side letter agreement private equity

Side Letter: Alaska's U-turn; China PE predictions; industry's next sports specialist. and a Shareholder within fifteen (15)days after the date of the Companys receipt of an Objection Notice; provided that if the Company and such Shareholder are unable to agree upon who shall serve as the Independent Appraiser Recently, the Delaware Chancery Court ruled on a dispute that heated up between a hedge fund manager and the fund's seed investor. Side Letters. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Shareholders Agreement substantially in the form 19, No. "Preferential terms do not necessarily benefit the fund or other investors that are not party to the side letter agreement and, at times, . 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 . Q(J^{),}X0)"1m} Rj}q=. A most favoured nation (MFN) clause entitles an investor to have visibility of side letter entitlements of other investors in the private equity fund and, in certain circumstances, allows such investor to elect to benefit from those entitlements. Founders tend to lose interest when it comes to the negotiation of capital raising documentation or investment agreement with investors. Managers should be alive to the implications of agreeing to side letter provisions, considering each term from a commercial, legal, regulatory and operational perspective. These side letter requests can come in many guises, including requests to vary the frequency, format and content of reporting. 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 (j) Severability. Background ESG Capital Partners was formed to purchase [] However, these documents are actually the most important as they can make or break your company. 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 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." While side letters can be helpful in securing key investments, it is imperative to fully understand their legal implications. For example, a request for portfolio level information should not result in the investor holding information it could use to its competitive advantage or to the detriment of other investors. 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 (xviii) Put/Call Exercise Date means, as applicable, (I)the date on which the Company delivers a Call Notice to a Shareholder with respect to the Companys exercise of a Call Finally, a private equity fund of funds may seek side letter pro-visions to ensure that the terms of an invest-ment do not conflict with the fund of funds' governing documents. Typically it is more appropriate for the manager rather than the fund to sign up to these requests. The private equity fund will generally be required to include the OID in income as "phantom income" as it accrues. Obligations of Transferees. In recent years there has been growing interest in co-investment vehicles, separately managed accounts and other alternatives to classic commingled funds. the agreement as between the general partner and an investor. ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. All certificates representing Purchased Securities and Option 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 EEA managers should bear this requirement in mind when deciding whether to agree to a particular side letter provision. 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 If such a provision is contemplated by a fund, it should ensure it is able to comply with these provisions and, from a practical perspective, to provide any reporting agreed. . (ix) Good Reason shall have the meaning set forth in the Employment Agreement. This Standard Document has integrated notes with important explanations and drafting and negotiating tips. A letter agreement between a single member of an investor syndicate . 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. 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 paying (or the Companys Subsidiaries are prohibited or restricted from delivering funds to the Company sufficient to permit the Company to pay) the Put/Call Price with respect to the Call Securities or the Put Securities, as applicable, Put). %PDF-1.5 % 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. e.g. Breach Event. shall be deemed to be the Put/Call Price with respect to such Call or Put, as applicable, and shall be final and binding on the parties. Shares shall bear legends as provided in the Shareholders Agreement. 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. In this key features document, we briefly highlight some considerations relevant to the use of side letter arrangements in Irish ILPs. 121 0 obj <]>>stream Except as expressly provided in this Agreement (including Section3, which shall be for the benefit of the Company, Silver Lake, Warburg Pincus and their respective Affiliates), 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, There are three versions of the post-money safe intended for use by US companies, plus an optional side letter. Side letters are an (increasingly) common way of formalising negotiated arrangements between a private fund and an investor.1Whilst used more widely in the closed-ended fund context (given the limited withdrawal rights associated with such funds, the typically higher level of negotiation and greater structural complexity), they are also a feature of open-ended funds, for instance where there is a seed or cornerstone investor investing significant capital or an investor subject to specific tax or regulatory regimes that require bespoke terms. These . Use them or shun them, side letters (also called side agreements or side letter arrangements) are part of the business landscape. In this example, a side-letter may be executed between the general partner and the investor regarding a different date when the investor can withdraw their investment. Requests for management rights letters are fairly common in today's market and do not impose significant burdens on . Enhanced reporting and information rights. A more detailed analysis of the ILP is available here. 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). Investor will execute a side letter that will serve, separate and . From a side letter perspective, this effectively increases their negotiating power, particularly if one of the schemes is granted an MFN which is extended to all members of its pool. Teasers are documents that contains a brief description of the business, its product and service offerings, and financial . 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). (g) Notices. The above is a summary of common side letter requests. (xvi) Purchase Price means the per-share consideration paid by the Shareholders for the x@g1c:/Zpd$ 9PGF Often an investor must notify the fund of any restrictions before it invests and/or require the opinion of external legal counsel to confirm that it is so restricted. 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 Transfer rights are particularly relevant in the closed-ended fund context where an investor cannot redeem from the fund should it wish to. Issues are amplified where any MFN rights are involved. An MFN right allows an investor to elect to receive the side letter provisions negotiated by other investors.3However, MFN provisions can be drafted in a number of ways, meaning that what the investor may actually be entitled to elect to receive can vary widely. 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. (xii) Material Breach Price means, with respect to any Call Securities or Put acquire from time to time shall be subject to the transfer restrictions and other provisions of the Shareholders Agreement. A little over a year ago, the Delaware Court of Chancery issued a forceful reminder that not all side letter agreements are enforceable. Each Put Notice shall set forth the Put Securities applicable to such Put. agreement (or related side letters), such as limiting outstanding debt to a . 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. as applicable, at the closing of the purchase of the Call Securities or Put Securities, as applicable, pursuant to Section3(e)). This letter agreement will confirm the agreement between us and you ("you" or the "Investor"), effective as of the . laws govern the subscription agreement and side letter. PEI Staff. the Other Shareholder Restricted Period. 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. 11053-VCL (Del. Purchased Securities, Option Shares or Purchase Price occurring after the date of this Agreement. The use of side letters is becoming a common theme amongst investors . 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 For example, if a private equity fund buys $100 of debt of a related portfolio company for $75, the portfolio company will generally have $25 of COD income and the debt will be treated as having been reissued to . Shareholder (or his or its Permitted Transferee) from the Company or any other Person in connection with the Transfer by such Shareholder or his or its Permitted Transferees of any Purchased Securities and Option Shares (including, without An investor in a PE fund will often indicate (commonly in the subscription agreement or a side letter entered into with the fund) whether it is interested in co-investment opportunities. (xxi) Put Securities means the Purchased Securities and the Option Shares. All Ch. Call) and (ii)if Slaines employment is terminated (x)by the Company without Cause, (y)by Slaine for Good Reason, or (z)on account of Slaines death or Disability, each Shareholder (or Section3, each of Silver Lake and Warburg Pincus. shall be null and void. Private equity investments involve significant risks, including the loss of the entire investment. the Company without Cause, by Slaine with Good Reason or by reason of Slaines death or Disability, the Purchased Securities and the Option Shares and (II) in the event Slaines employment is terminated by the Company for Cause or by or valuation firms. All notices, consents and other communications required or contemplated by this Agreement shall be in writing and shall be delivered in the manner specified herein or, in the absence of such specification, shall be deemed to have been duly given Nb"qA4Sz^Hj26$DVZ Each Call Notice shall set forth the Call Securities applicable to such Call and the Put/Call Price with Letter Agreement - Artemis America Partnership, Apollo Investment Fund LP and Samsonite Corp. (Jul 13, 1999) Lock-Up Agreement - Sirius Satellite Radio Inc., Apollo Management LP, Blackstone Group LP, Space Systems/Loral Inc. and Lehman Commercial Paper Inc. (Oct 17, 2002) (xi) Material Breach Event means Slaines material breach of the with respect to all or a portion of the Call Securities owned by such Shareholder and/or his or its Permitted Transferees and (II) the date on which a Shareholder delivers a Put Notice to the Company with respect to such Shareholders exercise Forms of side letters often have all fund parties (i.e., the manager, or valuation firms, (II) each of the Company and such Shareholder shall strike two of the names submitted by the other party and (III) the Independent Appraiser shall be selected by lot from the four remaining names of investment banking Inspire awe in others with the right use of this private equity investment proposal template. 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 Side letters: This aspect of the Proposed Rules represents a significant departure from the current practice of many private fund advisers and institutional and other investors with respect to side letters and other similar written agreements. April 15, 2021. This Side Letter Agreement (this Agreement) is made as of August4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the Company), Mason 4 0 obj If such Shareholder timely delivers such an Section3, shall terminate upon the earlier of the consummation of an IPO and the consummation of a Change of Control, whether or not a notice of exercise of any such Call or Put has been given prior to the consummation of an IPO or a Change of Shares Transferred by the Sponsors as of such date either in connection with the consummation of the IPO or following the consummation of the IPO (other than to a Permitted Transferee), and the denominator of which is the aggregate number of Shares Shareholders waiver of his or its rights to trial by jury. 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. VENTURE CAPITAL & PRIVATE EQUITY FUNDS DESKBOOK SERIES . Securities or Option Shares, as applicable, in accordance with Section4.02 of the Shareholders Agreement) shall be required, at the time of and as a condition precedent to such Transfer, to become a party to this Agreement (unless such (viii) Fair Slaines estate, as applicable) shall have the right, but not the obligation, to cause the Company to purchase, from time to time, all or any portion of the Put Securities owned by such Shareholder or any of his or its Permitted Transferees (a Canadian private equity and venture capital funds are often structured as limited partnerships which are governed by limited partnership agreements (LPA). 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. exercise such Call right pursuant to the terms and conditions of this Section3 in the same manner as the Company; provided that in the event that any Sponsor (and/or its assignees) (the Non-Exercising Sponsor) elects Purchase Agreement, dated as of August4, 2010 (thePurchase Agreement), pursuant to which the Shareholders have agreed to purchase from the Sponsors, and the Sponsors have agreed to sell to the Shareholders, 20,000,000 Private Equity X, L.P., Warburg Pincus X Partner, L.P., Silver Lake Partners III, L.P., and Silver Lake Technology Investors III, L.P., on the other hand (collectively, theSponsors), have entered into that certain Stock 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 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 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and representatives. 106 0 obj <> endobj The key question wherever the content or effect of a side letter is disputed is whether or not the side-letter is binding. For purposes of this Section2(a), Permitted Transfer Share Amount shall mean, with respect to a Shareholder as of any date, a number of Shares equal to specified portion of the Put Securities owned by such Shareholder or any of his or its Permitted Transferees at the Put/Call Price. 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 ( Check out our private equity due diligence playbook) Institutional and accredited investors dedicate large sums of money for private equity investments. 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. (c) Exercise of Put. (e) Closing. 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 Arrangement. You should . 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). (x) Independent Appraiser means an independent investment banking or valuation firm jointly selected by the Company 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. (xv) Option Shares means the shares of Common Stock issued to Slaine upon the exercise of Side letter. (g) Make-Whole. Capital Call Facilities - LPA and side letter review. (ii) No failure or delay by any party in exercising any right, power This document is not legal advice and should not be relied on as such. would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. MFN. Any Transfer in derogation of the foregoing Slaines employment is terminated (x)by the Company without Cause, (y)by Slaine for Good Reason, or (z)on account of Slaines death or Disability, and a Material Breach Event has not occurred, any Shareholder (or <> Pooling of UK local government pension schemes. 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

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