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Roger L. Neu

 

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Letter of Intent

Question: How much detail should the letter of intent contain?

The letter of intent should be detailed in the sense that it addresses all of the key deal issues, however, there should be very limited detail with respect to each of those issues. For instance, it would be appropriate to include in a letter of intent that accounts receivable would be guaranteed, but the letter of intent should not spell out the details of the timing regarding collection of receivables, assignment of uncollected receivables and other issues dealing with that particular matter. Those details should be set forth in the actual purchase agreement. [See "Letter of Intent" Brochure]

Question: What precaution should Seller take if the Buyer is a newly formed entity?

The concern regarding a newly formed shell entity Buyer generally focuses on Seller’s ability to get paid in the event of deferred purchase price such as receipt of a note or, in the case of other agreements where there would be future payment, such as the employment agreements that are a material part of the consideration. Sellers need to be more careful in making sure that deferred payments are properly secured in the case of a newly formed shell entity Buyer.

 


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