side letter agreement private equity

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 (xvi) Purchase Price means the per-share consideration paid by the Shareholders for the Deficiencies in this area can result in negative written findings at the conclusion of an examination and, in sufficiently serious cases, could result in an enforcement referral. co-investment rights, not tendered to the investor generally, usually the basis of the single member being the largest investor. (including the amount of Non-Exercised Call Securities) and, in such event, such other Sponsor (and/or its assignees) shall have a right to exercise such Call right with respect to all or any portion of the Non-Exercised Call Securities pursuant to 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 -. 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). Teaser Sent by Bankers. 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, This Side Letter Agreement (this Agreement) is made as of August4, 2010, by and among Igloo Holdings Corporation, a Delaware corporation (the Company), Mason 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 Finally, as a technical drafting point, side-letter covenants should be carefully drafted to ensure that the correct party is making the covenant. The Use of Side Letters in Investment Limited Partnerships Broad flexibility to negotiate side Sidecar Investment: An investment strategy in which one investor allows a second investor to control where and how to invest the capital. 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. Our new programme spotlights women whose achievements, innovation and leadership are reshaping private markets across a broad range of asset classes. The MFN exercise ensures that all investors who are allowed to see/elect to receive other investors side letter provisions are presented with their options within the agreed timeframe. Side agreements help private equity and hedge funds attract investors. among the parties with respect to the subject matter hereof. 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. Similarly, the staff observed private fund advisers that set up undisclosed side-by-side 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. 3 0 obj 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. 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 This Agreement and the other agreements referred to herein set forth the entire understanding 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. 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 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. 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 investor fills out a form documenting his or her suitability for investing in the partnership. EEA based AIFMs are also subject to an additional requirement to ensure the fair treatment of investors. The private equity fund will generally be required to include the OID in income as "phantom income" as it accrues. 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). The Shareholders acknowledge and agree that the Purchased Securities and any other equity securities of the Company or any of its Subsidiaries that the Shareholders shall 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). 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. 1. 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"). BROUGHT AND ENFORCED EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFOR) THE U.S. DISTRICT COURT FOR THE DISTRICT OF DELAWARE, AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF the Purchase Agreement. RECITALS . 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 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. Side letters are an (increasingly) common way of formalising negotiated arrangements between a private fund and an investor. 2 0 obj <> endobj 4 0 obj <>stream 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. 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 . Any time parties enter a contract, whether it is for sales, purchases, an acquisition, or any other contract, there is a possibility that the contracting parties will create an agreement outside of the formal . 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 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 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. (xv) Option Shares means the shares of Common Stock issued to Slaine upon the exercise of MFN. 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. 7. 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 If such Shareholder timely delivers such an If any provision of this Agreement Put). 11053-VCL (Del. 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) 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 amended from time to time, the Employment Agreement). private equity and real assets sectors. Agreement can be amended only by an instrument in writing signed by (x)each of the parties hereto and (y)solely with respect to Section3, each of Silver Lake and Warburg Pincus. Enhanced reporting and information rights. This article provides an overview of common side letter terms and current themes in the private fund market. Rather than a privately negotiated side letter process . the terms and conditions of this Section3 in the same manner as the Company. -. In this key features document, we briefly highlight some considerations relevant to the use of side letter arrangements in Irish ILPs. All covenants, agreements, representations and warranties made herein shall 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 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. or valuation firms. The typical management rights letter provides the fund with the minimum . 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 Accordingly, it is agreed that the Company shall be entitled to an injunction, restraining A side letter is an agreement apart from the main agreement (e.g. 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 Parties to a side letter negotiation should seek advice on the particular transaction in light of their circumstances. . side letters. 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'). Sometimes these side letters are borne of necessity for the investor to enter into the fund, either due to regulatory . Slaine without Good Reason and a Material Breach Event has not occurred prior to the Put/Call Closing Date, a price equal to the lower of (x)the Fair Market Value of (A)with respect to any Purchased Securities, such Call Securities as of (c) Exercise of Put. <> 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 employment of Slaine at any time or for any reason whatsoever, with or without Cause. 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 is determined to be invalid, illegal or unenforceable by any governmental entity, the remaining provisions of this Agreement, to the extent permitted by law shall remain in full force and effect provided, that the essential terms and You should . (ix) Good Reason shall have the meaning set forth in the Employment Agreement. 15 February 2023. 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 April 15, 2021. 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, shall be null and void. (a) Entire Agreement; Third Parties. (f) respect to such Call Securities as determined in good faith by the Board. A blanket consent is therefore not advisable. 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 e.g. 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. A little over a year ago, the Delaware Court of Chancery issued a forceful reminder that not all side letter agreements are enforceable. Confidentiality agreements are the foundation of NDAs and are indispensable in the assessment of any company. 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. 19, No. (ii) Call Securities means (I)in the event Slaines employment is terminated by US companies. (i) This However, they pose certain distinct issues with respect to side letters which can be problematic, particularly where the lenders ability to take security is compromised or the borrowing base is otherwise restricted. This document is not legal advice and should not be relied on as such. #+Cq..mw>@>J6@\?%'SFm!K*k_K!Zx'"AVboBEqp_D"9j }$w[u?"1GT!nAY\#BuhTloC? The ESG Capital Partners Case serves as an important reminder that private fund managers, investors and practitioners should always consider the following points to ensure enforceability of side letter agreements: 1. and the representations, warranties, covenants and conditions set forth below, the parties hereto, intending to be legally bound, hereby agree as follows: 1. First, a quick summary of the events leading up to the . [Signature Page to Side Letter Agreement]. the agreement as between the general partner and an investor. [2] My letter addresses what appears to be one of the most profound . Issues are amplified where any MFN rights are involved. (i) (l) Stock Splits and Similar Transactions. (m) Employment by the Thanks to the $2 trillion . Shareholders waiver of his or its rights to trial by jury. (c) Legends. Boards Determination of Put/Call Price. x[}S7KJbI!++[mT%,@te5[qfVgo.z^xW/Y-W"F4(e3zo\62[_kcLm95/^e.w]sKh0+(p e9 /drePPnY)EmqY'{mmy;rYm +u'lwogjfY6fV8yg_on@,~Vn3jva9[)>{Izscl_-rEvC_ k g_\_k:w+`-q)\iwvm~ n[; x%-{gglw/qG3:9[->[-tNuCGkAiz%Njqll G L Ye`[n6nK-v^lASRTKCv}A$X3a$j$FG+t,JX.9{ ^y!E 6}9b'Fsqy Side letter agreements have long been used in private equity fund investments to supplement or interpret the terms of a partnership agreement and related documents. conditions of this Agreement for all parties remain valid, binding and enforceable. 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. 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. 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 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. Any such terms should be both commercially appropriate and operationally practical for the fund and its manager. agreement (or related side letters), such as limiting outstanding debt to a . 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. . Certain investors will require side letters, providing them with additional . 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