Opinion ID: 169956
Heading Depth: 3
Heading Rank: 2

Heading: The Asset Acquisition Agreement

Text: As M r. Hipple came to better understand M errill Scott’s dire financial condition, he realized that EPI was its only valuable asset. Referring to EPI, he testified at his deposition that “M errill Scott itself really had essentially no value other than a collection of fairly talented employees, attorneys, accountants and some others.” Supp. R. vol. XI, doc. 123, ex. 1 at 146. He therefore recommended to M r. Brody that they “try to save that group of employees and that talent and see if something could be made of the financial planning and tax business by forming a new company with those employees.” Id.; see id. at 175 (“[W ]e were trying to salvage the business out of a bankrupt corporation.”). M r. Brody agreed with this plan, and on October 12, 2001, M r. Hipple incorporated International Planning Associates, Inc. (“IPA ”), naming himself as Chairman, CEO, and sole shareholder. According to M r. Hipple’s own testimony, IPA was formed for the singular purpose of acquiring M errill Scott’s tax and financial planning business embodied in EPI. Through mid-October, M r. Hipple worked with M r. Brody and others to draft the Asset Acquisition Agreement (“Agreement”), governing the sale of M errill Scott’s tax and financial planning -5- business. 1 He admits that while he was still a director of M errill Scott he negotiated the terms of the agreement on behalf of IPA. The Agreement is dated October 15, 2001. M r. Hipple testified that on that day, he met with Rodney Read and Dell Gailey, M errill Scott’s two other board members, to discuss the Agreement and the fact that he would resign as a director because “[he] was on the other side of the transaction as well.” Id. vol. XII, doc. 159, ex. B at 221. He went on to testify that “the board then approved the agreement as drafted and authorized it to be signed after [he] resigned.” Id. M r. Read signed the agreement on behalf of M errill Scott, and M r. Hipple signed on behalf of IPA. At the same time, M r. Hipple resigned from M errill Scott’s board. W ith respect to the specific timing of his resignation and the execution of the Agreement, he testified: W e did it all at one time. You know, okay, I’m resigning, you’re approving. I mean, it wasn’t like we had a formal meeting with a stenographer or anything. It was just, this has to be done and documented in the corporate records. So it was documented. Id. at 221-22. The Agreement contemplated essentially two separate transactions. First, IPA agreed to assume approximately $106,000 of M errill Scott debt in exchange 1 The record submitted on appeal does not include a signed copy of the Agreement. There are several unsigned copies of the A greement, however, including one attached to the report submitted by the Receiver’s forensic accounting expert Gil A. M iller. And both the Receiver and M r. Hipple agree that it was executed on October 15, 2001. Having no reason to doubt this representation, we accept it. -6- for all of the business conducted by EPI. This included “all future income, work in process, material agreements, employment agreements and confidentiality and non-disclosure agreements, strategic plans and relationships.” Id. vol. XIII, doc. 166, ex. A (Amended Expert Report of Gil A. M iller), tab 10 (Agreement) at 1. Second, in exchange for 15,000 shares of IPA common stock, M errill Scott agreed to sell certain computer hardware, furniture, and telephone assets listed on an attached schedule. According to the Receiver’s expert report, although IPA succeeded to M errill Scott’s relationship with EPI as contemplated in the Agreement, the actual amount of debt assumed and paid by IPA amounted to only $14,816. See M iller Report at 7. M errill Scott also paid certain debts on behalf of IPA, which w ere never repaid, and thus M r. M iller concluded that the actual consideration received by M errill Scott in exchange for its tax and financial planning business was a negative $151,704. According to M r. M iller, in exchange for this amount, IPA received approximately $2.35 million in client fees and commissions generated by EPI after the Agreement was executed. He also concluded that the vast majority of the clients who paid those fees were contacted by M errill Scott before October 15, 2001. Finally, he noted that there was no evidence of 15,000 shares of IPA stock ever being issued to M errill Scott. M r. Hipple disputes virtually all of these findings. He does not dispute, however, that after October 15, 2001, he worked exclusively for IPA. At his deposition, he admitted to establishing bank accounts -7- for IPA and EPI, securing office space for IPA, and taking other action in furtherance of his plan to completely separate the company from M errill Scott.