Introduction Sometimes a seller of a business will agree to take a portion of the purchase price based upon the future performance of the business. This part of the purchase price is called an earnout. The calculation of the earnout…
Monthly Archives: February 2019
Buyer and seller fight over calculation of net income earnout
Posted in purchase agreement Tagged with: cash vs accrual, earnout, membership interest purchase agreement, net income earnout
Boilerplate in business purchase agreement – good for insomnia, but may be important in a post-closing fight
Introduction Reading boilerplate in a business purchase agreement helps me sleep. The language is a tough read. But beneath the dense language are words that can really matter when a fight breaks out after the closing. The deal The buyer…
Posted in purchase agreement Tagged with: buyer guaranty of target liabilities, shareholder guaranty, stock purchase agreement
Worst case – buying a business with a large unknown liability
Introduction One of the biggest risks in buying a business, car or house is the unknown problems that pop up after the purchase. This case illustrates the problem. The deal Buyer purchased all the stock of a company from sellers.…
Posted in purchase agreement Tagged with: asset vs stock sale, guaranty, stock purchase agreement, unknown liabilities
Hawaii federal court says that seller of convenience stores cannot discharge his deal fraud liability in bankruptcy
Corporate entities controlled by Seller sold a chain of convenience stores and related assets to corporate entities controlled by Buyer. This sale was governed by a stock purchase agreement. The stock purchase agreement required that Seller submit a working capital…
Posted in purchase agreement Tagged with: fraud not dischargeable in bankruptcy, stock purchase agreement
Case demonstrates the risk of a seller of a business runs in agreeing to deferred purchase price in form of royalties
Between 1987 and 1999, Seller developed two software products. Both programs were designed to assist pharmaceutical companies and other related industries regulated by the Food and Drug Administration to comply with reporting and record-keeping obligations. Buyer was founded in 1997…
Buyer’s purchase price adjustment mechanism based upon a post-closing inventory audit survives seller challenge in court
Seller was a distributor of compressed gases and welding supplies in Indiana. Seller sold substantially all of its assets to Buyer including its stock of asset cylinders, pursuant to an October 2014 asset purchase agreement. As part of the asset…
Posted in purchase agreement Tagged with: post-closing inventory audit, purchase price adjustment, purchase price holdback
Inventor of product sues buyer of product for unauthorized use of inventor’s name for commercial purposes
An inventor had a Ph.D. in physical pharmacy and specialized in the formulation of topical creams for various health and wellness needs. He was the CEO of the seller and the public face of the company throughout the pharmaceutical industry.…
Health club buyer fights with seller’s landlord over ownership of some health club assets
Seller operated a health club in Georgia. It leased the building from Landlord. Seller ended up in financial trouble, filed for bankruptcy and sold its assets out of bankruptcy to Buyer. Buyer did not lease Landlord’s building. After the closing,…
Seller of business had no contractual duty to indemnify buyer for asbestos claims
In 1993, Buyer purchased from Seller the business operations related to certain lines of fragrance and cosmetic products pursuant to an asset purchase agreement. Among the product lines Buyer purchased were talcum powder products, which later became the subject of…
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