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[Date (ie.

July 31, 2002)]

[Name of Selling Shareholder(s)]

[Address of Selling Shareholder(s)]

Dear Sir or Madam:

Re: [Name of Corporation whose Shares are being Acquired]

This letter outlines the terms and conditions under which we intend to purchase from you all the
shares of the above corporation:

Buyer: [Name of Buyer]

Corporation: [Name of Corporation whose Shares are being Acquired]

Selling Shareholder(s): [Name of Shareholder 1] and [Name of Shareholder 2]

Shareholdings: [Name of Shareholder 1] [No. of Common Shares (ie. 40)]

Common Shares

[Name of Shareholder 2] [No. of Common Shares (ie. 60)]

Common Shares


Closing Date: [Closing Date (ie. April 1, 2003)]

Purchase Price: [Aggregate Purchase Price (ie. $300,000.00)]

Payment of Purchase [Amount Payable on Closing (ie. $100,000)] on Closing

Price: [Amount Payable 60 days after Closing (ie. $200,000)] 60 days
after Closing

Working Capital The Purchase Price has been established based on the assumption
Minimum: that the Corporation will continue to operate its business in the
ordinary course up to Closing. On Closing, the parties agree that
the Corporation’s Working Capital will be at least [Minimum
Working Capital on Closing (ie. $50,000.00)]. Working Capital is

defined as the sum of accounts receivable and cash less accounts

payable, accrued liabilities and any other current liabilities incurred
in the normal course of business, calculated in accordance with
GAAP as of Closing.

Within 60 days after Closing, the Corporation will deliver a Closing

balance sheet to Buyer together with a calculation of Working
Capital. If the Corporation’s Working Capital is less than
[Minimum Working Capital on Closing (ie. $50,000.00)], then the
Purchase Price will be adjusted downwards by an amount equal to
[Minimum Working Capital on Closing (ie. $50,000.00)] less the
actual amount of Working Capital (the “Working Capital
Deficiency”). The Selling Shareholder(s) shall immediately remit
the Working Capital Deficiency to Buyer. For greater certainty, any
Working Capital Deficiency will be paid by the Selling
Shareholder(s) directly.

Conditions Precedent: Buyer’s obligations to complete the transaction contemplated by

this Letter will be subject to the conditions that:

1. Regulatory approvals are received, if required;

2. There is no material adverse change in the Corporation’s

business prior to Closing;

3. Buyer is satisfied, in its sole discretion, with the results of

its due diligence;

4. There is satisfactory completion and execution of legal

agreements pertaining to this transaction, including
representations and warranties customary in transactions of
this type.

These conditions are inserted for Buyer’s benefit and may be

waived by Buyer at its sole discretion.

Tax Issues: Buyer and the Selling Shareholder(s) agree that they will endeavor
to work together to structure this transaction on a mutually
beneficial basis for income tax purposes.

Post Closing Assistance In order to assist with the transition of the Corporation’s business to
From Selling Buyer, the Selling Shareholder(s) agree to work full-time on a
Shareholder(s): consulting basis for Buyer for a period up to six months after
Closing. However, Buyer shall be under no obligation to retain the
services of the Selling Shareholder(s) at any time during this period.

The parties agree that the Selling Shareholder(s) shall each be paid
for their consulting services at the rate of [Daily Consulting Fee
payable to Selling Shareholder(s) (ie. $200.00)] per day (prorated
for partial days). The parties acknowledge that the Selling
Shareholder(s) will work approximately 60 hours combined per
week, at Buyer’s request, and will use their best efforts to assist
Buyer with the transition of the Corporation’s ownership.

Currency: All dollar amounts and currency referred to in this Letter of Intent
shall refer to lawful currency of the United States of America.

Transaction Costs: All legal, accounting and other professional fees incurred by the
Selling Shareholder(s) and the Corporation in connection with the
transaction contemplated herein will be for the account of the
Selling Shareholder(s).

Review of Information: Between the date of this Letter and the Closing Date, the
Corporation and the Selling Shareholder(s) shall provide, or cause
to be provided, to Buyer and Buyer’s representatives, access to all
offices, representatives and records of the Corporation to conduct
such investigations and reviews as they in their sole discretion
determine to be advisable from time to time. The Corporation and
the Selling Shareholder(s) shall also co-operate to the fullest extent
possible in arranging such meetings, as Buyer considers necessary
or desirable in its sole discretion between Buyer's representatives
and any employees of the Corporation designated by Buyer from
time to time, provided that Buyer will seek the permission of the
Selling Shareholder(s) before arranging any meeting or holding any
discussions with any other employees of the Corporation. The
Corporation shall authorize those described above to grant full
disclosure of all information relating to the Corporation to Buyer's


Standstill: During the 90 day period immediately following the date of

acceptance of this Letter of Intent (the “Standstill Period”) or unless
the parties herein mutually agree as a result of the termination of the
transaction contemplated herein, the Corporation and the Selling
Shareholder(s) shall not, and shall ensure that their representatives
do not, solicit, initiate, encourage, entertain or negotiate in respect
of any proposal or offer from, or provide any information relating in
any way to the Corporation, or any of its businesses or investments,
to any person, entity or group in connection with a possible
investment in the Corporation, or any acquisition of any of its

outstanding securities, or all or any substantial part of its assets.

Representation and The Corporation and the Selling Shareholder(s) jointly and
Warranty: severally represent and warrant that the entering into of this Letter
of Intent and the consummation of the transactions contemplated
hereby will not breach the terms of (i) any agreement or
understanding to which they are a party, or (ii) to the best of their
knowledge, any law, rule or regulation.

Disclosure: Except as agreed to in writing by the parties, no disclosure of this

letter or anything which it contemplates shall be made by the
Corporation, the Selling Shareholder(s), Buyer or any of their
respective representatives, except as may be required by applicable
law or regulatory authorities, in which case notice of such required
disclosure shall be provided to the other party in advance of such

Termination Date: If Closing does not occur within by the Closing Date, all of the
provisions of this Letter of Intent, except those set out beside the
headings “Representation and Warranty”, “Disclosure”,
“Indemnification”, and “Standstill”, shall terminate and neither
party will have any obligation to the other.

Legal Effect: The provisions of Part B of this Letter shall be legally binding
upon, and inure to the benefit of Buyer, the Selling Shareholder(s)
and the Corporation, and their respective successors, administrators
and assigns. Except for Part B, this Letter is an expression of the
intent of Buyer, the Selling Shareholder(s) and the Corporation to
proceed with the transaction(s) contemplated and shall not give rise
to any legal rights or obligations.

Governing Law: This Letter shall be governed by, and construed in accordance with,
the laws of the State of [State (ie. California)].

By signing where indicated below, you acknowledge that the Buyer’s and the Corporation’s
obligations will be determined and set out in final documentation executed by you and us, which
documentation must be in a form satisfactory to both you, us and our respective counsel.

If you are in agreement with the foregoing, kindly signify your acceptance by signing the second
copy of this Letter in the manner provided below and returning it to us on or before [Expiration
Date of Letter of Intent] failing which this Letter shall be of no effect.

Yours very truly,

[Name of Buyer]

THE UNDERSIGNED HEREBY ACKNOWLEDGE and agree to the terms and conditions as
set out above and confirms its full and binding authority to enter into these arrangements this __
day of _______________________, 20_____.

[Name of Selling Shareholder 1]

[Name of Selling Shareholder 2]