The Oklahoma Bar Journal September 2023

Certain restrictions can be so significant that once seen, should be immediately flagged to the entire deal team and the client.

renewal date, or a party may have been given a set number of renewal options that such party may uni laterally exercise during a certain period of time before the contract expiration date. With respect to the circumstances under which a contract may terminate, depending on the client’s particular needs, a termination for convenience is usually the primary concern for the diligence team. In some cases, the buyer may prefer a contract where it may terminate at any time without cause, whereas in others, it may be reluctant to assume a contract that can be terminated by the counterparty for convenience. If termination for convenience would result in any early termination fee or penalty, the diligence team should also include such informa tion in its summary. Assignment or change of control. Assignment or change of control (CoC) restriction is one of the most important contract diligence issues. Failure to obtain proper consent from third par ties could have a serious impact on the transaction. Depending on the transaction structure, the diligence team usually looks for either assignment restrictions or CoC restrictions. However, in the uncommon situation where a

product being provided under a contract solely by the contract title. Additionally, whether a contract needs to be disclosed under the purchase agreement frequently depends on whether the contract amount meets the required dis closure threshold. Therefore, the diligence team should also include a brief description of the subject matter and the amount of fees under a contract in its summary. If there are any special payment arrangements between the seller and the counterparty under the contract, such as any sort of prof it-sharing, such payment terms should also be noted. Term, renewal and termina tion. For both disclosure purposes and business integration purposes, it is important for the diligence team to understand whether a contract is still in effect and the circumstances under which it can be terminated. In addition to a contract’s initial term, the diligence team should note the options, if any, for the initial contract term to renew, e.g. , a contract may be renewed only by mutual consent from both contracting parties, or a contract may automatically renew unless notice not to renew is pro vided by either party during a cer tain period of time before the next

at the end of the article. Certain key contract issues are discussed below. To avoid confusion, the underlying purchase agreement in the contem plated M&A transaction is referred hereto as “purchase agreement,” whereas “contract” refers to the seller’s commercial contract subject to diligence review. Contract description. Each contract should be properly described so that it can later be properly cited. Typically, a contract should be described by its title, date and contracting party in the form of “[CONTRACT TITLE], dated [DATE], by and between [PARTIES].” If a contract has been amended, the amendments should also be referenced in the descrip tion of the contract, e.g. , Master Services Agreement, dated Jan. 1, 2021, by and between ABC Inc. and XYZ LLC, as amended by the First Amendment dated May 6, 2022, and the Second Amendment dated June 3, 2023. In addition to the offi cial description of the contract, the diligence team should also note the contract’s file name and VDR num ber (if any) so that the diligence team can easily find the particular document in the VDR if it needs to. Service and product; contract amount. Sometimes, it is not easy to perceive the service or

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

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THE OKLAHOMA BAR JOURNAL