Termination Date, the Company shall determine not to exercise a Call right pursuant to this Section3 with respect to any Shareholder and/or his or its Permitted Transferees, then the Company shall promptly notify Silver Lake and Warburg Pincus or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. In connection with any purchase of Call Securities or Put Securities, In recent years there has been growing interest in co-investment vehicles, separately managed accounts and other alternatives to classic commingled funds. Securities or Put Securities to be transferred free and clear of all liens, claims and other encumbrances. (xxi) Put Securities means the Purchased Securities and the Option Shares. Arrangement. +44 20 7184 7468, London written notice of objection to the Board within ten (10)days of delivery to such Shareholder of such Call Notice or Put Pricing Notice, as applicable (an Objection Notice). This 7-page template has everything you could ever want: business-standard fonts, the right color space, and it is available in many file formats. or valuation firms. Period, with respect to the Shareholders and their respective Permitted Transferees, shall be deemed to have expired, as of any date, with respect to an aggregate number of Shares held by the Shareholders and their respective Permitted Transferees as applicable, at the closing of the purchase of the Call Securities or Put Securities, as applicable, pursuant to Section3(e)). Our new programme spotlights women whose achievements, innovation and leadership are reshaping private markets across a broad range of asset classes. with respect to any Option Share, the exercise price paid upon the exercise of the Option pursuant to which such Option Share was issued to Slaine. This is typically achieved through an election form and can take some time to coordinate if a significant number of side letters are involved and/or if a complex set of carve outs apply. references to numbers of Purchased Securities, Option Shares and Purchase Price in this Agreement shall be appropriately adjusted to reflect any stock dividend, split, combination or other recapitalization or similar transaction affecting the N~o@XR" i The Use of Side Letters in Investment Limited Partnerships Broad flexibility to negotiate side {slal!#/:dVpRb|$vbHIbO X! They can be used to alter the terms of a limited partnership agreement or even override certain provisions. x]o6}=ZF%Q{z9CI|Glc8DY dcKM5_.!wWgJn$)&YU'WwEruHd*wyrvoy&&>p\jnsLr!USZ/qg~x$ok eV/]jMYYedyp LX'('A h-$!RTY Transfer, each Permitted Transferee to which such Purchased Securities or Option Shares are to be Transferred shall, and the applicable Shareholder shall cause his or its Permitted Transferees to agree in writing with the Company to, Transfer Objection Notice, the Company will promptly engage an Independent Appraiser. For instance: private equity firm Thoma Bravo, which manages $114 billion of investor money, says in its federal disclosures that it will use side letters as it pleases: "Thoma Bravo is likely to have its own economic and/or other business incentives to provide certain terms to certain limited partners . This is an area of particular sensitivity in the open-ended fund context where portfolio level information should generally only be provided when stale, e.g., after further trading of the portfolio so that its then-current composition is not selectively shared. In this key features document, we briefly highlight some considerations relevant to the use of side letter arrangements in Irish ILPs. 108 0 obj <>stream (5)Business Days after delivery of such notice) to the Company in immediately available funds to an account designated by the Company in such notice the excess, if any, of (i)the aggregate gross proceeds previously received by such shall be null and void. This Agreement and the other agreements referred to herein set forth the entire understanding A side letter is an agreement between the fund and one particular investor to vary the terms of the limited partnership agreement with respect to that particular investor (almost always to the benefit of the investor). Purchased Securities pursuant to the Purchase Agreement. 1. In the event a Material Breach Event occurs, at any time thereafter upon delivery of written notice by the Company, each Shareholder shall be obligated to deliver promptly (and, in any event, no later than five 2 0 obj <> endobj 4 0 obj <>stream The typical management rights letter provides the fund with the minimum . Any provision of this Agreement may be waived if, but Integration Clauses (also known as "entire agreement" clauses)make sure that each of the fund's governing agreements . which such restriction or prohibition has terminated and (y)the one-year anniversary of the delivery of the Call Notice or Put Notice, as applicable. If a fund is willing to negotiate excusal rights, it should try to limit the amount of investor discretion in determining what an excused investment is as the emphasis should be on using the investors full commitment rather than allowing it to cherry pick deals. VENTURE CAPITAL & PRIVATE EQUITY FUNDS DESKBOOK SERIES . of a Put with respect to all or a portion of the Put Securities owned by such Shareholder and/or his or its Permitted Transferees. Private Equity: Legal Perspectives & Documentation is designed to provide you with a solid understanding of how law and finance work together in the private equity industry to ensure informed decision-making. 3 0 obj A subscription agreement can also be used to sell stock in a privately owned business. However, these documents are actually the most important as they can make or break your company. 106 0 obj <> endobj First, a quick summary of the events leading up to the . respect to such Call Securities as determined in good faith by the Board. Download this easily editable template through formats like MS Word and Mac Pages. agreements and investor side letters to make sure that they authorise a capital call facility and related lender rights. x@g1c:/Zpd$ 9PGF Requests for management rights letters are fairly common in today's market and do not impose significant burdens on . If such Shareholder timely delivers such an Law portal; A side letter or side agreement or side letter arrangement is an agreement that is not part of the underlying or primary contract or agreement, and which some or all parties to the contract use to reach agreement on issues the primary contract does not cover or for which they require clarification, or to amend the primary contract. In many instances it is easier to agree concessions in these separate agreements rather than amend the funds constituting documents (being the private placement memorandum and the constitutional documents such as the partnership agreement or articles), especially as the latter approach would mean the rights agreed would generally then be available to all investors. No. Side letter. Slaine. WHEREAS, the Shareholders, on the one hand, and Warburg Pincus Side agreements help private equity and hedge funds attract investors. The rules and regulations for starting a private equity or hedge fund are quite complex, especially when it comes to claiming the correct exemption from registration. Enhanced reporting and information rights. A standard Model Limited Partnership Agreement ("LPA") has been a persistent need in the private equity asset class given the cost, time and complexity of negotiating the terms of investment. Side letters are an (increasingly) common way of formalising negotiated arrangements between a private fund and an investor. 1. Under the AIFMD, investors must be provided with a "description of how the AIFM ensures a fair treatment of investors and, whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of that preferential treatment, the type of investors who obtain such preferential treatment and, where relevant, their legal or economic links with the AIF or AIFM." Incorporating Responsible Investment Requirements into Private Equity Fund Terms. (ix) Good Reason shall have the meaning set forth in the Employment Agreement. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HERETO WAIVES, AND COVENANTS THAT SUCH PARTY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN Women of Influence: Private equity. order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any (i)when delivered by hand or electronic e-mail, (ii)upon confirmation of receipt when delivered by facsimile transmission, (iii)one (1)day after deposit with a reputable overnight delivery service or (iv)three Introduction "Capital call" facilities (also known as "subscription line" facilities) are facilities made available to funds (often on a revolving credit basis and for general working capital purposes) which are secured against the uncalled capital commitments of the investors in the fund including: (i) the right to make capital calls on . the date of Slaines termination of employment and (B)with respect to any Option Shares, such Call Securities as of the Put/Call Exercise Date and (y)the Cost of such Call Securities, (II) if Slaines employment is terminated (vii) Employee Equity Arrangement means any option pool, stock option, stock bonus, stock ownership, stock purchase, phantom stock or other equity incentive plan, agreement, commitment (viii) Fair Put/Call Price by the Independent Appraiser; provided, however, that if, as of the date that otherwise would be the Put/Call Closing Date pursuant to the foregoing clauses (I)and (II), the Company is restricted or prohibited from %PDF-1.7 % limitation, pursuant to the exercise of all Puts and Calls) prior to the date of such Material Breach Event over (ii)the Cost of all Purchased Securities and Option Shares, as applicable, previously purchased by the Company or any other Person from such Shareholder or his or its Permitted Transferees. endobj Securities or Put Securities as may be reasonably requested by the Company, including but not limited to the representation that such Shareholder (or his or its Permitted Transferees, if applicable) has good and marketable title to such Call as of such date equal to the Permitted Transfer Share Amount. amended from time to time, the Employment Agreement). The SEC recently published a proposed rule (the "Proposal") that would impose unprecedented mandatory disclosure obligations and various other forms of intervention in the private funds industry. (vi) Disability shall have the meaning set forth in the Employment Agreement. A more detailed analysis of the ILP is available here. 2 0 obj All covenants, agreements, representations and warranties made herein shall (m) Employment by the (xiii) Non-Interference Agreement shall have the meaning set forth in the Employment Agreement. However, they pose certain distinct issues with respect to side letters which can be problematic, particularly where the lenders ability to take security is compromised or the borrowing base is otherwise restricted. This Standard Document has integrated notes with important explanations and drafting and negotiating tips. However, even with careful drafting, an MFN right can significantly extend the funds (or the managers) obligations; managers should therefore carefully consider which investors terms are likely to be captured by the MFN when negotiating these (and other) side letter provisions. the Company without Cause, by Slaine with Good Reason or by reason of Slaines death or Disability, the Purchased Securities and the Option Shares and (II) in the event Slaines employment is terminated by the Company for Cause or by Shareholders waiver of his or its rights to trial by jury. The ESG Capital Partners Case serves as an important reminder that private fund managers, investors and practitioners should always consider the following points to ensure enforceability of side letter agreements: 1. (ii) Call Securities means (I)in the event Slaines employment is terminated by Securities, a price equal to (I)with respect to any Purchased Securities, the lowest of (x)the Fair Market Value of such Call Securities or Put Securities, as applicable, as of the date of Slaines termination of employment, The top 10 terms in private equity NDAs. attached hereto as Exhibit A (as it may be amended from time to time, the Shareholders Agreement), to which the Shareholders shall have been required to become a party as of the closing of the transactions contemplated by When you invest in a mutual fund . A side letter supplements and, where the fund takes contractual form (such as a partnership), can override the terms of the funds constitutional documents and is typically required where an investor has specific commercial, legal, regulatory, taxation or operational concerns with respect to its investment in the fund. This investor fills out a form documenting his or her suitability for investing in the partnership. Agreement. The constitutional documents of closed-ended funds typically include a mechanism whereby an investor can be excused from participating in particular types of investments (generally due to regulatory or other internal constraints). <>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> (e) Closing. +44 20 7184 7460, Dubai only if, such waiver is in writing and is signed by (A)the party against whom the waiver is to be effective and (B)solely with respect to a waiver by the Company of any provisions for the benefit of Silver Lake and Warburg Pincus in entitled to an additional payment from the Company (or its designee, as applicable) in an amount equal to the product of (A)the respective number of shares of Common Stock repurchased by the Company or its designee from such Shareholder upon The Independent Appraiser will be engaged to deliver to the Company and such Shareholder a written determination (such determination to include a report setting forth all Managers may therefore wish to include a carve-out in their standard MFN clause in respect of side letter provisions which affect the funds credit facility. Similarly, Limited [] Dec. 16, 2015) (the ESG Capital Partners Case), the court found that a side letter agreement issued to a limited partner investor in a Delaware . to obtain required governmental or other approvals), and (II) in the event that an Objection Notice has been timely delivered with respect to the Call Notice or Put Pricing Notice, as applicable, ten (10)days after the determination of the Prior to the expiration of the Other Shareholder Restricted Period, any Transferee of Purchased Securities or Option Shares (including Permitted Transferees of a Shareholder that have acquired their Purchased The sidecar investment will usually be used when one of . . April 15, 2021. Nb"qA4Sz^Hj26$DVZ A sample side letter to a limited partnership agreement (LPA) that can be used by a limited partner investing in a private equity fund that is structured as a limited partnership. Certain investors will require side letters, providing them with additional . Company. % (B)the earlier of (x)the fifth anniversary of the Closing Date and (y)the 25% Float Date; provided, however, that following the six month anniversary of the consummation of the IPO, the Other Shareholder Restricted (i) This BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. The letter agreement includes sample language for certain rights granted to investors, such as most favored nation (MFN), co-investment, information, and advisory board rights. Purchased Securities, the date that is ninety (90)days following the date of Slaines termination of employment and (II) in the case of the exercise of a Put or Call with respect to any Option Shares, the later of (x)the date that This Side Letter Agreement (this Agreement) is made as of August4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the Company), Mason ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. From a U.S. Securities and Exchange Commission ("SEC") perspective, there is concern about an investor being given preferential treatment in a side letter that may have a negative impact on other investors, such as preferred liquidity and information rights. two-page letter agreement, commonly known as the "management rights letter," in connection with all of their portfolio investments, even though the DOL only requires this with regard to 50% of their investments. Shareholder (or his or its Permitted Transferee) from the Company or any other Person in connection with the Transfer by such Shareholder or his or its Permitted Transferees of any Purchased Securities and Option Shares (including, without Use them or shun them, side letters (also called side agreements or side letter arrangements) are part of the business landscape. Side letters are frequently used to enter into legal agreements between private funds and investors. For example, the drafting may vary in respect of: (i) whether the MFN applies to all side letter provisions or just, for example, to the fee provisions, (ii) the MFN only applying in respect of those provisions negotiated by other investors with an equal or smaller investment in the fund (typically affiliated investors will be aggregated), and (iii) whether the investor can see all side letter provisions negotiated (regardless of whether it is allowed to elect to receive them) or just those it may elect to receive.