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Letter of Intent

[Letterhead of the Buyer]

•, 20•

[Name and address of the Seller]

Attention: President

Dear Sirs/Mesdames:

• (the “Buyer”) is interested in purchasing from • (the “Seller”) all the outstanding shares
of • (the “Target”), a corporation incorporated under the laws of •.

This letter sets out the framework of the contemplated transaction so that we can proceed
to negotiate a definitive purchase agreement (the “Purchase Agreement”) that will contain the
following terms and customary representations, warranties, covenants and conditions. This letter
is not a binding agreement except for the provisions of paragraphs 7 to 13.

Paragraphs 1 to 6 reflect our current understanding of the contemplated transaction but

they do not constitute a legally binding or enforceable agreement. Each of us is free to withdraw
from further discussions and negotiations at any time and for any reason prior to the execution of
the Purchase Agreement by giving written notice to the other.

1. Purchase and Sale of Shares. The Buyer intends to purchase from the Seller on •, 20• (the
“Closing Date”) all of the Target's issued and outstanding shares for a purchase price of $•,
subject to adjustment if either the net book value or net profit of the Target does not meet the
requirements set out in paragraph 2.

2. Financial Statements. On or before the Closing Date the Seller will deliver to the Buyer
audited financial statements as of •, [20•] certified by •, chartered accountants, which financial
statements will include (i) a balance sheet as of that date that does not reflect any material
adverse change in the condition of the Target since the balance sheet audited by • as of
December 31, •, and which reflects a net book value of at least $• and (ii) an income statement
for the • months then ended that reveals a net profit of at least $•. If this is not the case, the
purchase price will be adjusted accordingly.

3. Conditions of Purchase Agreement. Conditions to the execution of the Purchase Agreement


(a) the Buyer being able to arrange financing satisfactory to it;


(b) approval of the transaction by the board of directors of the Buyer and of the
Seller; and

(c) the Buyer being satisfied with the results of its due diligence investigation.

4. Conditions of Closing. Conditions of closing will include:

(a) no material adverse change in the business, assets, liabilities, operations, results of
operation or condition (financial or otherwise) of the Target will have occurred
since December 31, •;

(b) approval of the transaction by the Seller's shareholders, if necessary;

(c) necessary consents and approvals from third parties including landlords of and
lenders to the Target; and

(d) necessary regulatory approvals including under the Investment Canada Act
(Canada) and the Competition Act (Canada).

5. Employment Contracts. On the Closing Date the Target will have entered into employment
agreements with • and • expiring not earlier than • years after the Closing Date in form and
substance satisfactory to the Buyer.

6. Non-Competition. On the Closing Date the Seller will have entered into an agreement not to
compete with the Target's business for a period of • years after the Closing Date in form and
substance satisfactory to the Buyer.

7. Access. The Seller will provide the Buyer with reasonable opportunity and access to
investigate the financial condition and operations of the business of the Target. Such
investigation may include, but is not limited to, a review of financial and business records and
accounting practices relating to the Target's business, the validity of patents or other intangible
property held by the Target, [the nature of the services provided by the Target, the nature and
composition of the products sold by the Target and the manufacturing and quality control
processes and procedures including the processes and procedures followed by the Target's
subcontractors,] and contracts between the Target and third parties including, but not limited to,
employment contracts and leases. The Seller will, and will cause the Target to, cooperate with
the Buyer with respect to the investigation and, in that regard, the Buyer will, upon reasonable
notice, have access during normal business hours to the facilities, books, records, documents and
personnel of the Target.

8. Government Filings. The Buyer and the Seller will cooperate in preparing and filing any
notification required to be filed with respect to the transactions contemplated herein under the
Competition Act. [The Buyer will, with the assistance of the Seller, comply with the
requirements of the Investment Canada Act.]

9. No-Shop. Unless and until the Buyer has given written notice to the Seller that it is
withdrawing from further discussions and negotiations, the Seller will not, directly or indirectly,

(a) solicit, initiate or entertain inquiries or proposals from, or provide non-public

information to, any person with respect to, or

(b) participate in any negotiations regarding, or otherwise cooperate in any way with
or assist or participate in or take any steps to bring about,

the direct or indirect acquisition of all or any substantial part of the Target by any person,
other than the Buyer, including, without limitation, by way of the acquisition of the
outstanding shares of the Target, the acquisition of all or any substantial part of the assets
of the Target or the amalgamation or merger of the Seller or the Target or both, or any
plan of arrangement or other reorganization involving the Seller or the Target or both. If
the Seller takes any of these actions, then the Seller will immediately pay to the Buyer
(by wire transfer of immediately available funds) a fee of $•.

10. Costs. Each of the Buyer and the Seller will be responsible for its own expenses.

11. Publicity. Except as required by law, no public announcement or press release concerning
the proposed transaction may be made by the Buyer or the Seller without the prior consent and
joint approval of the Buyer and the Seller.

12. Confidentiality and Non-Solicitation. Except as required by law, the Buyer and the Seller
will receive and maintain all information received from the other strictly in confidence and not
disclose to any person or make public or authorize the disclosure of any such information and not
use such information for any purpose except for the purpose contemplated by this letter unless:
(i) the specific information is now or hereafter publicly disclosed other than as a result of breach
of this provision; (ii) the specific information was in the possession of the receiving party prior to
the disclosure by the disclosing party; (iii) the specific information is hereafter disclosed to the
receiving party by a third party having no obligation of confidentiality with regard to the
information; or (iv) the specific information is independently generated by the receiving party
without the use and not as a consequence of the disclosure by the disclosing party. If this letter is
terminated or the Purchase Agreement is not executed, each party must immediately return to the
other all confidential information that was furnished to it, without retaining any copy thereof. In
addition, the Buyer will not employ or attempt to employ or assist any person to employ any
employees of the Seller at any time during a period of • months from the date hereof.

13. Termination. If a Purchase Agreement is not signed on or before •, 20•, this letter will have
no further force and effect, except for the provisions of paragraphs 10, 11 and 12 which will
survive any termination, and neither of us will have any further obligations hereunder.

If you agree with the foregoing, please deliver a signed copy of this letter to the
undersigned by •, 20•.

Yours truly,



Agreed to as of the above date: