ASSET PURCHASE AGREEMENT DRAFTING PROMPT

You are an expert transactional attorney specializing in mergers and acquisitions. Your task is to draft a comprehensive Asset Purchase Agreement that protects your client's interests while facilitating a smooth transaction. This agreement governs the sale of specific business assets from a seller to a buyer, excluding certain assets and liabilities as negotiated by the parties.

DOCUMENT HEADER AND PARTIES

Draft a formal document header that establishes the legal framework for this transaction. Begin with a clear title "ASSET PURCHASE AGREEMENT" centered and in capital letters. Follow with an introductory paragraph that identifies the effective date of the agreement and introduces both parties with their full legal names, state of organization or residence, and designated short-form references (Seller and Buyer). Include a brief recital section that provides context for the transaction, explaining that Seller desires to sell certain assets of its business and Buyer desires to purchase those assets on the terms set forth in this Agreement. Ensure the language reflects the parties' mutual intent to be legally bound and establishes the consideration supporting the agreement.

PURCHASE AND SALE OF ASSETS

Draft a comprehensive section defining the scope of the asset transfer with precision and clarity. Begin with an affirmative statement that Seller agrees to sell, transfer, convey, and assign to Buyer, and Buyer agrees to purchase and acquire from Seller, all of Seller's right, title, and interest in and to the Purchased Assets. Define "Purchased Assets" to include all assets used in or related to the business being acquired, referencing a detailed Exhibit A that will itemize categories such as tangible personal property, equipment, inventory, intellectual property rights, contracts and agreements, customer lists, goodwill, books and records, and any other assets specifically identified. Emphasize that the description should be sufficiently detailed to avoid ambiguity about what is and is not included in the transaction. Use language that conveys the assets are sold "as is, where is" unless specific warranties are provided elsewhere in the agreement.

EXCLUDED ASSETS

Create a clear delineation of assets that are explicitly excluded from the transaction to prevent future disputes. Draft language stating that notwithstanding the broad description of Purchased Assets, certain assets shall be retained by Seller and are not part of this transaction. Reference Exhibit B for a complete list of Excluded Assets, and provide examples that typically include cash and cash equivalents, accounts receivable (unless specifically assumed), certain contracts Seller wishes to retain, assets used in other business operations, corporate records and minute books, tax records and returns, insurance policies and related claims, and any assets specifically identified by the parties. Include a catch-all provision stating that any asset not specifically listed as a Purchased Asset shall be deemed an Excluded Asset. This section should make clear that Buyer acquires no rights to Excluded Assets and Seller retains all ownership interests therein.

ASSUMPTION AND EXCLUSION OF LIABILITIES

Draft a carefully structured section addressing which liabilities Buyer will and will not assume, as this is often the most heavily negotiated aspect of an asset purchase. Begin with a strong statement that Buyer is purchasing assets only and is not assuming any liabilities or obligations of Seller, whether known or unknown, contingent or absolute, except for the Assumed Liabilities specifically identified in this Agreement. Define "Assumed Liabilities" narrowly to include only those obligations specifically listed on Exhibit C, which may include certain executory contracts being assigned, trade payables arising after closing, and specific identified obligations. Then create a comprehensive "Excluded Liabilities" provision that explicitly states Buyer is not assuming any liabilities including but not limited to: liabilities arising from Seller's operation of the business prior to closing, any tax liabilities of Seller, litigation or claims arising from pre-closing conduct, environmental liabilities, employee-related obligations except as specifically assumed, and any liabilities not specifically designated as Assumed Liabilities. Include indemnification cross-references to reinforce that Seller retains responsibility for Excluded Liabilities.

PURCHASE PRICE AND PAYMENT TERMS

Draft a precise section establishing the economic terms of the transaction with clarity regarding amount, allocation, and payment mechanics. State the aggregate purchase price as a specific dollar amount, and detail the payment structure including any combination of cash at closing, promissory notes, earnouts, or other consideration. If the purchase price is subject to adjustment based on working capital, inventory levels, or other metrics, describe the adjustment mechanism in detail including the timing of any post-closing true-up, the methodology for calculating adjustments, and the process for resolving disputes. Specify the form of payment (wire transfer, certified check, etc.) and provide detailed wire instructions or payment delivery instructions. Address how the purchase price will be allocated among different asset categories for tax purposes, referencing Exhibit D for the detailed allocation schedule, and include language requiring both parties to report the transaction consistently with this allocation on their respective tax returns unless otherwise required by law.

REPRESENTATIONS AND WARRANTIES OF SELLER

Draft comprehensive representations and warranties from Seller that provide Buyer with legal recourse if material facts about the business or assets are not as represented. Structure this section with an introductory paragraph stating that Seller represents and warrants to Buyer that the following statements are true and correct as of the date of this Agreement and as of the Closing Date. Include detailed representations covering: (1) Organization and authority, confirming Seller is duly organized, validly existing, in good standing, and has full power and authority to enter into this Agreement and consummate the transaction; (2) Title to assets, warranting that Seller has good and marketable title to all Purchased Assets, free and clear of all liens, encumbrances, and adverse claims except as disclosed; (3) Financial statements, representing that financial statements provided to Buyer are accurate, complete, and prepared in accordance with generally accepted accounting principles; (4) Compliance with laws, confirming the business has been operated in material compliance with all applicable laws and regulations; (5) Material contracts, identifying all significant agreements affecting the Purchased Assets and confirming no defaults exist; (6) Litigation, disclosing any pending or threatened legal proceedings; (7) Taxes, confirming all tax returns have been filed and all taxes paid; (8) Intellectual property, warranting ownership and non-infringement of all intellectual property included in Purchased Assets; (9) Employees and labor matters, disclosing employee-related issues and benefit plan obligations; and (10) Environmental compliance, representing compliance with environmental laws and absence of contamination. Each representation should be drafted with appropriate qualifications such as materiality thresholds and knowledge qualifiers where commercially reasonable.

REPRESENTATIONS AND WARRANTIES OF BUYER

Draft Buyer's representations and warranties, which are typically more limited than Seller's but nonetheless important to confirm Buyer's ability to complete the transaction. Include representations that: (1) Buyer is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with full corporate power and authority to execute this Agreement and perform its obligations; (2) The execution and delivery of this Agreement and consummation of the transaction have been duly authorized by all necessary corporate action; (3) This Agreement constitutes a legal, valid, and binding obligation of Buyer enforceable in accordance with its terms; (4) Buyer has sufficient funds available or financing commitments in place to pay the purchase price and consummate the transaction; and (5) No consent, approval, or authorization of any governmental authority is required for Buyer's execution of this Agreement or completion of the transaction, except as disclosed. These representations provide Seller with assurance that Buyer can perform its obligations under the Agreement.

COVENANTS REGARDING CONDUCT OF BUSINESS PRIOR TO CLOSING

Draft detailed covenants governing Seller's operation of the business during the period between signing and closing to preserve the value of the Purchased Assets. Begin with an affirmative covenant that Seller shall operate the business in the ordinary course consistent with past practice and use commercially reasonable efforts to preserve intact the business organization, maintain relationships with customers, suppliers, and employees, and preserve the goodwill associated with the business. Include specific negative covenants prohibiting Seller from taking certain actions without Buyer's prior written consent, such as: selling, transferring, or encumbering any Purchased Assets outside the ordinary course; entering into, amending, or terminating material contracts; making capital expenditures above a specified threshold; changing compensation or benefits for employees; incurring indebtedness; or taking any action that would make the representations and warranties untrue. These covenants protect Buyer's expectation interest in receiving the business in substantially the same condition as when the Agreement was signed.

NON-COMPETITION AND NON-SOLICITATION COVENANTS

Draft restrictive covenants that protect Buyer's investment by preventing Seller from competing with the acquired business or soliciting its relationships. Structure the non-competition provision to prohibit Seller and its principals from directly or indirectly engaging in any business that competes with the business being acquired within a defined geographic area for a specified period of time (typically two to five years depending on jurisdiction and industry). Define the restricted business activities with sufficient specificity to be enforceable while protecting Buyer's legitimate interests. Include a non-solicitation covenant prohibiting Seller from soliciting, hiring, or engaging any employees of the business or soliciting customers or suppliers for purposes of diverting business away from Buyer. Address the reasonableness of these restrictions by tying them to the geographic scope of the business, the duration to the time needed to establish customer relationships, and acknowledging that Seller is receiving valuable consideration as part of the purchase price for agreeing to these restrictions. Include a severability provision stating that if any restriction is found unenforceable, it should be modified to the maximum extent permitted by law rather than voided entirely.

CLOSING CONDITIONS AND DELIVERIES

Draft comprehensive provisions governing the closing process, including conditions precedent that must be satisfied before either party is obligated to close. Specify the closing date as either a fixed date or a date to be mutually agreed upon, not to exceed a certain number of days after signing. Detail Seller's closing deliverables including: a bill of sale transferring tangible personal property; assignment and assumption agreements for contracts and intellectual property; certificates of title for vehicles and equipment; corporate resolutions authorizing the transaction; certificates of good standing; a certificate signed by an officer confirming that all representations and warranties remain true and all covenants have been performed; releases of all liens on Purchased Assets; consents and approvals from third parties required to assign contracts; and all books, records, files, and data related to the business. Detail Buyer's closing deliverables including: payment of the purchase price by wire transfer; corporate resolutions authorizing the transaction; a certificate confirming Buyer's representations remain true; and the assumption agreement accepting Assumed Liabilities. Include conditions precedent for both parties such as accuracy of representations and warranties, performance of covenants, absence of material adverse changes, receipt of required consents, and absence of legal prohibitions on closing.

INDEMNIFICATION PROVISIONS

Draft a robust indemnification framework that allocates post-closing risks between the parties. Structure Seller's indemnification obligation to require Seller to indemnify, defend, and hold harmless Buyer from any losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising from: (1) any breach of Seller's representations, warranties, or covenants; (2) any Excluded Liabilities; (3) the operation of the business prior to closing; and (4) any specific matters identified through due diligence. Include Buyer's indemnification of Seller for breaches of Buyer's representations, warranties, and covenants, and for Assumed Liabilities. Establish procedural requirements for indemnification claims including prompt notice of claims, opportunity to defend, and cooperation obligations. Set forth limitations on indemnification such as: a deductible or basket amount below which no indemnification is owed; a cap on total indemnification liability (often tied to the purchase price); and a survival period for representations and warranties (commonly 12-24 months for general representations, longer for fundamental representations like title and authority, and indefinite for taxes and certain other matters). Specify that indemnification is the exclusive remedy for breaches except in cases of fraud. Address the relationship between indemnification and insurance recoveries, and whether indemnification is calculated on a gross or net basis.

GENERAL PROVISIONS

Draft standard but essential miscellaneous provisions that govern the interpretation and enforcement of the Agreement. Include a governing law clause specifying which state's laws will govern the Agreement without regard to conflicts of law principles, and consider whether to include a forum selection clause designating exclusive jurisdiction in particular courts. Add provisions addressing: entire agreement and amendment (stating this Agreement constitutes the entire understanding and can only be amended in writing signed by both parties); assignment (typically prohibiting assignment without consent except to affiliates); notices (specifying addresses and methods for formal communications); severability (providing that invalid provisions should be reformed rather than voiding the entire Agreement); waiver (clarifying that failure to enforce any provision does not waive future enforcement); counterparts and electronic signatures; expenses (typically each party bears its own costs); further assurances (requiring parties to execute additional documents reasonably necessary to effectuate the transaction); and construction (stating that the Agreement should not be construed against the drafter). Include a provision addressing confidentiality of the Agreement terms and the transaction unless disclosure is required by law.

SIGNATURE BLOCKS

Draft formal signature blocks that properly execute the Agreement and bind the parties. For each party, include the full legal name of the entity (or individual if applicable), a signature line, a line for the printed name of the signatory, a line for the title of the signatory, and the date of execution. If a party is an entity, ensure the signatory has appropriate authority (typically an officer such as President or Vice President for corporations, a manager or member for LLCs). Consider whether additional signatories are needed, such as individual guarantors if Seller is an entity but personal liability is desired for certain obligations like non-competition covenants. Include acknowledgment language if the Agreement will be recorded or if required by applicable law. Ensure the signature blocks reflect the formality appropriate for the transaction size and complexity.

EXHIBITS AND SCHEDULES

Prepare comprehensive exhibits and schedules that provide the detailed information referenced throughout the Agreement. Exhibit A should contain a detailed list of all Purchased Assets organized by category with sufficient specificity to identify each asset. Exhibit B should list all Excluded Assets with equal specificity. Exhibit C should identify all Assumed Liabilities with precision regarding the nature and amount of each obligation. Exhibit D should provide the purchase price allocation among asset categories in a format consistent with IRS Form 8594. Create disclosure schedules corresponding to each representation and warranty section where Seller discloses exceptions, qualifications, or additional information that would otherwise make a representation inaccurate. Organize schedules to mirror the structure of the representations and warranties section for ease of reference. Ensure all exhibits and schedules are dated, signed or initialed by the parties, and clearly incorporated into the Agreement by reference.

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DRAFTING INSTRUCTIONS: Adapt all provisions to the specific facts of the transaction, including industry-specific considerations, regulatory requirements, and the parties' negotiated business terms. Ensure consistency between the main agreement and all exhibits and schedules. Use defined terms consistently throughout the document. Consider whether any provisions require modification based on the jurisdiction's law, particularly for non-competition covenants and indemnification provisions. Tailor the level of detail and protection to the transaction size, with larger transactions warranting more comprehensive provisions. Review for compliance with applicable securities laws if the transaction involves regulated entities or securities. Consult with tax advisors regarding the purchase price allocation and structure to optimize tax treatment for the client.