Schedules and Exhibits

Supporting documents are attached to the purchase agreement as schedules or exhibits. The range of schedules and exhibits required will heavily depend on whether the sale is structured as an asset or stock sale. Certain schedules or exhibits may not be necessary for stock sales, as some agreements are transferable despite a significant change in the entity’s ownership. If the third-party agreement, such as the lease, contains a change of control provision, then they will need to be individually transferred and will not automatically transfer in a stock sale. Typical supporting documents include:

• For Asset Sales
  • Bill of Sale: This document is used for asset sales and transfers your company’s individual assets to the buyer via a bill of sale. The bill of sale may list both tangible and intangible assets included in the sale. Some advisors list intangible assets separately and transfer them using a separate set of exhibits.
• For Stock Sales
  • Assignment of Shares: This document transfers shares of your entity and is only used for stock sales. The shareholders of the selling entity will individually sign over their stock certificates to the buyer at closing.
• Reps and Warranties and Indemnification
  • Disclosure Schedules: Any exceptions to the reps and warranties are listed in the disclosure schedules.
  • Escrow or Holdback Agreement: Holdbacks are common in middle market transactions and require a third-party escrow agent to hold back a portion of the purchase price to reimburse the buyer for any covered items until the holdback period has expired.
• Tax
  • Allocation of Purchase Price: This breaks down the purchase price into separate asset classes for tax purposes and is recommended for both asset and stock sales.
• Security for the Seller Note
  • Promissory Note and Security Agreement: This document is recommended if a seller note is involved. The promissory note outlines the terms of repayment, and the security agreement enables you to place a UCC lien on the assets of the business until the buyer pays the note in full. A Uniform Commercial Code-1 (UCC-1) statement also needs to be filed to perfect the lien. Your lien may be in a junior position if the buyer obtains third-party financing to complete the acquisition.
  • Share Pledge Agreement: For stock sales, shares of your entity can be held in trust or escrow until the buyer pays the note in full. A buyer would likely only agree to this if a significant seller note was involved.
• List of Assets Included in the Purchase Price
  • List of Tangible Assets: This is a detailed list of all tangible assets that are being sold. This list isn’t necessary for stock sales, although it doesn’t hurt to be clear on which assets are owned by your entity and which assets are owned by you personally. Keeping an accurate list of assets can help prevent future litigation regarding which assets were meant to be included in the sale.
  • List of Intangible Assets and Intellectual Property: This exhibit includes a list of intangible assets included in the sale, such as phone numbers, websites, and other intangible assets.
  • List of Titled Property: A list of titled property included, such as real estate or vehicles. Titled assets require a separate set of transfer procedures. For example, vehicles may need to be transferred through the Department of Motor Vehicles in your home state.
• Assignments
  • Assignment of Contracts: This document transfers third-party contracts, such as equipment leases, from you to the buyer at closing.
  • Assignment of Intellectual Property: This exhibit transfers any intellectual property (IP), such as patents, trademarks, or other registered IPs, from you to the buyer. It can also transfer non-registered IPs, such as phone numbers, websites, and other forms of content.
• Miscellaneous
  • Employment/Consulting Agreement: This is necessary if you’ll continue working for the buyer in some capacity, although it can also take the form of an employment or consulting agreement.
  • Non-Competition Agreement: The non-competition agreement contains a description of what you may and may not do and for what period you’re restricted from competing. Almost all M&A transactions include a non-compete agreement. Sometimes this agreement is included as a clause in the purchase agreement, and sometimes it’s listed separately as an exhibit. The non-compete agreement should be voided if the buyer defaults on payments to you.
  • Corporate Resolution: A corporate resolution is required by the seller in an asset sale if the seller is an entity. Technically, the seller in an asset sale is the entity, such as a corporation or LLC, and a corporate resolution is required in most corporate bylaws when taking major actions, such as selling all assets of the company. A corporate resolution isn’t required if you’re selling your entity, such as in a stock sale. A corporate resolution may be required by the buyer whether an asset or stock sale.