Due Diligence Issue Key Contracts

Risk Non-exclusivity

Assignment Termination

Articles of Association

Solution

*
Competitors could use *
Price adjustment the same software or

*
Enter into exclusivity products agreement

*
Contract/products not *
Deal breaker?
worth as much

*
Restricts scope of use

Applicable for an asset purchase The contract can be terminated

Change of Control

Can terminate on written notice resulting in the loss of an important contract

Confidentiality

Breached already so could be sued or contract terminated

Pre-emption Rights

Other shareholders can prevent the Buyer from acquiring the entire share capital of the Target if they decide to exercise their preemption rights

Need consent - condition precedent Warranty that there have been no breaches and that any debts are fully paid up

*
Seek a waiver of change of control clause

*
Make SPA conditional on waiver

*
Enter into a new contract

*
Sellers obtain permission to disclose details of contract, if the answer is no then reevaluate purchase price

*
Or indemnity for breach

*
Remover pre-emption rights on transfer from articles

*
Ask sellers to obtain a written waiver of preemption rights from the

Further Information

*
How do they intend to use the contract & IP rights?

*
How key to the deal is this contract?

*
Is an exclusivity deal a viable option?

*
Is there an alternative supplier that could be used?
Have there been any breaches or are there any potential breaches?

*
Is there any other product that could be used?

*
Is termination likely?

*
Confidentiality Has there been any waiver of confidentiality?

Have pre-emption rights been followed in the past - have there been valid transfers in the past?

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