Sign Delaware Arbitration Agreement Online

Document type sign arbitration agreement delaware online

in this module we go into more depth on the term sheet the term sheet is the single word document in the whole of the process of structuring a product a deal which summarizes all the essential elements of the deal so it will come after the initial contacts are made before the due diligence starts and before the final deal and in MMX as a document that will summarize this central aspects of the deal so for any person acting as an adviser to a company a good understanding of how a term sheet is structured is one of the essential elements of understanding private equity deal structuring and we've dedicated a whole module to the term sheet and alone for this very reason the term sheet is something that would generally be created by the p-funk manager and therefore it is important for any advisor to the company to be familiar with the term sheet so that the there's no they're not intimidated by it and that they know what to expect in the different clauses and they are in a position to best advise the company owner as to what aspects of the term sheet are crucial and which ones are less crucial and in this way they will they will be able to add a lot of value it's possible that a legal adviser might be involved with the term sheet but in many emerging markets countries legal advisors may have lumen limited experience of product II term sheets and that's why even though legal advisor may be employed it is important that the trusted advisor with knowledge of private equity would be the central focus of the negotiation of the term sheet from the point of view of the seller the objectives of modulate are users of a term sheet and its sequence in the investment process an illustration example we work through a sample term sheet as typical clauses both the binding and the non-binding aspects and finally we just we cover disputes and litigation in private equity users of a turn sheets and sequins in the investment process introduction private equity deals tend to be complex and require detailed documentation parties to an agreement may include one or more P funds the target company shareholders of the company debt providers in emerging markets enforcement issues are even more important there is a preference in private equity for agreements governing laws to be in jurisdictions which have good knowledge and experience of private equity preparation of the documentation the non-disclosure agreement known as an NDA is usually signed up front to protect the parties sometimes as a preliminary letter of interest or LOI side to show a tangible intangible interest and allow the party to have something in writing at an early stage and legal counsel will be required poses the term sheet phase documentation sequence at the Dini sourcing phase a nondisclosure agreement is signed and perhaps a preliminary matter of interest is issued at the stage of preliminary due diligence and negotiations eternity to side during formal due diligence we would then look at the first drafts of the final closing agreements in the final negotiation the sale and purchase agreement and other related agreements would be signed and enclosing any final documentation and amendments of the corporate articles of association would be executed non-disclosure agreement or NDA allows for the exchange of confidential information between the parties in private equity it tends to be in one-way bias as the target company does not need much info about the private equity fund there is usually close lifting the secrecy obligations if the information becomes publicly available in some other way bikini graduating points of an NDA are the term of the agreements the items covered and any potential monetary remedies in the event of a breach NDA obligations may be reconfirmed or amplified by further confidentiality agreements during the deal they tend to be difficult to enforce unless there is a specific and clamorous breach included the term sheet it's also known as the heads of agreement or letter of intent it is the basic preliminary agreement setting out key terms and modus operandi - closing it's usually non-binding except for exclusivity and confidentiality clauses the private equity fund and the seller use the term sheet to make sure there is a general agreement on the terms to be included in the final documentation the term sheet also allows parties to start regulatory and government approval processes if these are relevant to this transaction it also allows the parties to approach other finance providers such as banks mezzanine providers are the co-investing private equity funds or Co investing LPS in the term sheet one of sensitivity can be that of which party is going to be paying the due diligence and other transaction costs and there's both in the case of a broken deal and other words deal doesn't conclude or a successful deal the term sheet can be signed at slightly different points in the transaction it can be signed at a very early stage or after a little bit of due diligence and negotiation but not too much some of the main items covered in a term sheet will be the amount of the investment the type of financial instrument the type of security that will be deployed and the percentage ownership as a results what use will be made of the new front injected into the company any incentive mechanisms for management's what are the exit agreements for the priority front exit their investments one of the veto rights that are going to be given to the private investor any changes in management as a condition of the deal what are going to be the steps to closing what are going to be the reporting requirements of the company post investments what are the cost of due diligence and the confidentiality agreements and the typical length of a term sheet would be something between 1 and 50 pages but most typically in between 12 or 2 or 25 pages question 1 what is the process and documentation sequence in a private equity investment please select one answer a preliminary due diligence and negotiation deal sourcing formal due diligence final negotiation in closing be deal sourcing preliminary due diligence and negotiation formal due diligence final negotiation and closing see preliminary due diligence and negotiation deal sourcing closing formal due diligence and final negotiation we're here explain some terms commonly found in specifically venture capital term sheets so referred to early stage companies and startups 2 minute of dividends means that the dividends would not be paid out in cash and would just be rolled up until the exit point liquidation preferences means that the firm shareholder would get first round on the liquidation and these can be participating not participating and participating participating means that the professionals would get a double benefit of liquidation preferences reverse vesting this would mean that the founders original founders entrepreneurs will actually leave their shares if they leave the company and usually the vesting happens over about 4 years with a TIF arrangement in other words the entrepreneurs have to stay for at least four years in order not to lose their shares anti-dilution this is a clause which protects the private investor in the cases of further financing round at a lower valuation pay-to-play means the private investor who doesn't participate in a future financing round may get the end references downgraded to comment employing poor effective refers to stop option grants to management the silent gorgeous agreement also known as the s PA is the main contract between the private active fund and the shareholders governing the terms of the transaction it reflects the key points of the due diligence the company valuation the deal pricing the deal structuring the future government corporate governance and the exit strategy that has been agreed two stages of the transaction are signing and closing most often these are staggered the acquisition could be structured as a purchase of I have equity shares or as assets and the certain purchase agreement may be supplemented by separate shareholders agreement as well key provisions of the SP a purchase of sale the priority fund purchases equity or assets of the cotton company the price is specified the price can be fixed at signing or adjusted at closing there's usually a long stop date by which the till the deal must be closed or terminated post assigning representations and warranties representation is a statement of a fact that is material to the transaction warranty is a confirmation that the statement made is true remedies for breach of representations and warranties could be termination to greement or damages covenants a covenant is a promise by a party to the agreement to refrain from taking certain actions before and after closing affirmative covenant is an action a party is required to take a negative covenants is an action a party must refrain from the purpose of pre-closing covenants is to ensure the buyers finds the company in the same condition at closing then assigning the purpose of post closing covenant relates the performance of target of the target company in other words it allocates the risk post closing indemnification this sets out that monetary remedy is protecting a party from losses it gives certainty of rights and responsibilities in the event of a breach s4 accounts can be sometimes used to guarantee payment conditions precedent these are events that must be waived or satisfied for the transaction to proceed if the condition precedent is not met the other party can walk away from the transaction pre closing condition precedents are the most commonly found in agreements these can be company specific items or they could be regulatory requirements material adverse change the MACC Clause allows the buyer to walk away in the case of a material event that impairs the value of the company the MACC Clause is used as a catch-all term to cover events not covered by precise specific clauses the buyer will seek a wide definition a flexibility the seller will seek a narrow definition in order to not give the buyer unfettered excuses to leave the deal termination rights these describe the circumstances under which a buyer party named walk away from the transaction post signing and it often includes provisions imposing break up things or the party terminating the agreement dead commitment letter this is a letter from a bank which is participating typically in a buyout transaction it will be addressed to the acquisition vehicle arranged by the leader range of the debt it will often be required by the seller before signing to make sure that the buyer has all the funding in beans to proceed with a leveraged buyout it will be subject to specific closing conditions such as an execution of a full-blown agreement equity commitment letter this will be a letter addressed by the private equity fund to its acquisition vehicle providing a limited guarantee of equity funding to the vehicle it also may be a letter from equity co-investors in a club deal used by the lead investors to show that the equity part of the arrangement is fully funded as per agreement an escrow agreement is a mechanism to enforce claims resulting from a breach of agreements or underperformance based upon a formula one of the parties usually the seller will put funds into an account controlled by a third party whose actions are regulated by the escrow agreement it is also possible to have shares in an escrow arrangement the escrow agent will turn over the cash or the shares to the party who can substantiate a claim escrow agreements become more important as the jurisdiction is less reliable for enforcement bank guarantees can also be a substitute for escrow agreements for some items shareholders agreement an agreement separate from the main s.p.a between the private equity fund and the selling shareholder it tends to cover items which are specific to relations and Arrangements between shareholders examples of this are exit Arrangements put call options dragon tagging all rights it will control provisions of the investments it can be more flexible and using articles of association it covers a range with relating to adjustments and shareholdings related to ratchet mechanisms and it has advanced of confidentiality as it involves only the shareholders by our debt documentation in the case in the case of leveraged buyouts there will also be a debt elements to the structure one would be a loan agreement this would be an agreement between the debt provider and the leveraged buyout SPV special purpose vehicle and this will contain the main terms the conditions precedent the covenants the default events the other type of debt documentation with the inter creditor agreements and this will govern rank rankings among the different debt providers in a leveraged buyout the secured lender the first second lien the junior debt holders it will cover the owner of claims the subordination of the lien stands to appearance pain blockages and limits as part of any project to deal there'll be a shareholders agreement signed typically as well as eventual modifications in the articles of association of the company articles of association are more regulated by statute and will focus more on economic rights the shells agreements are private documents and we'll define control and more complicated the economic rights so they are angled covered shareholder structure liquidation preference dividend rights and the basic rules of the share assembly in the board the sales agreements would come aboard arrangements veto rights share transfer agreements and other features such as dragon tag alone rights ratchet and other arrangements one of the important it's in any product agreement is the choice of jurisdiction for the agreements and in many cases primary opt this usually ends up being a large developed country jurisdiction let me give as an example if I'm a private equity fund from Spain and I'm negotiating an investment in a company in better Russia it's very likely the Belarusian company is not going to be comfortable to Spanish law and it's quite likely that the Spanish company is not going to be comfortable with Belarusian law because now they are familiar with it and so what tends to happen in international private agreements and many of them are because the proactive funds are usually incorporated in other jurisdictions is that the part that will decide to choose a jurisdiction with which they are both comfortable or can both accept and in in most cases in private equity this will end up being a jurisdiction such as English law or a US law southern district of Manhattan and others or perhaps a major European law such as German or French law in some cases with smaller deals or very local private equity funds doing let's say for example Serbian private equity fund investing in a Soviet company then is perfectly expected expected and possible that certain law would be would come to play but unless we're talking about a purely domestic investment fund you should expect that most private agreements will be structured under a different jurisdiction than the one of the company in which the the in which the company is located the country in which the company is located it is possible to have the agreements governed by by such a jurisdiction and the other choice that comes in when it comes to dispute resolution is the choices between using courts or international arbitration and is very common in private equity to you international arbitration but of course the party should seek independent legal advice for a specific deal as to whether the arbitration is the correct choice in terms of being enforceable for example question 2 which documents are included in the shareholders agreements please select all relevant answers a board arrangements B share transfer Arrangements C veto rights D shareholder structure illustration example we work through a sample turn sheet and it's typical clauses please note that the term sheet includes both binding and non-binding aspects the first session is investment 1.1 amount the total amount which will be invested both as money out and as money in we may specify the distinction in his Clause 1.2 valuation the pre-money and all post-money valuation basis upon which the in estment will be made 1.3 valuation adjustments in case of any shortfall emerging during subsequent due diligence this Clause deals with an eventual mechanism to adjust the valuation to reflect this typically will be a year for your adjustment based on net asset value 1.4 capitalization table there will be a table in the appendix showing the ownership structure pre investment and then post investment 1.5 instruments specification of the type of financial instruments in which the private equity investment will be made example preferred shares ordinary shares 1.6 timing of investment when the money will be transferred any deferred payments will be specified here 1.7 use of France there will be an appendix table showing in detail how the money in part of the funds will be used Session two conditions of investment 2.1 conditionality any conditions for the deals are closed means will either be conditions precedents or conditions and decedent to point to due diligence specification of the type of due diligence which shall be performed on the company prior to closing the cost of due diligence and which party shall pay for them will also be specified both in turn in case of a deal completing and in case of a broken deal 2.3 co-investment specify whether the lead investor will bring in any other private equity francisco investors on this deal 2.4 share options specify whether a share options scheme will be introduced for key managers employees and all board members 2.5 ratchet mechanism a ratchet mechanism means that there may be adjustments to the share Holdings link to the future results of the company section 3 good leave a bad lever 3.1 good leave a badly the present provisions specify under which conditions an employee will be considered either a good or bad lever this is important for the compensation structure especially the stock options one of the main objectives is to protect the company from key staff taking trade secrets to the competition section for terms of investments 4.1 representations and warranties statements made by management regarding the financial condition of the company list of specific statements for point to Board of Directors define the agreed structure of the new board of directors such as how many seats the investor will have any provision for an independent director 4.3 Veta rights the tamer which specifies a list of decisions which require the approval of a private equity director even if the priority fund has a minority stake this will curtail the power of the majority shareholder 4.4 corporate committees Clause specify the formation of more subcommittees such as an audit committee Remuneration Committee hiring committee 4.5 managerial appointments tools dealing with any changes in management as part of the investment such as the appointment of a new CFO and a method of selection 4.6 reporting introduction of auditing and reporting systems in the company post investment such as quickly monthly reporting commitment to implementing an Mis system 4.7 share acquisitions first refusal dragged along tagged among deals with future shared transactions among the parties to the transaction regulates the effects of a party selling or a third party making an offer for shares relevant to the exit strategy 4.8 exit strategy agreement as to how the parties will pursue an exit at a future time maybe a structured agreement or a general statement of intent 4.9 undertakings any other miscellaneous requirements or any other party to the transaction 4.10 service agreements any requirement that management and key employees enter into proper employment contracts which reflect the transaction and its requirements upon employees 4.11 team a specification of which employees are considered key men mainly a requirement the company take out insurance for them 4.12 monitoring fee fees charged by the private equity investor for acting as board members as well as further fees for work done in supporting the company 4.13 transaction costs specific specification of who bears which costs this would include due diligence costs as well as eventual brokered deal cost compensation to the primary routine mister section 5 confidentiality 5.1 confidentiality clause specifying that the contents of the term sheet are confidential this is a binding force 5.2 NDA undertaking commitment by the company that it will ensure its office as employees ends into further NDA agreements which will reconfirm and amplify the floors above section 6 applicable law 6.1 law specification of the jurisdiction whose loss of govern the agreements 6.2 dispute resolution mechanism for resolution of disputes typically choice between courts or arbitration procedure section 7 expiry date 7 point 1 deadline there will be a time limit on the validity of the executed term Sheen which will govern the exclusivity period there may also be a deadline specified for the other party to sign from the moment the P investor science so that the offer is time limited sexual aids exclusivity 8.1 exclusivity specifies that during the period of the term sheet the seller may not negotiate with any other party may also specify that the private investor may not negotiate with a direct competitor 8.2 breakup fee fees payable by the seller in the event of a broken deal circumstances under which the breakup takes place are also specified section 9 lingual relations 9.1 no intention to create legal relations legal clause amplifying the fact that the term sheet is to be considered non-binding or at least conditional on there's other events section 10 exclusions 10.1 exclusion of representations and warranties there may be some items which are being disclosed as items of concern which are then listed as exclusions from the general blanket statements made in the representation section section 11 model documents 11.1 document templates parties may agree to base their agreements upon some model documents such as the British Venture Capital Association or the North American Medical Association templates this is done to reduce legal fees binding versus non-binding term sheets typically term sheets will be non-binding except for costs exclusivity and confidentiality clauses confidentiality the parties commit to keep the transaction confidential exclusivity the parties will only negotiate with each other during the specified period cost due diligence and burger and feed costs will be binding as a practical issue one should be very careful to note that some courts may consider the term sheet a binding agreement in the event that it is very long and details so one has to get legal advice and be careful about the jurisdiction of choice for the agreement in this section we consider disputes and litigation in private equity transactions litigation and private equity like many other financial transactions is always a last resort and can be difficult and expensive the two choices are to go to court or to go to arbitration in the case in the case of the courts it turns to be expensive it tends to be lengthy the court may lack knowledge of private equity depending on the jurisdiction but the enforcement is usually clear at least from a domestic point of view although there may be problems in enforcing one the judgment one jurisdiction into a different one arbitration it's generally cheaper depending on the type of arbitration procedure chosen the parties are able to influence the choice of the arbitrator meaning they are able to appoint somebody with expertise in private equity it's in general faster but enforcement can be more of a problem than in courts they can be a problem at the level of X equal table which refers to the fact we have to take the arbitration having given court status they can be counted arbitration starts by the other side to muddy the waters there can be a nullification proceeding started to set aside the arbitration which is different for appeal and we can have non-recognition of the arbitration by certain courts here we are line some of the relevant concepts we may find in litigation these refer to the level of culpability and we give their discretion description of these the terms may vary a lot according to the jurisdiction but we give the terms according to English law and the advantage of that is that these four terms are clearly legally defined and well understood by the parties for a person has acted dishonestly with the intent of making a game for themselves or anyone else or fixing a loss or a risk of a loss or another willful misconduct a person who willfully misconduct himself who knows and appreciates that it is wrong conduct on his part in the existing circumstances gross negligence gross negligence is a conscious and voluntary disregard of the need to use reasonable care which is likely to cause foreseeable grave injury or harm to persons property or both it is conduct that is extreme when compared with ordinary negligence negligence simple negligence means negligence which is neither gross not wanton it means the failure to use what we care it differs from gross negligence in degree but not in kind some further irrelevant legal definitions exculpation this is a contractual provision that relieves the party from any liability resulting from a negligent or wrongful act indemnification is a contractual provision in which one party agrees to answer for specific one specific liability or harm that the other party may incur common arrangements in private equity funds regarding indemnification of exculpation may have an impact on a deal structure so it's important to understand the presence of these internal indemnification it's a typical provision that the partnership will indemnify the general part of the manager there idiots the persons involved friendly liabilities occurred in connection with the partnership external indemnification this focuses on the relation between the fund and an external service provider the service provider will not be liable to the partnership or its LPS and will be indemnified to a certain level exculpatory cause it closes this provides at the GP and its affiliates shall be liable for costs and expenses from mistakes of judgment then the above will generally be tempered by legal restriction or broadheads clauses and exceptions for willful misconduct or fraud working with legal counsel private equity it's possible to get to the term sheet stage without using new counsel if the private equity manager has a sufficient experience and uses a jurisdiction which is familiar to him such as for example English law legal counsel like other service providers is looking for work and is paid by the hour litigation insurance could be an option that is often available or not cost-effective particularly private equity in developing markets local counsel may lack private equity expertise and finally we have the diplomatic issue of engaging with the incapable legal counsel of a seller so a seller may hire legal counsel who's somebody who knows them they're comfortable with but there's no private equity knowledge and may get in the way of executing a successful deal and this requires some diplomacy and negotiations question 3 what are arbitration characteristics please select all relevant answers a enforcement of clear be cheaper depending on procedure C can influence choice of arbitrator D faster in general in this exes we present the attendees of the course with a black term sheet which has already been structured according to the lecture its module and we then present you with a situation of a preliminary agreement and you're required to translate that into a church sheet for this is a very useful exercise in terms of deal structuring so finally I would like to express my thanks to the World Bank for allowing me to profession of the course that I developed with them put it online my websites links for that certainly all the modules this module and all further modules will have a certain amount of case studies and additional materials attached to the module which are part of the learning experience these materials I will be posting on a specially created group that I have made in LinkedIn called Gavin Ryan ping course all you have to do is search a VIP group and the group will come out for you to join you who are following this course you'll be eligible to join my group and get these additional materials once you've connected to me only in and once you've subscribed to my youtube channel so when I receive the requests to join this group I will check these two things and then I will admit to you to the group so thank you very much for your attention I hope you've enjoyed this module and I look forward to seeing you on the next module you