University Station Alliance

Linking public broadcasting stations and their university partners since 2001

Anatomy Of An Asset Purchase Agreement

  1. Overview
    1. Outline of Steps of Typical Acquisition by Asset Purchase Agreement
      1. Letter of Intent
      1. Purchase Agreement
      1. “Executory Period”: Post-Signing to Closing
        1. Governmental and other third-party consents
        1. Preparation for closing
      1. Closing
      1. Post-Closing
  2. Letter of Intent
    1. Letter as “skeleton” of purchase agreement, setting forth “agreement in principle” and general understandings of the parties
    1. Legally binding agreement vs. agreement to negotiate in good faith
    1. Typical points addressed:
      1. Assets (real property, equipment, licenses, contracts, etc.)
      1. Purchase price and method of payment
      1. Subject to execution of definitive agreement with customary representations, warranties and covenants
      1. Due diligence rights
      1. Key government consents – FCC and PTFP
      1. Exclusivity
      1. Confidentiality
      1. Escrow deposit
      1. Termination date and other “outs”
  3. The Purchase Agreement
    1. The negotiation process
    1. Included and excluded assets in asset acquisitions
      1. Included: real property and tangible personal property, licenses, copyrights, trademarks & other intangibles, assumed contracts
      1. Excluded: cash on hand and cash equivalents, insurance policies, certain books and records, employment agreements & benefit plans
      1. Accounts receivable
  4. Purchase Price
    • Adjustments to purchase price: prepaid revenues, rent, utilities, taxes and other prorations; accounts receivable; specific liabilities
    • Earnest money escrow: liquidated damages
    • Assumption of Liabilities and Obligations
    • Representations and Warranties of Seller/Buyer
    • Pre-Closing Covenants
      • Seller’s affirmative covenants
      • Seller’s negative covenants
      • Joint covenants
    • Conditions to Closing
      • Conditions to Buyer’s obligations
      • Conditions to Seller’s obligations
      • Contrast failure to close due to breach of representations and warranties (liability for damages) with failure of closing condition to occur
    • Closing
      • Scheduling
      • Closing deliveries
    • Termination Rights
      • Terminating events; “drop-dead” date
      • Liquidated damages
      • Specific performance
    • Survival of Representations; Indemnification
    • Miscellaneous Provisions
      • Risk of loss
      • Commissions and brokerage fees
      • Filing fees (FCC filing fee) and counsel expenses
      • Assignment
      • Governing law
  5. The Executory Period: Post-Signing to Closing
    • The closing memorandum
    • Governmental filings and other governmental approvals
    • Third-party consents; assignment of contracts and leases
    • UCC, lien and judgment searches and releases
    • Title commitments, surveys and environmental reports
    • Conduct of business in ordinary course and preservation of assets
    • Additional Buyer due diligence: access to and review of information
  6. General corporate “clean-up” of items uncovered in due diligence process; authorizing resolutions
    • Schedule updates
  7. Closing
    • Standard closing documents; the purchase agreement as “road-map”
    • Prorations: prepaid revenues, rents, taxes, utilities, contractual obligations, barter contracts
    • Notification to governmental authorities and other third parties
    • Use of closing or side agreements to handle problems at closing
  8. Post-Closing