2007_private m&a points study_aba biz law_8.8.08

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003 Private Target Study (v2), slide 1Release Date 8.8.08

2007 Private Target2007 Private TargetMergers & Acquisitions Deal Points Study (v2)Mergers & Acquisitions Deal Points Study (v2)

A Project of the Mergers & Acquisitions Market Trends SubcommittA Project of the Mergers & Acquisitions Market Trends Subcommittee ee

of the of the

Committee on Negotiated Acquisitions Committee on Negotiated Acquisitions

of the of the

American Bar AssociationAmerican Bar Association’’s Section of Business Laws Section of Business Law


A Project of the M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions

of the American Bar Association’s Section of Business Law

Subcommittee ChairKeith A. Flaum, Cooley Godward Kronish LLP

Subcommittee Vice ChairsHendrik Jordaan, Holme Roberts & Owen LLP

Jessica C. Pearlman, K&L Gates LLP

Founding Subcommittee ChairsWilson Chu, Haynes and Boone, LLP

Larry Glasgow, Gardere Wynne Sewell, LLP

Special AdvisorRichard E. Climan, Cooley Godward Kronish LLP

Chair, Committee on Negotiated AcquisitionsJoel I. Greenberg, Kaye Scholer LLP

Private Target M&A Deal Points StudyPrivate Target M&A Deal Points Study


Private Target Study Working GroupPrivate Target Study Working Group

CO-CHAIRS

Wilson Chu Haynes and Boone LLP Dallas, TX

Larry Glasgow Gardere Wynne Sewell LLP Dallas, TX

ISSUE GROUP LEADERS

Dennis Barsky Jones Day

New York, NY

John Corrigan Adler Pollock & Sheehan, PC

Providence, RI

Mark Danzi Hill, Ward Henderson

Tampa, FL

David Fisher Bryan Cave LLP

New York, NY

Michael Kendall Goodwin Procter LLP

Boston, MA

Hendrik Jordaan Holme Roberts & Owen LLP

Denver, CO

Steven Tonsfeldt Heller Ehrman LLP

Menlo Park, CA

Jessica Pearlman K&L Gates LLP

Seattle, WA

Michael Hollingsworth Nelson Mullins Riley & Scarborough LLP Atlanta, GA

Carl Sanchez Paul, Hastings, Janofsky & Walker LLP

San Diego, CA

DISCLAIMERSThe findings presented in this Study do not necessarily reflect the personal views of the Working Group members or the views of their respective firms. In addition, the acquisition agreement provisions that form the basis of this Study are drafted in many different ways and do not always fit precisely into particular “data point” categories. Therefore, Working Group members have had to make various judgment calls regarding, for example, how to categorize the nature or effect of the provisions. As a result, the conclusions presented in this Study may be subject to important qualifications that are not expressly articulated in this Study.


Ronald Albert, Jr. Broad and Cassel

Miami, FL

Phil BauerThe Mosaic Company

Plymouth, MN

Allison BlixtJones Day

New York, NY

Kevin Boardman Patton Boggs LLP

Dallas, TX

Abigail Bomba Fried, Frank, Harris, Shriver & Jacobson LLP

New York, NY

Richard Brody Troutman Sanders LLP

Atlanta, GA

Thomas Chase Day Pitney LLP

Boston, MA

Terrence Childers Powell Goldstein LLP

Atlanta, GA

David Christopherson King & Spalding LLP

Atlanta, GA

John Clifford McMillan LLP

Toronto, Canada

Jay Cohen Duane Morris LLP

Baltimore, MD

Mattia Colonnelli de Gasperis Lombardi Molinari e Associati

Milan, Italy

Hannah Crockett Powell Goldstein LLP

Atlanta, GA

Edward Deibert Howard Rice Nemerovski Canady Falk & Rabkin PC

San Francisco, CA

Nicholas Deitrich Gowling Lafleur Henderson LLP

Toronto, Canada

Roger Edwards Advantage Sales & Marketing, LLC

Irvine, CA

George Flint Parsons Behle & Latimer

Salt Lake City, UT

Brian Galison Nelson Mullins Riley & Scarborough LLP

Atlanta, GA

Joshua Gaul K&L Gates LLP

Seattle, WA

Greg Giammittorio Morrison & Foerster LLP

McLean, VA

Lori Green Nixon Peabody LLP

Rochester, New York

Steven Haas Abrams & Laster LLP

Wilmington, DE

Lola Miranda Hale Epstein Becker & Green P.C.

Chicago, IL

Kathryn Heet Qwest Communications International Inc

Denver, CO

Patrick Henderson Shook, Hardy & Bacon, L.L.P.

Kansas City, MO

Ashley Hess Greenebaum Doll & McDonald PLLC

Cincinnati, OH

Troy Hickman Perkins Coie LLP

Seattle, WA

Raymond Hum Morrison & Foerster LLP

San Francisco, CA

Stuart Johnson Powell Goldstein LLP

Atlanta, GA

Woody Jones Andrews Kurth LLP

Houston, TX

Barbara Kaye Honigman Miller Schwartz and Cohn LLP

Ann Arbor, MI

Kristen Kercher Heller Ehrman LLP

Menlo Park, CA

Paul Kirkpatrick Haynes and Boone LLP

Dallas, TX



Kevin Kyte Stikeman Elliott LLP

Montreal, Canada

Cindy LinCurtis, Mallet-Prevost, Colt & Mosle LLP

Houston, TX

Matthew MartinHusch & Eppenberger, LLC

Chattanooga, TN

Albert McGrath Baker & McKenzie LLP

Dallas, TX

Rick McMillan Jones, Walker, Waechter, Poitevent,

Carrère & Denègre, L.L.P. New Orleans, LA

Craig Menden Fenwick & West LLP Mountain View, CA

Samuel Mullin Robinson & Cole LLP

Boston, MA

Cliff Pearl Hensley Kim & Holzer LLC

Denver, CO

Chris Philips Waller Lansden Dortch & Davis

Nashville, TN

Michael Philips Davis Wright Tremaine LLP

Portland, OR

Thomas Queen Graves Dougherty Hearon & Moody

Austin, TX

Stephen Quinlivan Leonard Street and Deinard

Minneapolis, MN

Dan Reid Grant Thornton LLP San Francisco, CA

Jim Scheinkman Snell & Wilmer L.L.P. Orange County, CA

Chris Scheurer McGuireWoods LLP

Charlotte, NC

Warren Silversmith Stikeman Elliott LLP

Montreal, Canada

Claudia Simon Paul, Hastings, Janofsky & Walker LLP

San Diego, CA

Deyan Spiridonov Paul, Hastings, Janofsky & Walker LLP

San Diego, CA

Mark Stoneman Armstrong Teasdale LLP

St. Louis, MO

Ben Straughan Perkins Coie LLP

Seattle, WA

James Sullivan Alston& Bird LLP

New York, NY

Thomas Talley Thacher Proffitt & Wood LLP

New York, NY

Brett Thorstad Weil, Gotshal & Manges LLP

Dallas, TX

Phillip Torrence Miller, Canfield, Paddock & Stone, P.L.C.

Kalamazoo, Michigan

Samuel Wales McDermott Will & Emery

Chicago, IL

Maryann Waryjas Katten Muchin Rosenman LLP

Chicago, IL

Rhys Wilson Nelson Mullins Riley & Scarborough LLP

Atlanta, GA

Iain Wood Haynes and Boone LLP

Dallas, TX

Tina Woodside Gowling Lafleur Henderson LLP

Toronto, Canada

Bryan Zair Clark Hill PLC

Detroit, MI

Matt Zmigrosky Haynes and Boone LLP

Dallas, TX



This Study analyzes publicly available acquisition agreements for transactions completed in 2006 that involved private targets being acquired by public companies. The prior study published in 2006 analyzed such agreements from transactions completed in 2004.

The Study sample was obtained from www.livedgar.com

The final Study sample of 143 acquisition agreements (out of an initial yield of 269) excludes agreements from transactions in which the Target was in bankruptcy, reverse mergers, and transactions otherwise deemed inappropriate for inclusion.

12%88%30%5%65%143$25M - $500M

Simultaneous Sign-and-Close

DeferredMixedAll StockAll Cash

ClosingConsideration# of Deals

Transaction Value* Range

* As determined by LIVEDGAR (includes reported debt assumed)* For purposes of this Study, it is assumed that transaction value as determined by LIVEDGAR is equal to “Purchase Price” as that term is used

in the underlying acquisition agreements

Private Target Study Sample OverviewPrivate Target Study Sample Overview


$51M - $100M23.1%

$101M - $200M18.2%

$25M - $50M39.9%

$201M - $300M7.7%

$301M - $400M8.4%

$401M - $500M2.8%

Private Target Study Sample OverviewPrivate Target Study Sample Overview(by transaction value)(by transaction value)


Other14.7%

Oil & Gas4.9%

Technology25.9%

Industrial Goods & Services

13.2%

Health Care15.4%

Financial Services8.4%

Construction & Materials

4.9%

Personal & Household Goods

6.3%

Aerospace & Defense

6.3%

•Media•Telecom•Auto & Parts•Retail•Travel & Leisure•Chemicals & Basic (Natural) Resources•Food & Beverage

Private Target Study Sample OverviewPrivate Target Study Sample Overview(by industry)(by industry)


Financial34.3%

Indeterminate1.4%

Entrepreneurial50.3%

Corporate14.0%

Private Target Study Sample OverviewPrivate Target Study Sample Overview(nature of principal sellers)(nature of principal sellers)

Entrepreneurial: founders appear to dominate management/ownershipCorporate: founders appear to no longer dominate management/ownershipFinancial: backed by financial sponsors who appear to have significant influence/control


I. Financial Provisions ………………………………………………………………………………………….Slide 11A. Post-Closing Purchase Price AdjustmentsB. Earnouts

II. Pervasive Qualifiers ………………………………………………………………………………………... Slide 21A. Materiality/MAE *v2 Supplement*B. Knowledge *v2 Supplement*

III. Target’s Representations and Warranties….……………………………………………………………...Slide 34A. Financial Statements (“Fair Presentation”; Internal Controls and Accuracy and Completeness)B. “No Undisclosed Liabilities”C. Compliance with LawD. “10b-5/Full Disclosure”

IV. Conditions to Closing……………….………….…………………………………………………………….Slide 50A. Accuracy of Target’s RepresentationsB. Buyer’s MAC ConditionC. No Legal ProceedingsD. Legal Opinions

V. Indemnification ……………….………….…………………………………………...................................Slide 62A. Sandbagging *v2 Supplement*B. Reliance *v2 Supplement*C. Disclaimer of Seller’s Representations and Warranties D. Seller’s Obligation to Update Disclosure SchedulesE. Survival/Time to Assert ClaimsF. Liability of Multiple IndemnitorsG. Types of Damages/Losses CoveredH. BasketsI. CapsJ. Indemnification as Exclusive RemedyK. Escrows/HoldbacksL. Stand-Alone IndemnitiesM. Setoffs/Mitigation

VI. Dispute Resolution ............. ………….…………………………………………................................... Slide 98A. Governing LawB. Venue C. Waiver of Jury TrialD. Alternative Dispute Resolution

ContentsContents


Financial Provisions*

* Disregards one transaction with unfiled financial provisions


PostPost--Closing Purchase Price AdjustmentsClosing Purchase Price Adjustments

Financial Provisions

The “Adjustment Amount” (which may be a positive or negative number) will be equal to the amount determined by subtracting the Closing Working Capital from the Initial Working Capital. If the Adjustment Amount is positive, the Adjustment Amount shall be paid by wire transfer by Seller to an account specified by Buyer. If the Adjustment Amount is negative, the difference between the Closing Working Capital and the Initial Working Capital shall be paid by wire transfer by Buyer to an account specified by Seller.

…

“Working Capital” as of a given date shall mean the amount calculated by subtracting the current liabilities of Seller included in the Assumed Liabilities as of that date from the current assets of Seller included in the Assets as of that date. The Working Capital of Seller as of the date of the Balance Sheet (the “Initial Working Capital”) was ______ dollars ($______).

(ABA Model Asset Purchase Agreement)NEW v2 SLIDE


Includes Adjustment

68%

No Adjustment

32%

PostPost--Closing Purchase Price AdjustmentsClosing Purchase Price Adjustments


(Subset: includes adjustment)

27%

13%

15%

20%

69%

4%

Other

Cash

Assets

Debt

Working Capital

Earnings

Adjustment Metrics*

* 29% of the post-closing purchase price adjustments were based on more than one metric



No Express Right by Buyer to Approve

Estimated Adjustment

66%

Includes Buyer's Right to Approve

Estimated Adjustment

34%

No Estimated Adjustment at

Closing36%

Includes Payment Based on Seller's

Estimated Closing Date

Financial Metric(s)

64%

PostPost--Closing Purchase Price Adjustments Closing Purchase Price Adjustments ––Estimates at ClosingEstimates at Closing

(Subset: includes estimated closing payment)

(Subset: deals with post-closing purchase price adjustment)


Purchase Price Adjustment Paid Only If Exceeds

Threshold10%

Purchase Price Adjustment

Amount Need Not Exceed a

Threshold90%


PostPost--Closing Purchase Price Adjustments Closing Purchase Price Adjustments ––ThresholdThreshold



PostPost--Closing Purchase Price Adjustments Closing Purchase Price Adjustments ––Preparation of Closing Balance SheetPreparation of Closing Balance Sheet

Not Deter-minable

1%

Buyer79%

Other7%

Seller13%

Not Deter-minable

4%

Silent2%

Other3%

GAAP14%

Consistent with Prior Financial

Statements5%

GAAP Consistent

with Past or Scheduled Practices

72%

MethodologyPreparing Party




Includes Separate Escrow22%

No Separate Escrow78%

Combination or Buyer Option

3%

Not Deter-minable

1%

Downward Adjustment Paid from Indemnity

Escrow55%

Downward Adjustment

Paid by Sellers41%

PostPost--Closing Purchase Price Adjustments Closing Purchase Price Adjustments ––Separate EscrowSeparate Escrow

(Subset: no separate escrow)




No Earnout

81%Includes Earnout

19%

EarnoutsEarnouts

11%

26%

37%

30%Revenue/Turnover

Earnings/EBITDA

Other**

Not determinable

(Subset: includes earnout)

Earnout Metrics*

* 4% of earnouts were based on more than one metric**Examples: regulatory approval of drug applications; attainment of certain post-closing contracts; launch of certain products



7%

63%

11%

22%To Run Consistentwith Past Practice

To Run to MaximizeEarnout

Neither Covenant

Not Determinable

Earnouts Earnouts ––BuyerBuyer’’s Covenants as to Acquired Businesss Covenants as to Acquired Business

(Subset: deals with earnouts)



Not Determinable

11%

No Offset Provision

37%

Buyer Can Offset

Indemnity Payments Against Earnout

52%

Earnouts Earnouts ––Acceleration and OffsetsAcceleration and Offsets

(Subset: deals with earnouts)

Not Determinable

4%

Earnout Does Not Accelerate on Change of

Control85%

Earnout Accelerates on

Change of Control11%



Pervasive Qualifiers

NEW v2 SLIDE


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect””

NEW v2 SLIDE


MATERIAL ADVERSE EFFECT . . . Means a change, effect, condition, or circumstance that, in the reasonable judgment of Buyer, is, or could reasonably be expected to be, material and adverse to the business, operations, assets, liabilities, financial condition, value, business prospects, ability to deliver services, operating results, cash flow, net worth or customer or provider relations of the Company, or otherwise materially adversely affecting the ability of Sellers to consummate the transactions contemplated hereby . . ..

(Kanaby International, Inc. acquisition of Adjoined Consulting, Inc.)


MAE Not Defined

3%

MAE Defined97%

"Prospects" Not Included

64%

"Prospects" Included

36%(Subset: MAE defined)


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect””

NEW v2 SLIDE


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect”” ––Forward Looking StandardsForward Looking Standards

Forward Looking

70%

Not Forward Looking

30%

(Subset: forward looking standard)

(Subset: deals with MAE definition)

"could be"22%

Other*45% "would

be"33%

* Agreements in the “Other” category use a combination of “could” and “would” or some other forward looking standard.


NEW v2 SLIDE


Included7%

Not Included

93%

Not Included

49%

Included51%

Definition Includes Buyer’s Ability to Operate Target’s Business Post Closing

Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect””(Subset: deals with MAE definition)

MAE as Stated Dollar Amount

Definition Includes Target’s Ability to Consummate Contemplated Transaction

Yes7%

No93%


NEW v2 SLIDE

(8% in deals in 2004)


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect”” ––CarveoutsCarveouts

NEW v2 SLIDE


“Material Adverse Effect” means . . ., except for any such changes or effects resulting, directly or indirectly, from (i) the public announcement of, or performance of the transactions contemplated by or pursuant to, this Agreement or the Escrow Agreement (including any action or inaction by the Company’s customers, suppliers, employees or competitors), (ii) changes in GAAP or any applicable Law, (iii) changes in the industry in which the Company and the Company Subsidiaries operate, (iv) any attack on, or by, outbreak or escalation of hostilities or acts of terrorism involving, the United States, any declaration of war by Congress or any other national or international calamity, (v) changes in general economic conditions or the financial or securities markets generally, or (vi) any adverse change or effect that is cured by Seller prior to the Closing . . ..

(Riddell Bell Holdings, Inc. acquisition of Jas. D. Easton, Inc.)


Definition Includes

Carveouts74%

No Carveouts Included

26%

(Subset: deals with MAE definition)



NEW v2 SLIDE



28%

37%

28%

37%

30%

45%

17%

54%

44%

58%

32%

63%

59%

83%

65%

88%Economic Changes

Industry Conditions

Actions Required byAgreement

Announcement of Deal

War or Terrorism

Financial Market Downturn

Changes in Law

Changes in Accounting

(Subset: deals with MAE definition with carveouts)



NEW v2 SLIDE

Deals in 2004

Deals in 2006


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect”” ––CarveoutsCarveouts Qualified by Disproportionate EffectQualified by Disproportionate Effect

NEW v2 SLIDE


“Material Adverse Effect” means . . ., except for any such changes or effects resulting, directly or indirectly, from (i) the public announcement of, or performance of the transactions contemplated by or pursuant to, this Agreement or the Escrow Agreement (including any action or inaction by the Company’s customers, suppliers, employees or competitors), (ii) changes in GAAP or any applicable Law, (iii) changes in the industry in which the Company and the Company Subsidiaries operate, (iv) any attack on, or by, outbreak or escalation of hostilities or acts of terrorism involving, the United States, any declaration of war by Congress or any other national or international calamity, (v) changes in general economic conditions or the financial or securities markets generally, or (vi) any adverse change or effect that is cured by Seller prior to the Closing, but only to the extent any such change described in clauses (ii), (iii), (iv) and (v) is not specifically related to or disproportionately impacts the Company or the Company Subsidiaries.

(Riddell Bell Holdings, Inc. acquisition of Jas. D. Easton, Inc.)


Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect”” ––CarveoutsCarveouts Include Burden of Proof StandardInclude Burden of Proof Standard

NEW v2 SLIDE


“Company Material Adverse Effect” shall mean. . .; provided, however, that none of the following shall be deemed, either alone or in combination, in and of themselves to constitute a Company Material Adverse Effect: (i) . . .; provided, however, that in the case of clauses (i) through (iii) above, inclusive, the Company has the burden of proving that a change, event, violation, inaccuracy, circumstance or effect is not a Company Material Adverse Effect because one or more of the foregoing exceptions applies.

(Planar Systems, Inc. acquisition of Clarity Visual Systems, Inc.)


(Subset: deals with MAE definition with carveouts)

Included3%

Not Included

97%

Carveouts Include Burden of Proof Standard

Carveouts Qualified by Disproportionate Effect

No38%

Yes62%

Definition of Definition of ““Material Adverse EffectMaterial Adverse Effect”” ––CarveoutsCarveouts to to CarveoutsCarveouts


NEW v2 SLIDE


Knowledge Knowledge ––InvestigationsInvestigations


NEW v2 SLIDE

No Investigation

Expressly Contemplated

(Actual Knowledge)

39%

Investigation Expressly

Contemplated (Constructive Knowledge)

61%

*

* Includes 6.7% of agreements that expressly negate investigation requirement and 32.6% of deals that are silent as to the investigation requirement



Identified Persons Included

93%

No Identified Person

7%

Knowledge Knowledge ––Identified PersonsIdentified Persons


NEW v2 SLIDE



Target’s Representations and Warranties


“Fairly presents” is GAAP qualified

Such financial statements fairly present (and the financial statements delivered pursuant to Section 5.8 will fairly present) the financial condition and the results of operations, changes in shareholders’ equity and cash flows of [Target] as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP.

(ABA Model Asset Purchase Agreement)

“Fairly presents” is not GAAP qualified

[T]he Financial Statements: (i) have been prepared from the books and records of the Company in accordance with US GAAP consistently applied during the periods covered thereby (except as otherwise disclosed therein); (ii) are complete and correct in all material respects; and (iii) fairly present in all material respects the financial position and the results of operations of the Company (on a consolidated basis) as of the dates and during the periods indicated therein…

(Hologic, Inc. acquisition of Suros Surgical Systems, Inc. )


Financial Statements Financial Statements ––““Fair PresentationFair Presentation”” RepresentationRepresentation


84%

75%

14%

24%

2%

1%

"Fairly Presents" is Not GAAPQualified

"Fairly Presents" is GAAPQualified

Not IncludedDeals in 2004

Deals in 2006

Financial Statements Financial Statements ––““Fair PresentationFair Presentation”” RepresentationRepresentation



The Company’s internal controls and procedures are sufficientto ensure that the Latest Financial Statements and the Annual Financial Statements are accurate in all material respects. …[A]ll accounts, books and ledgers related to the business of theCompany are properly kept, are accurate and complete in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein.

(ATS Medical acquisition of 3F Technologies)

Financial Statements Financial Statements ––Internal Controls and Accuracy and CompletenessInternal Controls and Accuracy and Completeness



Includes Internal Controls

Rep45%

No Internal Controls

Rep55%

Financial Statements Financial Statements ––Internal Controls and Accuracy and CompletenessInternal Controls and Accuracy and Completeness


No Accurate and

Complete Component

69%

Includes Accurate

and Complete

Component31%



Financial Statements Financial Statements ––Basis of Internal Controls RepresentationBasis of Internal Controls Representation

Regulation S-K, Item 601:To the Company’s Knowledge, there does not exist (i) any significant deficiency in the design or operation of internal controls which could adversely affect the Company’s or any Subsidiary’s ability to record, process, summarize and report financial data….

(EFJ Inc. acquisition of 3E Technologies International Inc.)

’34 Act, Section 13(b)(2)(B):The Company maintains internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(Nanometrics Incorporated acquisition of Accent Optical Technologies)

Rules 13(a)-(f), etc.:[Company] has established and documented, and maintains, adheres to and enforces a system of internal accounting controls which are effective in providing assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP (including the Financials), including policies and procedures that (a) require the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries, (b) provide assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its Subsidiaries are being made only in accordance with appropriate authorizations of management and the Board of Directors of the Company and (c) provide assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries.

(Autodesk Inc. acquisition of Alias Systems Holdings Inc.)



(Subset: deals with representation)

Rules 13(a)-(f), etc.

14%

Other 15%

'34 Act, Section 13(b)(2)(B)

62%

Regulation S-K Item 601

9%

Financial Statements Financial Statements ––Basis of Internal Controls RepresentationBasis of Internal Controls Representation



No Undisclosed Liabilities. Except as set forth in Part 3.13 [of the Disclosure Letter], [Target] has no Liability except for Liabilities reflected or reserved against in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business of [Target] since the date of the Interim Balance Sheet.

***

“Liability”--with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.


““No Undisclosed LiabilitiesNo Undisclosed Liabilities”” Representation Representation ––BuyerBuyer--Favorable FormulationFavorable Formulation



No Undisclosed Liabilities. Except as set forth in Part 3.13 [of the Disclosure Letter], [Target] has no liability of the nature required to be disclosed in a balance sheet prepared in accordance with GAAP except for …

““No Undisclosed LiabilitiesNo Undisclosed Liabilities”” Representation Representation ––TargetTarget--Favorable FormulationFavorable Formulation



““No Undisclosed LiabilitiesNo Undisclosed Liabilities”” RepresentationRepresentation

Rep Not Included

7%

Includes Rep93%

"All Liabilities"

(Buyer Favorable)

68%

"GAAP Liabilities"

(Target Favorable)

32%

(Subset: includes rep)





(Carveouts for items that are (1) reflected on Balance Sheet; (2) immaterial (stand alone); and (3) ordinary course (since the Balance Sheet date))

Except as reflected in the Company Balance Sheet, the Company has no liabilities (absolute, accrued, contingent or otherwise) which are required by GAAP to be set forth on a consolidated balance sheet of the Company and its consolidated Subsidiaries or in the notes thereto, other than… any liabilities and obligations incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice…and… liabilities that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(Nanometrics Incorporated acquisition of Accent Optical Technologies)

““No Undisclosed LiabilitiesNo Undisclosed Liabilities”” Representation Representation ––Qualifiers and ExclusionsQualifiers and Exclusions



9%

83%

44%

7%Knowledge Qualified

Immaterial Liabilities(Stand-alone)

Ordinary Course SinceBalance Sheet Date

Ordinary Course WithoutReference to Balance

Sheet Date

““No Undisclosed LiabilitiesNo Undisclosed Liabilities”” Representation Representation ––Qualifiers and ExclusionsQualifiers and Exclusions




77%

32%

76%

10% KnowledgeQualified

Covers PresentAND Past

Includes Noticeof Investigation

Includes Noticeof Violation

Compliance with Law RepresentationCompliance with Law RepresentationRep Not Included

1%

Includes Rep99%




Compliance with Law RepresentationCompliance with Law Representation

No Materiality Qualifier

22%

Qualified by MAE23%

Qualified by Materiality

(undefined)55%




“10b-5” Formulation

No representation or warranty or other statement made by [Target or any Target Shareholder] in this Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the certificates delivered pursuant to Section 2.7(a) or otherwise in connection with the Contemplated Transactions contains any untrue statement or omits to state a material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.

“Full disclosure” Formulation

Seller does not have Knowledge of any fact that has specific application to Seller (other than general economic or industry conditions) and that may materially adversely affect the assets, business, prospects, financial condition or results of operations of Seller that has not been set forth in this Agreement or the Disclosure Letter.


““10b10b--5/Full Disclosure5/Full Disclosure”” RepresentationRepresentation



Rep Not Included

38%

"10(b)-5" AND Full

Disclosure Formulation

10%

"10(b)-5" Formulation

Only52%

Not Knowledge Qualified

74%

Knowledge Qualified

26%

““10b10b--5/Full Disclosure5/Full Disclosure”” RepresentationRepresentation





Conditions to Closing*

* Disregards the study sample’s 12% of deals (compare: 16% for deals in 2004) that are “simultaneous sign-and-close”


Conditions to Closing

Single point in time: at closing

Each of the representations and warranties made by the Target inthis Agreement shall have been accurate in all respects as of the Closing Date as if made on the Closing Date.

Two points in time: at signing and at closing

Each of the representations and warranties made by the Target inthis Agreement shall have been accurate in all respects as of the date of this Agreement, and shall be accurate in all respects as of the Closing Date as if made on the Closing Date.

Accuracy of TargetAccuracy of Target’’s Representations s Representations ––WhenWhen Must They Be Accurate?Must They Be Accurate?


Includes "Bring Down"

Requirement99%

No "Bring Down" Requirement

1%

Includes "When Made" Requirement

60%

No "When Made"

Requirement40%

“When Made”(i.e., at signing)

Accuracy of TargetAccuracy of Target’’s Representations s Representations ––WhenWhen Must They Be Accurate?Must They Be Accurate?

* Includes deals with both “when made” and “bring down” requirements and deals solely with a “bring down” requirement

“Bring Down”(i.e., at closing)*





Accurate in all respects

Each of the representations and warranties made by the Target in this Agreement shall have been accurate in all respects as of the Closing Date as if made on the Closing Date.

Accurate in all material respects

Each of the representations and warranties made by the Target in this Agreement shall have been accurate in all material respects as of the Closing Date as if made on the Closing Date.

The “Big MAC/MAE” qualification

Each of the representations and warranties made by the Target in this Agreement shall be accurate in all respects as of the Closing Date as if made on the Closing Date, except for inaccuracies of representations or warranties the circumstances giving rise to which, individually or in the aggregate, do not constitute and could not reasonably be expected to have a Material Adverse Effect.

Accuracy of TargetAccuracy of Target’’s Representations s Representations ––HowHow Accurate Must They Be?Accurate Must They Be?







(inclusion of materiality qualifiers)(inclusion of materiality qualifiers)

"In all material respects"

62%

The Big MAC/MAE

29%

"In all respects"

9%

"In all material respects"

60%

The Big MAC/MAE

38%

"In all respects"

2%






Each of the representations and warranties made by the Target inthis Agreement shall be accurate in all respects as of the Closing Date as if made on the Closing Date, except for inaccuracies of representations or warranties the circumstances giving rise to which, individually or in the aggregate, do not constitute and could not reasonably be expected to have a Material Adverse Effect (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Material Adverse Effect” qualifications and other materiality qualifications and similar qualifications contained in such representations and warranties shall be disregarded).


((““double materialitydouble materiality”” carveout)carveout)



Disregards "double

materiality"71%

Silent29%

Silent25%

Disregards "double

materiality"75%

(Subset: deals with materiality/MAE qualifiers)





((““double materialitydouble materiality”” carveout)carveout)




Stand-Alone:

Since the date of this Agreement, there has not been any Target Material Adverse Change.

“Back-Door”:

“absence of changes” representation

Since the Balance Sheet Date, there has not been any Target Material Adverse Change.

plus

“Bring Down” formulation of “Accuracy of Representations” condition

BuyerBuyer’’s MAC Conditions MAC Condition



Stand-Alone MAC Condition

78%

No Stand-Alone MAC Condition*

22%

BuyerBuyer’’s MAC Conditions MAC Condition((““standstand--alonealone””))


*May include deals with “back door” MAC



No Legal ProceedingsNo Legal Proceedings((““standstand--alonealone””))

Condition Not Included

38%Includes No Legal

Proceedings Condition

62%

No Legal Proceedings

Related to the Transaction

76%

No Legal Proceedings of

Any Nature24%

(Subset: includes condition)



No Materiality Qualifier

56%

MAE Qualified

22%

Dollar Amount

Qualified2%

Of a Material Nature

2%

Affecting Material

Portion of Business

6%

Seeking Material or

Subst. Damages

12%

No Legal ProceedingsNo Legal Proceedings((““standstand--alonealone””))

Pending and Threatened Proceedings

65%

Pending Proceedings

Only35%

Materiality Qualifications

(Subset: deals including closing condition of no legal proceedings)

Pending/Threatened Proceedings



Required*70%

Not Required**30%

Legal Opinions (NonLegal Opinions (Non--Tax) of TargetTax) of Target’’s Counsels Counsel

(All deals: includes simultaneous sign-and-close deals)

* Typically as a condition to closing, but includes opinions required in a “Closing Deliveries” covenant**Does not account for opinions that may have been required or delivered outside of the express terms of the agreement




Indemnification*

* Disregards three transactions with redacted indemnification provisions


““SandbaggingSandbagging””((propro--sandbagging provision)sandbagging provision)

The right to indemnification, reimbursement or other remedy based upon any such representation [or] warranty… will not be affected by any investigation… conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of…such representation [or] warranty….

(ABA Model Stock Purchase Agreement)

Indemnification

NEW v2 SLIDE


““SandbaggingSandbagging””((antianti--sandbagging provision)sandbagging provision)

The Buyer shall have no right to indemnification under this Agreement in respect of any inaccuracy or breach of any representation or warranty of the Sellers to the extent that anyindividual listed in clause (iii) of the definition of "Knowledge" contained in Section 9.1 (but such knowledge shall not be ascribed to the Buyer or any such individual based on the aggregate knowledge of such individuals) has actual knowledge on the date of this Agreement that such representation and warranty is inaccurate as of the date of this Agreement.

(EDO Corporation’s acquisition of Impact Science & Technology Inc.)

Indemnification

NEW v2 SLIDE


Anti-Sandbagging Provision Included

9%

Silent41%

Pro-Sandbagging Provision Included*

50%

““SandbaggingSandbagging””

Indemnification

* The methodology used in analyzing the 2006 deals may take a more nuanced approach in defining “pro-sandbagging” by excluding clauses that merely state that seller’s representations and warranties “survive buyer’s investigation” without any other express statement on the impact of buyer’s knowledge or investigation on buyer’s post-closing indemnification rights.




NEW v2 SLIDE


““SandbaggingSandbagging””

Type of Knowledge

not Specified23%

Actual Knowledge

Only77%

Pre- or Post-Signing

61%

Pre-Signing Only31%

Post-Signing Only8%

Timing of Knowledge*Type of Knowledge

(Subset: deals with anti-sandbagging provisions)

* Anti-sandbagging provisions may include further triggers beyond timing of knowledge.

Indemnification

NEW v2 SLIDE


NonNon--RelianceReliance

The Buyer acknowledges and agrees that in entering into this Agreement it has not relied and is not relying on any warranties, representations, …or other statements whatsoever, whether written or oral (from or by any the Sellers or any Person acting on their behalf) other than those expressly set out in this Agreement and that it will not have any right or remedy arising out of any warranty, representation, …or statement not set out in this Agreement….

(Eaton Power Solutions’ acquisition of MGE Finances and MGE UPS Systems)

Indemnification

NEW v2 SLIDE


NonNon--RelianceReliance

Express Non-Reliance Provision Included*

41%

No Express Non-Reliance

Provision59%

Indemnification

* Includes deals with express disclaimers of representations or warranties.

NEW v2 SLIDE


No Pro-Sandbagging

Provision57%

Includes Pro-Sandbagging

Provision43%

NonNon--Reliance and Reliance and ““SandbaggingSandbagging”” ––CorrelationCorrelation

Express Non-Reliance Provision Included*

41%

Indemnification

* See footnotes on slides 65 and 67. NEW v2 SLIDE

Pro-Sandbagging

Provision Included*

50%

No Non-Reliance Provision

65%

Includes Non-Reliance Provision

35%

(Subset: includes pro-sandbagging provision)(Subset: includes non-reliance provision)


Indemnification

Survival/Time to Assert ClaimsSurvival/Time to Assert Claims

10.1 SURVIVAL…

All representations, warranties … in this Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the certificate delivered pursuant to Section 2.4(a)(v), and any other certificate or document delivered pursuant to this Agreement will survive the Closing…

10.5 TIME LIMITATIONS

If the Closing occurs, Sellers will have no liability (for indemnification or otherwise) with respect to any representation or warranty… unless on or before _______________ Buyer notifies Sellers of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer…

(ABA Model Stock Purchase Agreement)


5%

16%

3%

34%

9%

26%

1%

1%

4%

1%Silent

Express No Survival

6 months

> 7 to < 12 months

12 months

> 12 to < 18 months

18 months

> 18 to < 24 months

24 months

> 24 months

Survival/Time to Assert Claims Survival/Time to Assert Claims (generally)(generally)

Indemnification


13 %10 %10 %

16 %14%

16 %2 2 %

19 %15 %

2 4 %11%

3 6 %3 0 %

3 7%2 7 %

3 7 %2 0 %

3 7 %3 1%

39 %2 1%

4 2 %3 1%

5 4 %38 %

5 9 %5 5 %

6 7 %T axes (Rep)

Capitalization (Rep)

Due Authority (Rep)

Ownership of S hares (Rep)

E mployee Benef its/E RIS A (Rep)

Fraud

Due Organization (Rep)

E nvironmental (Rep)

Breach of S eller's/T arget's Covenants

Broker's/F inder's Fees (Rep)

T itle to/S uf f iciency of Assets

Intentional breach of S eller's/T arget's Reps

No Conf licts (Rep)

Intellectual P roperty (Rep)

Survival/Time to Assert Claims Survival/Time to Assert Claims ––Carveouts to Survival Limitations*Carveouts to Survival Limitations*

* Matters subject to carveouts typically survive longer than time periods generally applicable to representations* Only those categories appearing 10% of the time or more for deals in 2006 are shown

Deals in 2004

Deals in 2006

(Subset: deals with survival provisions)

Indemnification


Several But Not Joint

("Pro Rata")35%

Joint and Several

41%

Silent24%

Liability of Multiple IndemnitorsLiability of Multiple Indemnitors(Subset: deals with survival provisions)

Indemnification


Limited to "Out of Pocket"

3%

Not Limited to "Out of Pocket"

97%

Types of Damages/Losses CoveredTypes of Damages/Losses Covered

Excludes Diminution in

Value10%

Silent65%

Includes Diminution in

Value25%

Diminution in Value“Out of Pocket” Damages


Indemnification


Types of Damages/Losses CoveredTypes of Damages/Losses Covered

Excludes Incidental Damages

16%

Silent79%

Includes Incidental Damages

5%

Includes Consequent- ial Damages

6%

Silent63%

Excludes Consequent- ial Damages

31%

Consequential DamagesIncidental Damages

Excludes Punitive Damages

34%

Silent63%

Includes Punitive Damages

3%

Punitive Damages


Indemnification


Baskets Baskets –– DeductibleDeductible

In seeking indemnification for Damages under Section 11.2(a), the Indemnified Persons will make no claim for Damages unless and until such Damages aggregate at least $[X] (the “Deductible”), in which event such Indemnified Persons may make claims for all Damages exceeding the Deductible.

(Concur Technologies, Inc. acquisition of Outtask, Inc.)

Indemnification


Baskets Baskets –– First DollarFirst Dollar

No Parent Group Member shall be entitled to receive any indemnification payment with respect to any claim for indemnification under this Article 7 until the aggregate Damages for which the Parent Group would otherwise be entitled to receive indemnification exceeds $[X] (“Threshold”). Once such aggregate Damages exceed the Threshold, the Parent Group shall be entitled to indemnification for the aggregate amount of all Damages, regardless of the Threshold.

(Art Technology Group, Inc. acquisition of Estara, Inc.)

Indemnification


Baskets Baskets –– CombinationCombination

The Sellers’ indemnification obligations under this Article VIII shall be subject to the following limitations: (i) the Sellers shall not be required to indemnify Buyer Indemnitees for Losses under clause (a) or (b) of Section 8.2 until the aggregate amount of all such Losses exceeds $[X] (the “Threshold Amount”) in which event the Sellers shall be responsible only for Losses in excess of $[Y] (the “Deductible”)…

(EDO Corporation acquisition of Impact Science & Technology, Inc.)

Indemnification


BasketsBaskets

No Basket3%

Combination7%

Deductible54%

First Dollar36%






Indemnification


40%

62%

49%

28%

7%

8%

4%

2%

0.5% or less

> 0.5% to 1%

> 1% to 2%

> 2%

Baskets as % of Transaction ValueBaskets as % of Transaction Value

(Subset: deals with baskets)

Deals in 2004

Deals in 2006

Indemnification


Baskets as % of Transaction ValueBaskets as % of Transaction Value(statistical summary)(statistical summary)

________0.40%(0.60% in deals in 2004)

0.52%(0.69% in deals in 2004)

Deductible and First Dollar

2.03%(2.00% in deals in 2004)

0.02%(0.08% in deals in 2004)

0.39%(0.47% in deals in 2004)

0.50%(0.60% in deals in 2004)

First Dollar

2.00%(3.13% in deals in 2004)

0.03%(0.01% in deals in 2004)

0.40%(0.62% in deals in 2004)

0.53%(0.77% in deals in 2004)

Deductible

MaximumMinimum(> 0)

MedianMeanBasket Type


Indemnification


39%

55%

100%

Other IndemnityClaims

Breaches ofCovenants

Breaches ofRepresentations and

Warranties

Basket CoverageBasket Coverage


Indemnification


Basket Carveouts*Basket Carveouts*

* Only those categories appearing 10% of the time or more for deals in 2006 are shown**No data for 2004

Deals in 2004

Deals in 2006

3%11%

8%12%

8%13%14%

20%11%

22%

31%18%

31%8%

32%26%

42%11%

47%21%

52%41%

55%Fraud

Capitalization (Rep)

Due Authority (Rep)

Taxes (Rep)

Ownership of Shares (Rep)

Intentional breach of Seller's/Target's Reps

Due Organization (Rep)**

Breach of Seller's/Target's Covenants

Broker's/Finder's Fees (Rep)

Title to/Sufficiency of Assets (Rep)

Employee Benefits/ERISA (Rep)

No Conflicts (Rep)


Indemnification


Seller shall not have any liability under this Section 10 for any breach of any representation or warranty contained in this Agreement or any Ancillary Agreement executed and delivered by Seller or any covenant of Seller contained in this Agreement to be performed at or prior to the Closing, and no claims by the BuyerIndemnified Parties shall be so asserted, for any individual item where the Loss relating to such claim (or series of claims arising from the same or substantially similar facts or circumstances) is less than $[X]…

(Church & Dwight Co., Inc.’s acquisition of Orange Glo International, Inc.)

Eligible Claim Threshold Eligible Claim Threshold


Indemnification


Eligible Claim ThresholdEligible Claim Threshold

No Eligible Claim Threshold

82%

Includes Eligible Claim Threshold

18%


Indemnification


““Double MaterialityDouble Materiality””(materiality qualification disregarded for indemnification purpo(materiality qualification disregarded for indemnification purposes)ses)

For purposes of determining the breach of any representation or warranty for purposes of Section 9.1(b), any covenant in Section 5.2 or the amount of any Loss suffered by a Parent Indemnitee, “materiality,” “Material Adverse Effect” and similar qualifications… shall be ignored.

(The Reader’s Digest Association, Inc. acquisition of Allrecipes.com)

Indemnification


Materiality Disregarded for Breaches and

Damages72%

Materiality Disregarded for

Damages Calculation

Only28%

““Double MaterialityDouble Materiality””(materiality qualification disregarded for indemnification purpo(materiality qualification disregarded for indemnification purposes)ses)


Double Materiality Expressly

Disregarded*22%

Double Materiality Not

Expressly Disregarded

78%


(Subset: Double Materiality Expressly Disregarded)

* Of the deals with double materiality expressly disregarded, 31% have baskets higher than the mean and median basket amount for all deals with baskets.

Indemnification

Materiality Disregarded for

Breaches Calculation Only

0%


Caps*Caps*

Silent 1%

Yes - Less Than Purchase Price**

88%

Yes But Not Determinable

4%

Yes - Equal to Purchase Price

7%

* Caps generally applicable to contractual indemnification obligations; does not take into account different caps for specific items (see “Cap Carveouts”)

** Of deals with determinable caps, 44% equaled the escrow amount



(8% in deals in 2004) (74% in deals in 2004)


Indemnification


6%**

9%

4%

5%

12%

5%

14%17%

27%

17%

15%

21%

28%26%

Purchase Price

> 50% to < PurchasePrice

> 25% to 50%

> 15% to 25%

> 10% to 15%

10%

< 10%

* Caps generally applicable to contractual indemnification obligations; does not take into account different caps for specific items (see “Cap Carveouts”)

** Includes one deal with cap in amount greater than purchase price

Cap Amounts as % of Transaction Value*Cap Amounts as % of Transaction Value*

Deals in 2004

Deals in 2006

(Subset: deals with expressly stated cap)

Indemnification


Cap Amounts as % of Transaction Value*Cap Amounts as % of Transaction Value*(statistical summary)(statistical summary)

* Excludes deals with caps equal to transaction value

137.04%1.70%10.87%17.86%2004

80.00%1.00%10.14%16.39%2006

Maximum (≠ 100%)

Minimum (> 0)

MedianMeanDeals in:

(Subset: deals with expressly stated cap)

Indemnification


10%

10%

10%

12%

16%

16%

29%

29%

36%

40%

43%

46%

64%Fraud

Capitaliz ation (Rep)

Due Authority (Rep)

T axes (Rep)

Intentional Breach of S eller's/T arget's Reps* *

Due Organization (Rep)* *

Ownership of S hares (Rep)* *

Broker's/Finder's Fees (Rep)* *

Breach of S eller's/T arget's Covenants* *

E mployee Benef its/E RIS A (Rep)* *

E nvironmental (Rep)* *

T itle to/S uf f iciency of Assets (Rep)* *

No Conf licts (Rep)* *

Cap Carveouts*Cap Carveouts*(Subset: deals with expressly stated cap)

*Only those categories appearing 10% of the time or more for deals in 2006 are shown**Less than 10% for deals in 2004





Indemnification


Non-Exclusive Remedy

13%

Silent10%

Exclusive Remedy77%

Indemnification as Exclusive RemedyIndemnification as Exclusive Remedy(Subset: deals with survival provisions)

Indemnification


(Subset: deals with indemnification as exclusive remedy)

18%

17%

85%

81%

27%

45%

29%

40%

Breach ofCovenant

Fraud

EquitableRemedies

IntentionalMisrepresentation

Indemnification as Exclusive Remedy Indemnification as Exclusive Remedy –– CarveoutsCarveouts

Fraud Undefined

92%

Fraud Limited to "Actual" or Intentional

Fraud or Intentional

Misrep.8%

(Subset: includes fraud carveout)

Deals in 2004

Deals in 2006

Indemnification


All Cash75%

Combination of Cash and Securities

10%

All Stock or Other Securities

15%

No Escrow/ Holdback

13%

Escrow/ Holdback and

Earnout is Exclusive Remedy

4%

Escrow/ Holdback is Exclusive Remedy

32%

Escrow/ Holdback is

Not Exclusive Remedy

51%

Escrows/HoldbacksEscrows/Holdbacks(Subset: deals with survival provisions)

Indemnification


Escrows/Holdbacks as % of Transaction ValueEscrows/Holdbacks as % of Transaction Value(Subset: deals with determinable escrows/holdbacks)

3%

6%

16%

21%

14%

12%

5%

13%

8%3% and less

> 3% to < 5%

5%

> 5% to 7%

> 7% to < 10%

10%

> 10% to 15%

> 15% to 20%

> 20% to 25%

Indemnification


StandStand--Alone IndemnitiesAlone Indemnities(items for which indemnification specifically provided regardles(items for which indemnification specifically provided regardless of s of

indemnification for breaches of representations and warranties)indemnification for breaches of representations and warranties)

* “Other” frequently appearing stand-alone indemnities were items disclosed on a schedule; excluded liabilities; pre-closing liabilities; dissenters’ rights/dissenting share payment claims; and transaction expenses.

31%

51%

31%

10%

4%

None

Other*

Taxes

Environmental

ERISA


Indemnification


Setoffs/MitigationSetoffs/Mitigation(reduction of Buyer(reduction of Buyer’’s indemnification claims)s indemnification claims)

Includes Express

Setoff for Tax

Benefits31%

No Express

Setoff for Tax

Benefits69%

No Express

Setoff for Insurance Proceeds

37%

Includes Express

Setoff for Insurance Proceeds

63%

Buyer Expressly

Required toMitigate Losses22%

Buyer Not Expressly

Required to Mitigate Losses78%


Indemnification


Dispute Resolution


Governing Law*Governing Law*

Dispute Resolution

Other13%

State of Incorporation of

Buyer and Target30%

Place of Business of Buyer and Target

2%

Selling Stockholders' Residence/Business

2%

Target's Place of Business

3%

Buyer's Place of Business

15%

Target's State of Incorporation

19%

Buyer's State of Incorporation

16%

Delaware43%

Other37%

New York20%

* Assumes parties chose governing law based on state of incorporation in cases where chosen state matches both a state of incorporation and a place of business


Venue*Venue*

Silent17%

Other17%

Buyer's State of Incorporation

5%

Target's State of Incorporation

17%

Buyer's Place of Business

18%

Target's Place of Business

4%

Selling Stockholder's Residence/Business

1%Place of Business of

Buyer and Target4%

State of Incorporation of

Buyer and Target17%

* Assumes parties chose venue based on state of incorporation in cases where chosen state matches both a state of incorporation and a place of business

Dispute Resolution


Waiver of Jury TrialWaiver of Jury Trial

Waiver of Jury Trial Provision

Included49.7%

No Waiver of Jury Trial Provision

50.3%

Dispute Resolution


Includes General

ADR provision

31%

No General

ADR provision

69%

Mediation5%

Binding Arbitration

77%

Mediation then Binding Arbitration

18%

Alternative Dispute Resolution (Alternative Dispute Resolution (““ADRADR””)*)*

(Subset: includes provision)

* ADR provisions that generally cover disputes under acquisition agreement (rather than those limited to specific disputes such as purchase price adjustments or earnouts).

Dispute Resolution


Other20%

American Arbitration Association

66%

International Chamber of Commerce

5%

Judicial Arbitration &

Mediation Services

9%

Alternative Dispute Resolution (Alternative Dispute Resolution (““ADRADR””))

(Subset: deals with general ADR provisions)

Determined by Arbitrator

30%

Apportioned9%

Evenly Split34%

Loser Pays27%

Arbitration ExpensesSpecified Arbitrator(s)

Dispute Resolution

2007_private m&a points study_aba biz law_8.8.08

Documents