BUS-410 MIDTERM 3 STUDY GUIDE
QUESTIONS AND ANSWERS
Recitals (M&A agreement) - ANS ... The opening 'whereas' background section:
identifies the parties and the purpose/context of the deal. Sets up intent but is
generally not the operative binding terms.
Agreement / summary of deal (M&A) - ANS ... The core operative section: states
what is being bought/sold, the price/consideration, and the basic structure of the
transaction.
Representations & Warranties of Company and Shareholders - ANS ... Statements
of fact about the target company's condition (financials, contracts, litigation,
compliance, assets). If false, give the buyer grounds for indemnification or to walk
away.
Representations & Warranties of each Shareholder - ANS ... Individual factual
statements by each selling shareholder, e.g., that they own their shares free of liens
and have authority to sell.
Representations & Warranties of the Purchaser - ANS ... The buyer's statements of
fact: authority to enter the deal, financing capability, and that the purchase is
properly authorized.
Conditions to Closing - ANS ... What must be true or happen before either side is
obligated to close (regulatory approvals, accurate reps & warranties, no material
adverse change). If unmet, a party can refuse to close.
, Covenants (M&A) - ANS ... Promises to do or not do things, often after
signing/closing. Examples: Non-Compete, Non-Solicitation, and other post-closing
obligations.
Indemnification (M&A) - ANS ... Allocates responsibility for losses: who pays, and up
to what limits/time, if a representation, warranty, or covenant is breached. The risk-
shifting heart of the deal.
Miscellaneous / boilerplate (M&A) - ANS ... Standard closing provisions, including
Choice of Law (whose law governs) and Jurisdiction/forum (where disputes are
heard). Especially important in cross-border deals.
Three areas distinguishing U.S. vs. foreign labor law - ANS ... (1) Employee
participation in management decisions, (2) legal constraints on dismissal, (3)
inheriting the foreign firm's labor arrangements when acquiring it.
U.S. approach to employee participation - ANS ... Management has broad
flexibility to make strategic decisions with minimal employee involvement or
protection; decisions are the owner's prerogative.
German works council (Betriebsrat) - ANS ... Body representing plant employees in
decisions like plant closures and terminations; required at companies with more than
5 employees. Similar councils exist in Austria and the Netherlands.
German two-tiered board system - ANS ... A large Supervisory Board (Aufsichtsrat)
with mandatory employee representation plus a smaller Management Board
(Vorstand) that runs daily operations.
German board labor-representation thresholds - ANS ... Companies with >2000
employees: 50% labor / 50% shareholders on the Aufsichtsrat. Companies with
>500 employees: 1/3 labor representation.
QUESTIONS AND ANSWERS
Recitals (M&A agreement) - ANS ... The opening 'whereas' background section:
identifies the parties and the purpose/context of the deal. Sets up intent but is
generally not the operative binding terms.
Agreement / summary of deal (M&A) - ANS ... The core operative section: states
what is being bought/sold, the price/consideration, and the basic structure of the
transaction.
Representations & Warranties of Company and Shareholders - ANS ... Statements
of fact about the target company's condition (financials, contracts, litigation,
compliance, assets). If false, give the buyer grounds for indemnification or to walk
away.
Representations & Warranties of each Shareholder - ANS ... Individual factual
statements by each selling shareholder, e.g., that they own their shares free of liens
and have authority to sell.
Representations & Warranties of the Purchaser - ANS ... The buyer's statements of
fact: authority to enter the deal, financing capability, and that the purchase is
properly authorized.
Conditions to Closing - ANS ... What must be true or happen before either side is
obligated to close (regulatory approvals, accurate reps & warranties, no material
adverse change). If unmet, a party can refuse to close.
, Covenants (M&A) - ANS ... Promises to do or not do things, often after
signing/closing. Examples: Non-Compete, Non-Solicitation, and other post-closing
obligations.
Indemnification (M&A) - ANS ... Allocates responsibility for losses: who pays, and up
to what limits/time, if a representation, warranty, or covenant is breached. The risk-
shifting heart of the deal.
Miscellaneous / boilerplate (M&A) - ANS ... Standard closing provisions, including
Choice of Law (whose law governs) and Jurisdiction/forum (where disputes are
heard). Especially important in cross-border deals.
Three areas distinguishing U.S. vs. foreign labor law - ANS ... (1) Employee
participation in management decisions, (2) legal constraints on dismissal, (3)
inheriting the foreign firm's labor arrangements when acquiring it.
U.S. approach to employee participation - ANS ... Management has broad
flexibility to make strategic decisions with minimal employee involvement or
protection; decisions are the owner's prerogative.
German works council (Betriebsrat) - ANS ... Body representing plant employees in
decisions like plant closures and terminations; required at companies with more than
5 employees. Similar councils exist in Austria and the Netherlands.
German two-tiered board system - ANS ... A large Supervisory Board (Aufsichtsrat)
with mandatory employee representation plus a smaller Management Board
(Vorstand) that runs daily operations.
German board labor-representation thresholds - ANS ... Companies with >2000
employees: 50% labor / 50% shareholders on the Aufsichtsrat. Companies with
>500 employees: 1/3 labor representation.
