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Using A Letter Of Intent For Purchasing A Company’s Assets In Texas

The buyer and the seller in a business purchase agreement will often engage an attorney to assist with a letter of intent (sometimes called a letter of interest or “LOI”) prior to drafting a company agreement. After the parties sign the letter of intent, the potential buyer and seller should begin to negotiate the purchase agreement relating to the acquisition of the Assets. A letter of intent is not or should not be a binding contract. It is used to outline the anticipated terms of the agreement to be drafted by counsel of either the buyer or the seller. The Asset Purchase Agreement would include the terms summarized in the letter and include other representations, warranties, conditions, covenants, indemnities and other terms for the benefit of both parties. As part of the Asset Purchase and Sale Agreement, the parties shall also commence to negotiate ancillary agreements. These typical agreements may include: (i) an escrow agreement, (ii) a bill of sale, and (iii) an assignment and assumption agreement. Does the Seller require initial deposit or earnest money? Will it be refundable if you are able to terminate the purchase agreement during your due diligence period?

The letter of intent and the Asset Purchase Agreement should identify the assets and the purchase price. The purchase price for the Assets should be stated in the agreement in dollars and defined as the “purchase price.” Payment methods vary. Therefore, an amount may be payable at the closing of the transaction and another amount may be deposited with a mutually agreeable escrow agent to be held for a period of time after the closing. This is done in order to secure the performance of the seller’s post-closing obligations under a clear contract. At the closing of the purchase transaction the buyer would acquire substantially all of the assets, and certain specified liabilities of the Business free and clear of all encumbrances.

Buying a Company’s Property and Its System for Operations

If you are purchasing the assets of a company, the company or participating in a franchise agreement, you should examine the company’s system for developing and operating the business. A company’s system may include: (1) methods, procedures, and standards for developing and operating the business, (2) plans, specifications, equipment, signage and trade dress for the business, (3) particular products and services, (4) the marks used for branding, (5) training programs, (6) business knowledge, and (7) marketing plans and concepts.

As part of the system, you should be aware of system standards existing at the time of the purchase. System standards are the mandatory procedures, requirements, and/or standards of the system as determined by the business (sometimes documented), which may include any procedures, requirements and/or standards for appearance, equipment, inventory, marketing and public relations, operating hours, presentation of marks for branding, product and service offerings, quality of products and services, reporting, safety, and technology and uniforms.

Purchasing Intellectual Property of the Business

The business purchaser will typically purchase all intellectual property and marks needed for branding purposes. A potential concern is that seller of the marks and copyrighted material may not be the owner of the copyright. Many times a business will hire a branding company that will design marketing images, marks and branding in addition to included words or slogans. Copyright laws indicate that unless the business purchased all copyrights from the artist or designer, the art will remain the property of the artist. Therefore, as part of your due diligence for the purchase of the business and its marks, I recommend obtaining copies of the purchase agreement or the assignment document that conveys the copyright of the art to the business.

If you are purchasing a business consider including a non-compete agreement. If you are purchasing a company or its assets, then you should consider implementing an agreement that the seller shall not compete against you within a particular territory.

In addition, the buyer should make sure that the Seller does not work for a competitor or act as a consultant to any other company that is a competitor.

As part of the purchase the buyer should determine who has control and ownership over the business that the buyer is acquiring. I recommend that the seller identify each owner, officer and director of the business and describe the nature and extent of each owner’s interest in the business for sale. If several individuals have control or involvement with the business and will be receiving a portion of the sale proceeds, the non-compete agreement should extend to them as well.

Due Diligence in an Asset Purchase and Sale Agreement

The buyer of the business should confirm and require that the seller represent in an agreement that the business and each of its owners (i) are not violating any agreement (including any confidentiality or non-competition covenant) by entering into or performing under the purchase and sale agreement, (ii) are not a direct or indirect owner of any competitor, and (iii) are not listed or “blocked” in connection with, and are not in violation under, any anti-terrorism law, regulation, or executive order.

Along the same lines, the buyer should research all review and reporting websites and outlets like the Better Business Bureau, Yelp, and Google business listing reviews.

The buyer should secure an agreement from the seller that will authorize its management to allow the buyer and its advisors full access to the facilities, records, key employees, customers, suppliers, and advisors of the Business for the purpose of completing the buyer’s due diligence review. The due diligence investigation may include a complete review of the financial, legal, tax, environmental, intellectual property and labor records and business contracts.

Examine contracts owed by the business prior to purchase. Determine if they allow successor agreements. For example, the business may own a service, license or vendor contract that may soon expire. It is good to know if when the term of the agreement expires, the business may enter into a successor agreement for additional periods that may be for several years each. Determine if the contracts have certain conditions prior to each renewal like the requirement for (i) the business to notify the other party of the election to renew within in a certain period of time. For example, renewal terms are often 90 and 180 days prior to the end of the term; (ii) Business (and its affiliates) are in compliance with the contract in order to avoid potential forfeiture of renewal ability; and (iii) the business and each owner to enter into an indemnity agreement for the other party, its affiliates, and their respective owners, officers, directors, agents and employees. You may disagree with indemnification terms.

Our Business Attorneys Are Here to Assist You

Results come first in business law matters. Our business and real estate attorneys are experienced in drafting and negotiating complex letters of intent and business purchase and sale agreements.

From San Antonio to Houston, one Texas law firm delivers reliable legal solutions — The Weaver Law Firm, 713-572-4900.

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I have used Mr. Weaver on two occasions. The first case was a rather complicated financial real estate deal gone bad with a former partner. Through his dedication, he accomplished my primary goal and my secondary goal. He took my case to trial and won. I recommend him to all of those who need representation on such issues. Additionally, he also was a kind and understanding individual.

Latigo
Houston, Texas

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Rodney Hampton (Super Bowl Champion, Former New York Giants Running Back)
& Andetria Hampton

Richard and The Weaver Law Firm have been very committed to seeing our case through to success. His diligence in discovery and superior litigation skills helped obtain a favorable award and a very favorable judgment. It's never a pleasant experience to be sued, but we sued back and won. We found a trustworthy attorney and a good friend throughout the experience.

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Remax 360

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Houston, Texas

It is with great pleasure that I recommend the services of The Weaver Law Firm. I have utilized the firm for over three years. Richard Weaver has provided legal representation crucial to my business. During these years, Richard has served us in various areas that include representing the company, business planning, company formation, litigation and court proceedings. He has a professional and personal commitment to my company. We consider The Weaver Law Firm an essential part of our business. It is our utmost true belief that he will provide the same high quality of service to you.

Richard Peinado, President
Peace of Mind Services, LLC
Houston, Texas

My company and I started working with the firm since the beginning of 2012. This is an honest firm, hard at work. We never had to hire a law firm prior to 2012, and we are not going anywhere else. Thank you, Richard. And thank you to all your staff for all the great help, service and attention to our needs.

Josué Munguía, President
Trinity Distribution, LLC
Humble, Texas

The Weaver Law Firm was highly professional, easy to work with and most importantly, time-sensitive to the clients' needs. During our lease negotiations, Richard Weaver was readily available and was very helpful in making progress to finalize the deal. I will recommend The Weaver Law Firm to my future clients and look forward to working with Richard again.

Richard E. Buxbaum, RADIUS Realty Advisors
Houston, Texas 77057

As a small business enterprise, it's important to have a good support network. The Weaver Law Firm is a valuable resource providing professionalism, expertise and reliability for my company. Whether it's contract review or filing with the state for corporate requirements, I know I can count on Richard and his team.

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Enitial Advanced Communications
San Antonio, Texas and Washington, D.C.

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Terry Bynum, Owner
Able Paving
Houston, Texas 77205

My husband and I asked Richard Weaver to form a partnership agreement for a beach property when we were selling half our interest to another party. Richard did an outstanding job. He produced the necessary documents in a timely manner that thoroughly covered all aspects of our transfer of ownership. It was a pleasure to do business with such a professional and ethical firm.

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Houston, Texas

I have used The Weaver Law firm for quite some time. Richard's knowledge and experience have always helped me. He has also saved me plenty of headaches. He is always straightforward and honest. He clearly explains what my options are and always answers all my questions promptly. In the future, if I ever need someone to represent me, or advise me on my commercial lease contracts it's always going to be Richard Weaver. I always recommend his law firm to everyone I know.

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Sav-On Mattress Outlet LLC

Richard is a skilled, hardworking attorney who is passionate about his client's success.

Isaac W. Kyle, CEO
iCityCondo, Inc.

During the real estate boom, my wife and I invested in more than 10 houses in Houston mainly due to low entry prices and positive cash flow even though we lived in California. Naturally, we had to hire a property manager to take care of those houses for us. It was going fine for several months. But the property manager started sending money late and in the end, the property manager went in hiding after taking all of our rent income for several months. My wife and I decided to hire Richard Weaver as our lawyer after learning about his client reviews and background. At first, we did not know what to expect, but we didn't want to give up. We were not sure whether we would be able to recover anything. But Richard worked hard on our case and kept us informed during the process. Richard was wonderfully patient and understanding. Finally, to our pleasant surprise, he brought us a successful civil case when other lawyers had simply given up. His attention to detail surely helped win this case. On top of that, Richard is also very resourceful and worked within the budget we gave him. We can't say enough about the work Richard did on our behalf and highly recommend him for any real estate related legal matters.

and Hee
El Segundo, California

As a client of The Weaver Law Firm, I was extremely pleased with their services. In 2008, I sold my home in a short sell. The property transaction closed and title to the property passed to the new buyers. But the title agent/Esquire Title, LLC, failed to pay off the lien holder/lender, Wells Fargo. Evidently, Esquire initially tried to pay off the wrong lender. Before Esquire could or did pay Wells Fargo the new pay-off amount, the Texas Department of Insurance took over Esquire's operations, discontinued all residential real estate transactions being handled by Esquire, and froze Esquire's bank accounts. Thus, the funds intended to pay Wells Fargo were trapped in Esquire's bank account and never used to pay Wells Fargo. And Wells Fargo looked to me for payment. Wells Fargo sued me and the new owners of the property. After finding Mr. Weaver, he handled everything for me and kept me up to date on how the case was going. He was able to get a settlement showing that I owe nothing, which cleared me of all claims. Wells Fargo dropped their claims against me. It was reassuring to know that I had an attorney taking care of everything on my behalf. Mr. Weaver was very knowledgeable in real estate laws and looked out for my best interest. Thank you, Mr. Weaver.

Nikki Blaze
Houston, Texas

The Weaver firm efficiently handled some small business filings for me at a reasonable cost. I plan to continue to use the firm to meet my needs.

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Houston, Texas

Realtors are responsible for making real estate transactions run as smooth as possible, however, when there are problems, a real estate lawyer is necessary. For our family, Richard Weaver was just the lawyer for us.

I can safely say that Richard Weaver is a knowledgeable real estate lawyer from the point of drafting of the purchase agreement through and post closing.

Our issues involved environmental issues, seller disclosure and financing. Without Mr. Weaver's expertise, our situation could have been far more expensive to fix than if he had been involved post closing.

I now know that as buyers or sellers of real estate, people should consult an attorney before they sign the purchase agreement. This agreement spells out the terms of the transaction. By the time it is signed, it is often too late for the attorney to do anything about a problem with the real estate.

In our case we had already unknowingly signed a purchase agreement. Fortunately, Mr. Weaver was able to move swiftly and accurately towards resolution. He was able to lower the purchase price substantially and save us tens of thousands of dollars on the purchase of our dream home.

I liken hiring Richard Weaver to purchasing an insurance policy. When people wait until they know they need a lawyer, it is usually too late to find one. And if it isn't too late, it will usually cost much more to get a lawyer involved once the deal has gone awry. Many real estate transactions are time-sensitive and a responsive and attentive attorney can save the transaction or at least advise clients on the best options they have available.

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Jennifer Burke Tomball, Texas