Have you been contemplating a merger and/or acquisition? If so, you may want to include “Weinstein Clauses” in the purchase and sale agreements. Such clauses require the target company, and/or its equity owners, to represent that, within a specific time period, no sexual harassment or assault allegations have been made against the company’s officers or senior employees, and that the target company has not entered into any settlement agreements with regard to such behavior.

WHY INCLUDE THEM?

• The direct economic consequences of these claims can be massive, and it is in your best interest to avoid the costs associated with defending, litigating and resolving sexual harassment or assault allegations against your company’s officers or senior employees.
• To protect your company from reputational harm associated with prior sexual harassment or assault allegations engaged in by a target company’s employees.

If you decide to include “Weinstein Clauses” in such agreements, you will likely want to subject a portion of deal proceeds to escrow or holdback, in case representation by the target company is found to be false. Essentially, the “Weinstein Clauses” shift the liability of bad actors from the buyer to the seller.

And just in case you are wondering, “Weinstein Clauses” are named after well known and successful Hollywood producer Harvey Weinstein. In late 2017, he was the subject of a New York Times expose article that detailed decades of sexual harassment, unwanted sexual contact, and other sexual misconduct. It was revealed that Weinstein had entered into settlements with at least eight women and, later, as many as 80 women came forward to accuse Weinstein and various other famous Hollywood stars. Due to this scandal, all of Weinstein’s companies ceased doing business and various business partnerships were severed. This became the start of the #MeToo Movement, which later created the rise of “Weinstein Clauses.”

If you would like more information on this or need assistance in reviewing or drafting “Weinstein Clauses” pertaining to a merger and/or acquisition you are contemplating, please contact attorney Melinda Garcia, Esq., of Garcia & Gurney, ALC at 925-468-0400.

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