Character Technologies, the bankrupt company behind Character.ai, on November 5, 2026 filed the form of contract that a buyer of its assets outside Disney's license would sign, one day after the US Bankruptcy Court for the District of Delaware entered the order that governs the sale. The template leaves the price, the deposit and the list of assets blank, transfers whatever is bought "as is," and keeps statements, filings, objections or investigations by attorneys general outside its definition of a material adverse effect, the yardstick the contract uses for problems on the company's side. It contains none of the nine conditions that 39 states and the District of Columbia set in October for anyone acquiring the platform and its users' data.

In Short

Character.ai is bankrupt and selling what it owns: Disney has a $20 million deal for a license to some of its technology, and anyone who wants the rest, including the app itself, now has a standard contract to fill in. That contract leaves the price and the assets blank, gives the buyer almost no right to complain once the sale closes, and says state investigations of the company do not count as a serious problem with what is being sold. It says nothing about how users' data and conversations must be handled, which dozens of states have asked for, so any such protection would have to come from somewhere else, such as the court order approving a sale.

What was filed

The filing is Docket No. 136 in case 26-11603 (BLS), In re Character Technologies, Inc. It consists of a two-page notice signed on November 5 by Heather P. Lambert of Wilson Sonsini Goodrich & Rosati, alongside Erin R. Fay and Shane M. Reil, as proposed counsel to the company, which runs its business in Chapter 11 as debtor in possession. Exhibit 1 is a 48-page "Form of Additional Asset Purchase Agreement." Its cover page carries a draft stamp reading "Wilson Sonsini November 4, 2026."

The notice also records a step the case had been waiting for. The court, it says, entered the order "on November 4, 2026," citing Docket No. 106. On November 3, the company had asked the court to sign a further revised version of that order after the court indicated at an October 30 hearing that it would overrule the objections, as PPC Land reported when the judge said it would overrule 40 states' objections to Character.ai's Disney sale rules. The notice does not say whether the judge changed anything in the version submitted on November 3. The agreement itself defines the Bidding Procedures Order as "that certain order of the Bankruptcy Court entered on November 4, 2026, at Docket No. 106."

The form exists because the sale runs on two tracks. Disney Worldwide Services, Inc. is the stalking horse for what the filings call the Disney Target Assets: a non-exclusive perpetual license to certain intellectual property and claims, for $20 million, under the deal disclosed when Character.ai faced a wind-down as Disney's $20m bid licensed its IP, not the app. The procedures also let the company name "Additional Stalking Horse Purchasers" for everything else, which on the company's earlier descriptions includes the app, the brand and the user base. The notice says the form is filed "in accordance with the Bidding Procedures Order" and covers "Assets other than the Disney Target Assets."

Under the schedule in the order submitted on November 3, the company can name an additional stalking horse until November 14, a Saturday. Objections to such a designation are due at 9 p.m. Eastern on November 18, and if none is filed, the designation is approved without a hearing. Bids are due at noon on November 24, the auction is set for December 1 and the sale hearing for December 3 and 4. By PPC Land's count, the designation deadline falls ten days after the order was entered and the bid deadline 19 days after the form was filed.

A contract made of blanks

Almost every commercial term is a placeholder. The buyer is "[PURCHASER], a [type and jurisdiction of entity]." The agreement is "dated as of [], 2026." The price is "an amount of cash equal to $[] at the Closing," and the good faith deposit is "$[] in immediately available funds." The non-disclosure agreement between the parties is dated "[__], 2026," and the company must deliver the purchased assets "within [] days following the Closing Date."

The footnotes, each marked "Note to Draft," hand the drafting to the bidder. "Purchaser to determine scope of the Purchased Assets." "Purchaser to revise for amount of Consideration." On contracts: "The scope of contracts to be transferred will be determined subject to further business discussions and negotiations, to the extent permitted and desirable."

The four exhibits that would define the deal are cover pages only. Exhibit A, the Schedule of Purchased Assets, Exhibit B, the bill of sale, Exhibit C, the IP assignment agreement, and Exhibit D, the transition services agreement, each carry the word "(Attached)" with nothing behind it. Schedule 1.1(b), Regulatory Matters, reads "1. [__]," and the purchase price allocation table in Schedule 2.7 is empty.

So the form does not say what is for sale. A bidder writes its own list into Exhibit A under headings the agreement already names: "Purchased Contracts," "Purchased Intellectual Property" (which includes internet domain names), "Purchased Technology," "Permits" and "Products." The last of these is defined as "certain of the products and services developed, operated, marketed or sold by Seller utilizing the Purchased Assets."

Deposit and closing mechanics

The mechanics are spelled out even though the amounts are not. The buyer pays the deposit into a segregated account within two business days of signing. The deposit becomes non-refundable at the earlier of closing or a termination by the company for the buyer's uncured breach, and in that case the company keeps it "as liquidated damages." If the agreement ends for any other reason and the buyer is not in default, the deposit comes back within five business days.

Closing takes place "by electronic exchange of executed documents," no later than two business days after the conditions are met. The company delivers a tax form, a copy of the sale order and a certificate. The buyer delivers the deposit, the balance by wire and "written confirmation of the satisfaction of all Cure Costs."

What a buyer takes and what stays behind

Section 2.1 lists five categories of purchased assets: the purchased contracts, the purchased intellectual property, the purchased technology, permits "to the extent assignable," and the books and records. The company hands them over "in the form maintained by Seller as of the Closing."

The list of what stays behind is far longer. The company keeps all cash and all accounts receivable on the closing date, including "accrued but uninvoiced accounts receivable," and "whether or not arising from or related to the Purchased Assets." It keeps any intellectual property and technology not listed, its benefit plans, tax records, interests in other entities and insurance claims for events before closing. It keeps "all enterprise software, databases and networks of Seller, including all sales management, engineering, materials, business planning, finance and accounting systems utilized in connection with the Purchased Assets, except where they are provided under a Purchased Contract." And it keeps its litigation rights, including "chapter 5 avoidance actions (preference and fraudulent transfer claims)" and "all Claims of Seller against any current or former director, officer, employee or equityholder of Seller."

Receivables get their own covenant. If a buyer receives money that belongs to the company after closing, it must forward the amount "immediately upon receipt." A payment that does not say which invoice it covers is applied to the oldest one outstanding.

Licenses survive the sale

The intellectual property moves subject to existing rights. The transfer is subject to permitted exceptions, to "licenses to the Purchased Intellectual Property or Purchased Technology retained by Seller or granted to Seller pursuant to any Transfer Document or otherwise," and to ordinary-course contracts with use restrictions. A further sentence carries those obligations forward: "To the extent that Seller is required to ensure that successors assume such obligations to license with respect to the Purchased Intellectual Property or the Purchased Technology, Purchaser shall assume such obligations as of the Closing."

The definitions reinforce the point. A license "shall not be considered a Lien on any Intellectual Property," so a sale free and clear of liens does not strip one away. The form names no licensee. On its general terms, a buyer acquiring technology the company has licensed to others would take it subject to those licenses. Whether any of the technology inside Disney's license is offered for sale is not stated.

Liabilities the buyer takes on

The buyer assumes contract liabilities arising after closing, "all Cure Costs," transfer taxes, taxes for periods after closing, and "all other Liabilities with respect to the Products or the Purchased Assets arising after the Closing." Cure costs are the amounts that must be paid to counterparties before the company can assume a contract and assign it, as fixed by the court or agreed. Under section 3.2, the buyer pays all of them on the closing date. Section 11.2 adds every filing fee payable to a government body in connection with the deal.

Everything else stays with the estate: liabilities under contracts the buyer does not take, payables existing at closing under excluded contracts, and taxes for periods before closing.

As is, on one person's knowledge

The company's promises about the assets are few and narrow. It represents that it is in good standing, has authority to sign and owns the purchased assets, "subject to the limitations set forth in Section 2.1." On intellectual property, the whole representation is one sentence: "Subject to entry of the Sale Order, the Purchased Intellectual Property and Purchased Technology will be conveyed to the fullest extent permitted under Section 363(f) of the Bankruptcy Code." There is no statement that the technology works, is valid or does not infringe anyone else's rights.

Section 5.10, in capital letters, says the assets are transferred on a "WHERE IS" and, as to condition, "AS IS" basis, with no warranty "OF MERCHANTABILITY, SUITABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE." It adds: "SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO PURCHASER REGARDING THE PROBABLE SUCCESS OR PROFITABILITY OF THE OPERATIONS RELATED TO THE DEVELOPMENT, OPERATION AND SALE OF THE PRODUCTS." The buyer, for its part, must represent that it is "a sophisticated purchaser" relying on its own investigation and not on anything in "'data rooms,' management presentations, due diligence discussions or in any other form."

Where a representation is limited to what the company knows, the knowledge is that of one person. Schedule 1.1(a), "Knowledge of Seller," lists a single name: John Chatowski. He is also the person who receives legal notices for the company, at a character.ai address. The form gives no title. Earlier filings in the case described him as general counsel in some places and associate general counsel in others, a mismatch PPC Land noted when Disney budgeted $180m for Character.ai staff and $20m for the bankrupt company.

Nothing survives closing. Under section 11.11, the representations and covenants end at closing, and all claims about them terminate, "except in the case of Fraud," which the agreement limits to intentional common law fraud under Delaware law, with actual knowledge that a representation was false. The company's remaining obligations end at the earliest of 12 months after closing, the closing or dismissal of the case, the effective date of a Chapter 11 plan, or the company's dissolution. A no-recourse clause bars claims against the company's directors, officers, equity holders, attorneys and other affiliates.

State action does not count against the seller

The definition of "Seller Material Adverse Effect" may matter most to bidders weighing this asset. The company's representations are measured against it, and it sets the threshold for the encumbrances a buyer must accept. The definition then lists four things that "shall not be deemed to be, or attributable to," such an effect:

  • The bankruptcy itself: "the filing of the Chapter 11 Case, or any events or circumstances leading up to the Chapter 11 Case and any objections in the Bankruptcy Court to this Agreement, the Sale Order or assignment of the Purchased Contracts," and any court order.
  • Staff departures: "whether occurring before or after the Effective Date, loss or departure of Employees."
  • Regulators: "regulatory or attorney general statements, filings, objections or investigations."
  • Compliance with the court: "actions required by the Bankruptcy Code or the Bankruptcy Court."

Each exclusion maps onto a known feature of this case. The company's chief executive told the court in October that 46 states and territories had joined a multistate investigation, alongside a Kentucky lawsuit and civil investigative demands from Texas and New Mexico, according to the declaration PPC Land covered when Character.ai was shown to lose $8m a month despite $2.5m in monthly ad sales. Before the filing, Character.ai lost 66 of its 86 staff to Disney. The form puts both risks on the buyer's side of the ledger. Even "Ordinary Course of Operation" is defined to take account of "the reduction in Seller's workforce."

The closing condition that protects the buyer is narrow in any case. The company's representations must be true in all material respects at closing, but a failure counts only if it would "prevent or materially impair or delay" the company's performance of the deal. The representations on litigation and legal compliance exclude the "Regulatory Matters," and the schedule listing those matters is blank.

A court order that actually stops the sale is a different matter. Both sides' obligations depend on "No Order or Law preventing the Closing" and on a sale order that is not "subject to any stay, vacation or reversal." An objection alone does not let a buyer leave; an injunction would.

No foreign control, no "covered persons"

The buyer's representations contain three national security clauses that do not appear among the company's own.

Under section 6.8, the buyer "is not and is not controlled by a 'foreign person,' as defined in Section 721 of the U.S. Defense Production Act of 1950." Section 721 is the statute under which the Committee on Foreign Investment in the United States reviews foreign investments. The buyer must also promise not to let any foreign person affiliated with it, "whether affiliated as a limited partner or otherwise," obtain control, "access to any material nonpublic technical information," board membership or observer rights, or any involvement in decisions about "critical technology," "covered investment critical infrastructure," or "the use, development, acquisition, safekeeping, or release of 'sensitive personal data' (as defined in the DPA) of U.S. citizens maintained or collected by Seller or included in the Purchased Assets." The list mirrors the forms of access that, under that statute, can bring even a minority foreign investment within the committee's review.

Section 6.9 states that the buyer is not a "covered person" under Executive Order 14117 and "28 C.F.R. Part 202," the Justice Department rule that restricts transactions giving countries of concern, and persons tied to them, access to Americans' bulk sensitive personal data. Section 6.10 adds that neither the buyer nor its officers, directors, employees, agents, stockholders or partners is on a US, European Union or United Kingdom sanctions list.

None of this bars a foreign bidder outright. A footnote says: "Purchaser to revise if any of the following representations and warranties cannot be made, describing any exceptions with specificity." The default text, however, assumes a buyer controlled in the United States. These clauses, and one line in the definition of books and records, are the only places in the 48 pages that touch personal data. The scale explains why: a redaction motion earlier in the case put the platform's current and past users at about 163 million, according to the same coverage of the chief executive's declaration.

What the form says about users: nothing

The words "user," "minor" and "chat" do not appear in the agreement. Its only consumer privacy reference sits in the definition of books and records, which excludes "any files as may be required to be retained by Seller under applicable Law regarding privacy."

That silence stands against a specific list. On October 14, the coalition of 39 states and the District of Columbia set out nine conditions for any buyer, covering age assurance, protections for minors, the removal of characters posing as licensed professionals, crisis safeguards, a privacy program, account-level ad opt-outs that honor past choices, limits on training models or serving ads based on chats beyond what users agreed to, deletion of data before a sale, and truthful marketing, as reported when Character.ai faced 40 attorneys general over who could buy its users' chats. On October 29, the same coalition joined the US Trustee's objection, arguing that Character.ai user data needs a privacy ombudsman.

The Bankruptcy Code gives that request its footing. Under section 363(b)(1), if a debtor's privacy policy prohibits transferring personally identifiable information, the debtor may sell it only in a way consistent with the policy or after the court appoints a consumer privacy ombudsman and approves the sale. On the Disney track, the sale notice addresses the point in a footnote stating that the Disney Target Assets exclude personally identifiable information as the Code defines it. The form for the other assets has no equivalent line.

Whether user records would be sold at all depends on what a bidder writes into Exhibit A. The form does not say where they would fit. Its definition of technology covers "technical data" and "computer programs," while "all enterprise software, databases and networks" stay with the company unless provided under a purchased contract.

If conditions on users are imposed, the sale order is the obvious place. The agreement defines that order as one approving the deal "Free and Clear," with a finding that the buyer acted in good faith under section 363(m), "in form and substance acceptable to Purchaser and Seller, after consultation with the official committee of unsecured creditors." The states have no approval right in that definition. They can object by November 18 and argue at the December hearing.

Fees, back-up duty and the December 17 exit

A fee only for a stalking horse

Section 8.1 gives the buyer "a break-up fee and expense reimbursement collectively capped at three and a half percent (3.5%) of the Consideration." A footnote limits it: "These provisions are only applicable if the Purchaser is designated as an Additional Stalking Horse Purchaser." The fee is paid only if the company terminates because the buyer lost at auction, the company completed a rival transaction and the court approved it, and then only on the first business day after that rival deal closes. The rate matches Disney's, whose fee is set at $700,000, or 3.5% of the cash purchase price, a term the company defended when Character.ai kept its $21.7m bid floor for Disney rivals despite 32 states.

Signing does not end the shopping. Until the auction closes, the company may "initiate contact with, solicit or encourage" competing offers, judged "in Seller's sole and exclusive discretion." The buyer, meanwhile, must help obtain the sale order, supply evidence of its ability to perform and of its good faith, and may not, without the company's written consent, "file, join in, or otherwise support in any manner whatsoever any motion or other pleading relating to the sale of the Purchased Assets hereunder."

Sixty days on paper, December 17 in practice

A bidder that finishes second can be named back-up bidder and "shall remain bound by this Agreement, on its existing terms and at the last purchase price bid by Purchaser at the Auction," until the earlier of the rival deal closing and "sixty (60) days after the Bankruptcy Court's entry of an Order approving the Alternative Transaction." With a sale order on December 3 or 4, that would run to February 1 or 2, 2027, by PPC Land's count.

Another clause cuts across it. Under section 10.1(h), either side may terminate "if the Closing has not occurred on or before December 17, 2026." A back-up bidder bound "on its existing terms" keeps that right. The procedures, as PPC Land reported on November 4, make the back-up bid the winning bid only if the winner fails to close within two weeks of the sale order, which for an order entered on December 4 would be December 18, the first day on which a back-up could already walk away. The form does not reconcile the 60-day commitment with the December 17 date. By PPC Land's count, December 17 is 42 days after the form was filed and 13 days after the last day of the sale hearing.

Other exits

The other termination rights are standard for a bankruptcy sale. Either side may leave if the court does not enter the sale order, or if the case is dismissed, converted to a Chapter 7 liquidation, or handed to a trustee or an examiner with expanded powers, and that is not reversed within 14 days. Each side may terminate for the other's breach if it is not cured within 20 days. The company may also walk if its board determines, "in good faith after consultation with outside counsel," that continuing "would be inconsistent with its fiduciary duties." Damages for breach "shall not be limited to reimbursement of costs or expenses and may include the benefit of the bargain and/or premium lost by a Party's equityholders."

Disney's staff in the transition

A footnote to the definition of transfer documents ties the form back to Disney: "Transition Services Agreement Exhibit to be the 'Winning Bidder Transition Services Agreement'." The procedures use that name for the form under which Disney, which now employs most of Character.ai's former staff, would provide transition services to one winning bidder other than itself. PPC Land's November 4 coverage described its terms: the buyer pays Disney's cost plus a 10% margin, no person is required to spend more than 20% of their hours on the work, services last no longer than the lesser of 60 days after the agreement takes effect and 75 days after the auction, and the buyer gives Disney a release running from August 1, 2026 that covers the hiring of the company's former employees.

In the form filed on November 5, the transition services agreement is one of three documents that "each of Purchaser and Seller shall deliver" at closing. The filing does not explain how Disney's role as service provider fits an agreement listed between the company and its buyer.

The employees themselves get no rights from the deal. Section 11.9 says the agreement creates no third-party beneficiary rights in "any employee or former employee of Seller (including any beneficiary or dependent thereof)," and all employee benefit plans stay with the company.

Confidential terms, public docket

The agreement tries to keep its terms private, then makes room for the court. Section 7.5(b) says copies "shall not be publicly filed or otherwise made available to the public, except where such disclosure, availability or filing is required by applicable Law (including the Bankruptcy Code) or the Bankruptcy Court," and commits both sides to seek "confidential treatment" from the Securities and Exchange Commission where disclosure is required. Section 7.6 then lets the company disclose the agreement and its terms, without the buyer's consent, to the court "(including by filing on the docket in the Chapter 11 Case)," the US Trustee, any official creditors' committee and other parties in interest.

The remaining clauses are housekeeping with consequences. Disputes go exclusively to the Bankruptcy Court under Delaware law, and both sides waive a jury trial. Wilson Sonsini represents only the company, and the privilege over its deal communications stays with the company after closing. The company may assign its rights without the buyer's consent "to any liquidating trust, plan administrator, estate representative or other successor" under a confirmed plan, the vehicle that would remain if the business is wound down.

Loose ends

The template carries drafting leftovers. In the table of contents, the entry for Schedule 1.1(a) reads "Error! Bookmark not defined." Page 33 of the agreement is blank. The four exhibits are cover pages. The company's notice address appears as "Suite 120, #1152" in the agreement and "Suite 120, P.O. Box 1152" in the cover notice. And the sale order definition refers to consultation with "the official committee of unsecured creditors," although the notice does not say that such a committee has been appointed, and earlier versions of the procedures referred only to any committee that might be formed.

Why this matters for the marketing industry

Character.ai is an advertising-funded consumer AI service. Advertising brought in about $2.5 million in August 2026, close to half of monthly revenue, and the petition coverage counted 44 seller lines in the app's ads.txt file, including a direct Google account. The company has said the platform will be wound down if the sale does not produce a buyer that keeps it running. Disney's license does not do that. This form is the document through which such a buyer would acquire the app, its inventory and, if listed, its users.

For ad tech vendors and other partners, the form settles several practical questions. A contract moves to a buyer only if it is listed in Exhibit A, and the buyer pays the cure amount. Revenue earned before closing, invoiced or not, stays with the estate, and a buyer that receives it must pass it on. The company will not stand behind the technology after closing, and the buyer inherits any obligation to honor licenses already granted.

The form also sets out who carries regulatory risk. Investigations and objections by attorneys general do not let a buyer walk, the only data clauses concern foreign control and national security, and nothing in the agreement obliges a buyer to treat users' conversations any particular way. The states' conditions remain on the record, and the sale hearing on December 3 and 4 is where they would have to be argued.

Will anyone use the form? Before the filing, Character.ai drew one unusable offer from 28 potential buyers, and the deal it ended with follows the acqui-hire pattern of licensing a startup's technology and hiring its team: Disney paid $20m for Character.ai's IP and $180m for its staff. The deadline to name a second stalking horse is November 14.

Timeline

Summary

Who: Character Technologies, Inc., operator of Character.ai, through its proposed counsel Wilson Sonsini Goodrich & Rosati, and any bidder for its assets other than those licensed to Disney Worldwide Services, Inc. The coalition of 39 states and the District of Columbia, which set nine conditions for buyers, is the party whose terms the form leaves out.

What: A notice filing the form of asset purchase agreement for assets outside Disney's license (Docket No. 136), following entry of the bidding procedures order on November 4 (Docket No. 106). The form leaves price, deposit and assets blank, sells on an "as is" basis with no claims after closing except for fraud, excludes attorney general statements, filings, objections and investigations and staff departures from the material adverse effect definition, requires national security representations on foreign control and bulk sensitive data, offers a fee capped at 3.5% only to an additional stalking horse, and lets either side terminate if no closing occurs by December 17, 2026. It contains no terms on users, minors or chats.

When: Filed November 5, 2026; the form carries a draft date of November 4, 2026, the day the court entered the bidding procedures order. An additional stalking horse can be named until November 14, bids are due November 24, and the auction is set for December 1.

Where: The US Bankruptcy Court for the District of Delaware, case 26-11603 (BLS).

Why: The form is the only route through which a buyer could keep the ad-funded Character.ai platform running rather than see it wound down. For advertisers, ad tech partners and vendors, it decides which contracts can move and who pays to cure them, and for the states it shows that any protection for users' data would have to come from the sale order or a privacy ombudsman rather than from the buyer's contract.