(xvi) Purchase Price means the per-share consideration paid by the Shareholders for the 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. A key man is an important employee or executive who is critical to the operation of the business, and whose death, absence, or . (xii) Material Breach Price means, with respect to any Call Securities or Put the employment of Slaine at any time or for any reason whatsoever, with or without Cause. 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 Transferee is already a party to this Agreement) by executing and delivering such documents as may be necessary, in the determination of the Company, to make such Person a party hereto, whereupon, except as otherwise expressly provided herein, such Securities or Put Securities to be transferred free and clear of all liens, claims and other encumbrances. 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. Managers that are subject to the Alternative Investment Fund Managers Directive (2011/61/EU; "AIFMD") (whether as a European Economic Area ("EEA") based alternative investment fund manager ("AIFM"), managing an EEA alternative investment fund ("AIF") or through marketing an AIF to investors located in the EEA) must comply with the AIFMD rules on preferential treatment. In this key features document, we briefly highlight some considerations relevant to the use of side letter arrangements in Irish ILPs. 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 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 Similarly, the staff observed private fund advisers that set up undisclosed side-by-side Transferability is particularly important to certain investors, for example certain Germanpension funds. 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. 3 March 2012 State Gonments rev With substantial defined benefit . 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. (xxi) Put Securities means the Purchased Securities and the Option Shares. Side Letters. 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 between a private equity fund (a "Fund") and an investor (an "Investor") are generally contained in the constituent documents of the Fund, often a limited partnership agreement (an "LPA"), which sets forth the rights and obligations of the general partner and each . 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 c'5HJ~L;x}=u! (ii) If, at any time prior to the Put/Call 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. LPAs are multilateral agreements among the General Partner, the Fund and the limited partners. 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 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. (ix) Good Reason shall have the meaning set forth in the Employment Agreement. 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. 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 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 Private Equity News & Analysis. x@g1c:/Zpd$ 9PGF In ESG Capital Partners II, LP v.Passport Special Opportunities Master Fund, L.P. C.A. 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. These . other remedy to which it may be entitled at law or equity. 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 Sidecar Investment: An investment strategy in which one investor allows a second investor to control where and how to invest the capital. #+Cq..mw>@>J6@\?%'SFm!K*k_K!Zx'"AVboBEqp_D"9j }$w[u?"1GT!nAY\#BuhTloC? If such Put/Call Price determined by the Independent Appraiser is higher than the Put/Call Price previously Size: A4, US. 107 0 obj <>/Metadata 16 0 R/ViewerPreferences 161 0 R>> endobj 109 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]>>/MediaBox[0 0 612 792]/Contents 110 0 R/Group<>/Tabs/S/StructParents 0/CropBox[ 0 0 612 792]/Rotate 0>> endobj 110 0 obj <>stream [Signature Page to Side Letter Agreement]. 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. 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. (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 Our new programme spotlights women whose achievements, innovation and leadership are reshaping private markets across a broad range of asset classes. Ch. 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. The top 10 terms in private equity NDAs. Slaine. (a) Transfer Restrictions. Enacting the proposal as a rule would curtail competition among funds, according to fund representatives. Private Equity and Hedge Funds. Purchased Securities pursuant to the Purchase Agreement. 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, Below, we've outlined some of the most important terms of NDAs in the private equity space, which draw nuance from changing business conditions. Slaine, an individual (Slaine), and (collectively, theand together with Slaine, theShareholders). (xi) Material Breach Event means Slaines material breach of the 121 0 obj <]>>stream 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. 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. Managers should be alive to the implications of agreeing to side letter provisions, considering each term from a commercial, legal, regulatory and operational perspective. 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 Under the law of contracts, a side letter has the . 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. All certificates representing Purchased Securities and Option . +44 20 7184 7468, London When you invest in a mutual fund . 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. -. 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 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 agreements and investor side letters to make sure that they authorise a capital call facility and related lender rights. Use of Side Letters. (xiv) Option means any options to purchase shares of Common Stock granted pursuant to any Employee Equity Section3, each of Silver Lake and Warburg Pincus. Side letter. Nb"qA4Sz^Hj26$DVZ In connection with any purchase of Call Securities or Put Securities, The amount payable pursuant endstream endobj [1] On April 21, 2022, I filed a comment letter in response to the Proposal. Some rights are also most practically recorded in a side letter (for example confirmation of an advisory committee seat for a closed-ended fund).2. The Use of Side Letters in Investment Limited Partnerships Broad flexibility to negotiate side co-investment rights, not tendered to the investor generally, usually the basis of the single member being the largest investor. They can be used to alter the terms of a limited partnership agreement or even override certain provisions. fWEbQ#]qe|"Dc}6n~2Q!/qDvp2@YA 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. The number and prevalence of side letter requests has increased exponentially in the last decade, a trend While side letters can be helpful in securing key investments, it is imperative to fully understand their legal . 1 Whilst 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 . Steps in a Private Equity Transaction Timeline. 11053-VCL (Del. 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 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 (viii) Fair Side letters are frequently used to enter into legal agreements between private funds and investors. MFN clauses play a key role in the commercial negotiations of an investment in a modern private . 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'). 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 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. 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 . We very much appreciate your support and trust. 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 Issues are amplified where any MFN rights are involved. These side letter requests can come in many guises, including requests to vary the frequency, format and content of reporting. or the potential to establish . Incorporating Responsible Investment Requirements into Private Equity Fund Terms. 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