asset acquisitions - Jackson Walker LLP

7.3, the Buyer should be careful so as not to omit non-material contracts if a group orsignificant number of them, each individually non-material, may be material whenconsidered collectively.If the Buyer does agree to close where a material consent has not yet been obtained,the Buyer has an election under Section 2.10. The Buyer can either have the Seller continueits efforts to obtain the consent or have the Seller retain the material contract.A seller may object to the buyer’s right to elect to have the seller retain a materialcontract after the business is sold. Under such circumstances, the seller may be in a difficultposition to meet its obligations under the contract, particularly if it is exiting the businesssold. The seller could also argue that such an election may materially alter its realizationfrom the transaction and, therefore, its desire to sell. If the seller agrees to this kind ofprovision, the seller may insist on a right to renegotiate the purchase price depending on thematerial contract to be retained. As an alternative, the seller might negotiate a limitation onthe application to specific material contracts. Whether the buyer will have the ability toinsist on the inclusion of this provision is a matter of the parties’ relative bargainingpositions.If the Buyer elects to have the Seller continue its efforts to obtain consent, Section2.10(a) provides that (i) the contract is not yet assigned to the Buyer (because such apurported assignment might not be valid, and would be in violation of the assignmentrestrictions of the contract, and therefore the third party might attempt to cancel the contractor bring a claim for breach thereof), (ii) in the interest of leaving the parties as close aspossible to the positions bargained for in the Model Agreement, the parties must do all theylegally and reasonably can to procure for the Buyer the benefits the Buyer would havereceived had the contract been assigned at the Closing, (iii) the parties must continue afterthe Closing to attempt to obtain the missing consent (note that parties will sometimesnegotiate the issue of how long these efforts must continue), and (iv) once the missingconsent relating to a particular contract is obtained, that contract will be assigned to andassumed by the Buyer pursuant to a special-purpose assignment and assumption agreementwhich will generally follow the form of the assignment and assumption agreement attachedas Exhibit 2.7(a)(ii). Parties might prefer to reach agreement on the form of thespecial-purpose assignment and assumption agreement in advance.Section 2.10(b) deals with consent to non-material contracts. Examples ofnon-material contracts might be the lease of the office postage meter, the photocopiermachine service agreement and the water cooler rental agreement. Often, such non-materialcontracts are cancelable by either party upon 30 days’ notice, are contracts which simplyprovide for pay-as-you-go services, are contracts for which a substitute is readily available,or are contracts where the third party vendor is not likely to care who the contracting party isso long as the third party is paid in a timely manner.Section 2.10(b) provides the Buyer at the Closing with an election as to eachRestricted Non-Material Contract as to which a required consent has not been obtained bythe Closing. The Buyer can choose to have the contract assigned to it even in violation ofthe contract’s assignment provisions, figuring that (i) the risk of the third party canceling thecontract or bringing a breach of contract claim if and when such third party becomes awareof the unauthorized transfer is not significant, or (ii) even if such cancellation of or claimunder the contract is pursued by the third party, the amount of potential damages is minimal.3148166v1- 67 -