The M&A JournAl

The independenT reporT on deaLs and deaLmakers
Volume 8 Number 7

M&A Engagement Letters:
Brad L. Bacon1

Trend Spotting and Hostile Takeovers

2007 was an interesting year for M&A lawyers, thanks in large part to a deterioration of the credit markets during the second half of the year. Several high-profile deals cratered (e.g., Harman and United Rentals), while others closed only after they were re-priced (e.g., HD Supply and Lone Star Capital) or ended the year mired in acrimonious litigation (e.g., Sallie Mae and Genesco).2 Not surprisingly, 2008 is shaping up to be another interesting year, as the credit crisis continues to reshape the M&A landscape. The credit crunch has wreaked further havoc on private equity deals, killing some (e.g., NIBC Holding and Reddy Ice), pushing others to the brink of failure (e.g., Clear Channel), and calling into question the markets’ ability to absorb deals coming down the pipeline (e.g., BCE and Penn Gaming). Lenders have tried to escape funding commitments,3 and the federal government even brokered a unique and controversial deal to save once-storied Bear Stearns. The credit squeeze has also facilitated a resurgence of unsolicited bids in large, strategic deals (e.g., Microsoft/Yahoo!, United Technologies/Diebold, Electronic Arts/ Take-Two Interactive, and Blockbuster/Circuit City).4 These events will certainly influence the way M&A agreements are drafted and, to the delight of M&A practitioners, may even produce meaningful guidance concerning “best efforts”, “material adverse effect”, and other key contractual provisions. At the same time, these and other recent events can be used to spot developing issues and trends in terms of how companies negotiate M&A engagement letters with invest-

ment banks, some of which are discussed below. Given that unsolicited offers have once again become en vogue, also explained below is the fee structure customarily employed when a target company hires an investment bank to help thwart a hostile takeover.

Developing Issues & Trends
A. Conflicts of Interest. Given the choppy credit markets and that investment banks have sued clients to nullify funding commitments for deals they once supported, companies should be very cautious about hiring an investment bank as both M&A advisor and lead lender. As investment banks work to strengthen their balance sheets over the next several months, they may attempt to improve the pricing of, if not walk away from, “underwater” financing commitments. Although companies may be offended and angered when this happens, companies must appreciate that investment banks are no different than other companies: when push comes to shove, they will do what’s in their own best interests.5 What should companies do to help avoid unwieldy conflicts? First, before hiring an investment bank, a company should run to ground any conflicts (potential or real) that exist at that time. Commercial diligence will help to ensure that a company is not caught by surprise by a conflict that existed when the engagement letter was signed, which is inexcusable. Second, the engagement letter should make clear that the investment bank has an obligation to bring to the company’s attention any conflicts (potential or real) that

Reprinted with permission


or for failing to withdraw or update its fairness opinion after several adverse events occurred that undercut assumptions used by the investment bank to issue the fairness opinion. and require the company’s consent for any action that crystallizes a conflict of interest (e. however. high reward” nature of the advisory business and arguing that large success fees compensate them for wearing this risk. and companies will counter by pointing out the “high risk. in turn. This approach further reduces the risk that companies will have to pay sizeable fees to their M&A advisors for deals that cannot be completed. termination of the engagement letter alone is an acceptable remedy. Moreover. a federal court of appeals recently affirmed a trial court’s decision that an investment bank was not grossly negligent for issuing a fairness opinion based on management projections (which may have contained unrealistic forecasts). to motivate its investment bankers to avoid conflict situations. Fees. In The ha2003 Liquidating Trust v. made its fairness determination based on information provided to HA-LO’s board by another consultant (Ernest & Young). Accordingly.10 The trial court held that Credit Suisse was entitled to rely on projections provided by HA-LO without independent verification under 2 Reprinted with permission . This should come as no surprise. The bankers will make arguments grounded in fairness. as keeping people busy (even if busy on less profitable work) is traditionally a better alternative to employee lay-offs. justifying termination of the engagement letter). Deal certainty is important to companies when the markets are good. Inc. 75-90 percent of the success fee paid at closing). Investment banks may resist this termination right without a fair degree of specificity around the definition of conflict of interest. it may be more appropriate to tie most of the success fee to closing (for instance.. and various other factors. companies should consider whether. in today’s market. Nevertheless. and (ii) have withdrawn its fairness opinion or issued a new fairness opinion after the market price of several dot-com companies began to decline.g. Credit suisse securities (Usa) LLC 9. but instead. the merger consideration was fair to HA-LO from a financial point of view. After the deal closed. a company should strongly consider making a higher per- centage of the success fee payable at closing. providing “stapled” financing to the buyer in a sell-side engagement or joining the bank syndicate providing the acquisition financing in a buy-side engagement). Companies sometimes pay a portion (say. 20-40 percent) of the success fee before closing when certain milestones are achieved.6 B. Credit Suisse issued a fairness opinion to HA-LO’s board of directors representing that. however. but it becomes even more important (particularly to sellers) when the markets are bad.8 C. Companies should also consider the interplay between the conflict provisions and the termination and remedy provisions. For example. Here. to motivate its investment bankers to help sign up a deal that can be closed in jittery market conditions. investment banks may push for a bigger slice of any termination fees paid to sellers. Fairness Opinions. Also. as a commercial matter. Along similar lines. and that investment banks may push harder for inclusion of “break” fees in M&A engagement letters. it should come as no surprise that companies now have more leverage to further back-load the payment of success fees. as of the signing date. investment banks should concede this right so long as a company’s board makes a good-faith determination that a conflict of interest exists and that elimination of the conflict is in the best interest of the company and its shareholders (therefore. given the intense scrutiny about conflicts over the past several years. Investment banks are charging less in today’s environment and accepting engagements they may not have accepted early last year. HA-LO filed for bankruptcy protection and a trust created for HA-LO’s creditors sued Credit Suisse. companies should consider negotiating the right to terminate the engagement (without being subject to a fee tail) if a conflict of interest materializes based on the investment bank’s unilateral actions.The M&A journal Engagement Letters continued arise during the term of the engagement. sellers could face more push back from investment banks on this point until the markets improve and. notice and consent rights are reasonable tools to help companies avoid and manage conflict situations. directors’ fiduciary duties to shareholders. com. Relying heavily upon the terms of an M&A engagement letter. alleging it should (i) not have relied on management’s projections. deal volume and deal certainty improve. HA-LO Industries hired Credit Suisse as its M&A advisor in connection with HA-LO’s acquisition of Starbelly. considering the increasing rate at which deals seem to be failing and the sheer size of the termination/settlement payments associated with failed deals7.

when negotiating engagement letters. the fact that lenders are suing their clients to avoid financing commitments.11 Generally speaking. In light of the ha2003 decision. because M&A deals are rarely conditioned upon the delivery of a “bring down” fairness opinion at closing. as memorialized in the engagement letter. even if it means paying a little extra to receive an updated fairness opinion. companies are urged to focus on what the consequences (e.. they can always negotiate for that right. On appeal. Financing Rights. etc. an investment bank will often request the right to arrange the acquisition financing or other financing work (e. D. equity placements and interest rate swaps) required by the company in connection with the transactions covered by the M&A engagement letter. particularly those that hire an investment bank based on specific banker relationships and those considering investment banks rumored to be acquisition targets. In circumstances where another fairness opinion may add value (e. although this expectation typically didn’t manifest itself in writing until a written fairness opinion was delivered.. and it only seems to increase when the markets take a turn for the worse.g.g. Companies may revisit the commercial value of being able to have multiple opinions issued by their M&A advisors in light of the HA2003 decision. the company can simply ask its investment bank to issue another fairness opinion. When negotiating the engagement letter. the expectation has been that investment banks have no obligation to update or withdraw any fairness opinion issued as part of their engagements. if an investment bank later determines it must further jettison funding commitments to help shore up its balance sheet. therefore. a board of directors is deciding whether to extend the termination date of a cash-and-stock merger after a significant period of time has passed since the deal was signed).12 The HA2003 decision also suggests that. but commercial flexibility on financing matters is even more important for companies in today’s credit environment. based in part on the volatile market conditions. concerns that Bear Stearns might not be the only investment bank to implode. however.the M&A journal the terms of its engagement letter and. particularly for sellside deals. The turn-over rate among investment bankers is relatively high in normal market conditions. The involvement of highly-regarded partners and senior managing directors on a project. if companies really want the fairness opinion to cover fairness as of the closing date of a transaction. “Key Man” Provisions.13 In addition to increasingly using “key man” provisions to preserve relationships and help maintain consistency and quality of the M&A advice.g. As a practical matter. When this happens.. having the right to have a fairness opinion issued by its investment bank after a deal is signed has limited value. the involvement of prominent investment bankers in the company’s deal could help favorably sway the investment bank to follow through on its financing commitment to the company. however. because they may help to reduce the risk that the investment bank will walk away from a financing commitment. Fee Structures: Defending Hostile Takeover Bids When a company learns that an unsolicited Engagement Letters Reprinted with permission 3 . investment banks may attempt to clarify in M&A engagement letters that they have no obligation to update or withdraw any fairness opinion issued as part of their engagements. Higher turn-over rates help to explain why “key man” provisions are becoming more important to companies. Moreover. In the past. This is not to say a company cannot decide to obtain acquisition or take-out financing from the investment bank. companies would weigh the pros and cons of going this route before deciding whether to grant or reject the request. frequently contemplate the issuance of a fairness opinion as part of the investment bank’s mandate. Today. E. grounds for termination or fee reduction) should be if a “key man” provision cannot be honored or there’s a changein-control of the investment bank. M&A engagement letters. the Seventh Circuit affirmed. In other words. Credit Suisse had not been grossly negligent. may create more political pressure within the investment bank to honor its commitment should the firm decides to reduce its funding exposure under various M&A financing commitments. the engagement letter commonly provides that the fairness opinion will be issued in such form as the investment bank determines appropriate (which may include statements in the fairness opinion that the investment bank has relied upon information provided by the client and has assumed the accuracy and completeness of such information). companies should be reluctant to even consider this request. “key man” provisions are valuable to companies considering an investment bank for both M&A adviser and lender roles.

12 months) following the date of the engagement agreement. the success fees are very similar to success fees structured for mergers. and other interested parties. The Company’s obligation to pay us pursuant to this paragraph will survive any termination of our services under this Agreement any decision by [Potential Acquirer] and/or any other person or group (as defined in Section 13 of the Securities Exchange Act of 1934. it is also common for companies to pay up-front retainer fees to their investment bankers. as amended). will be credited on a onetime basis against the Success Fee (or any part thereof) that becomes payable within 12 months of the date of this Agreement pursuant to paragraph ( ) below. including the Company or any of its subsidiaries.The M&A journal Engagement Letters continued bid has been or will be made for the company. (i) a Success Fee has not been paid to us pursuant to paragraph ( ) below and (ii) a Triggering Event 15 has occurred.16 Companies faced with defending hostile takeover bids need to understand that investment banks have significant bargaining leverage when negotiating fees in these circumstances. as of the three-month anniversary of this Agreement or any successive three-month anniversary thereof (each such date. as the fee structures can be complicated and involve significant fees. and agree to pay a success fee to its advisor if the unsolicited bid turns morphs into a negotiated deal. securing exclusivity. there are no “standard” fee ranges for the retainer and advisory fees sought by investment banks under mandates related to defending hostile bids. A company will customarily pay an advisory fee to its M&A advisor while fending off the unwanted offer. In addition. obtaining financing rights. and a general lack of transparency around the fees paid to financial advisors in these situations (making it more difficult for companies to determine whether the fees being quoted are exorbitant). if not all. the fact that executives may be panicking if they haven’t been through this drill before. and divestitures that do not involve unsolicited bids.14 As hostile takeover bids can require tremendous up-front work by the advisors on very short notice. companies should carefully consider how the fees are structured. the company will pay the same amount of advisory fees on each Triggering Date so long as the hostile bid remains “live” and a success fee has not been paid. companies should expect investment banks to attempt to extract lucrative fees in these engagements. a “Trigger Date”). if not better terms in general (e. such as the next one or two successive payment periods. To illustrate these points. proxy advisory firms. acquisitions. Because hostile takeover bids frequently turn into negotiated deals.. According to some investment bankers at major Wall Street firms. as fees tied to a successful takeover defense could be criticized by shareholders. the fees paid to investment banks in these engagements normally include both “stand alone” and transactional elements. the company is sometimes required to pay the advisory fee on that Triggering Date and for an extended period of time following that Triggering Date. It is also customary that a majority. then the Company will pay. or negotiating longer fee tails). The advisory fee. if not develop a plan to thwart the takeover offer.” As for the transactional element of these fee arrangements. If. Advisory fees are normally paid on a monthly or quarterly basis. the sense of urgency that executives often experience to respond immediately to unsolicited offers.g. to us in cash an advisory fee of $( ) on each Trigger Date and on each of the next two successive three-month anniversaries thereof. Because hostile takeovers are often the weapon of last resort for the interested buyer. Experienced legal counsel can be invaluable with helping to negotiate these engagement letters. of the advisory fees paid by the company will be credited against any success fee that becomes payable within a certain period of time (often. such as the high-stakes nature of hostile takeovers. most companies have not negotiated M&A engagement letters with investment banks in these settings. if not another period of short duration such as each successive three-month anniversary of the date of the engagement letter (the applicable payment date is herein referred to as a “Triggering Date”). If the hostile bid is withdrawn or otherwise ceases before a Triggering Date and a success fee has not be paid. because most investment banks have established internal guidelines spelling out 4 Reprinted with permission . This leverage arises from a combination of factors. to the extent paid. or cause to be paid. Instead. to cease pursuing a transaction with the Company. Subject to the termination provisions. As a result. it will customarily hire experienced legal and financial advisors to help understand the process and the company’s options. a sample provision follows: “Advisory Fee.

2007). 3. as with any M&A engagement letter. Reprinted with permission 5 . At the same time. In the Genesco deal. Bacon. Newport Television LLC. To accomplish this.. If this happens. The M&A fees generated by an investment bank may pale in comparison to the fees earned by providing acquisition financing. Vice Chancellor Leo Strine provided a gold nugget to M&A lawyers during one of the hearings. This suggestion seems to have been taken to heart by private equity buyers. which was hit hard by the sub-prime mortgage meltdown. For now. at least in private equity deals. Wachovia sued its client to avoid funding its portion of the acquisition financing needed by the private equity buyer to purchase several television stations from Clear Channel. Engagement Letters ENDNOTES: 1. Lee Partners have caused their “shell” purchaser to sue its lenders for the debt financing needed by the private equity firms to complete their pending buyout of Clear Channel. 3550-VCS (Del. UBS. et al. The Genesco/Finish Line and Clear Channel/ Provident Equity storylines are particularly interesting. 2. some of which will inevitably influence the manner in which companies negotiate engagement letters with investment banks. Maybe these trends will reverse themselves as the financial and M&A market rebounds. 4. most investment banks are willing to structure the fees however a company prefers so long as the minimum fee requirement will be satisfied. The m&a Journal. fewer sellers may be willing to put themselves into play. The bottom line is. Volume 8. such as “break” fees and “key man” provisions. requesting that a court declare the combined company insolvent and declare void the bank’s funding obligation. Brad L. as Bain Capital and Thomas H. Feb. see Transcript of Oral Argument and Ruling on Motion to Expedite. Bacon is Vice President. had a change in heart and wanted out of its financing commitment. commercial reasonability may require a “shell” acquirer to shop an equity commitment to other private equity sponsors and sue its lenders for debt financing. concerns around closing certainty or a narrowing of premiums as cheap credit becomes more scarce). such as it did in the Genesco case. For additional information on many of the concepts discussed in this article. 26. Clear Channel Broadcasting. UBS (in its capacity as Finish Line’s M&A advisor) was judicially dressed down for failing to request key financial information before Finish Line entered into the Genesco deal. see Brad L. Although the lawsuit was dismissed and the acquisition completed. etc. though.the M&A journal the minimum level of fees (say. Inc. The Sallie Mae and Genesco transactions were terminated in the first quarter of 2008. utility. then the loss associated with the financing commitment could very easily outstrip the profit generated by providing M&A advice. even if the investment bank loses millions from the M&A advisory mandate. Ch. it’s not hard to understand how an investment bank could use the potential loan losses to justify an “economic breach” of the commitment letter. Finish Line hired UBS as its M&A advisor and lead lender. particularly as the reputation of financial buyers falters and they no longer have unfettered access to cheap capital (translating into a smaller pool of “white knight” candidates and better odds that a strategic buyer will not face competition from financial buyers able to pay juiced premiums). As potential sellers become more concerned about timing the market (i.. At the same time. Specifically. Strategic buyers with strong balance sheets may be more willing to make unsolicited offers or launch hostile takeovers to acquire companies in these camps. negotiating and drafting m&a engagement Letters with investment Banks: a Client’s perspective. No. companies would be well served to take stock of the events that have occurred since last summer when negotiating M&A engagement letters with investment banks. which may help to explain why UBS funded a large chunk of the $175 million termination fee paid to Genesco. It will be interesting to learn whether the concept of shopping the equity commitments in private equity buyouts gains traction in the future. v. the stock prices and valuations of many companies have been reduced significantly. Vice Chancellor Strine implied that. In the Clear Channel/Provident Equity deal. 5. As the credit markets dried up. M&A lawyers can expect more interesting developments. He has negotiated engagement letters with investment banks for more than $10 billion of M&A transactions involving domestic and international energy. * * * * * As 2008 continues. 2 (Dec.e. No. 2008). Assistant General Counsel & Assistant Corporate Secretary of Aquila. Inc. UBS took the extraordinary step of suing its own client. In the litigation that ensued.. companies should be mindful of perceptions associated with large-dollar mandates. if an investment bank is forced to sell loan commitments at a steep discount (which is around 15% today). and telecommunication assets and operations. Ct. $5 million) that should be generated for this type of advisory work.

. supra note 1 at 11-12 (explaining. available at www. although members of the Sallie Mae buy-out group agreed to arrange a new $31 billion credit facility for Sallie Mae as part of the termination settlement. particularly as companies face greater closing uncertainty in the M&A markets today. the investment bank would not have to return the fees to the company. 10. if the investment bank unilaterally creates a conflict that puts the deal in jeopardy after the company has paid the $5 million of milestone fees. therefore. unrealistic. Now. No. Order Granting CSFB’s Motion and Denying HA-LO’s Motion for Judgment on Partial Findings. App. Alan Schwartz. March 18. THE DEAL. THE DEAL. proxy advisory 6 Reprinted with permission . Investment banks sometimes request a success fee if a company successfully fends off a hostile takeover. and the company feels compelled to terminate the engagement to remove the risk and increase closing certainty. 7. or whether they should be recouped in specified situations. (b) payment of a $100 million reverse bust-up fee to United Rentals. especially if the financial advisor created the conflict.php. 06-3842. as amended.php (questioning whether advisor changes could be in store for IPOs that Bear Stearns is spearheading as lead or co-lead underwriter). the investment bank has liability exposure if the fairness opinion included in the Form S-4 is misleading. 04 C 3163 (N. would Microsoft have continued to use Bear Stearns? see. microsoft taps Bear stearns Ceo as consigliere for advice on Yahoo! deal. If Mr. For example. the dotcom bubble began to burst and the value of several dot. From a drafting perspective. for instance. see Bacon.thedeal. HA-LO chose to disregard E&Y’s conclusions and proceeded with the acquisition. Note that. the rationale for companies not paying “break” fees to M&A advisors). companies should revisit whether foregone fees should be viewed as “sunk” costs of a failed transaction.S. This seems like a poor result. and the company would remain subject to a fee tail following the termination date.COM.g. 20. 2008 U. Feb. Ill. reportedly advised Microsoft in its failed bid to acquire Yahoo!. Under the Securities Act of 1933.COM. March 5. because the trial court made no finding of fact regarding whether E&Y’s conclusions had been provided to CSFB. as they can be perceived negatively by shareholders. CEO of Bear Stearns. beyond the provisions specific to the issuance of a fairness opinion. Lexis 3504 (7th Cir. and (d) roughly $31 billion of debt commitments to Sallie Mae for purposes of refinancing a credit line. Also. Accordingly. Examples of recent termination payments / settlement concessions include: (a) payment of $175 million and the issuance of roughly $12 million of Finish Line common stock to Genesco. 2006). the ha2003 decision seems consistent with existing contract law: investment banks should not need to expressly provide that they have no duty to update or withdraw their opinions. 11. 14. that an investment bank is entitled to a $10 million success fee under an engagement letter. 2008. 20. Alex Lash.techconfidential. 2008). Sallie Mae would certainly not regard the syndication and lending efforts to be the cash equivalent of $31 billion (and. and rules and regulations promulgated pursuant thereto. the decision should not be construed as limiting an investment bank’s potential liability under federal securities law. and that $5 million of that fee will be paid upon achievement of certain milestones prior to closing. Bear stearns’ impact on ipos. 8. Sept. Schwartz were to have left Bear Stearns before Microsoft revoked its offer. As explained later in this article. available at www. in order not to have a contractual obligation to do so. if the investment bank’s fairness opinion is expertised and included in a Form S-4 filed with the SEC. Thereafter. e. 13. in E&Y’s opinion. Given the possible components of a termination/settlement package. among other things. should the investment bank be allowed to keep the $5 million? Without appropriate language in the engagement letter.The M&A journal Engagement Letters continued 6. (c) the purchase of $400 million of Harmon convertible debt companies (including companies contained in indexes used by Credit Suisse for purposes of its fairness opinion) deteriorated significantly.D. 12. E&Y had determined and informed HA-LO’s board that management’s projections were. engagement agreements customarily provide that an investment bank will rely solely on information provided by the company without independent verification. 2008. companies should be wary about paying “stand alone” success fees. 9. valuation methods and fee caps must be carefully thought through if a company is entertaining the notion of paying a “break” fee to its M&A advisor. For example. aff’d No. Alain Sherter. would not want to pay a sizeable “break” fee to its M&A advisor based on the $31 billion headline number).

stock dividend or recapitalization or similar transaction occurring after the date of this Agreement and (y) in the case of an asset sale. For example. or cause to be paid. See PeopleSoft.the M&A journal firms. PeopleSoft highlighted that the fees payable to its financial advisors (Citi and Goldman Sachs) in connection with the hostile takeover bid were not contingent on the company remaining independent. business combination or other strategic transaction or a recapitalization. exchange offer. merger or other business combination transaction. dissolution or other extraordinary transaction. including [Potential Acquirer] or any of its affiliates (a “Potential Acquiring Entity”). that the Success Fee will be reduced by the Announcement Fee. the Price Per Share will be calculated in good faith and mutually agreed to by us and the Company. or (B) it becomes public knowledge that a Potential Acquiring Entity has contacted the Company regarding any of the transactions or matters set forth herein or that such Potential Acquiring Entity intends to initiate. and other interested parties. as amended). a sale of 50% or more of outstanding common stock or assets (based on the book value thereof) of the Company. or execution of a definitive agreement with respect to. 15. 9. (iv) commences any solicitation of proxies or consents to vote any voting securities of the Company where the subject matter of such solicitation relates to any proposal or action of the type set forth herein. liquidation. or is considering initiating.. restructuring or liquidation of the Company. Inc. including the Company. If a sale. A sample provision follows: “For purposes of this Agreement. including any leveraged buy-out or management buyout. 2004).” 16. In these situations. (ii) publicly delivers a proposal or offer (either written or oral) subsequent to the date hereof describing an acquisition of the Company or its outstanding securities or assets by way of tender offer. the Company will pay us a fee of $( ) (the “Announcement Fee”). to us a success fee (the “Success Fee”) in cash as follows: (A) if the price per share paid to a holder of shares of common stock of the Company (the “Price Per Share”) is less than or equal to $( ). directly or indirectly with any person or group (as defined in Section 13 of the Securities Exchange Act of 1934. “Triggering Event” will typically be defined very broadly to mean pretty much any offer actually made or publicly contemplated by one or more potential buyers. Upon announcement of. as well as any recapitalization. or (B) if the Price Per Share is greater than $( ). (x) all amounts will be adjusted to reflect any stock split. A sample provision describing the success fee payable under an engagement letter relating to the defense of a hostile takeover offer follows: “Sale of the Company. as amended). this can certainly be accomplished without the involvement of an offensive “stand alone” success fee. issuances of securities.” MA Reprinted with permission 7 . a “Triggering Event” will occur when (A) any person or group (as defined in Section 13 of the Securities Exchange Act of 1934. sales of assets or otherwise. 10 (Mar. private or open market purchases of stock. the Success Fee will be an amount equal to ( )% of the aggregate consideration paid in such transaction or transactions. by means of a tender offer. (i) commences a tender or exchange offer with respect to the outstanding stock of the Company. involving the Company. exchange offer. Schedule 14A. the Company will at completion pay. If an investment bank wants to ensure that it generates at least a minimum amount of fees in connection with defending a hostile takeover effort. at p. whether in one or a series of transactions. or any other form of disposition which results in the effective sale of the principal business and operations of the Company by the current owners is completed. the Success Fee will be an amount equal to ( )% of the aggregate consideration paid in such transaction or transactions. company or entity. of 50% or more of the assets (based on the book value thereof) or 50% or more of the outstanding voting stock of the Company. in each case. For purposes of the preceding sentence. (iii) commences any solicitation of proxies or consents to change the composition of the Board of Directors of the Company. either directly or indirectly. merger. when PeopleSoft was trying to stave off Oracle’s takeover offer. restructuring. or (v) acquires beneficial ownership of more than [5%] of the outstanding voting stock of the Company or acquires beneficial ownership of any stock of the Company if the Potential Acquiring Entity publicly discloses such acquisition. provided. any of the transactions or matters set forth herein.

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