contract agreement for sale of a business

CONTRACT FOR THE PURCHASE AND SALE OF A BUSINESS THIS AGREEMENT is entered into by and between D.V. Rao, hereinafter referred to as Buyer, and Rowell Retail, Inc. hereinafter referred to as Seller. Seller agrees to sell, and Buyer agrees to buy the assets of the business known as a Shell Convenience Store, with business, assets and property located at 12515 Woodlawn Road, Woodlawn, Illinois. $ 1,210,000.00 TOTAL PURCHASE PRICE. Subject to the terms, conditions and adjustments under this agreement. Earnest money deposit by Buyer and held by Richard Carey Attorney at Law. Buyer and Seller acknowledge that any checks accepted by Broker and/or Closing Agent will be deposited and subject to collection. Escrow funds will not be dispersed until they have been cleared by said bank. Escrow accounts will not bear interest. By a duly executed Promissory Note of Buyer to Seller at 7% interest, 20 year amortization with the balance due and payable in 24 months. $ 25,000.00 $968,000.00 $217,000.00 closing. Balance by Cashier's Check, drawn on an Illinois Bank, to Closing Agent at or before THE PARTIES FURTHER AGREE THE SALE SHALL TAKE PLACE IN ACCORDANCE WITH THE FOLLOWING PROVISIONS. 1. PURCHASE PRICE ALLOCATION: The parties agree and acknowledge that the purchase price agreed between the parties represents the value of the business as a going concern and that the parties have made no allocation of the purchase price with respect to the assets to be sold and purchased under the terms of this agreement. The parties further agree that they shall, within the time required by the rules and regulations of the Internal Revenue Service, agree for federal tax purposes only, to an allocation of the purchase price of the assets sold and purchased under the terms of this agreement and shall each cause to be filed form 8594, or its equivalent, pursuant to and in accordance with the rules and regulations of the Internal Revenue Service and Section 1060 of the Internal Revenue Code, as amended from time to time. The parties acknowledge that they have been advised by the Broker, to allocate the purchase price as it is required by Law. 2. TAX DISCLOSURE: Illinois Statutes, governs the sales tax liability of parties involved in the sale or exchange of business assets. Broker discloses the existence of the statutory provision, as well as the potential transferee liability purported to be created therein, but specifically disclaims any responsibility to determine the extent to which the statutory provision is applicable herein. Broker advises that the parties hereto seek the assistance of independent counsel. 3. INVENTORY OF GOODS: It is agreed that the Buyer shall purchase the on-hand inventory of marketable goods at Seller's cost. An itemized physical inventory count shall be taken by Buyer and Seller prior to the closing. 4. BILL OF SALE: The Buyer shall receive from the Seller a Bill of Sale Absolute stating that all assets of the business which are to be sold under the agreement are of marketable title, free and clear of all liens and encumbrances, except any liens and encumbrances disclosed herein. 5. WARRANTY: Seller warrants that all outstanding liabilities of the Business, except as specifically set forth herein, shall be paid in full on or before the Closing of this sale and that Buyer shall receive possession of the Business free and clear of any encumbrances other than the security interest which may be created pursuant to this transaction. Seller’s Initials _______ Buyer’s Initials _______ THIS IS A LEGAL AND BINDING CONTRACT Page 1 of 5 6. INDEMNIFICATION AND RIGHT OF SET-OFF: Seller indemnifies Buyer and shall hold Buyer harmless from all debts, claims, actions, losses, damages and attorney's fees, existing or that may arise from or be related to Seller's past operation and ownership of the Business, except any liabilities assumed by Buyer herein. In the event Buyer should become aware of any such claim against the Business, not disclosed by Seller prior to Closing, Buyer shall promptly notify Seller in writing of such claim. In the event the Seller does not satisfy such claim or said claim is not disputed within ten days from the receipt of such notice, Buyer may, at its sole option, pay such claim and receive full credit against any Promissory Note owed to Seller under this contract. 7. CLOSING DATE: The undersigned hereby agree to execute any and all documents necessary to clos e this transaction. The Closing Date for this sale shall be on November 16, 2004 or before that date by mutual consent. Any extension of this closing date must be in writing and signed by Buyer and Seller. 8. CLOSING AGENT: The parties hereby appoint Seller’s Attorney or an appointed title company as Closing Agent to receive, deposit and distribute funds for the parties and acknowledge that Closing Agent shall prepare and obtain execution of escrow instructions, closing documents and instruments evidencing the terms and conditions of this transaction, as are required for the closing, conduct the closing, and provide for recording the documents. Buyer and Seller agree to execute said documents as are reasonably requested by the Closing Agent and each to pay one-half (1/2) of Closing Agent's fees and expenses. Such expenses shall include judgment and lien search, documentary stamp taxes, and the recording or filing of UCC-1 Financing Affidavits, Closing Agreement, Bill of Sale, Promissory Note, and such other documents as may be necessary, in the opinion of the Closing Agent, to effectuate the transaction. 9. COMPANY DEPOSITS AND PRORATION: Any amounts currently on deposit for the benefit of the business for utility service, leases, etc., are not included as part of this transaction. Buyer shall, effective with the closing, deposit such amounts necessary to continue the operation of the business. Taxes, insurance, rent, utilities, interest, etc., shall be prorated at the time of the closing of the sale. 10. ACCOUNTS RECEIVABLE AND PAYABLE: All accounts receivable and payable accruing prior to the closing shall be the property and responsibility of the Seller and are not included in this Agreement. All accounts receivable and payable accruing after the closing shall be the property and responsibility of the Buyer. 11 LITIGATION: Seller represents and warrants that, to the Seller's knowledge, there is no litigation or proceedings pending against or relating to the business; nor does the Seller know or have reasonable grounds to know of any basis of any such action or governmental investigation relative to the business, its properties or employees. 12. EQUIPMENT WARRANTY: All equipment included in this sale is being purchased on an "as is" basis; however, Seller warrants that all equipment shall be in good working order at time of closing. If not in working condition, Seller shall repair at his expense. Buyer shall be responsible for inspecting said equipment in order to determine that, as of the date of Closing, said equipment is in working condition. Seller’s Initials ______ Buyer’s Initials ______ THIS IS A LEGAL AND BINDING CONTRACT Page 2 of 5 13 OPERATION OF THE BUSINESS: Seller agrees to operate the business in substantially the same manner as has been customary in the past and shall deliver to Buyer, at time of closing, all customer accounts and records, supplier records, and any other documents pertinent to the operation of the business. Seller further agrees to maintain the business premises including heating, cooling, plumbing, electrical, etc., in a working and clean orderly condition. Any risk of loss shall be upon the Seller until closing, and upon the Buyer immediately thereafter. Buyer shall be responsible for inspecting the business premises prior to closing. 14. BUSINESS RECORDS: At the closing of this sale, Seller shall deliver to Buyer all customer accounts and records and any other documents pertinent to the operation of the Business. 15. STATUTE AND REGULATION COMPLIANCE: Seller hereby warrants that the business and/or premises conform with all requirements of the state, county, city or local government at the time of closing. Any expenses to bring the business and/or premises to the necessary standards shall be at the Seller's sole cost and expense. Seller agrees to cooperate with Buyer in obtaining, at Buyer's expense, any licenses, permits, approvals or certificates necessary for the continued operation of the business. 16. BUSINESS INFORMATION ACKNOWLEDGMENT: It is hereby understood and acknowledged by Buyer and Seller, that the financial and general business information and any further information provided by Broker, was provided to Broker by Seller. Buyer acknowledges that Buyer is relying solely on Buyer's own inspection of the Business and the representations of Seller as regards to the prior operating history of the Business and all material facts in making this offer. Buyer further acknowledges Broker has not done any independent investigation whatsoever of the business, and has not and will not verify the representations of the Seller. 17. BROKER'S FEE: The parties acknowledge and agree that the Seller has engaged the services of AMERICAN BUSINESSS BROKERS (Broker) and that the Broker has performed all its duties pursuant to the Broker Agreement with Seller and has earned its commission. Seller shall pay AMERICAN BUSINESS BROKERS commission of Eight percent (8%) from the proceeds of closing. Broker shall be deemed to include any and all other brokers with whom Broker is co-broking. 18. DISPERSAL OF FUNDS: At the time of closing all funds will be disbursed by the Closing Agent in accordance with the closing statement, which will be agreed to and signed by both Buyer and Seller. 19. DEFAULT: If Buyer should fail to pay on or before the closing date the balance of cash necessary to close this transaction, or to perform any of the covenants and conditions of the contract, all funds held in escrow shall be considered as liquidated damages and shall be dispersed as follows: payment of accrued closing agents costs, if any, with the remaining amount distributed one-half (1/2) to the Seller and one-half (1/2) to the Broker, not to exceed the total amount of the commission which would have been due to the Broker had the Buyer not breached and had consummated the sale. In the event Seller shall default by failing to perform any of the covenants and conditions contained in this Contract, Buyer shall have the right to terminate this Contract and demand the return of its escrow deposit. Seller’s Initials ______ Buyer’s Initials ______ THIS IS A LEGAL AND BINDING CONTRACT Page 3 of 5 20. ESCROW DISPUTES: In the event of a dispute at any time among Buyer, Seller and/or Broker, which may involve funds held in escrow by Broker, Broker shall notify the Illinois Real Estate Commission of such escrow dispute. The Escrow Agent shall have no liability making delivery of any held in accordance with the provisions of this contract. 21. PRE-CLOSING COVENANTS: Buyer and Seller agree not to divulge any of this information about this transaction prior to Closing. Buyer agrees not to visit business premises prior to Closing without Seller's approval. 22. INCORPORATION BY BUYER: It is acknowledged and agreed that Buyer may elect to incorporate. In such event, the new corporation shall become the buyer, and Buyer shall cause the corporation to ratify all of the terms and conditions of this Purchase Contract. Further, Buyer shall continue to be personally liable for the performance of the terms, covenants and conditions herein. covenants contained herein. 23. SEVERABILITY: In the event that any of the provisions or portions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, the validity of the remaining portions and provisions shall not be affected, and thereby held to be enforceable and valid. 24. SURVIVABILITY OF CONTRACT: The terms of this contract shall survive the closing and shall bind and inure to the benefit of the successors, assigns, personal representatives, heirs and legates of all parties. 25. GOVERNING LAW: This contract shall be governed by the law of the State of Illinois and venue on any action brought under the terms of this contract or arising from this contract shall be in Jefferson County, Illinois. 26. EXECUTION OF CONTRACT: This contract may be executed by the parties in one or more counterparts each of which shall be an original and all of which constitute one and the same agreement. 27. CONTINGENCIES: (1) Buyer will be allowed to examine Seller’s profit/loss statements, sales records, and all books and records for these locations within 10 days of the signing of this agreement and after such review, Buyer shall be entitled to terminate this Contract if not satisfied with the information provided: and thereafter his down payment shall be returned. (2) Seller shall provide to Buyer within an EPA document sufficient to verify that said property is not in violation of any contamination or in violation of any EPA laws. In the event of the purchaser being a corporation, the signatory to this agreement shall, in addition to the corporation, be personally liable for the performance of the terms, conditions and Seller’s Initials ______ Buyer’s Initials ______ THIS IS A LEGAL AND BINDING CONTRACT Page 4 of 5 THIS IS A LEGALLY BINDING DOCUMENT. READ IT CAREFULLY. If you do not understand it, consult with your advisors. Broker and Closing Agent are not authorized to give legal or tax advice. OFFER ACCEPTANCE: Buyer's offer shall be open for the Seller's written acceptance on or before 5 PM October 20, 2004. Time is declared to be of essence under this agreement. BUYER'S SIGNATURE: The undersigned Buyer expressly acknowledges fully reading, understanding and receiving a signed copy of this Agreement. Dated and received this the BUYER: BUYER: SELLER SIGNATURE: The undersigned Seller hereby agrees with the terms and conditions state above, and acknowledges receipt of a signed copy of this Agreement. Dated and received this the SELLER: SELLER: day of SELLER: SELLER: , 2004. day of BUYER: BUYER: , 2004. Seller’s Initials ______ Buyer’s Initials ______ THIS IS A LEGAL AND BINDING CONTRACT Page 5 of 5