Fill and Sign the A Comprehensive Guide to Due Diligence Issues in Mergers Form

15.06 Form: Outline of Considerations for Transactions Involving Foreign Investors The following is an outline of issues that the due diligence team should consider when determining the feasibility of the proposed transaction. A. Considerations for Determining Whether a Transaction Is Subject to Review Under the Exon-Florio Amendment.1. Determine if the merger, acquisition, or takeover involves a "foreign person" and a "U.S. person" as defined by 31 C.F.R. ¤ 800. 2. Determine if the merger, acquisition, or takeover might result in a foreign entity having "control" over a person engaged in interstate commerce in the United States. a. Will the entity have the power to determine directly or decide matters affecting the entity, including but not limited to: i. The sale, lease or mortgage, pledge or other transfer of the principal assets of the entity, even if in the ordinary course of business; ii. The dissolution of the entity; iii. The closing or relocating of the production or research and development facilities of the entity; iv. The termination or non-fulfillment of contracts of the entity; and/or v. The amendment of the articles of incorporation or constituent agreement with regard to any of the above i-iv. 3. Determine whether the structure of the transaction will create a potential threat to national security. The following factors are considered during a review : a. Is domestic production necessary for projected national defense requirements?; b. Are domestic industries capable of meeting the national defense requirements?; c. Does the control of domestic industries and commercial activity by foreign citizens affect the capability and capacity of the U.S. to meet the requirements of national security?; d. What are the potential effects of the transaction on the sales of military goods, equipment, or technology to a country that supports terrorism and proliferates missile technology or chemical and biological weapons?; e. What are the potential effects of the transaction on U.S. technological leadership in areas affecting national security? B. Guidelines for Transactions Subject to Exon-Florio 1. Voluntary Notification to CFIUS: a. Consider submitting a notification to CFIUS to avoid future investigation and possible divestiture b. Review Notification Procedure-31 C.F.R ¤ 800.401 c. Review Contents of Notice-31 C.F.R ¤ 800.402 2. Additional Considerations: a. Prepare proposed transaction terms to eliminate risks to national security. b. Consider whether or not the proposed transaction is feasible/practical given the Exon- Florio regulations. C. Considerations for Transactions Involving Government Contractors 1. Determine if continued security clearance is necessary for the execution of contracts after the transaction. 2. Determine if the transaction will result in an entity that is subject to foreign ownership, control or influence (FOCI): a. Will the foreign entity have the power to direct or decide matters affecting the management or operations of that company, and b. Could that control result in unauthorized access to classified information or could it adversely affect the performance of classified contracts? 3. Consider proposing the following possible methods to eliminate the risks to security and classified information: a. Creation of a Board Resolution b. Creation of Voting Trust Agreement c. Creation of a Proxy Agreement d. Obtain Foreign Government Assurances Pursuant to a Reciprocal Industry Security Agreement e. Creation of a Special Security Agreement