asset acquisitions - Jackson Walker LLP

Alternatively, the Buyer can elect not to take the contract, forcing the Seller to retain thecontract and all the liabilities thereunder.Arguably, it should be a buyer’s decision whether to accept or reject non-materialcontracts where consents have not been obtained. After all, it is the buyer’s post-closingoperation of the business which will suffer if the contracts are not assigned, so a buyershould decide what contracts it truly needs. However, the seller may argue that it too can beheld responsible if a contract is purportedly assigned in violation of the assignmentrestrictions of such contract, and therefore that the seller should have some say in whether ornot such a contract is transferred to a buyer in violation of the assignment restrictions (or atleast should be protected in some way, such as through indemnification, if the third partypursues a claim against the seller). The parties’ negotiating positions and strengths willgovern the outcome of this issue.Sections 5.4, 5.7, 6.1 and 6.2 will have to be coordinated so as to clarify that theparties must cooperate to obtain both the Material Consents and the Non-Material Consentsbefore the Closing.3. REPRESENTATIONS AND WARRANTIES OF SELLER ANDSHAREHOLDERSSeller and each Shareholder represent and warrant, jointly and severally, to Buyer as follows:COMMENTThe Seller’s representations and warranties are the Seller’s and the Shareholders’formal description of the Seller and its business. The technical difference betweenrepresentations and warranties — representations are statements of past or existing facts andwarranties are promises that existing or future facts are or will be true — has provenunimportant in acquisition practice. See Freund, Anatomy of a Merger 153 (1975).Separating them explicitly in an acquisition agreement is a drafting nuisance, and the legalimport of the separation has been all but eliminated. See Reliance Finance Corp. v. Miller,557 F.2d 674, 682 (9th Cir. 1977) (the distinction between representations and warranties isinappropriate when interpreting a stock acquisition agreement). The commentary to theModel Agreement generally refers only to representations.Representations, if false, may support claims in tort and also claims for breach of animplied warranty, breach of an implied promise that a representation is true, or breach of anexpress warranty if the description is basic to the bargain. Cf. U.C.C. § 2-313. See generallyBusiness Acquisitions ch. 31 (Herz & Baller eds., 2d ed. 1981). The Model Agreement,following common practice, stipulates remedies for breaches of representations that areequivalent to those provided for breaches of warranties (see Sections 1.1 (definition of“Breach”), 7.1 and 7.2 (conditions to the Buyer’s obligations to complete the acquisition),and 11.2(a) (the Seller’s and the Shareholders’ indemnification obligations)).Purposes of the Seller’s Representations: The seller’s representations serve threeoverlapping purposes. First, they are a device for obtaining disclosure about the seller beforethe signing of the acquisition agreement. A thorough buyer’s draft elicits information aboutthe seller and its business relevant to the buyer’s willingness to buy the assets. For example,the Fact Pattern assumes that the Seller has no subsidiaries and the representations reflect3148166v1- 68 -