Letter of Intent for Asset Purchase Agreement

Simple Letter of Intent for Stock Acquisition

Date of Letter:

Re: Letter of Intent

Dear :

This letter, when countersigned by your clients, will confirm the discussions to date between , a ("Purchaser"), and ("Seller"), regarding the possible acquisition by Purchaser of % of the outstanding capital stock of Seller. Purchaser and Seller are sometimes collectively referred to as the "Parties," and individually as a "Party." Purchaser's possible acquisition of % of the capital stock of Seller and the related transactions are sometimes collectively referred to as the "Possible Acquisition."

The Parties wish to commence negotiating a definitive written acquisition agreement providing for the Possible Acquisition (the "Definitive Agreement"). To facilitate the negotiation of the Definitive Agreement, the Parties request that counsel prepare an initial draft. Each of the paragraphs below contained under the heading "Matters in Principal" summarizes certain economic and other terms related to the Possible Acquisition that we have discussed to date, but is not intended to be binding upon either of us. Each of the paragraphs below contained under the heading "Binding Agreements" is intended to bind and be enforceable against each of us whether or not we sign the Definitive Agreement.

I. MATTERS IN PRINCIPAL

No paragraph set forth in this section of this letter (the "Nonbinding Provisions") shall be legally binding or enforceable against either or both of the Parties.

Section 1. Basic Transaction.

(a) Stock Purchase; Closing. Seller would sell to Purchaser % of the capital stock of Seller at the price (the "Purchase Price") set forth in Section 2 below. The closing of the Possible Acquisition (the "Closing") would occur as soon as possible after the receipt of any and all consents required in connection with the Possible Acquisition and the satisfaction of the other conditions to closing contained in the Definitive Agreement.

(b) Other Material Terms. [Insert other material terms: e.g., if a stock transaction, then a Section 338(h) (10) election, leveraged recapitalization accounting, pooling of interests accounting, etc.].

Section 2. Purchase Price; Payment Terms and Escrow; Purchase Price Adjustment.

(a) Purchase Price. The Purchase Price would be $ , plus or minus the purchase price adjustment described in this Section 2.

(b) Payment Terms and Escrow. Purchaser Subsidiary would pay the Purchase Price to Seller at the Closing in the following manner: (i) payment of $ by wire transfer of immediately available funds; (ii) delivery of an unsecured, non-negotiable promissory note in the principal amount of $ , accruing interest at a rate of % per annum, and providing for equal [annual] [quarterly] [monthly] payments of principal and accrued interest; and (iii) deposit of $ with a mutually acceptable escrow agent to be held in escrow for a period of years in order to secure the performance of Seller's obligations under the Definitive Agreement and related documents.

(c) Purchase Price Adjustment. The Purchase Price assumes that the Seller would have [stockholders' equity/working capital] of at least $ as of the Closing. The Purchase Price would be increased or decreased, as the case may be, on a dollar-for-dollar basis based on the Seller's actual [stockholders' equity/working capital] as of the Closing.

Section 3. Employment; Noncompetition Agreements.

(a) Employment Agreements. Seller and each of would enter into employment agreements on mutually agreeable terms, including the following:

(b) Noncompetition Agreements. Each of would execute noncompetition agreements in favor of Purchaser.

Section 4. Other Terms of the Definitive Agreement.

(a) Representations and Warranties, Covenants, Indemnities. Seller would make customary representations and warranties to Purchaser and would provide comprehensive covenants, indemnities and other protections for the benefit of Purchaser. The representations and warranties in the Definitive Agreement would be without qualification as to knowledge, materiality or otherwise.

(b) Significant Conditions. The consummation of the Possible Acquisition would be subject to the satisfaction of, among other things, the following conditions

II. BINDING AGREEMENTS

Each of the sections set forth below (collectively, the "Binding Provisions") is a legally binding and enforceable agreement of the Parties.

Section 5. Access. During the period commencing on the date this letter is signed by Seller (the "Signing Date") and ending on the date the Binding Provisions are terminated pursuant to Section 14 hereof (the "Termination Date"), Seller will afford Purchaser reasonable access to its personnel, properties, contracts, books and records, and all other documents and data.

Section 6. Exclusive Dealing. Until the later to occur of the Termination Date or days after the Signing Date: (a) Seller will not, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept, or consider any proposal of any other person relating to the acquisition of any of its stock, its assets or business, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation, or otherwise (other than sales of inventory in the ordinary course consistent with past practice); and (b) Seller will immediately notify Purchaser in writing of any contact (whether by telephone, personal conversation, fax, e-mail or otherwise) between Seller or their respective representatives and any other person regarding any offer, proposal or inquiry of the nature specified in subsection (a) of this Section 6.

Section 7. Break-up Fee. If (a) Seller breaches any material term of the Binding Provisions or (b) Seller terminates this letter as provided herein, and (c) within twelve months after the date of such termination, Seller enters into any agreement relating to the acquisition of a majority of the shares of its stock, its assets or business, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation, or otherwise (other than sales of inventory or immaterial portions of such Seller's assets in the ordinary course) whether or not such transaction is ultimately consummated, then, Seller will immediately pay to Purchaser in immediately available funds an amount equal to $ . In addition, Purchaser will be entitled to all other rights and remedies provided by law or in equity.

Section 8. Conduct of Business. During the period commencing on the Signing Date and ending on the Termination Date, Seller will operate its business in the ordinary course of business consistent with past practices and refrain from any extraordinary transactions.

Section 9. Disclosure. Except as and to the extent required by law, without the prior written consent of the other Party, neither Purchaser nor Seller will make, and each will direct its representatives not to make, directly or indirectly, any public comment, statement, or communication with respect to, or otherwise to disclose or to permit the disclosure of the existence of discussions regarding, a possible transaction between the Parties or any of the terms, conditions, or other aspects of the Possible Acquisition. If a Party is required by law to make any such disclosure, it must first provide to the other Party the content of the proposed disclosure, the reasons that such disclosure is required by law, and the time and place that such disclosure will be made.

Section 10. Costs. In the event that the Possible Acquisition is not consummated, each Party will be responsible for and bear all of its own costs and expenses (including any broker's or finder's fees and the expenses of its representatives) incurred at any time in connection with pursuing or consummating the Possible Acquisition. If, however, the Possible Acquisition is consummated, all of Purchaser's fees and expenses shall be paid out of the assets of the acquired entity or entities.

Section 11. Entire Agreement. The Binding Provisions constitute the entire agreement between the Parties and, except for that certain Confidentiality Agreement dated by and between the Parties, supersede all prior oral or written agreements, understandings, representations and warranties, and courses of conduct and dealing between the Parties on the subject matter hereof. Except as otherwise provided in this letter, the Binding Provisions may be amended or modified only by a writing executed by each of the Parties.

Section 11. Governing Law. The Binding Provisions will be governed by and construed under the laws of the State of without regard to conflicts of laws principles.

Section 12. Termination. This letter will automatically terminate upon the earlier to occur of: (a) closing of the Possible Acquisition or (b) months after the Signing Date. In addition, this letter may be terminated earlier upon written notice by either Party to the other Party unilaterally, for any reason or no reason, with or without cause, at any time; provided, however, that the termination hereof will have no effect on the liability of a Party for a breach of any of the Binding Provisions. Upon termination of this letter, the Parties shall continue to be bound by all of the Binding Provisions other than those relating to "Conduct of Business," which obligations will survive any such termination in accordance with its terms for a period of months.

Section 13. Counterparts. This letter may be executed in one or more counterparts, each of which will be deemed to be an original copy of this letter and all of which, when taken together, will be deemed to constitute one and the same agreement.

[Signature page follows]

If you are in agreement with the foregoing, please sign and return one copy of this letter agreement to me.

Very truly yours,

By:

Name:

Title:

Duly executed and agreed as to the Binding Provisions on [Signing Date].

By:

Name:

Title: