Strategies for Buyers, Sellers, Investment Banks and Their Counsel - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A M&A Engagement Letters: Strategies for Buyers, Sellers, Investment Banks and Their Counsel Negotiating Scope of Engagement, Fees, Confidentiality, Termination, Indemnification and More THURSDAY, MAY 7, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Kevin Miller, Partner, Alston & Bird , New York Stephen M. Kotran, Partner, Sullivan & Cromwell , New York James Ben, Managing Director, Rothschild , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Investment Bank Engagement Letters Kevin Miller Stephen M. Kotran James Ben Alston + Bird LLP Sullivan & Cromwell Rothschild 90 Park Avenue 125 Broad Street 1251 Avenue of the Americas 51 st Floor New York, New York 10016 New York, New York 10004 Tel: (212) 210-9520 Tel: (212) 558-4963 New York, New York 10020 Fax: (212) 922-3840 Fax: (212) 558-3588 Tel: (212) 403-3500 kevin.miller@alston.com kotrans@sullcrom.com Fax: (212) 403-3501 james.ben@rothschild.com - 5 -

The Engagement Letter Timing  Investment banks generally require that an engagement letter be signed prior to commencing substantive work on the engagement to ensure that there is a clear understanding of the terms of the proposed engagement, and that the Investment Bank has the benefit of an indemnity/release covering any advice and services rendered. 6 - 6 -

The Engagement Letter Scope of engagement  The Investment Bank will act as the Company’s (or specified committee of the Company's board) financial advisor (which may include rendering a fairness opinion).  Some engagements are fairness opinion only. 7 - 7 -

The Engagement Letter Scope of Engagement Sample Provisions :  Scope of Engagement. The Company hereby engages the Investment Bank to act as the Company’s exclusive financial advisor in connection with the proposed acquisition (the “Transaction”) of [[insert Target’s full legal name] (the “Target”)]. [or , if a business division or assets of the Target are to be acquired, insert description of Target’s business (the “Business”)]. The term “Transaction” shall also include any transaction or series of related transactions whereby, directly or indirectly, control of, or a significant interest in, [the Target][the Business] or any of [the Target’s businesses or assets][the Business] is acquired by or otherwise transferred to the Company or any of its affiliates, including, without limitation, a sale, acquisition or exchange of securities or assets, a lease or license of assets (with or without a purchase option) pursuant to a stock or asset purchase agreement or a merger, consolidation or reorganization, recapitalization, spin-off, split-off, tender offer, leveraged buyout or other extraordinary corporate transaction or business combination involving [the Target][the Business]; 8 - 8 -

The Engagement Letter Scope of Engagement Selected Discussion Topics  Opinion only v. broader financial advisory services Impact on fees and fee structures  Definition of Transaction  Exclusive v. non-exclusive financial advisor Reasons for engaging a second financial advisor (e.g., to address potential conflicts) Impact on fees and fee structures  Company v. specified committee of the Company's Board 9 - 9 -

The Engagement Letter Services to be provided Clients should have a clear understanding of the services to be performed by the Investment Bank. the Investment Banks should have a clear understanding of the services they are expected to perform. The scope and complexity of the services to be provided affects the determination of the appropriate fees. In re Daisy Sys. Corp. , 97 F.3d 1171 (9th Cir. 1996)  Allegation of broad duties as exclusive financial advisor based on nonexclusive list of services to be provided led to circumscribed lists of services in many engagement letters. 10 - 10 -

The Engagement Letter Services to be provided Sample Provisions : Services . The Investment Bank’s services under this engagement shall, to the extent requested by the Company and appropriate under the circumstances, consist of assisting the Company in:  reviewing and analyzing the business, financial condition and prospects of [the Company and] [the Target][the Business];  reviewing and evaluating the financial aspects of the proposed Transaction;  developing a strategy to effectuate the Transaction;  coordinating discussions and meetings with representatives of [the Target][the Business] to gather information regarding [the Target][the Business]; and  negotiating the Transaction. 11 - 11 -

The Engagement Letter Services to be provided Sample Provisions:  In addition, to the extent requested by the Company and appropriate under the circumstances, the Investment Bank agrees to [(i)] be available to meet with the Company’s Board of Directors to discuss the Transaction and its financial implications [and (ii) render an opinion (the “Opinion”) to the Board of Directors of the Company (solely in its capacity as such) as to the fairness, from a financial point of view, to the Company of the consideration to be paid by the Company in the Transaction (or, in the case of an exchange of securities of the Company, of the exchange ratio)]. 12 - 12 -

The Engagement Letter Beneficiary of Advice  All advice provided is intended solely for the use and benefit of the [Committee of the] Board of the Company and may not be relied upon by any other person or used for any other purpose. Baker v. Goldman Sachs & Co. , 656 F. Supp. 2d 226 (D. Mass. 2009) » Allegation of duties to other addressees of engagement letter led to scrutiny of addresses, avoidance of “you” and additional language regarding advice being rendered to directors “(solely in their capacity as such)”. The SEC does not generally permit opinions and related disclosure included in proxy statements and Schedule 14D-9s filed with the SEC to include a corresponding disclaimer to the extent it purports to disclaim liabilities under the federal securities laws. 13 - 13 -

The Engagement Letter Disclosure  The Investment Bank’s advice may not be disclosed to any other person except, if the Investment Bank renders a fairness opinion that is required to be summarized in a proxy statement or Schedule 14D-9 to be filed with the SEC and disseminated to shareholders, a summary of the opinion may be included in such filings subject to the Investment Bank’s prior review and written consent. Typically, a copy of the opinion is attached as an annex to such filing and qualifies any such description in its entirety.  State law varies with respect to whether a fairness opinion should be attached or summarized in a non-SEC filed merger proxy. 14 - 14 -