Fillable Printable Letter Agreement
Fillable Printable Letter Agreement
Letter Agreement
LETTER AGREEMENT
DATE: ____________________ __, 20__ (“Effective Date”)
BETWEEN:
Investee “Entrepreneur”
Email:
AND,
Investor “Investor”
Email:
Forgood andvaluableconsideration, thereceiptand sufficiencyof which are hereby acknowledged,
this Letter Agreement (“Agreement”) is entered into effective ___________ __, 20__:
1. Definitions.
1.1“AnnualReturnPayment”means an amountequalto____ percent (__%)of Entrepreneur’s
GrossAnnual Income foreach12-month periodbeginningonJanuary1and endingon December 31,withany
partial year being prorated based on number of days.
1.2“Appreciation” means (i)theFMVofeachnon-liquidassetofEntrepreneuratanygiventime
afterthedate ofthis Agreementminus (ii)theFMVofeachnon-liquidassetof Entrepreneur asofthe date of
thisAgreement(orthe dateofacquisitionofsuchnon-liquidasset,ifafterthedatehereof), assetforthon
ScheduleAtothisAgreement.Forthepurposeofclarity,“Appreciation”fora non-liquidassetmaybea
negative number.
1.3“FMV” meansfairmarketvalue.Thefairmarketvalue ofanyasset shallbedetermined by
agreementof theparties.Ifthe partiesare unabletoreachagreementon the fairmarketvalueofanyasset,
determinationofsuchfairmarketvalueshall bedetermined byathirdpartyappraiserreasonablyagreedto by
the parties.
1.4“Gross Annual Income” meansthetotalgrossincomeofEntrepreneurlistedonline22of IRS
Form 1040, as amended from time to time (or a successor form).
1.5“InvestmentAmount”meansanamountequalto__________________THOUSAND
DOLLARS ($____,000.00).
1.6“Non-cashIncome” meansthenetAppreciationonallnon-liquid assets ofEntrepreneur,
including,withoutlimitation,allownershipinterests inentities (e.g., corporations, limitedliability companies,
partnerships, jointventures), real estateholdings,securities,etc. Entrepreneurshall list allofhis{her}non-
liquidassets asofthe dateof thisAgreementonhisPFS,whichshallbeattached as Schedule B, andSchedule
B shall beupdatedas ofDecemberof eachyear anddeliveredtoInvestor onorbefore May1of thefollowing
year, in connection with the delivery of the PFS (defined herein).
1.7“Non-liquid Assets” means all assets of Entrepreneur, subject to the following:
(a)Assetswithapurchase priceof$5,000 or lessshallbe excludedfrom the definition
of“Non-liquid Assets, unlesssuchassetsare(i)generally knowntobecollectibleitems thatappreciateover
timesuchasbaseball cards,comicbooks, art,furniture,fine wine,jewelry,andsimilaritems,in whichcase
such items, regardless of the purchase price of such asset, shall be treated as Non-liquid Assets.
1
(b)Assetsthatwouldnormallybe includedonatypical PFSunderGenerallyAccepted
Accounting Principles,consistentlyapplied, shall be included in the definition of “Non-liquidAssets”
regardlessofpurchase price (e.g., significantoffice equipment, copyrightandother intellectualpropertyrights,
going concern, receivables, prepaids, etc.) shall be listed on the PFS and treated as a Non-liquid Asset.
(c)If at any timeanasset that would nototherwisebe considereda Non-liquidAsset
becauseithas apurchasepriceoflessthan$__,000(pursuanttosubsection (a)above)appreciates toanFMV
in excess of $__,000 it shall be thereafter be considered a Non-liquid Asset.
1.8“Option”meanstherightofEntrepreneur toterminate thisAgreement by notification of his
{her}intenttodosoandbypaymentof theTerminationAmount.TheOptionmaybeexercised by delivering
writtenoremail notice oftheintenttodosoto Investorattheaddresslistedabove andpaymentin full ofthe
Termination Amount.
1.9“PFS” meansthemostrecentunaudited,compiledpersonalfinancialstatementof
Entrepreneur preparedbyareputablecertified publicaccountant,whichshall beupdatedatleastonce peryear
and delivered to Investor on or before May 1 of each year.
1.10“TerminationAmount”meansanamountequalto________________________ DOLLARS
($_______________.00)plus___percent(__%) ofthe Non-cashIncomeas determined onthe date thatis365
days following the date of notice of exercise of the Option.
2. InvestmentinEntrepreneur.Inconsideration of thetermsand conditions containedherein, Investor
shall eachprovide to Entrepreneurthe InvestmentAmount,payable inimmediatelyavailable funds pursuantto
Section3.The InvestmentAmount shallbeprovided withoutrestrictionson use.Thatis, Entrepreneurmay
use the InvestmentAmountforanypurpose;however,itisthe parties’expectationandintention that
EntrepreneurwillusetheInvestmentAmount forincome generatingprojects and/or retirementofpersonal
debt.
3. Payment of Investment Amount. The Investment Amount shall be payable by Investor as follows:
3.1Investor.Investor shallpay theInvestmentAmount on theterms andconditionssetform in
Schedule A.
3.2EarlyPayment. Notwithstanding anything inSection3.1Investor may,butshallnotbe
obligated to, make any payments required pursuant hereto in advance of the due date for such payment.
4. OngoingObligation of Entrepreneur.Inconsideration oftheinvestment inEntrepreneur pursuantto
Section 2,onorbeforeMay1 of each yearofthe Term,EntrepreneurshallpaytoInvestor the AnnualReturn
Payment for the prior year.
5. Term.ThisAgreementshallcommenceonthedatefirst set forth aboveandshallcontinue untilthe
daythatis 365daysafter noticeofexercise oftheOption,providedthe TerminationAmounthasbeen paidin
full bysuchdate.Unless and until the TerminationAmounthasbeenpaid infull,this Agreementshall remain
infull force and effectin accordance withits termsuntil____________________1,21__; provided, however,
that, notwithstanding the foregoing, this Agreement is subject to early termination as follows:
5.1ThisAgreementshallterminate 365daysfollowingthedateofdeathofEntrepreneurand
paymentofa finalpaymentequaltothe sumoftheAnnualReturnPaymentfor such365dayperiod plus2%
of the Non-cash Income as of such date.
5.2If adoctordesignatedmutuallybyEntrepreneur(orEntrepreneur’sestateifEntrepreneuris
notthenableofindicating his selection),Investorconcludesthat Entrepreneurispermanentlydisabled, this
Agreement shall terminate 730 days following the date of such determination.
5.3If Investordefaultsinhis{her}obligationtopaytheInvestment Amount asandwhendue
under Section 3.1orSection3.2 respectively,Entrepreneurshall havethe optiontoeither(A) terminatethis
Agreementandrepayto Investor all amountspaidby Investor toEntrepreneur,without interestor premium,
2
within180daysof Entrepreneur’selection of this option and, atthetimeofsuchrepayment, thisAgreement
shall terminate andeachparties’rightsandobligationshereundershallterminate; or (B)if Entrepreneurdoes
notelecttoterminate this Agreementpursuantto(A)ofthisSection5.3,this Agreementshallcontinue;in
accordancewithitstermsunlessanduntilterminatedbyEntrepreneur; provided, however,that(i)
Entrepreneurshall beentitled toexercisetheoptiontoterminatesolong as Investorisindefaultand(ii)
Investorshall havetherighttoremedysuchdefaultatanytimeandbecome currentonpaymentofthe
InvestmentAmountsolong asthe Agreementhasnotbeenterminated,inwhichcase Entrepreneurmayno
longer terminatethisAgreementpursuantto(A) ofthisSection5.3.Entrepreneur’ssoleremedy for failureof
Investor to pay the Investment Amount shall be termination of this Agreement pursuant to this Section 5.3.
If theAgreementisterminated pursuant to Section5.1orSection5.2,neitherEntrepreneur,norhis
her}estate, as the case maybe,shall be obligatedtorepay theTerminationAmount, and subjecttopaymentof
any amounts due prior to termination, the Agreement and all obligations hereunder shall terminate.
6. General Provisions.
6.1ConsistentReporting.EachpartyagreestotreatpaymentoftheInvestmentAmount, the
Annual ReturnPayment andtheTerminationAmountconsistentlyforfinancialaccountingpurposesandtax
reportingpurposes. The parties shallreasonablycoordinate anddiscuss proper treatmentofsuchtransactions.
Investor(“Indemnitor”)agreestoindemnify,defendandholdEntrepreneurharmlessfromanytaxliability,
costs,expenses, liabilities,obligations,penalties, actions, judgments, suits,claims,anddisbursements
(including, withoutlimitation, thereasonable feesandexpenses ofcounselforEntrepreneur inconnectionwith
anyinvestigative,administrative orjudicialproceeding)(collectively, “Losses”),whichmaybeimposed on,
incurred by,orassertedagainstEntrepreneurinanymatterrelated tothe taxtreatmentofthepaymentto
Entrepreneur ofthe InvestmentAmounthereunder, including,withoutlimitation,anyandallliabilityfortaxes,
duties,levies(“Taxes”)ontheInvestmentAmountasincometoEntrepreneurandallLossesrelatedtoor
arisingfromsuchTaxes. Thepartiesacknowledge thatthe foregoing indemnificationislimited exclusivelyto
LossesthatdirectlyandsolelyrelatetotheFederalorstate taxtreatmentofEntrepreneur’sreceiptofthe
InvestmentAmountandfornoother Lossesexperienced by Entrepreneur, whetherpursuanttothis Agreement
or otherwise.
6.2Governing Law.ThisAgreementshallbegoverned by andconstruedinaccordancewiththe
laws of the state of _________, exclusive of choice-of-laws provisions.
6.3Assignment.Nopartymayassignsuchparty’srightsorobligationsunderthisAgreement
without the consent of all parties hereto.
6.4Amendment; Waiver.ThisAgreementmaynotbeamended,supplemented,canceled or
discharged, exceptbywritteninstrumentexecutedbythepartyagainstwhomenforcementissought.No
failuretoexercise, and nodelayinexercising, anyright, power orprivilegehereunder shalloperate asa waiver
thereof.Nowaiverofany breachofany provision of this Agreement shallbedeemedto beawaiver of any
preceding or succeeding breach of the same or any other provision.
This Agreement is executed as of the date first set forth above.
InvestorEntrepreneur
AGREED TO AND ACKNOWLEDGED BY:
I, {Name Spouseof Entrepreneur], beingthespouse ofEntrepreneur,haveread, do acknowledge,and
agreetobe bound bythetermsof thisAgreementasitrelatestoanycommunitypropertyinterestImayhavein
theassets ofmyhusband{wife},______________,Iampartytothis Agreement solelyforpurposesofthis
acknowledgement and I am not otherwise bound hereby.
3
{Name Spouse of Entrepreneur}
4
Schedule A
TERMS AND CONDITIONS OF PAYMENT OF INVESTMENT AMOUNT
5
Schedule B
PERSONAL FINANCIAL STATEMENT
(attached)
6
