Springing CFIUS Covenant

A springing CFIUS covenant ensures that the Company and its Investors will comply with any CFIUS application requirements in the future if necessary. If a Company doesn’t have any present CFIUS issues but could see some arising in the future—say, a smaller international Investor wanting to take more control of the Company someday—it is a good idea to make everyone agree to make their best efforts to submit necessary documents to CFIUS.

Best efforts clauses may not require Investors to hurt their own position in the Company. This may create complications if a CFIUS application could arguably hurt an Investor’s stake in the Company and then they choose not to comply with the application requirements.

Term Sheet Language: In the event that CFIUS requests or requires a filing/in the event of [ ]], Investors and the Company shall use reasonable best efforts to submit the proposed transaction to the Committee on Foreign Investment in the United States (“CFIUS”) and obtain CFIUS clearance or a statement from CFIUS that no further review is necessary with respect to the parties’ [notice/declaration]. Notwithstanding the previous sentence, Investors shall have no obligation to take or accept any action, condition, or restriction as a condition of CFIUS clearance that would have a material adverse impact on the Company or the Investors’ right to exercise control over the Company.