Share Purchase Agreements

Prawiro Widjaja
Partner
Corporate Mergers and Acquisitions

31 October 2014

Parties

Seller

will Seller have the financial resources to pay post-Completion warranty/indemnity claims?
hold-back/escrow part of proceeds

what is the use of proceeds?

is a Seller guarantor available?

Buyer

does Buyer have the financial resources to pay the purchase price?

what is the source of funding?

is a Buyer guarantor available?

Strategic/corporate vs PE buyer/seller

Sale Shares

What is being sold?

shares issued vs outstanding

common/ordinary vs preferred shares

options, warrants or rights for new shares

shareholders loans?

Rights attached to sale shares

sold with all rights attached as at [signing] vs [completion]

pre-completion dividend record date

liabilities?

Encumbrances

free and clear from any and all encumbrances

Purchase Price (assume 100% cash)

Basis for pricing

book value

EBITDA

Purchase price adjustments

cash free, debt free (net debt)

net working capital

Payment

signing deposit refundable vs non-refundable

hold-back/escrow and deferred payments

contingent value rights (earn-outs)

Purchase price vs warranty/indemnity claims

Conditions Precedent

Categories:

regulatory approvals

third party approvals lenders, customers, JV partners

no breach of warranties or covenants

no material adverse change

no injunction

Things to consider:

positive vs negative c/ps - to set Completion Date

covenants to satisfy c/ps - c/ps obligations

c/p for whose benefit and which party can waive?

materiality and exit option deposit, break fee

long-stop date

Warranties

What are warranties?

warranties representations
o termination vs rescission
o measure of damages

warranties covenants
o is or is not vs will or will not

Type of warranties

transaction due authorisation, no breach, enforceability, etc

title shares duly authorised, validly issued, fully paid, free from encumbrances, etc

business:
o overall: financial statements, no change since last balance sheet date, no undisclosed
liabilities, compliance with laws, data room information
o specific: financial indebtedness, security, hedges, commitments, contingent liabilities,
real property, plant and equipment, intellectual property, IT systems, employees,
customers and suppliers, environmental, insurance, tax, anti-bribery, trade sanctions

Warranties (2)

Purpose of warranties:

discovery prompts disclosure

termination ground

risk allocation claim for loss arising from breach of warranties

Warranties scope:

knowledge qualification

bring-down to completion

Warranties and disclosures:

disclosure neutralises warranty

but indemnity claims:

Disclosure letter:

general (data room, Q&A log) vs specific disclosure

fair disclosure

Indemnities

Indemnities vs warranties claim:

effect of disclosure

reasonably foreseeable loss vs make-whole

duty to mitigate

costs

Indemnities:

general vs specific indemnities

tax indemnity

environmental indemnity

limitations

Pre-Completion Covenants

Purpose:

Positive covenants

preserve target between signing and completion

carry on business in the ordinary course

Negative covenants:

no change in constitution, share capital, debt, distribution, business, M&A, employees,

litigation, etc

carve-outs for known or anticipated events

Post-Completion Covenants

Usual post-completion covenants include:

non-compete

change of name

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Liability Limitations

Liability limitations:

disclosure

financial limits
o de minimis
o threshold/deductible first dollar vs excess only
o caps title, tax, non-tax

time limits
o claim notice period
o claim pursuit period
o statutory time bar

no indirect or consequential loss, or loss of profit etc

provisions

contingencies

change in law, accounting standards, etc

conduct of claims

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Ancillary Agreements

Transitional Services

scope of services

service level

costs and fees

liability limitation

duration and termination

Trademark licence

Secondment of personnel

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Others

Specific performance

Confidentiality restrictions and exceptions

Costs and expenses

Assignments

Third party rights

Governing law

Dispute resolution

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Questions?

Thank You
Prawiro Widjaja
T +65 6890 7717
E prawiro@allenandgledhill.com

Allen & Gledhill LLP

One Marina Boulevard #28-00
Singapore 018989
www.allenandgledhill.com

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Notes:
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authoritative. Allen & Gledhill LLP does not warrant its accuracy or completeness or accept any liability for any loss or
damage arising from any reliance thereon.
The information in this presentation should not be treated as a substitute for specific legal advice concerning particular
situations.