asset acquisitions - Jackson Walker LLP

Property and Tangible Personal Property. In the event subsurface or other destructive testing isrecommended by any of Buyer Group, Buyer shall be permitted to have the same performed.COMMENTSection 5.1 provides the Buyer Group with access to the Seller’s personnel,properties, and records so that the Buyer can continue its investigation of the Seller, confirmthe accuracy of the Seller’s representations and also verify satisfaction of the variousconditions to its obligation to complete the acquisition; such as, for example, the absence ofa material adverse change in the financial condition, results of operations, business orprospects of the Seller.Note that the access right provided for in Section 5.1 extends to the Buyer Group,which includes prospective lenders and their Representatives. A prospective lender to abuyer may want to engage environmental consultants, asset appraisers and other consultantsto present their findings before making a definitive lending commitment.The access right in Section 5.1(a) is accompanied by the rights in subsection (b) toobtain copies of existing documents which may include licenses, certificates of occupancyand other permits issued in connection with the ownership, development or operation of theReal Property and in subsection (c) to obtain data not yet reduced to writing or data storage.In many acquisitions, the buyer’s investigation occurs both before and after thesigning of the acquisition agreement. While the Model Agreement provides forcomprehensive representations from the Seller, the importance of these representationsincreases if the Buyer is unable to complete its investigation prior to execution of theacquisition agreement. In those circumstances, the representations can be used to elicitinformation that the Buyer will be unable to ferret out on its own prior to execution (see theintroductory comment to Article 3 under the caption “Purposes of the Seller’sRepresentations”). If a buyer later discovers, during its post-signing investigation, a materialinaccuracy in the seller’s representations, the buyer can terminate or consummate theacquisition, as discussed below. Conversely, if the buyer has been able to conduct asignificant portion of its investigation prior to execution and is comfortable with the resultsof that investigation, the buyer may have greater latitude in responding to the seller’srequests to pare down the seller’s representations.The seller may want to negotiate certain limitations on the scope of the buyer'sinvestigation. For example, the seller may have disclosed that it is involved in a dispute witha competitor or is the subject of a governmental investigation. While the buyer clearly has alegitimate interest in ascertaining as much as it can about the dispute or investigation, boththe seller and the buyer should exercise caution in granting access to certain information forfear that such access would deprive the seller of its attorney-client privilege. See generallyHundley, White Knights, Pre-Nuptial Confidences and the Morning After: The Effect ofTransaction-Related Disclosures on the Attorney-Client and Related Privileges, 5 DEPAULBUS. L.J. 59 (1993). Section 12.6 provides that the parties do not intend any waiver of theattorney-client privilege.The seller is likely to resist subsurface testing by the buyer. Test borings coulddisclose the existence of one or more adverse environmental situations, which the seller orthe buyer or its tester may be obligated to report to a governmental agency without certaintythat the closing will ever occur. A test boring could exacerbate or create an adverse3148166v1- 112 -