Part 1: Letter of Intent

Draft a letter of intent (LOI) based on the Seller Deal Notes (Word)** (below). The LOI (or a separate document) should contain, where needed, comments that ask questions or explain drafting decisions or risks to the client.

Part 2: Provisions

Please also address the following items by drafting an appropriate provision and providing comments regarding your draft provision:

1. Is the LOI binding or nonbinding? Explain your rationale.
2. If things do not work out, how will the LOIand the relationship between the partiesterminate? Will they be able to simply walk away? Are there any surviving liabilities or obligations?
3. Include two or three boilerplate provisions and explain why you chose those boilerplate provisions.

**Deal Notes from Seller for LOI.

Dear Lawyer:

We think we've found a buyer for Elan Fashion, Inc. (Elan). The negotiations are on-going, but we'd like to keep things moving quickly by giving the buyer an LOI to look at. The buyer is Clothing Ventures, LLC (CV). From our discussions, we think CV wants to buy the assets of Elan, although it's possible buyer will want to re-structure the transaction after talking with tax advisers. We've set a purchase price of $25million, and they are interested based on our financials though CV has said this amount will have to be reduced if we don't hit the targeted net income at the end of the year.

CV is concerned about whether our distribution agreements can be assigned. I think some of them cannot be and we'll have to get consent to assignment before closing.CV also is concerned that we have valid trademarks for our fashion brands. We have everything in order and we've told CV it can evaluate our trademarks before the closing. We have one lawsuit going on now by a company (Nora Design Inc.) that claims we've infringed one of its copyrighted fabric prints. But we think this case will settle soon because Nora Design Inc. doesn't have a strong case. We want CV to defend this case.

CV has asked that I remain employed by it for one year and I am amenable to this for a $300k per year salary. CV has asked that the members of Elan agree not to compete following the closing. The members generally are ok with this for a limited time, but after my employment term with CV, I want to be able to serve as a fashion trend consultant to designers.

Please put together a simple LOI that we can give to Buyer to sign. We're ok with giving CV exclusivity so long as the deal is finished quickly. Also, we'd like to keep this deal confidential. We don't want our employees finding out about the sale until we get closer to closing. We've already signed a confidentiality agreement with CV for CV's due diligence for this deal.

Thanks.

Sincerely,

Brad Elan

President, Elan Fashion, Inc.