Common use of Comment Clause in Contracts

Comment. The no-breach-or-default opinions given in paragraph three are discussed in Section 15 of the Accord and the related Commentary. This opinion is designed to be limited to breaches or defaults related to performance of the Agreement through the closing when the Opinion Letter is delivered. Some buyers may seek to broaden the opinion to include required post-closing performance, inwhich event the Opinion should cover ‘‘execution, delivery and performance ’’ The most troublesome aspect of these opinions is identification of the agreements and commitments described in paragraph 3(b) of the opinion. It is not unusual, at least in the case of opinions not covered by the Accord, for the buyer to request that the opinion cover ‘‘any agreement or commitment known to us to which Seller is a party or by which its property or assets is bound.’’ Use of ‘‘known to us’’ introduces the uncertainties inherent in a knowledge standard and may result in an overly broad reference. The Accord and the model form of Accord opinion take a different approach and favor identifying the agreements and commitments to which this opinion is to apply (e.g., a list of agreements, a schedule to the acquisition agreement or a list of exhibits to an SEC filing). The opining lawyer should then review the agreements and com- mitments listed and give the opinion based upon that review. It is inappropriate to define the selection criteria for this Opinion in terms of the ultimate conclusion to be reached by the opining lawyer (e.g., all agreements and commitments that prohibit a change of control of the seller). This approach of utilizing a specific list requires that the parties define the agreements or commitments in a way that satisfies the buyer’s legitimate interest in having company counsel review those agreements and commit- ments likely to present significant issues while simultaneously limiting the scope of that review to one that is feasible and does not involve disproportionate cost in the context of the transaction. Counsel should take care in agreeing to opine to a very detailed list of insignificant agreements; the failure to obtain a consent to one immaterial agreement does not create an unintended failure of a condition to closing. If consummation of the acqui- sition would result in a default under one of the agreements covered in paragraph 3(b) of the opinion letter, company counsel could not deliver the opinion letter in the form required. Although the default would also constitute an inaccuracy in the represen- tation and warranty in Section 3.20 of the Model Asset Purchase Agreement, that inaccuracy would not necessarily cause the condition in Section 7.3 of the Model Asset Purchase Agreement to fail to be satisfied if consent to the particular agreement was not a ‘‘Material Consent’’ listed on Exhibit 7.3. If by reason of that same default company counsel could not deliver the opinion letter in the form required by Section 7.4(a), however, that condition to Buyer’s obligation to close would not be satisfied. the opinion letter).’’ In an asset sale, this opinion is customarily given by company counsel only with respect to the selling company and not with respect to shareholders of the company, even though they may be parties to the agreement. In many instances counsel to the company will not be counsel to the individual shareholders and the agreements are fundamentally performed by the company as seller of the assets, with the shareholders joining the agreement principally to join in the indemnifications.

Comment. The no-breach-or-default opinions given in See the second paragraph three are discussed in Section 15 of the Comment to paragraph 3 of the Accord and the related Commentary. This Opinion as to requests by Buyer’s counsel that this opinion is designed to be limited to breaches or defaults related to include performance of the Agreement through the closing when the Opinion Letter is deliveredagree- ment. Some buyers may seek to broaden the opinion to include required post-closing performance, inwhich event the Opinion should cover ‘‘execution, delivery and performance ’’ The most troublesome aspect of these opinions is identification of the agreements and commitments described in paragraph 3(b) of the opinion. It is not unusual, at least in the case of opinions not covered by the Accord, unusual for the buyer seller’s counsel to request that limit the opinion to cover only ‘‘any agreement or commitment known to us to which Seller is a party or by which any of its property or assets is are bound.’’ Use of ‘‘known to us,’’ however, introduces the uncertainties inherent in a knowledge standard xxxx- dard and may result in an overly broad reference. The Accord and In order to avoid confusion, the model form of Accord opinion take a different approach and favor contemplates identifying the agreements agree- ments and commitments to which this opinion is to apply (e.g., a list of agreements, a agreements or schedule to the acquisition agreement Agreement or a list of exhibits to an SEC filing). The opining lawyer should then review the agreements and com- mitments commitments listed on the certificate and give the opinion based upon that review. It is inappropriate to define the selection criteria for this Opinion in terms of the ultimate conclusion to be reached by the opining lawyer (e.g., all agreements and commitments that prohibit a change of control of the seller). This approach of utilizing a specific list requires that the parties define the agreements or commitments selection criteria in a way that satisfies the buyer’s legitimate interest in having company the seller’s counsel review those agreements and commit- ments commitments of the seller likely to present significant issues while simultaneously limiting the scope of that review to one that is feasible and does not involve disproportionate cost in the context of the transaction. Counsel should take care in agreeing to opine to a very detailed list of insignificant immaterial agreements; the failure to obtain a consent to one immaterial agreement does not create an unintended failure of a condition to closing if counsel cannot deliver the opinion letter exactly as provided in the Exhibit. Counsel should also take care in agreeing to opine to a very detailed list of insig- nificant agreements that the failure to obtain a consent to one immaterial agreement does not create an unintended failure of a condition to closing. If consummation of the acqui- sition acquisition would result in a default under one of the agreements covered in paragraph par- agraph 3(b) of the opinion letter, company counsel could not deliver the opinion letter in the form required. Although the default would also constitute an inaccuracy in the represen- tation representation and warranty in Section 3.20 of the Model Asset Purchase Agreement, that inaccuracy would not necessarily cause the condition in Section 7.3 of the Model Asset Purchase Agreement to fail to be satisfied if consent to the particular agreement was not a ‘‘Material Consent’’ listed on Exhibit 7.3. If If, by reason of that same default company counsel could not deliver the opinion letter in the form required by Section 7.4(a), however, that condition to Buyer’s obligation to close would not be satisfied. Companies typically are parties to agreements controlled by the laws of a variety of states not covered by the Opinion Letter. In giving the no-breach-or-default opinion above, TriBar II would permit the opining lawyer ‘‘to assume, without so stating in the opinion letter, that those contracts would be interpreted in accordance with their plain meaning (unless the . . . [opining lawyer] identif(ies) a possible problem, in which event they may want to obtain an opinion from local counsel).’’ Further, ‘‘[i]n the case of technical terms, their meaning would be what lawyers generally understand them to mean in the jurisdiction (or principal jurisdiction if more than one) whose law is specified for coverage in the opinion letter).’’ In an asset sale, this opinion is customarily given by company counsel only with respect to See the selling company and not with respect to shareholders last paragraph of the company, even though they may be parties Comment to the agreement. In many instances counsel to the company will not be counsel to the individual shareholders and the agreements are fundamentally performed by the company as seller paragraph 3 of the assets, with the shareholders joining the agreement principally to join in the indemnificationsAccord Opinion.