- Incorporate the specific transaction structure indicated below under "Deal Structure" in the Purchase Agreement I will provide.
- Make modifications for suggested changes (in addition to the below). Don't change anything other than the actual agreement.
- Have a section in the agreement. where I list the items (to be added as attachments) that the seller represents as true.
- Include reasonable remedies for materially false representations.
- Seller will provide 90 hours of consulting over 3 months, to include up to 30 hours of in-person consulting in the 1st month; the remainder can be provided remotely
- Dispute resolution by arbitration, with loser paying both parties' fees
- Purchase price should be allocated $135,000 to equipment and $40,000 to inventory.
- Seller protections: (a) Seller has full access to books and records during period of earn-out, (b) Seller has access to all online financial, operations, and marketing accounts during period of earn out, (c) If bank allows, Seller's name is on bank account during period of earn out, (d) Seller permission is required for adding any debt to the business such that debt-to-operating profit exceeds 3X.
- Seller non-compete is 5 years and 50 miles.
- Asset purchase
- Note that total purchase price is $175,000. The remainder of the payments are independent contractor payments, though they are referred to here as earn-out payments.
- Payment is made through cash at closing and payment through two earn-outs: A and B. Earn-Outs A and B would both be paid. (They are not options.)
- Closing Cash Payment: $250k. Of this amount, $75k is a pre-payment of Earn-Out A's payments, meaning that the first $75k of earn-out accrued under Earn-Out A would not be paid to Robert. The remaining $175k of the initial cash payment is not a pre-payment of earn-out.
- Earn-Out A: 12.7% of revenue minus $37k annually for 2 years. Earn out payments are structured as independent contractor compensation.
- Earn-Out B: 4.1% of revenue minus $11k annually for 2 years. Earn out payments are structured as independent contractor compensation.