ATM Equity Distribution Agreement

ATM Equity Distribution Agreement

Generates an Equity Distribution Agreement for an ATM offering program compliant with Rule 415(a)(4), Regulation M, and applicable exchange listing rules.

Prerequisites

Collect before drafting:

1. Issuer — legal name, state of incorporation, principal office
2. Registration statement — Form S-3 file number, effective date, maximum aggregate offering amount
3. Securities — class, par value, proposed ATM program maximum (must not exceed shelf availability)
4. Agent(s) — legal name(s), FINRA registration status, commission rate (market: 2–3%)
5. Exchange — principal listing market (NYSE/Nasdaq); 20%-cap shareholder approval status
6. Existing arrangements — prior ATM agreements, lock-ups, co-manager arrangements

Document Structure

Sale Mechanics

Placement Notice — Issuer delivers written notice specifying max shares, floor price, and sales period. Agent sells on commercially reasonable efforts basis and provides daily confirmations (shares sold, gross/net proceeds, VWAP).

Volume Limits — Daily cap typically ≤ 25% of average daily trading volume. Program cap must not exceed shelf availability; track against exchange listing limits.

Settlement — T+2 via DTC through issuer's transfer agent.

Mandatory Suspension Triggers:

• Issuer possesses undisclosed MNPI
• Quarterly earnings blackout
• Registration statement not effective or stop order in effect/threatened
• Exchange trading halt

Representations & Warranties

Corporate — Duly organized; full authority; agreement enforceable (subject to bankruptcy/equity carve-outs); no conflicts; no outstanding consents.

Registration & Disclosure — Registration statement effective, no stop order; compliant with Securities Act; no material misstatement/omission (10b-5 standard); Exchange Act filings current.

Capitalization — Accurate share counts; shares when issued will be validly issued, fully paid, non-assessable; no undisclosed preemptive rights; options/warrants/convertibles disclosed.

Financial — Financials present fairly per GAAP; no undisclosed MAC since most recent financials.

Compliance & Litigation — Material permits held; no undisclosed proceedings with potential MAE.

Issuer Covenants

• Maintain registration statement effectiveness; provide agent advance copies of amendments
• Furnish all Exchange Act filings and material communications
• Immediately notify agent of any event causing prospectus misstatement/omission
• Suspend sales during MNPI possession and earnings blackouts
• Provide reasonable due diligence access
• Deliver quarterly (and on request): officer's certificate (CEO + CFO), counsel opinion, negative assurance letter, auditor comfort letter

Indemnification & Contribution

• Issuer → Agent: Losses from misstatement/omission in registration statement, prospectus, or supplements (except agent-furnished information)
• Agent → Issuer: Losses from agent-furnished written information only
• Defense: Prompt notice; indemnitor may assume defense; no settlement without consent unless unconditional release with no fault admission
• Contribution: When indemnification unavailable; allocated by relative benefit and fault; agent cap = total commissions received

Conditions Precedent

Initial Closing — Executed agreement; counsel opinion; negative assurance letter; comfort letter; officer's certificate; exchange listing approval; registration statement confirmed effective.

Per-Placement — Reps true in all material respects; covenants performed; no stop order; no MAC; shares not suspended/delisted; updated opinions and comfort letters as required.

Termination

Pitfalls & Verification

• Rule 415(a)(4): Confirm all sales qualify as at-the-market (existing trading market, not fixed price); verify block transaction provisions preserve this characterization
• Regulation M: Address agent market activity restrictions during distribution periods [VERIFY current SEC guidance]
• Exchange 20% Cap: Confirm shareholder approval status (NYSE § 312 / Nasdaq Rule 5635) [VERIFY current rule text]
• Form S-3 Eligibility: Public float ≥ $75M; Baby Shelf Rule limits issuers with float < $75M to 1/3 of float per 12 months [VERIFY]
• No Underwriter Characterization: Agent must act on commercially reasonable efforts basis throughout — avoid Securities Act § 11 underwriter liability
• Shelf Tracking: Include mechanism to track shares sold against program maximum and remaining availability
• FINRA: Confirm registered broker-dealer status; Rule 5110 filing requirements may apply [VERIFY]
• Concurrent Programs: Track aggregate issuances across all ATM and equity programs against exchange caps
• Governing Law: Default NY; consider DE if charter-related issues are central
• Survival: Indemnification must expressly survive termination (statute of limitations period recommended)