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A Letter of Intent (LOI) in a joint venture situation. This represents the good faith intentions of the parties to proceed but is not legally binding. This document is drafted in favour of the leader of the joint venture.
The parties believe that the joint venture will be in their mutual best interests. They recognise that the various arrangements will need careful review but each will endeavour in good faith to agree the detailed terms of the joint venture, on the basis of the principles set out in this LOI, and to take all necessary other actions in order successfully to establish the joint venture. The parties' preferred intention is to create a new jointly-owned company into which they would transfer their existing interests. The parties will consider appropriate alternative structures if that becomes necessary or desirable because of tax and cost efficiency. The parties' preferred intention is to create a new jointly-owned company. The parties will consider appropriate alternative structures if that becomes necessary or desirable because of tax and cost efficiency.
The parties shall draw up and approve an initial business plan. The board of the joint venture company (the Board) will review the business plan at regular intervals and update it annually. Pending completion of the joint venture, each party shall ensure that its business and interests to be vested in the joint venture are carried on in the ordinary and usual course. Neither party (nor any member of their respective groups) can enter into any new venture or material transaction likely to have a material effect on the joint venture without the parties consulting each other beforehand.