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

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