ADDING VALUE TO BUSINESS DEALS What they did not teach you in Law School Craig Owen White, Esq. © All Rights Reserved 2015

Disclaimer Nothing contained in this presentation is to be considered as the rendering of legal advice for specific cases, and attendees are responsible for obtaining such advice from their own legal counsel. This presentation is for educational and informational purposes only. The views of the presenter should not be construed as the views of the International Senior Lawyers Project or of Hahn Loeser & Parks LLP.

The Business Lawyer is to: Assist Client in identifying, quantifying and assessing risk. Document the deal in a manner that identifies rights and obligations of each party and can be enforced under the rule of law. Charge reasonable fees and be promptly paid for services Be a steward of the commercial law, statutes and regulations. Maintain high ethics and integrity.

Business of Law Any factor, event, or occurrence that has the potential to interfere with the desired outcome.

ClieNTs’ Negative Perceptions Lawyers: Are a necessary evil Charge too much Do not listen to me Do not take the time to understand my business Do not take the time to know me Are more interested in finding problems than finding solutions Are arrogant Are more interested in making money than helping me.

Typical Transaction process Transaction Flow Lawyers Typically Present Business People Generally Discuss Business Opportunity Non- Disclosure Agreement Non- Binding Term Sheet, Letter of Intent or Heads of Agreement Lawyers Not Present Lawyers Typically Present

Typical Transaction Flow Lawyers Working Closely with Clients to Establish Deal Points Due Diligence and Fatal Flaw Analysis Scheduling of Transaction and Collateral Transactions Planned Definitive Transaction Documents Lawyers Fully Engaged Lawyer to Lawyer Negotiations Common

Typical Transaction Flow Lawyers Fully Engaged Exchange and Transfers: Consideration Title Deal Closing (s) Post Closing Items Business Transition in Full Swing Closing Binders File Closing

RISK in Buyer/Sell Transactions To be paid her price Wants payment in agreed upon form, at the time and place agreed upon Lowest tax possible Non or Limited recourse Protection against non payment or refund Wants to receive the agreed quantity and quality of goods or services At the agreed price Lowest tax possible To make payment as agreed Protection against non- conforming goods

Risk Discovery Mechanisms Self Discovery Sue Appreciative inquiry Knowledge of Industry, Current Events and Local Culture Interviews of Key Contacts Management Key Employees Key Customers Key Suppliers On Sight Inspections Requests for Documents, Contracts, Financial Statements and Other Key Information Representations and Warranties Negative Covenants Affirmative Covenants

Risk Allocation Mechanisms Traditional Creative Indemnification for Breach of Representations and Warranties Practice Alert – Indemnity is only as worthy as the indmenitor Caps on aggregate give back Basket on claims Exceptions to Baskets Life of the claims recovery process Funding for claims made Reduction in Purchase Price Third Party Insurance of Risk Examples – US Export – Import Bank World Bank Seller Financing Funded Third Party Escrow Accounts Name that Risk Third Party Insurance Environmental Political Disruption Insurance Social Engineering Risk

SIX STAGES OF NEGOTIATION Negotiation Strategies SIX STAGES OF NEGOTIATION Strategize Set the Climate Obtain Information Justify Positions Bargain Agree Legal_1:23956400

TYPES OF NEGOTIATIONS – THE THREE C’s Competitive (like sport – always a winner and a loser) Cooperative (win-win; power is balanced; motivated to develop trust and achieve compatible outcomes) Collaborative (win-win; power is shared; trying to achieve maximum return for each; joint problem solving; akin to partnership) Legal_1:23956400

Negotiating Strategies Best Alternative to a Negotiated Agreements (BANA) Understand Your Client’s Objectives and Risk Profile Understand the Counterparty’s Objectives and Risk Profile Industry Standards and Norms General Economic and Other Conditions (including time as a factor) Keep Client Expectations Realistic Cost Time Distraction

WHAT IS A SUCCESSFUL OUTCOME? An agreement that meets the legitimate interests of each party Resolves conflicting interests fairly Is durable Improves, or at least maintains, the relationship between the parties Legal_1:23956400

BARGAINING STYLES/TYPES 1. Competitive (WIN/LOSE) Argument and persuasion Lack of trust Concern for victory Holding out Creating deadlines 2. Cooperative/Collaborative (WIN/WIN) Proposing and applying principles Establishing mutual trust Developing options Trading off priorities and brainstorming Establishing time frames Legal_1:23956400

IMPASSE AND DECISIONS Competitive Possible impasse Compromising & splitting the difference Adding conditions Cooperative Impasse less likely Mutual decisions through joint problem solving Creating alternate outcomes/deals Legal_1:23956400

FINALIZING THE AGREEMENT Competitive Insisting your forms be used Unnecessary negotiations over draft language Cooperative Working on a single agreement Agreeing to terms Legal_1:23956400

STAGE 1 - STRATEGIZE Identify Your Currencies (i.e. what is it you have to offer) Plan Your Currencies Other items besides money: Number Timing Administration Support Future Service Referrals Legal_1:23956400

STAGE 1 - STRATEGIZE List your Objectives - Objectives define scope and set the benchmark for success What are your client's goals What are the goals of the other side What can your client concede What must your client achieve Your first offer BATNA (best alternative to a negotiated agreement) Legal_1:23956400

STAGE 2 – SET THE CLIMATE Learn To Set a Positive Climate Conversational Positive Relational Energetic Set the climate to suit the other negotiator’s style Probe for attitudes Legal_1:23956400

STAGE 3 – OBTAIN INFORMATION Learn Focused Listening Techniques Focused Listeners Encourage Speakers Physically: Nod Take notes Verbally: Offer encouraging phrases “I see …” “Tell me more …” “Hmm …” “That’s interesting, please go on …” Legal_1:23956400

STAGE 4 – JUSTIFY POSITION Get negotiator to state their price or position first Give your counter-offer Give the lowest (highest) price you can justify Legal_1:23956400

Other items besides money STAGE 5 – BARGAIN Other items besides money Number Timing Administration Support Future Service Referrals Legal_1:23956400

STAGE 6 – AGREE Successfully Negotiate a Win/Win Situation Both sides are better off You were each treated fairly You would negotiate with the other negotiator again Legitimize the Terms Put the terms in writing Legal_1:23956400

DEALING WITH PERSONALITIES Know your team strengths, and ignore the distractions Have a strategy for each personality: the “Big Picture” person the Alpha male/female the Bully/Intimidator the Nit-picker the Waffler the Silent One non-English speakers the Insecure Negotiator the Intransigent One the Consensus-builder/Collaborator your New Best Friend the Problem Solver Legal_1:23956400

COMMON MISTAKES TO AVOID Assuming the negotiation is a fixed pie and creating a win-lose negotiation Overvaluing your assets or position Abusing your power or leverage Not knowing what you want Over-commitment to a certain outcome Legal_1:23956400

Common Client Misperceptions MMYTH Reality Boilerplate language is meaningless and not worth the time to read it. The Closing is the most important part of the business deal. Lawyers are expensive and only see problems that will end up costing me more or screwing up my deal Often the most important part of the deal as it controls procedures for accessing claim relief. Business Deals are frequently collaborative by nature and the parties may need each other’s post –closing cooperation. Proactive lawyering saves the client money.

Preamble South African Style: Documenting the Deal Preamble South African Style: 1. PARTIES 1.1 LIME DISTRIBUTORS OF SOUTH AFRICA (PROPRIETARY) LIMITED 1.2 ANGLO-ALPHA LIMITED Identifies the parties and their legal capacity Practice Tip: Make sure signature page matches the preamble United States Style: This SUBSCRIPTION AGREEMENT (this “Agreement”) is hereby made and entered into effective as of [July 1,], 2015, by and between ABC, Inc., a for-profit Ohio corporation (“Purchaser”) and Health, Inc., a Delaware corporation (the “Company”), pursuant to and in connection with that certain Memorandum of Understanding, effective as of February 2, 2015 by and among Purchaser, the Company (the “LOI”).

Background or Recitals Basic Contract Components Background or Recitals PURPOSE: Helps the reader to understand who the parties are and what they were seeking to achieve. Practice Tip: Should brief and neutral. Recitals are generally not a part of the agreement unless incorporated into the agreement.

Interpretations or definitions Basic Contract Components Interpretations or definitions PURPOSE: Creates Definitions and Conventions to assist the reader. Practice Tip: Read Agreement carefully to ensure all terms have the intended meaning and are not circular.

Central Business Terms Basic Contract Components Central Business Terms PURPOSE: Clearly Record of the Primary Business Agreement: What is being bought, sold or exchanged Basic Business Terms - Price, Time, place of exchange or delivery Conditions Precedent to Legal Obligation to Perform Maturing Practice Tip: Use plain English and be clear as to what is important to your client. Example – Time is of the Essence.

Business Discovery and Reliance PURPOSE: The structured disclosure of risk factors as the foundation for price and other key business terms. Establishes the parameters of self- discovery of risk factors Disclosing party structured disclosure of information/risk factors upon which the counterparty is entitled to rely. Practice Tip: Discovery is a two-edged sword. Trust but verify.

Covenants and Collateral Agreements Basic Contract Components Covenants and Collateral Agreements PURPOSE: Collateral Matters that sometime impact the risk profile of the deal: Collateral promises and undertakings related to the primary business deal. Affirmative Covenants – Things a counterparty agrees to do. Negative Covenants -- Things that a counterparty agrees not to do. Practice Tip: If these agreements are important enough to document they are important enough to warrant monitoring systems and clear consequences for failure.

THE CLOSING PURPOSE: To clearly identify: Basic Contract Components THE CLOSING PURPOSE: To clearly identify: Time and place for transaction(s) to be consummated and the time and manner of counterparty performance and when and where title (and risk) changes hand. Practice Tip: Be clear as to the deliveries that are required to be made and the actions taken. The devil is in the details and the lawyer who masters the details will be the master of the deal.

Termination Provisions Basic Contract Components Termination Provisions Purpose: To be clear on when and what will break the deal and cancel the counterparties’ respective duties. Practice Tip: Be clear as to the consequences of a termination and what if any provisions of the previous agreement is to survive.

Disputes Resolution Establishes the venue and governing laws and rules for resolving conflicts and the selection and jurisdiction of the person or entity selected to resolve the dispute. Practice Tip: Think carefully about what your client practically needs to achieve and when before deciding on the dispute resolution forum, venue or governing law. PURPOSE -

MISCELLANEOUS (Boilerplate) PURPOSE - Intended to be industry standard provisions for common understanding and efficiency. Has evolved to anything but what it appears to be. Practice Tip: Read carefully as they can save or sink your client in times of crisis.

Common Dispute Resolution MECHANISMS Choice of Resolution Court Litigation Expedited Arbitration Mediation Multi- Tier Clauses Expert Determination Out of Court Dispute Resolutions

Considerations When Negotiating Dispute Resolution Clauses Enforceability Forum Neutrality Costs Time Quality Outcome Neutral Forum Confidentiality

WHEN THE DEAL GOES BAD PARABELLUM

Be Prepared WHEN THE DEAL GOES BAD Identify all key parties and stakeholders and interested parties Identify your client’s permanent interests Identify all environmental factors including time, venue and jurisdiction Identify your client’s key weaknesses Locate and review all documents and instruments and any shortcomings

THANK YOU