Insurance Agency Sales Contract And Loi Pdf

insurance agency sales contract and loi pdf

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This free template Letter of Intent for an Asset Purchase Agreement is a non-binding document outlining the general terms and price by which a buyer proposes to purchase the assets of a particular business.

A letter of intent sometimes referred to as a letter of interest outlines the intent of one party relative to another. These types of letters can be used in a variety of situations including business negotiations , to signal the intent to purchase real estate or by recipients of scholarships or college admissions to indicate the intent to accept a formal offer. In business, a letter of intent is commonly used as an initial proposal to the other party.

Authors: Elliott J. Ehrenreich and Frances A. Comparable sales of businesses: Research what similar businesses in the industry and geographic region have sold for in the past few years. It is sometimes difficult to get full details on all aspects and conditions involved in a completed sale i.

Free Letter of Intent

Authors: Elliott J. Ehrenreich and Frances A. Comparable sales of businesses: Research what similar businesses in the industry and geographic region have sold for in the past few years. It is sometimes difficult to get full details on all aspects and conditions involved in a completed sale i. Trade associations are good sources of general information on comparable sales in certain industries. Most valuations will at least look at some comparable sales of similar businesses see above and thereby provide a sense of the recent market.

Note : If a formal valuation is done, it will typically be requested as part of due diligence process see below. In negotiation process, existence of a formal valuation can get tricky. Typically done as rough estimate in very early discussions between buyer and seller. The buyer will want access to any and all information. Company records should be well organized and formally document previous transactions.

If multiple owners exist, ensure records and ownership are well documented. Buyer will be sensitive to potential issues with minority or disgruntled owners.

Make sure key contracts, suppliers and customers are in order and formalized. Review material leases and agreements with customers, vendors and suppliers. Are they written, and if so, are they signed by all parties? Convert verbal arrangements to writing if critical to the business. Prevent long-standing relationships from being terminated inadvertently.

Also, key employees may need a written employment contract. Review financial statements and assets with a critical eye. Prepare and review projections and budgets to illustrate growth potential to buyers.

Clean up receivables, remove or sell obsolete equipment or inventory, eliminate unprofitable assets. Clean up asset list and explore overall condition of tangible assets. F or buyers , evaluate the overall market for the business: investigate competitors and strategic partners in the business, and evaluate history of customers and suppliers of the business. For sellers , marketing of the business opportunity is tricky.

Buyers should begin discussions with bankers and financial advisors on financing methods and terms. If competitive bidding process is used, loan pre-approval is desired. Sellers should check loan covenants and current debt instruments. Check for any loan prepayment penalties or premiums. If it is a stock deal, can a buyer assume certain debts and liabilities without consent.

An asset sale requires the seller to organize, track and transfer title of all assets to the buyer and requires more documentation to be produced by the selling party. An asset acquisition generally requires the drafting of the following: deeds, bill of sale, contract assignments, assumption agreements and other documents required to transfer assets.

Additionally, there may be problems related to obtaining third-party consents when transferring contracts. The seller will be required to recognize gain on sales and distributions of assets. However, an asset sale is a more favorable structure for a seller if it is selling one division of the seller and retaining another.

Comparatively, an asset sale may leave the seller with unwanted assets which may be difficult to dispose of when the seller is no longer in operation i. A buyer typically prefers to acquire the assets of a company. Advantages include the ability to transfer some contracts without obtaining consent of a third-party, and the seller avoids future liability for any occurrence prior to the sale. Gain is taxed to the seller at capital gains rates.

One disadvantage is that a seller may have difficulty convincing all shareholders of a corporation to sell their stock. A buyer may require the sale of percent of the stock in a company to avoid dealing with future minority shareholders. In a h 10 transaction, the buyer and seller make an election under IRC Section and treat a stock sale as a hypothetical asset acquisition for tax purposes. As such, the potential seller must be cognizant of the fact that a transaction may not be executed and of the fallout related to exposure of confidential information to an existing competitor.

A strong NDA is crucial to outline the terms of exchanging confidential information, and the seller must determine any limits on the exchange of proprietary information.

An NDA should protect the parties in the exchange of confidential information, set parameters for the use of the information and outline recourse available to an injured party if necessary. Financial information: A potential buyer will typically require the seller to produce financial statements and federal and state income tax returns for the last three 3 to five 5 years. A buyer will typically request documentation concerning any loan, credit and security agreements as well as any information on significant equipment or personal property leases.

At this stage of the discussions before any term sheet or letter of intent , the exchange of information is very limited, but it is just enough for the potential buyer to assess the company and make an offer.

For most buyers, these are critical since a buyer is also looking at purchasing the potential growth and future profits of the seller. Binding: A binding letter of intent creates a legally binding obligation and may prevent future renegotiation by a party, including requiring a party to accept a term in the document it later determines to be disadvantageous upon due diligence.

Litigation may result if the parties leave a transaction and break a binding letter of intent. Non-Binding: A non-binding letter of intent includes a clause allowing a party to leave a transaction and does not create a binding legal obligation. The non-binding letter of intent sets forth an agreement in principal and gives the parties the ability to leave a deal in the event unforeseen facts or circumstances occur.

If a competitive bid process is in place, then cash payments will preempt rival non-cash bidders. This is a very common method when the buyer does not have the funds or inclination to pay the entire purchase price at closing. The negotiating positions of the parties are key, especially if the seller is in economic and financial turmoil.

Caution should be used when taking security interest and collateral behind primary lender s. Buyer and seller must be sensitive to the requirements of primary lender i. This method may enable the seller to utilize an installment sales method for tax purposes and defer overall gain at the time of the closing.

Escrows provide recourse for a buyer in the event of a breach of representations and warranties or potential outstanding liabilities of the seller. Seller will often try to limit the purposes and use of escrow funds. The escrow is tied to indemnity obligations and limitations of seller in the definitive agreement. The typical term of escrow ranges from 6 to 24 months from closing.

Future milestones and events must be as objective as possible. The parties agree that additional payments will be made to seller if certain events occur or certain milestones are reached by the business after the closing.

Typical events are future revenues, future sales to a specific customer or other financial metrics. EBITDA earnings before interest, taxes, depreciation and amortization is also a common element and financial metric in an earn-out. Milestones may or may not be realized and thus payments are considered contingent. If an earn-out is proposed, then a seller should seek to keep the existing seller management in place with buyer to run the business and increase the performance of the company.

There is a motivation of seller to make sure the business performs well. Comparatively, seller wants to receive payment for asset infrastructure that enabled the company to operate and generate profits. Working capital adjustments are meant to protect buyer against seller performing or refraining from certain actions such as:. A typical working capital adjustment calculation includes a measurement of the change between the sum of cash, inventory, accounts receivable and prepaids minus accounts payable and accrued expenses.

Other adjustments are included, and parties should ensure financial advisors and accountants review the calculations and methodology. The purchase agreement will address and handle any disputes between the parties on the working capital adjustments. The buyer should review copies of outstanding share certificates for additional restrictions.

Also, the buyer should review corporate minute books and records to determine if existing officers and directors are properly elected. The buyer should determine whether the seller has good title to property to be acquired in the transaction.

A corporate lien search should be performed to determine if any liens are outstanding against the seller. Be aware that, if the seller does business in other jurisdictions or owns property in multiple jurisdictions, then a lien search should be done in each such jurisdiction.

Any specialized equipment held by the seller should be inspected to determine condition, reliability, etc. Buyer should conduct a study to determine if any environmental concerns exist on property acquired as part of the transaction. If appropriate, the buyer should have an independent assessment done of the property prior to sale, and include specific representations and warranties related to condition of any real property acquired in the agreement.

Buyer in a stock acquisition should review financial statements and all federal, state and local tax returns for the past three 3 to five 5 years and determine if it will acquire any material tax liabilities tax obligations or tax assets NOLs.

Buyer should review existing contracts with key suppliers, vendors and other third parties. Buyer should perform a review of existing management, officers and directors to determine whether to retain existing personnel following the transaction. Buyer should review all IP owned by the seller including all patents, pending patent applications, trademarks, tradenames and copyright registration papers.

Buyer should review all existing employment contracts entered into by the seller and existing employees of the seller. Significant HR policies should be reviewed, and an audit of any outstanding or potential litigation by employees against the seller should be performed.

A buyer may incorporate appropriate representations and warranties into the agreement to mitigate any potential exposure related to an outstanding HR liability. Buyer should determine whether the seller must comply with any state or federal regulatory requirements. The buyer should be confident the seller has complied with all necessary regulations in the past, and that it will be able to comply with such regulations after the transaction.

A buyer may incorporate appropriate representations and warranties into the agreement when appropriate. Buyer should require the seller to give specific representations and warranties regarding the acquired business, which protect the buyer of a business and outline the terms whereby a buyer can walk away from a transaction.

Buyer and seller should include certain conditions and requirements in the agreement that must take place in order for each party to be obligated to perform. Buyer and seller should indemnify each other from future liability caused by the other. Representations and warranties should be included in the definitive agreement to protect each respective party from any future claims made against the company or breach of a condition of sale.

The tax consequences following the sale of different classes of assets are not the same for a buyer and seller. Generally, a buyer will benefit from a majority of the purchase price being allocated to assets of the seller.

Letter of Intent for Asset Purchase Agreement - Free Downloadable Template

FirstName] [Client. LastName] [Client. FirstName] [Sender. LastName] [Sender. This Agency Agreement is entered into as of [Date] by and between [Sender.

There is no question that insurance agencies in Massachusetts are consolidating​. considering and executing a final and binding contract regarding an agency purchase or sale. what the other is thinking, then yes, a term sheet, memorandum or letter of intent is not for you. Print Friendly, PDF & Email.

Letter of Intent for Asset Purchase Agreement - Free Downloadable Template

Business owners requiring a letter of intent to purchase real estate, also known as a real estate letter of intent, should start with Priori's real estate letter of intent sample. A letter of intent to purchase of real property outlines the terms of the prospective sale before the buyer commits to the purchase. A lawyer is available for free consultations through Priori to discuss this document and much more. The property "Property" is located at [Insert address and any other identifying information] and more particularly described in Exhibit A, attached hereto and made a part hereof.

There is no question that insurance agencies in Massachusetts are consolidating. There are a myriad of reasons why. In this dynamic insurance environment, existing owners of agencies should be on the lookout for opportunities to acquire or to retire an agency. The information provided in this checklist is not intended to be used as a legal template or considered to be legal advice for any particular situation or party. It is essential to consult with an attorney regarding the specifics of any legal transaction.

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Home Legal Documents Letter of Intent. A Letter of Intent is a written document that outlines a preliminary agreement between two parties regarding the terms of a potential purchase or other transaction. The two parties can settle on certain terms while agreeing to continue to negotiate the other terms and details of the transaction before actually signing a purchase agreement. Describe in detail what is being purchased, including any agreements on what will be included or excluded in the transaction the parties will be negotiating. Include any terms that have been agreed upon, such as purchase price or price adjustments.

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Agreements & Checklists

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Real Estate Letter of Intent – Purchase or Lease

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Letter of Intent For Purchase of Real Property