SCRIPT

UNIT 3

Listening A: the rights issue

Mr Young: ... so if there are any questions, I'd be happy to answer them now.

Ms Siebert: Mr Young, I’ve got a question, if you don't mind. In your talk, you mentioned a rights issue.
Could you explain to me in detail what a rights issue is?

Mr Young: Well, a rights issue is an issue of new shares for cash to existing shareholders. The shares are
issued proportionally, - that is, in proportion to the number of shares the shareholders already hold.
It’s a good way of raising new cash from shareholders. For publicly quoted companies, it’s a source
of new equity funding.

Ms Siebert: I see. But why issue shares to existing shareholders?

Mr Young: From a legal standpoint, a rights issue must be made before making a new issue to the
public, and the existing shareholders have what is referred to as the ‘right of first refusal’ on the
newly issued shares. This right is also known as a ‘pre-emption right’. Why is this important for the
shareholder? Well, when a shareholder takes up these pre-emption rights, he can maintain his
existing percentage holding in the company. However, shareholders sometimes waive these rights
and sell them to others. Another thing a shareholder can do is to vote to cancel their pre-emption
rights.

Ms Siebert: What about the price of these shares?

Mr Young: The price at which the new shares are issued is generally much lower than the market price
for the shares. You often see discounts of up to 20 or 30 per cent.

Ms Siebert: That doesn’t really make sense to me. Why would a business offer new shares at a price
that’s significantly lower than the current market price of the shares?

Mr Young: There are quite good reasons for doing this, actually. The main reason is to make the offer
attractive to shareholders. Also, the aim is to encourage the shareholders either to take up their
rights or sell them. The idea behind thiS is to ensure that the share issue is fully subscribed. That
means, of course, that the new shares have all been sold. The price of discount has another
function, too: it serves as a kind of safeguard if the market price of the company’s shares falls before
the issue is completed. It makes sense if you think about it: if the market share price fell below the
rights issue price, then it would be very unlikely that the issue would be successful. Naturally, in such
a case, shareholders could buy the shares more cheaply on the stock market than by taking up their
rights to buy through the new issue.

Ms Siebert: So, let me see if I understand you correctly. You said that existing shareholders don't have to
take up their rights to buy new shares, is that right?

Mr Young: That's right. Shareholders who don't want to take up their rights are entitled to sell them on
the stock market or by way of the company making the rights issue, either to other existing
 shareholders or new shareholders. In that case, the buyer has the right to take up the shares on the
same basis as the seller.

Ms Siebert: Mmm, I see. Are there any other matters connected to rights issues that I should know
about?

Mr Young: Just one more thing, perhaps - shareholder reactions. Shareholders may be unhappy about
firms continually making rights issues and may have a negative reaction. They may not like being
forced to do something - and rights issues force them either to take up their rights or sell them. As a
result, they may sell their shares. And selling their shares can drive down the market price.

Ms Siebert: That makes sense. I think I've got it now. Well, thanks for the detailed answer.

Mr Young: My pleasure. Any more questions?

===

UNIT 5
Listening A: contract negotiation techniques
Good morning. I'm very happy to have been invited here today to hold this talk on
effective contract negotiations. Before we get started, I'd like to tell you something
about the topics I intend to cover. My talk will be divided into two parts: the first, more
informative part will be held as a kind of lecture, and the second, practical part will
involve role-plays, to give you a chance to try out some of the techniques you'll be
hearing about. In the informative part, I'll cover preparing for a negotiation, tips for
using agreement templates and term sheets, as well as some general negotiating
techniques. This'll be followed by ways to overcome objections from the other side and
how to recognise a good deal. Then we'll break for coffee. The second half of our session
will then be dedicated to role-plays.
Now I'd like to move on to the topic of using agreement templates and term sheets. It's
common to start out with an existing contract template, which gives you a kind of
blueprint of the things that are usually included in such an agreement. It’s important to
realise that negotiating with a contract template means that it’s necessary to review the
terms and conditions it contains carefully. Please note that you have to consider what is
not in the agreement but should be, that is, what’s missing and should be added. This is
really just as important as carefully reviewing the language in the agreement. Here, I
want to stress that it'd be wise to consult with a senior lawyer, preferably someone who
has experience negotiating agreements of the kind that you're negotiating. When using
a term sheet as the basis of negotiations, it's imperative to keep good notes of all
discussions or emails regarding the items on the sheet. Term sheets are usually used by
lawyers to transfer the terms that have been agreed into an official agreement, so it’s
crucial that the information on these sheets is precisely what has been agreed on by all
parties. Sometimes a lawyer will incorporate items from a term sheet onto an
agreement template. In such a case, he should be careful not to include language
originally in the template that isn’t appropriate.
OK, now I'd like to turn to some general negotiating techniques. It's good practice to
separate the issues at stake into different categories in your mind: things you can’t
possibly accept, major points, minor points and things you can easily live without. Then
you can make trades with the other side, one item for another. This is also known as
‘horse-trading’. It can go like this: ‘I'll change this provision like you want if you agree to
add a provision that I want’. When it comes to discussing numbers, if possible let the
other side suggest the first number. In the case of a sales contract, for example, the first
number the other side states is usually the least he expects to pay, whereas the seller's
first number is the highest amount he thinks he might be able to get.
My advice is to know the number you really want to end up with and try to suggest a
starting number that'll force the other side to respond with a number that, when
combined with your starting number, will average out to a number you'd be happy to
accept. So what you do is propose meeting the other party in the middle by averaging
the two numbers out.
My next point has to do with overcoming some of the objections you commonly hear in
a negotiation. Sometimes the other party’ll object to removing a clause that you don't
want by saying something like: ‘Don't worry, we won't hold you to that item, so we'll
just leave it in’. In such a case, you should insist that the item's taken out. The best
argument in this situation is to say that if they're not going to hold you to it, then why
not Just take out of the agreement. It's important to be aware that the people involved
in making the agreement can all one day lose their jobs or take employment with
another company, and so their promise not to hold you to something is worthless,
because they might not be around any more. Almost all agreements contain a merger
clause, which states that anything that was said or written before the agreement was
signed does not matter unless it's explicitly written in the agreement.
All right, there are some other objections that can be raised in the course of a
negotiation. These include ...
===
Listening B: the non-competition clause in the franchise agreement
Arthur Johansson: If I may, I'd like to address another one of the clauses in the franchise
agreement: the non-competition clause here, at the bottom of page three.

Ms Orvatz: Yes, the non-compete. Well, I'll just say upfront that that's standard, that’s in
all our agreements.
Arthur Johansson: Right. That may be so, but i’m afraid we can't go along with it in its
present form.
Ms Orvatz: What do you object to? All our franchisees accept that. It's standard
practice, like I said.
Arthur Johansson: Well, the clause in question states, and I quote: ‘Franchisee shall not,
for a continuous uninterrupted period and continuing for two years thereafter, own,
operate, maintain, or engage in any business that: (a) offers products or services
which are the same as or similar to the products and services offered by the
Franchised Business under the System and (b) is, or is intended to be, located at or
within a 25-mile radius of the Approved Location.’ What this means is that in the
event that the agreement between my client and your corporation should at one
time no longer be in effect, my client wouldn't be able to operate a sandwich
restaurant for two full years in his own neighbourhood. I'm afraid that’s out of the
question
Ms Orvatz: Well, you must understand that my client has to protect itself - I mean, a
former franchisee could just come along and set up a nearly identical sandwich
restaurant right near one of our restaurants, and with all the know-how he got from
us ...
Arthur Johansson: Yes, I fully understand the reasoning behind that provision, no need
to explain. But my client also has skills and abilities of his own, proven skills relevant
to the sandwich-making business. That’s why your client is interested in concluding a
franchise agreement with him in the first place. Let's face it: your client owns a
young and upcoming franchise enterprise that may be promising, but it certainly
isn’t well known or well established yet - you need the skills and know-how of
experienced franchisees as much as they need you. So I'll say it again: we simply
could not accept any clause that would forbid my client from making a living through
these skills independently for two whole years, if that should one day become
necessary.
Ms Orvatz: What do you suggest? We’re not in a position to remove the non-compete
clause from the contract, let me be perfectly clear about that.
Arthur Johansson: Of course. Our proposal is to reduce the scope of the clause. If you
could consider reducing the time period the non-compete covers, we'd be willing to
be more flexible about the arbitration clause, for example.
Ms Orvatz: Well, all right. In that case, I think we could talk about a reduction.
Arthur Johansson: That's certainly a step in the right direction. How about this: we
suggest reducing the time frame to six months.
Ms Orvatz: That would be difficult for us. We could only reduce it to eighteen months,
and that's already very generous on our part.
Arthur Johansson: Let's agree on a year, shall we? After all, you and I both know that
your client really wants to enter into this agreement with my client, as he’s perfectly
suited to run a franchise in that part of town, which, let’s be honest, isn’t exactly the
safest neighbourhood. He knows the area, he has the necessary skills and experience
…
Ms Orvatz: OK, OK. I think we could live with that. A year it is.
Arthur Johansson: Very well.
Ms Orvatz: Now, what about the arbitration clause? You said you'd be willing to be a bit
more flexible …
===
UNIT 6
Listening A: The remedy of specific performance and five types of cases in which the plaintiff's claim
is not converted into money damages

I'd like to tell you something about the remedy of specific performance in my country,
Denmark. As you know, specific performance is a remedy requiring a person who has
breached a contract to perform specifically what he or she had agreed to do. Danish
contract law provides that where one party breaches the contract, the non-breaching
party may choose between specific performance and damages. However, there are a
limited number of cases for which specific performance will actually be ordered. There
are five types of cases where the remedy is specific performance. I'm going to tell you
something about these specific cases in which specific performance is ordered.
The system works as follows: if the court orders the breaching party to perform as
provided in the contract, there are two possibilities: compliance or non-compliance with
the court order. Either the defaulting party performs or he doesn’t. If he doesn’t, the
other party can decide to go to the judicial enforcement agent. This judicial
enforcement agent is called the foged in Denmark. A foged is similar to the bailiff in
common law. He basically fulfils the functions of a bailiff. The Code of Procedure 17
regulates what the foged has to do. This code stipulates that the foged can convert the
plaintiff's claim into money damages. So, what usually happens is that the claim is
turned into money damages.
However, there are five types of cases in which the plaintiff's claim is not converted into
money damages and the defendant must perform his obligations under the contract. Let
me briefly tell you what these five cases are.
First of all, there is the case where objects - such as goods that have already been
produced - simply need to be handed over to the plaintiff. This also includes situations in
which a person is to be put in possession of real estate.
The second type of case is where goods can be procured from a third party. The foged
can allow for a third party to perform, and if the breaching party doesn't pay for this,
the foged can seize his assets.
Third, we have the case where the only act that has to be performed is a signature on a
document. All that is needed is the signature: in this case, the foged can sign for the
defendant.
In the fourth type of case, the act to be performed is the transfer of a pledged security.
The foged can seize assets from the breaching party and pass them on to the pledgee.
Finally, we have a fifth case, where the breaching party must be restrained from
performing certain acts that are harmful to the other party.
So, generally speaking, the foged will convert a claim of specific performance into
money, unless the acts which the defendant must perform can be performed by a third
party, as in the five specific cases I've just explained to you.
===
Listening B: Summary of a specific performance case: the Glaptech case
Ms Hayes: As I understand the situation, Mr Anderson, Glaptech was to write a software
program for you to incorporate into the website that you’re designing for a ferry
company.
Mr Anderson: That's right. They were supposed to write a program that would allow the
visitor to book passage online, and I was to insert it into the website and deliver the
product to my customer on May 15th.
Ms Hayes: Did they not deliver on time, or did they deliver something that didn’t work?
Mr Anderson: It was on time, but the program they wrote was full of unnecessary code.
Worse than that, it couldn’t book tickets from customers with Macs, only PCs, and
we were really clear in the contract that it had to work for all customers using
modern home computers.
Ms Hayes: Well, ‘modern home computers’ isn’t quite as clear a specification as one
might like, but I can't imagine a jury not finding that both Macs and PCs fall within
that definition. By the way, did you draft the contract yourselves or did you engage
an attorney?
Mr Anderson: We did it ourselves.
Ms Hayes: OK. Were you able to deliver your website on time?
Mr Anderson: Not to the original deadline. The ferry line gave me an extra three weeks
to deliver, but I had to give them a 10% discount and find someone else to clean up
the mess that Glaptech made. Fortunately, I have a cousin in New York who could do
it, but he charged New York prices, and I had to pay him to fix the program that I had
already paid Glaptech to write. I actually lost money on the job. Plus, this is a small
town, and it certainly didn’t do my reputation any good to be late. I just hope that I
don’t lose a customer because of this.
Ms Hayes: Well, if you do lose the customer and they were a long-standing customer
and Glaptech knew it, and if we can prove all of that at trial, you might be able to
recover what are called ‘consequential damages’.
Mr Anderson: OK.
Ms Hayes: I'll get back to that in a second, First of all, they breached the contract by not
delivering'the geods thit you'’® . had ordered, that is to say a program that would
work on both PC and Mac.
Mr Anderson: OK.
Ms Hayes: You were able to fix the problem. Did you get in touch with anyone besides
your cousin, say, another programmer here in town?
Mr Anderson: Nope, I had no time and I wasn't going to mess around.
Ms Hayes: That could be a bit of a problem. You're supposed to mitigate your damages,
which means that you had to make a reasonable effort to solve the problem as
inexpensively as possible. You don't have to get the lowest possible price, but in the
best-case scenario, you would have shopped around at least a little, preferably
locally. If we can't show the court that another programmer would have charged
more or less the same as your cousin and done the same quality work, you'll only be
able to recover what a local programmer would have charged for the work.
Mr Anderson: That's not fair. I really want to make these guys pay. This whole thing
really upset me. I couldn't sleep and I lost a lot of weight from the stress.
Ms Hayes: Well, since this is a contract case, you can't recover for your emotional injury
- you’re only entitled to get what you'd have gotten if the contract had been fulfilled.
In the same way, you can’t get punitive damages - you can't ‘punish’ someone for
not fulfilling a contract, you can only get what is called the ‘benefit of your bargain’.
On the other hand, you may be able to get what I mentioned earlier, consequential
damages, which are damages that flow from the result of the breach of contract. Did
they know what your deadline was?
Mr Anderson: Yes, I told them on the phone a dozen times.
Ms Hayes: Good. There are two items here, assuming that the contract you entered into
with them doesn’t waive consequential damages. I need to look closely at the
contract. If it doesn’t, you should be able to recover the 10% discount that you had
to give the ferry company. We just need to show that they could have foreseen that
you would have to give your customer a discount if the program they designed was
unsatisfactory and had to be fixed, thus forcing you to deliver the goods late. That
shouldn't be hard. As I mentioned before, if you lose the customer, you may be able
to recover damages for that as well. But I have to warn you that proving that they
could have foreseen that you would lose a customer will be extremely difficult. So,
how does this all sound to you?
Mr Anderson: Not as good as I would have liked, but good enough. Where do we go
from here?
Ms Hayes: Let me go through the file and read through the contract. Then I'll prepare
the complaint, which I should be able to file at the end of next week. I’ll be in touch.
Mr Anderson: Great. Thanks for your help.
===