PRINCIPLES

OF
ENTREPRENEURSHIP
[corperSHUN entrepreneurship]
Table of Contents
2
What is an Entrepreneur?.......................................................................................................................................... 3
Characteristics of Successful Entrepreneurs ............................................................................................................. 3
The Ten D’s of an Entrepreneur ............................................................................................................................... 4
IDEA ASSESSMENT AND BUSINESS DEVELOPMENT PROCESS..................................................................... 5
GETTING FROM IDEA TO IMPLEMENTATION.................................................................................................... 8
A Checklist For Starting A New Value-Added Business.......................................................................................... 8
Feasibility ................................................................................................................................................................. 9
WRITING A VALUE-ADDED BUSINESS PLAN .................................................................................................. 12
Ten Questions to Answer in Writing the Plan ........................................................................................................ 12
How to Write the Plan............................................................................................................................................. 13
Who Should Write the Plan .................................................................................................................................... 13
How Long Should It Be .......................................................................................................................................... 13
Not All Business Plans are Alike ............................................................................................................................ 14
Who are the Readers of Your Plan.......................................................................................................................... 14
KEY POINTS IN WRITING A BUSINESS PLAN ................................................................................................... 15
Getting Prepared ..................................................................................................................................................... 15
Elements of the Plan ............................................................................................................................................... 16
Writing the Plan ...................................................................................................................................................... 17
CONTRACTS AND AGREEMENTS ....................................................................................................................... 18
Overview of Confidentiality Agreements ............................................................................................................... 18
Provisions of the Agreement and Duties and Obligations Created ......................................................................... 18
Consequences of Breaching a Confidentiality Agreement...................................................................................... 19
SAMPLE ONE-SIDED CONFIDENTIALITY AGREEMENT ............................................................................ 20
SAMPLE MUTUAL CONFIDENTIALITY AGREEMENT ................................................................................ 22
OVERVIEW OF CONSULTING AGREEMENTS ................................................................................................... 25
Provisions of the Agreement and Duties and Obligations Created ......................................................................... 25
Scope of Work ........................................................................................................................................................ 25
Compensation. .................................................................................................................................................... 25
Term and Termination. ....................................................................................................................................... 26
Rights and Data................................................................................................................................................... 26
Conflict of Interest; Non-Solicitation. ................................................................................................................ 26
Miscellaneous Provisions.................................................................................................................................... 26
Consequences of Breaching a Consulting Agreement ........................................................................................ 26
SAMPLE CONSULTING AGREEMENT............................................................................................................. 27
ARTICLE 1......................................................................................................................................................... 27

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 ARTICLE 2......................................................................................................................................................... 27
ARTICLE 3......................................................................................................................................................... 28
ARTICLE 4......................................................................................................................................................... 28
ARTICLE 5......................................................................................................................................................... 28
ARTICLE 6......................................................................................................................................................... 29
ARTICLE 7......................................................................................................................................................... 29
ARTICLE 8......................................................................................................................................................... 29
ARTICLE 9......................................................................................................................................................... 30
Overview of Letters of Intent.................................................................................................................................. 31
Provisions of the Agreement and Duties and Obligations Created ..................................................................... 31
Introductory Provisions....................................................................................................................................... 31
SAMPLE LETTER OF INTENT ........................................................................................................................... 33

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What is an Entrepreneur?

Much has been written about entrepreneurs. Some of it portrays entrepreneurs as almost mythical characters who obtain
their skills from a unique genetic combination. However, research tells us that entrepreneurship can be learned. The
information below provides some characteristics and skills you may want to acquire to improve your entrepreneurial
ability.

In the context of a value-added business, an entrepreneur is someone who identifies a market opportunity for a
commodity/product and creates a business organization to pursue the opportunity.

To help you understand entrepreneurs, here are four characteristics of successful entrepreneurs.

Characteristics of Successful Entrepreneurs :

1. Successful entrepreneurs are able to identify potential business opportunities better than most people. They focus on
opportunities - not problems - and try to learn from failure.

2. Successful entrepreneurs are action-oriented. This comes from a sense of urgency. They have a high need for
achievement, which motivates them to turn their ideas into action.

3. Successful entrepreneurs have a detailed knowledge of the key factors needed for success and have the physical stamina
needed to put their lives into their work.

4. Successful entrepreneurs seek outside help to supplement their skills, knowledge and ability. Through their enthusiasm
they are able to attract key investors, partners, creditors and employees.

Risk Takers

It is commonly believed that entrepreneurs are risk-takers. However, the evidence suggests that they are risk-averse just
like you and me. Successful entrepreneurs attempt to minimize their risk exposure whenever appropriate. They do this by
carefully assessing the risk/reward relationship of their actions. Risk is assumed only when the opportunity for reward is
sufficiently large enough to warrant the risk.

Sense of Limits

At a very early age, from our parents, friends and teachers, we begin developing a sense of limits. These are limits of what
we can and cannot do and what we can and cannot accomplish. It is manifest in many ways such as “we’re not good
enough, not smart enough, or not capable enough”. This sense of limits is based on emotions rather than logic.

Entrepreneurs either don’t have this sense of limits or fight against it. All things are possible. Removing the sense of limits
unleashes the creativity and innovative juices that are needed for successful entrepreneurship.

Locus of Control

Entrepreneurs tend to have a strong internal locus of control. Locus of control is a concept defining whether a person
believes he/she is in control of his/her future or someone else is in control of it. For example, we all know people who
believe they have no control over their lives. They believe that what happens to them is dictated by outside forces. People
who feel they are victims of outside forces have an external locus of control – “it’s not my fault this happened to me”. By
contrast, entrepreneurs have a very strong internal locus of control. They believe their future is determined by the choices
they make.

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Control of their Future

Entrepreneurs want to be self-directed. They want to be in control of their activities. This is linked to the “locus of control”
discussion above. Entrepreneurs often don’t fit well in traditional employment positions. They don’t want to be told what
to do. Entrepreneurs know what they want to do and how to do it.

Creators

Entrepreneurs like to create things. A business entrepreneur likes to create businesses and organizations. Often the more
unique the business the better entrepreneurs like it. They like the challenge of coming up with new solutions.

Entrepreneurs may not be the best managers. After the organization is built they may lose interest or not have the skills
needed to manage the business. Just because they are good at creating a business doesn’t mean they will be good at
running a business.

The Ten D’s of an Entrepreneur

Below are ten D’s that help define an entrepreneur. If you want to be an entrepreneur, you will need to possess many of
these behaviours. As you read over the list, compare yourself to these behaviours. How do you stack-up? What do you
need to change?

1. Dream -Entrepreneurs have a vision of what the future could be like for them and their businesses. And, more
importantly, they have the ability to implement their dreams.

2. Decisiveness - They don’t procrastinate. They make decisions swiftly. Their swiftness is a key factor in their success.

3. Doers - Once they decide on a course of action, they implement it as quickly as possible.

4. Determination - They implement their ventures with total commitment. They seldom give up, even when confronted by
obstacles that seem insurmountable.

5. Dedication - They are totally dedicated to their business, sometimes at considerable cost to their relationships with their
friends and families. They work tirelessly, twelve-hour a day and seven-day works for weeks are not uncommon when an
entrepreneur is striving to get a business off the ground.

6. Devotion - Entrepreneurs love what they do. It is that love that sustains them when the going gets tough. And it is love
of their product or service that makes them so effective at selling it.

7. Details - It is said that the devil resides in the details. That is never truer than in starting and growing a business. The
entrepreneur must be on top of the critical details.

8. Destiny - They want to be in charge of their own destiny rather than dependent on an employer.

9. Dollars - Getting rich is not the prime motivator of entrepreneurs. Money is more a measure of their success. They
assume that if they are successful they will be rewarded.

10. Distribute - Entrepreneurs distribute the ownership of their businesses with key employees who are critical to the
success of the business. Business Development Process

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IDEA ASSESSMENT AND BUSINESS DEVELOPMENT PROCESS

An important aspect of successful business development is to follow a process of how you will assess a business idea or
concept (project), decide whether to move forward with the project and build a business if it is decided to move forward.
The five steps below help outline a simple process you can follow. The steps are not a rigid structure to follow. Rather they
identify issues you need to address and when to address them. If you do not follow a process, you will find yourself going
in circles and revisiting the same issues over and over without making progress. In addition to wasting time, the frustration
may cause you to make poor decisions that can haunt you later.

Following the steps above does not guarantee business success. However, it can greatly increase your chances of success.

 Step 1 – Initial Idea Exploration, Identification and Assessment

The origination of a new business idea can come from a variety of sources. It may come from the board room of an
existing business or a group of producers sitting around the kitchen table. Regardless of the setting, you may want to
use the following approach to formulate the business concept. Anytime during steps 1 and 2 you may decide that your
idea is not viable, in which case you may want to abandon the idea.

• Form a project committee –

Creating a good project committee involves bringing together individuals who have the business
development skills needed to investigate the idea/concept and carry through with business formation
if the concept is viable.

• Formulate general business idea(s) or concept(s) –

Define your business idea/concept and describe why it has merit. Your idea may involve filling an
unmet need in the marketplace with a new product, providing an existing product in a new form,
producing a product better or cheaper than competitors, or other ways in which value can be added.
Remember, an idea is only viable if people are willing to pay you for what it provides. For example,
a premium product is only viable if someone is willing to pay more for it.

• Identify alternative business models or scenarios for the idea(s) –

A business model describes how the business will function in producing the product or service and
providing it to the customer. A business scenario is a logical assemblage of the essential business
elements starting with raw materials procurement and ending with the sale of the final product, and
all the stages in between.

• Investigate idea/concept and alternative business scenarios –

Conduct an initial informal investigation of the validity of your idea. Investigate the scenarios or
models. Early in the process this may be nothing more than a series of telephone calls to
knowledgeable individuals. Does your idea make sense? Identify business scenarios/models for
further study and eliminate those that are not viable.

• Formal investigation –

You may want to conduct a formal assessment such as a pre-feasibility study or a marketing study of
the idea and various scenarios or models. This may involve using consultants to investigate various
aspects of the project. It may involve eliminating additional scenarios/models or identifying new
ones.

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 • Further refine scenarios –

Select those scenarios that are viable for further study and eliminate the rest. As you go through Step
1 you should accomplish two things:

 Through the process of elimination you will reduce the number of scenarios/models under
consideration for further study.

 Refine and flesh-out the remaining scenarios/models.

 Step 2 - Idea/Concept and Scenario/Model Deliberation and Assessment

• Further refine the business scenarios/models –

If you have conducted any of the formal assessments described above, you have information that can
be used to further refine your business scenario/models. So by now you should have refined your
idea to one or a small number of specific and detailed business scenario/models that you want to
assess. This is critical before you move to the next step.

• Conduct feasibility study –

A feasibility study will provide a comprehensive and detailed assessment of the market, operational,
technical, managerial and financial aspects of your business project. These factors will feed into the
economic assessment of your project (is it profitable?). If you have already conducted a pre-
feasibility study, marketing study or other study; these materials can be used in the feasibility study.
Feasibility studies are usually prepared by consultants, so you will need to investigate consultants
who are familiar with your type of business and experienced in preparing feasibility studies.

• Analyze the feasibility study –

When you receive the feasibility report, the first step is not to begin deliberations on whether to
progress with the project. Rather, you need to determine the completeness and accuracy of the
study. Does it address the issues you want addressed? Was there a thorough investigation of the
critical issues? Challenge the assumptions and conclusions of the study. Only after you have
accepted the study as being complete and comprehensive can you move to Step 3.

• Further refine the idea and scenario/model –

However, before you proceed you may see the need for further study of various aspects of the
business project. It is not uncommon for the feasibility study to uncover new issues that need to be
investigated. This may create the need for additional negotiations with your consultants to expand on
the original scope of the feasibility study.

 Step 3 - Go/No-Go Decision

This is the most critical step in the entire business development process. In a sense it is the point of no return.
Once you start down the path of creating a business, it is difficult to turn back. If you have unresolved doubts or
reservations about the project, you should not proceed. That is why it is important to have an open, honest and
thorough discussion when making this decision. You may find that there is division in your committee. Some
members may want to move forward while others may want to end it.

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 This is not uncommon. Each needs to take an honest look at the other side’s arguments. If the issues cannot be
resolved, each side needs to go its own way with no bad feelings. At this point the remaining members need to
determine if they want to proceed with business creation.

Commitment to the project is another important factor to consider before you proceed. Most beginners to business
development greatly underestimate the time and effort required to start a business. A financial commitment by
project members at this time (everyone throws some money in the pot) is an important sign of commitment to
creating the business.

This step involves making one of the three possible decisions listed below:

• Decide that the project is viable and move forward with it.

• Decide to do more study and or analyze additional alternatives.

• Decide that the project is not viable and abandon it.

 Step 4 – Business Plan Preparation and Implementation

If you decide to proceed with creating a business, you will need to prepare a business plan. A business plan is an
outline or blueprint of how you will create your business. If you conducted a feasibility study, it will provide some
of the information needed for your business plan. Also, business planning often involves the use of consultants.
However, don’t turn the process completely over to a consultant, you need to stay integrally involved in the
planning process. Remember, it is your business.

Although planning can involve considerable time and effort, it is the easiest part. Implementing the plan is much
more difficult. Many prospective businesses experience problems or failure due to the improper implementation of
their business plan. This step requires commitment and dedication. Unforeseen problems will emerge.Your
persistence is critical.

Implementing your business plan will include, but is not limited to:

• Creating a legal structure

• Securing market access

• Raising equity and securing financing

• Hiring management/staff

• Constructing facility

• Other

 Step 5 – Business Operations

Now that you have successfully started your value-added business, your work has just begun. Producer groups
often forget that once the business is created, it takes constant attention for it to remain healthy and viable.
Operating a business is very different than starting a business. It requires a different set of skills. So the people
who create the business may not be the best people to manage the business.

Conclusion

These are the five steps you will want to follow for taking an idea and making a viable business from it. These steps will
not guarantee success. However, they will increase your odds of success. Also, you will make more efficient use of your
time.

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GETTING FROM IDEA TO IMPLEMENTATION

A Checklist For Starting A New Value-Added Business

This guide is not a comprehensive list of every step you will need to take. Rather, we hope that the listing below can help
you understand the basic steps you will need to take in forming a new value-added business and creating an action plan at
the beginning of your start-up efforts to ensure that you can successfully move idea to implementation.

Exploration and Assessment

This phase sets the stage for your new value-added venture. You need to surround yourself with a hard-working set of
persons with a knowledgeable set of resource-providers. Also, you must make sure that everyone involved has the same
vision. If you cannot agree to a common purpose and vision upfront, developing the business plan and recruiting potential
producer-investors will be very difficult. The following are some of the steps you should take during the Exploration and
Assessment Phase.

• Form a steering committee. Choose a group people who are well-respected, hard-working and willing to work as a
team to build your new business. You should also make sure that the individuals represent the various geographic areas
your project will likely involve during the start-up process.

• Identify your shared purpose, vision, mission and values. Ask yourself, “what is our reason for joining together as
group of producers?”, “what do we want to be in 5 and 10 years?” and “what are the things we value?”

• Formulate and develop your business ideas. Determine how you plan to capture value from your commodities and
narrow your list to a few options. You can begin the process by brainstorming in your steering group, or you can work with
persons who are knowledgeable about market opportunities in specific commodity sectors. It may require a little research
to find the business idea that best meets your purpose, but you can assign parts of this task to members of your steering
committee.

• Conduct an initial assessment of your market opportunities. Ask yourself “does this idea make sense given the
competitive environment of the industry?” and “will this provide a good or service that someone will be willing to
purchase?”

• Identify resource providers, such as facilitators, information specialists, and consultants, to assist you in the start-
up of your venture. You need to surround yourself with good resource providers. Whether it is an, a local economic
developer, an Ag Innovation Center staff member or other value-added agriculture professional, there are resource
providers available to assist you throughout the state. These resource providers can help you locate information, facilitate
and plan meetings, and help you manage the project from idea to implementation.

• Prepare a budget for estimated start-up expenses and develop a financing plan for paying for these expenses.
Potential sources of funds for start-up expenses are producers and other local sources, businesses in your area, local
associations, and state or federal grant funds. In order to gauge commitment to the project, producers should be asked to
contribute at least part of the start-up expenses.

• Incorporate your new organization under appropriate state statutes. You will need to hire experienced attorneys to
help you with this stage.

If your group of producers is committed to the project and can work as an effective team and you have developed a list of
potential business ideas, you are ready to proceed to the next phase.

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Feasibility

The following are some of the steps you need to take during the Feasibility Phase:

• Conduct initial market research and analysis to narrow down your options for potential business ideas. You will
need to make an initial determination based upon your market research whether your business idea has the potential to
bring value back to your group of producers. The feasibility study step can be very costly, so your initial market research
and analysis is critical in ultimately obtaining a high-quality, focused market feasibility study.

• Prepare a market feasibility study, which is an analysis of the investment decision. The market feasibility study
will determine whether your business idea is feasible from a technical, financial and organizational perspective. The market
feasibility study is an analysis of the market demand for a specific product or service and answers key questions about your
idea, including the level of production required for efficiently operating the processing or marketing business that you
proposed. The feasibility study helps you understand existing and potential market demand for the good or service, the
minimum efficient scale needed for production, potential marketing channels, current industry structure, and competitive
environment in the industry. Lenders often desire an independent feasibility analysis from experienced consultants, so be
sure to hire consultants who are familiar with the industry and have conducted prior market feasibility studies. The
feasibility study will help you determine whether the project is financially feasible for the specific group of producers
involved.

• Make sure the feasibility study answers the questions you need in making the decision whether to continue to
pursue the project or not. Once you receive the final feasibility study, you may want to ask the following questions when
reviewing the completed feasibility analysis:

 What assumptions were made in preparing the feasibility study? Do you agree with those assumptions? How
would the results of the study change if some of the assumptions changed?

 Does the market feasibility study anticipate best-case and worst-case scenarios?

 How did the consultants obtain their information?

 Does the study identify and address potential risk factors?

If your market research and feasibility study are positive, meaning you have a good business idea that will bring a positive
return on investment back to producers, you are ready to develop a business plan which will guide you through the
specifics of building your producer-owned value-added business.

Planning

The following are some of the steps you need to take during the Planning Phase:

1. Review your legal organization, and determine what regulatory requirements, taxes, insurance, and intellectual
property issues need to be addressed. Your attorney will assist you in designing an organization that meets the
needs of your own group of producers. You will formalize the initial board of directors at this time, so you will
need to identify board members with board officers. The steering committee should answer several simple
questions before meeting with your attorney to develop your organizational documents:

2. Who Do You Want to Own the Organization? How will your organization be capitalized? Where will your equity
come from? Will it only come from agricultural producers? Will you obtain equity from other sources?

3. Who Do You Want to Control the Organization? Should the organization be a democratic one, with one-
member/one-vote? Or should voting rights based upon level of investment? Who will make decisions?

4. Who Do You Want to Benefit From the Organization? How will contributors of equity capital benefit from the
organization? Will rewards come through higher commodity prices paid to producers? Through stock dividends?
How will profits be distributed--returned to investors, reinvested in the business to fund operations or future

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 expansion, or returned on the basis of patronage?

5. Begin writing your business plan. The business plan is an important document in that it becomes your action plan
for creating a successful business. The business plan uses information you collected in the market feasibility stage
and creates an implementation plan, which will include financial, governance, procurement, risk management,
operations and management issues.

6. Determine plant and equipment needs. Your market feasibility study should provide guidance in your specific
plant and equipment needs for your new venture.

7. Determine how you will finance the business. You should estimate that at least 40% of the total project cost will
need to be provided upfront—this should primarily come from producers, but additional equity could be obtained
through private sources. Your ability to raise funds from producers and non-producers is affected by state and
federal tax, securities and corporation laws. You may also be eligible for tax credits, loan guarantees, and other
financial assistance; however these programs often have specific requirements that may affect how you will need
to structure your business.

8. Determine whether producers will need to make any changes in production practices to meet any quality
requirements necessary. If you are going to sell a high-quality processed good to consumers, you will need a
quality control system throughout the entire process - from gate to plate - to ensure a quality end product.

9. Select a site for your operations. Selection of the site is critical as your location must be competitive in terms of
transportation, input procurement and/or proximity to consumers. It may not always make financial sense to have
a processing facility in your own town. If your goal is to obtain a positive return on investment in the value-added
venture, you must be open to looking at sites away from your local area.

10. Obtain feedback on your business plan from persons not involved in the project to make sure your business plan
has addressed required issues and makes sense to other persons. Sometimes an outside perspective can help you
identify areas that need clarification or improvement.

11. Hire initial human resources, the staff who will run the business. Your hiring decisions are critical, especially
early management you may hire to oversee the construction and equity drive. You should hire people with
experience, and you need to realize that hiring capable people with experience may be costly.

12. Meet with engineering design and construction firms. Meet with several engineering design and construction firms
to determine which firm has the services and price which best fit the specific needs of your project. You will
likely want to competitively bid your design and construction projects to make sure you can make an informed
comparison of the services and prices offered by competing firms.

Once you have completed a comprehensive business plan and you have a clear plan for capitalizing and implementing your
business, you are ready to move to the Implementation Phase.

Implementation

The following are some of the steps you need to take during the Implementation Phase:

1. Meet with lenders to share your business plan and discuss potential debt financing options. As stated above, most
lenders will require that you must contribute at least 40% of the total project cost upfront before they will provide
any debt financing. Lenders will want to see a complete business plan with all of potential risk factors identified.

2. Prepare prospectus, offering circular or other investment documents. The prospectus, also called an offering
circular, provides prospective producer-members with the information they need to make an informed decision
about investing in the new venture. It is critical that you hire experienced and qualified legal expertise to prepare
your investment documents, as mistakes can be costly. Make sure the attorney you hire understands cooperative,
corporation and securities laws and can ensure that all the necessary steps are completed before soliciting money

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 from producers or other investors. You must make sure that your organizational documents allow for non-
producer investment and that you comply with all state and federal securities laws in securing both producer and
non-producer financial participation in your new venture.

3. Secure equity capital through producer members. Once your prospectus is completed, you will need to conduct
meetings with prospective producer-members. At these meetings you will share your prospectus, provide an
overview of the new venture, and answer any questions producers have in analyzing their decision to invest in the
new venture. These meetings may be your one chance to convince other producers to invest in your project, so
make sure these meetings are well-planned and that you are able to adequately answer the questions producer-
members are likely to ask.

4. Secure equity capital through non-producer investors, if required. Your business plan and prospectus will specify
your plans for securing equity from non-producer investors. Again, you must make sure that your organizational
documents allow for non-producer investment and that you comply with all state and federal securities laws in
securing both producer and non-producer financial participation in your new venture.

5. Secure debt. Once you have raised the required equity, you are ready to finalize your loan with the lender.

6. Begin construction or remodelling of facilities. Once you have received approval from your lender, you can begin
construction or remodelling activities. To save valuable time, be sure to meet with engineering design and
construction firms and bid out your design and construction projects so that you can begin construction activities
soon after you secure the loan.

7. Hire additional staff members and develop a system for selecting, retaining and training people-human resources.
Your board and new management team should hire additional employees and develop a system for appraising the
performance of your staff.

Once you have implemented the immediate aspects of your business plan, you are ready to move to the Operations Phase
and become a fully-functioning business.

Operations

The following are some of the steps you need to take during the Operations Phase:

Make sure you communicate regularly with your members. An effective member relation is critical. Your producer-
members own your new business and they will want to be updated regularly on the status of the business.

1. Establish a system for monitoring performance of management and other human resources. The Board of
Directors will need to have clearly identified performance objectives for the management team, and the
management team should then make sure there is a system for appraising the performance of employees on a
regular basis.

2. Develop a strategic plan to guide your organization after the start-up process which includes growth or exit
strategies. You should continue to revise your strategic plan as external conditions change so that you can adapt
quickly to changes in the competitive environment. Your opportunities as a business will continue to change as the
competitive environment changes. You will need to continually update your strategic plan to ensure that your
organization will be able to effectively compete, grow or transition over time.

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WRITING A VALUE-ADDED BUSINESS PLAN

A business plan is only one step in creating a viable value-added business. Writing a great business plan is meaningless
unless you properly implement the plan. Many value-added start-up business ventures fail because they do not focus their
efforts on properly implementing the plan.

The business plan is not something you complete and then forget about. It is a living document that will undergo change as
you move through the business development and implementation process.

Focus on the quality of your business plan, not its length. Does it address the relevant issues? The business plan should
properly and succinctly tell your story. The length of the business plan should be the shortest version needed to adequately
tell your story. Anything more is not a sign of depth or completeness. Rather, it will dissuade people from reading the plan
because of its length. Remember; focus on content -- not length.

Ten Questions to Answer in Writing the Plan

There are certain elements that are critical for a business plan. Below are ten questions your business plan should answer.
The quality of your business plan will depend on how well you can answer them. You can use these as a “checklist” of the
completeness of your plan.

1) Who are we?

2) What do we do?

3) What do we have to offer?

4) Why will someone pay for our product/service?

5) What resources do we have?

6) Where are we going?

7) What do we need to get there?

8) Why will we be successful?

9) Why should someone participate/invest?

10) How will we measure performance?

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How to Write the Plan

Your business plan should be written in plain, easy-to-read language. Use short simple sentences. Determine what you
want to cover in your business plan and make headings for each of the items. Make sure your business plan covers all of
the relevant topics. To help you organize your business plan use Create your Own Value-Added Business Plan and
Information File Key Points in Writing a Business Plan.

Proofread your plan for the following:

• Poor organization

• Vague statements

• Errors in logic

• Repetitive statements

• Inconsistency

• Misspelled words

• Poor grammar

• Incomplete sentences

• Mathematical errors

It is usually a good idea to have someone who is not involved in the project proofread your business plan. They can help
you aspects of your business plan that may need additional clarification and explanation.

Who Should Write the Plan

Although it is common and often preferable to have someone help you write the business plan, the founders or
management team is ultimately responsible for creating the ideas and content of the business plan. Stated simply, if you are
not intimately involved in writing the business plan, you will not know what it contains. If you don’t know what the
business plan contains, how can you implement the plan? If you cannot implement the plan, how can you create a
successful business?

So, the primary responsibility for writing the business plan is with you, the founders or the management team. Consultants
or professional writers can be used to help you with creating the business plan, but their role is only to assist you in this
important process.

However, it is often a wise investment to hire a consultant to review a draft of the plan. Having an outsider review the plan,
especially someone who knows the industry and is familiar with writing business plans, can be invaluable in pointing out
deficiencies and shortcomings of the plan. Finding and correcting these deficiencies can greatly improve your business
plan.

How Long Should It Be

Focus on the quality of your business plan, not its length. The length of the business plan should be the shortest version
needed to adequately tell your story. The business plan should properly and succinctly tell your story. Does it address the
relevant issues? Anything more is not a sign of depth or completeness. Rather, it will dissuade people from reading the
plan because of its length. Remember; focus on content -- not length.

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Not All Business Plans are Alike

Value-added agriculture includes many types of businesses. Businesses range from a few producers marketing products
directly to local consumers to large-scale integrated processing/manufacturing businesses. Likewise, who you are writing
the business plan for can vary substantially.

Who are the Readers of Your Plan

In addition to the type of value-added business you are starting, your plan needs to be tailored to the reader of your plan.
Most value-added businesses have several types of stakeholders. A stakeholder is someone who has a stake or interest in
the outcome of the business. In addition to the business founders, stakeholders include equity investors, bankers, key
employees, and others. Different stakeholders have different priorities. These priorities need to be balanced in the business
plan.

Figure 1 lists the issues to emphasize or deemphasize depending on whom the plan is written for. For example, bankers are
usually looking for cash-flow while investors may be looking for growth. This is not to say that the content and direction of
the business plan should be altered. However, it does mean that the focus of the plan may shift.

This means that you may have more than one version of the business plan. This is alright as long as the same story is told -
just with different emphasis.

Implementing the Business Plan

A business plan is only one step in creating a viable value-added business. Writing a great business plan is meaningless
unless you properly implement the plan. Many value-added start-up business ventures fail because they do not focus their
efforts on properly implementing the plan. Essentially this is a plan for implementing the plan. A portion of the business
plan should focus on the steps required to implement the plan. This should include a timeline and milestones of
accomplishments.

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KEY POINTS IN WRITING A BUSINESS PLAN

Below are key points to remember when preparing your business plan. The information is presented as a series of points
that can be used as a “checklist” of important aspects of your plan. A more thorough discussion of preparing a business
plan and a more comprehensive outline for creating your business plan are available

You may want to review the points below when you start preparing your plan. It will help you focus your energies on the
important aspects of the plan. You may also want to review the points when you are finishing the plan. It may identify
important areas in your business plan that you have missed.

The points are presented in three categories. The first focuses on getting prepared for writing your business plan. The
second identifies the broad sections that should be included in the plan (other sections can be added as needed). The third
deals with the actual writing of the plan.

Getting Prepared

1. Assign Responsibility - Place one person in charge of preparing the plan. You may divide the responsibility of
outlining various sections of the plan among the other members of your committee. However, one person needs to be
responsible for integrating the various sections into one comprehensive document.

2. Get Help - Although it is important that you are responsible for creating the plan, you may want to hire someone
to help you with the plan. He/she can do most of the actual writing. In addition, he/she can challenge your assumptions and
conclusions.

3. Target Your Reader - If you are preparing your business plan for a specific purpose such as obtaining financing,
consider the viewpoint of the type of person for whom you are writing the plan. This may be bankers, investors, customers,
or other persons. If bankers are your target reader, provide them with an understanding of your business and how you will
use their loan.

4. Know Your Business - Represent your company’s image and convince the reader you understand all aspects of the
business. The reader will ask you to clarify aspects of the plan. If you cannot answer these questions, the reader will doubt
your ability to lead the business venture, and for good reason.

5. Promote Your Business Concept - The business plan may be used as a document to promote your business
concept. The content and quality of the plan should be representative of your company.

6. Be Honest - Although you may be using the business plan to promote your business concept, be honest. Do not be
overly optimistic or try to hide limitations or weaknesses. It may come back to haunt you later.

7. Prepare to Use the Plan - You are the primary reason for writing the plan. It is to help you think through all
aspects of the project and provide you with a blueprint for creating the business venture.

8. Just Getting Started - Remember, when you have prepared your business plan you are just getting started. The
success of your business ventures rests on how well you implement your plan.

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Elements of the Plan

1. Describe Your Role as Leader - Convince the reader that you and your team can provide the leadership skills
needed to implement the business plan, create the business and turn it over to the managers. Disclose how you and your
team will be rewarded for starting the business.

2. Outline the Business Model - Explain how the business will be organized. How will the business make money?
Why will the business make money?

3. Describe Your Product - If you are producing a differentiated product, what are its attributes (quality, distribution,
service, etc.) and how do they differ from those of your competitor’s products. If you are producing a commodity or
providing a service, why can yours be cheaper than your competitors?

4. Define Your Market - Explain who your customers are and why they will buy your product. Quantify your market,
sales, production, and cost data. Do not generalize. Be specific. Use data to help tell the story.

5. Describe Your Product Distribution Plan - Describe the channels you will use to get your product to your
customers. Explain how your product be positioned conveniently for your customers.

6. Outline Your Promotion Plan - Your promotion plan needs to get your customer’s attention. How will your
customers learn about the unique aspects of your product? Explain how you will convince them to buy your product.

7. Identify Your Competition - Describe your competitors and how they differ from you. Explain why customers will
buy your product rather than those of your competitors. Discuss any competitive advantage you have over your
competitors.

8. Describe the Managers - Describe the team that will manage the company once the business is up and running.
Convince the reader that they will be successful in managing this business.

9. Describe the Technology - If your business concept focuses on processing, manufacturing or some other
transformation of technology into a product, describe the technology used in this transformation. Is the technology cutting-
edge or traditional? Is it experimental or proven? Can competitors adopt the technology?

10. Describe the Business Financing - Explain how much equity is needed and how you will attract investors. Are
credit sources in place?

11. Outline the Business Structure - Describe the business structure. Has it been created? Describe the governance of
the business.

12. Discuss Investor Issues - Will profits be distributed to shareholders or kept within the business for expansion?
Explain how investors can exit the business if they invest. Are there specific exit strategies outlined for investors? What is
the expected liquidity of equity shares?

13. Focus on Strategy - Answer the three strategic planning questions:

a. Where are we now?

b. Where do we want to be?
c. How do we get there?

14. Project Revenue, Costs and Returns - This will convert all of the previously discussed elements into a financial
projection or outcome. It is your indicator of success. However, its value is based on how accurately it represents the
economic assumptions made in the previous sections of the plan. The accuracy of the numbers coming out of the financial
projection is based on the accuracy of the numbers going into the projection. You may want to project returns under best-
case and worst-case scenarios of price, production and sales.

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15. Include Supporting Evidence - This includes statistics, studies, documents and other evidence to support the goals
and claims you make in the business plan.

16. Summarize Your Plan - Include an Executive Summary of your plan. This is a stand-alone piece that provides an
overview of why your business concept will be successful. Although the Executive Summary is placed at the beginning of
the plan, it is usually prepared last.

Writing the Plan

1. Follow a Framework - It helps to use an outline when you are writing your business plan. Include only those
sections of the outline that are relevant to your business concept. Begin each major section on a new page with the
appropriate title; for example, Markets, Finances, etc.

2. Customize Your Plan - The actual content of the business plan will vary depending on the nature and complexity
of the business, the stage of business development and the type of financing needed.

3. Write Clearly and Concisely - Write in easy to understand terms. Avoid jargon and terms that are unfamiliar to
people outside of your industry.

4. Be Flexible - Be open to making changes if warranted. As you write your business plan you may see changes that
need to be made in your plan, your business model or your business strategy. Flexibility will be even more important when
you are implementing your plan.

5. Refine the Plan - Review, revise and rewrite. It is extremely rare to achieve the finished version of a plan in the
first draft. It may need to be re-written several times. However, the purpose of rewriting the plan is to fill in gaps, solidify
the logic and make the plan easier to understand by the reader. It is not to add extraneous materials. So if you find the
length of the plan expanding greatly after each rewrite, your efforts are probably counterproductive. At some point in time
you need to declare the plan finished - for now - remembering that the plan will need to be updated as conditions change.

6. Proofread the Plan - Ask an outsider who is knowledgeable of business plans to review your plan.

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CONTRACTS AND AGREEMENTS

Overview of Confidentiality Agreements

Confidentiality agreements, also referred to as non-disclosure agreements, are agreements that are used when the owner of
confidential information wishes to disclose that information to another party (either an individual or a company) usually in
the course of business negotiations, and wishes the information to remain confidential. By signing a confidentiality
agreement, the recipient undertakes the obligation not to disclose the confidential information as defined in the agreement.
While the terms of a confidentiality agreement can typically be detailed in 3 to 4 pages, a confidentiality agreement could
be 15 or more pages when it covers, for instance, jointly developed, patentable technology.

Provisions of the Agreement and Duties and Obligations Created

Below is a discussion of the more important issues to be considered when negotiating and drafting a confidentiality
agreement.

• Definition of Confidential Information.

The parties must negotiate what information is “confidential.” It can be assumed that the party disclosing the confidential
information would like the definition to be very inclusive and the recipient would like the definition to be very narrow. The
definition provided in Information File Sample One Sided Confidentiality Agreement is fairly inclusive and illustrate the
breadth of items that can be defined as confidential.

• Obligation of Confidentiality.

Every confidentiality agreement must detail how the confidential information will be handled by the recipient. The
recipient’s failure to treat the confidential information in compliance with these requirements will result in a breach.
Typical requirements include not disclosing the object and scope of the discussions between the parties, not using the
confidential information other than for the specified purpose agreed to by the parties, and not disclosing the confidential
information to persons or entities other than the employees or agents of the recipient without the prior written consent of
the disclosing party. If employees or agents of the recipient are provided access to the confidential information, the
disclosing party should expressly provide in the agreement that the recipient must cause those persons to be bound by the
same obligation of confidentiality, and yet remain responsible for the acts of those persons.

• Exceptions to Obligation of Confidentiality.

Confidentiality agreements typically exclude certain information from the definition of confidential information. Some
common exceptions include information that is or becomes public through no act of the recipient, information that was
already in the possession of the recipient as of the date of disclosure, and information that is disclosed by court order. Prior
to the recipient disclosing confidential information pursuant to court order, the confidentiality agreement should specify
that the recipient is obligated to notify the disclosing party of the court’s request and detail the disclosing party’s rights to
intervene to protect its confidential information.

• Ownership of Confidential Information.

The disclosing party should also consider requiring the recipient to acknowledge that the confidential information is the
property of the disclosing party and that the disclosure of the information does not convey any right, title or license in the
information to the recipient. This is necessary to prevent ambiguity as to what rights, if any, the recipient has in the
confidential information. Typically, the transfer of rights would not be the subject of a confidentiality agreement, but rather
a development or joint venture agreement should the parties determine to work together using the confidential information.
Even then, however, it may not be in the best interest of the owner of the confidential information to transfer any portion of
its ownership rights in the confidential information.

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• Terms.

The confidentiality agreement must also specify the time period during which confidential information will be disclosed
and the time period during which the confidentiality of the information is to be maintained. These periods may or may not
be the same, and they need not be specified by exact dates (years, months, weeks, etc.). For example, the Sample One-
Sided Confidentiality Agreement form and Sample Mutual Confidentiality Agreement form provide that disclosure will
occur for so long as the parties are discussing a possible business relationship, but the obligation of confidentiality survives
until an exception to the obligation arises. Other agreements may quantify the time periods and, for example, provide that
the disclosure period is for one year and the obligation to maintain the confidentiality of the information is for a two-year
period thereafter. If the disclosure period is quantified, the disclosing party should require that the agreement provide for
termination by either party at any time prior to the end of the term, subject to reasonable notice as negotiated by the parties.
This allows the disclosing party to terminate its obligation to disclose confidential information if it does not wish to
proceed with working with the recipient.

• Miscellaneous Provisions.

After spending considerable time negotiating and defining what constitutes confidential information and the obligations to
keep the information confidential, it is often easy for parties to neglect the miscellaneous provisions that one typically finds
at the end of the agreement. The parties should always pay careful attention to what law will govern the agreement, how
disputes will be resolved, and the assign ability of the rights and obligations under the agreement.

Consequences of Breaching a Confidentiality Agreement

When a confidant breaches his or her obligations under a confidentiality agreement, he or she is subject to remedies
available to the disclosing party. These remedies include equitable relief and monetary damages. An injunction against the
breaching confidant helps prevent any further breach of the agreement. The court may also award monetary damages if
damages can be quantified.

Parties should understand that it is often times difficult and expensive to enforce a confidentiality agreement even though
the agreement, on its face, it detailed as to what is confidential information and what constitutes a breach of the obligation
of confidentiality. This is so because of the proof necessary to demonstrate a breach by the other party. Also, while an
injunction prohibits future dissemination of the confidential information, it is difficult to contain the information once it has
been disclosed and it is difficult to quantify monetary damages. Because of the enforcement issues, the sound advice is to
not enter into a confidentiality agreement or share confidential information with a party you do not trust to keep the
information confidential.

Summary

Confidentiality agreements can be straightforward 3 to 4 page documents or complex, extensive agreements depending on
the confidential information the subject of the agreement. The terms detailed above, however, should be considered as
basic requirements for any confidentiality agreement. With the key terms detailed in a written agreement, the parties will
have reasonable expectations about services to be performed under the agreement and the consequences if those
expectations are not met.

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SAMPLE ONE-SIDED CONFIDENTIALITY AGREEMENT

For an explanation of this agreement see Information File Overview of Confidentiality Agreement.

This Agreement is entered into as of this _____ day of ___________, 20__, by and between ________________________
(“Company”), a [state of organization and business structure], and __________________________ (“Contact”).

WHEREAS, Contact and Company will be having discussions concerning Company’s business activities to develop,
construct, own and operate [type of project] (the “Project”) (hereinafter referred to as the “Authorized Purpose”), which
discussions will require Company to disclose information to Contact that Company deems proprietary and confidential;

WHEREAS, Company wishes to protect its confidential information against any unauthorized use and any unauthorized or
uncontrolled disclosure.

NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, Company and Contact agree as follows:

A. As used throughout this Agreement, the term “Confidential Information” means information not generally known to
third parties and which is proprietary to Company including information about Company’s Project which includes
information relating to product strategies, financing strategies, organizational strategies, site location strategies, permitting
strategies, design/build and other contract discussions and strategies, technical know-how, trade secret information,
financial information, plant specifications, prospective investor lists and strategies, pricing policies, operational methods,
marketing information including without limitation strategy, sales, finance and business systems and techniques, business
plans, and other business affairs of Company relating to the Project. All information of Company that is disclosed to
Contact or to which Contact obtains access, whether originated by Contact or by the discloser or others, shall be presumed
to be Confidential Information.

B. It is understood that unauthorized disclosure or use, whether intentional or unintentional, of any of the Confidential
Information would be detrimental to Company. Accordingly, Contact agrees:

1. Not to disclose to any third party the object and scope of the discussions between the parties, except as required by law
or as may be necessary to enforce the terms hereof.

2. Not to use any of the Confidential Information for any purpose other than for or in connection with the Authorized
Purpose.

3. To maintain all of the Confidential Information in confidence and not to disclose any portion of the Confidential
Information to any person or entity not authorized hereunder without the prior written consent of Company.

4. That any dissemination of Confidential Information shall be only in connection with the Authorized Purpose, and shall
be only to the employees, agents or affiliates of Contact who have a need to know said Confidential Information in order
for Contact to carry out proper purposes and responsibilities related to Contact’s discussions with Company and the
Authorized Purpose and who have been advised of the confidential nature of such information. Further, that Contact shall
cause such employees, agents and affiliates who have access to the Confidential Information to comply with the terms and
provisions of this Agreement in the same manner as each party is bound hereby, with Contact remaining responsible for the
actions and disclosures of such representatives.

5. That, upon termination of the discussions between the parties or upon Company’s request, all records, any compositions,
articles, documents and other items which contain, disclose and/or embody any Confidential Information (including,
without limitation, all copies, reproductions, summaries and notes of the contents thereof), regardless of the person causing
the same to be in such form, shall be returned to Company or destroyed by Contact, and Contact will certify that the
provisions of this paragraph have been complied with.

C. The obligations pursuant to Section B above shall not apply to information which:

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1. Is or becomes a part of the public domain through no act or omission of Contact;

2. Can be shown to be already possessed by Contact as of the date of disclosure;

3. Shall be made available to Contact on a non-confidential basis by a third party having a right to do so;

4. Is disclosed by order of a court of competent jurisdiction; or

5. Company authorizes, in writing, for release.

D. In the event that Contact or its representatives receives a request to disclose all or any part of the Confidential
Information under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a
governmental body, the receiving party agrees to:

1. Immediately notify Company of the existence, terms and circumstances surrounding such a request, so that is may seek
an appropriate protective order and/or waive Contact’s compliance with the provisions of this Agreement; and

2. If disclosure of such Confidential Information is required in the opinion of Contact’s counsel, to the extent possible
cooperate with Company in obtaining reliable assurances that confidential treatment will be accorded to the disclosed
Confidential Information.

E. The parties hereto acknowledge that the Confidential Information is the property of Company and the disclosure of the
Confidential Information to Contact does not convey any right, title or license in the Confidential Information to Contact.
Contact shall not appropriate the Confidential Information to its own use or to the use of any third party and shall only use
the Confidential Information for the exclusive benefit of Company except to the extent otherwise authorized in writing by
Company.

F. It is further understood and agreed that no failure or delay by Company in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.

G. The termination of the discussions or relationship between the parties shall not relieve Contact or its employees, agents
or affiliates of the obligations of non-use or nondisclosure hereunder or the obligation to return or destroy certain materials.

H. The parties agree that money damages would not be sufficient remedy for any breach of this Agreement, and the non-
breaching party shall be entitled to enforce this Agreement by injunctive and other available relief, including without
limitation specific performance.

I. This Agreement shall be governed by and construed and interpreted in accordance with the substantive laws of the State
of [governing law]. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations of the receiving party and rights of the disclosing
party expressed herein shall be in addition to, and not in limitation of, those provided by applicable law. This Agreement
may be modified or waived only by a separate writing by Contact and Company expressly so modifying or waiving such.
This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. References to Company and Contact shall be deemed to include each of their
affiliates, if any. Any disputes arising out of this Agreement shall be venued in federal or state district court in the State of
[governing law], and each party hereby consents to the jurisdiction of such court. This Agreement shall be binding upon the
parties hereto and their successors and assigns.

IN WITNESS WHEREOF, the parties acknowledge their agreement to the foregoing as of the date first set forth above by
execution of the Agreement by their respective authorized representatives.

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SAMPLE MUTUAL CONFIDENTIALITY AGREEMENT

For an explanation of this agreement see Information File Overview of Confidentiality Agreement.

THIS AGREEMENT, is entered into this _____ day of ________, 20___, by and between ________________________
[defined name], a [state of organization and business structure], and __________________________ [defined name] a
[state of organization and business structure], (each a “Party” and collectively the “Parties”).

WHEREAS, the Parties will be having discussions concerning their respective business operations and future business
opportunities (the “Authorized Purpose”), which discussions will require the disclosure of information that the Parties
deem proprietary and confidential;

WHEREAS, the Parties wish to protect their respective confidential information against any unauthorized use and any
unauthorized or uncontrolled disclosure.

NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

A. As used throughout this Agreement, the term “Confidential Information” means information not generally known to
third parties and which is proprietary to the Party disclosing such information (the “Disclosing Party”) including
information relating to product strategies, financing strategies, organizational strategies, site location strategies, permitting
strategies, design/build and other contract discussions and strategies, technical know-how, trade secret information,
financial information, plant specifications, prospective investor lists and strategies, pricing policies, operational methods,
marketing information including without limitation strategy, sales, finance and business systems and techniques, business
plans, and other business affairs of the Disclosing Party. All information of the Disclosing Party that is disclosed to the
other Party (the “Receiving Party”) or to which the other Party obtains access, whether originated by the Receiving Party or
by the Disclosing Party or others, shall be presumed to be Confidential Information.

B. It is understood that unauthorized disclosure or use, whether intentional or unintentional, of any of the Confidential
Information would be detrimental to the Disclosing Party. Accordingly, each Party agrees:

1. Not to disclose to any third party the object and scope of the discussions between the Parties, except as required by law
or as may be necessary to enforce the terms hereof.

2. Not to use any of the Confidential Information for any purpose other than for or in connection with the Authorized
Purpose.

3. To maintain all of the Confidential Information in confidence and not to disclose any portion of the Confidential
Information to any person or entity not authorized hereunder without the prior written consent of the Disclosing Party.

4. That any dissemination of Confidential Information shall be only in connection with the Authorized Purpose, and shall

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be only to the employees, agents or affiliates of Receiving Party who have a need to know said Confidential Information in
order for the Receiving Party to carry out proper purposes and responsibilities related to the Receiving Party's discussions
with the Disclosing Party and the Authorized Purpose and who have been advised of the confidential nature of such
information. Further, the Receiving Party shall cause such employees, agents and affiliates who have access to the
Confidential Information to comply with the terms and provisions of this Agreement in the same manner as each party is
bound hereby, with the Receiving Party remaining responsible for the actions and disclosures of such representatives.

5. That, upon termination of the discussions between the Parties or upon the Disclosing Party's request, all records, any
compositions, articles, documents and other items which contain, disclose and/or embody any Confidential Information
(including, without limitation, all copies, reproductions, summaries and notes of the contents thereof), regardless of the
person causing the same to be in such form, shall be returned to the Disclosing Party or destroyed by the Receiving Party,
and the Receiving Party will certify that the provisions of this paragraph have been complied with.

C. The obligations pursuant to Section B above shall not apply to information which:

1. Is or becomes a part of the public domain through no act or omission of the Receiving Party;

2. Can be shown to be already possessed by the Receiving Party as of the date of disclosure;

3. Shall be made available to the Receiving Party on a non-confidential basis by a third party having a right to do so;

4. Is disclosed by order of a court of competent jurisdiction; or

5. The Disclosing Party authorizes, in writing, for release.

D. If the Receiving Party or its representatives receives a request to disclose all or any part of the Confidential Information
under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a governmental
body, the Receiving Party agrees to:

1. Immediately notify the Disclosing Party of the existence, terms and circumstances surrounding such a request, so that is
may seek an appropriate protective order and/or waive the Receiving Party's compliance with the provisions of this
Agreement; and

2. If disclosure of such Confidential Information is required in the opinion of the Receiving Party's counsel, to the extent
possible cooperate with the Disclosing Party in obtaining reliable assurances that confidential treatment will be accorded to
the disclosed Confidential Information.

3. The Parties hereto acknowledge that each Party's Confidential Information is the property of the Disclosing Party and the
disclosure of the Confidential Information to the Receiving Party does not convey any right, title or license in the
Confidential Information to the Receiving Party. The Receiving Party shall not appropriate the Confidential Information to
its own use or to the use of any third party.

F. It is further understood and agreed that no failure or delay by the Disclosing Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege hereunder.

G. The termination of the discussions or relationship between the Parties shall not relieve either Party or its employees,
agents or affiliates of the obligations of non-use or nondisclosure hereunder or the obligation to return or destroy certain
materials.

H. The Parties agree that money damages would not be sufficient remedy for any breach of this Agreement, and the non-
breaching Party shall be entitled to enforce this Agreement by injunctive and other available relief, including without
limitation specific performance.

I. This Agreement shall be governed by and construed and interpreted in accordance with the substantive laws of the State
of [governing law]. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under applicable law,

Page | 23
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations and rights of the Parties expressed herein shall be
in addition to, and not in limitation of, those provided by applicable law. This Agreement may be modified or waived only
by a separate writing by the Parties expressly so modifying or waiving such. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
References to the Parties shall be deemed to include each of their affiliates, if any. Any disputes arising out of this
Agreement shall be venued in federal or state district court in the State of [governing law], and each Party hereby consents
to the jurisdiction of such court. This Agreement shall be binding upon the Parties hereto and their successors and assigns.

IN WITNESS WHEREOF, the Parties acknowledge their agreement to the foregoing as of the date first set forth above by
execution of the Agreement by their respective authorized representatives.

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OVERVIEW OF CONSULTING AGREEMENTS

Various forms of consulting agreements are frequently used by today’s businesses. Consulting agreements can range from
one page to 20 or more pages depending on the subject matter of the agreement and whether other agreements between the
parties are included or are incorporated by reference. This summary will discuss in more detail the terms of Information
File Sample Consulting Agreement form and the legal rights and obligations created under the agreement, as well as
provisions that could be adapted to specific circumstances and arrangements.

This summary does not constitute legal advice. Parties negotiating and contemplating entering into consulting agreements
should consult with competent legal advisors.

Provisions of the Agreement and Duties and Obligations Created

The consulting agreement is an agreement between a consultant and a client that wishes to retain certain specified services
of the consultant for a specified time at a specified rate of compensation. As indicated previously, the terms of the
agreement can be quite simple or very complex. Below is a discussion of the more important issues to be considered in
every consulting agreement.

Scope of Work;

Compensation.

It is critical that the consulting agreement specifically state what services the consultant is to provide. Without this
specificity it will be difficult, if not impossible, to determine whether the consultant has performed his or her obligations.
The typical consulting agreement will use an exhibit to list the services that are to be provided. This allows the parties to
amend that exhibit as the relationship evolves without amending the entire agreement.

The time allowed for the consultant to perform the services must also be provided. The Information File Sample Consulting
Agreement File contemplates the consultant devoting a specified number of hours per month to performing the services.
This arrangement is typically used when the consultant is providing services that are more general in nature. Alternatively,
when the services are more specific in nature, the client may pay for services as they are performed and pay a flat fee for
completion of each specified service. The client should also consider whether to negotiate a “hold-back” pending
completion of the services. If a hold-back is being negotiated, the hold-back should be significant enough to keep the
consultant engaged to complete the services or not used as all.

Consultants also typically request that certain “expenses” be reimbursed. Some of the items a client might find
objectionable are secretarial services, copying services, messenger services, phone calls, some meals and limited
transportation, etc. The consultant’s rates should include at least some of the consultant’s overhead expenses. Where to
draw the line is a point of negotiation.

The client should always require the consultant to agree to perform the services with high professional standards and
business ethics, maintain the confidentiality of the client and, if appropriate, require the consultant to obtain prior written
approval before engaging any other person to assist with performing the services under the agreement. Without these
requirements, the client is jeopardizing its assets (confidential information of the client, for example) without recourse
against the consultant.

Independent Contractor. The agreement must indicate that the consultant’s status is that of an independent contractor.
While important for tax reasons (withholding, etc.), it is also important from the perspective of the consultant not being
able to contractually bind the client to third parties and may limit the client’s liability for acts committed by the consultant,
even if committed while performing services under the agreement.

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Term and Termination.

The term of the agreement is typically quantified in months or years. Most likely it will coincide with the compensation
schedule. The client should also protect its interests by allowing it to terminate the agreement under certain conditions.
Typically these conditions are (1) breach of confidentiality or non-solicitation provisions of the agreement, or (2) illegal
activities that affect consultant’s performance under the agreement. Without this right to terminate the agreement, the client
is obligating itself to the consultant even if the consultant has taken actions contrary to the client.

Rights and Data.

The consulting agreement should address the use of the consultant’s work. Some agreements allow the client complete use
of the physical product delivered by the consultant and may not include an assignment of copyright on the assumption that
the consultant will want to retain the copyright. Clauses like the one included in Information File Sample Consulting
Agreement File do include an assignment of copyright. The best position for the client is to get complete ownership of not
only the tangible documents that the consultant prepares, but also the copyrights to those documents. However, the
consultant may demand considerable more compensation to assign this right making it impractical. It is very important,
however, for the parties to clearly understand their respective rights relating to not only the physical documents but the
copyrights as well.

Conflict of Interest; Non-Solicitation.

Clients should consider including a non-competition clause in the agreement, at least for the term of the agreement and
within the market area of the client. Any non-competition clause must be reasonable to be enforceable. Most consulting
agreements also include a statement that the consultant will not solicit the client’s employees for at least the term of the
agreement.

Miscellaneous Provisions.

After spending considerable time negotiating the services to be performed, the compensation, the ownership rights to the
work product, etc. it is often easy for parties to neglect the miscellaneous provisions that one typically finds at the end of
the agreement. The parties should always pay careful attention to what law will govern the agreement, how disputes will be
resolved, and, probably most importantly, the assign ability of the rights and obligations under the agreement. Typically,
the rights and obligations are not assignable since the client is hiring the consultant because of the consultant’s specific
expertise and the consultant is agreeing to perform the services only for the client. There may be situations, however, where
an assignment may be necessary, i.e. the client merges with or into another entity.

Consequences of Breaching a Consulting Agreement

When a consultant breaches his or her consulting agreement, he or she is subject to remedies available to the client. These
remedies include equitable relief and monetary damages. An injunction against the breaching consultant helps prevent any
further breach of the agreement. It may also be possible to enforce performance under the agreement - especially if the
consultant was hired to perform specific duties that only he or she has the knowledge and ability to complete. However, if a
court does not require specific performance because the services can be performed by another party or for other reasons,
the court will likely grant injunctive relief and award monetary damages.

Summary

Consulting agreements are frequently used in today’s business world and vary in complexity from simple, one-page
documents to very complex, 20+ page documents. The terms detailed above, however, should be considered as basic
requirements for any consulting agreement. With the key terms detailed in a written agreement, the parties will have
reasonable expectations about services to be performed under the agreement and the consequences if those expectations are
not met.

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SAMPLE CONSULTING AGREEMENT

For an explanation of this agreement see Information File Overview of Consulting Agreements File.

This Consulting Agreement, dated effective _____________, 200___ (this “Agreement”), is made and entered into by and
among ___________________ [name of the Company], a [state of incorporation and business structure] (the “Company”)
and [name of consultant] (the “Consultant”).

ARTICLE 1

SCOPE OF WORK

1.1 Services. The Company has engaged Consultant to provide services in connection with the Company’s [summary of the
project or business of the Company]. Consultant will [summary of the services Consultant is to provide], and such other
services as described at Exhibit A (collectively, the “consulting services”).

1.2 Time and Availability. Consultant will devote _______ hours per month in performing the services for the Company as
stated herein. Consultant shall have discretion in selecting the dates and times it performs such consulting services
throughout the month giving due regard to the needs of the Company’s business. If the Company deems it necessary for the
Consultant to provide more than ________ hours in any month, Consultant is not obligated to undertake such work until
the Consultant and Company have agreed on a rate of compensation. [The time devoted can be hours per day, per week, or
per year. The Company may also elect to pay a flat monthly fee regardless of hours, but the Company should be cautious of
this approach.]

1.3 Confidentiality. In order for Consultant to perform the consulting services, it may be necessary for the Company to
provide Consultant with Confidential Information (as defined below) regarding the Company’s business and products. The
Company will rely heavily upon Consultant’s integrity and prudent judgment to use this information only in the best
interests of the Company.

1.4 Standard of Conduct. In rendering consulting services under this Agreement, Consultant shall conform to high
professional standards of work and business ethics. Consultant shall not use time, materials, or equipment of the Company
without the prior written consent of the Company. In no event shall Consultant take any action or accept any assistance or
engage in any activity that would result in any university, governmental body, research institute or other person, entity or
organization acquiring any rights of any nature in the results of work performed by or for the Company.

1.5 Outside Services. Consultant shall not use the service of any other person, entity or organization in the performance of
Consultant’s duties without the prior written consent of an officer of the Company. Should the Company consent to the use
by Consultant of the services of any other person, entity or organization, no information regarding the services to be
performed under this Agreement shall be disclosed to that person, entity or organization until such person, entity or
organization has executed an agreement to protect the confidentiality of the Company’s Confidential Information (as
defined below) and the Company’s absolute and complete ownership of all right, title and interest in the work performed
under this Agreement.

1.6 Reports. Consultant shall periodically provide the Company with written reports of his observations and conclusions
regarding the consulting services. Upon the termination of this Agreement, Consultant shall, upon the request of Company,
prepare a final report of Consultant’s activities.

ARTICLE 2

INDEPENDENT CONTRACTOR

2.1 Independent Contractor. Consultant is an independent contractor and is not an employee, partner, or co-venturer of, or
in any other service relationship with, the Company. The manner in which Consultant’s services are rendered shall be
within Consultant’s sole control and discretion. Consultant is not authorized to speak for, represent, or obligate the
Company in any manner without the prior express written authorization from an officer of the Company.

2.2 Taxes. Consultant shall be responsible for all taxes arising from compensation and other amounts paid under this

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Agreement, and shall be responsible for all payroll taxes and fringe benefits of Consultant’s employees. Neither federal,
nor state, nor local income tax, nor payroll tax of any kind, shall be withheld or paid by the Company on behalf of
Consultant or its employees. Consultant understands that it is responsible to pay, according to law, Consultant’s taxes and
Consultant shall, when requested by the Company, properly document to the Company that any and all federal and state
taxes have been paid.

2.3 Benefits. Consultant and Consultant’s employees will not be eligible for, and shall not participate in, any employee
pension, health, welfare, or other fringe benefit plan, of the Company. No workers' compensation insurance shall be
obtained by Company covering Consultant or Consultant’s employees.

ARTICLE 3

COMPENSATION FOR CONSULTING SERVICES

3.1 Compensation.

The Company shall pay to Consultant ₦_________ per month for services rendered to the Company under this Agreement.
The monthly compensation shall be paid on the first of the month following the month the services were provided. The
monthly compensation shall be paid regardless of the number of consulting hours provided by Consultant in a particular
month. [Another option is to pay hourly and require monthly time documentation. The monthly compensation would be
reduced by the hourly rate for the number of hours less than the devoted hours.]

3.2 Reimbursement. The Company agrees to reimburse Consultant for all actual reasonable and necessary expenditures,
which are directly related to the consulting services. These expenditures include, but are not limited to, expenses related to
travel (i.e. airfare, hotel, temporary housing, meals, parking, taxis, mileage, etc.), telephone calls, and postal expenditure.
Expenses incurred by Consultant will be reimbursed by the Company within 15 days of Consultant’s proper written request
for reimbursement.

ARTICLE 4

TERM AND TERMINATION

4.1 Term. This Agreement shall be effective as of _________, 200__, and shall continue in full force and effect for ____
consecutive months. The Company and Consultant may negotiate to extend the term of this Agreement and the terms and
conditions under which the relationship shall continue.

4.2 Termination. The Company may terminate this Agreement for “Cause,” after giving Consultant written notice of the
reason. Cause means: (1) Consultant has breached the provisions of Article 5 or 7 of this Agreement in any respect, or
materially breached any other provision of this Agreement and the breach continues for 30 days following receipt of a
notice from the Company; (2) Consultant has committed fraud, misappropriation or embezzlement in connection with the
Company’ s business; (3) Consultant has been convicted of a felony, or (4) Consultant’s use of narcotics, liquor or illicit
drugs has a detrimental effect on the performance of her employment responsibilities, as determined by the Company.

4.3 Responsibility upon Termination. Any equipment provided by the Company to the Consultant in connection with or
furtherance of Consultant’s services under this Agreement, including, but not limited to, computers, laptops, and personal
management tools, shall, immediately upon the termination of this Agreement, be returned to the Company.

4.4 Survival. The provisions of Articles 5, 6, 7 and 8 of this Agreement shall survive the termination of this Agreement and
remain in full force and effect thereafter.

ARTICLE 5

CONFIDENTIAL INFORMATION

5.1 Obligation of Confidentiality. In performing consulting services under this Agreement, Consultant may be exposed to
and will be required to use certain “Confidential Information” (as hereinafter defined) of the Company. Consultant agrees
that Consultant will not and Consultant’s employees, agents or representatives will not, use, directly or indirectly, such
Confidential Information for the benefit of any person, entity or organization other than the Company, or disclose such

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Confidential Information without the written authorization of the President of the Company, either during or after the term
of this Agreement, for as long as such information retains the characteristics of Confidential Information.

5.2 Definition. “Confidential Information” means information, not generally known, and proprietary to the Company or to
a third party for whom the Company is performing work, including, without limitation, information concerning any patents
or trade secrets, confidential or secret designs, processes, formulae, source codes, plans, devices or material, research and
development, proprietary software, analysis, techniques, materials or designs (whether or not patented or patentable),
directly or indirectly useful in any aspect of the business of the Company, any vendor names, customer and supplier lists,
databases, management systems and sales and marketing plans of the Company, any confidential secret development or
research work of the Company, or any other confidential information or proprietary aspects of the business of the
Company. All information which Consultant acquires or becomes acquainted with during the period of this Agreement,
whether developed by Consultant or by others, which Consultant has a reasonable basis to believe to be Confidential
Information, or which is treated by the Company as being Confidential Information, shall be presumed to be Confidential
Information.

5.3 Property of the Company. Consultant agrees that all plans, manuals and specific materials developed by the Consultant
on behalf of the Company in connection with services rendered under this Agreement, are and shall remain the exclusive
property of the Company. Promptly upon the expiration or termination of this Agreement, or upon the request of the
Company, Consultant shall return to the Company all documents and tangible items, including samples, provided to
Consultant or created by Consultant for use in connection with services to be rendered hereunder, including without
limitation all Confidential Information, together with all copies and abstracts thereof.

ARTICLE 6

RIGHTS AND DATA

All drawings, models, designs, formulas, methods, documents and tangible items prepared for and submitted to the
Company by Consultant in connection with the services rendered under this Agreement shall belong exclusively to the
Company and shall be deemed to be works made for hire (the “Deliverable Items”). To the extent that any of the
Deliverable Items may not, by operation of law, be works made for hire, Consultant hereby assigns to the Company the
ownership of copyright or mask work in the Deliverable Items, and the Company shall have the right to obtain and hold in
its own name any trademark, copyright, or mask work registration, and any other registrations and similar protection which
may be available in the Deliverable Items. Consultant agrees to give the Company or its designees all assistance reasonably
required to perfect such rights.

ARTICLE 7

CONFLICT OF INTEREST AND NON-SOLICITATION

7.1 Conflict of Interest. Consultant covenants and agrees not to consult or provide any services in any manner or capacity
to a direct competitor of the Company during the duration of this Agreement unless express written authorization to do so
is given by the Company’s President. A direct competitor of the Company for purposes of this Agreement is defined as any
individual, partnership, corporation and/or other business entity that engages in the business of [define business –
substantially similar to what is provided at Section 1.1] within _____ miles of the [facility, headquarters, etc.].

7.2 Non-Solicitation. Consultant covenants and agrees that during the term of this Agreement, Consultant will not, directly
or indirectly, through an existing corporation, unincorporated business, affiliated party, successor employer, or otherwise,
solicit, hire for employment or work with, on a part-time, consulting, advising or any other basis, other than on behalf of
the Company any employee or independent contractor employed by the Company while Consultant is performing services
for the Company.

ARTICLE 8

RIGHT TO INJUNCTIVE RELIEF

Consultant acknowledges that the terms of Articles 5, 6, and 7 of this Agreement are reasonably necessary to protect the
legitimate interests of the Company, are reasonable in scope and duration, and are not unduly restrictive. Consultant further
acknowledges that a breach of any of the terms of Articles 5, 6, or 7 of this Agreement will render irreparable harm to the
Company, and that a remedy at law for breach of the Agreement is inadequate, and that the Company shall therefore be

Page | 29
entitled to seek any and all equitable relief, including, but not limited to, injunctive relief, and to any other remedy that may
be available under any applicable law or agreement between the parties. Consultant acknowledges that an award of
damages to the Company does not preclude a court from ordering injunctive relief. Both damages and injunctive relief shall
be proper modes of relief and are not to be considered as alternative remedies.

ARTICLE 9

GENERAL PROVISIONS

9.1 Construction of Terms. If any provision of this Agreement is held unenforceable by a court of competent jurisdiction,
that provision shall be severed and shall not affect the validity or enforceability of the remaining provisions.

9.2 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (and not the
laws of conflicts) of the State of [governing law].

9.3 Complete Agreement. This Agreement constitutes the complete agreement and sets forth the entire understanding and
agreement of the parties as to the subject matter of this Agreement and supersedes all prior discussions and understandings
in respect to the subject of this Agreement, whether written or oral.

9.4 Dispute Resolution. If there is any dispute or controversy between the parties arising out of or relating to this
Agreement, the parties agree that such dispute or controversy will be arbitrated in accordance with proceedings under
American Arbitration Association rules, and such arbitration will be the exclusive dispute resolution method under this
Agreement. The decision and award determined by such arbitration will be final and binding upon both parties. All costs
and expenses, including reasonable attorney’s fees and expert’s fees, of all parties incurred in any dispute which is
determined and/or settled by arbitration pursuant to this Agreement will be borne by the party determined to be liable in
respect of such dispute; provided, however, that if complete liability is not assessed against only one party, the parties will
share the total costs in proportion to their respective amounts of liability so determined. Except where clearly prevented by
the area in dispute, both parties agree to continue performing their respective obligations under this Agreement until the
dispute is resolved.

9.5 Modification. No modification, termination or attempted waiver of this Agreement, or any provision thereof, shall be
valid unless in writing signed by the party against whom the same is sought to be enforced.

9.6 Waiver of Breach. The waiver by a party of a breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other or subsequent breach by the party in breach.

9.7 Successors and Assigns. This Agreement may not be assigned by either party without the prior written consent of the
other party; provided, however, that the Agreement shall be assignable by the Company without Consultant’s consent in
the event the Company is acquired by or merged into another corporation or business entity. The benefits and obligations
of this Agreement shall be binding upon and inure to the parties hereto, their successors and assigns.

9.8 No Conflict. Consultant warrants that Consultant has not previously assumed any obligations inconsistent with those
undertaken by Consultant under this Agreement.

IN WITNESS WHEREOF, this Agreement is executed as of the date set forth above.

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Overview of Letters of Intent

Letters of intent are interim documents used in the course of negotiating terms for a transaction that serve a combination of
functions. One, they signify a commitment to the transaction by setting out generally agreed to terms of the transaction.
This allows the parties to negotiate major issues without being distracted by issues that are not likely to be “deal-killers.”
Two, they typically include a timeline and method for resolving open issues.

This summary will discuss in more detail the terms of Information File Sample of Letter of Intent and the legal rights and
obligations created under it, as well as provisions that could be adapted to specific circumstances and arrangements.

This summary does not constitute legal advice. Letters of intent are not always a necessary or desired step in the
negotiation process. Parties negotiating and contemplating entering into a letter of intent should consult with competent
legal advisors.

Provisions of the Agreement and Duties and Obligations Created

Because a letter of intent will likely include both binding and nonbinding terms, it is important for the parties to understand
the rights and obligations that may be created by a letter of intent. Below is a discussion of some of the issues to consider
when negotiating and drafting a letter of intent to be sure it accurately reflects the intention of the parties.

Introductory Provisions

The first portion of a letter of intent should accurately and succinctly define the parties to the letter, summarily describe the
proposed transaction, and provide an overview of the binding and nonbinding provisions of the letter.

In Information File Sample of Letter of Intent, it is expressly provided in this introductory section that “the letter as a
whole and paragraphs 1 – 4 of Part One in particular, do not and shall not constitute a legal and binding obligation . . ..”
This means that, as to the Definitive Agreements, the File C5-86 is merely an agreement to agree. Courts have consistently
held that an agreement to agree is not binding on the parties. As to the method of negotiating and preparing the definitive
agreements, including confidentiality obligations, due diligence, deposit payments, etc., those terms should be made
binding and are provided in Part Two of Information File Sample of Letter of Intent. Each of the sections of Part One and
Part Two are discussed below.

Part One: Nonbinding Statement of Understanding

• Proposed Transaction. This section describes the proposed transaction in more detail, but should make the
entering into of any definitive agreement subject to conditions applicable to the transaction. Typically, due diligence,
financing, and compliance with applicable laws are three conditions to entering into the definitive agreements.

• Consulting Agreement; Non-Compete; Board Seat. The Sample Letter of Intent form contemplates the acquisition
of all of the outstanding stock of a closely held corporation. Because of the selling shareholders’ experience in the industry,
the acquirer intends to retain them as consultants for a specified period of time so long as they are willing to enter into a
non-compete agreement. Obviously, this will not be the case for every transaction, but demonstrates the issues that can be
covered by a letter of intent, and serves as a model if this situation did arise.

• Preparation of Definitive Agreements. Variations of this section should be included in every letter of intent. It
provides a general description of the method by which the parties will negotiate the definitive agreements and the general
terms of those agreements. Remember, however, that this section is an agreement to agree and is not binding on the parties.
The final terms of the general issues listed in this section are still subject to agreement by the parties.

• Conditions Precedent to the Closing. This section describes in detail the conditions to closing. As previously
indicated, satisfactory due diligence, successful financing, and compliance with applicable laws and regulations are
standard conditions. Other conditions include obtaining the necessary consents from lenders, shareholders, etc., the
delivery of legal opinions, and the absence of adverse change to the condition of a party. These conditions could be varied
and should be drafted specific to the proposed transaction.

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Part Two: Agreements of the Parties Regarding the Procedures for Negotiation and Preparation of the Definitive
Agreements

• Due Diligence. Whether a transaction reaches closing often times depends on the results of the due diligence.
Because of its important role, parties will typically agree to what information will be provided and by whom and in what
timeframe. It is common for the target to require that the requests for information not contemplated by the letter of intent be
reasonable.

• Confidentiality. The parties should agree to the level of confidentiality that will be required regarding the terms of
the letter of intent and their ongoing negotiations. Also, because information will be exchanged during due diligence and
during the negotiations, the parties should agree on what information is confidential. In most cases, the parties will
expressly state that all information is confidential unless otherwise provided and that the obligation of confidentiality
survives the term of the letter.

• Public Disclosure. The parties should determine when and if the public will be made aware of the existence of the
letter and the proposed transaction. This will help prevent any premature disclosure that may jeopardize the transaction or
the parties’ alternatives should the transaction not reach fruition. It is typical for the parties not to want any public
disclosure until the definitive agreements have been signed. The parties may also find it in their best interests to agree on
how the proposed transaction is made public.

• Disclaimer of Liabilities. Typically, parties will desire to limit their liability in the event the transaction is not
completed. The degree of each party’s liability is a point of negotiation.

• Termination. The letter of intent must have a termination provision. The Sample Letter of Intent form allows
either party to unilaterally withdraw at any time with proper notice. This unilateral right to terminate, however, is subject to
losing the deposit payment as discussed below.

• Exclusive Opportunity; Deposit. A deposit is not always a subject of a letter of intent. However, in the Sample
Letter of Intent form, the acquirer agreed to pay a deposit so that it would have the exclusive opportunity to acquire the
stock for a specified period of time. When deposits are required, and the transaction closes, the deposit is typically applied
to the acquisition price.

Consequences of Breaching a Letter of Intent

If a party breaches a binding provision of a letter of intent, that party will likely be subject to both equitable and monetary
damages. For example, if the party breaches the obligation of confidentiality, a court may grant an injunction against the
further disclosure of that information. Also, the breaching party may be subject to monetary damages to the extent they can
be quantified by the court.

Summary

Letters of intent are used to signify a commitment to a proposed transaction without reaching an agreement on all of the
terms of the transaction. Because they typically contain both binding and nonbinding provisions, parties must be express
about which provisions are binding. If not, a court will likely hold that the letter is merely an agreement to agree, at least as
to the definitive agreements contemplated by the letter, and is therefore unenforceable.

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SAMPLE LETTER OF INTENT

For an explanation of this agreement see Information File Overview of Letters of Intent File.

<<date>>

<<addressee>>

<<address>>

<<address>>

<<address>>

RE: CONFIDENTIAL LETTER OF INTENT

Gentlemen:

The purpose of this Letter of Intent (“Letter”) is to set forth certain non-binding understandings and certain binding
commitments between ____________________, an [type of business] (“Acquirer”) and [list names of owners], owners of
100% of the capital stock of ______________________, an [type of business] (“Target”), with respect to a proposed
transaction in which Acquirer, or its successor, will purchase all of the capital stock of Target. For purposes of this Letter,
Target, each of its shareholders, and Acquirer are sometimes collectively referred to as “parties” and individually as a
“party.”

The terms of the acquisition will be more particularly set forth in a purchase agreement and one or more definitive
agreements (collectively “Definitive Agreements”) to be mutually agreed upon by the parties. This Letter outlines the
proposed transaction based on each party’s present understanding of the current condition of the assets and business
operations of Target. In particular, Acquirer understands that Target owns all of the land, buildings, equipment, rolling
stock, and other assets consisting of the facility in [city and state of facility/assets] and that [list names of shareholders]
collectively own 100% of the outstanding shares of capital stock of Target. [List names of shareholders] understand that
Acquirer may assign its rights under this Letter.

The following numbered paragraphs 1 - 4 of Part One constitute a general outline of the proposed transaction, the purchase
price, key ancillary agreements and important conditions. The provisions shall be included in the Definitive Agreements,
but in all instances shall be subject to and contingent upon the parties reaching agreement on the Definitive Agreements
and the terms and conditions set forth in the Definitive Agreements. The parties’ expressly state their intention that this
Letter as a whole, and paragraphs 1 - 4 of Part One in particular, do not and shall not constitute a legal and binding
obligation, contract or agreement between any of the parties, are not intended to be an extensive summary of all of the
terms and conditions of the proposed acquisition or the Definitive Agreements, and are subject to the approval of
Acquirer’s primary lender. The parties do, however, expressly intend that paragraphs 5 – 10 of Part Two of this Letter,
upon acceptance by [list names of shareholders], Target and Acquirer, shall constitute the parties’ agreements with respect
to the procedures for negotiation and preparation of the Definitive Agreements.

PART ONE: NONBINDING STATEMENT OF UNDERSTANDING

1. ACQUISITION OF THE STOCK. S

ubject to (1) the satisfactory results of a due diligence inspection by Acquirer (as provided in paragraph 5) and the making
of any agreed upon adjustments to the acquisition price reflecting the assets, liabilities (both known and contingent),
finances and business operations of Target, and (2) the ability of Acquirer to secure adequate debt financing to acquire the
capital stock for the purchase price (as defined below) and adequately capitalize the business to operate Target’s business,
and (3) also subject to the conditions, agreements and undertakings referred to below in this Letter, Acquirer will purchase
all of the issued and outstanding capital stock of Target.

Acquirer will purchase the capital stock for a purchase price of ₦___________________ (“Purchase Price”) subject to the

Page | 33
provisions of this Letter. ₦________________ of the Purchase Price will be paid in cash on the date of acquisition
(“closing”). Acquirer will pay the remaining ₦____________ portion of the Purchase Price over a 5-year period under a
subordinated note secured by a pledge of Target stock with the following terms and other terms that may be agreed to by
the parties and subject to senior lender approval: (1) the annual rate of interest on the unpaid portion shall be ______%; (2)
payments shall be made quarterly with the first payment being an interest only payment in the amount of ₦___________;
(3) payments 2 through ___ shall be interest and principal payments each in the amount of ₦__________; (4) Acquirer
may prepay the note at any time without penalty; and (5) in the event of default, [list names of shareholders] may take
actions necessary to protect their interest.

2. CONSULTING AGREEMENT; NON-COMPETE; BOARD SEAT.

At closing, [list names of shareholders] will each enter into a ____-month consulting agreement providing for
compensation of ₦_____/day and reimbursement of out of pocket expenses when their services are requested by Acquirer.
In a separate agreement, and except for providing services to benefit Acquirer, [list names of shareholders] will also each
agree not to be involved in any way with the [list type of business that shareholders cannot engage in] until the earlier of
Acquirer discontinuing operations or ___ years from the date of closing.

[List names of shareholders] will also be entitled to appoint one director to the Board of Acquirer until the Purchase Price
is paid in full. If [list names of shareholders] wish to appoint someone other than one of them that appointment must be
mutually agreed to by all parties. This right extends into any entity that Acquirer merges into or otherwise assigns its rights
in this Letter.

3. PREPARATION OF DEFINITIVE AGREEMENTS.

The parties will negotiate the terms and agreement. Begin preparation of the Definitive Agreements that will govern the
Acquirer’s proposed acquisition of the capital stock. To the extent appropriate for transactions of this type and size, the
Definitive Agreements will contain customary representations, warranties, covenants, indemnities and other agreements of
the parties, including but not limited to: (1) representations and warranties related to each party’s power and authority to
enter into the Definitive Agreements and perform its obligations hereunder; (2) representation and warranty by [list names
of shareholders] that the accounts receivable plus cash, less accounts payable, of Target will be equal to or greater than
₦___________ on the day prior to closing; (3) ownership and title to the capital stock of Target (and that such interest will
be conveyed free and clear of all encumbrances); (4) various representations and warranties concerning Target and
Acquirer such as due organization, good standing, the absence of violation of other agreements and laws, the accuracy of
financial information being relied upon, and other matters customary for transactions of this sort; (5) indemnities from [list
names of shareholders] in favour of Acquirer against all claims and liabilities with respect to breach of such representations
and warranties concerning their ownership interest in the capital stock of Target in favour of Acquirer against all claims
and liabilities with respect to breach of such representations and warranties; (6) indemnities from [list names of
shareholders] in favour of Acquirer for environmental liability caused prior to the date of closing and an indemnity from
Acquirer in favour of [list names of shareholders] for environmental liability caused after the date of closing; and (7)
indemnities from Acquirer in favour of [list names of shareholders] against all claims and liabilities with respect to breach
of Acquirer’s representations and warranties

The Definitive Agreements are expected to include, without limitation: (1) a purchase and sale agreement to govern
Acquirer’s acquisition of the capital stock; (2) a promissory note; (3) a consulting agreement; (4) a non-compete
agreement, and (5) any other agreements necessary or desirable in connection with any of the foregoing arrangements or
any transaction contemplated herein.

4. CONDITIONS PRECEDENT TO THE CLOSING OF PROPOSED ACQUISITION.

The Definitive Agreements shall include customary conditions precedent generally applicable to an acquisition of the
nature and size of the transactions contemplated by this Letter, each of which must be satisfied prior to the consummation
of the transactions contemplated thereby. In general, the closing of the proposed acquisition and the obligations of each
party under the Definitive Agreements will be subject to the satisfaction of the conditions precedent, which shall include
but not be limited to:

(a) Satisfactory Results of Due Diligence. The satisfactory completion of due diligence investigation and acquisition audit
by Acquirer (as provided in paragraph 5) showing that the assets of Target and any actual or contingent liabilities against
those assets, and the prospective business operations by Acquirer of Target’s business are substantially the same as

Page | 34
currently understood by Acquirer as of the date of this Letter (determined without regard to any documents which Target or
any party may have previously delivered to Acquirer).

(b) Compliance. Satisfactory determination that the acquisition and prospective business operations by Acquirer of Target’s
business will comply with all applicable laws and regulations, including antitrust and competition laws.

(c) Consents and Approvals. The approval and consent of the Definitive Agreements by the respective Boards of Target
and Acquirer and the receipt of the consents and approvals from all governmental entities, utility providers, railways,
material vendors, lenders, landlords, customers, and other parties which are necessary or appropriate to the acquisition of
the capital stock and for the prospective business operation by Acquirer, and the receipt of all necessary governmental
approvals including the expiration or termination of all required waiting periods.

(d) Absence of Material Litigation or Adverse Change. There must be no pending or threatened material claims or litigation
involving Target, and no material adverse change in the business prospects of Acquirer operating Target’s business.

(e) Delivery of Legal Opinions. Customary legal opinions must be delivered, the content of which shall be mutually agreed
upon.

(f) Successful Financing. Acquirer must secure the debt and equity financing necessary to acquire the capital stock of
Target.

(g) Environmental. An environmental inspection by a licensed environmental inspection firm contracted by Acquirer must
show the assets of Target to be free from significant environmental liabilities. Acquirer shall be given access to the
property of Target and documents as necessary for Acquirer and its agents to conduct the inspection and prepare the reports
at the Acquirer’ cost. [List names of shareholders], and Target shall represent and warrant as a condition of closing that to
the best of their knowledge there are no material adverse environmental liabilities associated with Target or the property it
owns.

PART TWO: AGREEMENTS OF THE PARTIES REGARDING THE PROCEDURES FOR NEGOTIATION AND
PREPARATION OF THE DEFINITIVE AGREEMENTS.

In consideration of the costs to be borne by each party in pursuing the acquisition and sale contemplated by this Letter and
in consideration of the mutual undertakings by the parties as to the matters described in this Letter, upon execution of
counterparts of this Letter by each party, the following paragraphs 5 through 10 will constitute legally binding and
enforceable agreements of the parties regarding the procedures for the negotiation and preparation of the Definitive
Agreements.

5. DUE DILIGENCE.

From the date of acceptance by the parties of the terms of this Letter, until the negotiations are terminated as provided in
paragraph 9 of this Letter, Target will give Acquirer and Acquirer’s management personnel, legal counsel, accountants, and
technical and financial advisors, full access and opportunity to inspect, investigate and audit the books, records, contracts,
and other documents of Target as it relates to Target’s business and all of Target’s assets and liabilities (actual or
contingent), including, without limitation, inspecting Target’s property and conducting additional environmental
inspections of property and reviewing financial records, contracts, operating plans, and other business records, for the
purposes of evaluating issues related to the operation of Target’s business. Target further agrees to provide Acquirer with
such additional information as may be reasonably requested pertaining to Target’s business and assets to the extent
reasonably necessary to complete the Definitive Agreements.

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6. CONFIDENTIALITY.

By their signature below, each party agrees to keep in strict confidence all information regarding the terms of the proposed
acquisition of the capital stock, except to the extent Acquirer must disclose information to lenders and equity partners to
obtain necessary debt and equity financing. If this proposal is terminated as provided in paragraph 9, each party upon
request will promptly return to the other party all documents, contracts, records, or other information received by it that
disclose or embody confidential information of the other party. Acquirer agrees to keep all material and information
provided to it, under paragraph five above, confidential and to promptly return the same to Target upon termination of this
Letter. The provisions of this paragraph shall survive termination of the agreements set forth in paragraphs 5 - 10.

7. PUBLIC DISCLOSURE.

No party will make any public disclosure or issue any press releases pertaining to the existence of this Letter or to the
proposed acquisition and sale between the parties without having first obtained the consent of the other parties, except for
communications with employees, customers, suppliers, governmental agencies, and other groups as may be legally
required or necessary or appropriate (i.e., any securities filings or notices), and which are not inconsistent with the prompt
consummation of the transactions contemplated in this Letter. The provisions of this paragraph shall survive termination of
the agreements set forth in paragraphs 5-10.

8. DISCLAIMER OF LIABILITIES.

Except for breach of any confidentiality provisions hereof, no party to this Letter shall have any liability to any other party
for any liabilities, losses, damages (whether special, incidental or consequential), costs, or expenses incurred by the party in
the event the negotiations among the parties are terminated as provided in paragraph 9. Except to the extent otherwise
provided in any Definitive Agreement entered into by the parties, each party shall be solely responsible for its own
expenses, legal fees and consulting fees related to the negotiations described in this Letter, whether or not any of the
transactions contemplated in this Letter are consummated.

9. TERMINATION.

Except for the provisions set forth in paragraphs 5 - 10 of Part Two, each party hereby reaffirms its intention that this Letter
as a whole, and paragraphs 1 - 4 in particular, are not intended to constitute, and shall not constitute, a legal and binding
obligation, contract or agreement between any of the parties, and are not intended to be relied upon by any party as
constituting such. Accordingly, the parties agree that any party to this Letter may unilaterally withdraw from negotiation or
dealing at any time for any or no reason at the withdrawing party’s sole discretion by notifying the other party of the
withdrawal in writing. If any party withdraws from dealing or negotiation prior to ___________, or fails to negotiate in
good faith, or if each party hereto has not entered into the Purchase Agreement by _________________, then any
obligation to negotiate and prepare the Definitive Agreements or otherwise deal with any other party to this Letter, and the
agreements of the parties set forth in paragraphs 5 - 10 shall immediately terminate and Target(s) shall retain the deposit
described in paragraph 10. It is agreed, however, that the terms of any Purchase Agreement or other Definitive Agreements
entered into by the parties controls over the right to withdraw from dealing or negotiations in this paragraph.

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10. ACQUIRER EXCLUSIVE OPPORTUNITY; DEPOSIT.

[List names of shareholders] agree that neither of them nor any of their affiliates will pursue, solicit or discuss any
opportunities for any party other than Acquirer to acquire or otherwise control the capital stock of Target until this Letter is
terminated by Acquirer or mutually by Acquirer and [list names of shareholders] or any of the events in paragraph 9 do not
occur by the dates stated and [list names of shareholders] notify Acquirer in writing that they are pursuing other buyers for
the capital stock. In consideration for this exclusive opportunity, Acquirer will pay to [list names of shareholders],
collectively, a $__________ deposit upon the execution by them of this Letter. The deposit is non-refundable but will be
applied to the Purchase Price at closing.

If the terms of this Letter are agreeable to you, please sign a copy of this Letter and return a signed copy by facsimile to me
at _____________________ by no later than noon on _________________, followed by a mailed original signed copy.
This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed an
original, but all of which taken together shall constitute one and the same document. Upon acceptance of the binding
provisions of this Letter (those provisions set forth in paragraphs 5 - 10) by each party, the parties will negotiate in good
faith to prepare and enter into Definitive Agreements to govern the proposed acquisition and sale, subject to the termination
provisions set forth in paragraph 9.

Should you have any questions, please contact me at the phone number listed above.

Sincerely,

_______________________________________

“ACQUIRER”

By: __________________________

Its: __________________________

_________________________________________

________________, Individually and on behalf of Target

_________________________________________

________________, Individually and on behalf of Target

________________, Individually and on behalf of Target

_________________________________________

________________, Individually and on behalf of Target

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