Xerox Provisions Merger Agreement

The most important thing is that this financing contract usually includes an obligation for the seller to provide all the information necessary to begin the marketing period set out in the sales contract and the letter of commitment. See Conditionality in Acquisition Financing Commitment Documents – Timing Condition and Marketing Period Condition. As noted above, the time between signing the letter of commitment and concluding the acquisition and financing of the loans on the other is often long. Lenders whose letters of commitment do not have a market MAC, particularly lenders who have fully supported the commitments, are at risk of damaging financial markets during the syndication of commitments and the resulting inability to sell their bonds to other lenders. The Flex provisions limit this risk and allow for changes to certain financing conditions agreed upon without the borrower`s consent, where necessary for the lenders organizing the loan to transfer their commitments. The provision of the executed acquisition contract is a precondition for lenders` commitment to finance the loans. As explained in more detail below, lenders sometimes accept, as a case, a near-final acquisition contract project, coupled with an agreement reached by the buyer that there will be no substantial changes without the prior approval of the lenders. The terms of the acquisition agreement are important to lenders on a number of points, beyond understanding the structure and activity of the borrower after the closing of the transaction. Lenders also regularly require the inclusion of certain provisions in acquisition contracts. Overall, the issue of shared jurisdiction could challenge a Delaware court to impose the concrete execution of a merger contract, all lawyers agreed, because any order requiring lenders to finance a transaction would have to come from a New York court. The provisions of Xerox (named after a financing by Xerox in which these clauses were first seen) grant this protection to lenders in the form of confirmation by the seller in the acquisition agreement that the seller`s only recourse to the buyer and its lenders to terminate the acquisition is the demerger commission provided in the acquisition agreement. If the acquisition is completed because lenders do not finance their obligations, lenders may continue to be the subject of a buyer`s default action, but Xerox`s provisions should protect lenders from the seller`s action. On the other hand, the sellers` emphasis on financing security has led some sellers to roll back the acceptance of these provisions.

Some high-leverage sellers even negotiate the right to impose remedies (or induce the buyer to impose remedial action) against lenders as part of a letter of commitment. High-quality sponsors and borrowers continued to push lenders to enter into agreements in order to have even more collateral diligence and steps of perfection after conclusion. This prospect could deter sellers from pursuing litigation if they know that the benefit of legal action will be limited and that there will be significant resources to be implemented, several lawyers said. Many private equity transactions have provisions that cap the maximum harm that the seller can derive. The structure of the acquisition is important to lenders because it will dictate a number of issues for financing, including the perfection of collateral, the identity of guarantors and borrowers, and the date of takeover (i.e. the length of time lenders will have to meet their obligations).

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