Guarantee of Obligations under Asset Purchase Agreement

If you are selling Asset of a company and has entered into Asset Purchase Agreement with the buyer then, how would you be sure that, the payments would be paid by the buyers or he would honors his obligations under the Agreement? To safeguards your interest, you can insert the guarantee and indemnity clause in the Asset Purchase Agreement, where the guarantor, would guarantee of obligations.

When the Asset Purchase Agreement is entered between the business Asset buyers and seller of Assets, Guarantee of Obligations under Asset Purchase Agreement, guarantee and indemnity clause is inserted, where the obligations of the sellers are guaranteed. Basically, the guarantor is a parent company or third party.

The necessity of guarantor arises when the buyer defaults in his obligations under the Agreement. The guarantor is basically Parent company or third party, who promises to perform the obligation of buyer in case of his default. The third person, through written guarantee pays of debt or other obligations as agreed by the buyer. Such guarantee strengthens the hand of the vendor at the time of sale amount recovery.

It is also essential to understand, what Asset Purchase Agreement is? Asset Purchase Agreement is entered between the business Asset buyer and seller of such Assets, without a sale of stock or transfer. This type of sale and purchase transaction is basically entered, when one business or company buys another company. The Agreement defines the assets and liabilities that are sold by the seller or purchased by the buyer.

The Assets that are to be sold may include real estate, office supplies, professional services, intellectual property, machineries, furniture or any other assets. The liabilities are connected to the assets and are termed accordingly. The Agreement contains numerous clauses and provisions and among all main clauses, the Guarantee and Indemnity clause is most important for the protection of the Buyers and Sellers rights.

Below given Guarantee of Obligations under Asset Purchase Agreement template can help you in safeguarding your interest in Asset Purchase Agreement:

Guarantee of Obligations under
 Asset Purchase Agreement

Guarantee

TO: ____________________[Name of Vendor] (the “Vendor”)

RE:
__________________[Name of Purchaser] (the “Purchaser”) Purchase from the
Vendor of the Assets of __________________[Name of Purchased Business],
________________________[Address of Purchased Business] pursuant to an Asset
Purchase Agreement dated as of ___________________[Date of Asset Purchase Agreement] (the "Purchase Agreement") among the Vendor and the Purchaser
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby

acknowledged, the undersigned, ______________________[Name of Guarantor] (the “Guarantor”) hereby unconditionally guarantees to the Vendor, payment and performance by the Purchaser of all amounts owing to the Vendor and performance of all obligations of the Purchaser under the Purchase Agreement (collectively the “Obligations”) and indemnifies the Vendor as a debtor and not simply as a surety.

The Guarantor hereby further agrees with the Vendor as follows:

1. The Vendor shall not be bound to exhaust its recourse against the Purchaser or others of any securities it may at any time hold before being entitled to payment and performance from the Guarantor of the Obligations. The Guarantor renounces to all benefits of discussion and division.
2. This Guarantee shall not be affected by any change in the name of the Purchaser, or by any change whatsoever in the objects, capital structure or constitution of the Purchaser, or by the sale of the Purchaser’s business or any part thereof or by the Purchaser being amalgamated with any corporation, but shall, notwithstanding any such event, continue to apply to all Obligations; and in the case of the Debtor being amalgamated with acorporation, this guarantee shall apply to the liabilities of the resulting corporation, and the term " Purchaser " shall include each such resulting partnership and corporation, or by the insolvency, bankruptcy, dissolution, winding up or incapacity of the Purchaser, but shall notwithstanding the happening of any such event continue to apply to the Obligations.
3. The Guarantor shall be bound by any account settled between the Vendor and the Purchaser, and if no such account has been so settled immediately before demand for payment under this Guarantee any account stated by the Vendor shall be accepted by the Guarantor as conclusive evidence of the amount which at the date of the account so stated is due by the Purchaser to the Vendor or remains unpaid by the Purchaser to the Vendor.
4. No suit based on this Guarantee shall be instituted until demand for payment has been made, and demand for payment shall be deemed to have been effectually made upon the Guarantor if and when an envelope containing such demand, addressed to the Guarantor
   as follows:

                _____________________________
               
                 ______________________________
               [Address of Guarantor]

5. is posted, postage prepaid, in the post office. Moreover, when demand for payment has been made, the Guarantor shall also be liable to the  Vendor  for al legal costs (on a solicitor and client basis) incurred by or on behalf of the Vendor resulting from any action instituted on the basis of this Guarantee.

6. This Guarantee shall extend to and enure to the benefit of the Vendor and its  heirs, executors, successors and assigns, and every reference herein to the  Guarantor is areference to and shall be construed as including the Guarantor,  and its successors and assigns or of each of them or of any of them, as the  case may be to and upon all of whom this Guarantee shall extend and be  binding

7.   This Guarantee shall be governed by the laws of the   State of__________________[State].

IN WITNESS WHEREOF the Guarantor has executed this Guarantee as of _________________[Date of Guarantee].

Witness__________________

[NAME OF GUARANTOR]________________