(3)days after deposit in the U.S. mail, to the respective addresses, facsimile numbers or electronic email addresses of the parties set forth below: (i) If to the Company, to it at the following address: (ii) If to any Shareholder or any of his or its Permitted Transferees, to Slaine at the following address: (h) Injunctive Relief. applicable, from the applicable Shareholder and/or his or its Permitted Transferees, as applicable, for the Put/Call Price, in each case (x)payable in cash and (y)minus any applicable tax withholdings to satisfy the Companys (l) Stock Splits and Similar Transactions. Our new programme spotlights women whose achievements, innovation and leadership are reshaping private markets across a broad range of asset classes. e4 Ju.PRG-:'M|Fx+Ml/y@[j:#msSt6-YTXj./Bx^ An investor in a PE fund will often indicate (commonly in the subscription agreement or a side letter entered into with the fund) whether it is interested in co-investment opportunities. 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). 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 or arrangement for the benefit of one or more employees, directors and/or consultants of the Company or any of its Subsidiaries (other than this Agreement). 121 0 obj <]>>stream Securities, such Call Securities or Put Securities, as applicable, as of the date of Slaines termination of employment and (y)with respect to any Option Shares, such Call Securities or Put Securities, as applicable, as of the Put/Call Put). <> The Down Side of Side Letters in Private Equity - MLT Aikins Put/Call Closing Date means, with respect to the relevant Call or Put, the later of (I)twenty five (25)days after delivery of the Call Notice or Put Notice, as applicable (subject to extension to the extent necessary Purchased Securities pursuant to the Purchase Agreement. as applicable, pursuant to this Section3, the Company will be entitled to receive customary representations and warranties from the applicable Shareholder (or his or its Permitted Transferees, if applicable) regarding the purchase of such Call One of the first steps of buy-side M&A (in a private equity transaction timeline) is when the bankers send teasers to the Private Equity players. 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 Call Securities pursuant to Section3(b) above, the Company enters into a definitive agreement that, if consummated, will result in a Change in Control, then, upon and subject to the consummation of such transaction, each Shareholder shall be 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 (a) Transfer Restrictions. 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 As a result, some investors were unaware of the potential harm that could be caused if the selected investors exercised the special terms granted by the side letters. fWEbQ#]qe|"Dc}6n~2Q!/qDvp2@YA % To the extent a fund has a credit facility and any of the provisions described above are also covered by an MFN right, these issues can be exacerbated because multiple investors may be able to elect to receive the problematic provisions. x][s8~OUNS6C*:v$\gMvlR%g. 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 Benefits and Pitfalls of Using Side Letters for Private Placements Considerations for Private Fund Advisers. Private Equity NDAs: Top 10 Terms to Know | Ontra PDF VENTURE CAPITAL & PRIVATE EQUITY FUNDS - Morgan, Lewis & Bockius %PDF-1.5 (a) General. 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. A blanket consent is therefore not advisable. (vi) Disability shall have the meaning set forth in the Employment Agreement. Their use in the open-ended funds context is increasing, particularly to tie in certain key persons financially, including required investment levels and notification rights where a key person submits a significant redemption request (which could potentially be linked to favourable liquidity rights). Non-Interference Agreement. Private Capital Markets - Legal Templates & Insights - VC Experts (c) Exercise of Put. A subscription agreement is between a company and a private investor to sell a specific number of shares at a specific price. specified portion of the Put Securities owned by such Shareholder or any of his or its Permitted Transferees at the Put/Call Price. The side letter can be used to facilitate a large investment that attracts other strategic investors, which could benefit the fund and the execution of its investment strategy. YC Safe Financing Documents | Y Combinator GPs and LPs should take care when crafting ESG-related provisions for LPAs and side letters to ensure agreement on the legal interpretation of such provisions. %PDF-1.7 % SAFEs are easy to use and get the job done with minimal cost, and can work for both single investors and for groups of investors. 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 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. PEI Staff. shall be cumulative and not exclusive of any rights or remedies provided by law. delivery of such Put Notice to the Company, the Company shall notify such Shareholder in writing of the Put/Call Price with respect to such Put Securities as determined in good faith by the Board (a Put Pricing Notice). Purchasing Portfolio Company DebtThreshold Issues for Private Equity Download the Safe. Breach Event. This Side Letter Agreement (this Agreement) is made as of August4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the Company), Mason other remedy to which it may be entitled at law or equity. +44 20 7184 7468, London 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. endobj Certain investors will require side letters, providing them with additional . Examples of this include where excusal or transfer rights affect the existing credit assessment on the borrowing base. Options for ESG provisions in private equity fund terms (ix) Good Reason shall have the meaning set forth in the Employment Agreement. 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 (iii) Cause shall have the meaning set forth in the Dear Investor: Thank you for your investment in [Name of Company], a [Delaware] corporation (referred to as the "Company" or as "us" and "we" in this letter). ESG provisions may include a confirmation that the fund will comply with the UN Principles for Responsible Investment when making investments or that investee companies comply with the ten principles of the United Nations Global Compact or other guidelines that are more specifically tailored to the investor in question, including restrictions on making investments in companies engaged in certain lines of business. determined by the Board, then the costs and expenses of such Independent Appraiser shall be borne by the Company. is ninety (90)days following the date of termination of employment of Slaine and (y)the date that is two hundred seventy (270)days following the date of exercise of the Option pursuant to which such Option Shares were issued to If a Shareholder believes in good faith that the Put/Call Price is greater than the amount set forth in the Call Notice or the Put Pricing Notice, as applicable, then such Shareholder may deliver a Transferability is particularly important to certain investors, for example certain Germanpension funds,4who may need to be able to demonstrate free transferability (or as near to free transferability as the fund can practically offer) for regulatory reasons. 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 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 . 3) In some circumstances an MFN is included in the funds constituting documentation rather than being agreed separately by side letter. 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 endstream endobj PDF Observations from Examinations of Investment Advisers Managing Private Managers negotiating side letters on behalf of a fund should ensure that a transfer right provides them with sufficient comfort with respect to the identity and nature of the transferee (this is particularly the case where the fund has a credit facility and does not want to jeopardise its borrowing base) and that appropriate customer due diligence information will be provided in connection with any transfer. 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. 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 While investors commonly seek an acknowledgement in a side letter that they are interested in co-investment opportunities (or a similar election right), the range of alternative investment structures currently in vogue introduces new side letter concerns, particularly in relation to strategy and allocation issues (for example strategy caps and successor fund provisions). Background ESG Capital Partners was formed to purchase [] Most favored nation clause samples. Any provision of this Agreement may be waived if, but General Partners ("GPs") have an interest in reducing the length of side letter agreements, providing fundraising certainty, and lowering their fund formation costs. 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 "Preferential terms do not necessarily benefit the fund or other investors that are not party to the side letter agreement and, at times, . Focus on PE fund investments: practice points relating to side letter . This disclosure obligation applies prior to investment and following any material changes to such preferential treatments. 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 4) These are commonly referred to as so-called VAG investors, i.e., those which are either a German insurance company, pension pool, pension fund or other pension scheme which is directly or indirectly subject to the provisions of the German Insurance Supervision Law or the Ordinance on the investment of restricted assets of pension schemes, funeral expenses funds and small insurance companies or the Ordinance on the investment of restricted assets of pension funds regarding the investment of their restricted assets. Aside from the commercial and practical considerations relevant to agreeing to a side letter provision, there are certain regulatory issues that managers should also bear in mind. We very much appreciate your support and trust. Safe: Valuation Cap, no Discount to this Section3(g) shall be payable promptly following, and subject to, the closing of the transactions contemplated by such definitive agreement contemplated by clause (iv)of the previous sentence. [Remainder of page intentionally Enter to open, tab to navigate, enter to select, Practical Law Standard Document w-016-5805, https://content.next.westlaw.com/practical-law/document/Iba4bc2fcb68611e8a5b3e3d9e23d7429/Side-Letter-to-Limited-Partnership-Agreement?viewType=FullText&transitionType=Default&contextData=(sc.Default), Side Letter to Limited Partnership Agreement. One of the simplest (and cheapest) ways to invest in an early-stage company is often through a Simple Agreement for Future Equity (SAFE). Below, we've outlined some of the most important terms of NDAs in the private equity space, which draw nuance from changing business conditions. The Company or any Shareholder may file an original counterpart or a copy of this Section4(i) with any court as written evidence of the consent of the Companys or such 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. 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." Side letter - Wikipedia agrees that a violation of any of the terms of this Agreement will cause the Company irreparable injury for which adequate remedy at law is not available. Private Equity Contracts - Sample Contracts and Business Forms - OneCLE any of his or its rights hereunder except in connection with a Transfer of the Purchased Securities in compliance with the terms and conditions of the Shareholders Agreement and Section2 hereof. Board, then the costs and expenses of such Independent Appraiser shall be borne by such Shareholder (which costs and expenses may, in whole or in part, be deducted from the cash delivered to such Shareholder and/or his or its Permitted Transferees, N~o@XR" i Side Pocket: Definition, How Side Pocketing Works, Pros & Cons 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 Founders tend to lose interest when it comes to the negotiation of capital raising documentation or investment agreement with investors. as applicable, at the closing of the purchase of the Call Securities or Put Securities, as applicable, pursuant to Section3(e)). The themes identified in this note also demonstrate that the private fund space continues to evolve and that managers also need to adapt in order to ensure that they move with the times, rather than getting caught out by a term that is hastily agreed to without the overall implications receiving proper attention. Confidentiality agreements are the foundation of NDAs and are indispensable in the assessment of any company. 3 March 2012 State Gonments rev With substantial defined benefit . Focusing on key legal steps and documentation with sample agreements, you will learn about the latest trends, developments and legal . securities of the Company on such date) of the aggregate fees and expenses that would reasonably be expected to be incurred by the Company and its Subsidiaries in connection with a Change of Control. 2 0 obj If any provision of this Agreement 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. 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. 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 VENTURE CAPITAL & PRIVATE EQUITY FUNDS DESKBOOK SERIES . PDF VENTURE CAPITAL & PRIVATE EQUITY FUNDS - Morgan, Lewis & Bockius