lock-up-agreement

# Lock-Up Agreement

Drafts a market-standard lock-up agreement protecting post-offering price stability, aligned with the underwriting agreement. Covers Rule 13d-3 beneficial ownership scope, derivative/hedge prohibitions, permitted transfer conditions, transferee joinders, and underwriter third-party beneficiary rights.

## Prerequisites

Collect before drafting:

1. **Underwriting agreement** — lock-up period, form, release mechanics, representative name
2. **Securityholder details** — name, capacity, entity type, address, beneficial ownership scope
3. **Issuer details** — legal name, jurisdiction, offering type (IPO vs secondary), security class
4. **Equity awards inventory** — options, RSUs, warrants, convertibles, ESPP, other awards
5. **Existing transfer restrictions** — stockholders' agreement, registration rights, ROFR/repurchase

## Document Outline

1. Title, date, addressee (representative of underwriters), parties
2. Recitals — offering context, underwriting agreement reference, consideration
3. Definitions — "Lock-Up Period," "Common Stock," "Beneficial Ownership" (Rule 13d-3)
4. Lock-Up Covenant — transfer and hedging restrictions
5. Lock-Up Period — start/end formula, early release language
6. Extension — earnings/material news blackout extension [VERIFY]
7. Permitted Transfers — categories + conditions
8. Representations and Authority
9. Enforcement — stop-transfer, legends, refusal to register
10. Third-Party Beneficiary (underwriters)
11. Waiver/Release mechanics
12. Governing Law, Venue, Injunctive Relief
13. Miscellaneous — amendments, waivers, counterparts, e-signatures, severability
14. Signature blocks (individual/entity)

## Core Covenant Checklist

- Prohibit direct or indirect offer, sell, pledge, lend, hypothecate, gift, assign, transfer
- Prohibit derivatives/hedges transferring economic exposure (cash or physical settlement)
- Cover beneficially owned securities under Rule 13d-3
- Cover securities issuable on conversion/exercise/vesting
- Apply to shares acquired during the Lock-Up Period

## Key Clauses

**Lock-Up Period:** Begins on agreement date, ends [180] days after final prospectus date, unless earlier released in writing by the Representative.

**Extension (if required):** If the Company issues an earnings release or announces material news during [17] days before through [17] days after the Lock-Up Period end date, extend until [18] days after such release/announcement, unless waived by the Representative. [VERIFY]

## Permitted Transfers

| Category | Scope |
| --- | --- |
| Gifts | Bona fide gifts to family members or 501(c)(3) charities |
| Estate Planning | Trusts for holder/immediate family; will/intestacy; QDRO/divorce |
| Entity Restructuring | Affiliates or entities controlled by holder or same manager/GP/advisor |
| Company Repurchase | Transfers to issuer under repurchase/ROFR agreements |
| Equity Awards | Exercise/vesting/settlement (no sale; shares remain locked) |
| Rule 10b5-1 | Plan establishment with no sales during Lock-Up Period and no public announcement |

**Conditions for all permitted transfers:**
1. Transferee executes joinder lock-up in substantially the same form
2. Section 16(a) report (if required) states transfer was permitted under lock-up
3. No voluntary public disclosure during Lock-Up Period except as required by law

## Representations

- Authority and enforceability (subject to bankruptcy/creditor rights and equity)
- No conflicting agreements or inconsistent proxies/voting arrangements
- Holder acknowledges reliance by issuer and underwriters

## Enforcement and Beneficiary Rights

- Stop-transfer instructions to transfer agent; issuer may refuse noncompliant transfers
- Restrictive legends on certificates or book-entry positions
- Underwriters are intended third-party beneficiaries with direct enforcement rights
- Representative may release all or part; specify pro rata release if required by underwriting agreement or exchange rules

## Pitfalls and Verification

- Align lock-up period, release mechanics, and exceptions with the underwriting agreement first
- Use "final prospectus date" as anchor unless underwriting agreement dictates otherwise
- Ensure permitted transfers keep restrictions attached via joinder
- Flag conflicts with existing transfer or registration rights for resolution
- Mark [VERIFY] on any exchange or regulatory timing rule not specified by underwriting agreement
- Keep governing law/venue consistent with underwriting agreement unless directed otherwise