Pub. 5 2015 Issue 1

11 to the end could cause undue delay, misunderstandings between the parties, and even jeopardize a closing. Third, most dealerships have existing agreements, leases and even non-cancelable contracts with vendors and third par- ties (e.g., computer equipment/software maintenance contracts, agreements for uniforms, advertising, etc.). It is important for these agreements to be reviewed and identified early on so the parties can determine how they are to be handled, whether they will be assumed by the buyer, and what third party consents are required for them to be assigned. Failure to identify and address these obligations can prove costly and adversely impact the buy- sell closing. Fourth, there are certain reasons why a party might seek to use a letter of intent. And while, ordinarily, not a substitute in a buy-sell transaction for the formal buy-sell agreement required by the factory to start the approval process, the letter of intent itself might give rise to a conclusion that it is a binding contract, creating legal obligations of the parties. The best course in the circumstance of a letter of intent, as with any written document, is to first consult with an attorney before it is signed. Fifth, the parties should evaluate the necessity of any due diligence inspections of the business and assets and any real estate and improvements, including who will bear inspection performance costs and the consequence of inspection findings that are not satisfactory. Early determination of these issues could facilitate avoidance of delay, keep the deal together, or allow a party to determine whether to proceed to closing. Sixth, the structure of the selling dealership is often a corpora- tion or other legal entity. Though the buyer may have been dealing with the seller’s majority owner all along, minority shareholders may have rights under the law and the corporation’s governing documents which can impact the buy-sell process. Determine early in the process the rights, if any, of minority shareholders to avoid unnecessary delay and secure required approvals. The better course for aspiring sellers or buyers is to retain competent legal counsel as early as possible before beginning the buy-sell process. Where principals participate in discussions about a prospective deal with interested parties or take other steps before securing counsel, extreme care must be exercised to avoid pitfalls that could adversely result in the undoing of the coveted deal, prove costly to the parties, or impact the parties’ legal rights and protections.  Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois, and has exclusively represented the unique business interests of automobile dealers state-wide for nearly 25 years. Formerly in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her practice in the areas of dealership ownership transfers (asset purchases and stock acquisitions), mergers and acquisitions, franchise law and franchise issues, factory relations, corporate law, add points, commercial real estate transfers, advertising, and other issues impacting day-to-day dealership operations.