Today and Friday we’re introducing the last of our provisions tied to the funding process. Today we have two: one is the essentially boilerplate provision from venture capital contracts that disclaims any promise by the funder(s) to provide or assist with financing in any way other than per the contract, and one that deals with bringing new funders in, not as replacements but as co-investors. Friday we will introduce our language in response to Mr. Reilly’s suggestion that accelerated investments were not fair if the litigation counsel was the reason funding fell short.
First the provision limiting the funder to its commitments in this contract:
5.8 No Commitment for Additional Financing: The Plaintiff acknowledges and agrees that [no Funder has/the Funder has not] made any representation, undertaking, commitment or agreement to provide or assist the Plaintiff in obtaining any financing, investment or other assistance, other than the investments as set forth herein and subject to the conditions set forth herein. In addition, the Plaintiff acknowledges and agrees that (i) no statements, whether written or oral, made by [any/the] Funder or its representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist the Plaintiff in obtaining any financing or investment, (ii) the Plaintiff shall not rely on any such statement by [any/the] Funder or its representatives and (iii) an obligation, commitment or agreement to provide or assist the Plaintiff in obtaining any financing or investment may only be created by a written agreement, signed by such Funder and the Plaintiff, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement.
Next the limitation on new funders:
5.9 New Funder Participation: Plaintiff can invite other potential funders to participate in any Closing at its sole discretion, provided that existing Funders are allowed to continue participating according to the capital commitment each had already made. Funders can invite additional potential funders to participate in Closings, but the Plaintiff, in its sole discretion, must approve both the new funder’s participation and the size of its investment before the potential funder can participate. For the avoidance of doubt, no Litigation Proceed Rights shall be sold to any person unless such person joins this Agreement.
In one way the provision makes an obvious point; of course Plaintiff need not sell to anyone it does not wish to. These are arms’-length, private transactions. However the provision adds value by making clear the Plaintiff cannot disadvantage existing funders and that existing funders’ consent is not necessary for the Plaintiff to bring in new participants.