1. Software Compliance Risks in
M&A Transactions
Presented by Robert J. Scott
Managing Partner Scott & Scott, LLP
●
www.ScottandScottllp.com

2. Software Compliance Risks in M&A Transactions
Types of Transactions
ο Stock Transactions
ο Asset Purchase Agreements
ο Reverse Triangular Mergers
ο Statutory Mergers
Copyright © 2013 – Scott & Scott, LLP

3. Software Compliance Risks in M&A Transactions
Important License Provisions
ο Definition of Licensee
ο Scope of Confidentiality Provision
ο Provisions related to Third-Party Access
ο Outsourcing & Third Party Maintainer Provisions
ο Transferability Provisions
ο Definitions of Affiliate
ο Anti-Reverse Engineering Provisions
ο Indemnity and Holdback Provisions
Copyright © 2013 – Scott & Scott, LLP

4. Software Compliance Risks in M&A Transactions
Cincom vs. Novelis
ο No Right To Transfer Unless Specifically Granted In
The License Agreement
ο Reverse Triangular Merger Constitutes A Prohibited
Transfer Under The Terms Of The License
ο Acquiring Company Required To Relicense Software
Previous Licensed
Copyright © 2013 – Scott & Scott, LLP

5. Software Compliance Risks in M&A Transactions
ACS vs. Cincom
ο Cincom Claimed That Xerox Transaction Constitutes
A Prohibited Transfer Citing Cincom vs. Novelis
ο ACS Filed Declaratory Judgment Action In Northern
District Of Texas Seeking A Declaration That No
Additional License Fee Was Owed
ο Matter Was Settled Out Of Court
ο Cincom Vs. Novelis 6th Circuit Opinion Remains
Prevailing Law
Copyright © 2013 – Scott & Scott, LLP

6. Software Compliance Risks in M&A Transactions
Deal-Specific Issues
ο Stock Transactions – Look For Change In Control
Language Usually Greater Than 50%
ο Asset Purchase – Look For Assignment Rights,
Silence Is A Problem
ο Joint Ventures – Look For Definition Of Affiliates
And Third-party Access And Confidentiality
Provisions
ο Mergers – Review Statutory Merger Statutes
Copyright © 2013 – Scott & Scott, LLP

7. Software Compliance Risks in M&A Transactions
Assessing the Risks
ο Review the Value of the Software in Question
ο Determine Whether Publisher Typically Allows
Transfer if Asked
ο Review Language in License Agreement to
Determine Definition of Affiliate
ο Research Publisher’s Position Regarding Other
Companies’ License Transfers
ο Identify Transfer Fees Outlined in License
Agreement, If Any
Copyright © 2013 – Scott & Scott, LLP

8. Software Compliance Risks in M&A Transactions
Risk Mitigation Strategy
ο Pre-Deal Software License Review
ο Adding Software Asset Schedules to Deal Docs
ο Post-Deal Notice and Permissions
ο Negotiating New License Terms
Copyright © 2013 – Scott & Scott, LLP

9. Contact Information
Robert J. Scott, Esq.
Managing Partner
Scott & Scott, LLP.
1256 Main Street, Suite 200
Southlake, TX 76092
Phone: (214) 999-2902
Fax: (214) 999-0333
E-Mail: rjscott@scottandscottllp.com
Software Compliance Risks in M&A Transactions
Copyright © 2013 – Scott & Scott, LLP

10. Contact Information
Robert J. Scott, Esq.
Managing Partner
Scott & Scott, LLP.
1256 Main Street, Suite 200
Southlake, TX 76092
Phone: (214) 999-2902
Fax: (214) 999-0333
E-Mail: rjscott@scottandscottllp.com
Software Compliance Risks in M&A Transactions
Copyright © 2013 – Scott & Scott, LLP