asset acquisitions - Jackson Walker LLP

name which is material to the value of the Business which is put up for sale, that positionordinarily will be known at the outset of negotiations and will have a significant effect on thepurchase price. If the buyer and the seller can agree to share the trade names, the transaction willrequire carefully-drawn license arrangements. The more frequent sharing of intellectual propertyarises in the context of patented and unpatented inventions and processes. In this context thenegotiations involve whether the technology will be sold to the buyer, with a license back to theseller, or retained by the seller, with a license to the buyer. In some instances, buyer and sellermay agree to share research and development activities for a period of time, along the lines of ajoint venture. All such arrangements will require carefully drawn confidentiality and field-of-useor non-competition provisions. The latter may be particularly complex if the technology has apotential use that is broader than the current activities of the seller or the acquired Business; inthose instances it will be necessary to agree upon who has the right to use or license thetechnology for those other purposes. In drafting all shared-technology agreements, counsel forboth parties must be sensitive to the difficulties which might arise in the event that one of theparties becomes bankrupt or comes under the control of a competitor of the other party.Information Systems; Software. The computer systems of the acquired Businessprobably will be linked with all operations of the seller, and the critical question is the extent towhich the information systems of the division can function on their own if they are uncoupledfrom the rest of the seller’s enterprise. The same issue is presented by telephone systems,customer communication systems, vendor purchasing links, satellite communications, and otherinformation processing systems. These needs can be resolved either by the buyer supplying orcontracting for such services from other suppliers or by continuing support agreements betweenthe seller and the buyer for continuation of the seller’s services after closing, generally only foran interim period. Special care should be given to the need to obtain computer source codesfrom the seller, and on difficulties in converting important data bases of the seller for the use bybuyer. Proprietary software of the seller which is critical to the activities of the acquiredBusiness may be purchased outright and included in the assets conveyed or may be subjected to aperpetual license from seller to buyer.Records. It is likely that there will be records of past activities of the division which willbe retained in some central location by seller and which will not be transferred to the buyer. Thebuyer should impose strict confidentiality on any seller-retained records which contain businessor trade secrets and should provide for continuing access of the buyer to those records in thefuture.Seller’s Contracts with Third Parties. Most asset acquisitions involve the assignment ofcontracts from the seller to the buyer. The buyer generally protects its business expectations byrequiring that the seller warrant that the assignment does not require consent of the othercontracting party or by requiring that the seller deliver consents prior to closing. As to thosecontracts which relate only to the activities of the acquired Business, the divisional acquisitionproceeds identically to the acquisition of all of the assets of a corporation. In some instances,however, the seller may have purchase contracts for materials with a single provider which areapplicable to various or all of the seller’s operations, including the division which is offered forsale. Such contracts will not be assigned to the buyer, and it is incumbent upon the buyer todetermine, early in the negotiations, whether any such contracts are so favorable that their losswould materially adversely affect the acquired Business. If there are such contracts, and2415257v2Appendix D – Page 7