Asset Purchase Agreement
–Legal Experts In Drafting Contract Wanted. Q: Draft An Agreement For Purchase And Sale Of Assets (“Purchase Agreement”) For Your Client Who Wants To Sell A Law Practice. Maximum 12 Pages
The attached draft aircraft purchase agreement has many, many drafting errors. There is legalese, provisions are way too long, and there is a total lack of craftsmanship. Please clean it up. Redraft the agreement to reflect the deal below. There will be a fair amount of revision. Do not use any supplementary sources, other than those distributed to you in our course. Do not draft provisions other than the ones I have specifically asked for or those that are required because of the cascade effect (text pages 342-343). Finally, please draft an agreement from the point of view of your client, the seller.
– Draft an Agreement for Purchase and Sale of Assets (“Purchase Agreement”) for your client who wants to sell a law practice.
– Focus on the material covered in class (textbook, class notes, TWEN, articles referenced, these instructions, Assignment, including Chapters 1-12, 14, 16-18 and Chapter 32; plus the Material Adverse Condition article on TWEN (“The MAC Clause: An Emperor With No Clothes”), and the following articles in the course reader: Parol Evidence after Riverisland; Liquidated Damages Clauses; and the Indemnity Primer.
– Use the Aircraft Purchase Agreement, which is posted on TWEN, as the base document on which you will incorporate the information and the deal points.
– Clean up all language used from the form by applying what we have covered (ie, use of “may”, “shall”, active form, no legalese…)
– Do not include language that is clearly not requested.
– If given information to specify a date or amount, calculate date or amount to get full credit.
– 13-page maximum for both documents, but the Promissory Note cannot be longer than 1 page.
– I reserve the right to modify these instructions and deal points up to 1 week before the due date and time. I will accept the latest version you send me before the due date and time.
– Due no later than 09:00 a.m. Saturday, November 5, 2016 by e-mail to email@example.com
Deal Overview (may apply to purchase agreement or the Note exhibit)
– Your California client, a limited liability partnership whose legal name is Bar None, LLP, but who does business as (dba) The Top Law Firm, wants to sell substantially all of the assets in connection with a law practice located at the building with an address of 3333 Sunset Blvd, Los Angeles, CA. As an LLP, your client is an entity in which the attorney-owners are partners, but no partner is liable to any creditor of the law firm nor is any partner liable for any negligence on the part of any other partner (i.e., each partner has limited liability). The managing partner is J.D. Advocate. The buyer, on the other hand, is Prince Law, but – because he also wants limited liability – he does not want to practice as a sole proprietor so he will create a California entity called Prince Law, P.C. and register it with the California State Bar and California Secretary of State. The LLP is registered with the California State Bar and California Secretary of State.
– Purchaser is willing to pay, as the purchase price for substantially all of the assets of the practice, the amount of $2,500,000, based on the value determined by the seller-ordered appraisal of the going concern and the intangible property (goodwill). However, the intangible property to be purchased excludes the name of the business, “The Top Law Firm.” That name carries a lot of value developed and earned through the years of the firm providing outstanding legal work, and seller registered (Trademarked) and owns the name, Seller is relying on this fact. Instead, seller will “rent” or license the name of the business to buyer for $5,000 per month, with the first payment due at closing, along with a signed Business Name Licensing Agreement. Also, the assets transferred do not include the building. Buyer will rent the building for another $5,000 per month, with the first payment due at closing, along with a signed Building Lease Agreement. The transferred assets include all personal property within the building, including office equipment, etc., so that the buyer purchases the practice ready to start practicing. While you do not have to draft a building lease agreement or a business name licensing agreement, your purchase agreement does have to account for this information.
– Purchaser will assume, at closing, a $500,000 mortgage on the building on which the practice is located. Also due at closing, buyer will make first mortgage payment and the parties will exchange a signed Mortgage Assignment and Assumption Agreement, along with the other Asset Assignment and Assumption Agreement. While you do not have to draft an assignment and assumption agreement for the mortgage or the purchased/transferred assets, nor do you have to draft any mortgage loan documents, your purchase agreement does have to account for this information.
– Because the purchase price, net of adjustments, is still a bit too much for buyer, buyer must seek loan financing of $500,000 during the due diligence period. Buyer promises Seller he will try to get such a loan before closing, but if he is unable to get the loan, Purchaser will have a walk-away right. Your client tells you to ensure you provide appropriate qualifications so that this is not an easy walk away right. Trying to get a loan is not enough.
– Buyer does have and agrees to loan seller, upon signing the Purchase Agreement, the amount of $250,000, which $250,000 loan will be evidenced by a promissory note. The loan funds are to be used by Seller solely to pay some outstanding tax debts on the law practice. The $250,000 loan amount will become a deposit upon signing the Purchase Agreement. If the parties do not proceed to a sale (i.e. the deal does not close), the loan will be repaid by Seller within six months.
– The remainder of the balance is due at closing and will be paid by wire transfer, and the closing will be in person (face-to-face) at the location where the asset is to be transferred.
More Deal Points
Purchase and Sale Agreement
– Closing is on the last day of class, but in no event later than the last official day of the semester (drop dead closing date is at semester’s end). Signing date is on the assignment’s due date. Effective date is when the assignment was distributed.
– Add recitals noting details of the promissory note, building lease, name license, and the assignment of the mortgage, in addition to a generic purchase and sale recital, plus any other information that should be included in recitals, based on the textbook.
– Include a complete definitions section, with at least 10 defined terms.
– The purchase price will be paid as noted above.
– Any confidentiality is indefinite.
– Your client requested that a MAC clause be included to ensure that buyer isn’t able to get out of the deal easily if there is a change in economic conditions that affects the industry or economy.
– For items in which knowledge is at issue, draft appropriate knowledge qualifiers to protect your client from overbroad reps, warranties and covenants, yet have buyer’s reps, warranties and covenants be as broad as possible.
– California law applies.
– There are no schedules, so make sure there is no referenc