Contractual Considerations Relevant to Multi-Jurisdictional Merger Review

1
Contractual Considerations Relevant to
Multi-Jurisdictional Merger Review

• Prepared byPeter FranklynOsler, Hoskin
  Harcourt LLPToronto, Ontario
• for the ABA Section of International Law
  ConferenceApril 5, 2006

2
Key Issues

• closing conditions
• responsibility for/cooperation in securing
  approvals
• efforts required to obtain approval/allocation of
  risk
• maintaining privilege over common work product

3
Closing Conditions

• Various alternatives available including
• general language providing for requirement to
  make all necessary filings
• in jurisdictions where filing is required and
  where failure to allow waiting period to expire
  or to obtain clearance would prevent completion
  of transaction, or
• specify jurisdictions in which filings/approvals
  are required
• see Appendix A

4
Responsibility for/cooperation in securing
approvals

• Usually requires parties to work together to
  collect information and make necessary filings,
  to allow review in advance of making material
  submissions, to cooperate in responding to
  information requests and to complete filing
  within prescribed time after signing of agreement
• See Appendix A and Appendix B, paras (a)-(c)

5
Efforts required to obtain approval/allocation of
risk

• Ranges from purchaser friendly (reasonable or
  commercially reasonable efforts) to very
  vendor friendly (hell or high water)
  conditions
• Type of provision depends on negotiating dynamics
  (e.g., whether auction process with multiple
  bidders, highly motivated seller etc.),
  anticipated degree of regulatory
  risk/uncertainty, parties tolerance for
  accepting risk

6
Purchaser Friendly Provision

• Typically requires commercially reasonable
  efforts or some variation without a requirement
  that buyer agree to hold separate arrangement or
  commit to make divestitures
• e.g., litigate to point of unappealable final
  decision but no obligation to divest
• effectively gives the buyer an option and
  allows buyer to walk if obtaining approval
  requires a remedy/concession buyer is not
  prepared to agree to

7
Middle Ground

• Requires a greater degree of commitment/risk on
  the part of the buyer (e.g., limited divestiture)
  qualified by language imposing an upper limit on
  its obligation such as
• a financial cap on the value of assets that are
  required to be divested
• reference to specific assets or business units
  that buyer is not required to divest
• commitment based on a defined threshold e.g.
  material adverse effect having regard to the
  purchasers business
• See Appendix B, paras (d) (e) and Appendix C

8
Vendor Friendly Provision Hell or High Water

• Shifts all antitrust clearance risk to buyer
• Requires buyer to take all steps (up to and
  including hold separate arrangements and
  divestiture) as may be necessary to secure timely
  antitrust clearance without limitation or setoff
  against purchase price
• Provides deal protection for seller where there
  is significant antitrust risk that seller is not
  prepared to share
• See Appendix B, para (d), Appendix C, para (b)
  (excluding last phrase) and Appendix D
• Risk of disclosing this to regulatory agencies
• possible alternatives include use of reverse
  break fee or inclusion of remedial obligations
  in joint defense agreement

9
Preserving Privilege/Joint Defense Arrangements

• Designed to allow collaboration among counsel
  (and experts) to avoid/defend against litigation
  and obtain clearance without waiving privilege
• Potential use for shielding risk allocation/
  divestiture provisions
• Effectiveness somewhat untested