A significant portion of Jonathan A. Azrael and Paul J. Schwab’s practice at Azrael, Franz, Schwab & Lipowitz (“AFSL”) is assisting clients in commercial matters.

AFSL successfully handled a number of transactions last year.   From our perspective, commercial activity increased in Maryland during 2014.   Below is a summary of some of the matters one of our attorneys, Paul J. Schwab, handled last year.

1. Sale of Dental Practice. A client AFSL represented in previous transactions decided to sell his pediatric dental practice. After reviewing the nondisclosure agreement, AFSL helped negotiate the letter of intent and was involved through closing several months later.  The timing of the transaction allowed the purchasing dentist to terminate her prior employment and to obtain bank financing.  (Unlike many purchasers, dentists can frequently get most, if not all, of the purchase price financed by a commercial lender.)  The purchaser entered into a new lease with the landlord, which was good for the seller so it did not need to worry about the purchaser defaulting on the lease.  Important issues in this transaction included the seller’s noncompetition covenants and staff, billing and other transition matters.

2. Purchase of Vending Machine Company. One of AFSL’s longstanding clients acquired the assets of a competitor in the vending machine business at a price of over $1,000,000.00.  The seller had machines at many locations.  Some of them were modern ones in which the sales and inventory could be remotely determined as of the closing.  Others required a physical inspection of the machine to determine its inventory and cash.  To meet the parties’ needs, AFSL closed the transaction within seven weeks of being brought into the negotiations.

The purchaser financed some of the purchase price by loans from a bank and the seller.  The seller’s loan provided funds that could be offset against if the acquired locations did not perform as expected after closing or if the seller’s representations and warranties were untrue.  Besides ensuring that the owner of the selling company and its key employees were prohibited from competing with the purchaser or soliciting the seller’s customers, the contract documents addressed what happened if the purchaser lost a location in the months after closing or if the post-closing revenues from the machines experienced a significant drop.  The contract also detailed the handling of inventory and cash in the older machines and who bore the sales taxes and the costs of transferring the selling company’s vehicles.

3. Purchase of Retail Franchise Business. AFSL was asked to handle the purchase of a franchise location on an expedited basis.  The Baltimore County retail store sold bird seed and feed and other products of interest to nature enthusiasts and other customers.  In addition to preparing the contract and related documents and organizing the limited liability company to purchase the assets, AFSL verified that the seller had good title to its assets, reviewed the franchise agreement and the lease for the location and assisted in the assignment of the existing lease to the purchaser.

4. Lender Funds Purchas and Rehabilitation of Vacant Baltimore City Property. AFSL acted as lender’s counsel in numerous commercial loans.  In that capacity, AFSL reviewed title to real estate and other collateral and prepared the appropriate promissory notes, guarantees, loan agreements, deeds of trust and other documents.

Some of the loans AFSL handled in 2014 might not have been made in prior years.  One was to fund a real estate developer’s purchase and rehabilitation of a vacant building in Baltimore City.  AFSL’s loan documents provided that upon satisfying certain conditions the borrower could obtain funds for its improvement of the acquired property.

5. Loans for Purchase of Real Estate and Business in Baltimore County. A commercial lender asked AFSL to represent it on real estate and business acquisition loans scheduled to close in less than two weeks.  The selling business was a franchisee whose service area included Baltimore County.  It owned a number of vehicles and significant cleaning equipment.  The owner of the franchisee also owned the Baltimore County real estate from which it conducted its business.

The purchaser was to be receiving loans from Baltimore County to partially fund the real estate and business purchases.  The bank made first and second priority loans for the real estate and the business acquisitions.  Its loan documents provided that interest only payments were due on the second priority (‘junior”) bridge loans and that those loans had to be paid off within 90 days of closing.   The borrower subsequently closed on the Baltimore County loans so that the Bank ended up with only first priority loans on the real estate and the business assets.

6. Recycling Business Purchases Real Estate Leased from Baltimore City. A number of years ago AFSL represented a client in leasing a large piece of real estate in Baltimore City. The property was comprised of a number of parcels each with a different tax account number.  The lease provided the tenant with the option to purchase the property at a set price and gave the tenant credit against the purchase price for certain improvements and payments it made under the lease.

The client decided to exercise its purchase option.  AFSL prepared the client’s notice to exercise the option and assisted the client in documenting the expenses for which it received credit and in assigning the purchase option to a company it formed to own the property.  It also worked with the title company to ensure that the unique property was properly described in the deed and communicated with the City Solicitor’s office and the client’s accountant to resolve an open matter that had significant tax consequences. As the deed required approval of Baltimore City’s Board of Estimates and the City insisted that the client address certain concerns of the neighbors, it took almost seven months from the giving of the notice to the recording of the deed.

The attorneys of Azrael, Franz, Schwab and Lipowitz hope the increased activity continues this year and are happy to assist in your commercial transactions.  For information or to schedule a meeting, please contact Jon Azrael or Paul Schwab today.