California Asset Purchase Agreement

CALIFORNIA ASSET PURCHASE AGREEMENT

Prepared Under California Commercial Code Division 6, Labor Code, Revenue and Taxation Code, and Corporations Code

TABLE OF CONTENTS

1. Parties and Effective Date
2. Recitals — California Regulatory Framework
3. California-Specific Definitions
4. Purchase and Sale of Assets
5. Assumed Liabilities and Excluded Liabilities
6. Purchase Price, Allocation Under I.R.C. § 1060, and California Tax Mechanics
7. California Bulk Sales Compliance (Com. Code §§ 6101–6111)
8. California Tax Clearance Certificates (FTB and CDTFA)
9. Closing and Deliverables
10. Representations and Warranties of Seller
11. Representations and Warranties of Buyer
12. Covenants — Including Cal. WARN Act, § 16600, and § 16601
13. Conditions Precedent
14. Post-Closing Adjustments
15. Indemnification, Basket, and Cap
16. Limitations of Liability
17. Termination
18. Dispute Resolution — California Courts
19. General Provisions
20. Execution
21. Schedules and Exhibits Index

1. PARTIES AND EFFECTIVE DATE

This California Asset Purchase Agreement ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and between:

Seller: [________________________________] ("Seller"), a [________________________________] organized under the laws of [________________________________], with its principal office at [________________________________]; and

Buyer: [________________________________] ("Buyer"), a [________________________________] organized under the laws of [________________________________], with its principal office at [________________________________].

Each a "Party" and collectively the "Parties."

2. RECITALS — CALIFORNIA REGULATORY FRAMEWORK

WHEREAS, Seller owns and operates the business known as "[________________________________]" (the "Business") in the State of California;

WHEREAS, Buyer desires to purchase substantially all of the assets used in the Business and to assume certain specified liabilities;

WHEREAS, the Parties intend that this transaction comply with the following California-specific requirements:

(a) Bulk Sales Law — Cal. Com. Code §§ 6101–6111, which imposes notice and compliance obligations on buyers of business assets in bulk;
(b) California WARN Act — Cal. Lab. Code §§ 1400–1408, which requires 60 days' written notice before a mass layoff, plant closing, or relocation affecting 50 or more employees;
(c) FTB Tax Clearance — Cal. Rev. & Tax. Code § 18662 and § 18669, which impose successor liability on asset buyers for unpaid Seller taxes;
(d) CDTFA Sales Tax Clearance — Cal. Rev. & Tax. Code § 6811, which exposes buyers to Seller's unpaid sales tax liability;
(e) Shareholder Approval — Cal. Corp. Code § 1001, which may require Seller shareholder approval for the sale of substantially all assets; and
(f) Non-Compete Restrictions — Cal. Bus. & Prof. Code § 16600 (general ban) and § 16601 (sale-of-business goodwill exception);

NOW, THEREFORE, in consideration of the mutual covenants herein, the Parties agree as follows:

3. CALIFORNIA-SPECIFIC DEFINITIONS

"Accounts Receivable" means all trade accounts, notes, and amounts receivable arising from Business operations before Closing.

"Affiliate" has the meaning set forth in 17 C.F.R. § 230.405.

"Assumed Liabilities" has the meaning set forth in Section 5.1.

"Bulk Sale" means a sale not in the ordinary course of Seller's business of more than half the Seller's inventory and equipment as measured by fair market value on the date of this Agreement, subject to the thresholds in Cal. Com. Code § 6103.

"Business Day" means any day other than a Saturday, Sunday, or day on which California state government offices are closed.

"California WARN Act" means Cal. Lab. Code §§ 1400–1408 and the regulations thereunder.

"CDTFA" means the California Department of Tax and Fee Administration (successor to the Board of Equalization for sales and use tax purposes).

"Closing" has the meaning set forth in Section 9.1.

"Excluded Assets" has the meaning set forth in Section 4.2.

"Excluded Liabilities" has the meaning set forth in Section 5.2.

"FTB" means the California Franchise Tax Board.

"FTB Tax Clearance Certificate" means the certificate issued by the FTB pursuant to Cal. Rev. & Tax. Code § 18662 certifying that Seller has no outstanding income or franchise tax liabilities.

"Fundamental Representations" means the representations in Sections 10.1 (Organization), 10.2 (Title), 10.8 (Taxes), and 10.10 (Brokers).

"Intellectual Property" means all trademarks (including California state registrations under Cal. Bus. & Prof. Code § 14201), copyrights, patents, trade secrets (as defined by Cal. Civ. Code § 3426.1), domain names, and other IP used in the Business.

"Law" means any California or federal statute, regulation, rule, code, order, or requirement.

"Losses" has the meaning set forth in Section 15.2.

"Material Adverse Effect" means any event materially adverse to the Assets, the Business, or Seller's ability to consummate the transaction, excluding changes affecting (i) the general California economy, (ii) the industry generally, or (iii) California legislative or regulatory changes of general applicability.

"Permits" means all California state and local licenses, permits, and approvals, including any issued by the California Department of Consumer Affairs, California Department of Public Health, CalOSHA, or local business license authorities.

"Purchase Price" has the meaning set forth in Section 6.1.

"Sales Tax Clearance Certificate" means the clearance issued by the CDTFA under Cal. Rev. & Tax. Code § 6811.

"Successor Liability" means the liability imposed on asset buyers under Cal. Rev. & Tax. Code § 18669 (FTB) and Cal. Rev. & Tax. Code § 6811 (CDTFA) for unpaid Seller taxes.

4. PURCHASE AND SALE OF ASSETS

4.1 Assets to Be Purchased. At Closing, Seller shall sell, transfer, assign, convey, and deliver to Buyer all right, title, and interest in the following assets used in the Business ("Assets"):

(a) Accounts Receivable;
(b) Inventory, raw materials, work-in-process, finished goods, and supplies;
(c) Machinery, equipment, vehicles, tools, furniture, fixtures, and computers;
(d) Contracts listed on Schedule 4.1(d);
(e) Intellectual Property and associated goodwill (including California state trademark registrations);
(f) Permits listed on Schedule 4.1(f), to the extent transferable under California law;
(g) Books and records relating primarily to the Assets or Business;
(h) Prepaid expenses, deposits, and security deposits;
(i) Customer lists (subject to CUTSA trade secret protections);
(j) All California state and local business licenses and permits to the extent transferable; and
(k) All goodwill associated with the Business.

4.2 Excluded Assets. The Assets exclude, and Seller retains:

(a) Seller's organizational documents, minute books, and corporate records;
(b) Cash, cash equivalents, and bank accounts;
(c) Tax refunds and credits for pre-Closing periods;
(d) Employee benefit plan assets;
(e) Assets listed on Schedule 4.2; and
(f) Rights under this Agreement.

5. ASSUMED LIABILITIES AND EXCLUDED LIABILITIES

5.1 Assumed Liabilities. Buyer assumes only:

(a) Post-Closing obligations under assigned Contracts (not related to pre-Closing breaches);
(b) Trade payables incurred in the ordinary course and reflected on the Closing Balance Sheet;
(c) Liabilities expressly listed on Schedule 5.1; and
(d) California WARN Act obligations arising solely from Buyer's post-Closing employment decisions (Section 12.4).

5.2 Excluded Liabilities. Buyer does not assume any liability not expressly assumed, including:

(a) Taxes for periods ending on or before the Closing Date, including California income, franchise, sales, use, employment, and property taxes;
(b) Employee benefit plan liabilities;
(c) Product liability claims for products sold pre-Closing;
(d) Environmental liabilities related to pre-Closing operations;
(e) Any liability arising from Seller's failure to comply with the California Bulk Sales Law;
(f) Any CalOSHA penalties or citations arising from pre-Closing conditions;
(g) Pre-Closing California WARN Act liabilities; and
(h) Any Successor Liability for which Seller fails to obtain clearance under Section 8.

6. PURCHASE PRICE, ALLOCATION UNDER I.R.C. § 1060, AND CALIFORNIA TAX MECHANICS

6.1 Purchase Price. The aggregate purchase price consists of:

(a) Cash Consideration: $[________________________________];
(b) Assumption of the Assumed Liabilities; and
(c) Earn-out payments (if any) per Schedule 6.1(c).

(Collectively, the "Purchase Price.")

6.2 Deposit. Within [____] Business Days after execution, Buyer shall deposit $[________________________________] ("Deposit") with [________________________________] ("Escrow Agent") under an escrow agreement substantially in the form of Exhibit A.

6.3 Payment at Closing. Buyer shall pay the Cash Consideration (less the Deposit) by wire transfer to Seller's designated account. The Deposit shall be released per the Escrow Agreement.

6.4 Purchase Price Allocation. Within ninety (90) days after Closing, Buyer shall deliver to Seller a schedule allocating the Purchase Price among the Assets in accordance with I.R.C. § 1060 and the Treasury Regulations thereunder. The allocation shall also comply with California's conformity rules. Both Parties shall report consistently for all California and federal tax purposes.

6.5 Withholding — FTB. If Seller is a non-California resident (individual or entity), Buyer shall withhold and remit to the FTB the amount required under Cal. Rev. & Tax. Code § 18662 (currently 7% of the sales price for amounts exceeding $1,500), unless Seller provides a valid FTB Form 590 (Withholding Exemption Certificate) or FTB Form 593-C.

6.6 Sales and Use Tax. The sale of Assets constituting tangible personal property is subject to California sales tax unless an exemption applies (e.g., occasional sale exemption under Cal. Rev. & Tax. Code § 6006.5). The Parties shall determine the taxable and exempt components and cooperate in CDTFA reporting.

6.7 Property Tax Reassessment. Buyer acknowledges that the transfer of real property or certain tangible personal property may trigger reassessment by the California County Assessor under Cal. Rev. & Tax. Code § 110.1 (change in ownership).

7. CALIFORNIA BULK SALES COMPLIANCE (COM. CODE §§ 6101–6111)

7.1 Applicability Determination. The Parties shall determine whether this transaction constitutes a "Bulk Sale" under Cal. Com. Code § 6102. The Bulk Sales Law does NOT apply if:

(a) The fair market value of the Assets on the date of this Agreement exceeds $5,000,000 (Cal. Com. Code § 6103(3)(i)); or
(b) The fair market value of the Assets, net of liens and security interests, is less than $10,000 (Cal. Com. Code § 6103(3)(j)).

7.2 Bulk Sale Compliance Checklist. If the transaction IS a Bulk Sale under Division 6, the following must be completed:

☐ (a) List of Creditors. Seller shall furnish Buyer a sworn list of Seller's existing creditors, including names, business addresses, and amounts owed, as required by Cal. Com. Code § 6104.

☐ (b) Schedule of Assets. Seller shall provide a schedule describing all business assets included in the sale, per Cal. Com. Code § 6104.

☐ (c) Notice to Creditors. Buyer (or the Parties jointly) shall give written notice of the Bulk Sale to all of Seller's creditors on the sworn list at least twelve (12) business days before the Closing Date, as required by Cal. Com. Code § 6105. The notice shall include:

• A statement that a bulk sale is about to be made;
• The names and business addresses of the Seller and Buyer;
• The location and general description of the Assets;
• The date, time, and place of the Closing; and
• Whether Seller's debts will be paid in full as they fall due from the proceeds.

☐ (d) Recording. If required, the notice shall be filed with the County Recorder's office in the county where the Assets are located.

☐ (e) Proceeds Distribution. If Seller's debts are not to be paid in full, the Parties shall comply with the distribution requirements of Cal. Com. Code § 6106.2.

7.3 Consequences of Non-Compliance. If the Bulk Sales Law applies and the Parties fail to comply, Buyer may be liable to Seller's creditors for the lesser of: (a) the consideration paid by Buyer, or (b) the debts owed to Seller's creditors. Cal. Com. Code § 6107.

7.4 Seller Indemnity for Bulk Sales. Seller shall indemnify Buyer for any losses arising from Seller's failure to provide accurate creditor information under this Section 7.

8. CALIFORNIA TAX CLEARANCE CERTIFICATES (FTB AND CDTFA)

8.1 FTB Tax Clearance. Seller shall use commercially reasonable efforts to obtain a Tax Clearance Certificate from the FTB prior to Closing, confirming that Seller has no outstanding California income or franchise tax liabilities. The Parties acknowledge:

(a) Under Cal. Rev. & Tax. Code § 18669, a successor who acquires a substantial portion of a business's assets may be held liable for the seller's unpaid California tax obligations;
(b) Buyer's exposure as a "successor" extends to the amount of consideration paid to Seller;
(c) If Seller cannot obtain the FTB Tax Clearance Certificate before Closing, the Parties may agree to (i) escrow a portion of the Purchase Price pending clearance, or (ii) obtain a tax lien certificate showing no outstanding liens; and
(d) The FTB clearance process typically takes 30–90 days.

8.2 CDTFA Sales Tax Clearance. Seller shall obtain a Sales Tax Clearance Certificate from the CDTFA under Cal. Rev. & Tax. Code § 6811, confirming that Seller has no outstanding sales or use tax liability. The Parties acknowledge:

(a) Under Cal. Rev. & Tax. Code § 6811, a buyer of business assets who fails to withhold a sufficient portion of the purchase price to cover the seller's unpaid sales tax becomes personally liable for the deficiency;
(b) Buyer may withhold from the Purchase Price an amount sufficient to cover potential sales tax liability until the CDTFA clearance is received; and
(c) The CDTFA typically issues clearance within 30–45 days of request.

8.3 EDD Clearance. Seller shall also provide evidence of compliance with California Employment Development Department ("EDD") obligations, including payment of unemployment insurance contributions and state disability insurance.

8.4 Closing Condition. Buyer's obligation to close is conditioned on receipt of satisfactory clearance certificates or mutually agreed escrow arrangements under Sections 8.1–8.3.

9. CLOSING AND DELIVERABLES

9.1 Closing. The Closing shall occur on [__/__/____] ("Closing Date") at [____] a.m./p.m. Pacific Time, at [________________________________] or remotely by electronic signature exchange.

9.2 Seller Closing Deliverables.

(a) Bill of Sale (Exhibit B);
(b) Assignment and Assumption Agreements for Contracts, IP, and Permits;
(c) Possession of tangible Assets;
(d) Certificates of title for titled Assets;
(e) Certificate of Good Standing from the California Secretary of State dated within ten (10) days;
(f) FTB Tax Clearance Certificate (or escrow arrangement per Section 8.1);
(g) CDTFA Sales Tax Clearance Certificate (or escrow per Section 8.2);
(h) Bulk Sales creditor list and compliance documentation (Section 7);
(i) California WARN Act compliance confirmation (if applicable — Section 12.4);
(j) Cal. Corp. Code § 1001 shareholder approval (if Seller is a California corporation selling substantially all assets); and
(k) Such other instruments as Buyer may reasonably request.

9.3 Buyer Closing Deliverables.

(a) Cash Consideration per Section 6.3;
(b) Assumption Agreements duly executed;
(c) Certificate of Good Standing from Buyer's state of organization;
(d) Evidence of California qualification (if Buyer is a foreign entity registering to do business in California); and
(e) Such other instruments as Seller may reasonably request.

10. REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants as of the Effective Date and Closing Date:

10.1 Organization and Authority. Seller is duly organized, validly existing, and in good standing under California law (or qualified to do business in California). Seller has all requisite authority to execute this Agreement. If Seller is a California corporation, the sale has been or will be authorized under Cal. Corp. Code § 1001 (sale of substantially all assets requires board and, potentially, shareholder approval).

10.2 Title to Assets. Seller has good and marketable title to the Assets, free from all liens except Permitted Liens on Schedule 10.2.

10.3 No Conflicts. Execution and performance do not violate any Law, organizational document, or Contract, except as disclosed on Schedule 10.3.

10.4 Financial Statements. The Audited Financial Statements fairly present the financial position of the Business.

10.5 Compliance with California Law. Seller is in material compliance with all California laws applicable to the Business, including:

(a) California Employment Development Department requirements (payroll taxes, SDI, UI);
(b) CalOSHA workplace safety requirements;
(c) California Department of Fair Employment and Housing (DFEH) / Civil Rights Department requirements;
(d) California environmental regulations (DTSC, CARB, Regional Water Quality Control Boards);
(e) California consumer protection laws (Bus. & Prof. Code § 17200, § 17500); and
(f) CCPA/CPRA data privacy requirements (if applicable).

10.6 Permits. Seller holds all California state and local Permits necessary to operate the Business, listed on Schedule 4.1(f).

10.7 Intellectual Property. Schedule 10.7 lists all registered IP, including California state trademark registrations. Seller owns or has valid licenses. No known infringement claims.

10.8 Taxes. All California and federal Tax Returns have been timely filed and all Taxes paid. Seller has no outstanding assessments or liens from the FTB, CDTFA, EDD, or IRS. Seller has complied with California franchise tax obligations.

10.9 Litigation. Except as disclosed on Schedule 10.9, no pending or threatened claims before any California court, arbitrator, or administrative agency.

10.10 Brokers. No brokerage or finder's fees.

10.11 Employees and Labor Matters.

(a) Schedule 10.11 lists all employees, positions, and compensation;
(b) Seller is in compliance with California wage-and-hour laws (Cal. Lab. Code §§ 510, 1182.12, 1194), meal and rest break requirements, and Wage Orders of the California Industrial Welfare Commission;
(c) No pending or threatened California Labor Commissioner (DLSE) complaints, Private Attorneys General Act (PAGA) claims, or class actions; and
(d) Seller has complied with AB 5 worker classification requirements.

10.12 Environmental. No known violations of California environmental law (DTSC, CEQA) related to the Business or Assets.

10.13 California Bulk Sales. Seller has provided a complete and accurate list of creditors as required by Section 7.

10.14 Survival. General representations survive for [____] months after Closing. Fundamental Representations survive until expiration of the applicable California or federal statute of limitations plus sixty (60) days.

11. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants:

11.1 Organization. Duly organized, in good standing, and authorized. If a foreign entity, Buyer shall register to transact business in California before the Closing Date per Cal. Corp. Code § 2105.

11.2 No Conflicts. No violations of Law, organizational documents, or Contracts.

11.3 Financing. Sufficient funds to pay the Purchase Price.

11.4 Brokers. No brokerage fees.

11.5 Solvency. Buyer will be solvent after giving effect to the transaction.

11.6 Survival. [____] months after Closing.

12. COVENANTS — INCLUDING CAL. WARN ACT, § 16600, AND § 16601

12.1 Conduct of Business. From Effective Date to Closing, Seller shall operate in the ordinary course, maintain Assets, and not take any action that would trigger California WARN Act obligations.

12.2 Access. Seller shall provide Buyer reasonable access to Assets, Contracts, records, and California regulatory filings.

12.3 Confidentiality. The Parties shall maintain confidentiality of Business information, subject to CUTSA protections for trade secret components (Cal. Civ. Code § 3426 et seq.).

12.4 California WARN Act Compliance (Cal. Lab. Code §§ 1400–1408).

(a) Applicability. The Cal-WARN Act applies to employers with 75 or more employees (full-time and part-time) in the preceding twelve (12) months. Cal. Lab. Code § 1400(a).
(b) Triggering Events. Mass layoff (50+ employees in a 30-day period), plant closing, or relocation.
(c) Notice Requirement. The employer must provide 60 days' written notice to: (i) affected employees; (ii) the California Employment Development Department (EDD); (iii) the local workforce development board; and (iv) the chief elected official of each city and county where the event occurs. Cal. Lab. Code § 1401.
(d) Allocation of Responsibility. Seller is responsible for all Cal-WARN Act obligations arising from layoffs or plant closings occurring before Closing. Buyer is responsible for any Cal-WARN triggering events occurring after Closing, including layoffs connected to integration of the acquired Business.
(e) Penalties. An employer who fails to give required notice is liable for back pay and benefits for up to sixty (60) days per affected employee. Cal. Lab. Code § 1402.
(f) Cooperation. The Parties shall cooperate to ensure continuous employment is offered to a sufficient number of employees to avoid triggering Cal-WARN obligations at Closing, or shall provide the required 60-day notice.

12.5 Non-Competition — Cal. Bus. & Prof. Code § 16600 and § 16601.

(a) General Rule. Cal. Bus. & Prof. Code § 16600 provides that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
(b) Sale-of-Business Exception (§ 16601). California provides a narrow statutory exception: a person who sells the goodwill of a business may agree with the buyer not to carry on a similar business within a specified geographic area, as long as the buyer carries on a like business therein. Cal. Bus. & Prof. Code § 16601. This exception applies ONLY when:

• The seller transfers "goodwill" as part of the transaction;
• The geographic restriction is reasonably limited to the area where the Business has operated; and
• The buyer actually carries on a like business in that area.
  (c) Non-Competition Covenant. Subject to and in strict compliance with Cal. Bus. & Prof. Code § 16601, for a period of [____] years following the Closing Date, Seller shall not carry on a business similar to the Business within [________________________________] (geographic area).
  (d) Non-Solicitation. Seller shall not, for [____] years after Closing, directly solicit for employment any person who was an employee of the Business on the Closing Date and who accepted employment with Buyer. This provision is intended to protect the goodwill being acquired and is subject to California enforceability requirements.
  (e) Employee Non-Competes Prohibited. Nothing in this Agreement imposes a non-compete obligation on any individual employee of Seller. Individual employees are protected by § 16600.
  (f) Severability. If any court holds that a non-competition provision exceeds the scope permitted by § 16601, the provision shall be reformed to the maximum enforceable scope.

12.6 Further Assurances. Each Party shall execute additional documents reasonably necessary to consummate the transaction.

12.7 Employee Matters and Cal. Lab. Code § 2870. If Buyer hires former Seller employees and requires invention-assignment agreements, Buyer shall comply with Cal. Lab. Code §§ 2870–2872, including providing the mandatory written notice regarding employee invention rights.

13. CONDITIONS PRECEDENT

13.1 Buyer's Conditions.

(a) Seller's representations true and correct in all material respects;
(b) Seller's covenants performed;
(c) Receipt of consents listed on Schedule 13.1;
(d) No injunction or legal restraint;
(e) Receipt of FTB Tax Clearance Certificate (or escrow arrangement);
(f) Receipt of CDTFA Sales Tax Clearance Certificate (or escrow arrangement);
(g) Completion of Bulk Sales compliance (if applicable);
(h) California WARN Act notice provided (if applicable); and
(i) Cal. Corp. Code § 1001 shareholder approval obtained (if applicable).

13.2 Seller's Conditions.

(a) Buyer's representations true and correct;
(b) Buyer's covenants performed;
(c) No injunction or legal restraint; and
(d) Buyer has obtained California qualification to transact business (if a foreign entity).

14. POST-CLOSING ADJUSTMENTS

14.1 Closing Balance Sheet. Within sixty (60) days after Closing, Buyer shall prepare and deliver an unaudited balance sheet of the Business as of the Closing Date.

14.2 Disputes. If Seller objects within thirty (30) days, the Parties shall attempt resolution. Failing that, either Party may submit the matter to [________________________________] (independent California-licensed CPA firm) for binding resolution. The independent accountant's fees shall be allocated based on the proportion of disputed amounts resolved in favor of each Party.

14.3 Payment. Adjustments owed shall be paid within five (5) Business Days of final determination, with interest at [____]% per annum.

15. INDEMNIFICATION, BASKET, AND CAP

15.1 Seller Indemnification. Seller shall indemnify Buyer from Losses arising from:

(a) Breach of Seller representations or warranties;
(b) Breach of Seller covenants;
(c) Excluded Liabilities;
(d) Seller's failure to comply with the California Bulk Sales Law;
(e) Successor Liability resulting from Seller's failure to obtain FTB or CDTFA clearance; and
(f) Pre-Closing California WARN Act violations.

15.2 Buyer Indemnification. Buyer shall indemnify Seller from Losses arising from:

(a) Breach of Buyer representations or warranties;
(b) Breach of Buyer covenants;
(c) Assumed Liabilities; and
(d) Post-Closing California WARN Act violations.

15.3 Exclusive Remedy. Except for fraud or willful misconduct, indemnification under this Section 15 is the exclusive post-Closing remedy.

15.4 Basket and Cap.

(a) Basket. Seller is not liable under Section 15.1(a) unless aggregate Losses exceed $[________________________________] ("Basket"), after which Seller is liable for all Losses exceeding the Basket.
(b) Cap. Seller's aggregate liability under Section 15.1(a) shall not exceed $[________________________________] ("Cap").
(c) Exclusions. The Basket and Cap do not apply to: (i) Fundamental Representations; (ii) covenant breaches; (iii) Excluded Liabilities; (iv) Bulk Sales non-compliance; (v) FTB/CDTFA Successor Liability; or (vi) fraud or willful misconduct.

15.5 Procedures.

(a) Claim Notice. The Indemnified Party shall promptly provide written notice. Failure to give timely notice does not relieve the Indemnifying Party except to the extent prejudiced.
(b) Third-Party Claims. The Indemnifying Party may assume the defense with California-qualified counsel reasonably acceptable to the Indemnified Party.
(c) Cooperation. The Indemnified Party shall cooperate and provide records.
(d) Settlement. No settlement without the Indemnified Party's written consent (not unreasonably withheld).

15.6 Tax Treatment. Indemnity payments shall be treated as Purchase Price adjustments for California and federal tax purposes.

16. LIMITATIONS OF LIABILITY

16.1 Consequential Damages. Except for fraud, willful misconduct, or indemnification claims, neither Party is liable for punitive, special, or consequential damages.

16.2 Risk Allocation. The Basket, Cap, and liability limitations reflect the negotiated allocation of risk and are enforceable to the fullest extent permitted by California law.

17. TERMINATION

17.1 Termination Events. This Agreement may be terminated before Closing:

(a) By mutual written consent;
(b) By either Party if Closing has not occurred by [__/__/____] ("Outside Date"), provided the terminating Party is not in breach;
(c) By Buyer if conditions in Section 13.1 become incapable of fulfillment;
(d) By Seller if conditions in Section 13.2 become incapable of fulfillment; or
(e) By either Party if a California court or federal court issues a final, non-appealable order prohibiting the transaction.

17.2 Effect. Upon termination, this Agreement is void except Sections 12.3, 17.2, 18, and 19, which survive.

17.3 Deposit Disposition. If terminated due to Seller's breach: Deposit returned to Buyer. If terminated due to Buyer's breach or failure to close: Deposit released to Seller as liquidated damages.

18. DISPUTE RESOLUTION — CALIFORNIA COURTS

18.1 Governing Law. California law, without conflict-of-law principles. Cal. Civ. Code § 1646. For transactions exceeding $250,000: Cal. Civ. Code § 1646.5.

18.2 Venue. Exclusive jurisdiction in the California Superior Court, County of [________________________________], and the United States District Court for the [________________________________] District of California.

18.3 Arbitration (Optional).

☐ Elected. Binding arbitration administered by [________________________________] in [________________________________], California, under its commercial rules, applying California substantive law.

☐ Not elected. Courts specified in Section 18.2.

18.4 Jury Trial Waiver. TO THE FULLEST EXTENT PERMITTED BY CALIFORNIA LAW, EACH PARTY WAIVES ANY RIGHT TO TRIAL BY JURY.

18.5 Equitable Relief. Either Party may seek injunctive relief or specific performance in California courts without posting bond to the extent permitted.

18.6 Prevailing Party Fees. The prevailing Party recovers reasonable attorneys' fees and costs.

18.7 Statute of Limitations. Four (4) years for breach of this written Agreement under Cal. Code Civ. Proc. § 337.

19. GENERAL PROVISIONS

19.1 Notices. Written, delivered by personal delivery, overnight courier, certified U.S. mail, or email (with confirmation) to addresses on Schedule 19.1.

19.2 Amendment. Writing signed by both Parties.

19.3 Assignment. No assignment without consent, except Buyer may assign to an Affiliate or financing source (remaining liable).

19.4 Severability. Invalid provisions modified to minimum extent; remainder continues.

19.5 Entire Agreement. This Agreement and all Schedules and Exhibits constitute the entire agreement.

19.6 Electronic Signatures. Valid per Cal. Civ. Code § 1633.1 et seq.

19.7 Counterparts. Multiple counterparts, each an original.

19.8 Construction. Headings for convenience only. "Including" means "including without limitation."

19.9 UCC Compliance. Title to Assets constituting "goods" passes at Closing per Cal. Com. Code § 2401.

20. EXECUTION

IN WITNESS WHEREOF, the Parties have executed this California Asset Purchase Agreement.

SELLER:
[________________________________]
By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

BUYER:
[________________________________]
By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

21. SCHEDULES AND EXHIBITS INDEX

Schedules:

• Schedule 4.1(d) — Assigned Contracts
• Schedule 4.1(f) — Transferred Permits (California State and Local)
• Schedule 4.2 — Excluded Assets
• Schedule 5.1 — Assumed Liabilities
• Schedule 6.1(c) — Earn-Out Structure
• Schedule 10.2 — Permitted Liens
• Schedule 10.3 — Required Consents
• Schedule 10.7 — Intellectual Property (Including CA State Trademark Registrations)
• Schedule 10.9 — Litigation (California Courts and Agencies)
• Schedule 10.11 — Employees, Positions, and Compensation
• Schedule 13.1 — Buyer Required Consents
• Schedule 19.1 — Notice Addresses

Exhibits:

• Exhibit A — Escrow Agreement
• Exhibit B — Bill of Sale
• Exhibit C — Assignment and Assumption Agreement
• Exhibit D — IP Assignment (Including California State Trademark Assignments)
• Exhibit E — Non-Competition Agreement (Cal. Bus. & Prof. Code § 16601)
• Exhibit F — Bulk Sales Notice (Cal. Com. Code § 6105)
• Exhibit G — California WARN Act Notice Template (Cal. Lab. Code § 1401)

Sources and References

• Cal. Com. Code §§ 6101–6111 — Bulk Sales Law (Division 6)
• Cal. Com. Code § 2401 — Passage of title (UCC Article 2)
• Cal. Corp. Code § 1001 — Sale of substantially all assets
• Cal. Corp. Code § 2105 — Foreign corporation qualification
• Cal. Lab. Code §§ 1400–1408 — California WARN Act
• Cal. Lab. Code § 1402 — WARN Act penalties
• Cal. Lab. Code §§ 2870–2872 — Employee invention protections
• Cal. Lab. Code §§ 510, 1182.12, 1194 — Wage-and-hour laws
• Cal. Rev. & Tax. Code § 6006.5 — Occasional sale exemption
• Cal. Rev. & Tax. Code § 6811 — CDTFA sales tax clearance / successor liability
• Cal. Rev. & Tax. Code § 18662 — FTB nonresident withholding
• Cal. Rev. & Tax. Code § 18669 — FTB successor liability
• Cal. Rev. & Tax. Code § 110.1 — Property tax reassessment on change of ownership
• Cal. Bus. & Prof. Code § 16600 — Non-compete prohibition
• Cal. Bus. & Prof. Code § 16601 — Sale-of-business goodwill exception
• Cal. Bus. & Prof. Code §§ 16600.1, 16600.5 — 2024 non-compete amendments
• Cal. Bus. & Prof. Code § 17200 — Unfair Competition Law
• Cal. Bus. & Prof. Code § 14201 — California state trademark registration
• Cal. Civ. Code § 1633.1 et seq. — Uniform Electronic Transactions Act
• Cal. Civ. Code § 1646 — Choice of law
• Cal. Civ. Code § 3426 et seq. — CUTSA
• Cal. Code Civ. Proc. § 337 — Four-year statute of limitations
• I.R.C. § 1060 — Purchase price allocation

This template is designed for use under California law. It is not a substitute for legal advice from a California-licensed attorney.