Fill and Sign the Legal Opinion Backup Form

5.10[4] Legal Opinion BackupMEMORANDUM Note: The following Backup Memorandum presupposes the existence of a "baseline" model legal opinion. If one does not exist, references should be adjusted accordingly. TO: Opinion Committee FROM: John Smith RE: Backup of Legal Opinion for XYZ Corporation in connection with the First Round Financing DATE:___________________________ Instructions: All brackets and footnotes should be omitted and all blanks completed. Other Persons Signing the Opinion, Actively Involved in the Transaction, or Other Lawyers Consulted: Name Initials Approved: This memorandum sets forth the basis for each opinion expressed in the opinion letter. It does not purport to describe in detail either all aspects of our due diligence investigation or the particular provisions of all laws and regulations applicable to the transaction. All capitalized terms used herein and not otherwise defined have the meanings assigned to them in the opinion letter. Name of corporation covered by the following procedures: Agreement covered by the following procedures: 1. Corporate Status Opinions A. Corporate ExistenceAlternative 13 Corporate Existence The language in paragraph of the opinion letter: ฀ conforms ฀ does not conform to the Model Opinion. ฀ No corporate existence opinion is being given. This due diligence supports other opinions described below. ฀ Jurisdiction of incorporation is ______________, which is within Included Laws as defined in the opinion letter. ฀ Yes ฀ No, explain: ฀ Obtain long form [certificate] [articles] of incorporation ("charter") from Secretary of State showing the initial charter and all amendments and attach copy to this memorandum. The date of the long form charter: __________ [insert date] ฀ Evidence of certificate from Secretary of State as proof of incorporation under statute: ฀ Prima facie ฀ Conclusive ฀ Citation to statute ฀ Date of certificate: _____________ [insert date] ฀ Date of closing: ________________ [in sert date] Are "bring down" certificates or telephone calls planned for day of closing? ฀ Yes ฀ No, because opinion paragraph __ contains an appropriate assumption or exception. ฀ No, because [specify reason] . ฀ Describe any other additi onal procedures performed. Alternative 2 Due Incorporation The language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Did _________ form the Company using the model incorporation documents and, if so, when? ฀ Yes, date __________, attorneys involved ฀ No ฀ Performed full corporate check. ฀ Reviewed corporate records of the Company to ensure that corporate records are consistent with the requirements of incorporating under corporate statute as in effect on date of incorporation. Were any errors committed by the Company in the incorporation process? ฀ No. ฀ Yes. Explain the errors and correction action taken: ฀ Confirmed that no proceedings for dissolution or me rger have commenced and that no resolutions have been adopted with respect to dissolution or merger. ฀ Officer's certificate ฀ Good Standing certificate ฀ Obtained certificates of Company officers attesting to the authenticity and completeness of the resolutions and confirming that no resolutions have been adopted with respect to charter or by-law amendments relating to a merger or dissolution. Typically there will be a closing certificate to this effect, and at the pre-closing, verification that the by- laws and resolutions attached to the closing certificate are the same as the ones examined earlier during due diligence.฀ Confirmed that the Company has filed all required annual reports with the State by obtaining a good standing or other certificate from appropriate State official and attached a copy to this memorandum or, if such a certificate is not issued by any State official, obtained a certificate from the Company. ฀ Confirmed that the Company is not delinquent in paying its taxes by obtaining a good standing certificate or tax certificate from appropriate State official and attached a copy to this memorandum or, if such a certificate is not issued by any State official, obtained a certificate from the Company. ฀ Are "bring down" cert ificates or telephone calls planned for day of closing? ฀ Yes ฀ No, because opinion paragraph ___ contains an appropriate assumption or exception ฀ No, because [specify reason] _______________________ ฀ Verified that charter has no time limit that has expired. Alternative 3 Due Organization The language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Performed full corporate check. ฀ Reviewed corporate records of the Company t o ensure that corporate records are consistent with the requirements of incorporating under corporate statute as in effect on date of incorporation. ฀ Identified and corrected any errors committed by the Company in the incorporation process. ฀ Confirmed that no proceedings for dissolution or merger have commenced. ฀ Obtained certificates of Company officers attesting to the authenticity and completeness of the minute books and confirming that no resolutions have been adopted with respect to charter or by-law amendments relating to a merger or dissolution. Typically there will be a closing certificate to this effect, and at the pre-closing, verification that the by- laws and resolutions attached to the closing certificate are the same as the ones examined earlier during due diligence. ฀ Confirmed that the Company has filed all required annual reports with the State by obtaining a good standing or other certificate from appropriate State official and attached a copy to this memorandum or, if such a certificate is not issued by any State official, obtained a certificate from the Company.฀ Verified that charter has no time limit that has expired. ฀ Reviewed minutes to determine that the Company has taken the following actions in compliance with applicable State law as in effect at the time of the action and in conformity with the Company's by-laws in effect at the time of the action. ฀ Elected directors (if not done in the articles or certificate of incorporation) ฀ Appointed officers ฀ Ratified actions of incorporator, if required by statute ฀ Adopted by -laws ฀ Adopted a corporate seal, if required by statute ฀ Issued stock, if required by statute in order to transact business ฀ If the due organization opinion is to be tendere d, discuss and document with the receiving party's counsel that this opinion also covers the following additional procedures. ฀ Verified that the incorporator(s) have adopted a resolution in conformity with applicable corporate law appointing directors and taking such other steps as permitted. ฀ Verified that the board of directors adopted resolutions taking the required organizational steps. ฀ Verified the issuance of stock. See below. ฀ The following procedures must be performed for all altern atives: B. Good Standing in State of Incorporation The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Opinion. ฀ No opinion on good standing in state of incorporation is being given. This due diligence supports other opinions described below. ฀ Confirmed that the Company has filed all required annual reports with the State by obtaining a good standing or other certificate from appropriate State official and attached a copy to this memorandum or, if such a certificate is not issued by any State official, obtained a certificate from the Company. ฀ Confirmed that the Company is not delinquent in paying its taxes by obtaining a good standing certificate or tax certificate from appropriate State official and attach a copy to this memorandum or, if such a certificate is not issued by any State official, obtained a certificate from the Company. ฀ Ordered and will obtain "bring down" faxes of (or confirm by telephone) the facts to be reflected in all certificates from the State, if available, if Partner signing the Opinion or Opinion Review Partner believes this is necessary. C. Corporate PowerThe language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Opi nion. ฀ No opinion corporate power is being given. This due diligence supports other opinions described below. ฀ Reviewed State law and certificate of incorporation to determine whether the Company has sufficient corporate power to engage in the Transaction. ฀ If the Transaction involves the giving of a guarantee by the Company, verified that the statutory powers granted in the general corporate law provide power to give such guarantees: ฀ Statutory authority reviewed: ฀ California ______ ฀ DGCL ¤ 122(13) ฀ New York _____ ฀ Texas Art. 1302-2.06 ฀ Other (specify) ______ ฀ Verified that Board approval contains the phrases and language required by the applicable statute. Is the Company subject to any special corporate statute, such as for banks, insurance companies, etc., that might have statutory limits on corporate power? ฀ No ฀ Yes, [insert explanation]: D. Foreign Qualifications The language in paragraph __ of the opinion letter:฀ conforms ฀ does not confor m to the Model Opinion. ฀ No opinion on foreign qualification is being given. This due diligence supports other opinions described below. ฀ Identified, with assistance of the Company, where the Company owns or leases real property or has material operations and obtained a certificate from the Company about same. ฀ Obtained certificates of qualification from those jurisdictions and attached those certificates to this memorandum. ฀ If the Company is not qualified in a particular jurisdiction, reviewed State law to determine if qualification is necessary, discussed with the Company and obtained the qualification. E. General ฀ Identified any missing corporate records that are needed in order to give these opinions: ________________________ and prepared corrective actions. 2. Authorization, Execution and Delivery Opinion A. Authorization, Execution and DeliveryThe language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ No explic it opinion on authorization, execution and delivery being given. This due diligence supports other opinions mentioned below. This opinion paragraph relates to:฀ The Agreement; ฀ The Transaction Documents; ฀ Other agreements: [insert list] ฀ Have rendered opinion as to (or opinion letter paragraph ___ assumes) corporate status and power; if not, perform backup procedures listed thereunder. ฀ Determined what approvals are required (check as appropriate):฀ Board of directors; ฀ Share holders; ฀ Other (identified): ฀ Documents reviewed to determine required approvals (check as appropriate): ฀ Charter; ฀ By-laws; ฀ State corporation law; ฀ Board resolutions; ฀ Reviewed all required approvals; ฀ Listing requiremen ts of any market in which the Company's securities are traded, e.g., NYSE or Nasdaq (identified): ฀ Agreement and other Transaction Documents (describe requirements):_______________________________________________________________________ ฀ Required approvals were obtained using proper procedures. ฀ The Agreement and the Transaction are within the scope of the approvals of the Board and the Shareholders, e.g., if Board approved a draft or form of agreement, any changes are within the authority granted to officers. ฀ Verified that Board approval contains the phrases and language required by any applicable statute or agreement. ฀ Officer authorized in the board resolution authorizing the Transaction and the Agreement has signed the Agreement. Authorization done by name of individual or by title. ฀ Incumbency certificate or resolution or certificate properly identifies the individual signing the Agreement as being the officer with the title authorized in the resolution. ฀ Case law suppo rts that officer signing the Agreement has ex officio authority to sign the Agreement in the event that the resolution does not name an individual or an officer. Provide case authority. ฀ Observed physical delivery and authorized release of Agreement by the parties with intention to create a contract. Indicate name of attorney who will be attending the closing or signing and observing the delivery: B. Enforceability OpinionThe language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ No opinion on enforceability is being given. This due diligence supports other opinions mentioned elsewhere. This opinion relates to: ฀ The Agreement; ฀ The Transaction Documents ฀ Other Agreements: [in sert list] ___________________ ฀ Performed "Corporate Existence" due diligence. ฀ Performed "Corporate Power" due diligence. ฀ Performed "Authorization, Execution and Delivery" due diligence. ฀ The requirements for the formation of a contract u nder the law of the State governing the Agreement have been met: ฀ Requirements as to form have been met, e.g., Del. Corp. Code, ¤166 requires stock purchase agreements to be in writing; some statutes require notarization or corporate seals; ฀ Agreement is not so vague or incomplete as to be rendered void; ฀ Agreement is not in preliminary form and the parties to it intend to be bound by it; ฀ Consideration requirements are met, i.e. no illusory promises such as revocation at one party's discretion; ฀ Agreement is not contrary to public policy, e.g., gambling, usurious, unreasonable restrictions on stock transfer, in California, indemnification for the indemnified's negligence; ฀ If Agreement has been in effect prior to the date of the opin ion, e.g., a subsequent takedown under a credit facility, confirmed the validity of any waivers, amendments or supplements to the Agreement as originally in effect. ฀ Verified with counsel that this opinion does not cover the following topics (if relevant), such laws should be covered in a separate opinion, if desired:฀ The Federal Reserve Board margin requirements; ฀ The fiduciary obligations of directors; ฀ Federal and state tax laws; ฀ Federal and state antitrust laws; ฀ Exon-Florio amendment to the Defense Production Act of 1962; ฀ The Investment Company Act of 1940; ฀ Federal and state securities laws; ฀ Expressly take an exception or confirmed the enforceability (if requested by the Opinion Review Partner, attach memorandum analyzing enforceability under applicable law) of any of the following provisions in the Agreement: ฀ Arbitration provision; ฀ Indemnification; ฀ Choice of law;฀ Set-off provisions; ฀ No -shop; ฀ Lock -ups; ฀ Non -competition; ฀ Restr ictions on voting rights; ฀ Liquidated damages; ฀ Waiver of right to a jury trial; ฀ Disclaimer of warranties; ฀ Provisions concerning the handling of disputes; ฀ Choice of forum and consent to service; ฀ Loan acceleration clauses; ฀ D ue on demand clauses; ฀ Provisions concerning right of secured creditor to take and sell collateral; ฀ Financial covenants, to the extent not merely a trigger for a default; ฀ Guarantees ฀ Keep-well provisions; ฀ Oral modifications to agreem ent. ฀ Governing law jurisdiction chosen by the Agreement or Transaction Documents: . ฀ Is his jurisdiction within the Included Laws as defined in the opinion letter? ฀ Yes ฀ No, but opinion letter paragraph __ explicitly deals with this issue. ฀ No, explain: ฀ Is the choice of law clause expressly limited to substantive law and does it exclude the choice of law provisions of the selected jurisdiction? ฀ Yes฀ No ฀ If no, if requested by the Opinion Review Partner, attach a memorandum analyzing what jurisdiction's substantive laws would apply to the Agreement after the application of the choice of law provisions of the selected jurisdiction. Indicate the jurisdiction whose laws were used in analyzing whether the Agreement is legal, valid, binding and enforceable: . ฀ Is the Company already in bankruptcy, or do we have reason to believe that bankruptcy or insolvency is imminent? ฀ No ฀ Yes, but opinion letter paragraph _____ explicitly addresses this issue. 3. No Violation of Law Opinion The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ No opinion on violation of law is being given. This due diligence supports other opinions mentioned elsewhere. This paragraph relates to: ฀ The Agreement; ฀ The Transaction Documents; ฀ Other Agreements: [insert list] ____________________ ฀ Discussed with in -house counsel and the Company's regular counsel, which laws and regulations apply to the Company and are covered by this opinion. ฀ Identified the following specific laws and regulations that are covered by the opinion [list below]: ฀ Identified the obligations the Company is incurring by entering into the Agreement. ฀ Verified that the A greement and the obligations thereunder do not violate (are not prohibited by) these laws and regulations 4. No Violation of Judgments Opinion The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal O pinion. ฀ No opinion on violation of judgments is being given. This due diligence supports other opinions mentioned elsewhere. This paragraph relates to: ฀ The Agreement; ฀ The Transaction Documents; ฀ Other Agreements: [insert list] _________ __________ ฀ Identified applicable orders and attached list to backup memorandum or opinion letter. ฀ Identified the obligations the Company is incurring by entering into the Agreement. ฀ Obtained Officer's Certificate listing applicable orders o r verifying that none exist. ฀ Verified that the Agreement and the obligations thereunder do not violate (are not prohibited by) these laws and regulations. 5. No Violation of Charter or Agreements Opinion The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ No opinion on violation of judgments is being given. This due diligence supports other opinions mentioned elsewhere. This paragraph relates to: ฀ The Agreement;฀ The Transaction Documents; ฀ Other Agreements: [insert list] ___________________ ฀ Verified that opinions concerning corporate status, power and authority are being given and the backup for those opinions have been completed. ฀ Schedule of agreements and instruments has been reviewed and agreed to by the Company and the party receiving the opinion and their counsel. ฀ Obtained certificate from the Company as to completeness of reviewed agreements and instruments. ฀ Analyzed the covenants in all the reviewed agreements and instruments and compared with the Agreement or Transaction Documents. Note especially covenants relating to assignability, confidentiality, allowing financial advisors rights of first refusal on other transactions, maintaining inventory at a certain location and change of control provisions, incurrence of debt, incurrence of liens and incurrence of other agreements that contain negative covenants. ฀ Obtained compliance certificates from the Company. ฀ Obtained certificate as to compliance with any financial covenants. 6. Government Approvals Opinion The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ No opinion on violation of judgments is being given. Thi s due diligence supports other opinions mentioned elsewhere. This paragraph relates to: ฀ The Agreement; ฀ The Transaction Documents; ฀ Other Agreements: [insert list] ___________________ ฀ Discussed with in -house counsel and the Company's regular counsel which laws and regulations apply to the Company and are covered by this opinion. ฀ Identified the following laws and regulations that are covered by the opinion [list below]: _____________________________________________________ ฀ Identified the obligations the Company is incurring by entering into the Agreement. ฀ Identified all permits, consents, notices and applications that are required to be filed and listed below (insert list): ฀ Verified that all permits, consents, not ices and applications have been obtained and that all waiting periods or periods for appeal have expired, except as listed below (insert list): ฀ Verified that the Agreement does not violate (is not prohibited by) these laws and regulations. 7. Capital Stock Opinions A. Opinion on number of shares authorized The language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Performed all the procedures set forth below with respect to due authorization of the shares since the initial formation of the Company. B. Opinion on number of shares outstanding The language in paragraph __ of the opinion letter: ฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Performed all the procedures set forth below with respect to valid issuance since the initial formation of the Company. C. Opinion of Due Authorization of Specific Shares The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Mo del Legal Opinion. ฀ Corporate status opinion is being given or the necessary backup procedures have been performed. ฀ Verified that the Shares do not have any terms that are not allowed by the applicable State corporation statute, the charter and by-laws (e.g., N.Y. Bus Corp ¤¤ 512(b) and 519(a)(1) limit redemption and conversion provisions; the case law of many jurisdictions requires that all shares in the same class of stock have identical provisions; some statutes prohibit cumulative voting and some mandate it); these issues are especially important when opining on shares designed as takeover defenses, such as stock issuable under a shareholder rights plan or preferred stock. ฀ Confirmed that initial capitalization set forth in the charter complied with the corporation statute in effect at the time it was filed and that the charter was properly approved and filed. See corporate status opinion. ฀ Confirmed that all amendments to the charter relating to capitalization were properly approved and filed. See corporate status opinion. ฀ If the creation of a new class of stock required the approval of holders of another class of stock, confirmed that such approval was properly obtained. ฀ Describe any defects in these approvals : ฀ Verified that description of the terms of the Shares in the charter conforms to the requirements of the applicable corporation statute. ฀ Verified that a sufficient number of shares are (were) available for the issuance on the date of the issuance: ฀ Obtained a certificate from the Company that replacement stock certificates were issued only because the original certificates were lost or destroyed. ฀ Verified that there were no known previously invalid issuances. If there were any, describe the circumstances: . ฀ Verified that any shares acquired by the Company are treated as issued unless the proper statutory steps have been taken to restore those shares to the status of authorized but unissued shares and that the applicable statutory requirements were followed for the purchase of the shares by the Company. ฀ Obtained a certificate from the transfer agent (or inspected stock ledger) to determine the number of shares issued and outstanding. ฀ Reviewed the audited financial statements of the Compan y to confirm the above actions. D. Opinion on Valid Issuance The language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Indicate whether you are relying on the long form certificate from the Secretary of State providing every charter document filed by the Company; if not you must analyze due authorization pursuant to the applicable statutory provision in effect at the time of each amendment. ฀ Yes฀ No ฀ Verified that number of sh ares issued equals or is less than the number of shares authorized. ฀ Determined the number of shares reserved for issuance or otherwise committed for issuance pursuant to board resolution, issuance of convertible securities, exercise of options, etc. and treated as outstanding for purposes of this computation. ฀ Prepared a spreadsheet tracing the number of shares authorized and issued (direct issues, conversions, exercises of options and warrants). ฀ Reviewed charter, by -laws, applicable corporate statute to determine any requirements regarding the following and verified compliance with those requirements:฀ Approval by directors ฀ Approval by shareholders ฀ Form of certificate ฀ Required signatures or facsimile signatures on certificat e ฀ Corporate seal or facsimile seal on certificate ฀ Terms that the directors are required to specify, especially for preferred stock ฀ Additional procedures with respect to blank check preferred stock ฀ Verified that all shares of stock purpo rtedly issued were delivered in certificated form and recorded on the stock ledger or were delivered in uncertificated form and properly recorded. See Article 8 of the Uniform Commercial Code. ฀ Confirmed that the number of authorized and unissued share s exceeds the number of shares being issued in the Transaction. E. Opinion on Fully Paid and Non-assessableThe language in paragraph __ of the opinion letter:฀ conforms ฀ does not conform to the Model Legal Opinion. ฀ Reviewed applicable corporate law, charter and by-laws to determine required minimum payment and type of consideration ฀ Verified that Agreement complied with requirements as to amount and type of consideration. ฀ If non-cash consideration is to be received, reviewed Board resolution determining the value assigned to the consideration for compliance with applicable corporate statute and conflict of interest statute, if appropriate. ฀ Verified receipt of consideration by an officer's certificate. ฀ If shares are bei ng issued as a stock dividend or in a stock split, verified compliance with applicable statutory provisions, including exchange requirements. 8. No Litigation Confirmation Paragraph The language in the opinion letter:฀ conforms ฀ does not confo rm to the Model Legal Opinion. ฀ Checked records of Managing Clerk in the office rendering the opinion letter. ฀ Consulted with partner in charge of client and other partners or lawyers who regularly work on client's matters or are involved in the Transaction [insert list of names]: _____. ฀ Reviewed letters _________ has sent to the Company's auditors in the past. ฀ Checked billing records. ฀ Reviewed notes to financial statements for discussion of litigation (if Transaction is an acquisition, determine whether Target's disclosures are relevant). ฀ Obtained Officer's Certificate as to litigation. ฀ Reviewed Transaction Documents and any related schedules for litigation disclosures. ฀ Reviewed recent agreements, related schedules and disclosure documents for litigation disclosures.