side letter agreement private equity side letter agreement private equity

is determined to be invalid, illegal or unenforceable by any governmental entity, the remaining provisions of this Agreement, to the extent permitted by law shall remain in full force and effect provided, that the essential terms and The SEC staff on examination has been known to review side letters to test whether they are being adhered to and whether proper disclosure was made. or the potential to establish . . (iv) Change in Control shall have the meaning set forth in the Employment In this key features document, we briefly highlight some considerations relevant to the use of side letter arrangements in Irish ILPs. e.g. Exhibit 10.18 SIDE LETTER AGREEMENT . 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 minority discount, discount for illiquidity or other similar type of discount shall be taken into consideration minus (II) such Call Securities or Put Securities, as applicable, pro rata portion (based on the aggregate outstanding equity (i)the aggregate number of Shares held by such Shareholder and his or its Permitted Transferees immediately following the consummation of the IPO multiplied by (ii)a fraction, the numerator of which is the aggregate number of It also considers the regulatory context and practical points for managers navigating the restrictions and obligations of multiple side letters. +44 20 7184 7460, Dubai -. Whether it is appropriate to grant such requests should be considered on a case by case basis. Deficiencies in this area can result in negative written findings at the conclusion of an examination and, in sufficiently serious cases, could result in an enforcement referral. A side letter is a document that is ancillary to another contract. 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 (xiii) Non-Interference Agreement shall have the meaning set forth in the Employment Agreement. from such Shareholder or his or its Permitted Transferees. Certain UK local government pension schemes have recently pooled their investment assets into eight distinct pools to improve the efficiency of the management of their assets. The main source for these ground rules are the Company's Shareholders Agreement or Investor Rights Agreement (each of which we refer to in this article as the Shareholders Agreement).The Company's organizational documents, and any confidentiality agreements and side letters with shareholders, may also contain applicable requirements or . (g) Notices. x[}S7KJbI!++[mT%,@te5[qfVgo.z^xW/Y-W"F4(e3zo\62[_kcLm95/^e.w]sKh0+(p e9 /drePPnY)EmqY'{mmy;rYm +u'lwogjfY6fV8yg_on@,~Vn3jva9[)>{Izscl_-rEvC_ k g_\_k:w+`-q)\iwvm~ n[; x%-{gglw/qG3:9[->[-tNuCGkAiz%Njqll G L Ye`[n6nK-v^lASRTKCv}A$X3a$j$FG+t,JX.9{ ^y!E 6}9b'Fsqy This article provides an overview of common side letter terms and current themes in the private fund market. Founders tend to lose interest when it comes to the negotiation of capital raising documentation or investment agreement with investors. 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 co-investment rights, not tendered to the investor generally, usually the basis of the single member being the largest investor. Including appropriate provisions to accommodate a capital call . Side letters are frequently used to enter into legal agreements between private funds and investors. The sidecar investment will usually be used when one of . Restricted Period shall mean, with respect to the Shareholders and their respective Permitted Transferees, the period from the Closing Date until the later of (A)the second (2nd)anniversary of the consummation of the IPO and Side letter. 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. (c) Legal Counsel and Interpretation. The side letter can add provisions to the SAFE, or can change (amend) provisions in the SAFE. It is better to be consistent in agreeing side letter terms, for example, having a 'house' provision that is stuck to. pursuant to the terms and conditions of the agreements governing the indebtedness for borrowed money of the Company and its Subsidiaries, then the Put/Call Closing Date shall be the earlier of (x)ten (10)days after the first date on All certificates representing Purchased Securities and Option (e) Closing. Side letters are frequently used to enter into legal agreements between private funds and investors. specified portion of the Put Securities owned by such Shareholder or any of his or its Permitted Transferees at the Put/Call Price. 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. the Call Securities pursuant to Section3(b) above, (iii)a Material Breach Event has not occurred, and (iv)within four (4)months following the Companys (or its designees) exercise of its option to repurchase the The key question wherever the content or effect of a side letter is disputed is whether or not the side-letter is binding. (i) Waiver of Jury Side Letters. (xvi) Purchase Price means the per-share consideration paid by the Shareholders for the Nothing contained in this Agreement shall be deemed to obligate the Company or any Subsidiary of the Company to employ Slaine in any capacity whatsoever or to prohibit or restrict the Company (or any such Subsidiary) from terminating Issues are amplified where any MFN rights are involved. Credit facilities are an increasingly popular tool used by closed-ended funds to satisfy short-term bridging needs and smooth the capital call process. 106 0 obj <> endobj Purchased Securities, Option Shares or Purchase Price occurring after the date of this Agreement. A side letter is an agreement apart from the main agreement (e.g. 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 or the potential to establish . respect to such Call Securities as determined in good faith by the Board. conditions of this Agreement for all parties remain valid, binding and enforceable. Securities or Put Securities to be transferred free and clear of all liens, claims and other encumbrances. 1. shares (thePurchased Securities) in the aggregate of common stock of the Company, par value $0.01 per share (the Common Stock); WHEREAS, the Shareholders and the Company desire to enter into this Agreement to set forth the terms of their mutual understanding relating to certain transfer restrictions and repurchase rights that The LPAC is a governing body of the PEF comprised of a select number of investor representatives; its members have specific rights and duties outlined in the limited partnership agreement. Definitions. 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. e4 Ju.PRG-:'M|Fx+Ml/y@[j:#msSt6-YTXj./Bx^ c'5HJ~L;x}=u! (xiv) Option means any options to purchase shares of Common Stock granted pursuant to any Employee Equity Objection Notice, the Company will promptly engage an Independent Appraiser. 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. -. 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. Pooling of UK local government pension schemes. would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. 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. 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. Download. Boards Determination of Put/Call Price. No. 19, No. (d) Successors; Assignment. The Shareholders acknowledge and agree that the Purchased Securities and any other equity securities of the Company or any of its Subsidiaries that the Shareholders shall A side letter, or side agreement, is a collective bargaining agreement that is not part of the underlying or primary collective bargaining agreement (CBA) but is used by the parties to the contract to reach agreement on issues that the CBA does not cover, to clarify issues in the CBA or to modify the CBA (permanently or temporarily). (xi) Material Breach Event means Slaines material breach of the Shares shall bear legends as provided in the Shareholders Agreement. or valuation firms. (ii) Call Securities means (I)in the event Slaines employment is terminated by Steps in a Private Equity Transaction Timeline. the Other Shareholder Restricted Period. Trial. the exercise of its repurchase right pursuant to Section3(b) above, and (B)the positive difference, if any between (x)the price per share of Common Stock received by the Companys shareholders in connection with such Integration Clauses (also known as "entire agreement" clauses)make sure that each of the fund's governing agreements . (c) Legends. SAFEs solve two problems: (1) nobody knows what an early-stage . THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 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 (ii) If, at any time prior to the Put/Call Side Letter: Alaska's U-turn; China PE predictions; industry's next sports specialist. +44 20 7184 7468, London 1) In certain circumstances the manager may also be a party. Similarly, Limited [] A blanket consent is therefore not advisable. 1. Examples of this include where excusal or transfer rights affect the existing credit assessment on the borrowing base. 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. Slaines estate, as applicable) shall have the right, but not the obligation, by one or more written notices to the Company (each, a Put Notice) delivered on or prior to the Put/Call Termination Date, to Put all or any Market Value means, with respect to any Call Securities or Put Securities, as applicable, as of the relevant date, (I)the price that a willing buyer would pay for such Call Securities or Put Securities, as applicable, from a willing Alexander J. Davie. Transferability is particularly important to certain investors, for example certain Germanpension funds. (viii) Fair Private Equity and Hedge Funds. Breach Event. Below are some practical considerations that could be relevant when managing a fund with side letters: Side letters are becoming an increasingly significant part of a fundraise. the parties hereto, intending to be legally bound by the terms hereof, have caused this Agreement to be executed as of the date first above written by their officers or other representatives thereunto duly authorized. -. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and representatives. In such event, Silver Lake (and/or its assignee) and Warburg Pincus (and/or its assignee) shall have a pro rata right (based on their relative ownership of Shares at the time of delivery of such notification by the Company) to material analyses used in arriving at such determination) within thirty (30)days of being engaged stating the Independent Appraisers determination of the Put/Call Price and such Put/Call Price as determined by such Independent Appraiser Make sure you reference any fund "gate" provisions in your side letter agreements. . 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). Side letters may provide the ability for an investor to elect to receive the benefit of side letter provisions the fund has entered into with other investors. x]o6}=ZF%Q{z9CI|Glc8DY dcKM5_.!wWgJn$)&YU'WwEruHd*wyrvoy&&>p\jnsLr!USZ/qg~x$ok eV/]jMYYedyp LX'('A h-$!RTY agreements and investor side letters to make sure that they authorise a capital call facility and related lender rights. A management rights letter is a key aspect for venture capital funds when investing in companies, as it enables funds to raise capital without subjecting the activities of the fund to the various restrictions imposed under ERISA. the limited liability partnership agreement) and is usually an extension or supplement in the sense that it further clarifies certain provisions of the main agreement. First, a quick summary of the events leading up to the . 2) Conversely, certain rights generally should not be included in a side letter, notably those that would create a new class of interests from a local law perspective or restrict the fund as a whole (such as tighter investment restrictions than those described in the funds constituting documentation). However, the schemes have not pooled using a consistent structure so, as it stands, requests should be considered on a case by case basis it may be that the various schemes do not necessarily fall within a funds definition of affiliate (which is generally how entities are grouped together for the purposes of an MFN clause). A subscription agreement is between a company and a private investor to sell a specific number of shares at a specific price. RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH THE DEALINGS OF ANY PARTY HERETO IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER Company. Annual (or more frequently if appropriate) certifications from the teams responsible for compliance with individual provisions can support this process. If Slaines employment with the Company shall be terminated for any reason, the Company shall have the right, but not the obligation, by one or more written notices to the Shareholders (each, a Call Notice) delivered on or The private equity due diligence process is a lengthy sequence of steps that involves a lot of research and information gathering, analytics, discussions, and assessments. #+Cq..mw>@>J6@\?%'SFm!K*k_K!Zx'"AVboBEqp_D"9j }$w[u?"1GT!nAY\#BuhTloC? Download this easily editable template through formats like MS Word and Mac Pages. "Preferential terms do not necessarily benefit the fund or other investors that are not party to the side letter agreement and, at times, . 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 . 11053-VCL (Del. In recent years there has been growing interest in co-investment vehicles, separately managed accounts and other alternatives to classic commingled funds. MFN clauses play a key role in the commercial negotiations of an investment in a modern private . Non-Interference Agreement. endobj Q(J^{),}X0)"1m} Rj}q=. prior to the Put/Call Termination Date (unless such Call is being exercised after the occurrence of a Material Breach Event, in which case such Call Notice may be delivered at any time after the occurrence of such Material Breach Event), to Call all A more detailed analysis of the ILP is available here. shall apply to the Purchased Securities, as well as any other equity securities of the Company that the Shareholders shall acquire from time to time; and. % within such fifteen (15)day period, (I)each of the Company and such Shareholder within five (5)days of the end of such fifteen (15)day period shall submit a list of the names of four nationally recognized investment banking <>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>>