The Wrong Dollar Amount
It’s common practice to state monetary amounts both in numerals and in words, such as “$1,000,000 (one million dollars)”. If the words and numbers don’t agree, that can lead to serious repercussions.
Mistakes of this kind are unusual. They were found in less than 1% of EDGAR documents analyzed with CrossCheck 365, but when they happen it’s kind of a big deal.
An example from Section 7.3(d) of a merger agreement between Cadmium Holdings, Inc., Voyager Learning Company, and others, dated June 20, 2009:
(d) Consonant shall pay, or cause to be paid, to Vowel: (i) a fee equal to Four Million Five Hundred Dollars ($4,500,000) (the “Consonant Ordinary Termination Fee”), if this Agreement is terminated by Vowel or Consonant pursuant to Sections 7.1(i); …
From the context of the document, it appears that $4,500,000 was the correct amount; however, the general rule is that “words prevail over numbers,” meaning that this could have been a $495,000 blunder.
Not big enough to get you excited? How about this one, from Section 1.4(a)(iv) of a Merger Agreement between F5 Networks, Inc. and NGINX, Inc. dated March 9, 2019:
Cash shall not include any cash or cash equivalents subject to any legal or contractual restriction on the ability to transfer or use such cash or cash equivalents for any lawful purpose, including security deposits, collateral reserve accounts, escrow accounts, custodial accounts, and other similar restricted cash or cash equivalents, other than up to One Million, Seven Hundred and Fifty Million Dollars ($1,750,000) of Security Deposits…
The verbal amount, “One Million, Seven Hundred and Fifty Million,” could also be expressed as “one trillion, seven hundred and fifty billion”, or $1,750,000,000,000. That’s a significant rounding error.
These errors aren’t limited to monetary amounts. An example from Section 3.2 of Master Agreement by and between The Northern Trust Company and Wellteq PTE LTD, dated March 1, 2021:
Either Party may terminate the Agreement immediately upon written notice to the other Party if the other Party: … (ii) materially breaches a payment obligation under the Agreement or such SOW, Schedule and/or Purchase Order and fails to remedy such breach within ninety (30) days after receiving written notice thereof from the other Party.
And this, from a Merger Agreement among DataRam Corporation, U.S. Gold Corp. and Copper King LLC dated November 28, 2016:
(c) Twenty Two Million Three Hundred and Eighty Four Thousand and Ninety Three (22,334,893) shares of Common Stock shall be issued to the holders of Series A Preferred Stock;
This one has two separate mistakes (should be 22,384,093, assuming the words are correct), for a difference of 49,200 shares.
CrossCheck 365 reports these mistakes under the Miscellaneous section, as well as in the guided review. The Miscellaneous section lists all number / word phrases (correct or incorrect) as well as all dates. CrossCheck 365 reports date errors as well (e.g., “June 31, 2001”), but I’ll save those for another post.