asset acquisitions - Jackson Walker LLP

other legal remedies with respect to the acquisition described in the notice. Thus, the failureto file such a notice can have an adverse effect on the Seller. Clause (ii) alerts the Buyer tothe existence of regulatory provisions of this type.The parties may face a troublesome dilemma if both the Buyer and the Seller areaware of a possible violation of law that might occur as a consequence of the acquisition orrelated transactions. If the possible violation is not disclosed by the Seller in the DisclosureLetter, as between the parties the Seller will bear the risks associated with any violation (seeSection 11.2(a)). But if the Seller elects to disclose the possible violation in the DisclosureLetter, it may be providing a discoverable “road map for a lawsuit by the government or athird party.” Kling & Nugent Simon, Negotiated Acquisitions of Companies, Subsidiariesand Divisions § 11.04(7) (1992).Although clause (iii) (which addresses the possible revocation of GovernmentalAuthorizations) overlaps to some extent with clause (ii), clause (iii) is included because aGovernmental Authorization may become subject to revocation without any statutory orregulatory “violation” actually having occurred.Clause (iv) is important because the sale of the assets will trigger state and local taxconcerns in most states. In many states, the sale of assets may routinely lead to areassessment of real property and may increase taxes on personal property. For example, ifrolling stock is to be transferred, the transfer will, in some cases, lead to increased localtaxes. Seller’s counsel should resist any representation to the effect that the sale of assetswill not lead to a reassessment.Clause (v) deals with contractual defaults and other contractual consequences thatmay be triggered by the acquisition or related transactions. Many contracts provide that thecontracts may not be assigned without the consent of the other parties thereto. Hence,without such consents, the contracts would be breached upon the transfer at the closing.Clause (v) alerts the Buyer to the existence of any such contracts.Clause (v) applies to “Seller Contracts,” the definition of which extends both tocontracts to which the Seller is a party and to contracts under which the Seller has any rightsor by which the Seller may be bound. The inclusion of the latter type of contracts may beimportant to the Buyer. For example, the Buyer will want to know if the Seller’s rightsunder a promissory note or a guaranty given by a third party and held by the Seller would beterminated or otherwise impaired as a result of the acquisition. Because such a promissorynote or guaranty would presumably be signed only by the third party maker or guarantor(and would not be executed on behalf of the Seller in its capacity as payee or beneficiary),the Seller might not be considered a party to the note or guaranty.Other examples of contracts that may be covered by the expansive definition of“Seller Contract” include the following:1. contracts under which the Seller is a third party beneficiary;2. contracts under which a party’s rights or obligations have been assigned toor assumed by the Seller;3. contracts containing obligations that have been guaranteed by the Seller;3148166v1- 75 -