side letter agreement private equity

Upon the exercise of any Put or Call pursuant to this Section3, (i)the Company shall, on the Put/Call Closing Date, purchase such Call Securities or Put Securities, as Transfer rights are particularly relevant in the closed-ended fund context where an investor cannot redeem from the fund should it wish to. the employment of Slaine at any time or for any reason whatsoever, with or without Cause. 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. or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 11053-VCL (Del. This article provides an overview of common side letter terms and current themes in the private fund market. Silver Lake and Warburg Pincus) shall have the right, but not the obligation, to purchase, from time to time, all or any portion of the Call Securities then owned by any Shareholder or any of his or its Permitted Transferees (a Forms of side letters often have all fund parties (i.e., the manager, 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. 19, No. ( Check out our private equity due diligence playbook) Institutional and accredited investors dedicate large sums of money for private equity investments. N~o@XR" i The amount payable pursuant 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 The sidecar investment will usually be used when one of . (k) Governing Law; Jurisdiction. 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 Each Put Notice shall set forth the Put Securities applicable to such Put. Steps in a Private Equity Transaction Timeline. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and representatives. 15 February 2023. 106 0 obj <> endobj 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). to the Company free and clear of all liens, claims or other encumbrances by delivering to the Company such instruments of transfer as shall reasonably be requested by the Company. Safe: Valuation Cap, no Discount Some investors may have genuine tax related concerns (for example, the need to be supplied with K-1 schedules in order to prepare their US tax returns) or regulatory reporting issues (such as the need to comply with the Solvency II Directive (2009/138/EC)). Enhanced reporting and information rights. affording the single member special rights, e.g. 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). 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 . 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 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. agreements and investor side letters to make sure that they authorise a capital call facility and related lender rights. 1) In certain circumstances the manager may also be a party. 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. Any Transfer in derogation of the foregoing Company. This letter agreement will confirm the agreement between us and you ("you" or the "Investor"), effective as of the . Side letters supplement the terms of a funds constituting documents, so they should be considered whenever these documents are consulted. However, such provisions may be acceptable if sufficiently disclosed to the other investors who are able to take the information into account when making their investment decision. Environmental, Social and Governance ("ESG") concerns. From a U.S. Securities and Exchange Commission ("SEC") perspective, there is concern about an investor being given preferential treatment in a side letter that may have a negative impact on other investors, such as preferred liquidity and information rights. 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 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 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 Breach Event. 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 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. Inspire awe in others with the right use of this private equity investment proposal template. 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. 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. . Canadian private equity and venture capital funds are often structured as limited partnerships which are governed by limited partnership agreements (LPA). Requests for management rights letters are fairly common in today's market and do not impose significant burdens on . 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 Under the law of contracts, a side letter has the . A subscription agreement can also be used to sell stock in a privately owned business. 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. ) =]xIm"LU5-N%v$TjG&VD#ZWU_JP3HCcQp/&z@H2WK$#0IP)Z:*ji(Zz6HLOCh}4=R\{x9+O ;V= l xO!{Qxy2 a# g7@ [V: +6k.:f*`h+g~sc[u-)goO.wYKc{v8/q6C1:s13 7#e}m S~sq`]EX62 -. <>>> for any reason (other than by the Company for Cause or by Slaine without Good Reason) and a Material Breach Event has not occurred prior to the Put/Call Closing Date, a price equal to the Fair Market Value of (x)with respect to any Purchased [Remainder of page intentionally 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. A letter agreement between a single member of an investor syndicate . 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). First, a quick summary of the events leading up to the . (x) Independent Appraiser means an independent investment banking or valuation firm jointly selected by the Company All 1. MFN clauses play a key role in the commercial negotiations of an investment in a modern private . (xvi) Purchase Price means the per-share consideration paid by the Shareholders for the They can be used to alter the terms of a limited partnership agreement or even override certain provisions. 1 0 obj For example, a fund of . as of such date equal to the Permitted Transfer Share Amount. United Nations-supported Principles for Responsible Investment (PRI) offers guidance on the placement of ESG provisions in LPAs and side letters on pages 13-14 of their Incorporating Responsible Investment Requirements into Private Equity Fund Terms report. This document is not legal advice and should not be relied on as such. 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). 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. 3) In some circumstances an MFN is included in the funds constituting documentation rather than being agreed separately by side letter. IN WITNESS WHEREOF, (a) Most Favored Nation. -. When you invest in a mutual fund . A side letter is a side agreement between the company and the investor made at the time the investor invests in the SAFE. 4 0 obj WHEREAS, the Shareholders, on the one hand, and Warburg Pincus . (ix) Good Reason shall have the meaning set forth in the Employment Agreement. A blanket consent is therefore not advisable. held by the Sponsors and their respective Permitted Transferees immediately prior to the consummation of the IPO. PEI Staff. Author: Dan Brecher. Exhibit 10.18 SIDE LETTER AGREEMENT . (B)the earlier of (x)the fifth anniversary of the Closing Date and (y)the 25% Float Date; provided, however, that following the six month anniversary of the consummation of the IPO, the Other Shareholder Restricted (e) Survival. back to such Shareholder (or to another Permitted Transferee of such Shareholder) any Purchased Securities or Option Shares he, she or it owns if such Permitted Transferee ceases to be a Permitted Transferee of such Shareholder prior to the end of 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 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 ability to request further information from the manager is also commonly included in the private placement memorandum, with summaries of side letter rights typically made available. (ii) No failure or delay by any party in exercising any right, power (xx) Put/Call Termination Date means (I)in the case of the exercise of a Put or Call with respect to any Sidecar Investment: An investment strategy in which one investor allows a second investor to control where and how to invest the capital. % Side Letters. All certificates representing Purchased Securities and Option 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. If No. 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. 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 (f) EEA managers should bear this requirement in mind when deciding whether to agree to a particular side letter provision. (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 determined by the Board, then the costs and expenses of such Independent Appraiser shall be borne by the Company. 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. Including appropriate provisions to accommodate a capital call . The use of side letters is becoming a common theme amongst investors . 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 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. 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). +971 4 425 6338, London 121 0 obj <]>>stream the terms and conditions of this Section3 in the same manner as the Company. 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 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 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), In ESG Capital Partners II, LP v.Passport Special Opportunities Master Fund, L.P. C.A.

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