fulfillment, on or before such Closing, of each of the following conditions, unless otherwise waived:
4.1 Representations and Warranties. The representations and warranties of the Company contained in Section 2 [and the representations and warranties of the Founders in Section _] shall be true and correct in all respects as of such Closing.
4.2 Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before such Closing.
4.3 Compliance Certificate. The President of the Company shall deliver to the Purchasers at such Closing a certificate certifying that the conditions specified in Subsections 4.1 and 4.2 have been fulfilled. 4.4 Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of such Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from [___________], counsel for the Company, an opinion, dated as of the Initial Closing, in substantially the form of Exhibit I attached to this Agreement.
4.6 Board of Directors. As of the Initial Closing, the authorized size of the
Board shall be [______], and the Board shall be comprised of [_________________].49
4.7 Indemnification Agreement. The Company shall have executed and
delivered the Indemnification Agreements.
4.8 Investors’ Rights Agreement. The Company and each Purchaser (other
than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder) [and the other stockholders of the Company named as parties thereto] shall have executed and delivered the Investors’ Rights Agreement.
4.9 Right of First Refusal and Co-Sale Agreement. The Company, each
Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder), and the other stockholders of the Company named as parties thereto shall have executed and delivered the Right of First Refusal and Co-Sale Agreement.
4.10 Voting Agreement. The Company, each Purchaser (other than the
Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder), and If this section is used, the Company must take the actions necessary to elect the agreed-upon
Board of Directors.
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the other stockholders of the Company named as parties thereto shall have executed and delivered the Voting Agreement.
4.11 Restated Certificate. The Company shall have filed the Restated
Certificate with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.
4.12 Secretary’s Certificate. The Secretary of the Company shall have
delivered to the Purchasers at the Closing a certificate certifying (i) the Bylaws of the Company, (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements, and (iii) resolutions of the stockholders of the Company approving the Restated Certificate.
4.13 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser, and each Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates. 4.14 Minimum Number of Shares at Initial Closing. A minimum of
[_________] Shares must be sold at the Initial Closing.50
4.15 Management Rights.51 A Management Rights Letter shall have been
executed by the Company and delivered to each Purchaser to whom it is addressed.
4.16 [SBA Matters. The Company shall have executed and delivered to each SBIC Purchaser a Size Status Declaration on SBA Form 280 and an Assurance of Compliance on SBA Form 652, and shall have provided to each such Purchaser information necessary for the preparation of a Portfolio Financing Report on SBA Form 1031.]
4.17 [Preemptive Rights. The Company shall have fully satisfied (including
with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its securities.52]
5. Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchasers at the Initial Closing [or any subsequent Closing] are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:
50
Sometimes the term sheet will specify that a minimum number of Shares must be sold at the Initial See explanatory commentary in introduction to model Management Rights Letter.
Usually only necessary at a later round of financing, when there are existing preemptive rights
Closing.
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holders.
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5.1 Representations and Warranties. The representations and warranties of
each Purchaser contained in Section 3 shall be true and correct in all respects as of such Closing. 5.2 Performance. The Purchasers shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by them on or before such Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.
5.4 Investors’ Rights Agreement. Each Purchaser shall have executed and
delivered the Investors’ Rights Agreement.
5.5 Right of First Refusal and Co-Sale Agreement. Each Purchaser and the
other stockholders of the Company named as parties thereto shall have executed and delivered the Right of First Refusal and Co-Sale Agreement.
5.6 Voting Agreement. Each Purchaser and the other stockholders of the
Company named as parties thereto shall have executed and delivered the Voting Agreement. 5.7 [Minimum Number of Shares at Initial Closing. A minimum of [_______] Shares must be sold at the Initial Closing.]
6.
Miscellaneous. 6.1 Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company[, the Founders] and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchasers or the Company.53
6.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
53
Sometimes a limited survival period is negotiated.
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6.3 Governing Law. This Agreement shall be governed by the internal law of [the State of Delaware].54
6.4 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. 6.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or interpreting this Agreement.
6.6 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Subsection 6.6. If notice is given to the Company, a copy shall also be sent to [Company Counsel Name and Address] and if notice is given to the Purchasers, a copy shall also be given to [Purchaser Counsel Name and Address].
6.7 No Finder’s Fees.55 Each party represents that it neither is nor will be
obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees or representatives is responsible. The Company Some practitioners may select Delaware law as it has historically been the richest source for
corporation law precedent. Other practitioners will prefer to choose the (non-Delaware) jurisdiction in which they are admitted to practice, if for no other reason than not having to retain Delaware counsel in the event they are called upon to give an enforceability opinion. In Abry Partners V v. F&W Acquisition LLC, Case No. C.A. 1756-N (Del Ch. Ct. Feb. 14, 2006), the Delaware Chancery Court stated that it would respect a Delaware choice of law provision so long as Delaware law has a material relationship to the transaction – which will very often be the case in venture financings (e.g., parties are Delaware corporation, LLPs, or LLCs). However, it should be noted that if an action is brought in a jurisdiction other than the state whose governing law has been selected, that jurisdiction will apply its own choice of law principles in deciding whether or not to give effect to the governing law selected by the parties. Further, under the internal affairs doctrine of the state whose law is chosen to govern the agreement, whether or not the parties so provide, the DGCL will apply to certain provisions (e.g., voting of shares of stock).
55 This provision may need to be modified to fit the facts of a particular transaction.
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agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
6.8 Fees and Expenses. At the Closing, the Company shall pay the reasonable fees and expenses of [_______], the counsel for [name of lead Purchaser56], in an amount not to exceed, in the aggregate, $[________].
6.9 [Attorneys’ Fees. If any action at law or in equity (including, arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.]
6.10 Amendments and Waivers.57 Except as set forth in Subsection 1.3 of this
Agreement, any term of this Agreement may be amended, terminated or waived only with the written consent of the Company, and (i) the holders of at least [specify percentage] of the then-outstanding Shares, or (ii) for an amendment, termination or waiver effected prior to the Initial Closing, Purchasers obligated to purchase [specify percentage] of the Shares to be issued at the Initial Closing. Any amendment or waiver effected in accordance with this Subsection 6.10 shall be binding upon the Purchasers and each transferee of the Shares (or the Common Stock issuable upon conversion thereof), each future holder of all such securities, and the Company.
6.11 Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
6.12 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, Typically, only the lead Purchaser is actually represented by counsel, with the other Purchasers
relying on the lead Purchaser having conducted due diligence and hired legal counsel. Occasionally, counsel will represent the Purchasers as a group, or one or more of the other Purchasers will have separate counsel, in which case this provision will need to be tailored accordingly.
57 This provision may need to be tailored if there are to be Milestone Closings to permit or prevent,
as appropriate, a majority from waiving or changing the agreed-upon milestones and related conditions. In addition, if Founder’s representations are included, this provision may need to give the Founder protection against adverse amendments.
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