In the previous post, my initially-published version (which went out to this blog’s email subscribers but which I subsequently revised) blamed the Bayer and Merck lawyers for the wall-of-words paragraphs reproduced in the Delaware chancery court’s opinion in Merck v. Bayer. The actual version of those contract sections contract, as filed at the SEC’s EDGAR Web site, includes somewhat-shorter paragraphs.
But the language could still have been pretty-drastically simplified. And for that we should indeed blame the lawyers — especially the lawyers for Buyer, likely at the Sullivan & Cromwell firm, according to the Notices section of the contract.
Example: Section 2.6 from the SEC version is as follows:
2.6 Assumption of Liabilities.
Effective as of the Closing, neither Seller nor any of its Affiliates shall have any liability or obligation with respect to, and Buyer shall assume and thereafter pay, perform and discharge when due, all liabilities and obligations of Seller and its Affiliates, whether relating to periods prior to, on, or after the Closing, to the extent related to or arising from, the Transferred Consumer Care Assets, the Consumer Care Business, the Transferred Rx Product Assets, the Rx Product Business and/or the Conveyed Sites, other than the Retained Liabilities (collectively, the “Assumed Liabilities”) (provided that, notwithstanding anything to the contrary in this Section 2.6, (i) any liabilities or obligations of the Companies or any of their Subsidiaries shall not constitute Assumed Liabilities, it being acknowledged and agreed that such liabilities or obligations (other than Retained Liabilities) shall remain the liabilities or obligations, as applicable, of the Companies or their applicable Subsidiaries immediately after the Closing, and (ii) nothing in this Section 2.6 shall affect Buyer’s rights pursuant to Article X), including, without limitation: … [subdivisions (a) through (f) omitted]
Here’s a possible (partial) rewrite that follows the SSRP Rule: Short, Single-Subject Paragraphs:
2.6 Assumption of Liabilities.
(a) Effective as of the Closing, Buyer will assume all “Assumed Liabilities,” defined in subdivision (c) below.
(b) Without limiting Buyer’s obligation under subdivision (a), Buyer will take any and all action required to ensure that neither Seller nor any of its Affiliates have any liability or obligation with respect to the Assumed Liabilities.
(c) Definition: The term “Assumed Liabilities” refers to all liabilities and obligations of Seller and its Affiliates — except as subdivision 2.6(e) — whether relating to periods prior to, on, or after the Closing, to the extent related to or arising from one or more of the following:
(1) the Transferred Consumer Care Assets;
(2) the Consumer Care Business;
(3) the Transferred Rx Product Assets;
(4) the Rx Product Business; and/or
(5) the Conveyed Sites.
(d) The term “Assumed Liabilities” includes, without limitation:
(1) all obligations and liabilities under the Material Contracts to which any member of the Seller Group is a party or by which it is bound, to the extent relating to the Consumer Care Business;
(2) [for subdivisions (2) through (7), add the text of exceptions listed in the original version’s subdivisions 2.6(b) through 2.6(g)] …
(8) the obligations and liabilities set forth in Section 2.6(d)(8) of the Seller Disclosure Schedule.
(e) Exception: The term “Assumed Liabilities” does not include any of the following:
(1) any liabilities or obligations of the Companies or any of their Subsidiaries;
(2) the Retained Liabilities.
Much more readable, no?
Sure, it’d take a few more minutes of lawyer time to follow the SSSP Rule (again: Short, Single-Subject Paragraphs).
But that extra cost would undoubtedly be “couch change” compared to the overall legal costs of doing the asset sale that was the subject of the contract.
- Which version would be signed sooner, because it could be more-quickly reviewed and, if necessary, negotiated and revised?
- Which version would the clients’ business people prefer to read?
- Which version would a judge or law clerk prefer to read?
There’s only one reasonable answer.