The
documentation for even a simple transaction can be inches thick. In most
transactions I have been involved in, the buyer’s attorney prepared the
original draft of the documents.
The
main document for the transaction is usually called the Definitive Agreement
(sometimes called the Purchase/Sale Agreement). This document describes what’s
being sold, the price and terms, the representations and warranties of the
parties, contingencies to closing, all of the legal boilerplate and exhibits.
Other documents include: Covenant Not to Compete, Consulting Agreement and Management Agreement.
For transactions where there are downstream payments, additional documents include Security Agreement, Stock Pledge and other security instruments such as a Trust Deed, Personal and Corporate Guarantees. Sometimes there is stock and/or preferred stock that the seller receives as a part of the purchase price.
There are many other documents that become a part of the closing process such as: resignation of the seller from the Board of Directors, Bills of Sale, Tax Releases, Leases and Lease Assumptions and Lease Assignments, Deeds, Board Resolutions, Corporate Records, Physical Inventories, Appraisals, Opinion Letters, Financial Records, Side Letters, Releases of Personal Guarantees, Escrow Provisions, License Transfer, etc., etc.
In the negotiation of the transaction, you are confronted with myriads of issues you have never thought about or considered. Some examples of arcane issues you will face are: bulk sale, definition of default, foreclosure procedure, indemnification, representations and warranties (what and how much exposure, and for how long), subordination, allocation of purchase price, product liability insurance (what happens if a product you produced becomes a product liability case after you sell the business?), ad infinitum.
Most of these issues were not even touched on at the Letter of Intent level. Some are business issues and some are legal issues. Each one will have to be negotiated as a part of finalizing the documentation of the transaction. And many can be deal killers. As a rule of thumb, only about 50% of the signed Letters of Intent ever end up closing.
You will be glad you have your intermediary, your accountant and your attorney to guide you through this jungle.