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A clause used in a note and/or security agreement which gives the lender the right to demand payment in full if a certain event occurs such as default or if the ownership of the business changes without the lender’s consent; sometimes referred to as a “due on sale” clause.
means a system of accounting established and administered with sound business practices to permit the preparation of Financial Statements of the Company on an accrual basis that fairly represent the financial position and results of operations of the Company for the periods covered. Unless otherwise specified, in this Agreement and all other Transaction Documents all accounting principles applied in a current period must be comparable in all material respects to those applied during the preceding comparable period.
The act of accepting an offer by virtue of fully executing legal documents which results in a binding agreement or contract.
means the amount of money owed to vendors or others by the Company reflected on the Current Financials of the Company or arising in the Ordinary Course of Business of the Company as of a stated date. Often this information is presented in the form of an "aged accounts payables report" which includes the number of days since the Company was invoiced.
means the amount of money owed by customers to the Company reflected on the Current Financials of the Company or arising in the Ordinary Course of Business of the Company as of a stated date. Often this information is presented in the form of an "aged accounts receivable report" which includes the number of days since the customer was invoiced.
of a particular fact or matter means, as to any Person, that such Person is actually aware of such fact or other matter to the best of their ability and memory. For purposes of this Agreement, the Seller will be deemed to have Actual Knowledge of any fact or matter of which any individual who is serving, or who at any time has served, as a director or officer of the Company has, or at any time had, Actual Knowledge.
A written instrument referenced in a legal document that adds additional terms or defines additional detail to a written contract. For example an excluded assets addendum would list assets not included in the transaction.
means, when used with reference to a specified Person, (a) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, and (b) if the specified Person is an individual, such individual’s spouse and natural and adoptive lineal descendants, and trusts and family partnerships (or other entities) established for the benefit of any such Person. As used herein, “control,” “controlled by,” and “under common control with” means possession, directly or indirectly, of power to direct, or cause the direction of, management or policies (whether through ownership of voting securities, by Contract, or otherwise).
Also known as an “Exclusive Agency Listing” or "Exclusive Listing". - A written instrument giving the agent or broker the right to sell the assets or stock of a business for a specified time and receive a commission regardless of the source of the buyer.
Checking this believed to be incorrect: However, the owner may sell the property himself/herself to a buyer who was not introduced to the business by the agent without the payment of a commission to the agent.
One acting under authority of a principal to do the principal’s business. The agent must use his or her best efforts and keep the principal fully informed of all material facts.
means this Membership Interest Purchase Agreement, including all Exhibits and Schedules, as it may be amended, modified, or supplemented from time to time.
A table for tax filing purposes found in purchase agreements of the total transaction value in the APA when a business is sold. The allocation contains a breakdown of the total transaction value allocated to inventory, furniture, fixtures and equipment, leasehold improvements, goodwill, consulting services and any other purchased tangible or intangible assets. Values are placed on each component of the allocation and the buyer and seller agree on this breakdown for tax filing purposes. The IRS requires that such an allocation be a part of the buyer’s and seller’s tax return when a sale takes place; Form 8594, the “Asset Acquisition Statement”, must be filed with the buyer’s and seller’s tax return for the year in which an applicable asset acquisition takes place.
A written instrument that modifies a previously agreed to term or condition after a definitive agreement has been executed. This is different than an addendum because it is not by and part of the original agreement and modifies same.
Amortization is the expression of the allocation of a loan payments portion of interest payment vs. principal payment to total payment.
Asset Purchase Agreement. Interchangeable with Definitive Purchase Agreement is the binding document that along with attachments and addendums details the binding terms and conditions of a business purchase and sale.
means the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date.
A gain in value due to any cause. Real estate is an asset that often appreciates in value over time.
The submission of a disputed matter for resolution outside the normal judicial system. It is often speedier and less costly than courtroom procedures. An arbitration award can be enforced legally in court if binding. Non-binding arbitration is effectively a best efforts attempt at determining a mutually acceptable resolution, but is not legally enforceable. If one or more parties cannot agree on a single arbitrator, they can select arbitrators under the rules of the American Arbitration Association (AAA). Arbitration clauses are often inserted into contracts as the forum to settle disputes arising out of the contract.
The amount the seller of a business is asking a buyer to pay for the assets or stock of a business which may or may not include specific assets such as inventory, personal effects, receivables and cash on hand.
This term has multiple definitions dependent upon on its usage:
The means by which a business owner transfers ownership of tangible and intangible assets to another owner without transferring the ownership structure or stock.
The sale of a business enterprise at a price based solely upon the value of the tangible assets typically when the business is no longer operating or operating at a loss.
A sale of a business in which the buyer acquires only specific assets (and possibly assumes some liabilities). Unlike a stock sale, the buyer obtains the assets usually free and clear of any liabilities, liens or encumbrances of the seller. The buyer is also permitted to “step-up” in basis on the assets purchased based on their allocated fair market values for tax depreciation purposes.
means An Assignment In The Form, Properly Completed, Signed, Dated, And Delivered By The Seller At The Closing.
means liabilities of the Seller which the Buyer agrees to assume post-closing.
One who is appointed, in writing, to perform a specific act for and in place of another, e.g. signing documents for someone in their absence.
A statement of the assets, liabilities, and capital of a business or other organization at a specific point in time, detailing the balance of income and expenditure over the preceding period.
The initial rent amount in a lease first or 'base' year prior to any annual escalation or other fees/expenses which may be contained in a lease.
The dollar amount set forth as the minimum loss that must be suffered by the buyer before the buyer can recover damages under the indemnification provisions. Deductible Basket: Seller is only responsible for damages exceeding the basket amount (e.g., under a deductible basket of $100, if a claim of $150 is made then the seller must pay $50). Dollar-One Basket (Tipping Basket): Seller is responsible for all damages once damages reach the threshold basket amount (e.g., under a dollar-one basket of $100, if a claim of $150 is made then the seller must pay $150).
Means any “employee benefit plan,” as defined in ERISA Section 3(3), including any (a) non-qualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multi-employer Plan, as defined in ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA Section3(1)) or material fringe benefit plan or program, or (e) stock purchase, stock option, severance pay, employment, change-of-control, vacation pay, company awards, salary, continuation, sick leave, maternity leave, family leave, excess benefit, bonus, or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy, or other arrangement, whether or not subject to ERISA.
A Written Agreement By Which One Person Assigns Or Transfers His Or Her Rights To Or Interest In Goods And Personal Property To Another.
An expression sometimes used to label the intangible assets (e.g. goodwill) in the purchase of a business enterprise. That portion of a requested price that cannot be supported through the application of established valuation methodology, and which generates no economic benefit.
A pledge to pay a sum of money in the event of failure to fulfill obligations; e.g. inflicting damage, or mishandling funds - Usually written by a company for a fee. Also known as a Surety Bond.
means, as to any representation, warranty, covenant, obligation, or other provision of this Agreement or another Transaction Document, the occurrence of any material inaccuracy in, material breach of, or material failure to comply with, such representation, warranty, covenant, obligation, or other provision. To the extent this Agreement or another Transaction Document provides for notice and/or the Right to cure the breach of or failure to comply with a covenant or obligation of a Party herein or therein, such breach will not constitute a "Breach" for purposes of this Agreement until such notice has been given and the period to cure has lapsed.
One who acts as an agent for another (his/her principal) when negotiating with third parties on behalf of the principal. This arrangement falls under “agency” law applicable in the state in which the principal - agent arrangements arises.
A bulk sale, sometimes called a bulk transfer, is when a business sells all or nearly all of its inventory to a single buyer and such a sale is not part of the ordinary course of business.
Laws enacted by the states to protect creditors against secret sales of all or substantially all of a business’s goods. It requires certain notices prior to the sale and sets forth ways of voiding the sale (see Uniform Commercial Code).
means the business and operations of the Company relating to management of rental and other properties, and to the provision of maintenance and other related services to its customers or clients together with all goods sold, leased, or otherwise provided, services performed, or other activities conducted by the Company.
A Business Broker is an intermediary dedicated to serving clients and customers who desire to sell or acquire main street businesses. A business broker is committed to providing professional services in a knowledgeable, ethical and timely fashion. Typically, a Business Broker provides information and business advice to sellers and buyers, maintains communications between the parties and coordinates the negotiations and closing processes to complete desired transactions. The most qualified Business Brokers hold the Certified Business Intermediary (CBI) credential which is managed by the International Business Brokers Association.
means any day other than a Saturday, a Sunday, or any other day on which banking institutions in Texas or North Carolina are authorized or obligated by Law to be closed.
Company name by which a certain business is known.
When a Broker agrees that one or more named prospective buyers are not commissionable or only partially commissionable in the event a named prospective buyer purchases the business. If the Seller sells the business to one, or more, named Buyer Prospects, the Business Broker receives:
- No commission if that buyer prospect was fully carved out.
- Partial commission if that that buyer was partially carved out; that is the broker assists the Seller and Buyer to complete the transaction, but the fee is reduced or a fixed fee is stipulated in the listing agreement. This listing is taken when the Seller is convinced that a specific person will buy their business and won't list because of that. In the vast majority of cases the person(s) who were carved out do not buy the business. Most carve outs expire if a written offer has not been received within 30-90 days of listing.
A normal corporation for federal income tax purposes. The entity itself pays income taxes. Note that when we sell a business, the net proceeds are taxed at the "C" level, then any distributions to the shareholder(s) pay captial gains taxes on their personal level.
A clause in a lease or other contract stating the condition(s) under which the contract can be canceled or terminated by either party. It often has an expiration date and may provide for simple notice or payment of money to cancel the contract. Used interchangeably with 'termination cause'.
A check drawn on the bank’s own funds. It is often used to close a sale because there is generally no waiting for the check to clear.
Latin for “Let the buyer beware”.
The Certified Business Intermediary ® (CBI) is a prestigious designation exclusive to the IBBA® that identifies an experienced and dedicated business broker. It is awarded to intermediaries who have proven professional excellence through verified education as well as exemplary commitment to our industry.
Confidential Business Review. A document describing the financial and operational aspects of a business being marketed for sale explicitly including confidential information not available to individuals who have not completed a non-disclosure agreement (NDA). Also referred to as a CIM or Confidential Information Memorandum.
means the Comprehensive Response, Compensation and Liability Act, or any successor Law, and regulations and rules issued pursuant to such Act or successor Law.
A check guaranteed by the bank. The bank holds the necessary funds and will not accept any withdrawals against the certified amount. The bank also will not usually honor a stop payment on a certified check.
A chattel is an article of personal property and it includes both animate and inanimate property. U.C.C. stands for the Uniform Commercial Code which governs the granting of security agreements. A chattel search is a review of the appropriate county and Secretary of State Records in regard to any liens against chattels, tax liens and judgments.
A mortgage on personal property (not real estate). A mortgage on equipment would be a chattel mortgage.
Confidential Information Memorandum. A document describing the financial and operational aspects of a business being marketed for sale explicitly including confidential information not available to individuals who have not completed a non-disclosure agreement (NDA). Also referred to as a CBR or Confidential Business Review.
An entity with which a Business Broker has a fiduciary relationship.
When all due diligence is complete, legal documents are final and executed and funds are distributed to the seller, seller’s agents, creditors and others.
The legal documents that are part of a business closing. They might include: a definitive purchase contract, promissory notes, mortgage, security agreements, financing statements, subordination agreements, bill of sale, covenant-not-to-compete, consulting agreements, employment agreements, leases, assignments, escrow agreement, releases, tax clearances, director and shareholder consents, legal opinions, environmental opinions, fairness opinions, and IRS Form 8594 Asset Acquisition Statement.
A statement which contains the financial settlements between the buyer and seller and the cost each must pay. They may be on one statement, or the buyer and seller may each receive separate statements.
The Certified M&A Professional Program is offered by the Coles College of Business at Kennesaw State University in conjunction with The M&A Source. The program is an adaptation of the educational/certification offerings of the Coles College M&A Academy, which focuses on the unique aspects of middle market M&A activity. It is ideal for M&A M&A advisors, Private Equity Groups and other professionals serving this sector, as well as senior management of privately held businesses.
or co-brokering is when a Business Broker agrees to share a portion of the commission with another business broker. Many business brokerage firms and Brokers do not co-broker, however several states require co-brokering.
An agreement between two or more Business Brokers for sharing services, responsibility and compensation on behalf of the client required in many states excluding North Carolina and infrequent in states where it is not required.
Close of escrow.
The ceiling and floor of the price fluctuation on an underlying asset. For example, the price fluctuation where stock in part of the consideration; or, the fluctuation in the amount of trued-up working capital compared to estimated working capital.
When an agent combines the funds of a buyer or seller with his/her own in a trust account. This is against the law in most areas and in most states. Licensed brokers may lose their license if comingling funds.
When title to the goods, fixtures and equipment or the business itself are not transferred to the buyer, and remains with the seller, until the terms of the contract have been met. This generally means when all the payments have been made. This is different than a chattel mortgage.
Certain obligations that must be fulfilled in order to legally require the other party to close the transaction. Conditions to closing may relate to corporate approvals, governmental filings and approvals, compliance, licenses, permits, etc. Typically, a condition to closing may be waived by the party that benefits from the condition.
means any information of or relating to the Company or to a Party or its Affiliates, other than Public Information, which is deemed to be confidential by the Company or such Party or its Affiliates, including, without limitation, information coming within any one or more of the following categories with respect to the Company or such Party or its Affiliates: (a) information concerning (i) operations, (ii) finances, (iii) business opportunities, (iv) business methods and concepts, and (v) business plans; (b) information concerning (i) customers and prospective customers, including customer names, customer lists, and the terms of contracts with customers, and (ii) suppliers, including the terms of contracts with suppliers; (c) information concerning (i) products and services, (ii) marketing and sales plans, assessments, evaluations, reports, and presentation materials, and (iii) concepts or ideas related to the business of the Company or such Party or its Affiliates that are proprietary and unique; (d) information concerning internal policies and procedures, including personnel policies and procedures; (e) Proprietary Rights of the Company or such Party or its Affiliates; (f) financial statements, reports, manuals, notebooks, letters (and other correspondence, including electronic mail), and other written material pertaining to the Company or such Party or its Affiliates or otherwise pertaining to the business of the Company or such Party or its Affiliates; and (g) information furnished to the Company or such Party or its Affiliates by a customer, a prospective customer, or a third-Person which is not Public Information.
means any consent, approval, ratification, waiver, or other authorization, including any Governmental Approval.
Something of value which induces a person to enter into a contract. The promise to do something must be in exchange for some act or thing of value which is the consideration. This is a necessary element in a contract.
A clause in a agreement, contract, escrow, etc. that only makes it binding upon the occurrence or non-occurence of a stated event. For example, the sale of the business is contingent upon the buyer obtaining financing or the sale is contingent upon revenue not falling by more than 10%.
means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding between two or more parties to do, or not to do, something. Elements of an enforceable contract include: (a) an offer to be bound to do or refrain from doing something, which has been accepted, (b) sufficient consideration, (c) a valid subject matter, (d) legal capacity of the parties and (e) for those contracts to which the Statute of Fraud applies, its requirements must be met.
means any Contract providing for compensation, benefits, insurance coverage, severance pay or benefits, disability pay or benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation to an individual (Contractor) and with respect to which the Company or any of its Subsidiaries or any ERISA Affiliate has or may have any material liability or obligation in exchange for services for the benefit of Company.
A transfer of title. (See Title)
Business Brokers who share their knowledge, expertise and skills for the benefit of the business brokerage profession, clients, customers and the public good.
Change of possession
An entity created by or under the authority of the laws of a state, composed of individuals united under a common name, and which for certain legal purposes is considered a natural person. Characteristics of a corporation include: (a) continuity of life, (b) centralization of management, (c) limited liability, and (d) free transferability of interest.
An agreement made part of a purchase contract, in which the seller promises not to enter into a similar or competing business, for a specified period of time, within a designated area.
Affirmative covenants obligate the seller or the buyer to take certain actions prior to the closing. Negative covenants restrict the seller from taking certain actions prior to the closing without the buyer’s prior consent. Negative covenants protect the buyer from the seller taking actions prior to the closing that change the business that the buyer expects to buy at the closing.
Coronavirus disease (COVID-19) is an infectious disease caused by the SARS-CoV-2 virus.
means the Credit and Guaranty Agreement dated July 30, 2018, by and among Associations, Inc., the Buyer, and certain of their Affiliates, on the one hand, and the Agent and the Lenders that are from time to time parties thereto, on the other hand, as it has been or may be amended from time to time.
A person to whom a debt is owed by another person who is called the debtor.
means, collectively, (a) the unaudited Financial Statements of the Company for current year to date, and the last three fiscal years.
a person or organization that buys goods or services from a store or business.
means all losses, claims, obligations, demands, assessments, penalties, fines, forfeitures, liabilities, costs, damages of any kind, and reasonable attorneys’ fees and expenses, whether or not involving a third-Person claim, arising, directly or indirectly, from, asserted against or incurred by reason of, resulting in any manner from, or relating in any manner to losses incurred by any party.
“doing business as” - an identification of the trade name of the business, which may differ from the legal corporate name. Also known as a "fictitious name."
of any Person means, from time to time, and without duplication, all indebtedness, liabilities, and obligations of such Person, whether or not considered as liabilities according to GAAP, and whether matured or unmatured, direct or indirect, or absolute, fixed, or contingent.
means the Bankruptcy Code of the United States and any other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent transfer or conveyance, suspension of payments, or similar Law from time to time in effect affecting the Rights of creditors generally.
A promissory note that has no set time period for repayment and can be called due by the holder at any time.
Those who are elected by the stockholders to manage the affairs of a corporation. Shareholders elect directors; directors elect officers; officers manage the day-to-day affairs of a corporation.
The following 16 events would lead to the discharge of the original contract:
A statement that attempts to limit liability in the event information is inaccurate.
– The earnings of a business enterprise prior to the following items:
- Income taxes
- Non-operating income and expenses
- Nonrecurring income and expenses
- Depreciation and amortization
- Interest expense or income
- Owner’s total compensation for those services which could be provided by a sole owner/manager Narratively, it is the amount of money a business is able to generate for it's owner(s) that can be spent on non-business expenses without any adverse effect on the business.
means and includes all documents, agreements, instruments, certificates, writings, notices, consents, affidavits, letters, telegrams, statements, files, computer disks, microfiches, or other documents in electronic format (including electronic mail), schedules, exhibits, or other papers or records.
Unlawful constraint exercised upon a person whereby he/she is forced to do some act against their will.
An agreement in the sale of a business where the buyer agrees to pay the seller consideration in the future (typically cash or stock) based upon certain future events or performance of the business post-close. Because earn-out payments are contingent on the future performance of the acquired company, they are not included in the purchase price.
A sum of money given to bind an agreement or an offer. It is usually refundable, but might be non-refundable or partially refundable. Refundable earnest money is referred to as soft and non-refundable earnest money is referred to as hard.
The “profitable” life of fixtures and equipment or any improvement; this life could be greater or less than the depreciable life for income tax purposes.
means the date of the last signature by all parties to the Agreement.
means, current eastern time, be it daylight savings or standard time on the Closing Date.
mean an employment agreement entered into by the Seller’s principal and the Buyer at the Closing.
An encumbrance is a claim against a property by a party that is not the owner. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is lifted. The most common types of encumbrance apply to real estate; these include mortgages, easements, and property tax liens. Not all forms of encumbrance are financial, easements being an example of non-financial encumbrances. An encumbrance can also apply to personal – as opposed to real – property. The term is used in accounting to refer to restricted funds inside an account that are reserved for a specific liability.
means the Rights arising under or with respect to all Contracts to which the Company is entitled on the Closing Date and which relate to the Business.
means any federal, state, and local Law relating to: (a) the existence, cleanup, removal, and/or remedy of contamination on property; (b) the protection of the environment from spilled, emitted, discharged, discarded, deposited, or emplaced Hazardous Materials; (c) the generation, use, transport, storage, handling, disposal, removal, or recovery of Hazardous Materials; and (d) exposure to hazardous, toxic, or other substances alleged to be harmful.
means any Governmental Approval issued or obtained with respect to the Business or the Business Assets under any applicable Environmental Law.
means “Phase I Environmental Site Assessments” as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-05 (and, if necessary, “Phase II Environmental Site Assessments”), prepared by an independent environmental auditor approved by Lender and delivered to Lender in connection with the Loan and any amendments or supplements thereto delivered to Lender, and shall also include any other environmental reports delivered to Lender pursuant to this Agreement and the Environmental Indemnity.
means “Phase I Environmental Site Assessments” as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-05 (and, if necessary, “Phase II Environmental Site Assessments”), prepared by an independent environmental auditor approved by Lender and delivered to Lender in connection with the Loan and any amendments or supplements thereto delivered to Lender, and shall also include any other environmental reports delivered to Lender pursuant to this Agreement and the Environmental Indemnity.
means all equipment, machinery, vehicles and other transportation equipment, tools, furnishings, and fixtures owned, leased, or subject to a contract of purchase and sale or lease commitment, that is used or held for use in the Business by the Company. See FF&E.
means the Employee Retirement Income Security Act of 1974, as amended, or any successor Law, and regulations and rules issued pursuant to such Act or any successor Law.
means any entity that is a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliated services group” with, the Company, as defined in Section 414(b), (c), (m), or (o) of the IRC.
A clause, generally in a lease, that provides for an increase in the rent at a specified time.
A deed, a bond, money or other piece of property delivered to a third person to be delivered by him/her to the grantee only upon the fulfillment of a condition. A portion of the consideration that is deposited with a neutral third party (in the case of an escrow) or withheld by the buyer (in the case of a holdback) to be applied toward future indemnification claims by the buyer. After a specified period of time, any consideration remaining in the escrow or holdback account is released to the seller.
The length of time after the closing date that the escrow is held before being released to the seller.
A listing whereby the Seller is obligated to pay the Brokers commission regardless of the source of the buyer or their involvement in the negotiations if sold during the exclusive term.
When a business owner gives one Broker or Agent the authority to sell his/her business. The Broker or Agent receives commission no matter who sells the business - even if the seller finds the buyer during the listing period. (See Agency Listing). This is the only form of listing that ENLIGN accepts.
To complete, to make, to perform, to do, to follow through; to execute a contract; to make a contract: especially signing, sealing and delivering. To make an agreement binding by signing.
means any real property, leasehold, or other interest in real property currently or formerly owned, used, or operated by the Company and any building, plant, structure, or equipment affixed to real property currently or formerly owned, used, or operated by the Company.
FF&E or Furniture, Fixtures and Equipment is a list of a companies assets included in the transaction denoted with the current fair market value of the assets in as-is, where-is condition meaning that the value is appropriate for a buyer intending to use the assets in the same way and location as the seller. It is not book value, depreciated value, replacement cost or disposal value.
The name of a business, in most areas, this name is filed with a state county or local government agency to be legally effective. Also referred to as d.b.a. or 'doing business as'.
Acting in a relationship or position of trust on anothers behalf, usually regarding financial matters or transactions.
includes financial reports such as a balance sheet, profit and loss statement, reconciliation of capital and surplus, tax returns, accounts receivable, accounts payable and/or statements of cash flow.
A recorded document filed generally in the secretary of state’s office of the state and shows that there is a lien against the fixtures and equipment (real property) of the business.
An amount paid to another party for locating and referring a client or customer. If this is for debt or for the sale of equity, then a Business Broker must meet the SEC's licensure requirements to be paid consideration in any form.
Financial Industry Regulatory Authority
means a certificate in the form of Exhibit G, completed and executed by the Seller for the Company for the purposes of satisfying the Buyer’s obligations under U. S. Treasury Regulations §1.1445-(c)(3)(i).
The right or license granted to an individual or group (franchisee) to market a company’s (franchisor’s) goods or services in a particular geographic territory. Franchises have strict requirements to qualify as an owner/operator. Prospective Buyers should research these requirements early in the due diligence process.
means those representations set forth in the Agreement, the Disclosure Schedules, and all documents produced during the Due Diligence Period.
means generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board.
means an approval, authorization, consent, permit, license, or exemption of, registration or filing with, or report or notice to, any Governmental Authority.
means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government, including, without limitation, any government authority, agency, department, board, commission, or instrumentality of any of the foregoing, and any tribunal or arbitrator of competent jurisdiction.
is an agreement under which a tenant and landlord agree to a periodic adjustment of monthly payments, typically upon the annual anniversary of the initial term.
Also referred to as “Tangible Assets” Those assets which are material or physical (e.g. inventory, equipment, tools, vehicles, real estate, leasehold improvements).
means any hazardous substance, as defined by §101(14) of CERCLA, and any other petroleum or petroleum chemical product, substance, or waste that is regulated by any Governmental Authority under any Environmental Law.
From a practical perspective a hold back is the same as an escrow except that it is not held by a fiduciary, but by the Buyer.
references the legal immigration status of a businesses labor force. Non-compliant workers are not legal citizens of the United States and do not have a valid Visa or work papers to be legally employed in the United States.
is an abbreviation for International Business Brokers Association. When it comes time to sell or buy a business, choose to work with an experienced IBBA Member who will guide you through every step of the process. Look for the Certified Business Intermediary® (CBI) designation to identify individuals who have met our highest standards for education, ethics and professionalism. The IBBA's website can be found at www.ibba.org.
means (a) Liens for Taxes not yet due and payable, (b) mechanic’s Liens and materialmen’s Liens for services and materials for which payments are not yet due or which are being contested in good faith by appropriate proceedings, and (c) landlord’s Liens for rental payments not yet due and payable.
When one party to an agreement agrees to make the other party financially whole for damages and/or losses for specific risk factors they incur as a result of the transaction.
Financial consideration that compensates another party for an incurred loss or damage covered under contractual representations and warranties in a legal agreement.
a non-binding written legal agreement that outlines the major terms and conditions of a transaction to insure that the Buyer and Seller are in agreement before expending time and funds on drafting of a definitive agreement. Similar to Letter of Intent, Memorandum of Understanding.
A written legal document, created to affect the rights of the parties.
That which has no physical existence but represents value, such as goodwill, going concern value, business trade name, reputation. (See Blue-Sky)
A person who has died without having made a will or with an invalid will sometimes referred to as will and testament.
IOI - Indication of interest typically used in lower middle market transactions whereas a LOI or Letter of Intent is typically used in main street transactions.
means the Internal Revenue Code, as amended, or any successor Law, and regulations and rules issued by the IRS pursuant to the Internal Revenue Code or any successor Law.
Incapable of being rescinded, modified, recalled or canceled; unchangeable.
means the United States Internal Revenue Service and any successor agency.
Same as Tenancy in Common, but if one party dies, his or her title passes to the other surviving joint tenant(s), and not to the heirs of the decedent.
A business arrangement between two or more persons. Similar to a partnership except that it exists to undertake a single project.
a person doing work of vital importance (as in a business organization). While gender specific, does not imply women cannot be deemed key to the businesses operations.
Insurance purchased on the life of a person doing work of vital importance (as in a business organization) such that if they die (in the event of life insurance) or become injured (in the case of disability insurance) funds are available to replace the role of the affected individual. While gender specific, does not imply women cannot be deemed key to the businesses operations.
of a particular fact or matter means, as to any Person, that such Person (a) has Actual Knowledge of such fact or other matter or (b) reasonably should know or be aware of such fact or matter based upon the office or position held by such Person or other factors relevant to such determination. For purposes of this Agreement, the Seller will be deemed to have Knowledge of any fact or matter of which any individual who is serving, or who at any time has served, as a director or officer of the Company has or at any time had, Knowledge.
A landlord is the individual or legal entity that owns real property who with the tenant or lessee executes a lease for use of real property.
means any applicable statute, law, ordinance, rule, regulation, order, writ, injunction, decree, judgment, or opinion of any Governmental Authority.
The Lifetime Certified Business Intermediary ® (LCBI) is a prestigious designation exclusive to the IBBA® that identifies an experienced and dedicated business broker. It is awarded to intermediaries who have proven professional excellence through verified education as well as exemplary commitment to our industry having maintained continuous membership of 15 years and CBI status for a minimum of minimum of 12 years.
A written legal document in which possession of a property is given by the owner (lessor) to second party (lessee) for a specified time and for a specified rent, and setting forth the conditions upon which the lessee may use and/or occupy the property.
A lease in which the lessee has the right to purchase the property for a stipulated price at or within a stipulated time.
means the real property leased by the Company, as tenant, and used in connection with the operation of the Business.
A property held under tenure of lease; a property consisting of the right of use and occupancy by virtue of a lease agreement; the lessee’s (tenant’s) interest in a lease.
Any article or fixture that is attached to land or buildings. Leasehold improvements paid for by the tenant enure to the landlord once attached to the building. Some exceptions might be telephone equipment and computer equipment.
means the lease agreements between the Company and the owner(s) of the Leased Real Property used in connection with the operation of the Business.
The legal identification of real property typically referencing a map on file in the local registrars office.
The legal identification of real property.
A tenant in an individual or legal entity that has a right to occupy a premise by virtue of a lease with a landlord. (see Landlord)
A landlord; one who grants a right to the Lessee to occupy the premises by virtue of a lease. (See Landlord)
A description of the key points in a potential acquisition of a business, drafted to see if the parties are in general agreement on key issues before proceeding further in negotiations, and is generally designed not to be legally binding on either party. Sometimes buyers or sellers will use a more informal Memorandum of Understanding or a more formal Indication of Interest to identify the key points of a potential business purchase.
means any license, approval, certificate, permit, franchise, consent, concession, grant, or authorization granted by any Person, including any Governmental Authority.
means any lien, mortgage, pledge, security interest, encumbrance, adverse claim, title defect, title retention agreement, voting trust agreement, property settlement or marital dissolution agreement, preemptive right, right of first refusal, or other interest, equity, option, restriction, or charge of any kind.
The Lifetime Merger & Acquisition Master Intermediary (Lifetime M&AMI) certification is an elite designation exclusive to the M&A Source that affords professional growth and marketability. It is offered to any current holder of the M&AMI that has been an M&A Source member for a minimum period of fifteen (15) years, held the designation for at least ten (10) years and who has attained the minimum age of seventy (70).
A partnership composed of two or more partners whose contributions and liabilities are limited. A limited partnership requires at least one general partner and one limited partner. The general partner(s) are responsible for the management and liability for its debts. A limited partner has no right in management and his/her liability is limited to amount of investment.
means any action, proceeding, claim, lawsuit, or investigation conducted or threatened by or before any Governmental Authority.
Letter of Intent from a Buyer prospect usually used in a main street transaction whereas in lower middle transactions it is more typical to use an IoI or Indication of Interest.
generally means businesses with an enterprise value above main street typically served by business brokers but below middle market typically served by investment bankers. $1,000,000 to $50,000,000 is a common range.
An M&A Advisor is an intermediary dedicated to serving clients and customers who desire to sell or acquire businesses in the lower middle market. An M&A Advisor is committed to providing professional services in a knowledgeable, ethical and timely fashion. Typically, a M&A Advisor provides information and business advice to sellers and buyers, maintains communications between the parties and coordinates the negotiations and closing processes to complete desired transactions. The most qualified M&A Advisors hold Merger and Acquisition Master Intermediary (M&AMI) credential which is managed by the Merger and Acquisition Source and/or the Certified Merger and Acquisition Professional certification.
The M&A Source is so named because it represents “the source” of opportunity and professional growth for merger and acquisition M&A advisors and strategic professionals who are dedicated to the lower middle market (LMM). The M&A Source website can be found at www.masource.org.
The Merger & Acquisition Master Intermediary (M&AMI) certification is an elite designation that
affords professional growth and marketability unlike any other in the M&A profession. This title
distinguishes its’ holders as seasoned intermediary professionals who have a solid educational
background, proven accomplishments in completing deals and a strong passion for the M&A Source and
means (a) a material adverse effect upon the validity, performance, or enforceability of any of the terms of this Agreement or any other Transaction Document, or (b) an event or circumstance that alone, or when taken together with other events or circumstances, could reasonably be expected to result in a loss to the Business, would have, or might reasonably be expected to have, a material adverse effect on the Business Assets or the Business, or that would constitute a criminal violation of Law.
is a structured, interactive process where an impartial third party assists disputing parties in resolving conflict through the use of specialized communication and negotiation techniques.
a non-binding written legal agreement that outlines the major terms and conditions of a transaction to insure that the Buyer and Seller are in agreement before expending time and funds on drafting of a definitive agreement. Similar to Letter of Intent, Indication of Interest.
Any combination that forms one company from two or more previously existing companies.
A statement contrary to fact. If the statement or action is made with intent to deceive, it may be deemed to be fraudulent.
A written instrument recognized by law by which real property is pledged to secure a debt or obligation; a lien on real property.
means the North Carolina Department of Revenue and any successor agency.
Failure to act as a reasonably prudent person to protect the interest or safety of others.
Capable of being negotiated; assignable or transferable in the ordinary course of business.
A price which must be expressly agreed upon, below which the owner (principal) will not sell the property and at which price the agent will not receive a commission; the agent receives the excess over and above the net listing as their commission. This type of commission is unlawful in some states.
A lease in which the tenant (lessee) pays a pro-rata share of normal property expenses such as real estate taxes, insurance, maintenance, etc., thereby assuring the landlord (Lessor) of a fixed income.
A listing whereby the Seller is not obligated to pay the Brokers commission if the buyer was not first identified by the Broker.
An asset unnecessary to the operation of a business enterprise and the generation of its revenues.
Means that the Seller is required to operate the business exactly as if the business was not being sold between initial contract and closing. Specifically intended to prevent the Seller from taking self enriching actions that would have an adverse effect on the Buyer.
a person authorized to perform certain legal formalities, especially to draw up or certify contracts, deeds, and other documents for use in other jurisdictions.
Key points that buyers and sellers want to come to a general agreement on often include: stock or asset purchase, purchase price, down payment, seller financing terms, liabilities assumed, covenant-not-to-compete terms, consulting/employment agreement terms and real estate lease terms.
means any Law designed to provide safe and healthful working conditions and reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.
A deduction by one against a claim of another; e.g. unknown claims against the assets purchased by a buyer may be “offset” against the obligation the buyer owes to the seller (seller financing).
A listing which is non-exclusive; may be given to any number of agencies without obligation to compensate any of them except the one who first secures a Buyer ready, willing and able to meet the terms of the listing, or who secures the acceptance by the Seller of a satisfactory offer. ENLIGN never accepts open or non-exclusive listings.
A written agreement granting to a party the exclusive right, during a stated period of time, to buy or obtain control of property or assets on specified terms, but without any obligation of such party actually to exercise such option.
means any order, award, decision, opinion, decree, injunction, judgment, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Authority.
means an action taken by a Person if (and only if): (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and (b) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority).
means the Articles of Organization and the Operating Agreement of the Company, as amended to the Effective Date.
A generic term used in business brokerage to represent the proprietor, general partner or controlling shareholder (singular or plural as appropriate) of a business enterprise. Generally any individual that has complete or partial interest in a business.
The salary or wages paid to the owner, including related payroll burden.
Total of an owner’s salary and perquisites, after the compensation of all other owners has been adjusted to market value.
A profit and loss statement is a financial statement that summarizes the revenues (income) and costs (expenses) incurred during a specified period.
has the meaning given such term in the introductory paragraph of this Agreement.
A business relationship between two or more persons who join together to contribute to the capital and/or operations of an enterprise, and share the profits and losses (also, see Limited Partnership). Partnerships must lack two or more of the four corporate characteristics (see Corporations) to be taxed as such.
means (a) Inchoate Liens, (b) pledges or deposits made to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, pension, or other social security programs, and (c) good faith pledges or deposits made to secure performance of bids, tenders, Contracts (other than for the repayment of borrowed money), or leases, not in excess of 10% of the aggregate amount due thereunder, or to secure statutory obligations, surety or appeal bonds, or indemnity, performance, or similar bonds in the Ordinary Course of Business.
Expenses incurred at the discretion of the owner which are unnecessary to the operation of the business.
means any natural person, firm, partnership, joint venture, association, corporation, limited liability company, trust, Governmental Authority, or other legal entity.
Any property which is not real property; that which is not permanently affixed to the property. Not a leasehold improvement.
An instrument authorizing a person to act as the agent of the person granting it. A general power of attorney authorized the agent to act generally on behalf of his/her principal; a special or limited power of attorney limits the agent to a specific or particular act.
A pocket listing is a listing that is retained by a business broker and not made available to other brokers or marketed publicly. Pocket listings are marketed privately to selected prospective buyers. A pocket listing may also be referred to as an “off-market listing” or “exclusive listing.”
In the language of the loan business, a point is one percent of the amount of the loan.
In a merger and acquisition transaction, a working capital adjustment typically represents a pre-determined amount of working capital the selling company must have on the books as of the closing date. If the actual amount is more than the pre-determined target amount, the purchase price is increased by the excess. If it is less, the purchase price is decreased.
means an assignment and assumption agreement properly completed, signed, dated, and delivered by the Company and the Seller immediately prior to the Closing.
The employer of an agent. Also, a sum of money owed excluding any accrued interest.
A signed written instrument which acknowledges a debt with the promise to pay the debt on specified terms, (i.e. payment amount, payment date(s), interest rate and term).
means, when used with reference to a specified Person, any intangible property right owned by such Person, including, but without limitation: (a) any patent, invention, and industrial design (whether or not patentable); (b) any registered, unregistered, and common law trademark, service mark, domain name, logo, and trade name; (c) any copyright; (d) any registration, application, and renewal of any of the foregoing; (e) any trade secret, know-how, customer list, software, formula, production process and technique, mask work, research and development information, investigation, drawing, specification, design, plan, improvement proposal, technical and computer datum, and information relating to any future product plan or strategic issue; and (f) any Rights in or under any Contract to which such Person is a Party or by which such Person is bound, including, but not limited to, any Right in any license agreement and sub-license agreement with third-Persons relating to any of the foregoing.
The division of money obligations according to a formulaic calculation. In a business closing, a seller may have pre-paid certain expenses which are assumed by the Buyer. The costs of these benefits are “prorated” between the Seller and the Buyer as part of the closing statement (e.g. prepaid rent, prepaid advertising, security deposits).
means (a) information that is publicly available, (b) information that a Person develops or has developed independently without use of any Confidential Information of the Company or another Party or its Affiliates, and without such Person’s involvement with the Company or any other Party or its Affiliates, so long as such Person’s independent development of such information can be documented and verified, and (c) information which is rightfully received by a Person from a third-Person who has no duty of confidentiality with respect to such information.
The agreement setting out the terms for the purchase of a business. A purchase agreement is the “road map” followed by the buyer and the seller in a business transaction. It would include items such as a description of what is being purchased, the down payment and repayment terms, buyer and seller representations, warranties, and indemnification’s, and so on. Also commonly referred to as Asset Purchase Agreement, Stock Purchase Agreement or Definitive Purchase Agreement.
A Business Broker who receives introductory information to a business buyer or seller which leads to a client relationship. Some business brokers provide consideration to a referring party in the form of a referral fee.
An individual who provides introductory information which leads to a client relationship. Some business brokers provide consideration to a referring party in the form of a referral fee.
A Business Broker who provides introductory information which leads to a client relationship. Some business brokers provide consideration to a referring party in the form of a referral fee. Some Business Brokers provide consideration to other business brokers by co-brokering and splitting the commission.
The relinquishment of some right or benefit by a person or entity who already has some interest or right therein.
Specific assurances made by Buyers and Seller in a purchase and sale agreement stating that certain statements are true and correct. The purchase and sale agreement also includes specific remedies should assurances made turn out to be false or inaccurate.
means legal and equitable rights, remedies, powers, privileges, and benefits.
The amount of equity retained by the selling shareholder(s) and is measured as a percentage of total equity of the new company and the dollar value of equity retained. Rollover equity is commonly used to bridge the perceived gap in enterprise value by providing a 'second bite of the apple' in the future when presumably the business is worth more providing the seller with a larger multiple than at the time of initial sale.
A small business corporation which is treated differently than a C-Corporation for income tax purposes. Normally, it can be used by a corporation with 75 or fewer domestic shareholders when the corporation has only one class of stock. Individuals, another S Corporation, estates, certain trusts, certain financial institutions and tax exempt organizations may own shares in an S Corporation. An S Corporation may own 100% of a C Corporation. If all the statutory requirements are met, the shareholders can elect to have most of the corporation’s income and deductions flow through to the shareholders in a manner similar to the taxation of a partnership.
Securities and Exchange Commission
means the Securities Act of 1933, as amended, and any successor Law.
is a legal document, properly completed, signed, dated, and delivered by the Buyer (debtor) and the Seller (creditor) at the Closing in the event the debtor fails to pay the principal obligation.
A note payable or loan to the shareholder(s) or owner(s) of a business provided in the sale or transition of a company by the buyer. Seller financing is typically used to bridge a valuation gap either where other forms of financing are not available or where a buyer desires to preserve the borrowing ability of the selling company for secured financing. Seller financing is typically secured by a personal guarantee and UCC filing on the assets being transferred and subordinated below all other debt such as bank loans.
The interest on principal (the outstanding amount borrowed) only as compared to compound interest, which is interest on both principal and accumulated interest outstanding.
means that the Seller has granted permission to a Broker to represent their business to a stated individual or individuals. The broker is not permitted to market the business publicly or share confidential information with any other party; it is "restricted" to the people/companies shown on the agreement. If the business does not sell during the agreements term to the specific Buyer Prospect(s), then the listing terminates. Other Brokers and the Seller themselves can bring other Buyer Prospects which would not pay a commission.
The act of inserting a page with proper execution by all parties to the agreement into a legal document to modify the terms and conditions without modifying the previously executed document.
A business owned by one person or married persons. The owner is personally liable for the debts of the business. The business is not incorporated in any form as a legal entity of its own.
State law which provides that certain contracts must be in writing in order to be enforceable by law; e.g. the sale of real property, a lease of real property for more than one year, broker’s authorization to act as an agent on behalf of his/her principal, etc.
means that the buyer is purchasing all or a portion of the stock of a corporation and the buyer assumes essentially all assets and liabilities of the Seller. In a stock transaction the Buyer is generally not entitled to a step up in basis in the underlying assets in the corporation which is an adverse impact on the Buyer and Buyer is potentially at risk of known and unknown liabilities of the acquired company pre-sale.
The method in which the target and the buyer exchange value. The target sells either assets or stock, and the buyer provides consideration primarily in the form of either cash or stock. The parties could also merge by exchanging stock.
A lease where the lessee can be the lessor, in effect, on a subsequent lease. The owner of the property often must approve in writing the tenant’s right to sublease to a new tenant. This is different from a “master lease” where the lessee has greater control over subletting the property.
The act of making an encumbrance secondary or junior to another lien.
is a legal document, properly completed, signed, dated, and delivered by the Seller, the Agent, and the Buyer at the Closing that defines the order of preference in the event of a default by Buyer (debtor).
means, with respect to a specified Person, any other Person of which at least a majority of the capital stock or other equity securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such Person is directly or indirectly owned or controlled by the specified Person or by one or more of its Subsidiaries.
The length of time after the closing or effective date during which the representations and warranties must be true and the seller is responsible for indemnifying the buyer (e.g., claims by the buyer must be made on or before that date).
The concept that post-acquisition performance, in which the profitability of the continued entity is greater than the sum of the profitability of the individual entities before the acquisition, will increase.
means any tax, assessment, fee, levy, impost, duty, deduction, withholding, or other charge of any nature whatsoever imposed by any Laws or by any Governmental Authority.
means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Law relating to any Tax.
Two or more persons holding an undivided interest in the same property. Each tenant can dispose of his/her undivided interest by deed or by will; upon death, the interest are dispersed per will, trust, estate or by the State in which you live if intestate. (See Joint Tenancy; Intestate)
Double Materiality Scrape, Fair Presentation, In All (Material) Respects, Knowledge, Material Adverse Effect, Operation in Ordinary Course, Sandbagging, 10b-5 Full Disclosure, etc. You should ask the attorney who has drafted the documents exactly what they mean to insure that you understand what you are agreeing to.
Evidence that the person or entity claiming to be the owner of the property is in fact the lawful owner thereof; an instrument evidencing such ownership. Some examples of property in the United States with titles are motor vehicles, land and buildings.
Insures the interest of the buyer or mortgagee in real estate against a defective title and/or fraud.
The total of all consideration passed at any time between the Buyer and Seller for an ownership interest in a business enterprise and may include, but not be limited to, all remuneration for tangible and intangible assets such as furniture, equipment, supplies, inventory, working capital, non-competition agreements, employment and/or consultation agreements, licenses, customer lists, franchise fees, assumed liabilities, stock options, stock or stock redemptions, real estate, leases, royalties, earn-outs and future considerations.
means Debt of the Company relating to the provision of goods and services to the Company for the conduct of the Business of the Company in the Ordinary Course of Business and that are classified as “trade payables or “accounts payable.”
means the Buyer’s purchase of the Interests from the Seller, and the Seller’s sale of the Interests to the Buyer, pursuant to this Agreement, and includes the execution, delivery, and performance by the Parties of this Agreement and the other Transaction Documents.
means this Agreement, the Assignment, the Promissory Note, the Security Agreement, the FIRTPA Certificate, the Employment Agreement, the Pre-Closing Assignment and Assumption Agreement, and all other instruments, certificates, agreements, and documents executed and delivered in connection with the Transaction.
State laws which regulate the transfer of personal property. Article Nine of the U.C.C. creates a security interest in real property used in business transactions to collateralize a bank note and/or seller financing.
The length of time an asset can be utilized before it needs to be replaced.
Correct or legally binding. For example a purchaser of a medical spa must possess a valid medical license; or the terms of the consulting agreement are valid.
VOID - To have no force or effect; that which is unenforceable. Is commonly used to describe an entire agreement or term of an agreement which is no longer enforceable.
To relinquish or abandon; to forego a right to enforce or require anything. Many legal documents have contingent terms that may be waived by a party to the agreement.
To legally assure or a legal or binding promise usually referenced with "Representation" as in "Representations and Warranties".
A loan with which the lender can only look to the security for the debt and cannot go after the buyer personally in the case of default. Also referred to as a non-recourse loan. Often bank loans to closely-held businesses require “personal guarantees” of the business owner(s).