The Facts: ABC Company (the "Buyer") is in negotiations with XYZ Company (the "Seller") over a possible deal in which the Buyer would purchase substantially all the assets of the Seller. Both the Buyer and the Seller are publicly traded companies. The Buyer has net assets of about $700 million USD, and the Seller has net assets of approximately $400 million USD. Each company does business in more than a dozen U.S. states. The Seller is aware of only one lawsuit that has been filed against it. The lawsuit, Smith v. XYZ Co., is pending in a Tennessee small claims court, which cannot award the plaintiff more than $25,000 USD in damages.

The first draft of the Asset Purchase Agreement contains a representation that XYZ Company (the Seller) is making to ABC Company (the Buyer). The representation states that, "To the Seller's knowledge, there are no lawsuits or other proceedings pending or threatened against it."

• Answer the following:
• Assume that the Seller's representation about pending or threatened litigation remains based upon the "Seller's knowledge," as stated in the initial draft above. Draft two definitions of the Seller's knowledge:
  • One from the perspective of the Buyer in this scenario, reflecting what the Buyer would want the Seller's knowledge to include; and
  • One from the perspective of the Seller being asked to make the representation, reflecting the Seller's desire to limit the scope of the representation the Seller is giving.
• Note that the question does not ask you to restate the representation that will be given by the Seller. Instead, it asks you to define what the term "knowledge" will mean when it is used in the Seller's representation.