Letter of Intent or Term Sheet Samples

 

On this page we provide descriptions, how to videos, and following that you can download deal specific letter of intent and term sheet templates.

 

What Is the Letter of Intent (LOI)?  

It is a confidential document, usually prepared by the buyer or investor, which outlines in general terms the purchase or investment agreement between the parties.  All of the following are the same thing: term sheet, memorandum of understanding (MOU), letter of intent (LOI), heads of agreement, deal points, etc. The term sheet, LOI, or MOU can be used for mergers, acquisitions, and joint ventures (also commonly referred to as business sale, business purchase, and business alliance). Further below on this page, we provide specific examples for each type of transaction.

 

 

Most of the time it is not a legally binding commitment to buy, sell, or invest. However, certain provisions such as confidentiality stand still and payment of consultants during the diligence period should be and usually are binding. I refer to the LOI as a handshake in writing.  

 

The main purpose is to assure that the parties agree on the general terms of the deal before starting due diligence. Without the terms written, the parties will expose themselves to crucial ambiguities and omissions.
 

What Is Covered?

It should identify and confirm agreement on all significant issues of the potential transaction. The following is my basic checklist:  

  • What's being sold? Is it a stock sale, an asset sale, or equity interest? What specific items are included are included or excluded?
  • The price including security instruments and other money issues. This defines all consideration that will potentially change hands as a result of the transaction. This includes, purchase price, investment capital, consulting agreements, non-compete agreements, employment agreements, royalty agreements earn-outs and any other such agreement.It is usually a good idea to make the latest published Balance Sheet as the base price document and adjust the purchase price at closing to reflect any gains or losses to that Balance Sheet. This is fair; the Seller gets credit for profits or losses all the way to the actual closing.
  • Terms. Will it be all cash at closing or will there be financing. The LOI also describes what security agreements are to be created for any future payments. If there is third party financing ahead of seller financing, The LOI should include the seller's right to approve such financing and establish a date for a financing commitment to be in place from the third party.
  • The payment provisions. These define how and when the payments take place.
  • The allocation of the price to the various layers of the deal.  (For example, what is the value of the Non-Compete Agreement and how much of the purchase price is allocated to it.) This is often postponed until later with the proviso that the parties will agree to allocations such as to minimize taxes on the deal. Putting off is bad. Since tax issues that benefit one party many hurt the other, later negotiation is not a good deal. I insist with my clients that allocations are agreed on up front and included in the LOI. Allocation is key to minimizing taxes and should be reviewed with your accountant and financial planner prior to signing the LOI.
  • A definition of what is being sold and what is not. List the categories of items. A good place to start is the current balance sheet and list exceptions or add-ons as appropriate.
  • Work to be done by consultants and advisors before a Definitive Agreement is signed and who pays for that work. Many times the buyer and sell will spend significant sums during the due diligence period on outside advisors.
  • Definition of which party is responsible for drafting the Definitive Agreement. In my experience, the buyer or investor's lawyer usually does this. The LOI should have a target date for the completion of the definitive. 

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Term Sheet/Letter of Intent Template

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Asset Purchase - M&A01

Asset Purchase - M&A02

Stock For Cash & Stock Purchase - M&A03

Stock For Cash Purchase - M&A04

Stock for Stock Purchase - M&A05

Earnout Purchase - M&A06

Joint Venture - M&A07

Product Distribution - M&A08

Product License - M&A09

Technology Development - M&A10

Series A Preferred - M&A11

Series B Preferred - M&A12

 

 

 

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Merger Agreement & Joint Venture Agreement Templates

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Asset Purchase & Sale Agreement- DEF01

Stock Purchase & Sale Agreement: Common Stock, Shorter Version- DEF02

Stock Purchase & Sale Agreement: Common Stock, Longer Version- DEF11

Stock Purchase & Sale Agreement: Preferred Stock, Longer Version- DEF12

Distribution Agreement - DEF03

Exclusive License Agreement - DEF04

Joint Venture Agreement - DEF05

Marketing & Sales Only Joint Venture Agreement - DEF06

License Technology In Exchange For Stock Agreement - DEF13

Partnership Agreement - DEF07

Promissory Note - DEF08

Non-Disclosure Agreement : DEF09

Shareholder Agreement - DEF10

 

 

 



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Download Additional Agreement and Term Sheet Templates
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Distributor Agreement Joint Venture Agreement Stock Purchase and Sale Agreement Acquisition Confidentiality Agreement MARKET, INDUSTRY, AND COMPANY, RESEARCH
Merger Agreement -1 Merger Agreement -2 Merger Agreement -3 Merger Agreement -4 New Business, Product, and Startup Ideas
Letter of Intent to Purchase Business Letter of Intent to Joint Venture Basics of Buying or Selling a Business Presentation and Report Charts and Graphics - Big Time Saver!  

 

 Other Templates File Description
Exclusive License Agreement - Sample 1 Template to develop an exclusive license agreement with royalties between two parties (Word Document)
Exclusive License Agreement - Sample 2 Another template to develop an exclusive license agreement with royalties between two parties (Word Document)
Exclusive License Agreement - Sample 3 Another template to develop an exclusive license agreement with royalties between two parties (Word Document)
Non-Exclusive License Agreement Template to develop a non-exclusive license agreement with royalties between two parties (Word Document)
Agreement For Joint Technology Development, Licensing - Sample 1 Template to develop a comprehensive joint technology development, licensing, and marketing agreement between parties (Word Document)
Agreement For Joint Technology Development, Licensing - Sample 2 Another template to develop a comprehensive joint technology development, licensing, and marketing agreement between parties (Word Document)
Collaborative Research Agreement Template agreement to develop the term and conditions for collaborative research between parties (Word Document)
Joint Marketing Agreement - Sample 1 Template to develop a joint marketing and distribution agreement with compensation between two parties (Word Document)
Joint Marketing Agreement - Sample 2 Another template to develop a joint marketing and distribution agreement with compensation between two parties (Word Document)
How To Prepare A Business For Sale Step-by-step action plan on the specific tactics of what you need to do prepare your business for a successful sale with the highest potential value (Word Document)
Offering Memorandum or Sales Prospectus A document describing your business, its prospects, and why a potential purchaser should buy it.
Presentation for Approval to Buy/Sell a Business Provides the presentation framework and details needed to get a business sale or purchase approved by the board or other senior executives.
Transitioning Your Company Through A Sale Or Merger Presentation template with the step-by-step issues to be faced and processes involved as a company and the owners go through a business sale or merger. The step-by-step process is complete in that it starts from the first call/meeting and goes beyond post merger/acquisition integration (PowerPoint Document)

 

 

 

 

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