2007 - Private M&a Points Study - ABA Biz Law - 8.8.08

2007 Private Target
Mergers & Acquisitions Deal Points Study (v2)

A Project of the Mergers & Acquisitions Market Trends Subcommittee
of the
Committee on Negotiated Acquisitions
of the
American Bar Association’s Section of Business Law
M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Private Target Study (v2), slide 1
Release Date 8.8.08
Private Target M&A Deal Points Study
A Project of the M&A Market Trends Subcommittee
of the Committee on Negotiated Acquisitions
of the American Bar Association’s Section of Business Law
Subcommittee Chair
Keith A. Flaum, Cooley Godward Kronish LLP
Subcommittee Vice Chairs
Hendrik Jordaan, Holme Roberts & Owen LLP
Jessica C. Pearlman, K&L Gates LLP
Founding Subcommittee Chairs
Wilson Chu, Haynes and Boone, LLP
Larry Glasgow, Gardere Wynne Sewell, LLP
Special Advisor
Richard E. Climan, Cooley Godward Kronish LLP
Chair, Committee on Negotiated Acquisitions
Joel I. Greenberg, Kaye Scholer LLP

Release Date 8.8.08
Private Target Study Working Group
CO-CHAIRS
Wilson Chu Larry Glasgow
Haynes and Boone LLP Gardere Wynne Sewell LLP
Dallas, TX Dallas, TX
ISSUE GROUP LEADERS

Dennis Barsky John Corrigan Mark Danzi
Jones Day Adler Pollock & Sheehan, PC Hill, Ward Henderson
New York, NY Providence, RI Tampa, FL
David Fisher Michael Kendall

Bryan Cave LLP Goodwin Procter LLP
New York, NY Boston, MA
Hendrik Jordaan Steven Tonsfeldt Jessica Pearlman

Holme Roberts & Owen LLP Heller Ehrman LLP K&L Gates LLP
Denver, CO Menlo Park, CA Seattle, WA
Michael Hollingsworth Carl Sanchez

Nelson Mullins Riley & Scarborough LLP Paul, Hastings, Janofsky & Walker LLP
Atlanta, GA San Diego, CA
DISCLAIMERS
The findings presented in this Study do not necessarily reflect the personal views of the Working Group members or the
views of their respective firms. In addition, the acquisition agreement provisions that form the basis of this Study are
drafted in many different ways and do not always fit precisely into particular “data point” categories. Therefore, Working
Group members have had to make various judgment calls regarding, for example, how to categorize the nature or effect of
the provisions. As a result, the conclusions presented in this Study may be subject to important qualifications that are not
expressly articulated in this Study.

Release Date 8.8.08
Ronald Albert, Jr. Phil Bauer Allison Blixt
Broad and Cassel The Mosaic Company Jones Day
Miami, FL Plymouth, MN New York, NY
Kevin Boardman Abigail Bomba Richard Brody

Patton Boggs LLP Fried, Frank, Harris, Shriver & Jacobson LLP Troutman Sanders LLP
Dallas, TX New York, NY Atlanta, GA
Thomas Chase Terrence Childers David Christopherson

Day Pitney LLP Powell Goldstein LLP King & Spalding LLP
Boston, MA Atlanta, GA Atlanta, GA
John Clifford Jay Cohen Mattia Colonnelli de Gasperis

McMillan LLP Duane Morris LLP Lombardi Molinari e Associati
Toronto, Canada Baltimore, MD Milan, Italy
Hannah Crockett Edward Deibert Nicholas Deitrich

Powell Goldstein LLP Howard Rice Nemerovski Canady Falk & Rabkin PC Gowling Lafleur Henderson LLP
Atlanta, GA San Francisco, CA Toronto, Canada
Roger Edwards George Flint Brian Galison

Advantage Sales & Marketing, LLC Parsons Behle & Latimer Nelson Mullins Riley & Scarborough LLP
Irvine, CA Salt Lake City, UT Atlanta, GA
Joshua Gaul Greg Giammittorio Lori Green

K&L Gates LLP Morrison & Foerster LLP Nixon Peabody LLP
Seattle, WA McLean, VA Rochester, New York
Steven Haas Lola Miranda Hale Kathryn Heet

Abrams & Laster LLP Epstein Becker & Green P.C. Qwest Communications International Inc
Wilmington, DE Chicago, IL Denver, CO
Patrick Henderson Ashley Hess Troy Hickman

Shook, Hardy & Bacon, L.L.P. Greenebaum Doll & McDonald PLLC Perkins Coie LLP
Kansas City, MO Cincinnati, OH Seattle, WA
Raymond Hum Stuart Johnson Woody Jones

Morrison & Foerster LLP Powell Goldstein LLP Andrews Kurth LLP
San Francisco, CA Atlanta, GA Houston, TX
Barbara Kaye Kristen Kercher Paul Kirkpatrick

Honigman Miller Schwartz and Cohn LLP Heller Ehrman LLP Haynes and Boone LLP
Ann Arbor, MI Menlo Park, CA Dallas, TX

Release Date 8.8.08
Kevin Kyte Cindy Lin Matthew Martin
Stikeman Elliott LLP Curtis, Mallet-Prevost, Colt & Mosle LLP Husch & Eppenberger, LLC
Montreal, Canada Houston, TX Chattanooga, TN
Albert McGrath Rick McMillan Craig Menden

Baker & McKenzie LLP Jones, Walker, Waechter, Poitevent, Fenwick & West LLP
Dallas, TX Carrère & Denègre, L.L.P. Mountain View, CA
New Orleans, LA
Samuel Mullin Cliff Pearl Chris Philips

Robinson & Cole LLP Hensley Kim & Holzer LLC Waller Lansden Dortch & Davis
Boston, MA Denver, CO Nashville, TN
Michael Philips Thomas Queen Stephen Quinlivan

Davis Wright Tremaine LLP Graves Dougherty Hearon & Moody Leonard Street and Deinard
Portland, OR Austin, TX Minneapolis, MN
Dan Reid Jim Scheinkman Chris Scheurer

Grant Thornton LLP Snell & Wilmer L.L.P. McGuireWoods LLP
San Francisco, CA Orange County, CA Charlotte, NC
Warren Silversmith Claudia Simon Deyan Spiridonov

Stikeman Elliott LLP Paul, Hastings, Janofsky & Walker LLP Paul, Hastings, Janofsky & Walker LLP
Montreal, Canada San Diego, CA San Diego, CA
Mark Stoneman Ben Straughan James Sullivan

Armstrong Teasdale LLP Perkins Coie LLP Alston& Bird LLP
St. Louis, MO Seattle, WA New York, NY
Thomas Talley Brett Thorstad Phillip Torrence

Thacher Proffitt & Wood LLP Weil, Gotshal & Manges LLP Miller, Canfield, Paddock & Stone, P.L.C.
New York, NY Dallas, TX Kalamazoo, Michigan
Samuel Wales Maryann Waryjas Rhys Wilson

McDermott Will & Emery Katten Muchin Rosenman LLP Nelson Mullins Riley & Scarborough LLP
Chicago, IL Chicago, IL Atlanta, GA
Iain Wood Tina Woodside Bryan Zair

Haynes and Boone LLP Gowling Lafleur Henderson LLP Clark Hill PLC
Dallas, TX Toronto, Canada Detroit, MI
Matt Zmigrosky
Haynes and Boone LLP
Dallas, TX

Release Date 8.8.08
Private Target Study Sample Overview
This Study analyzes publicly available acquisition agreements for

transactions completed in 2006 that involved private targets being
acquired by public companies. The prior study published in 2006
analyzed such agreements from transactions completed in 2004.
The Study sample was obtained from www.livedgar.com
The final Study sample of 143 acquisition agreements (out of an initial
yield of 269) excludes agreements from transactions in which the Target
was in bankruptcy, reverse mergers, and transactions otherwise
deemed inappropriate for inclusion.
Transaction # of Consideration Closing

Value* Range Deals
All Cash All Stock Mixed Deferred Simultaneous
Sign-and-Close
$25M - $500M 143 65% 5% 30% 88% 12%
* As determined by LIVEDGAR (includes reported debt assumed)

* For purposes of this Study, it is assumed that transaction value as determined by LIVEDGAR is equal to “Purchase Price” as that term is used
in the underlying acquisition agreements

Release Date 8.8.08
(by transaction value)
$25M - $50M
39.9%
$51M - $100M
23.1%
$401M - $500M
2.8%
$301M - $400M
$101M - $200M
8.4%
18.2%
$201M - $300M
7.7%

Release Date 8.8.08
(by industry)
Industrial Goods
& Services Financial Services
13.2% 8.4%
Aerospace
& Defense
6.3%
Personal &
Health Care Household Goods
15.4% 6.3%
Construction
& Materials
4.9%
Oil & Gas

4.9%
Technology Other •Media

•Telecom
25.9% 14.7% •Auto & Parts
•Retail
•Travel & Leisure
•Chemicals & Basic (Natural) Resources
•Food & Beverage

Release Date 8.8.08
(nature of principal sellers)
Financial
34.3%
Indeterminate
1.4%
Corporate
14.0%
Entrepreneurial
50.3%
Entrepreneurial: founders appear to dominate management/ownership

Corporate: founders appear to no longer dominate management/ownership
Financial: backed by financial sponsors who appear to have significant influence/control

Release Date 8.8.08
Contents
I. Financial Provisions ………………………………………………………………………………………….Slide 11
A. Post-Closing Purchase Price Adjustments
B. Earnouts
II. Pervasive Qualifiers ………………………………………………………………………………………... Slide 21
A. Materiality/MAE *v2 Supplement*
B. Knowledge *v2 Supplement*
III. Target’s Representations and Warranties….……………………………………………………………...Slide 34
A. Financial Statements (“Fair Presentation”; Internal Controls and Accuracy and Completeness)
B. “No Undisclosed Liabilities”
C. Compliance with Law
D. “10b-5/Full Disclosure”
IV. Conditions to Closing……………….………….…………………………………………………………….Slide 50
A. Accuracy of Target’s Representations
B. Buyer’s MAC Condition
C. No Legal Proceedings
D. Legal Opinions
V. Indemnification ……………….………….…………………………………………...................................Slide 62
A. Sandbagging *v2 Supplement*
B. Reliance *v2 Supplement*
C. Disclaimer of Seller’s Representations and Warranties
D. Seller’s Obligation to Update Disclosure Schedules
E. Survival/Time to Assert Claims
F. Liability of Multiple Indemnitors
G. Types of Damages/Losses Covered
H. Baskets
I. Caps
J. Indemnification as Exclusive Remedy
K. Escrows/Holdbacks
L. Stand-Alone Indemnities
M. Setoffs/Mitigation
VI. Dispute Resolution ............. ………….…………………………………………................................... Slide 98
A. Governing Law
B. Venue
C. Waiver of Jury Trial
D. Alternative Dispute Resolution

Release Date 8.8.08
Financial Provisions*
* Disregards one transaction with unfiled financial provisions

Release Date 8.8.08
Financial Provisions
Post-Closing Purchase Price Adjustments
The “Adjustment Amount” (which may be a positive or negative number) will

be equal to the amount determined by subtracting the Closing Working Capital
from the Initial Working Capital. If the Adjustment Amount is positive, the
Adjustment Amount shall be paid by wire transfer by Seller to an account
specified by Buyer. If the Adjustment Amount is negative, the difference
between the Closing Working Capital and the Initial Working Capital shall be
paid by wire transfer by Buyer to an account specified by Seller.
…
“Working Capital” as of a given date shall mean the amount calculated by
subtracting the current liabilities of Seller included in the Assumed Liabilities
as of that date from the current assets of Seller included in the Assets as of
that date. The Working Capital of Seller as of the date of the Balance Sheet
(the “Initial Working Capital”) was ______ dollars ($______).
(ABA Model Asset Purchase Agreement)

NEW v2 SLIDE
Release Date 8.8.08
Post-Closing Purchase Price Adjustments

No
Adjustment
32%
(Subset: includes adjustment)
Includes
Adjustment Adjustment Metrics*
68%
Earnings 4%
Working Capital 69%
Debt 20%
Assets 15%
Cash 13%
Other 27%
* 29% of the post-closing purchase price adjustments were based on more than one metric

Release Date 8.8.08
Post-Closing Purchase Price Adjustments –

Estimates at Closing
(Subset: deals with post-closing purchase price adjustment)
Includes
Payment
Based on
Seller's
Estimated
Closing Date
Financial
Metric(s)
64%
No Estimated
Adjustment at
Closing (Subset: includes estimated closing payment)
36%
Includes
Buyer's
Right to
Approve
No Express Estimated
Right by Adjustment
Buyer to 34%
Approve
Estimated
Adjustment
66%

Release Date 8.8.08

Threshold
Purchase Price
Adjustment Paid
Only If Exceeds
Threshold
10%
Purchase Price
Adjustment
Amount Need
Not Exceed a
Threshold
90%

Release Date 8.8.08

Preparation of Closing Balance Sheet
Preparing Party Methodology

Consistent
with Prior
Financial
Statements
5%
Buyer Other
79% Seller 3%
13% Silent
2%
Not Deter-
minable
GAAP 4%
Other
Consistent
7% GAAP
Not Deter- with Past or
Scheduled 14%
minable
1% Practices
72%

Release Date 8.8.08

Separate Escrow
Includes
Separate
Escrow
22%
(Subset: no separate escrow)

No Separate
Escrow
78% Downward
Adjustment
Paid by Combination
Sellers or Buyer
41% Option
3%
Downward
Adjustment
Not Deter- Paid from
minable Indemnity
1% Escrow
55%

Release Date 8.8.08
Earnouts
No
Earnout
Includes
81%
Earnout
19%
(Subset: includes earnout)
Earnout Metrics*
Revenue/Turnover 30%
Earnings/EBITDA 37%
Other** 26%
Not determinable 11%
* 4% of earnouts were based on more than one metric

**Examples: regulatory approval of drug applications; attainment of certain post-closing contracts; launch of certain products

Release Date 8.8.08
Earnouts –
Buyer’s Covenants as to Acquired Business
(Subset: deals with earnouts)
To Run Consistent 22%

with Past Practice
To Run to Maximize 11%
Earnout
63%
Neither Covenant
7%
Not Determinable

Release Date 8.8.08
Earnouts –
Acceleration and Offsets
(Subset: deals with earnouts)
Earnout Does
Not Accelerate No Offset
on Change of Provision
Control 37%
85%
Earnout
Accelerates on
Buyer Can
Change of
Offset
Control
Indemnity
11%
Payments
Against
Earnout Not
Not 52% Determinable
Determinable 11%
4%

Release Date 8.8.08
Pervasive Qualifiers
NEW v2 SLIDE
Release Date 8.8.08
Definition of “Material Adverse Effect”
MATERIAL ADVERSE EFFECT . . . Means a change, effect, condition, or

circumstance that, in the reasonable judgment of Buyer, is, or could
reasonably be expected to be, material and adverse to the business,
operations, assets, liabilities, financial condition, value, business prospects,
ability to deliver services, operating results, cash flow, net worth or customer
or provider relations of the Company, or otherwise materially adversely
affecting the ability of Sellers to consummate the transactions
contemplated hereby . . ..
(Kanaby International, Inc. acquisition of Adjoined Consulting, Inc.)
NEW v2 SLIDE
Release Date 8.8.08

MAE Not
Defined
3%
"Prospects"
(Subset: MAE defined) Included
36%
MAE Defined
97%
"Prospects"
Not Included
64%
NEW v2 SLIDE
Release Date 8.8.08
Definition of “Material Adverse Effect” –

Forward Looking Standards
(Subset: deals with MAE definition)
Not Forward
Looking
30%
(Subset: forward looking standard) "could be"

22%
Forward
Looking
70%
Other*
45% "would
be"
33%
* Agreements in the “Other” category use a combination of “could” and “would” or some other forward looking standard.
NEW v2 SLIDE
Release Date 8.8.08

MAE as Stated Dollar Amount Definition Includes Buyer’s Ability to Operate

Target’s Business Post Closing
No
93%
Included
7%
Yes Not
Included
7%
93%
(8% in deals in 2004) Definition Includes Target’s Ability to
Consummate Contemplated Transaction
Not
Included
49%
Included
51%
NEW v2 SLIDE
Release Date 8.8.08

Carveouts
“Material Adverse Effect” means . . ., except for any such changes or
effects resulting, directly or indirectly, from (i) the public
announcement of, or performance of the transactions contemplated by
or pursuant to, this Agreement or the Escrow Agreement (including
any action or inaction by the Company’s customers, suppliers,
employees or competitors), (ii) changes in GAAP or any applicable
Law, (iii) changes in the industry in which the Company and the
Company Subsidiaries operate, (iv) any attack on, or by, outbreak or
escalation of hostilities or acts of terrorism involving, the United
States, any declaration of war by Congress or any other national or
international calamity, (v) changes in general economic conditions or
the financial or securities markets generally, or (vi) any adverse
change or effect that is cured by Seller prior to the Closing . . ..
(Riddell Bell Holdings, Inc. acquisition of Jas. D. Easton, Inc.)
NEW v2 SLIDE
Release Date 8.8.08

Carveouts
No
Carveouts
Included
26%
Definition
Includes
Carveouts
74%
(80% in deals in 2004)
NEW v2 SLIDE
Release Date 8.8.08

Carveouts
(Subset: deals with MAE definition with carveouts)
88%
Economic Changes
65%
83%
Industry Conditions
59%
Actions Required by 63%

Agreement 32%
58%
Announcement of Deal
44%
54%
War or Terrorism
17%
Deals in 2006
45%
Financial Market Downturn
30% Deals in 2004
37%
Changes in Law
28%
37%
Changes in Accounting
28%
NEW v2 SLIDE
Release Date 8.8.08

Carveouts Qualified by Disproportionate Effect
“Material Adverse Effect” means . . ., except for any such changes or effects
resulting, directly or indirectly, from (i) the public announcement of, or
performance of the transactions contemplated by or pursuant to, this
Agreement or the Escrow Agreement (including any action or inaction by the
Company’s customers, suppliers, employees or competitors), (ii) changes in
GAAP or any applicable Law, (iii) changes in the industry in which the
Company and the Company Subsidiaries operate, (iv) any attack on, or by,
outbreak or escalation of hostilities or acts of terrorism involving, the United
States, any declaration of war by Congress or any other national or
international calamity, (v) changes in general economic conditions or the
financial or securities markets generally, or (vi) any adverse change or effect
that is cured by Seller prior to the Closing, but only to the extent any such
change described in clauses (ii), (iii), (iv) and (v) is not specifically
related to or disproportionately impacts the Company or the Company
Subsidiaries.
(Riddell Bell Holdings, Inc. acquisition of Jas. D. Easton, Inc.)
NEW v2 SLIDE
Release Date 8.8.08

Carveouts Include Burden of Proof Standard
“Company Material Adverse Effect” shall mean. . .; provided, however, that

none of the following shall be deemed, either alone or in combination, in and of
themselves to constitute a Company Material Adverse Effect: (i) . . .; provided,
however, that in the case of clauses (i) through (iii) above, inclusive, the
Company has the burden of proving that a change, event, violation,
inaccuracy, circumstance or effect is not a Company Material Adverse
Effect because one or more of the foregoing exceptions applies.
(Planar Systems, Inc. acquisition of Clarity Visual Systems, Inc.)
NEW v2 SLIDE
Release Date 8.8.08

Carveouts to Carveouts
(Subset: deals with MAE definition with carveouts)
Carveouts Qualified by Carveouts Include Burden of

Disproportionate Effect Proof Standard
No Included
38% 3%
Yes
62%
Not
Included
97%
NEW v2 SLIDE
Release Date 8.8.08
Knowledge –
Investigations
No
Investigation
Expressly
Contemplated
(Actual
Knowledge)
39%*
Investigation
Expressly
Contemplated
(Constructive
Knowledge)
61%
* Includes 6.7% of agreements that expressly negate investigation requirement and 32.6% of deals that are silent as
to the investigation requirement
NEW v2 SLIDE
Release Date 8.8.08
Knowledge –
Identified Persons
Identified
Persons
Included
93%
No Identified
Person
7%
NEW v2 SLIDE
Release Date 8.8.08
Target’s Representations and Warranties

Release Date 8.8.08
Financial Statements –
“Fair Presentation” Representation
“Fairly presents” is GAAP qualified
Such financial statements fairly present (and the financial statements delivered
pursuant to Section 5.8 will fairly present) the financial condition and the results
of operations, changes in shareholders’ equity and cash flows of [Target] as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP.
“Fairly presents” is not GAAP qualified
[T]he Financial Statements: (i) have been prepared from the books and records
of the Company in accordance with US GAAP consistently applied during the
periods covered thereby (except as otherwise disclosed therein); (ii) are
complete and correct in all material respects; and (iii) fairly present in all
material respects the financial position and the results of operations of the
Company (on a consolidated basis) as of the dates and during the periods
indicated therein…
(Hologic, Inc. acquisition of Suros Surgical Systems, Inc. )

Release Date 8.8.08
“Fair Presentation” Representation
Deals in 2006
1%
Deals in 2004
Not Included
2%
24%
"Fairly Presents" is GAAP
Qualified
14%
75%
"Fairly Presents" is Not GAAP
Qualified 84%

Release Date 8.8.08
Internal Controls and Accuracy and Completeness
The Company’s internal controls and procedures are sufficient

to ensure that the Latest Financial Statements and the Annual
Financial Statements are accurate in all material respects.
…[A]ll accounts, books and ledgers related to the business of the
Company are properly kept, are accurate and complete in all
material respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein.
(ATS Medical acquisition of 3F Technologies)

Release Date 8.8.08
Internal Controls and Accuracy and Completeness
Includes
Includes Accurate
Internal and
Controls Complete
Rep Component
45% (32% in deals in 2004) 31%
No Accurate
No Internal and
Controls Complete
Rep Component
55% 69%

Release Date 8.8.08
Basis of Internal Controls Representation
Regulation S-K, Item 601:
To the Company’s Knowledge, there does not exist (i) any significant deficiency in the design or operation
of internal controls which could adversely affect the Company’s or any Subsidiary’s ability to record,
process, summarize and report financial data….
(EFJ Inc. acquisition of 3E Technologies International Inc.)
’34 Act, Section 13(b)(2)(B):

The Company maintains internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(Nanometrics Incorporated acquisition of Accent Optical Technologies)
Rules 13(a)-(f), etc.:

[Company] has established and documented, and maintains, adheres to and enforces a system of internal
accounting controls which are effective in providing assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with GAAP (including the Financials), including
policies and procedures that (a) require the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries, (b)
provide assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the Company and its
Subsidiaries are being made only in accordance with appropriate authorizations of management and the
Board of Directors of the Company and (c) provide assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries.
(Autodesk Inc. acquisition of Alias Systems Holdings Inc.)
Release Date 8.8.08
Basis of Internal Controls Representation
(Subset: deals with representation)
Regulation S-K
Other
Item 601
15%
9%
Rules 13(a)-(f),
etc.
14%
'34 Act, Section

13(b)(2)(B)
62%

Release Date 8.8.08
“No Undisclosed Liabilities” Representation –

Buyer-Favorable Formulation
No Undisclosed Liabilities. Except as set forth in Part 3.13 [of the

Disclosure Letter], [Target] has no Liability except for Liabilities
reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course
of Business of [Target] since the date of the Interim Balance Sheet.
***
“Liability”--with respect to any Person, any liability or obligation of such Person of any kind,
character or description, whether known or unknown, absolute or contingent, accrued or
unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the financial statements of
such Person.

Release Date 8.8.08

Target-Favorable Formulation
No Undisclosed Liabilities. Except as set forth in Part 3.13 [of the

Disclosure Letter], [Target] has no liability of the nature required to
be disclosed in a balance sheet prepared in accordance with
GAAP except for …

Release Date 8.8.08
“No Undisclosed Liabilities” Representation

Rep Not
Included
7%
"GAAP
Liabilities"
(Subset: includes rep) (Target
Favorable)
32%
Includes Rep
93%
"All
Liabilities"
(Buyer
Favorable)
68%

Release Date 8.8.08

Qualifiers and Exclusions
(Carveouts for items that are (1) reflected on Balance Sheet; (2) immaterial
(stand alone); and (3) ordinary course (since the Balance Sheet date))
Except as reflected in the Company Balance Sheet, the Company has no

liabilities (absolute, accrued, contingent or otherwise) which are required by
GAAP to be set forth on a consolidated balance sheet of the Company and
its consolidated Subsidiaries or in the notes thereto, other than… any
liabilities and obligations incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practice…
and… liabilities that, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Company Material
Adverse Effect.
(Nanometrics Incorporated acquisition of Accent Optical Technologies)

Release Date 8.8.08

Qualifiers and Exclusions
Knowledge Qualified 7%
Immaterial Liabilities 44%

(Stand-alone)
Ordinary Course Since 83%

Balance Sheet Date
Ordinary Course Without

Reference to Balance 9%
Sheet Date

Release Date 8.8.08
Compliance with Law Representation

Rep Not
Included
1%
(Subset: includes rep)
Includes
Rep
99%
Knowledge 10%
Qualified
Covers Present 76%

AND Past
Includes Notice 32%

of Investigation
Includes Notice 77%

of Violation

Release Date 8.8.08
Compliance with Law Representation
Qualified by No Materiality
MAE Qualifier
23% 22%
Qualified by
Materiality
(undefined)
55%

Release Date 8.8.08
“10b-5/Full Disclosure” Representation

“10b-5” Formulation
No representation or warranty or other statement made by [Target or any

Target Shareholder] in this Agreement, the Disclosure Letter, any
supplement to the Disclosure Letter, the certificates delivered pursuant to
Section 2.7(a) or otherwise in connection with the Contemplated
Transactions contains any untrue statement or omits to state a material fact
necessary to make any of them, in light of the circumstances in which it was
made, not misleading.
“Full disclosure” Formulation
Seller does not have Knowledge of any fact that has specific application to
Seller (other than general economic or industry conditions) and that may
materially adversely affect the assets, business, prospects, financial
condition or results of operations of Seller that has not been set forth in this
Agreement or the Disclosure Letter.

Release Date 8.8.08
“10b-5/Full Disclosure” Representation
Rep Not
Included
38%
"10(b)-5"
AND Full
Disclosure
Formulation
10%
(Subset: includes rep)
"10(b)-5" Knowledge
Formulation Qualified
Only 26%
52%
Not Knowledge
Qualified
74%

Release Date 8.8.08
Conditions to Closing*
* Disregards the study sample’s 12% of deals (compare: 16% for deals in 2004) that
are “simultaneous sign-and-close”
Release Date 8.8.08
Conditions to Closing
Accuracy of Target’s Representations –

When Must They Be Accurate?
Single point in time: at closing
Each of the representations and warranties made by the Target in

this Agreement shall have been accurate in all respects as of the
Closing Date as if made on the Closing Date.
Two points in time: at signing and at closing

this Agreement shall have been accurate in all respects as of the
date of this Agreement, and shall be accurate in all respects as of
the Closing Date as if made on the Closing Date.

Release Date 8.8.08

When Must They Be Accurate?
“When Made” “Bring Down”

No "When
(i.e., at signing) (i.e., at closing)*
Made"
Requirement
40% No "Bring Down"
(47% in deals in 2004) Requirement
1%
Includes "Bring
Includes
Down"
"When Made"
Requirement
Requirement
60% 99%
* Includes deals with both “when made” and “bring down” requirements and deals solely with a “bring down” requirement

Release Date 8.8.08

How Accurate Must They Be?
Accurate in all respects
Each of the representations and warranties made by the Target in this

Agreement shall have been accurate in all respects as of the Closing Date
as if made on the Closing Date.
Accurate in all material respects

Agreement shall have been accurate in all material respects as of the
Closing Date as if made on the Closing Date.
The “Big MAC/MAE” qualification

Agreement shall be accurate in all respects as of the Closing Date as if
made on the Closing Date, except for inaccuracies of representations or
warranties the circumstances giving rise to which, individually or in
the aggregate, do not constitute and could not reasonably be expected
to have a Material Adverse Effect.
Release Date 8.8.08

(inclusion of materiality qualifiers)

(i.e., at signing) (i.e., at closing)* "In all
material
respects"
"In all 60%
"In all
respects" (59% in deals in 2004)
material
"In all 2%
respects"
respects" 62%
9%
The Big The Big

MAC/MAE MAC/MAE
29% 38%

Release Date 8.8.08

(“double materiality” carveout)

this Agreement shall be accurate in all respects as of the Closing
Date as if made on the Closing Date, except for inaccuracies of
representations or warranties the circumstances giving rise to which,
individually or in the aggregate, do not constitute and could not
reasonably be expected to have a Material Adverse Effect (it being
understood that, for purposes of determining the accuracy of
such representations and warranties, all “Material Adverse
Effect” qualifications and other materiality qualifications and
similar qualifications contained in such representations and
warranties shall be disregarded).

Release Date 8.8.08

(“double materiality” carveout)
(Subset: deals with materiality/MAE qualifiers)

(i.e., at signing) (i.e., at closing)*
Silent
29%
Silent
25%
Disregards
"double
Disregards materiality"
"double 75%
materiality"
71%

Release Date 8.8.08
Buyer’s MAC Condition
Stand-Alone:
Since the date of this Agreement, there has not been any
Target Material Adverse Change.
“Back-Door”:
“absence of changes” representation
Since the Balance Sheet Date, there has not been any
Target Material Adverse Change.
plus
“Bring Down” formulation of “Accuracy of
Representations” condition

Release Date 8.8.08
Buyer’s MAC Condition

(“stand-alone”)
No Stand-Alone
MAC Condition*
22%
Stand-Alone MAC
Condition
78%
*May include deals with “back door” MAC

Release Date 8.8.08
No Legal Proceedings
(“stand-alone”)
Condition Not
Included
38%
Includes No Legal
Proceedings
Condition
62%
(Subset: includes condition) No Legal

Proceedings of
Any Nature
24%
No Legal
Proceedings
Related to the
Transaction
76%

Release Date 8.8.08
No Legal Proceedings
(“stand-alone”)
(Subset: deals including closing condition of no legal proceedings)
Pending/Threatened Proceedings Materiality Qualifications

Seeking Affecting
Material or Material
Pending and
Subst. Portion of
Threatened
Damages Business
Proceedings
Of a Material 12% 6%
65%
Nature
2%
MAE
Qualified
22%
Pending No
Proceedings Dollar
Materiality
Only Amount
Qualifier
35% Qualified
56%
2%

Release Date 8.8.08
Legal Opinions (Non-Tax) of Target’s Counsel

(All deals: includes simultaneous sign-and-close deals)
Not Required**
30%
Required*
70%
* Typically as a condition to closing, but includes opinions required in a “Closing Deliveries” covenant
**Does not account for opinions that may have been required or delivered outside of the express terms of the agreement

Release Date 8.8.08
Indemnification*
* Disregards three transactions with redacted indemnification provisions

Release Date 8.8.08
Indemnification
“Sandbagging”
(pro-sandbagging provision)
The right to indemnification, reimbursement or other remedy based

upon any such representation [or] warranty… will not be affected
by any investigation… conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement
or the Closing Date, with respect to the accuracy or inaccuracy of…
such representation [or] warranty….
(ABA Model Stock Purchase Agreement)
NEW v2 SLIDE
Release Date 8.8.08
Indemnification
“Sandbagging”
(anti-sandbagging provision)
The Buyer shall have no right to indemnification under this

Agreement in respect of any inaccuracy or breach of any
representation or warranty of the Sellers to the extent that any
individual listed in clause (iii) of the definition of "Knowledge"
contained in Section 9.1 (but such knowledge shall not be ascribed
to the Buyer or any such individual based on the aggregate
knowledge of such individuals) has actual knowledge on the date
of this Agreement that such representation and warranty is
inaccurate as of the date of this Agreement.
(EDO Corporation’s acquisition of Impact Science & Technology Inc.)
NEW v2 SLIDE
Release Date 8.8.08
Indemnification
“Sandbagging”
Anti-Sandbagging
Provision Included
9%
Pro-Sandbagging
Provision
Included*
50%
Silent
41%
* The methodology used in analyzing the 2006 deals may take a more nuanced approach in defining “pro-
sandbagging” by excluding clauses that merely state that seller’s representations and warranties “survive buyer’s
investigation” without any other express statement on the impact of buyer’s knowledge or investigation on buyer’s
post-closing indemnification rights.
NEW v2 SLIDE
Release Date 8.8.08
Indemnification
“Sandbagging”
(Subset: deals with anti-sandbagging provisions)
Type of Knowledge Timing of Knowledge*

Actual
Knowledge
Pre- or Post-
Only
Signing
77%
61%
Pre-Signing
Post-Signing
Only
Type of Only
31%
Knowledge 8%
not Specified
23%
* Anti-sandbagging provisions may include further triggers beyond timing of knowledge.

NEW v2 SLIDE
Release Date 8.8.08
Indemnification
Non-Reliance
The Buyer acknowledges and agrees that in entering into this

Agreement it has not relied and is not relying on any warranties,
representations, …or other statements whatsoever, whether
written or oral (from or by any the Sellers or any Person acting on
their behalf) other than those expressly set out in this
Agreement and that it will not have any right or remedy arising out
of any warranty, representation, …or statement not set out in this
Agreement….
(Eaton Power Solutions’ acquisition of MGE Finances and MGE UPS Systems)
NEW v2 SLIDE
Release Date 8.8.08
Indemnification
Non-Reliance
No Express
Non-Reliance
Provision
59%
Express Non-
Reliance
Provision
Included*
41%
* Includes deals with express disclaimers of representations or warranties.

NEW v2 SLIDE
Release Date 8.8.08
Indemnification
Non-Reliance and “Sandbagging” –

Correlation
Pro-
Sandbagging
Provision
Express Non- Included*
Reliance 50%
Provision
Included*
41%
(Subset: includes non-reliance provision) (Subset: includes pro-sandbagging provision)
Includes Pro- Includes Non-

Sandbagging Reliance
Provision Provision
43% 35%
No Non-
No Pro- Reliance
Sandbagging Provision
Provision 65%
57%
* See footnotes on slides 65 and 67. NEW v2 SLIDE

Release Date 8.8.08
Indemnification
Survival/Time to Assert Claims
10.1 SURVIVAL…
All representations, warranties … in this Agreement, the Disclosure Letter,
the supplements to the Disclosure Letter, the certificate delivered pursuant
to Section 2.4(a)(v), and any other certificate or document delivered
pursuant to this Agreement will survive the Closing…
10.5 TIME LIMITATIONS

If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty… unless on or
before _______________ Buyer notifies Sellers of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer…
(ABA Model Stock Purchase Agreement)

Release Date 8.8.08
Indemnification
Survival/Time to Assert Claims

(generally)
1%
Silent
4%
Express No Survival
6 months 1%
1%
> 7 to < 12 months
26%
12 months
9%
> 12 to < 18 months
34%
18 months
3%
> 18 to < 24 months
16%
24 months
5%
> 24 months

Release Date 8.8.08
Indemnification
Survival/Time to Assert Claims –

Carveouts to Survival Limitations*
(Subset: deals with survival provisions)
67%
T axes ( Rep )
55%
59%
Cap italiz ation ( Rep )
38%
Du e Au th ority ( Rep ) 54%
3 1%
42%
O wn ersh ip of S h ares ( Rep )
2 1%
39%
E m p loyee Ben ef its/E RIS A ( Rep )
3 1%
37%
F rau d
20%
37%
Du e O rg an iz ation ( Rep )
27%
37% Deals in 2006
E n viron m en tal ( Rep )
30%
36%
Breach of S eller' s/T arg et' s Coven an ts 11%
Deals in 2004
24%
Broker' s/F in d er' s F ees ( Rep )
15 %
19 %
T itle to/S u f f icien cy of Assets
22%
In ten tion al b reach of S eller' s/T arg et' s Rep s 16 %
14 %
16 %
No Con f licts ( Rep )
10 %
10 %
In tellectu al P rop erty ( Rep ) 13 %
* Matters subject to carveouts typically survive longer than time periods generally applicable to representations
* Only those categories appearing 10% of the time or more for deals in 2006 are shown

Release Date 8.8.08
Indemnification
Liability of Multiple Indemnitors

Silent
24% Joint and
Several
41%
Several But
Not Joint
("Pro Rata")
35%

Release Date 8.8.08
Indemnification
Types of Damages/Losses Covered

“Out of Pocket” Damages Diminution in Value
Not Limited
to "Out of Excludes
Pocket" Diminution in
97% Value Silent
10% 65%
Limited to Includes
"Out of Diminution in
Pocket" Value
3% 25%

Release Date 8.8.08
Indemnification
Types of Damages/Losses Covered

Incidental Damages Consequential Damages
Silent Excludes Silent

Excludes Consequent-
79% 63%
Incidental ial Damages
Damages 31%
16%
Includes
Consequent-
Includes
ial Damages
Incidental
6%
Damages
5%
Punitive Damages
Excludes
Silent
Punitive
63%
Damages
34%
Includes
Punitive
Damages
3%

Release Date 8.8.08
Indemnification
Baskets – Deductible
In seeking indemnification for Damages under Section 11.2(a), the

Indemnified Persons will make no claim for Damages unless and
until such Damages aggregate at least $[X] (the “Deductible”), in
which event such Indemnified Persons may make claims for all
Damages exceeding the Deductible.
(Concur Technologies, Inc. acquisition of Outtask, Inc.)

Release Date 8.8.08
Indemnification
Baskets – First Dollar
No Parent Group Member shall be entitled to receive any

indemnification payment with respect to any claim for indemnification
under this Article 7 until the aggregate Damages for which the
Parent Group would otherwise be entitled to receive indemnification
exceeds $[X] (“Threshold”). Once such aggregate Damages exceed
the Threshold, the Parent Group shall be entitled to indemnification
for the aggregate amount of all Damages, regardless of the
Threshold.
(Art Technology Group, Inc. acquisition of Estara, Inc.)

Release Date 8.8.08
Indemnification
Baskets – Combination
The Sellers’ indemnification obligations under this Article VIII shall

be subject to the following limitations: (i) the Sellers shall not be
required to indemnify Buyer Indemnitees for Losses under clause (a)
or (b) of Section 8.2 until the aggregate amount of all such Losses
exceeds $[X] (the “Threshold Amount”) in which event the Sellers
shall be responsible only for Losses in excess of $[Y] (the
“Deductible”)…
(EDO Corporation acquisition of Impact Science & Technology, Inc.)

Release Date 8.8.08
Indemnification
Baskets
Combination No Basket
7% 3% (4% in deals in 2004)
Deductible
54%
First Dollar
36%

Release Date 8.8.08
Indemnification
Baskets as % of Transaction Value
(Subset: deals with baskets)
2%
Deals in 2006
> 2% 4%
Deals in 2004
8%
> 1% to 2%
7%
28%
> 0.5% to 1%
49%
62%
0.5% or less
40%

Release Date 8.8.08
Indemnification
Baskets as % of Transaction Value

(statistical summary)
Basket Type Mean Median Minimum Maximum

(> 0)
Deductible 0.53% 0.40% 0.03% 2.00%

(0.77% in deals in 2004) (0.62% in deals in 2004) (0.01% in deals in 2004) (3.13% in deals in 2004)
First Dollar 0.50% 0.39% 0.02% 2.03%

(0.60% in deals in 2004) (0.47% in deals in 2004) (0.08% in deals in 2004) (2.00% in deals in 2004)
Deductible and 0.52% 0.40% ____ ____

First Dollar (0.69% in deals in 2004) (0.60% in deals in 2004)

Release Date 8.8.08
Indemnification
Basket Coverage
Breaches of 100%
Representations and
Warranties
55%
Breaches of
Covenants
Other Indemnity 39%

Claims

Release Date 8.8.08
Indemnification
Basket Carveouts*
55%
Fraud 41%
52%
Capitalization (Rep) 21%
47%
Due Authority (Rep)
11%
42%
Taxes (Rep) 26%
32%
Ownership of Shares (Rep) 8%
31%
Intentional breach of Seller's/Target's Reps
18%
31%
Due Organization (Rep)**
Deals in 2006
22%
Breach of Seller's/Target's Covenants 11%
20% Deals in 2004
Broker's/Finder's Fees (Rep) 14%
Title to/Sufficiency of Assets (Rep) 13%
8%
12%
Employee Benefits/ERISA (Rep)
8%
11%
No Conflicts (Rep)
3%
* Only those categories appearing 10% of the time or more for deals in 2006 are shown
**No data for 2004

Release Date 8.8.08
Indemnification
Eligible Claim Threshold
Seller shall not have any liability under this Section 10 for any
breach of any representation or warranty contained in this
Agreement or any Ancillary Agreement executed and delivered by
Seller or any covenant of Seller contained in this Agreement to be
performed at or prior to the Closing, and no claims by the Buyer
Indemnified Parties shall be so asserted, for any individual item
where the Loss relating to such claim (or series of claims arising
from the same or substantially similar facts or circumstances) is less
than $[X]…
(Church & Dwight Co., Inc.’s acquisition of Orange Glo International, Inc.)

Release Date 8.8.08
Indemnification
Eligible Claim Threshold
No Eligible Claim
Threshold
82%
Includes Eligible
Claim Threshold
18%

Release Date 8.8.08
Indemnification
“Double Materiality”
(materiality qualification disregarded for indemnification purposes)
For purposes of determining the breach of any representation or

warranty for purposes of Section 9.1(b), any covenant in Section 5.2
or the amount of any Loss suffered by a Parent Indemnitee,
“materiality,” “Material Adverse Effect” and similar
qualifications… shall be ignored.
(The Reader’s Digest Association, Inc. acquisition of Allrecipes.com)

Release Date 8.8.08
Indemnification
“Double Materiality”
(materiality qualification disregarded for indemnification purposes)
Double
Materiality
Expressly
Disregarded*
22% Materiality
Disregarded for Materiality
Breaches Disregarded for
(Subset: Double Materiality Calculation Only Damages
Expressly Disregarded) 0%
Double Calculation
Only
Materiality Not
28%
Expressly
Disregarded
78%
Materiality
Disregarded for
Breaches and
Damages
72%
* Of the deals with double materiality expressly disregarded, 31% have baskets higher than the mean and
median basket amount for all deals with baskets.

Release Date 8.8.08
Indemnification
Caps*
Yes - Less Than

Purchase Price**
Silent 1% 88%
Yes But Not
Determinable
4%
Yes - Equal to
Purchase Price
7%
* Caps generally applicable to contractual indemnification obligations; does not take into account different caps for
specific items (see “Cap Carveouts”)
** Of deals with determinable caps, 44% equaled the escrow amount
Release Date 8.8.08
Indemnification
Cap Amounts as % of Transaction Value*

(Subset: deals with expressly stated cap)
26%
< 10% 28%
21%
10%
15%
17%
> 10% to 15% 27%
17%
> 15% to 25% 14%
5%
> 25% to 50%
12% Deals in 2006
> 50% to < Purchase 5%
Price 4% Deals in 2004
9%
Purchase Price
6%**
* Caps generally applicable to contractual indemnification obligations; does not take into account different caps for
specific items (see “Cap Carveouts”)
** Includes one deal with cap in amount greater than purchase price
Release Date 8.8.08
Indemnification
Cap Amounts as % of Transaction Value*

(statistical summary)
Deals in: Mean Median Minimum Maximum

(> 0) (≠ 100%)
2006 16.39% 10.14% 1.00% 80.00%
2004 17.86% 10.87% 1.70% 137.04%
* Excludes deals with caps equal to transaction value

Release Date 8.8.08
Indemnification
Cap Carveouts*
F rau d 64% (77% in deals in 2004)
Cap italiz ation ( Rep ) 46% (26% in deals in 2004)
Du e Au th ority ( Rep ) 43% (11% in deals in 2004)
T axes ( Rep ) 40% (27% in deals in 2004)
In ten tion al Breach of S eller' s/T arg et' s Rep s* * 36%
Du e O rg an iz ation ( Rep ) * * 29%
O wn ersh ip of S h ares ( Rep ) * * 29%
Broker' s/F in d er' s F ees ( Rep ) * * 16%
Breach of S eller' s/T arg et' s Coven an ts* * 16%
12%
E m p loyee Ben ef its/E RIS A ( Rep ) * *
E n viron m en tal ( Rep ) * * 10%
10%
T itle to/S u f f icien cy of Assets ( Rep ) * *
No Con f licts ( Rep ) * * 10%
*Only those categories appearing 10% of the time or more for deals in 2006 are shown
**Less than 10% for deals in 2004

Release Date 8.8.08
Indemnification
Indemnification as Exclusive Remedy

Non-Exclusive
Remedy
13%
Silent
10%
Exclusive Remedy
77%

Release Date 8.8.08
Indemnification
Indemnification as Exclusive Remedy – Carveouts

(Subset: deals with indemnification as exclusive remedy)
40%
Deals in 2006
Intentional
Misrepresentation 29%
Deals in 2004
45%
Equitable
Remedies 27%
81%
Fraud
85%
17%
Breach of
Covenant 18%
(Subset: includes fraud carveout)
Fraud
Limited to
"Actual" or
Intentional
Fraud or
Intentional
Misrep.
8%
Fraud
Undefined
92%

Release Date 8.8.08
Indemnification
Escrows/Holdbacks
Escrow/
No Escrow/ Holdback is
Holdback Exclusive
Combination of 13% Remedy
32%
Cash and
Securities
10%
All Stock or
Other Securities
Escrow/
15% Escrow/ Holdback and
All Cash
Holdback is Earnout is
75% Not Exclusive Exclusive
Remedy Remedy
51% 4%

Release Date 8.8.08
Indemnification
Escrows/Holdbacks as % of Transaction Value

(Subset: deals with determinable escrows/holdbacks)
3% and less 8%
> 3% to < 5% 13%
5% 5%
> 5% to 7% 12%
> 7% to < 10% 14%
10% 21%
> 10% to 15% 16%
> 15% to 20% 6%
> 20% to 25% 3%

Release Date 8.8.08
Indemnification
Stand-Alone Indemnities
(items for which indemnification specifically provided regardless of
indemnification for breaches of representations and warranties)
ERISA 4%
Environmental 10%
Taxes 31%
Other* 51%
None 31%
* “Other” frequently appearing stand-alone indemnities were items disclosed on a schedule; excluded liabilities; pre-
closing liabilities; dissenters’ rights/dissenting share payment claims; and transaction expenses.

Release Date 8.8.08
Indemnification
Setoffs/Mitigation
(reduction of Buyer’s indemnification claims)
No
Express
Setoff for
Insurance
Proceeds
No Includes 37%
Express Express
Setoff for Setoff for
Tax Tax
Benefits Benefits
69% 31%
Includes
Express
Setoff for
Insurance
Proceeds
63%
Buyer Not Buyer
Expressly Expressly
Required to Required to
Mitigate Mitigate
Losses Losses
78% 22%

Release Date 8.8.08
Dispute Resolution

Release Date 8.8.08
Dispute Resolution
Governing Law*
Buyer's State of
Incorporation
16% Buyer's Place of
Business
15%
Other
13%
Selling Stockholders'
Residence/Business
2%
Target's State of
Place of Business of Incorporation
Buyer and Target 19%
2%
Delaware
43%
Target's Place of
State of Business
Incorporation of 3%
Buyer and Target
30%
Other New York

37% 20%
* Assumes parties chose governing law based on state of incorporation in cases where chosen state matches both a
state of incorporation and a place of business

Release Date 8.8.08
Dispute Resolution
Venue*
Buyer's Place of
Buyer's State of Business
Incorporation 18%
5%
Target's State of
Incorporation
Silent 17%
17%
Target's Place of
Other Business
17% 4%
State of
Selling Stockholder's Incorporation of
Residence/Business Place of Business of Buyer and Target
1% Buyer and Target 17%
4%
* Assumes parties chose venue based on state of incorporation in cases where chosen state matches both a state of
incorporation and a place of business

Release Date 8.8.08
Dispute Resolution
Waiver of Jury Trial
Waiver of Jury
Trial Provision
Included
49.7%
No Waiver of
Jury Trial
Provision
50.3%

Release Date 8.8.08
Dispute Resolution
Alternative Dispute Resolution (“ADR”)*
Includes
General
ADR
provision
31%
No
General (Subset: includes provision) Mediation
ADR 5% Mediation
provision then Binding
69% Arbitration
18%
Binding
Arbitration
77%
* ADR provisions that generally cover disputes under acquisition agreement (rather than those limited to specific
disputes such as purchase price adjustments or earnouts).

Release Date 8.8.08
Dispute Resolution
Alternative Dispute Resolution (“ADR”)

(Subset: deals with general ADR provisions)
Specified Arbitrator(s) Arbitration Expenses

Judicial
Arbitration &
Mediation
Services
American Loser Pays Apportioned
9%
Arbitration 27% 9%
International
Association
Chamber of
66%
Commerce
5%
Other
20%
Determined
by Arbitrator Evenly Split
30% 34%

Release Date 8.8.08

2007 - Private M&a Points Study - ABA Biz Law - 8.8.08

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2007 Private Target

Mergers & Acquisitions Deal Points Study (v2)

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

ISSUE GROUP LEADERS

David Fisher Michael Kendall

Hendrik Jordaan Steven Tonsfeldt Jessica Pearlman

Michael Hollingsworth Carl Sanchez

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Kevin Boardman Abigail Bomba Richard Brody

Thomas Chase Terrence Childers David Christopherson

John Clifford Jay Cohen Mattia Colonnelli de Gasperis

Hannah Crockett Edward Deibert Nicholas Deitrich

Roger Edwards George Flint Brian Galison

Joshua Gaul Greg Giammittorio Lori Green

Steven Haas Lola Miranda Hale Kathryn Heet

Patrick Henderson Ashley Hess Troy Hickman

Raymond Hum Stuart Johnson Woody Jones

Barbara Kaye Kristen Kercher Paul Kirkpatrick

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Albert McGrath Rick McMillan Craig Menden

Samuel Mullin Cliff Pearl Chris Philips

Michael Philips Thomas Queen Stephen Quinlivan

Dan Reid Jim Scheinkman Chris Scheurer

Warren Silversmith Claudia Simon Deyan Spiridonov

Mark Stoneman Ben Straughan James Sullivan

Thomas Talley Brett Thorstad Phillip Torrence

Samuel Wales Maryann Waryjas Rhys Wilson

Iain Wood Tina Woodside Bryan Zair

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

 This Study analyzes publicly available acquisition agreements for

Transaction # of Consideration Closing

* As determined by LIVEDGAR (includes reported debt assumed)

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Oil & Gas

Technology Other •Media

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Entrepreneurial: founders appear to dominate management/ownership

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

* Disregards one transaction with unfiled financial provisions

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Post-Closing Purchase Price Adjustments

The “Adjustment Amount” (which may be a positive or negative number) will

(ABA Model Asset Purchase Agreement)

Post-Closing Purchase Price Adjustments

(Subset: includes adjustment)

Working Capital 69%

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Post-Closing Purchase Price Adjustments –

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Post-Closing Purchase Price Adjustments –

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Post-Closing Purchase Price Adjustments –

Preparing Party Methodology

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

Post-Closing Purchase Price Adjustments –

(Subset: no separate escrow)

M&A Market Trends Subcommittee of the Committee on Negotiated Acquisitions, http://www.abanet.org/dch/committee.cfm?com=CL560003

(Subset: includes earnout)

Not determinable 11%

* 4% of earnouts were based on more than one metric

This Study analyzes publicly available acquisition agreements for