ProposaltoPurchaseStockoftheCompanyDearSellers:Thisletterisintendedtosummarizetheprincipaltermsofaproposalbeingconsideredby__________________(the"Buyer")regardingitspossibleacquisitionofalloftheoutstandingcapitalstockof________________(the"Company")from______________("A")and_____________________,whoaretheCompany'ssolestockholders(the"Sellers").Inthisletter,(i)theBuyerandtheSellersaresometimescalledthe"Parties,"(ii)theCompanyanditssubsidiariesaresometimescalledthe"TargetCompanies,"and(iii)theBuyer'spossibleacquisitionofthestockoftheCompanyissometimescalledthe"PossibleAcquisition."PARTIThePartieswishtocommencenegotiatingadefinitivewrittenacquisitionagreementprovidingforthePossibleAcquisition(a"DefinitiveAgreement").TofacilitatethenegotiationofaDefinitiveAgreement,thePartiesrequestthattheBuyer'scounselprepareaninitialdraft.TheexecutionofanysuchDefinitiveAgreementwouldbesubjecttothesatisfactorycompletionoftheBuyer'songoinginvestigationoftheTargetCompanies'business,andwouldalsobesubjecttoapprovalbytheBuyer'sboardofdirectors.BasedontheinformationcurrentlyknowntotheBuyer,itisproposedthattheDefinitiveAgreementincludethefollowingterms:1.BasicTransaction.TheSellerswouldsellalloftheoutstandingcapitalstockoftheCompanytotheBuyerattheprice(the"PurchasePrice")setforthinParagraph2below.Theclosingofthistransaction(the"Closing")wouldoccurassoonaspossible2.PurchasePrice.ThePurchasePricewouldbe$____________(subjecttoadjustmentasdescribedbelow)andwouldbepaidinthefollowingmanner:(a)attheClosing,theBuyerwouldpaytheSellersthesumof$_____incash;(b)attheClosing,theBuyerwoulddepositwithamutuallyacceptableescrowagentthesumof$_______,whichwouldbeheldinescrowforaperiodofatleast_____yearsinordertosecuretheperformanceoftheSellers'obligationsundertheDefinitiveAgreementandrelateddocuments;and(c)attheClosing,theBuyerwouldexecuteanddelivertoeachSelleranunsecured,non-negotiable,subordinatedpromissorynote.ThepromissorynotestobedeliveredtotheSellersbytheBuyerwouldhaveacombinedprincipalamountof$_______,wouldbearinterestattherateof___%perannum,wouldmatureonthe_____anniversaryoftheClosing,andwouldprovidefor_____equal[annual][quarterly]paymentsofprincipalalongwith[annual][quarterly]paymentsofaccruedinterest.
ThePurchasePriceassumesthattheTargetCompanieshaveconsolidatedstockholders'equityofatleast$____________asoftheClosing.ThePurchasePricewouldbeadjustedbasedonchangesintheTargetCompanies'consolidatedstockholders'equityasoftheClosing,onadollar-for-dollarbasis.3.EmploymentandNon-CompetitionAgreements.AttheClosing:(a)theCompanyandAwouldenterintoa_____-yearemploymentagreementunderwhichAwouldagreetocontinuetoserveastheCompany's[VicePresidentandChiefOperatingOfficer]andwouldbeentitledtoreceiveasalaryof$_____peryear;and(b)eachSellerwouldexecutea_____-yearnoncompetitionagreementinfavoroftheBuyerandtheCompany.4.OtherTerms.TheSellerswouldmakecomprehensiverepresentationsandwarrantiestotheBuyer,andwouldprovidecomprehensivecovenants,indemnitiesandotherprotectionsforthebenefitoftheBuyer.TheconsummationofthecontemplatedtransactionsbytheBuyerwouldbesubjecttothesatisfactionofvariousconditions,including:(a)_______________________________________________(b)_______________________________________________PARTIIThefollowingparagraphsofthisletter(the"BindingProvisions")arethelegallybindingandenforceableagreementsoftheBuyerandeachSeller.1.Access.DuringtheperiodfromthedatethisletterissignedbytheSellers(the"SigningDate")untilthedateonwhicheitherPartyprovidestheotherPartywithwrittennoticethatnegotiationstowardaDefinitiveAgreementareterminated(the"TerminationDate"),theSellerswillaffordtheBuyerfullandfreeaccesstoeachTargetCompany,itspersonnel,properties,contracts,booksandrecords,andallotherdocumentsanddata.2.ExclusiveDealing.Untilthelaterof(i)[90]daysaftertheSigningDateor(ii)theTerminationDate:(a)theSellerswillnotandwillcausetheTargetCompaniesnotto,directlyorindirectly,throughanyrepresentativeorotherwise,solicitorentertainoffersfrom,negotiatewithorinanymannerencourage,discuss,accept,orconsideranyproposalofanyotherpersonrelatingtotheacquisitionoftheSharesortheTargetCompanies,theirassetsorbusiness,inwholeorinpart,whetherdirectlyorindirectly,throughpurchase,merger,consolidation,orotherwise(otherthansalesofinventoryintheordinarycourse);and
(b)TheSellerswillimmediatelynotifytheBuyerregardinganycontactbetweentheSellers,anyTargetCompanyortheirrespectiverepresentativesandanyotherpersonregardinganysuchofferorproposaloranyrelatedinquiry.3.Break-UpFee.If(a)theSellersbreachParagraph2ortheSellersprovidetotheBuyerwrittennoticethatnegotiationstowardaDefinitiveAgreementareterminated,and(b)within[six]monthsafterthedateofsuchbreachortheTerminationDate,asthecasemaybe,eitherSelleroroneormoreoftheTargetCompaniessignsaletterofintentorotheragreementrelatingtotheacquisitionofamaterialportionoftheSharesoroftheTargetCompanies,theirassets,orbusiness,inwholeorinpart,whetherdirectlyorindirectly,throughpurchase,merger,consolidation,orotherwise(otherthansalesofinventoryorimmaterialportionsoftheTargetCompanies'assetsintheordinarycourse)andsuchtransactionisultimatelyconsummated,then,immediatelyupontheclosingofsuchtransaction,theSellerswillpay,orcausetheTargetCompaniestopay,totheBuyerthesum$_______.ThisfeewillnotserveastheexclusiveremedytotheBuyerunderthisletterintheeventofabreachbytheSellersofParagraph2ofthisPartTwooranyotheroftheBindingProvisions,andtheBuyerwillbeentitledtoallotherrightsandremediesprovidedbylaworinequity.4.ConductofBusiness.DuringtheperiodfromtheSigningDateuntiltheTerminationDate,theSellersshallcausetheTargetCompaniestooperatetheirbusinessintheordinarycourseandtorefrainfromanyextraordinarytransactions.5.Confidentiality.Exceptasandtotheextentrequiredbylaw,theBuyerwillnotdiscloseoruse,andwilldirectitsrepresentativesnottodiscloseorusetothedetrimentoftheSellersortheTargetCompanies,anyConfidentialInformation(asdefinedbelow)withrespecttotheTargetCompaniesfurnished,ortobefurnished,byeitherSeller,theTargetCompanies,ortheirrespectiverepresentativestotheBuyeroritsrepresentativesatanytimeorinanymannerotherthaninconnectionwithitsevaluationofthetransactionproposedinthisletter.ForpurposesofthisParagraph,"ConfidentialInformation"meansanyinformationabouttheTargetCompaniesstamped"confidential"oridentifiedinwritingassuchtotheBuyerbytheSellerspromptlyfollowingitsdisclosure,unless(i)suchinformationisalreadyknowntotheBuyeroritsrepresentativesortoothersnotboundbyadutyofconfidentialityorsuchinformationbecomespubliclyavailablethroughnofaultoftheBuyeroritsrepresentatives,(b)theuseofsuchinformationisnecessaryorappropriateinmakinganyfilingorobtaininganyconsentorapprovalrequiredfortheconsummationofthePossibleAcquisition,or(c)thefurnishingoruseofsuchinformationisrequiredbyornecessaryorappropriateinconnectionwithlegalproceedings.UponthewrittenrequestoftheSellers,theBuyerwillpromptlyreturntotheSellersortheTargetCompaniesordestroyanyConfidentialInformationinitspossessionandcertifyinwritingtotheSellersthatithasdoneso.6.Disclosure.Exceptasandtotheextentrequiredbylaw,withoutthepriorwrittenconsentoftheotherParty,neithertheBuyernoreitherSellerwill,andeachwilldirectitsrepresentativesnottomake,directlyorindirectly,anypubliccomment,statement,orcommunicationwithrespectto,orotherwisetodiscloseortopermitthedisclosureoftheexistenceofdiscussionsregarding,apossibletransactionbetweenthePartiesoranyoftheterms,conditions,orotheraspectsofthetransactionproposedinthisletter.IfaPartyisrequiredbylawtomakeany
suchdisclosure,itmustfirstprovidetotheotherPartythecontentoftheproposeddisclosure,thereasonsthatsuchdisclosureisrequiredbylaw,andthetimeandplacethatthedisclosurewillbemade.7.Costs.TheBuyerandeachSellerwillberesponsibleforandbearallofitsowncostsandexpenses(includinganybroker'sorfinder'sfeesandtheexpensesofitsrepresentatives)incurredatanytimeinconnectionwithpursuingorconsummatingthePossibleAcquisition.Notwithstandingtheprecedingsentence,theBuyerwillpayone-halfandtheSellerswillpayone-halfoftheHSRActfilingfee.8.Consents.DuringtheperiodfromtheSigningDateuntiltheTerminationDate,theBuyerandeachSellerwillcooperatewitheachotherandproceed,aspromptlyasisreasonablypractical,toprepareandtofilethenotificationsrequiredbytheHSRAct.9.EntireAgreement.TheBindingProvisionsconstitutetheentireagreementbetweentheparties,andsupersedeallpriororalorwrittenagreements,understandings,representationsandwarranties,andcoursesofconductanddealingbetweenthepartiesonthesubjectmatterhereof.Exceptasotherwiseprovidedherein,theBindingProvisionsmaybeamendedormodifiedonlybyawritingexecutedbyalloftheparties.10.GoverningLaw.TheBindingProvisionswillbegovernedbyandconstruedunderthelawsoftheStateof________________withoutregardtoconflictsoflawsprinciples.11.Jurisdiction:ServiceofProcess.Anyactionorproceedingseekingtoenforceanyprovisionof,orbasedonanyrightarisingoutof,thisLettermaybebroughtagainstanyofthepartiesinthecourtsoftheStateof______________,Countyof__________________,or,ifithasorcanacquirejurisdiction,intheUnitedStatesDistrictCourtforthe_______________Districtof____________________,andeachofthepartiesconsentstothejurisdictionofsuchcourts(andoftheappropriateappellatecourts)inanysuchactionorproceedingandwaivesanyobjectiontovenuelaidtherein.Processinanyactionorproceedingreferredtointheprecedingsentencemaybeservedonanypartyanywhereintheworld.12.Termination.TheBindingProvisionswillautomaticallyterminateon_______,19___andmaybeterminatedearlieruponwrittennoticebyeitherpartytotheotherpartyunilaterally,foranyreasonornoreason,withorwithoutcause,atanytime;provided,however,thattheterminationoftheBindingProvisionswillnotaffecttheliabilityofapartyforbreachofanyoftheBindingProvisionspriortothetermination.UponterminationoftheBindingProvisions,thepartieswillhavenofurtherobligationshereunder,exceptasstatedinParagraphs2,3,5,7,9,10,11,12,13and14ofthisPartTwo,whichwillsurviveanysuchtermination.13.Counterparts.ThisLettermaybeexecutedinoneormorecounterparts,eachofwhichwillbedeemedtobeanoriginalcopyofthisLetterandallofwhich,whentakentogether,willbedeemedtoconstituteoneandthesameagreement.14.NoLiability.TheparagraphsandprovisionsofPartOneofthisletterdonotconstituteandwillnotgiverisetoanylegallybindingobligationonthepartofanyofthePartiesor
anyoftheTargetCompanies.Moreover,exceptasexpresslyprovidedintheBindingProvisions(orasexpresslyprovidedinanybindingwrittenagreementthatthePartiesmayenterintointhefuture),nopastorfutureaction,courseofconduct,orfailuretoactrelatingtothePossibleAcquisition,orrelatingtothenegotiationofthetermsofthePossibleAcquisitionoranyDefinitiveAgreement,willgiverisetoorserveasabasisforanyobligationorotherliabilityonthepartofthePartiesoranyoftheTargetCompanies.Ifyouareinagreementwiththeforegoing,pleasesignandreturnonecopyofthisletteragreement,whichthereuponwillconstituteouragreementwithrespecttoitssubjectmatter.BUYER:By:____________________________Name:__________________________Title:___________________________DulyexecutedandagreedastotheBindingProvisionson_________,199__.PROSPECTIVESELLERS:______________________________________________________________________
