The Standby Equity Distribution Agreement (SEDA) emerged as a flexible financing tool for public companies seeking alternative ways to access capital markets. It provides an equity line of credit that can be drawn upon as needed, offering advantages over traditional follow-on offerings. This document type is primarily used when companies need to raise capital incrementally while maintaining control over timing and amount. Under U.S. securities laws, these agreements must carefully address registration requirements, disclosure obligations, and trading restrictions. They typically include detailed mechanics for draw-downs, pricing formulas, and conditions precedent to funding.
Standby Equity Distribution Agreement for the United States
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Key Requirements PROMPT example:
Standby Equity Distribution Agreement
"Need a Standby Equity Distribution Agreement for our NASDAQ-listed biotech company to establish a $50 million equity line facility with Goldman Sachs, with quarterly draw-down rights and a 24-month commitment period starting March 1, 2025."
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1. Parties: Identification of the company and the investor(s)
2. Background: Context of the agreement and basic premises
3. Definitions: Key terms used throughout the agreement
4. Commitment: Terms of the equity commitment, including size and duration
5. Draw Down Terms: Procedures and conditions for requesting equity investments
6. Pricing Mechanism: Formula for determining share price for each draw down
7. Conditions Precedent: Conditions that must be met before draws can be made
8. Representations and Warranties: Standard assurances from both parties
9. Covenants: Ongoing obligations of the parties
10. Term and Termination: Duration and termination provisions
1. Registration Rights: Rights to register shares for resale - include when investor requires ability to freely resell shares
2. Placement Agent Provisions: Terms relating to any placement agent involvement - include when a placement agent is involved in the transaction
3. Market Making Provisions: Provisions regarding market making activities - include when party will engage in market making
1. Form of Draw Down Notice: Standard form for requesting draws under the facility
2. Pricing Calculation Examples: Illustrative examples of how pricing mechanism works
3. Disclosure Schedule: Exceptions to representations and warranties
4. Form of Compliance Certificate: Template for periodic compliance certification
5. Required Approvals: List of required regulatory and corporate approvals
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