Tax Covenants and Indemnification Clauses
(Private Target Acquisition)

Summary

These Tax Covenants and Indemnification Clauses (Private Target Acquisition) are generally included in an acquisition agreement for stock of a private company. The buyer and seller's perspectives, along with other practical guidance, are in bracketed and optional clauses and drafting notes. In a typical private company acquisition, the seller will generally be liable for certain pre-closing taxes. Accordingly, the seller will want to limit the buyer's ability to adversely affect the seller's pre-closing tax situation. The buyer, on the other hand, will want to ensure that the sellers do not affect the buyer's post-closing tax position or otherwise take positions in a pre-closing year that could adversely affect buyer in a post-closing year. For a more detailed discussion on tax covenants applicable to the acquisition of a private target, see C Corporation Stock Acquisition Tax Issues. In the event the target company has any subsidiaries, any reference to the Company below should also include the Company's subsidiaries. This template is drafted with the idea that multiple sellers are involved. If there is only one seller, then the below clauses should be revised accordingly. This template does not address covenants regarding: • ERISA or employment benefits provisions. • Provisions that may be applicable to special kinds of corporations, such as real estate investment trusts and insurance companies. For template tax covenants typical to a public company acquisition, see Tax Covenants (Public Target Acquisition).