SunGard Provisions

Last Updated: Jun 7, 2019

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Also known as “specified representations language” and “SunGard conditionality”, SunGard provisions are used to limit the closing conditions in an acquisition financing deal and to increase deal certainty.  These provisions are sought after by sellers and private equity sponsor buyers, are prevalent in large-sponsored transactions, and are becoming more common in middle-market sponsored deals as well.  The goal is to limit the differences in conditionality between the acquisition agreement conditions to close and the financing commitment letter conditions to close, which thus limits the borrower’s risk of being forced to close an acquisition without access to the financing proceeds. The main elements of SunGard limited conditionality are: (1) requiring that the “Material Adverse Effect” condition to closing in the commitment letter matches the requirement in the acquisition agreement exactly (including that the governing law of the acquisition agreement is used in determining if a Material Adverse Effect has occurred); (2) limiting representations and warranties to include solely (a) representations by the target that are material to the interests of the lenders and that the purchaser/borrower can terminate the acquisition agreement if such representations are not true, and (b) certain additional specified material representations; and (3) limiting the collateral that must be perfected at closing to (a) the type that can be perfected by the filing of a UCC-1 financing statement, (b) the filing of intellectual property security agreements for intellectual property that is registered as of the closing date, and (c) the delivery of stock certificates.