Term Sheet, Letter of Intent, & Memorandum of Understanding Templates
A letter of intent (LOI) is a document outlining an agreement of the major terms between two or more parties before the more dtailed full definitive agreement is finalized. The concept is similar to a term sheet or memorandum of understanding (MOU). Such outlined agreements may be about merger and acquisition transaction, joint ventures, and strategic alliances. As such they cover asset purchase term sheets, stock purchase term sheets, stock and cash term sheets, earnout letters of intent, technology development licensing, exclusive and non-exclusive reseller licensing, joint venture formation letter of intent, etc. Term sheet templates, letter of intent templates, and MOU templates are an important way to ensure all aspects of the transaction between the parties are properly addressed.
LOIs, MOUs and term sheets resemble short, written contracts, but are usually in tabular form and not binding on the parties in their entirety. Many documents, however, contain provisions that are binding, such as those governing non-disclosure, governing law, exclusivity or covenants to negotiate in good faith. A term sheet may sometimes be interpreted by a court of law as binding the parties to it if it too-closely resembles a formal contract and does not contain clear disclaimers.
A letter of intent may be presented by one party to another party and subsequently negotiated before execution (or signature). If carefully negotiated, an LOI may serve to protect both parties in a transaction. Using proven term sheet templates is a wise decision to make this requirement a reality. For example, a seller of a business may incorporate what is known as a non-solicitation provision, which would restrict the buyer’s ability to hire an employee of the seller’s business should the two parties not be able to close the transaction. On the other hand, an LOI may protect the buyer of a business by expressly conditioning its obligation to complete the transaction if is unable to secure financing for the transaction.