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- 1 - [date] [Name] [Address] [Address] Dear __________________: The purpose of this letter is to outline the manner in which [name of buyer] ("Buyer), purposes to purchase certain assets of [name of seller] ("Seller"). Buyer and Seller recognize that the transaction will require further documentation and approvals, including the prepara tion and approval of a formal agreement setting for the terms and conditions of the proposed purcha se in more detail) the "Purchase Agreement"); but buyer and Seller execute this let ter to evidence their intention to proceed in mutual good faith to carry out the transaction substantial ly in the manner outlined herein. The proposed terms and conditions include, but are not limited t o, the following: 1. Assets To Be Sold. Seller will sell to Buyer its inventories ("Inventory"); fixed assets, including, without limitation, furniture, equipment, machinery, automobiles, leasehold improvements, and supplies and tools; manuals; catalogs; sales literature; files; re cords; customer lists; patents and trademarks (if any); registrations; its name "___________"; and the right to use its telephone numbers. In addition, Seller will assign and transfer to Buyer the following: a. All equipment leases, if any, under which Seller is the lessee, relating t o equipment used in its business; b. All purchase contracts, if any, under which Seller is the purchaser, relating to equipment used in its business; c. All purchase contracts, if any, under which Seller is the purchaser, relating to inventory sold in its business; d. All sales contracts, if any, under which Seller is the purchaser, relating to inventory sold in its business; e. All contracts, if any, which Seller has with its suppliers. 2. Assets To Be Retained. Seller will retain its cash, checking, savings, and trust accounts; accounts and notes receivable; advances to employees; prepaid expenses; and all its other current assets except inventories. - 2 - 3. Liabilities. Buyer will assume only certain liabilities and obligations of Seller relating to the contracts and leases of equipment and the contracts of purchase and sale of inventory mentioned in section 1, above. All other liabilities and obligations of Seller, incl uding trace accounts payable, accrued wages, and tax liabilities, shall remain the sole obligation of the Seller. 4. Purchase Price. The Purchase Price for the assets described in section 1 shall be $_____________ (the "Purchase Price"), which shall be increased or decreased by the positive or negative difference between the value of the Inventory and the sum of $_____________ (the value of the Inventory shown on the balance sheet of Seller on ________________, 20___). A physical inventory for the purpose of determining the value of the Inventory will be taken as follows: a. Between ___________ and ___________, 20__, Seller will cause a physical count to be taken of the Inventory. The physical count will be adjusted to reflect purchases and sales in the ordinary course of business through ___________, 20__. Buyer may appoint a representative or representatives to verify the physical count, and those representatives shall be entitled to be present at al l times during the taking of the count. b. Each item of Inventory will be priced in accordance with the supplier's latest price list in effect for Seller for shipments received before ___________, 20__ (including freight), provided that prior to the execution of the Purchase Agreement, Seller and Buyer will segregate certain items that in their opinion should be valued separately for the purpose of computing the value of the Inventory. 5. Allocation of Purchase Price. The Purchase Price, as adjusted, will be allocated to the Inventory and to other assets as follows: a. Inventory: $___________, as adjusted pursuant to section 4. b. Furniture, fixtures, equipment, tools, supplies, machinery, leasehold improvements, and other fixed assets: $___________. c. Sale Catalog: $___________. 6. Closing and Payment. The closing will occur on ___________________, 20__ ("Closing Date"). The Purchase Price as adjusted, will be paid as follows: a. Up to $_________ of the Purchase Price, as adjusted, will be paid on the Closing Date. b. The balance of the Purchase Price, as adjusted, will be paid, with interest acc ruing on the unpaid balance at the rate of _______% per annum, over a period of _______ years from the Closing Date. - 3 - 7. Property To Be Leased. Lessor will lease to Buyer the building in which Seller currently operates its business at a monthly rental of $_______ per month for term of _____ years, under a written lease satisfactory to lessor and Buyer, which will be executed and delivered on the Closing Date. 8. Bulk Sales Law. Assuming Seller has no contingent liabilities, Buyer will waive the requirements of the Uniform Commercial Code - Bulk Transfers Act with respect to notification of Seller's creditors, and Seller will hold Buyer harmless from any liability of Seller not assumed by Buyer and any liability to creditors of Seller arising out of its failure to comply with the Uniform Commercial Code - Bulk Transfers Act. 9. Conduct of Business. Until the Closing Date, Seller will use its best efforts to conduc t its business in a reasonable and prudent manner in accordance with past practices; will engage in no transaction out of the ordinary course of business; will enter into no agreement or transaction extending beyond ____________, 20__; will use its best efforts to preserve its existing business organization and relations with its employees, customers, suppliers, and others with whom it has a business relationship; will not dispose of any of the assets, except such as are retired and replaced in the ordinary course of business; will conduct its business in compliance with all applicable laws and regulations; wi ll not make any distribution to shareholders; and will not pay any bonuses or make any salary or wage increases. 10. Access. During reasonable business hours, Seller will permit Buyer to have access to the premises in which Seller conducts its business, and to all its books, records, and personnel. Seller will furnish to Buyer such financial data, operating data, and other information as Buyer shall reasonably request, and will immediately hand to Buyer or its representatives for review its stock book, minute book, and copies of all retirement pla ns, employment agreements, leases, contracts with suppliers, and other contractor or documents to which it is a party. 11. Warranties. The Purchase Agreement will contain the warranties by Seller, including without limitation the following: a. Warranties relating to the organization and good standing of Seller. b. Warranties as to the accuracy of the financial statements of Seller provide d to Buyer. c. Warranties against any litigation or liabilities, including tax liabilit ies for prior years, other than those items disclosed to Buyer. d. Warranties that all contracts, leases, and other agreements of Seller, if any, have been disclosed. - 4 - e. Warranties that Seller has good title to the assets, unencumbered by any liens except those disclosed. f. Warranties that no brokerage commission will be due as a result of this transaction. g. Warranties that the operation of all the assets will be in full compliance with all applicable federal, state, and local statutes, ordinances, and regulations. 12. Covenant Not to Compete. Seller and [individual], for themselves and any of their affiliates, will agree not to compete with Buyer in [describe area] for a period of _________ years commencing on the Closing Date. As consideration for this agreement not to compete, Buyer will pay [individual] $___________ per month for 60 months, payable on the ______ day of each month commencing ____________, _____. 13. [Individual's] Employment. After the Closing Date, [individual] will work for Buyer at an annual salary of $__________ until either [he] [she] or Buyer desires to terminate such employment. 14. Negotiations With Others. Until ____________, _______, Seller will not offer the assets to, entertain offers for the assets Seller will not offer the assets to, entertain offers for the assets from, negotiate for the sale of the assets to, or make information about the asset s available to, any third party. It is understood that this letter sets forth an agreement in principle only, is not bi nding on the parties hereto, and may not be relied upon as the basis for a contract by estoppe l; provided that the parties intend that sections 10 and 14 will be enforceable until __________, ______. With the exceptions of sections 10 and 14, it is understood that no party shall be bound until a Purchase Agreement has been duly executed and delivered. [Buyer] BY: ___________________________ Agreed to in principle: [Seller] By: ___________________________ [title]