Common use of Comment Clause in Contracts

Comment. See the second paragraph of the Comment to paragraph 3 of the Accord Opinion as to requests by Buyer’s counsel that this opinion include performance of the agree- ment. 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 for the seller’s counsel to 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 assets are bound.’’ Use of ‘‘known to us,’’ however, introduces the uncertainties inherent in a knowledge xxxx- dard and may result in an overly broad reference. In order to avoid confusion, the form of opinion contemplates identifying the agree- ments and commitments to which this opinion is to apply (e.g., a list of agreements or schedule to the Agreement or a list of exhibits to an SEC filing). The opining lawyer should then review the agreements and commitments listed on the certificate and give the opinion based upon that review. This approach of utilizing a specific list requires that the parties define the selection criteria in a way that satisfies the buyer’s legitimate interest in having the seller’s counsel review those agreements and 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 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 acquisition would result in a default under one of the agreements covered in 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 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, 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).’’ See the last paragraph of the Comment to paragraph 3 of the Accord Opinion.

Comment. See the second The no-breach-or-default opinions given in paragraph of the Comment to paragraph 3 three are discussed in Section 15 of the Accord Opinion as and the related Commentary. This opinion is designed to requests by Buyer’s counsel that this opinion include be limited to breaches or defaults related to performance of the agree- mentAgreement 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 unusual, at least in the case of opinions not covered by the Accord, for the seller’s counsel buyer to limit request that 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 are is bound.’’ Use of ‘‘known to us,’’ however, introduces the uncertainties inherent in a knowledge xxxx- dard standard and may result in an overly broad reference. In order to avoid confusion, The Accord and the model form of Accord opinion contemplates take a different approach and favor identifying the agree- ments agreements and commitments to which this opinion is to apply (e.g., a list of agreements or agreements, a schedule to the Agreement acquisition agreement or a list of exhibits to an SEC filing). The opining lawyer should then review the agreements and commitments com- mitments 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 selection criteria agreements or commitments in a way that satisfies the buyer’s legitimate interest in having the seller’s company counsel review those agreements and commitments of the seller 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 immaterial insignificant 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 acquisition acqui- sition would result in a default under one of the agreements covered in par- agraph 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 representation 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, 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).’’ See In an asset sale, this opinion is customarily given by company counsel only with respect to the last paragraph selling company and not with respect to shareholders of the Comment company, even though they may be parties to paragraph 3 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 Accord Opinionassets, with the shareholders joining the agreement principally to join in the indemnifications.