An incremental assumption agreement is a legal contract that outlines the conditions and terms of transferring ownership of assets, liabilities, and obligations from one company to another in a merger or acquisition. The agreement is executed when the acquirer assumes the liabilities and obligations of the acquired company over time, rather than all at once.

In other words, the acquirer takes on the financial commitments of the acquired company in stages, as the liabilities are identified and become due. This approach is typically used when the parties involved are uncertain about the full extent of the liabilities and obligations of the acquired company, and need more time to investigate and negotiate the terms of the transfer.

An incremental assumption agreement differs from an all-at-once assumption agreement, where the acquirer assumes all the liabilities and obligations of the acquired company immediately upon the completion of the merger or acquisition. This approach is more straightforward and less time-consuming, but also riskier for the acquirer, as they may inherit unknown or unforeseen liabilities.

Under an incremental assumption agreement, the acquirer and the acquired company typically agree to a schedule of assumption dates, on which the acquirer will assume specific liabilities and obligations. This schedule may be adjusted based on the results of due diligence and negotiations between the parties.

An incremental assumption agreement also typically includes provisions for how disputed liabilities will be resolved, such as through arbitration or litigation. It may also require the acquired company to provide the acquirer with ongoing financial and operational information, to help them identify and manage the liabilities and obligations that are being assumed.

In conclusion, an incremental assumption agreement is a flexible and practical approach to transferring ownership of assets, liabilities, and obligations in a merger or acquisition. It allows the parties involved to manage risk and uncertainty more effectively, while also providing a framework for resolving disputes and ensuring ongoing transparency and communication.