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LETTER OF INTENT

A Letter of Intent is a written preliminary contractual arrangement (also sometimes entitled


“memorandum of understanding” or “heads of agreement”) which usually authorizes immediate
commencement of negotiation of a definitive contract. The contractual arrangement has to be
drafted carefully in order to avoid it being interpreted as the definitive contract which would bind
the parties to obligations which they are not willing to commit at this stage of negotiations 1. This
does not mean that the Letter of Intent cannot contain obligations binding to the parties such as
confidentiality and cost sharing arrangements.
This model agreement is a preliminary arrangement to take over a business through a share
purchase2.

THIS LETTER OF INTENT IS MADE AND ENTERED INTO

between

__________, a company incorporated and existing under the laws of __________, with its
registered office at __________ [address] and registered with the __________ under number
__________ (the “Party 1”)

and

__________, a company incorporated and existing under the laws of Belgium, with its registered
office at __________ [address] and registered with RPR/RPM in __________ [judicial district]
under number __________ (the “Party 2”).

The Party 1 and the Party 2 are hereinafter collectively referred to as “the Parties”.

WHEREAS the Party 1 is considering the purchase of the shares held by Party 2 in __________
[full name, address and company number of the target company] (the “Shares”). __________
[name of the target company], together with any and all of its affiliates, is hereinafter referred to as
the “Company”;

WHEREAS further to recent discussions between the Parties, this letter confirms that Party 1
intends to acquire the Shares in the Company under the terms and conditions set forth below and
subject to contract;

WHEREAS Party 1 is, based on the limited information received by it so far, not in a position to
make any final judgement on the true value of the Company’s business and assets;

WHEREAS the terms of this letter are not exhaustive and are not intended to be legally binding
except where specifically stated below;

WHEREAS the purchase price for the Shares ultimately depends on the completion and evaluation
of due diligence reports prepared on behalf of Party 1;

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The arrangement can also be made in form of a letter with a unilateral declaration by one party,
countersigned by the recipient of the letter.
2
See also model Share Purchase Agreement.

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NOW, THEREFORE, the Parties declare as follows:

Article 1 – Target company

Party 1 intend to purchase the Shares in the Company subject to a detailed share purchase
agreement with Party 2 and such ancillary agreements as would be customary in this type of
transaction.

Article 2 – Price

The price for the Shares shall be between __________ euro [amount in words] (€ __________)
[amount in numbers] and __________ euro (€ ___________) based on an enterprise value for the
Company of __________ euro (€ __________) calculated in accordance with __________
[description of the method or formula]), subject to proper due diligence, and is payable in cash to
Party 2, subject to certain adjustments stemming from the results of the due diligence.

Article 3 – Conditions

The proposed purchase is conditional on the following:

1. Party 1 has conducted and is satisfied with the results of the financial, legal, social, tax,
regulatory, environmental, technical and commercial due diligence of the Company, which will
include any other reports and investigations Party 1 deems necessary.

2. Party 2 allows Party 1 and its respective advisers full access to records, key employees,
advisers and transactions of the Company to allow them to complete the investigations
required.

3. Party 2 provides and procures the provision of any information required by the Party 1 to
complete the required investigations and the information provided is accurate and not
misleading.

4. The [board of directors][shareholders] of Party 1 and the [board of directors][shareholders]


Party 2 approve the purchase.

5. Any third party (such as the regulatory or tax authorities) consents to or approves the purchase
on terms satisfactory to Party 1, and such consent or approval remains in full force and effect.

6. The Parties sign a detailed and legally binding share purchase agreement incorporating
warranties and indemnification clauses and any other terms negotiated by the Parties and
customary for a transaction of this kind, including the restrictive covenants mentioned below.

7. The warranties and indemnification clauses in the share purchase agreement are accurate as
of the closing date and Party 2 is not otherwise in material breach of its obligations under the
share purchase agreement.

8. There has been no material adverse change to the business, operations, assets, (financial,
trading or other) position, profits or prospects of the Company between the date of this letter
and the closing date.

9. [optional] Each key employee identified by Party 1 enters into a new employment contract with
the Company on the terms agreed with Party 1.

10. [optional] Party 1 and __________ [name of managers or co-investors] sign a shareholders
agreement and develop a mutually acceptable, comprehensive business plan for the Company
prior to the share purchase.

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11. Party 2 enters into restrictive covenants on behalf of itself and any relevant related parties
(other than the Company) preventing Party 2 and any such parties from:

(a) competing with the business of the Company for __________ years following the closing,

(b) approaching any employees of the Company for __________ years following the closing,

(c) approaching any customers of the Company for __________ years following the closing,
and

(d) disclosing any confidential information regarding the Company.

12. Party 1 and Party 2 each produce a legal opinion, in a form satisfactory to the other, confirming
that they have the requisite capacity to enter into the share purchase agreement.

13. Party 1 has secured financing for the transaction, which financing is already being sought.
Party 1 has received preliminary confirmation from various banks that they will finance the
transaction at terms and conditions which do not vary substantially from those already
described by these banks.

Article 4 – Language

The negotiations shall be conducted in English, and all legal documents related to the proposed
share purchase shall be drafted in English, except where Belgian law requires the use of another
language.

Article 5 – Timeframe

Party 1 intends to proceed promptly with the proposed purchase. Party 1 and the Party 2 shall
negotiate in good faith with a view to completing the share purchase by, on, or before __________
[date].

Article 6 – Exclusivity

6.1. This article applies to any discussions between Party 2 and anyone other than the Party 1
relating to any investment in the Company or the acquisition of any of the Company’s
shares, any portion of its business or any of its major assets (the “Third Party
Negotiations”).

6.2. Party 2 must immediately terminate any Third Party Negotiations currently underway.

6.3. Prior to __________ [date] or until notified by Party 1 that it no longer wishes to proceed
with the purchase, Party 2 must not directly or indirectly:

(a) participate in any Third Party Negotiations;

(b) seek, encourage or respond to any approach that could lead to Third Party
Negotiations;

(c) enter into any letter of intent, agreement or arrangement pursuant to any Third Party
Negotiations; or

(d) disclose any information about the Company to a party that wishes to enter into Third
Party Negotiations (unless the information is already available to the public).

6.4. Party 2 must ensure that its employees, agents and advisers and the Company and its
employees, agents and advisers comply with the obligations set forth in this article.

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6.5. Party 2 acknowledges that Party 1 will incur significant costs, fees and expenses through
reliance on this article and that if Party 2 breaches this provision it must (without prejudice
to any other remedies Party 1 may have) indemnify Party 1 for any costs, fees and
expenses incurred in connection with the investigation of the Company and the negotiation
of this letter and any other documents connected with the proposed purchase.

Article 7 – Expenses

7.1. Each Party shall bear its own costs incurred in connection with the share purchase,
regardless of whether such costs proceed the purchase, including (without limitation) the
expense of preparing and negotiating this Letter of Intent, the acquisition documents and
any documents contemplated by the foregoing.

7.2. Each Party will indemnify, defend and hold harmless the other against the claims of any
brokers or finders for payment of fees or costs.

Article 8 – Duration

8.1. Either Party may terminate negotiations in relation to the proposed purchase at any time,
without the need to give any reason for doing so or incurring any liability to the other Party.

8.2. In the event either Party decides in good faith that the negotiations will not lead to a result,
it will so notify the other Party and as a result of the notification, this letter will automatically
terminate 3 weeks following the date of delivery of the termination notice.

8.3. This letter will automatically expire on __________ [date] unless Parties have agreed to
extend its duration prior to this expiration date.

8.4. Articles 6, 7, 8, 9 and 10 shall survive and continue in full force and effect in accordance
with the terms of this letter notwithstanding its expiry or termination.

Article 9 – Confidentiality

The Parties undertake to keep strictly confidential and not to disclose to any person or entity and
not to use for his own purpose, both during the term of this letter and after the termination thereof,
the negotiations, the due diligence investigations as well as the conditions for the proposed
purchase set forth herein, unless otherwise agreed upon 3.

Article 10 – Applicable Law and Jurisdiction

10.1. All issues, questions and disputes concerning the validity, interpretation, enforcement,
performance or termination of this letter shall be governed by and construed in accordance
with Belgian law, and no effect shall be given to any other choice of law or any conflict-of-
laws rules or provisions (Belgian, foreign or international) that could cause the laws of any
jurisdiction other than Belgium to be applicable.

10.2. Any dispute concerning the validity, interpretation, enforcement, performance or termination
of this guarantee shall be submitted to the exclusive jurisdiction of the __________ courts.

[optional] Any disputes arising out of or in relation with this Agreement shall be finally
settled under the CEPANI Rules of Arbitration by one or more arbitrators in accordance with
those Rules. The arbitral tribunal shall be composed of __________ [number] arbitrators.
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In most cases these obligations are set out in a more detailed Confidentiality Agreement signed by the parties
separately. The signing of a Letter of Intent may also trigger disclosure obligations under listing rules or other
regulatory requirements.

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The seat of the arbitration shall be __________ [city]. The arbitration shall be conducted in
__________ [language.]

FOR AND ON BEHALF OF PARTY 1

______________________________ [name]

______________________________ [title]

______________________________ [date]

______________________________ [signature]

FOR AND ON BEHALF OF PARTY 2

______________________________ [name]

______________________________ [title]

______________________________ [date]

______________________________ [signature]

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