asset acquisitions - Jackson Walker LLP

4. Choice of LawIn transactions where the assets or divisions being purchased are in more than one location orjurisdiction, or where the seller and buyer are based in different states, the selection of choice of law,which governs interpretation and construction of the Agreement, and the venue for bringing disputes,can be critical. As was discussed above, certain states (notably Pennsylvania, New Jersey, Michiganand California) are often in the vanguard of expanding the scope of existing exceptions to thegeneral rule of successor liability, and of developing new theories. Although frequently overlookedin most agreements, these clauses can be critical to avoiding successor liability. Thus, the buyer’sposition could be improved if the transaction or one or more of the parties thereto can be found tohave an appropriate nexus to a jurisdiction which reflects the traditional rule or has eliminated one ormore exceptions by statute - e.g., Texas has eliminated the de facto merger doctrine by statute.5. Retention of Management and EmployeesAs more fully described in the discussions on the elements of the “mere continuation” and“substantial continuity” doctrines above, and in the discussion of the policies underlying the laborand employment cases above, the higher the number of officers, management, supervisors andemployees which are retained by the purchaser, the closer the purchaser gets to finding that it is theseller’s successor. There is a natural tension, however, between the avoidance of liability and theclient’s need to retain persons who are familiar with the assets and operations being purchased,including institutional history. Recognizing that retention of none of the seller’s supervisors andemployees is impractical, your best advice might be to identify for the buyer the risk associated withretaining a large number of employees, while counseling that only the barest minimum number ofemployees which must be retained for smooth transaction be retained.6. Operational ChangesEven though the purchaser may be loathe to change the operations of a successful business,consider that the more the new business looks like the old business, the greater the risk that a“substantial continuity” claim can be sustained.7. InsuranceDepending upon the nature risks assumed and the nature of the business and assets beingacquired, the purchaser may have two options when it comes to insurance. First, the purchaser maybe able to obtain insurance, based on the results of its due diligence and the other clauses in thepurchase and sale agreement, from its own insurers insuring against unknown and contingentliabilities which may have been inadvertently assumed. Second, if found to be the seller’s successor,the purchaser may be able to salvage a reasonable resolution from an adverse result by arguing that itshould be able to obtain the benefits of the seller’s insurance. This would especially be true if theseller’s insurance policies were “occurrence” policies, which cover all claims attributable to theperiod the policy was in effect, rather than “claims made” policies which merely cover those claimsactually made during the pendency of the policy.2525936v1Appendix C – Page 16