Emergency Business Litigation : Chicago Business Crisis Lawyer & Attorney : Tom Patterson Law Firm : IL Emergency Business Litigation, Temporary Restraining Orders

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By Jay Lewis

Hold-Separate Conditions

In order to maintain Roche’s rights, the lower Court set forth conditions for MAS and Alere’s sale to move forward.  The hold-separate portion of the order contained the following:

1. MAS survives the merger in its current form as an independent, though wholly or partially owned, corporate entity;
2. There are no material changes in MAS’s operations;
3. There are no material changes in MAS’s business plans;
4. Alere does not hire any current or former employees, officers, or directors of MAS;
5. MAS does not hire any current or former employees, officers, or directors, of Alere;
6. No current or former employees, officers, or directors of Alere serve as directors or board members of MAS;
7. No current or former employees, officers, or directors of MAS serve as directors or board members of Alere;
8. MAS does not share with Alere any confidential or proprietary information regarding Roche or any other company with which MAS does business;
9. MAS does not share with Alere any of MAS’s own confidential and proprietary information except to the extent that MAS shares such information with third parties in its normal course of business; and
10. MAS does not transfer or dispose of any material assets or make any material acquisitions.

The ten conditions above, however, did not address MAS and Alere’s agreement preventing MAS from incurring substantial liabilities before a completed purchase.  Under the agreement, MAS could not allow its assets to become subject to liens, sell new stock or acquire new business, dispose of intellectual property, or incur debt other than in the ordinary course of business prior to close.  The Appellate Court added an additional condition to appease Alere’s concerns.

11. If Alere acquires MAS subject to the first 10 conditions, then MAS remains bound by all promises in §7.7 of the acquisition agreement for as long as this injunction remains in force.

If MAS and Alere meet conditions one through eleven, they would be allowed to move forward with the sale.  Once the arbitrator makes a final deicison as to Roche’s right of first refusal, the sale would either close or die on the vine, but either way, Roche’s rights would not be harmed prior to the completion of the arbitration.

Bond

In dicta, the Court addresses the lower court’s decision not to require Roche to post a bond.  Although the Roche-MAS contract waives the parties’ entitlement to an injunction bond, the Court cautions judges to take care in setting a bond, “[P]reliminary injunctions…are more likely to be erroneous than injunction issued at the close of the litigation.  A party injured by an erroneous preliminary injunction is entitled to be made whole.”  The Court also stated, “Judges therefore should take care that the bond is set high enough to cover the losses that their handiwork could cause.”

The Court attempted to hedge any potential mistake in entering a conditional injunction by asking Roche to promise to pay for MAS the same amount as Alere.  “[I]f Roche eventually acquires the shares it will pay the investors at least $43 million plus interest from the time the MAS-Alere deal originally was scheduled to close.”