Every commercial lease has a sentence that reads like this: “… at the end of the lease term, the Tenant must return the leased premises to the Landlord in the same condition as when the lease term began, normal wear and tear excepted.” Sounds pretty simple. But what about all of the improvements you made, like cabinets, lighting and partitions?” Those improvements weren’t there when you signed the lease. So, returning to the “same condition” may not include those improvements. Who pays to remove them and return your space to its original condition?” Most likely, it’s you. (more…)
Business acquisition agreements have special features that you wouldn’t normally expect to see in run-of-the-mill contracts. This articles discusses two such features: pre-closing covenants and closing conditions.
Business acquisition agreements generally include a few covenants which obligate the purchaser and seller to do, or refrain from doing, certain things. In deals where there is a period of time between signing the purchase agreement and the closing (similar to buying a house where you sign a contract and then close the deal a few weeks later), there are normally a number of pre-closing covenants.
The purchaser usually performs extensive due diligence of the target company’s operations and records during the period between signing the purchase agreement and the closing. (Again, this is similar to the period after signing a purchase agreement for a house during which inspections are made and bank financing is lined up.) The parties also begin obtaining consents and making governmental filings and their legal counsel draft documents necessary for the closing. The parties generally agree to do — or refrain from doing — certain things during this period. Here are some examples of the seller’s pre-closing covenants:
- provide access to its records, assets, and facilities for the purchaser’s due diligence;
- continue to operate the business in the normal course;
- not amend its corporate documents;
- not sell additional equity;
- not do anything that would have an adverse effect on the business or its assets or operations;
- obtain required consents;
- refrain from negotiating with any other potential purchasers; and
- use its best efforts to fulfill the conditions to closing.
The purchaser’s covenants are not nearly as extensive. The purchaser might covenant for the following:
- obtain required consents; and
- use its best efforts to fulfill the conditions to closing.
Business acquisition agreements generally provide that certain things must happen before the purchaser has an obligation to proceed with closing, and certain things must happen before the seller is obligated to sell. These are known as closing conditions. In transactions where there is a simultaneous signing and closing (i.e., the acquisition agreement is signed at the same time that the transaction closes), closing conditions aren’t necessary.
Here are some examples of typical closing conditions that must be met before the purchaser is required to close the deal:
- the representations and warranties are true and accurate;
- required consents have been obtained;
- the seller has performed its pre-closing covenants;
- there has been no material adverse change in the business, or its assets or operations; and
- there has been no legal proceeding that would stop the transaction from proceeding.
If the respective closing conditions aren’t met, the parties aren’t obligated to close the transaction.
You love to shop … or maybe you don’t. But in either event we have to buy things to survive. In your business you routinely make purchase decisions, large and small. Here’s a business purchase quiz for you: Have you ever negotiated a critical purchase without knowing how much the item costs? Nope. Have you ever bargained with a supplier without seeing the price list? Of course not. Have you ever spent hours and hours ($$) finding a much wanted item and then spent more hours ($$) arranging special delivery and more hours ($$) getting it assembled AND THEN asked how much it costs? No, you say?
But that’s probably how you negotiated your lease, if you negotiated at all. People spend countless hours looking for the location, negotiating with a broker, picking out carpet and paint colors BEFORE they ever see the lease. How can that be? Because business owners (that’s you) think that commercial leases are really all the same. Leases are a commodity right? Wrong … oh, so wrong. Of course you know the base rent and the options to renew. But everything else just seems a blur. No matter. None of that other stuff really matters. Wrong … oh, so wrong. (more…)
Seems we just can’t get away from those pesky, real estate/environmental liability issues. We now have a couple of Appellate Court cases on the Bona Fide Prospective Purchaser defense (the “BFPP” for those of you following my blog posts).
You will remember that in order to claim the defense, you have to do things before you buy the property, and then, do things after you buy it. Well, one of these cases addresses the before and after part. The other case only addresses the after part.
How many times do I have to tell you, you have to do both parts. . .
First, in Voggenthaler v. Maryland Square LLC., 2013 WL 3839330 (CTA 9, 2013), a purchaser of a shopping center knew one of its tenants had some problems with dry cleaning fluid. It bought the property anyway. We only know it found out because the seller disclosed a report that said the property was contaminated. And, if that was not enough, there was an issue about whether it exercised due care on the post purchase obligations. (more…)
Workers’ Compensation. Just the phrase causes many to conjure up images of employees faking injury to secure monetary reward. Employers cringe when they hear “workers’ compensation” or an “on the job injury”.
However, it may come to a shock that many small businesses are unaware of the laws that are meant to protect not only employees in the state of Missouri but employers as well. In many, many instances, an employer is much better served operating under the workers’ compensation system. One could write a novel on the do’s and don’ts of workers’ compensation cases, both from the perspective of the injured employee as well as from the perspective of the covered employer. In an effort to streamline a tedious subject, following is a summary of what small businesses should know about Missouri workers’ compensation and why they should care it exists. (more…)
So we’ve talked a lot about how to avoid environmental liability when buying or leasing real property. The next question is, how do I know if I have an environmental problem, and when do I call in an environmental lawyer? We lawyers all want to be wanted, so the answer is, as soon as you contemplate the transaction.
Actually I jest; it is more than just because we want to be wanted. There really are good reasons for getting the environmental lawyer involved. Most importantly, is that the environmental lawyer can really help when the property has any number of conditions which indicate a potential for problems. So what is on the list? If you have:
Dinosaurs are extinct right? Well, not in the business world. There’s a dinosaur still in our midst known as the limited partnership. In reviewing loan documents for a local lender I uncovered what should have been a fossil, but alas, it was still living. Limited partnerships (LP’s) were originally created to allow for both limited liability and the benefit of partnership taxation. (Corporations provide limited liability, but could never be taxed as partnerships.) (more…)
Many times, companies and/or manufacturers entering into a long-term lease of premises, sign a lease that contains some very interesting provisions with respect to the providing of liability insurance, workers’ compensation insurance, etc.
This is also true when it leases equipment/autos. The lease of equipment usually contain provisions with respect to the obligation of the company or manufacturer to provide specific types of insurance with specific limits required, and in many instances a requirement that the landlord/lessee be named as an additional named insured and that certificates of insurance be provided to them. (more…)
The general rule in Missouri is that the employer is immune to civil liability or third-party actions arising out of injuries to one of its employees. The employee’s sole remedy for those injuries fall exclusively under the Workers’ Compensation Statute.
This no longer is the rule. The employer can now find itself brought in as a third-party defendant by the provider of an electrical utility if for any reason the employee was injured by an “overhead power line”. The statute specifically states and, case law interpreting it as well, makes the company/manufacture employer liable to the utility and, is no longer immune for these type of actions. Section 2 of the Workers’ Compensation Policy would therefore be called upon to provide coverage, but in most instances, the limits of liability our $100,000.00. (more…)
For those companies and manufacturers, who use temporary employment services to provide employees to conduct their usual and customary business, a serious situation can arise where the company can be left without Workers’ Compensation Coverage.
This can occur when the “temporary employment service” contract contains provisions that the temporary employee is actually employed by the temporary employment service, that it will be responsible for all benefits, Workers’ Compensation coverage etc. This is “all well and good” so long as there is a Workers’ Compensation policy in effect providing coverage to the “temporary employment service” for any injuries to the temporary employee provided to the company or manufacturer. (more…)