Asset Purchase Agreement or Contract

Purchase Price
- Deposit: Details of deposit
- Cash at Close
- Promissory Note, if any. - balance due (Various methods for paying off balance including, but not limited to: monthly, quarterly, and annual payments, variable or fixed interest rates, balloon payments, etc.)

Applicable Asset Allocation
Important for Buyer to minimize those assets allocated to goodwill, because usually not able to write goodwill off except over a very long period of time. The IRS provides a procedure for the Buyer and Seller to allocate the value of the assets which are being transferred. The Buyer can minimize the value of goodwill so that value is allocated overwhelmingly to other hard assets such as equipment and inventory, and such intangible assets like leases and restrictive covenants. For purposes of the contract, Buyer and Seller will want to stipulate how they plan to allocate the consideration paid for the assets in accordance with applicable IRS provisions and forms. Would reference separate Schedule or Exhibit. (See IRR Section 1060 and IRS Form 8594)

Closing Date
Need to establish deadline for parties to conclude transaction: Time is of the essence!

Authority
Need assurances from each of the parties that they are authorized to act on behalf of the business without the need for outside approval and that no agreement(s) prevent them from proceeding with the transaction.

Closing Agent & Escrow Agent
It is imperative that the parties have a licensed professional oversee the legal and financial adequacy of the documents at closing to prevent problems down the road. Also important to segregate deposits and cash at close with independent escrow agent. (Like an attorney's trust account - preferably ours.)

Observation (Due Diligence Period)
Gives the Buyer an opportunity to observe and inspect the business prior to making a commitment pursuant to an "out" clause.

Training Period
Buyer may want to have the opportunity to train under the Seller for purposes of acclimating himself to the workings of the business (usually 30 days). May condition purchase on Buyer feeling comfortable with his ability to operate business pursuant to an "out" clause.

Transition Services
Buyer may also want Seller to provide certain administrative and/or other services to Buyer during the initial period of time when Buyer first takes over the business (usually, two, three or four weeks). In many instances, during such period, the Seller is willing to provide various support services in order to facilitate the orderly transfer of the business. Such support services rendered by Seller may include clerical & staff support services, network support services, telephone support services, and internet connectivity services.

Business Records & Financial Information
Gives Buyer an opportunity to review all relevant documents for purposes of evaluating the business assets.

Franchise
If selling franchised business, buyer will usually have to be approved by franchisor and thereafter will be subject to franchise agreement(s). Get copy of franchise agreement. Buyer will want a legal opinion letter attesting to the validity of the transfer.

Trademarks
Seller transfers all rights and interests in trademarks, service marks and copyrights to Buyer. May be an assignment or license.

Trade Name
Seller transfers business name (DBA) to Buyer. If applicable, it agrees to change it's corporate name, which allows Buyer to change it's corporate name to match name of newly acquired business.

Licenses & Permits
Buyer will want assurances that all applicable Licenses & Permits are transferred. In Purchase Agreement, Buyer will want cooperation of Seller in obtaining necessary license and permit documents. Relevant docs include: Beer, liquor and wine licenses; Lottery license; Health Department license, Fire Code permits, and zoning and occupancy permits.
Assignment of Lease
Seller will assign lease to Buyer. If lease cannot be assigned, Seller will assist Buyer in obtaining a lease. Purchase can be conditioned on Buyer getting lease. Security deposit must also be accounted for in this agreement.

Bill of Sale
Seller will provide Buyer with a Bill of Sale reflecting valid transfer of title to all assets.

Taxes
Buyer will want assurances that all taxes have been timely paid. Generally, sales taxes are treated as a lien on assets/inventory. Therefore, any taxes due, but yet unpaid will have to be dealt with. Include as prepayment by Seller.

Indemnification
Buyer will want to be indemnified by Seller against any expenses/losses incurred by Buyer as a result of Seller's prior management of the Business assets.

Disclosure
Buyer will want warranty from Seller that there are no other undisclosed liabilities outstanding against business assets.

Default
In case of default by Seller, Buyer may have the right to rescind contract with a return of any deposits, and address default in non-binding mediation and thereafter, if necessary, arbitration.

Accounts Receivable
The payments for these accounts is usually retained by the Seller.

Accounts Payable
The responsibility for these accounts usually stays with the Seller.

Business Deposits (Prepayments)
Those amounts on deposit for the benefit of the Business. (e.g., utility services, leases, insurance, etc.).

Condition of Equipment/Inspections
Gives Buyer right to inspect all items held for sale & assets to ensure compliance with all express and implied warranties related to their condition.

Inventories
Gives Buyer right to take inventory of all items held for sale & assets

Operation of Business
Assures Buyer that Seller will operate pursuant to the ordinary course of business prior to close

Phone, Fax, & Mail
Seller should transfer all phone lines and re-route all mail to buyer

Seller's Restrictive Covenants
Such restrictive covenants offer the Buyer statutory remedies for violation and often prevent the Seller from selling his business and turning around and opening up a competing shop just across the street from Buyer or sharing business ideas with others. As always, ensure any such restrictive covenant is within statutory parameters.

Risk of Loss
Risk of loss to any assets generally remains with Seller prior to close and flows to Buyer after close.

Mediation and Arbitration
Mediation and Arbitration should always specify a location in Client's jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available).

Governing Law
Always stipulate that the contract will be governed under whatever law the Client ordinarily conducts business. Always make sure that venue and jurisdiction are as convenient to client (Buyer) as possible.

No Modification or Waiver
No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision.

Entire Agreement
This agreement constitutes the entire agreement of the parties and may be modified only in a writing executed by both parties.

Notices
Notices should always list the current and best addresses where each party may contact the other for whatever reason.

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