This Letter of Intent is a document signed by two parties currently negotiating in the United States a possible business deal such as distribution and manufacturing agreements, joint ventures, trademark license, franchising, technological transfer, mergers and acquisitions, etc. The Letter of Intent sets forth a number of ground rules for negotiations and a commitment by the parties not to enter into negotiations with others to complete a similar transaction so long as these negotiations continue. If successful, the parties intend to execute a binding agreement.

LEGAL WARNING

Depending upon your particular situation this contract might not meet your needs and requirements. In case of doubt, you should consult a legal advisor.Global Negotiator as publisher and copyright holder of this contract disclaims all warranties, whether express or implied, respecting the legal content of this contract. For any claims arising out or in connection with the use of this contract, Global Negotiator shall be limited to a refund of the purchase price.

INDEX

PartiesSummaryProvisions

1. Negotiations2. Conduct of

Negotiations3. Costs & Expenses of

Negotiation4. Protection of

Information5. Limitation of

Liability6. Term7. General Provisions

Signatures

LETTER OF INTENT FOR BUSINESS NEGOTIATION (USA)

Nº OF PAGES: 7 + 6 (GUIDE TO NEGOTIATING CONTRACTS IN THE USA)FORMAT: WordLANGUAGE: English

LETTER OF INTENT FOR BUSINESS NEGOTIATION (USA)

EFFECTIVE DATE: [Date]

BETWEEN: [COMPANY NAME] ("Party 1"), a corporation organized andexisting under the Laws of [State/Country], with its head officelocated at [complete address].

AND: [COMPANY NAME] ("Party 2"], a corporation organized and existing under the Laws of [State/Country], with its head office located at [complete address].

SUMMARY

Party 1 is engaged in the [Describe business] of [Describe specific Products] (the “Products/Services”).

Party 2 is engaged in [Describe what Party 2 does].

The parties propose entering into an Agreement concerning:

[Describe purpose] (the “Deal”).

On [Month, Day, Year], the parties had discussions concerning the Deal during which they determined that further negotiations would be appropriate. As it is expected that these subsequent negotiations will involve frequent communications, including the exchange of proprietary information, they agree as follows.

AGREEMENT

Except for Sections 2.3, 3, 4, 5, 7 and this section that are legally binding, and survive any cessation of negotiations or termination of this Agreement, this Agreement is only a statement of intent to conduct further negotiations and does not constitute a binding Agreement in any respect. Such a binding Agreement will arise only when all material terms have been set forth in a conclusive written Agreement, or sets of Agreements, executed by both parties (the “Final Agreement”). All drafts, “term sheets,” memoranda, and other communications prepared or exchanged in the course of negotiations, even if signed by one or both Contacts (defined below), are preliminary and have no legal effect unless subsequently incorporated into a Final Agreement.

1. NEGOTIATIONS

1.1 Designation of Negotiators

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The following persons (the “Contacts”) shall represent the parties in the negotiations:

For Party 1 [Name] For Party 2, [Name]

Either party may replace their Main Contact by giving written notice to the other party.

2. CONDUCT OF NEGOTIATIONS

2.1 Schedule negotiations

The parties desire to execute a Final Agreement by [Month, Day, Year] (the “Target Date”). The Contacts will talk regularly, schedule negotiations, and coordinate all exchanges of information, including recommendations, drafts, and proposals. A Timetable setting forth the preliminary schedule of negotiations is attached as Exhibit A. A reasonable number of employees, agents and advisers may accompany the Contacts at meetings and negotiations.

2.2 Items in the Final Agreement

The parties will negotiate with the goal of including the following items in the Final Agreement:

1. [insert item]2. [insert item]3. [insert item]4. [insert item]5. [insert item]6. [insert item]

2.3 No Simultaneous Negotiations

So long as the parties are actively engaged in negotiations with each other, both agree not to directly or indirectly enter into negotiations or arrangements with any third parties engaged in [Describe nature of the deal] that are the same as, or functionally equivalent to, the subject to these negotiations.

3. COSTS & EXPENSES OF NEGOTIATION

3.1 Each party shall bear its own costs and expenses.

3.2 In the event that the parties agree to select a location other than at their respective offices, the cost will be shared equally.

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4. PROTECTION OF INFORMATION

4.1 The parties agree to conspicuously mark all information exchanged or created in the course of negotiations as “Confidential Information.” The receiving party along with its affiliates, agents, and employees (collectively “Recipient”), may use this Confidential Information for any purpose, including the manufacture, design or sale of the Recipient's Products and services. The Recipient's use of the Information is subject only to:

(1) an obligation, for a [Enter number] year period commencing from the date of receipt, to refrain from revealing any Confidential Information to third parties not engaged in these negotiations by using the same care and discretion that the Recipient employs to protect its own documents that it does not want disclosed, and (2) the originating party's trademarks, copyrights, and patent rights that it may not interfere or otherwise use.

4.2 Any copies of the Confidential Information should be marked and treated as such.

4.3 If a Final Agreement has not been executed, then upon termination of this Agreement, the parties agree to return the other's Confidential Information, including all copies.

4.4 The parties agree to use their best efforts to avoid disclosure of the fact or object of their negotiations and to restrict all internal communications concerning the negotiations to those recipients to whom such information must be disclosed in order to effectively conduct the negotiations. Except as otherwise required by law, the parties agree not to issue any press releases or make any public announcements regarding the negotiations without the prior written approval of the other.

4.5 Despite any captions, headings, or restrictions regarding proprietary matters or any nondisclosure notices or policy statements contained in the Confidential Information, this Section 4 constitutes the sole and exclusive Agreement of the parties concerning the Confidential Information and any information exchanged or disclosed in connection with the negotiations.

4.6 If the negotiations result in a Final Agreement, the Final Agreement may contain further terms and conditions respecting confidentiality.

5. LIMITATION OF LIABILITY

Neither party shall make a claim against, or be liable to, the other party or its affiliates or agents for any damages, including, without limitation, lost profits or injury to business reputation, resulting from the continuation or abandonment of negotiations and the consequences of that. Neither party shall make a claim against, or be liable to, the other party or its affiliates or agents for any special, incidental, or consequential damages, including, without limitation, lost profits, based on

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any breach, default, or negligence of such other party, its affiliates, or agents with respect to Sections 2.4 and 4 of this Agreement.

6. TERM

This Agreement shall continue until either party gives written notice of its intention to abandon further negotiations, or until superseded by the execution of the Final Agreement.

7. GENERAL PROVISIONS

7.1 Independent Contractors

The relationship between both parties established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to give either party the power to direct and control the day-to-day activities of the other. Neither party is an agent, representative or partner of the other party. Neither party shall have any right, power or authority to enter into any agreement for, or on behalf of, or incur any obligation or liability of, or to otherwise bind, the other party. This Agreement shall not be interpreted or construed to create an association, agency, joint venture or partnership between the parties or to impose any liability attributable to such relationship upon either party.

7.2 Publicity

Neither party will make any public announcement or issue any press release concerning the terms of this Agreement without the prior approval of both parties.

7.3 Non-Solicitation

Neither party shall solicit for employment or hire the other’s current or future employees, either directly or indirectly, during the Term of this Agreement, without obtaining the other’s prior written approval. Should an employee change employment from one party to the other, the new employer shall pay the old employer a fee equivalent to Twenty Percent (20%) of the employee’s new compensation, annualized for the first year.

7.4 Governing Law & Jurisdiction

This agreement and the parties’ actions under this Agreement shall be governed by and construed under the laws of the state of [State], without reference to conflict of law principles. The parties hereby expressly consent to the jurisdiction and venue of the federal and state courts within the state of [State]. Each party hereby irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth in the preamble of this Agreement, such service to become effective thirty (30) days after such mailing.

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7.5 Entire Agreement

This Agreement, including the attached exhibits, constitutes the entire Agreement between both parties concerning this transaction, and replaces all previous communications, representations, understandings, and Agreements, whether verbal or written between the parties to this Agreement or their representatives. No representations or statements of any kind made by either party, which are not expressly stated in this Agreement, shall be binding on such parties.

7.6 All Amendments in Writing

No waiver, amendment or modification of any provisions of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the party against whom such waiver, amendment or modification is sought to be enforced. Furthermore, no provisions in either party’s purchase orders or in any other business forms employed by either party will supersede the terms and conditions of this Agreement.

7.7 Notices

Any notice required or permitted by this Agreement shall be deemed given if sent by registered mail, postage prepaid with return receipt requested, addressed to the other party at the address set forth in the preamble of this Agreement or at such other address for which such party gives notice hereunder. Delivery shall be deemed effective three (3) days after deposit with postal authorities.

7.8 Costs of Legal Action

In the event any action is brought to enforce this Agreement, the prevailing party shall be entitled to recover its costs of enforcement including, without limitation, attorneys’ fees and court costs.

7.9 Inadequate Legal Remedy

Both parties understand and acknowledge that violation of their respective covenants and Agreements may cause the other irreparable harm and damage, that may not be recovered at law, and each agrees that the other’s remedies for breach may be in equity by way of injunctive relief, as well as for damages and any other relief available to the non-breaching party, whether in law or in equity.

7.10 Arbitration

Any dispute relating to the interpretation or performance of this Agreement shall be resolved at the request of either party through binding arbitration. Arbitration shall be conducted in [County], [State] in accordance with the then-existing rules of the American Arbitration Association. Judgment upon any award by the arbitrators may be entered by any state or federal court having jurisdiction. Both parties intend that this Agreement to arbitrate be irrevocable.

7.11 Delay is Not a Waiver

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No failure or delay by either party in exercising any right, power or remedy under this Agreement, except as specifically provided in this Agreement, shall operate as a waiver of any such right, power or remedy.

7.12 Force Majeure

In the event that either party is unable to perform any of its obligations under this Agreement or to enjoy any of its benefits because of any Act of God, strike, fire, flood, governmental acts, orders or restrictions, Internet system unavailability, system malfunctions or any other reason where failure to perform is beyond the reasonable control and not caused by the negligence of the non-performing party (a “Force Majeure Event”), the party who has been so affected shall give notice immediately to the other party and shall use its reasonable best efforts to resume performance. Failure to meet due dates resulting from a Force Majeure Event shall extend such due dates for a reasonable period. However, if the period of nonperformance exceeds sixty (60) days from the receipt of notice of the Force Majeure Event, the party whose ability to perform has not been affected may, by giving written notice, terminate this Agreement effective immediately upon such notice or at such later date as is therein specified.

7.13 Non-Assignability & Binding Effect

Except as otherwise provided for within this Agreement, neither party may assign any of its rights or delegate any of its obligations under this Agreement to any third party without the express written permission of the other. Any such assignment is deemed null and void.7.14 Severability

If any provisions of this Agreement are held by a court of competent jurisdiction to be invalid under any applicable statute or rule of law, they are to that extent to be deemed omitted and the remaining provisions of this Agreement shall remain in full force and effect.

7.15 Cumulative Rights

Any specific right or remedy provided in this Agreement will not be exclusive but will be cumulative upon all other rights and remedies described in this section and allowed under applicable law.

7.16 Headings

The titles and headings of the various sections and sections in this Agreement are intended solely for convenience of reference and are not intended for any other purpose whatsoever, or to explain, modify or place any construction upon or on any of the provisions of this Agreement.

7.17 Counterparts

This Agreement may be executed in multiple counterparts, any one of which will be considered an original, but all of which will constitute one and the same instrument.

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7.18 Survival of Certain Provisions

The warranties and the indemnification and confidentiality obligations set forth in the Agreement shall survive the termination of the Agreement by either party for any reason.

UNDERSTOOD, AGREED & APPROVED

We have carefully reviewed this Contract and agree to and accept all of its terms and conditions. We are executing this Agreement as of the Effective Date above.

For and on behalf of [Party 1] For and on behalf of [Party 2]

________________________________ ___________________________________Mr./Ms. ................................................. Mr./Ms. ...................................................................................................... [position] .......................................................position]

© Copyright Global Marketing Strategies

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Foreign companies doing business in the USA often consider using the same contract templates as in other Western countries, especially those governed by the Common Law system, given that, due to historical and political ties between the USA and United Kingdom, the American legal system is based on the British Common Law System.

This guide contains an outline of the legal System in the USA and the Contract Law related to the British Common Law as well as the contract templates most commonly used with foreign companies in the USA; it also offers the reader key issues for negotiating and drawing up contracts in the USA.

THE LEGAL SYSTEM IN THE USA AND CONTRACT LAW

Contract law in the USA is governed by three main sources:

Common law, created by courts through the interpretation of prior facts and circumstances. This is the primary source of contract law in many countries, as courts generally interpret and define the other sources as well; and

Specific statutes in each jurisdiction, generally at the state level. For example, the Uniform Commercial Code (“UCC”) of each state in the United States governs contracts pertaining to the sale of goods in that state.

Federal law that is uniform in application, and governs in areas in which national consistency is seen as more important (e.g., federal taxation, patent law and copyright law).

For most contracts involving commercial transactions, all fifty states have enacted, at least partially, a body of statutory law (UCC), which governs a variety of commercial relations involving consumers and merchants, among others, Article 2 of the UCC governs the sale of goods, which are defined by the code as items that are "movable" at the time of the contract. Related to exclusive distribution agreements, there are some exceptions such as the states of Louisiana and Wisconsin and the associated state of Puerto Rico, which have statutes strongly protective of local distributors.

Nevertheless, English and American law have some important differences, especially with regard to business contracts. Although both countries share the common root of the Common Law, its evolution has been different and because of that, certain legal and jurisprudential developments have appeared in the United States. Perhaps the greatest difference is the absence in English law, of an implied duty of good faith when negotiating a contract. This duty, however, does exist in American law, which is aligned, in this sense, with most European legal systems, such as the French or Spanish systems, even with other systems of the Common Law and the Australian system, which do require bargaining in good faith by the parties and,

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GUIDE FOR NEGOTIATING CONTRACTS IN THE USA

therefore, the obligation to maintain confidentiality, or the transparent use of information and the responsibility for a sharp break from negotiations.

Besides these legal differences, there are also some linguistic differences between legal English in the United States and in the United Kingdom: there are some words that mean the same but spelled differently in the two countries (USA: labor / UK: labour) (USA: offense / UK: offence) (USA: defense / UK: defence). There are also specific legal expressions which vary from one country to the other, for example, the expression "best endeavours" - commonly used in Great Britain - to indicate that the parties will do everything in their power to achieve a particular result, in the United States it is replaced by the expression "best efforts". The same circumstance is found in the American expression "merchantable quality" to be used in contracts for the sale of goods to ensure (or not) product quality, meanwhile in United Kingdom the equivalent expression is "satisfactory quality"

THE MOST COMMONLY USED COMMERCIAL CONTRACTS

In commercial relations between foreign companies and US companies, it is usually the American company which take the initiative to draw up contracts, which, therefore, should be adapted to US practice and laws.

The contracts most commonly used for foreign companies doing business in the USA are:

Exclusive Distribution Agreement : when a company appoints a Distributor to distribute its products to authorized dealers or others who then sell them to their end-users. Because of the exclusivity of the relationship, the agreement contains marketing commitments by the Distributor to the Supplier.

Non-Exclusive Distribution Agreement : the Supplier promotes and sells its product in the American market through Distributors working on a non-exclusive basis. The Supplier should complete one of this type of agreement for each of its Distributors in the USA

Authorized Dealer Agreement : used for the distribution of certain products (consumer electronics, appliances, heating and cooling systems, etc.) that require special knowledge or expertise to sell them.

Sales Representative Agreement : when a company appoints an independent sales representative to promote and sell its products or services in the USA. The company appoints an individual or a legal entity to seek clients and carry out transactions, normally in a certain states of the country. The representative receives its fees through commissions on the sales it achieves.

Consulting Services Agreement : used by independent consultants or consulting firms to establish the conditions of its service proposal to its customers.

Maintenance Service Agreement : in this contract a company provides maintenance services for products such as equipment, computers, machinery, etc.

Manufacturing Agreement : used for companies which subcontract in the USA the manufacturing of its products to a manufacturer based in the country which has to satisfy a number of specifications such as the materials used and which also undertakes to keep

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the information strictly confidential and to comply with the intellectual property rights (patents, trademarks) of the company which hires it.

Trademark License Agreement : this contract permits another party (the Licensee) to use one or more of the Licensor´s trademarks in a designated territory

Confidentiality Agreement : used for companies which do business in the USA and which need to safeguard certain confidential information (in particular commercial and technological secrets) which are submitted during on-going negotiations.

KEY ISSUES FOR NEGOTIATING CONTRACTS IN THE USA

Some of the key issues relating to negotiate contracts in the USA are explained below. It should be borne in mind that several of the points that are made in this legal context also have relevance to the negotiation of commercial agreements in general. Contracts in writing

In the United States, “freedom of contract” is a very important legal principle, and in the absence of strong public policy to the contrary, courts will usually enforce written agreements. Accordingly, you should document your commercial relationships in writing, even if using “boilerplate” contracts such as standard terms and conditions of sale. Be warned, though, that US lawyers tend to be more verbose than other lawyers and frequently produce long and comprehensive contracts. Nonetheless, “Plain English” in legal documents has gained popularity over time.

Date

The date usually appears at the beginning of the document but it is normally the last item to be completed as it will usually be dated when it has been signed by all parties. Sometimes, however, work under an agreement will start before - or perhaps some time after - the date which appears in the agreement. This can be dealt with in the language of the contract. For example, in the Exclusive Distribution Agreement, the term "Commencement Date" is defined as which is the date upon which performance of agreement commences.

Parties

Be sure to insert full and accurate details here. The details will vary depending on whether a party to the contract is a company, partnership, individual or some other entity, and whether the party is based in the United States or another country. Unlike contracts in Europe or other countries, in the United States it is not necessary to specify in this section of the contract the name and position of the person who actually signs the contract in representation of each of the companies.

Sometimes the official address which appears on page 1 on the contract after the name of a party will be different from the address at which that party conducts its operations under the agreement.  In that case, the "Notices" clause in the contract can refer to the address for routine communications.

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General Provisions

Most contracts in the USA have a General Provisions clause that incorporates other clauses (Governing Law & Jurisdiction, Entire Agreement, Notices, Costs of Legal Action, Arbitration, Force Majeure, etc.) that in other countries are drawn separately.

Signature

Always ensure that whoever signs the contract has the authority to do so. In the case of a Corporation or a Limited Liability Company (LLC), the Bylaws or Operating Agreement may specify who can sign. Under US law, the signature of a director or executive officer can normally be relied upon by the other party as a director or executive officer will usually have ostensible authority with which to bind the entity of which he/she is a director or executive officer; in the case of a Partnership it is usually not practical to get all the partners to sign, so check to ensure that the partner or partners who sign have authority to do so; when the other party is a Sole Proprietor the individual who owns the business should sign; if it were an individual, clearly the individual should sign personally.

Notarization

The underlying purpose of having a signature notarized is for evidentiary reasons. The notary’s stamp serves as proof that the signature on the agreement is indeed the signature of the party whose name appears.

In the United States, most contracts can be effective without any signatures being notarized; notarization is normally only required in respect of documents that are being registered (such as transfers of land, etc.). However, different jurisdictions have different rules, so always check the rules before finalizing the contract.

Number of Original Contracts

It is usual for each party to a contract to retain one original. Thus, where there are two parties, two original copies should be signed and one retained by each party. A contract can only be effective if the necessary formalities to create a binding agreement between the parties have been observed. If in doubt, obtain legal advice from lawyers in the appropriate jurisdiction.

Governing Law, Jurisdiction and Arbitration

In commercial contracts drawn in the United States between foreign companies and American companies, it is usual to refer disputes to US Contract Law and, specifically, to the law of the specific state where the American party is located. Besides, it is usual to go Arbitration Courts to resolve conflicts. An example of Arbitration provision is as follows:

Any dispute relating to the interpretation or performance of this Agreement shall be resolved at the request of either party through binding arbitration. Arbitration shall be

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conducted in [County], [State] in accordance with the then-existing rules of the American Arbitration Association. Judgment upon any award by the arbitrators may be entered by any state or federal court having jurisdiction. Both parties intend that this Agreement to arbitrate be irrevocable.

Negotiation procedure

Begin contract negotiations with the following steps:

Understand what it is you want to accomplish with the contract and what the other party wants to accomplish;

Identify your position and the other party’s position (strengths vs. weaknesses); Be prepared and provide room for negotiation; and Bring solutions to the table – try to work towards resolution of disagreements rather than

just butting heads! Until a final definitive agreement is reached, all draft agreements, term sheets or letters of

intent should clearly state the following:

This document is not intended to create or constitute any legally binding obligation between the parties hereto, and no party shall have any liability or obligation to another with respect to this document until a fully integrated definitive agreement is prepared, authorized, executed, and delivered by all parties.”

In some circumstances, a party will insist on using its form contract and will not be willing to negotiate terms. This is called an “adhesion contract” and the other party will not be able to obtain the desired product or service unless it acquiesces to the form contract. This could be the case of the Authorized Dealer Agreement. Adhesion contracts may not be enforceable to the extent they contain unreasonable terms.

When dealing with government entities or political subdivisions such as cities and towns, be aware of legal requirements applicable to those entities, including public bidding requirements, fair wage laws, open door laws and others.

Drafting a contract

Once the basic outline of terms is negotiated, contract drafting may begin. When given the opportunity, it is generally best to be the party that drafts the contract. Advantages of “controlling the draft” are that it:

Provides extra control over the negotiations; Allows you to define the issues Prevents hidden or surprise issues; Enables the deal to be structured on your terms; and Helps you influence the timing of the drafting process.

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From the key issues that have been mentioned above it is evident that as far as drawing up and signing international contracts in the USA is concerned, commercial practices are fairly similar to those in Western countries (mainly the United Kingdom) and based on the basic principles of Common Law, although some significant differences appear; it should also be noted that when specific issues or questions between the parties arise, legal advice should be sought.

LEGAL WARNINGDepending upon your particular situation this contract might not meet your needs and requirements. In case of doubt, you should consult a legal advisor. Global Marketing Strategies, S.L. as publisher and copyright holder of this contract disclaims all warranties, whether express or implied, respecting the legal content of this contract. For any claims arising out of or in connection with the use of this contract, the potential liability of Global Marketing Strategies shall be limited to a refund of the purchase price.

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