The Asset Purchase Letter of Intent is a crucial preliminary document used in Canadian business transactions when one party intends to purchase substantial assets from another. It serves as a roadmap for the transaction, outlining key terms while maintaining flexibility for detailed negotiations. This document is typically used after initial discussions but before comprehensive due diligence and definitive agreements. It incorporates Canadian federal and provincial legal considerations, including Competition Act requirements, tax implications, and provincial property transfer laws. While mostly non-binding, it usually contains binding provisions for confidentiality and exclusivity. The LOI helps parties align their expectations, secure financing, and proceed with detailed due diligence, making it an essential step in significant asset acquisitions within the Canadian business landscape.
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1. Date and Addresses: Opening of letter with current date and formal addresses of both parties
2. Introduction: Opening paragraph identifying the parties and their intent to enter into discussions regarding the proposed transaction
3. Transaction Overview: High-level description of the proposed transaction, including the nature of assets to be purchased
4. Purchase Price and Payment Terms: Proposed purchase price, payment structure, and any adjustments or earnout provisions
5. Key Assets: General description of the assets to be purchased and any excluded assets
6. Due Diligence: Outline of the proposed due diligence process, timeline, and access to information
7. Closing Conditions: Major conditions that must be satisfied before closing
8. Timeline: Proposed schedule for due diligence, definitive agreement, and closing
9. Binding Provisions: Explicitly binding terms including confidentiality, exclusivity, and governing law
10. Non-Binding Nature: Clear statement that other terms are non-binding except those specifically identified as binding
11. Signature Block: Closing paragraph, signature lines for both parties
1. Financing Contingency: Include when buyer's ability to complete the transaction is dependent on obtaining financing
2. Employee Matters: Include when the transaction involves significant employee transitions or considerations
3. Real Estate: Include when specific real estate assets are material to the transaction
4. Regulatory Approvals: Include when transaction requires specific regulatory approvals
5. Break-up Fee: Include when parties want to specify compensation if transaction doesn't proceed under certain circumstances
6. Environmental Matters: Include when environmental due diligence is a significant consideration
7. Intellectual Property: Include when IP assets are material to the transaction
1. Schedule A - Asset List: Preliminary list of key assets to be included in the transaction
2. Schedule B - Price Structure: Detailed breakdown of purchase price components if structure is complex
3. Schedule C - Timeline: Detailed timeline of key dates and milestones
4. Appendix 1 - Exclusivity Terms: Detailed terms of the exclusivity agreement if complex
5. Appendix 2 - Confidentiality Terms: Detailed confidentiality provisions if not covered in a separate NDA
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