Receivables Collection Agreement:
If you are not acquiring any or all of the current receivables there will most likely be a separate agreement detailing your acceptance to collect the receivables on behalf of the seller (if that is actually the case), reimbursement methods to the seller of receivables collected, payment of collection costs and commissions or fees if applicable. This document may also detail what actions the seller may or may not take in order to collect his outstanding receivables.
Employment Agreement With The Seller:
If the primary intent of the employment agreement with the seller is the transfer of knowledge then it is prudent to specify when and where that transfer of knowledge will take place. It is also important that the employment contract with the seller has a method whereby you can easily terminate it if for whatever reason the seller is not cooperative. You may also wish to stipulate hours and days of the week. If, for instance you are busy handling the day-to-day business challenges and opportunities from 9 to 5, Monday through Friday you may wish to specify some evening and/or weekend meetings within the employment contract.
You should also define the vacation period and when the former owner will be able to take a vacation. As a general statement you would not want the seller to take a two-week vacation the day after closing.
Earn-out Agreement:
If part of the financial consideration of the sale is subject to an earn-out agreement the terms of said agreement are usually defined in separately. If there is an earn-out agreement with the seller and if it is appropriate the earn-out agreement may be included in the seller’s employment agreement.
Compliance Agreement:
The compliance agreement confirms that all parties to the transaction, the buyer and the seller agree to sign and/or execute any additional documents or agreements that may be necessary to consummate the entire transaction post closing. As an example the seller has agreed to transfer the web domain to you, the buyer. The actual paper work will transpire after closing the sale of the business. If it is necessary for the seller to sign a document that actually transfers the name this agreement stipulates that he will do so.
Agreement Waiving Rights To Jury Trial:
Most individuals will agree that the outcome of trials deliberated on by jurors is driven in a lot of cases by emotions rather than rational evidence. This agreement stipulates that should it be necessary to involve the courts to decide an issue that pertains to the purchase of the business that both parties agree to waive their right to a jury trial.
Continuing Guaranty:
This agreement or document states that the buyer on a personal level will guaranty all of the commitments made to the seller by you, the buyer. The need for this document is predicated on the fact that many of the agreements that may be signed in order to consummate the transaction are actually signed by the company not the individual as the buyer. In other words, you are guarantying the commitments made by the company with respect to this transaction.
Assignment of Leases, Rents & Profits:
This agreement is a general statement that the seller is assigning any and all leases, and other contractual commitments from the former company to you, the buyer. This agreement is important in asset and asset/share transactions.
Environmental Compliance Agreement:
The environmental compliance agreement stipulates that the seller, during the period that he owned the company was in compliance with all environmental legislation and that there are no environmental situations that may appear at a later date. The agreement may have a “save harmless” clause protecting you, the buyer.
Transfer of Personal Property Agreement:
You may identify, when performing the due diligence exercise, that some items which are used in the business are actual the personal property of the seller. You will require a separate agreement that either transfers the personal property to the business or a separate agreement buying that personal property.
It is not unusual for a small business owner to actually own a vehicle or other item personally. As it is his business it really doesn’t matter whether the ownership of the item has his or the company’s name on the actual ownership documentation.
Bill of Sale & Bulk Transfer Certification:
As this transaction involves the sale of tangible items such as inventory and fixtures under most State sales tax legislation you, the buyer would have to pay sales tax on the items that you are acquiring. However, States realize that this is not a "sale" of merchandise to an end user; it is actually a transfer of ownership from one entity to another. This certificate avoids the necessity to pay State sales tax on the transaction.
Share Certificate:
If you are acquiring the shares of the corporation then the seller will provide you with a duly signed share certificate transferring the shares of the corporation to you, the buyer.
There will be other documents to sign. Some will relate to the corporation such as a “Corporate Resolution To Borrow”. Others will be a group of forms for notifying Municipal, State and Federal Government Departments of the sale of the business.
Even though your lawyer may have prepared all of the agreements and documents it is important that you read and confirm that they present exactly what you want and that the terms and conditions are what you expected them to be before going to the closing. Once signed these are the terms and conditions that you will have to live with. There will be no going back at a later date and stating that you misunderstood or that that is not what the seller told you or not what you had agreed to. If there are sections, paragraphs or statements that you do not understand or that do not represent your understanding of the deal then question them. This is another circumstance where the only “stupid” question is the one that was not asked. The more agreements and documents that are prepared the more likely that their will be conflicts, ambiguities and inconsistencies within and between them.
A date will be chosen to actually close or consummate the transaction. On this date the buyer and seller will meet with their perspective lawyers in tow and sign all of the documents and the buyer will turn over whatever funds have been agreed to. By this time all of the negotiations have taken place and agreement has been reached on any and all points of contention.
DO NOT enter into a final closing with statements such as "we can work that out later"! If you have been unable to work it out prior to the closing why would you believe that you would be able to work it out after the closing?