information to any other person or company,
with respect to a similar business arrangement, during the ninety (90) days
following the date this letter is accepted by you.][2]
3. Confidentiality
of Negotiations. The parties shall
use best efforts to maintain at all times as confidential information the fact
that you or we have executed this letter, the terms of this letter and the
existence and content of any negotiations between us except that both parties
may (i) inform advisors, counsel, and employees
with a need to know as each party deems necessary, and (ii) make
appropriate disclosures if required by applicable securities laws.[3]
4. Governing
Law. This letter shall be governed
by the substantive laws of the State of [
5. Entirety. This letter constitutes the entire
understanding and agreement between the parties hereto and their affiliates
with respect to its subject matter and supersedes all prior or contemporaneous
agreements, representations, warranties and understandings of such parties
(whether oral or written). No promise,
inducement, representation or agreement, other than as expressly set forth
herein, has been made to or by the parties hereto. This letter and its exhibit hereto may be
amended only by written agreement, signed by the parties to be bound by the
amendment. Parol
evidence and extrinsic evidence shall be inadmissible to show agreement by and
between such parties to any term or condition contrary to or in addition to the
terms and conditions contained in this letter and its exhibit.
6. Construction. This letter shall be construed according to
its fair meaning and not strictly for or against either party. This letter does not, and is not intended to,
impose any binding obligations on the parties, except as provided in
Section 2 and 3 above.[4]
If the terms
and conditions of this letter are acceptable, please sign and return to us a
copy of this letter so that we can move forward with our discussions.
Very truly yours,
xyz Corporation
By:
Title:
XXX
Corporation
By:
Title:
Accepted
and Agreed:
XXX
Corporation
By:
Title:
CONFIDENTIAL
TERM
SHEET
This
term sheet summarizes the principal terms with respect to the potential
formation of a joint venture corporation (“Newco”), whose
shareholders will be xyz Corporation (“ XYZ ”) and xxx aware Corporation (“ XXX ”). This term sheet is intended solely as a basis
for further discussion and is not intended to be and does not constitute a
legally binding obligation of the parties. [5] No legally binding obligations on the parties
will be created, implied, or inferred until appropriate documents in final form
are executed regarding the subject matter of this term sheet and containing all
other essential terms of an agreed upon transaction and delivered by all parties. Without limiting the generality of the
foregoing, it is the parties’ intent that, until that event, no agreement
binding on the parties shall exist and there shall be no obligations whatsoever
based on such things as parol evidence, extended
negotiations, “handshakes,” oral understandings, or courses of conduct
(including reliance and changes of position).
Efforts by either party to complete due diligence, negotiate, obtain
financing or prepare a contract shall not be considered as evidence of intent
by either party to be bound by this term sheet or otherwise. The performance by either party prior to
execution of a formal contract of any of the obligations which may be included in
a contract between the parties when negotiations are completed shall not be
considered as evidence of intent by either party to be bound by this term
sheet.
The parties are discussing a
transaction on the following terms:
General: Newco will be a corporation incorporated under the laws of
the State of __________.[6]
Purposes: Newco will be organized for the purpose of
__________________ ______________________________ (the “Joint Venture
Purpose”), and for the purpose of engaging in all activities and transactions
that are necessary in furtherance of that purpose.[7] Newco shall not
engage in any other activity except as set forth above.
Location of Newco will be located at ____________________.
Principal Office:
Management: The Board of
Directors of Newco shall consist of __________
directors (to be named by XYZ ) and
__________ directors (to be named by XXX
).[8] The parties
will execute a Shareholders Agreement setting forth the rights to elect
directors and other management matters.
Business Plan: The parties will
agree prior to the formation of the joint venture on a Business Plan for the
first [three (3)] years of operation of the venture.
Matters Requiring Action on the following
matters shall only be taken pursuant to
Consent: resolutions
duly adopted by a vote or consent of [all] [a majority] the directors of Newco:[9]
(a) approval of any agreements, documents or other arrangements
between or involving Newco and any shareholder or
affiliate thereof, as well as any amendment, consent or waiver with respect to such
arrangements;
(b) removal of directors other than by the party which designated
the director to be removed;
(c) approval of the appointment of the members of any committee
established by the Board of Directors;
(d) terms of any employment agreements with officers of Newco;
(e) approval of, and amendment to, any budgets, assessments or
financial plans;
(f) approval of agreements providing for the payment or receipt
in excess of [$ _________________];
(g) all transactions regarding buildings and land, including the
lease, purchase, sale and mortgage thereof;
(h) individual plans and projects which are capital in nature and
for which the anticipated expenditure will exceed [$ ]
(i) providing loans, guarantees, or other
extensions of credit other than in the ordinary course of business;
(j) amendment of the Articles or the Bylaws of Newco;
(k) merger into or with or acquisition of all or part of the
business of another person or entity;
(l) sale, lease, transfer, or other disposition of the assets of
Newco having a fair market value, sale price, or book
value at time of disposition greater than [$__________];
(m) liquidation, dissolution, winding up or voluntary bankruptcy
of Newco;
(n) fixing compensation of officers, including bonuses;
(o) change in the Business Plan;
(p) declaration of dividends [except for ___% annual priority
dividends to XYZ ];
(q) appointment, removal or change of any officer;
(r) any material change in the business of Newco;
(s) issuance, purchase or redemption by Newco
of any securities of Newco and any change, increase
or reduction in the capitalization of Newco;
(t) the borrowing of funds by Newco in
excess of [$ _______].
Officers: The
President of Newco shall be selected [by __________]
[by majority vote of the directors] and
the other officers shall be selected as follows: __________________.
Initial Capital At the Closing of
the Agreement, xyz shall make a cash
Contributions and contribution of
$__________ to Newco for its shares of stock and
Ownership: XXX shall make a capital contribution of
$__________ to Newco and all of XXX ’s right, title, and interest in the
assets described in Exhibit 1.[10] A single class of $0.001 par value [common
stock] shall be authorized consisting of _____ shares. Shares will be issued in the following
proportions:
XYZ
_____%
XXX
_____%
Additional [ XYZ ] [ XXX
] will be obligated to make additional capital
Contributions: contributions to Newco in the following instances:
____________________.[11]
[Loans to Newco: XYZ will loan [$__________] to Newco on the following conditions and for the following
purposes: ______________________________.
The key terms for such loans are as follows:
(a) Interest Rate: __________%
(b) Maturity Date: __________
(c) Payment Schedule: __________
(d) Loan Origination Fee: $__________
(e) Secured by: ____________________
Failure to Make If [ XYZ ] [ XXX ]
fails to make the additional required contributions,
Additional the other
party will have the option to exercise one or more of the
Contributions: following rights to
the extent not inconsistent: __________________ [12]
Restrictions on Each party and its
Affiliates will be prohibited from directly or
Competition: indirectly
competing with Newco in the following areas: ______ [13]
Transfer
of Except
as provided for below, without the prior written consent
Interests: of the other
party, no party, nor any assignee or successor in interest of any party, shall
sell, assign or otherwise transfer any interest in Newco.[14] xyz and
XXX will have a right of first
refusal on [(i)] issuances or transfers of
securities, [and (ii) license, joint venture or other business arrangements
proposed by Newco].
Confidentiality: All employees of Newco will execute Confidentiality and Invention Assignment
Agreements.[15]
Each party shall, at all times during the term of the venture and
thereafter, use its reasonable efforts to safeguard the secrecy of any of Newco’s confidential information, including marketing
plans, customer information, specialized information, or financial information.
Defaults and If a default event
occurs, the non-breaching party shall
have the
Remedies: option to
exercise the following rights to the extent not inconsistent:
____________________.[16]
Deadlock Events: If a majority of the
Board of Newco can not agree on any material business
or management issue arising out of the venture, a Deadlock will be deemed to
exist. Upon the occurrence of a
Deadlock, either party may:
(a) Submit the matter to [binding] arbitration.
(b) Exercise the Buy‑Sell Option set forth below.
(c) Require that the Chief Executive Officer of each party meet
to attempt to resolve the deadlock.
(d) [Other Options.]
Buy-Sell Option: Under a Deadlock Event
and certain other instances to be detailed in the definitive documents, a party
shall have the right to exercise a buy-sell option (the “Buy-Sell Option”),
whereby the electing party would be required to designate a price at which it
would be willing to sell its interest or to purchase the other party’s interest
in Newco, and the non-electing party would have the
option to buy or sell such interest at that price.
Preferential Treatment Newco
and xyz will execute a Preferential Treatment
Agreement: Agreement,[17]
providing for, among other things, (i) preferential
pricing and priority of production to xyz and its affiliates for purchase of Newco’s products, (ii) a non-exclusive, irrevocable,
royalty-free license to Newco for developed
technology for xyz and its affiliates to make and use any products for their
internal purposes, (iii) Newco’s technical
assistance to xyz to allow it to manufacture products using the licensed
technology, and (iv) a “most-favored nation” provision for xyz with
respect to all price reductions, rebates, allowances, etc., offered to any
other customer of Newco.
Representations and The parties will make a number
of representations and warranties,
Warranties: including (i) due incorporation, qualification, and authorization
to enter into the joint venture, (ii) exclusive ownership of the assets
being contributed to Newco free of any lien, security
interest, infringement, or adverse claim, [(iii) accuracy and adequacy of
the statements made in the __________ patent,] (iv) other representations
and warranties concerning the business, liabilities, and good standing of the
parties, and (v) other representations and warranties typically obtained
in transactions of this type. The
parties will agree to indemnify and hold harmless Newco
and the other party for any losses or liabilities arising from any breach of a
representation or warranty.
Employment Agreement and Newco will
enter into an Employment Agreement and
with Key Employee: Confidentiality and
Invention Assignment Agreement with ____________________ (“Key Employee”)
containing substantially the following terms:
(a) __________-year term.
(b) Base salary of $__________ yearly.
(c) Bonus (if any) as determined by the Board of Newco.
(d) Other customary benefits that may be available to other
employees of Newco, such as medical, dental, etc.,
all as determined by the Board.
(e) Confidentiality and invention assignment protection for the
benefit of Newco.
(f) [Other benefits.]
XYZ
Reimbursement Newco will enter into a Reimbursement Agreement with XYZ ,
Agreement: providing
reimbursement to xyz and its affiliates for agreed upon services and goods
provided to Newco at [“cost” plus allocable overhead]
for goods and at an agreed upon rate for services. xyz will be compensated for the use of its
facilities by Newco.
XXX
Reimbursement Newco will enter into a Reimbursement Agreement with XXX ,
Agreement: providing
reimbursement to XXX for agreed upon services provided to Newco at an agreed upon rate.
Conditions to Closing:
(a) Truth and accuracy of representations and warranties and
performance of all obligations by the parties.
(b) Satisfactory conclusion of due diligence investigation.
(c) Receipt of satisfactory opinions of counsel.
(d) Agreement on Business Plan.
(e) Finalization and execution of all documents set forth below
under “Anticipated Documentation” in form and substance satisfactory to the
parties.
(f) Key man life insurance having been obtained by Newco for the benefit of xyz on Key Employee for the amount
of XYZ ’s anticipated aggregate capital
contributions.
(g) No litigation or governmental proceeding pending or
threatened.
(h) Approval of the Boards of Directors of xyz and XXX
[and any required shareholder approval].
(i) Receipt of any needed regulatory
approval.
[(j) Anti-trust clearance/Hart-Scott-Rodino
filing clearance.]
(k) Other customary conditions.
Anticipated Documentation:[18]
(a) Master Agreement (setting forth the overall venture
formation agreement among the parties, with accompanying exhibits such as
Articles, Bylaws, licenses, etc.).
(b) Articles of Incorporation[19]
of Newco (setting forth the Articles to be filed with
the Secretary of State).
(c) Bylaws (setting forth the Bylaws of Newco).
(d) Shareholders Agreement (setting forth the agreement of
the parties with receipt to the management and operations of Newco).
(e) Organizational Resolutions of the Board of Directors of Newco (setting forth the organizational Board
resolutions).
(f) XXX Contribution
Agreement (providing for XXX ’s
contribution of assets to Newco with appropriate
representations and warranties).
(g) Business Plan (setting forth the Business Plan for Newco).
(h) XYZ Reimbursement
Agreement (setting forth the
services to be performed, personnel provided, use of XYZ ’s facilities and other matters to be
provided to Newco by
XYZ , and the amounts to reimburse or compensate xyz therefor).
(i) XXX
Reimbursement Agreement (setting forth the services to be performed,
personnel provided, and other matters to be provided to Newco
by XXX , and the amounts to reimburse or
compensate XXX therefor).
(j) Preferential Treatment Agreement (setting forth the
terms of certain preferential treatment and the license to be granted by Newco to xyz and its affiliates).
(k) Employment and Invention Assignment Agreement with Key
Employee (providing for the terms of employment of Key Employee with Newco).
(l) Technology License Agreement (setting forth the terms
of technology licensing from XXX to Newco).
(m) Trademark License Agreement (setting forth the terms of
any trademarks or service marks to be licensed to Newco).
(n) Distribution Agreement (setting forth the terms of any
distribution or supply arrangement between Newco and
one or more of the parties).
(o) Confidentiality and Invention Assignment Agreement
(setting forth confidentiality and invention assignment obligations, to be
signed by all employees of Newco).
(p) Opinion of XXX ’s
Patent Counsel (setting forth the intellectual property opinions to be
rendered in respect of the patents and technology to be contributed by XXX to
Newco).
(q) Opinion of XXX ’s
Counsel (setting forth the various legal opinions to be rendered to XYZ ).
(r) Opinion of XYZ ’s
Counsel (setting forth the various legal opinions to be rendered to XXX ).
Expenses: Each party to
bear its own legal fees and expenses in connection with this transaction.
Schedule: The expected
time schedule is as follows:
Event Date
First Draft of Definitive
Agreements ______________ Approval by Board of Directors ______________
Regulatory
Filings ______________
Signing
Definitive Agreements ______________
Closing Date ______________
Distribution
List: A distribution list is attached as
Exhibit 2.
* * * * *