Focusing on key legal steps and documentation with sample agreements, you will learn about the latest trends, developments and legal . 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. Shares, the lower or (x)the Fair Market Value of such Call Securities or Put Securities, as applicable, on the applicable Put/Call Exercise Date and (y)the Cost of such Call Securities or Put Securities, as applicable. Download the March 2023 issue of Private Equity International 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. The need for consistency between side letter terms (including any MFN rights granted) becomes particularly apparent when conducting this exercise. acquire from time to time shall be subject to the transfer restrictions and other provisions of the Shareholders Agreement. Use Caution When Entering Into Side Letters With Investors Under the law of contracts, a side letter has the . This Agreement and the other agreements referred to herein set forth the entire understanding 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. Side Letters: The Times They Are a-Changin - Proskauer Rose endobj 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 amended from time to time, the Employment Agreement). From the hundreds of nominations for the inaugural Women of Influence in Private Markets list, we could select just 10 from the private equity sphere. PEI Staff. WHEREAS, in connection with the execution and delivery of this Agreement, Slaine has entered into an Employment Agreement, dated as of the date hereof, among the Company, IDC and Slaine (as it may be 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. If such Put/Call Price determined by such Independent Appraiser is not higher than the Put/Call Price previously determined by the Parties to a side letter negotiation should seek advice on the particular transaction in light of their circumstances. While side letters can be helpful in securing key investments, it is imperative to fully understand their legal . the employment of Slaine at any time or for any reason whatsoever, with or without Cause. Ch. Side Pocket: A side pocket is a type of account used in hedge funds to separate illiquid assets from other more liquid investments. The top 10 terms in private equity NDAs. NOW, THEREFORE, in consideration of the foregoing, specified portion of the Put Securities owned by such Shareholder or any of his or its Permitted Transferees at the Put/Call Price. fWEbQ#]qe|"Dc}6n~2Q!/qDvp2@YA Enhanced reporting and information rights. 2 0 obj <> endobj 4 0 obj <>stream Download this easily editable template through formats like MS Word and Mac Pages. Capital Call Facilities - LPA and side letter review. the Purchase Agreement. respect to such Call Securities as determined in good faith by the Board. Financial Services and Investment Management, California Notice at Collection & Privacy Notice, Private fund side letters: common terms, themes and practical considerations. 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. It is better to be consistent in agreeing side letter terms, for example, having a 'house' provision that is stuck to. Shares shall bear legends as provided in the Shareholders Agreement. Recently, the Delaware Chancery Court ruled on a dispute that heated up between a hedge fund manager and the fund's seed investor. Subscription Agreement: Everything to Know - UpCounsel This Side Letter Agreement (this Agreement) is made as of August4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the Company), Mason WHEREAS, the Shareholders, on the one hand, and Warburg Pincus . A more detailed analysis of the ILP is available here. Download the March 2023 issue of Private Equity International. 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 This Side Letter Agreement (this "Agreement") is made as of August 4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the "Company"), Mason Slaine, an individual ("Slaine"), and (collectively, the and together with Slaine, the "Shareholders"). 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 from such Shareholder or his or its Permitted Transferees. In connection with any purchase of Call Securities or Put Securities, Private Equity News & Analysis. 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). (i) This the agreement as between the general partner and an investor. 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 . If at any time from the date of this Agreement until the earlier of the (i) Maturity Date of the Convertible Note and (ii) payment in full of principal and interest of the Convertible Note, the Company sells equity, including debt convertible into equity, in cash to third party . Thanks to the $2 trillion . held by the Sponsors and their respective Permitted Transferees immediately prior to the consummation of the IPO. 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 Each Put Notice shall set forth the Put Securities applicable to such Put. minimum statutory withholding requirements, and (ii)the applicable Shareholder and/or his or its Permitted Transferees, as applicable, shall, simultaneously therewith, transfer and deliver such Call Securities or Put Securities, as applicable, As a general matter, to avoid any enforceability issues, care should be taken to ensure that the correct parties are parties to the side letter and in the right capacity. PDF EXECUTION VERSION - Lovell Minnick Partners EEA based AIFMs are also subject to an additional requirement to ensure the fair treatment of investors. The side letter can add provisions to the SAFE, or can change (amend) provisions in the SAFE. Key person terms are common in the closed-ended fund context (where a key person event is likely to trigger the suspension of the investment period). Introduction. The Use of Side Letters to Limited Partnership Agreements - Eurekahedge PDF First Edition - Ropes & Gray SAFEs solve two problems: (1) nobody knows what an early-stage . These side letter requests can come in many guises, including requests to vary the frequency, format and content of reporting. When you invest in a mutual fund . 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. 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). (a) Entire Agreement; Third Parties. Since a typical private equity fund raises capital over a period of time with multiple closings, a side letter is a convenient way to address the specific concerns of an investor. e.g. 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 (a) General. Each of the parties hereto acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. . The amount payable pursuant 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. 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. affording the single member special rights, e.g. Author: Dan Brecher. 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 Example Investor Side Letter Agreement Angel Investing - Holloway 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 transaction, and (y)the per share Put/Call Price paid by the Company (or its designee, as applicable) to repurchase the Call Securities upon the exercise of its repurchase right pursuant to Section3(b) above. 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 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. Side letters are frequently used to enter into legal agreements between private funds and investors. % This Limited Partner Advisory Committee (LPAC) clause for private equity fund (PEF) side letter is to be used when the PEF grants an investor the right to appoint a representative to the PEF's LPAC. (xiv) Option means any options to purchase shares of Common Stock granted pursuant to any Employee Equity <> (g) Make-Whole. A blanket consent is therefore not advisable. 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 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. Too Big to Fail, COVID-19 Edition: How Private Equity Is Winning the Side Letter: Alaska's U-turn; China PE predictions; industry's next sports specialist. Side Letters. If the scope of the prohibited investments is stated in the side letter itself, it is generally helpful to state why they are prohibited in order to increase the chance that the provision is taken outside the scope of any relevant MFN right. 3) In some circumstances an MFN is included in the funds constituting documentation rather than being agreed separately by side letter. Limited Partner Advisory Committee (LPAC) Side Letter Clause (Private endobj If these issues arise, managers should ensure that the concessions are achievable, do not unduly limit their firms growth and development strategy and that they can be effectively monitored. Control. Inside: The price is right - the ins and outs of portfolio valuation; From regulation to collaboration - a 17-page special report on co-investing; Expert comment and analysis from industry leaders; Plus much more. 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. 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, MFN. 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 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. (i) Call Event means either (I)the termination of Slaines employment for any reason or (II) a Material A number of private equity funds and hedge funds are structured as limited partnerships that are governed by the terms of a limited partnership agreement (an 'LPA'). 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. Where a manager is willing to provide an MFN right, these rights are generally reserved for more significant investors as they can have wide-ranging implications for the fund, especially if they are not managed effectively. Transfer rights are particularly relevant in the closed-ended fund context where an investor cannot redeem from the fund should it wish to. (e) Closing. Requests for management rights letters are fairly common in today's market and do not impose significant burdens on . Notwithstanding anything herein to the contrary, in the event that (i)Slaines employment is terminated by the Company without Cause or by Slaine for Good Reason, (ii)the Company (or its designee) exercises its option to repurchase