Description

Asset Purchase Agreement (Pro-Buyer)

Summary

This Asset Purchase Agreement is a short-form document for use in the acquisition of certain tangible or intangible assets. Assets under this agreement do not include real property, accounts receivable, or equity interests in other entities. This agreement contains limited representations and warranties, covenants, and indemnification provisions. It also assumes signing and closing are simultaneous, so it does not contain conditions precedent or termination provisions.

Asset Purchase Agreements vary in length and complexity depending on several factors, such as:

• The relationship between the parties.
• Whether signing and closing are simultaneous or separate.
• The size of the deal.
• The assets being purchased.
• The liabilities being assumed.

Details

Businesses selling all or substantially all of their assets should consider using a different agreement. Additionally, businesses selling a division or line of business should consider using a different agreement than this one. In a sale involving all or substantially all assets, the purchase agreement must contain more comprehensive representations and warranties about the acquired business and the purchased assets. Parties should require such comprehensive representations and warranties due to the greater potential for post-closing liabilities. A buyer can try to limit the liabilities it assumes to those expressly stated in the purchase agreement. However, certain federal and state laws may supersede the limitations set out in the agreement. Such laws may impose successor liability on the buyer when it acquires all or substantially all of a business’ assets.

Assumptions

This Asset Purchase Agreement assumes that:

There is a single corporate buyer and a single corporate seller.

If there are additional buyers or sellers, adjustments must be made. For example, the buyers or sellers should determine whether their obligations are joint, several, or joint and several. Once making such determination, buyers and sellers should amend the agreement accordingly.

The acquisition is an arm’s-length transaction.

Affiliated parties (such as a parent company and subsidiary) may not have any representations and warranties or indemnification rights. If they do, these provisions would be much more limited.

Signing and closing are simultaneous.

If signing and closing are not simultaneous, sections containing pre-closing covenants, conditions precedent, and termination rights should be added to the purchase agreement.

The acquisition does not involve the sale of real property, accounts receivable or equity interests in other entities.

The buyer and the seller are US corporations and the purchased assets are located in the US.

Parties may need to modify this agreement to comply with local laws.  Thus, parties should consider modifying this agreement or its terms if organized or operating in a foreign jurisdiction.  Additionally, parties should consider modifying this agreement if their transactions take place in a foreign jurisdiction. Further, parties should consider modifying the asset purchase agreement if the purchased assets are located in a foreign jurisdiction.

The transaction does not trigger filing requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).

The HSR Act requires parties to M&A transactions to file premerger notification forms with the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) and to wait a specified period before the acquisition is closed. However, meeting thresholds for the size of the parties and the transaction can trigger the HSR Act filing and waiting period requirements.

Other Considerations

A buyer typically prepares the first draft of the asset purchase agreement, which favors the buyer. Most of the provisions in the initial draft then go through several rounds of changes during negotiations. This asset purchase agreement favors the buyer. Nevertheless, this agreement is relatively reasonable for those aiming to reduce time and expenses towards a final version.