• Abracadabra! Delaware Court Does Away with “Magic Words” for Valid Anti-Reliance Provisions

    By David Hoeppner, Esq. February 18, 2016 Integration clauses typically state that an agreement is the entire and only agreement between parties, superseding any prior written or oral agreements.  Similarly, “anti-reliance” language provides that the only representations on which the parties relied in deciding to enter the contract are those within the contract itself.  Integration and anti-reliance clauses are commonly found in M&A agreements and contracts for other complicated transactions.  The rationale behind such language is to limit a party’s recourse for misrepresentations made outside the agreement.  The enforceability of such clauses varies by jurisdiction.  As a recent Delaware Court of Chancery ...

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    Friday, February 19th, 2016

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  • Successor Liability in Asset Purchases under New York Law

    By David Hoeppner, Esq. January 22, 2016 When buying or selling a business, potential successor liability of the buyer is a primary concern.  Successor Liability means liability that the Buyer of a business’s assets may have for the acts or liabilities of the Seller of those assets. General Rule in New York:  The Buyer of a business’s assets does not assume and is not liable for the Seller’s liabilities unless otherwise expressly stated in the purchase and sale agreement. This is a primary reason that sales and acquisitions of businesses are often structured as asset sales. However, New York law contains four exceptions to ...

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    Friday, January 22nd, 2016

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  • Earnout Payments and the Implied Covenant of Good Faith

    By David Hoeppner, Esq. September 25, 2015 Summary An earnout is a contractual provision in an agreement for the purchase and sale of a business in which the Seller’s receipt of payment is contingent upon or varies with achievement of certain business goals, such as revenue or profitability targets (a sample is available under “the Earnout Provision,” below). Under Delaware Law, the Implied Covenant of Good Faith and Fair Dealing (Implied Covenant) prohibits the Buyer of a business from purposefully interfering with the Seller’s earnout.  However, the Implied Covenant does not, in itself, obligate a Buyer to create conditions for a Seller to ...

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    Friday, September 25th, 2015

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  • Delaware Chancery Court Determines it has Broad Discretion to Retroactively Ratify Defective Corporate Acts

    By David Hoeppner, Esq. March 18, 2015  On January 30, 2015, the Delaware Chancery Court decided its first case involving Delaware General Corporate Law (DGCL) Sections 204 & 205 (In re Numoda Corp. S’holders Litig., C.A. No. 9163–VCN, 2015 WL 402265 (Del. Ch. Jan. 30, 2015)) (“Nomuda“).  DGCL Sections 204 and 205 permit a corporation or the Court of Chancery to ratify defective corporate acts.  Those sections of the law became effective on April 1, 2014, and provide in part: “(a) …no defective corporate act or putative stock shall be void or voidable solely as a result of a failure of authorization if ratified ...

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    Wednesday, March 18th, 2015

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  • How to Limit Fiduciary Duties in Delaware LLC Agreements

    By David Hoeppner, Esq. October 10, 2014 On August 1, 2013, the Delaware Assembly passed an amendment to Section 18-1104 of the Delaware LLC Act, expressly providing that corporate director-type fiduciary duties apply by default to LLC managers (and members active in the LLC operations). The amended statutory language is shown below, with the change underlined. “§ 18-1104 Cases not provided for in this chapter. In any case not provided for in this chapter, the rules of law and equity, including the rules of law and equity relating to fiduciary duties and the law merchant, shall govern.” The amended statue was a response to the Delaware ...

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    Friday, October 10th, 2014

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  • Market Terms in M&A Transactions

    By David Hoeppner, Esq. October 17, 2014 The following checklist is based on a report from the American Bar Association Mergers and Acquisitions Committee, Market Trends Subcommittee, which published a study of 136 private target M&A transactions ranging in size from $17.5 M to $4.7 B, each completed in 2012. 1. Deals with an Earnout: % of deals with an earnout: 25% 2. Length of Earnout: 56% of earnouts last 24 months or less 3. “Material Adverse Effect” defined to include past events that could reasonably be expected to materially adversely affect the target: 93% included. 4. “Material Adverse Effect” excludes “force majeure”-type events (acts of ...

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    Thursday, October 09th, 2014

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