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Letter of Intent For Stock Exchange Transaction Under IRC 368a1B by William M Keever LETTERHEAD Date VIA

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Legal Documents by William M. Keever

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									                                               [LETTERHEAD]




                                           [Date ____________]


VIA FACSIMILE & EXPRESS MAIL
Personal, Private & Confidential
_________________
_________________


                 Re:      Letter of Intent

Dear ________:

                We have been involved in discussions regarding the possibility of ______________
(“Corporation”) financing the growth and expansion of ________________________ (“Company”).
After careful consideration, we have reached what we consider to be a mutually beneficial proposal
for both enterprises. We believe a transaction can be crafted that will finance the business plan of
the Company, [provide liquidity to Company’s shareholders – where Corporation is public or
expects to go public], and add value to Corporation shareholders through the acquisition of
Company’s ________________________ assets. Our goal in making this proposal is the mutual
success of both companies.

                The purpose of this letter is to outline the terms of such proposal, wherein the
Company’s shareholders would exchange their stock for the Corporation’s common stock via a plan
of reorganization as defined by Section 368(a)(1)(B) of the U.S. Internal Revenue Code, whereby
Company would become a wholly owned subsidiary of the Corporation. The Company has [one]
class of equity securities with ______________ shares of [.001] par value common stock authorized
and ______________ shares presently issued and outstanding. The Company’s shares are held by
_____ stockholders in approximately [____] states.


1.      Terms and Conditions of Proposed Transaction. We recognize that the transaction will
require further documentation and approvals, including the preparation and approval of a formal
agreement setting forth the terms and conditions of the proposed share exchange (“Plan and
Agreement of Reorganization” or “Exchange Agreement”). The proposed terms and conditions
include, but are not limited to, the following:

[Credit Facility:         Corporation will immediately, upon the execution of a Credit Facility
                          Agreement, transfer unrestricted free trading common shares of Corporation
                          or related entity (the “Shares”) sufficient to facilitate a loan or credit facility
                          to be equal to a minimum of $_______________ USD of credit to Company
                          pursuant to the terms and conditions of the Credit Facility Agreement.
Prepared by William M. Keever
Letter of Intent – For Stock Exchange – IRC Section 368(a)(1)(B) Reorganization
__________________
__________________
[Date] ________
Page 2 of 7

                  Company will be allowed to draw down on the Facility at any time without
                  restriction for use in the operation of Company. The Corporation and the
                  Company will use their best efforts in obtaining the loan or credit facility
                  through the placement of the Shares at a banking or other financial
                  institution in order to create the funding needed by Company.

                  [The Credit Facility Agreement will provide that in the event Compnay is
                  unable to hypothecate the Shares to raise a minimum of $____________
                  USD of credit within ninety (90) days from the day of closing, Corporation
                  will itself provide and fund the credit facility.]

                  [The Credit Facility Agreement will provide that in the event Company is
                  unable to hypothecate the Shares to raise a minimum of $______ Million
                  USD of credit within [ninety (90)] days from the day of closing, Company
                  will have the right to unilaterally rescind the transaction.]

                  [The Credit Facility Agreement will provide that in the event the Company is
                  unable to hypothecate the Shares within ninety (90) days from the day of
                  closing, and Corporation fails to provide and fund the credit facility, the
                  Company will have the right to unilaterally rescind the transaction.]

                  [The letter may also provide that the transaction (stock exchange) closes in
                  escrow contingent on the funding; or that the stock exchange itself is
                  contingent on the funding]

Stock Exchange:   Upon the execution and approval of a Plan and Agreement of Reorganization,
                  Corporation will issue and deliver to each Company shareholder a pro rata
                  number of shares or fractional shares of Corporation’s common stock (the
                  “Stock”) for each share of Company stock held by such shareholder
                  according to the Purchase Price in the Stock Exchange Agreement.

Purchase Price:   Corporation will acquire Company for a purchase price of $_____ million
                  USD to be paid in the form of Corporation Stock, exchanged pursuant to a
                  Stock Exchange Agreement for all issued and outstanding COMPANY
                  common stock. [The Corporation Stock exchanged in the transaction must
                  be registered and free trading on the day of closing or within sixty (60) days
                  of the closing date.] The value and number of shares of Corporation’s Stock
                  will be determined and calculated using the lesser of [either the average
                  Market Bid Price of the Stock on the day of closing, or $_____ per share.]

Board
Representation:   [_______________ will be nominated and entitled to serve on the
                  Corporation working board of directors for a period of three (3) years.
                  COMPANY’s current shareholders will be allowed to nominate all directors
                  of COMPANY for a period of at least five (5) years.]
__________________
__________________
[Date] ________
Page 3 of 7


Employment
Agreements:            The Company’s key employees will enter into Employment Agreements with
                       Corporation or the Company, as the case may be, on or before closing
                       wherein such employees would be entitled to an appropriate salary, bonuses
                       and certain Corporation stock options to be priced at the lesser of either the
                       average Market Bid Price of the Stock on the day of closing, or $_____ per
                       share.

               Although there are other issues that will have to be discussed, this proposal provides
the basic terms and conditions of the contemplated acquisition. We are excited regarding the
prospect of working with Corporation and feel the transaction will greatly benefit each organization’s
shareholders. However, given the need for immediate financing, we believe that time is of the
essence. In any event, please feel free to contact me directly should you have any questions.

2.     Standard Provisions

        The Agreement will contain usual and customary representations, warranties, covenants, and
other agreements (including a tax allocation agreement), on behalf of Company and its stockholders
and the Closing will be subject to usual and customary conditions, including:

        [The Agreement will contain such representations, warranties, covenants, and other
agreements (including a tax allocation agreement) on behalf of Company and its stockholders as are
satisfactory to both parties in their sole discretion, and the Closing will be subject to customary
conditions, including:]

       (a) compliance by the parties with the Hart-Scott Rodino Antitrust Improvements Act (H-S-R
               Act);
       (b) obtaining of necessary consents or approvals of governmental bodies, lenders, lessors, or
               other third parties;
       (c) absence of pending or threatened litigation regarding the Assets, the Liabilities or the
               Agreement;
       (d) satisfactory completion of Corporation's due diligence investigation and acquisition
               audit; and
       (e) delivery of customary legal opinions, closing certificates, and other documentation.]

[3.    Financing

       Corporation's obligation to Close the transaction is subject to its obtaining the financing as
herein described.]

[4.    Corporation's Financial Condition
__________________
__________________
[Date] ________
Page 4 of 7


        On the closing date, the Corporation will have not less than $__________ of total
shareholders' equity and not more than $__________ of total acquisition indebtedness (including
the Purchase Note). Corporation will be capitalized with a minimum of $__________ of equity. The
obligation of Corporation to make payments under the Purchase Note will be personally guaranteed
by _________________________.]

[5.    Noncompetition Agreement

       Corporation's obligation to close shall be conditioned on, among other things, [Name]
entering into a noncompetition agreement with the Corporation on terms satisfactory to the
Corporation.]

[6.    Escrow Provision

       The Agreement will contain provisions for an escrow of $__________ of the purchase price
to secure Corporation against undisclosed liabilities, misrepresentations and breaches of
warranties, covenants, and agreements by the Company.]

7.     Other

        Upon execution of counterparts of this Letter by you, the following lettered paragraphs will
constitute the legally binding and enforceable agreement of Corporation and Company (in
recognition of the significant costs to be borne by Corporation and Company in pursuing this
transaction and further in consideration of their mutual undertakings as to the matters described
herein).

       (a)     Access. Subject to the terms set forth in paragraph (g) below respecting
       confidentiality and certain other matters, Company will afford Corporation's employees,
       auditors, legal counsel, and other authorized representatives all reasonable opportunity and
       access during normal business hours to inspect, investigate, and audit the Assets, Liabilities,
       contracts, operations, and business of Company before Closing. Corporation will conduct
       such inspection, investigation, and audit in a reasonable manner during regular business
       hours.

       (b)    Consents. Corporation and Company will cooperate with one another and proceed,
       as promptly as is reasonably practicable, to prepare and file the notifications required by the
       H-S-R Act, to seek to obtain all necessary consents and approvals from lenders and
       landlords, and to endeavor to comply with all other legal or contractual requirements for or
       preconditions to the execution and consummation of the Agreement.
__________________
__________________
[Date] ________
Page 5 of 7


     (c)     Best Efforts. Corporation and Company will negotiate in good faith and use their
     best efforts to arrive at a mutually acceptable definitive Agreement for approval, execution,
     and delivery on the earliest reasonably practicable date. Corporation and Company will
     thereupon use their best efforts to effect the Closing and to proceed with the transactions
     contemplated by the Agreement as promptly as is reasonably practicable.

     (d)     Exclusive Dealing. [Company/Corporation] will not offer the same transaction to
     any other company or person other than                 [Company/Corporation]         nor will
     [Company/Corporation], or any of its stockholders, enter into negotiation with any other
     party for the disposition of the business or stock of Company during the pendency of
     negotiations between Corporation and Company, and neither Corporation nor Company will
     unilaterally terminate these negotiations without cause unless: (i) the transactions
     contemplated by the Agreement shall not have been approved by the boards of directors of
     both Corporation and Company or the notifications required by the H-S-R Act shall not have
     been filed on or before _______________; (ii) the Closing shall not have occurred on or
     before the later of _______________ or 40 days after filing of the notifications required by
     the H-S-R Act; or (iii) a material change or event (exclusive of a competing offer) shall have
     occurred that would make proceeding with such execution and approval of the Agreement or
     such Closing illegal, invalid, or contrary to the fiduciary duties of the board of directors of
     Corporation or Company.

     [Company agrees that during the period in which this transaction is pending neither
     Company nor any of its stockholders will negotiate with any other parties relative to any
     disposition of the business or stock of Company, or any part thereof.]

     [Company will not, directly or indirectly, through any officer, director, agent, or otherwise,
     (i) solicit or initiate, directly or indirectly, or encourage submission of inquiries, proposals,
     or offers from any potential Corporation (other than Corporation) relating to the disposition
     of the assets or securities of Company, or any part thereof (other than sales of inventory in
     the ordinary course) or (ii) subject to fiduciary obligations under applicable law as advised
     in writing by counsel, participate in any discussions or negotiations regarding, or furnish to
     any person any information with respect to, the disposition of the assets or any securities of
     Company or any part thereof.]

     (e)    Costs. Corporation and Company will each be solely responsible for and bear all of
     its own respective expenses, including, without limitation, expenses of legal counsel,
     accountants, and other advisers, incurred at any time in connection with pursuing or
     consummating the Agreement and the transactions contemplated thereby.
__________________
__________________
[Date] ________
Page 6 of 7

     (f)     Public Disclosure. Before the Closing, neither Corporation nor Company shall make
     any public release of information regarding the matters contemplated herein except (i) that a
     joint press release in agreed form shall be issued by Corporation and Company as promptly
     as is practicable after the execution of this letter, (ii) that Corporation and Company may
     each continue such communications with employees, customers, suppliers, franchisees,
     lenders, lessors, shareholders, and other particular groups as may be legally required or
     necessary or appropriate and not inconsistent with the best interests of the other party or the
     prompt consummation of the transactions contemplated by this letter, and (iii) as required by
     law.

     (g)     Confidentiality. Corporation agrees that (except as may be required by law) it will
     not disclose or use and it will cause its officers, directors, employees, representatives, agents,
     and advisers not to disclose or use, any Confidential Information (as hereinafter defined) with
     respect to Company furnished, or to be furnished, by Company to Corporation in connection
     herewith at any time or in any manner and will not use such information other than in
     connection with its evaluation of the Acquisition. For the purposes of this paragraph (g)
     "confidential information" means any information identified as such in writing to
     Corporation by Company. If the Acquisition is not consummated, Corporation will promptly
     return all documents, contracts, records, or properties to Company. The provisions of this
     paragraph (g) shall survive the termination of this Letter.

     Corporation agrees to treat all information concerning Company furnished, or to be
     furnished, by or on behalf of Company in accordance with the provisions of this paragraph
     (collectively, the Information), and to take, or abstain from taking, other actions set forth
     herein. The Information will be used solely for the purpose of evaluating the Acquisition,
     and will be kept confidential by Corporation and its officers, directors, employees,
     representatives, agents, and advisers; provided that (i) any of such Information may be
     disclosed to Corporations' officers, directors, employees, representatives, agents, and advisers
     who need to know such information for the purpose of evaluating the Acquisition, (ii) any
     disclosure of such information may be made to which Company consents in writing, and (iii)
     such information may be disclosed if so required by law. If the Acquisition is not
     consummated, Corporation will return to Company all material containing or reflecting the
     information and will not retain any copies, extracts, or other reproductions thereof. The
     provisions of the paragraph (g) shall survive the termination of this Letter.

     (h)     Except with respect to the provisions of paragraph (g), either party hereto may
     terminate this letter and hereafter this letter shall have no force and effect and the parties
     shall have no further obligations hereunder if the Agreement is not signed on or before
     _______________, if such terminating party is not to breach of any of the binding provisions
     hereof.
__________________
__________________
[Date] ________
Page 7 of 7


       Please sign and date this Letter prior to _______________ in the spaces provided below to
confirm our mutual understandings and agreements as set forth in the Letter and return a signed copy
to the undersigned. If we do not receive a signed copy of this letter on or before
__________________, we will assume you have no further interest in pursuing this matter.

                                                     Very truly yours,


                                                     CORPORATION

                                                     By:
                                                     Name:
                                                     Title:
                                                     Date:


ACKNOWLEDGED AND AGREED TO:

COMPANY

By:
Name:
Title:
Date:

								
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