Acquisition and preparing for indicative agreements Business Contract Drafting Arief Surowidjojo April 10, 2012

Purposes and objective of acquisition Market entrance or expansion Increase production capacity Exploring market for new products Cost reduction on production process, marketing, human resources, and access resources Strengthening financial positions Increasing bargaining positions in facing lenders, regulators, suppliers, distributors, and other stakeholders Shorten the geographical distance to important resources Acquiring products Combine products or technology Obtaining most tax efficient operations Securing resources Acquiring management and human capitals Business diversification

Acquisition and corporate reorganization How it is done Vertical integration Horizontal integration Conglomeration Legal forms of corporate reorganization Acquisition Merger Consolidation Spin-off Other forms of acquisition: technology, management, market share, distribution control, human capital, others

Acquisition drafting process Gathering internal general interests Facts finding process, selection of targets, desk studies, field research, feasibility studies, business planning, form of cooperation, determination of roles in the cooperation, recommendation to proceed Exchange of interests with the targets Prepare non-disclosure agreement Prepare and negotiate MOU on indicative agreements between the parties Due diligence process starts Due diligence reports submitted Legal, financial, business position are determined, list of issues prepared Negotiation technique and strategy are determined Negotiation of Conditional Sale and Purchase of Shares Agreement commences Drafting process of the CSPSA

acquisition drafting process Issues in drafting MOU – Names do not matter: MOU, terms sheet, letter of intent, joint statement, etc, the purpose is more important – expressing interests to negotiate a business deal on a set of basic principles – Binding or not binding – Exclusive or not exclusive – Time limit or fulfillment of certain conditions – Sufficiency of facts and assumptions used to a closer commitment – Due diligence level – Cost distribution – Clear ideas on the form of cooperation or business relationship – Exit clause – Good faith as equally informed parties – Confidentiality – Enforcement level – Indemnity

acquisition drafting process Structure and content of MOU – Parties involved – Conditions precedent: due diligence, studies, research, corporate and regulatory approvals, etc – Expression to be binding or not – Exclusivity – Term and termination – Basic reference for negotiation: subject, object, pricing, time frame etc – Cost sharing – Indemnity – Confidentiality – Dispute settlement – Governing law

MOU drafting exercise ABC Investment is a US-based investment company having operations in a number of emerging countries. It holds 33% of issued shares in PT DEF Tbk., a coal mining company with a number of mines in South Sumatera. The other shareholders of PT DEF Tbk., are PT GHI Tbk., a government-owned integrated mining company, including major operations in South Sumatera, owning 33% of PT DEF Tbk’s shares, and public that owns 34% of the shares. PT GHI Tbk., is troubled by the recent economic crisis, and the government intends to focus on investment in companies where it has a controlling power through equity. ABC Investment is offered to acquire majority shares (70%) in PT JKL, a newly-established mining company with proven coal mining deposits in Central Kalimantan. PT JKL is owned by PT MNO, a controlled subsidiary of PT GHI Tbk. Due to recent crisis in North America, in order to be able to invest outside the country, ABC Investment needs special consent from its board of executives, and its lenders. The acquisition needs also an approval from the Indonesian ministry of energy and mineral resources. (1) Please indicate issues that may be faced by you as lawyer appointed to represent ABC Corp. (2) Please propose a strategy for ABC Corp., in acquiring the target(s) (2) please prepare draft of MOU for ABC Corp., if ABC corp., decides to go ahead with the plan to acquire the target(s). This is an individual assignment, not a group assignment