Advanced Private Equity Term Sheets and Series A Documents

  • ID: 3511145
  • Book
  • Region: United States
  • ALM Media, LLC
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“If you have a desire to understand from top to bottom the terms of a private equity transaction and why each term/clause/section is negotiated in or out of a deal, then you should purchase this book. In short, it is an excellent desk companion for any private equity professional.” — Paul J. Marino, Visionaries: The Young Venture Capital Society NewsletterSucceeding in the venture capital industry requires knowledge of the terrain and a keen understanding of the terms essential to a well-structured transaction. This encyclopedic guide is packed with state-of-the-art analysis, forms and commentary, all designed to help you master the most crucial stages of the venture financing process.

The Advanced Private Equity Term Sheets and Series A Documents book with a CD examines all of the deal terms you may encounter—anti-dilution protection, warrant coverage, liquidation preferences, and others. It provides clause-by-clause discussion of the Stock Purchase Agreement, along with time saving tools, such as model documents, opinion letters and a due diligence checklist contributed by a Big 4 accounting firm. You'll also get the most current data from an industry-wide survey of West Coast and East Coast deal terms and trends, so you'll know whether a given provision is “market” or “industry standard”—a must before your next negotiation. Whether you are dealing with claw back provisions or “next round financing”, cram downs or the “overhang problem”, this definitive book brings you the in-depth, nuanced answers you need to achieve your objectives.

Book #00673; loose leaf with a CD, one volume, 1,416 pages; published in 2003, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-120-0.
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Chapter 1: Introduction to Series A Financing: Glossary of Terms
§ 1.01 Introduction to Venture Capital
§ 1.02 Glossary of Terms

Chapter 2: Model Term Sheets
§ 2.01 The Term Sheet
[1] Model Term Sheet: Series A Preferred Stock
[a] Note on “No Shop, No Solicitation” Clauses
[2] Model Exclusive Dealing Provisions
[3] Model Term Sheet: Series B Preferred Stock
[4] Binding Obligations Inadvertently Created by the Term Sheet
[5] No Such Thing as Boilerplate
§ 2.02 Counsel’s Conflicting Roles in Drafting Term Sheets
§ 2.03 “Play or Pay”
[1] The Return of “Play or Pay”
[2] Dealing with the Holdout Who Won’t Play or Pay
[3] The Benchmark Case
§ 2.04 Terms: The Economic and Practical Impact
[1] Valuation
[2] Savage Terms
[3] Dilution, Dilution, Dilution
§ 2.05 Valuation: Model Resolutions of Special Meeting of the Board of Directors Establishing Fair Market
§ 2.06 Piercing the Corporate Veil
[1] Introduction
[2] Traditional Veil Piercing for Shifting Common Law Liability Within Corporate Groups
[a] Limited Shareholder Liability and Traditional Veil Piercing
[b] Piercing Based on a Single Factor
[3] Alternative Doctrines
[a] “Enterprise” Theories
[b] Agency and “Quasi-Agency”
[4] Veil Piercing Can Permit Courts to Reach Good Results
[a] Problems with the Identity of the Contracting Party
[b] Asset Manipulation and Contract Performance
[5] Piercing the Veil in Corporate Groups—Asking the Wrong Questions
[6] Piercing the Veil in Corporate Groups—Asking the Right Questions
[7] Conclusion

Chapter 3: Series A Round Definitive Documents
§ 3.01 Model Stock Purchase Agreement
[1] Representations and Warranties
[a] Representation and Warranties Insurance as a Strategic Negotiation Tool for Dealmakers
[2] Material Adverse Change
[3] Environmental Representations
[4] Covenants
[5] Time Limits
[6] Baskets and Thresholds
[7] Credit for Tax Benefits
[8] Hart-Scott-Rodino
[a] Covered Transactions
[b] Size-of-Transaction Test
[c] Size-of-Person Test
[d] Valuations
[e] Exemptions
[f] Reporting Requirements
[g] Waiting Period; Second Request; Penalties
[h] Tiered Filing Fee Structure
[i] Making the Proper HSR Act Determination
[9] Model Schedule of Exceptions
[10] Disclosure Schedule
[11] An Efficient Solution for Multiple Closings
§ 3.01A Stock Purchase Agreement (Series A)--Biotech
§ 3.01B Preferred Stock Purchase Agreement (Short Form)
§ 3.01C Term Sheet: Series A Preferred Stock
§ 3.02 Model Subscription Agreement, Convertible Preferred Stock
[1] Subscription Agreement
[2] Subordinated Convertible Promissory Note
§ 3.03 Model Stockholders Agreement
[1] Controlling Shareholder and/or Director Liability
[2] Model First Refusal Agreement
[3] Note on Limiting Rights of First Refusal and Information Rights to “Major Investors”
§ 3.04 Model Common Stock Warrant
[1] Warrant Anti Dilution In Case of a Down Round
§ 3.05 Model Registration Rights Agreement
[1] Terms of Registration Rights Agreement
[a] Background
[2] Expenses
[3] Rule 415 “Shelf” Registrations
[4] Indemnification for Secondary Offerings
[5] Lockups
[a] Serial Lockups
§ 3.05A Registration Rights Agreement (Short Form)
§ 3.06 Sample Opinion Of Issuer’s Counsel
[1] Note on Opinion of Issuer’s Counsel
§ 3.07 Series A Convertible Preferred: Model Certificate of Designation
[1] Preferred Dividend PIK Feature
[2] Participating Preferred and Variations
[3] Conversion Rights
[4] Exception to Definition of Dilutive Issuance
[5] Full Ratchet and Weighted Average
[6] Internal Revenue Code § 305
[a] Redemption Provisions
[b] Antidilution Provisions
[7] Exploding Preferred, Redeemable at the Option of the Holder
[8] Broad-Based Weighted Average
§ 3.07A Confidentiality Agreement (Short Form)
§ 3.07B Non-Disclosure Agreements
[1] Non-Disclosure Agreements In Venture Capital Transactions
[a] Industry Custom
[b] Best Practices
[c] Summary
[2] Non-Disclosure Agreement: Venture Capital Fund and Prospective Portfolio Investment
[3] Model Non Disclosure Agreement (Alternate Form)
§ 3.07C Model Indemnification Agreement (Compact Model Form)
[1] Introduction
[2] Model Indemnification Agreement
§ 3.08 Model LLC Agreement
[1] Model LLC Agreement: Long Form
[2] To ‘LLC’ or To ‘C’: That is the Question
[3] Model LLC Agreement: Alternative Form
[4] Second Amended Model LLC Agreement: Long Form
§ 3.09 Full-Ratchet Weighted Average, Broad-Based Calculations
[1] Weighted Average Anti-Dilution
[2] Narrow-Based v. Broad-Based Weighted Average Anti-Dilution
§ 3.10 Due Diligence Checklist

Chapter 3A: General Partner Issues and Documentation
§ 3A.01 General Partner: LLC Agreement
§ 3A.02 Model LLC Agreement for Advisers Fund
§ 3A.03 The General Partnership Vehicle as an LLC
[1] Venture Funds: Don’t Fear the LLC
§ 3A.04 Placement Fees as Organizational Expenses
§ 3A.05 Side Letters and Special Treatment of Limited Partners
[1] Shortened Time for Redemption
[2] Side Deals
[3] Issues of Transparency
[4] Self-Imposed Restrictions
[5] Defaulting Partners
[6] Unanswered Questions
§ 3A.06 Co-Investment Rights for LPs: Sample Side Letter
§ 3A.07 [Reserved]
§ 3A.08 Limited Partner’s Right to Obtain Access to Identities of Other Limited Partners
[1] Background
[2] The Court’s Analysis
[3] Conclusion
§ 3A.09 Model Side Letter with State Pension Plan Trustee
§ 3A.10 Inadequate PPM Disclosure
§ 3A.11 Mandatory Registration
[1] Registration of Finders
[2] Business Brokers Not Required to Register as Brokers
[3] SEC’s Warning to Unregistered Finders
§ 3A.12 New Rules of the Road for Advisers to Private Funds
[1] Applicability to Advisers of Private Funds
[2] No Applicability to Foreign Private Advisers
[3] Requirements Under the Act
[4] Conclusion
§ 3A.13 Secondary Trading of Limited Partnership Interests in Private Equity Funds
[1] Why the Secondary Market Is Growing
[2] What Terms to Look for in Secondary Market Transactions
[3] Conclusion
§ 3A.14 Creditors Of Insolvent LLCs Do Not Have Derivative Standing
[1] Background
[2] Court of Chancery Ruling
[3] The Supreme Court Decision
[4] Conclusion
§ 3A.15 Limiting Your Liability: Protect Yourself with a Well-Written General Release

Chapter 4: Fiduciary Duties of Controlling Shareholders in Down Rounds
§ 4.01 Introduction to Down-Rounds
[1] Common Down-Round Characteristics
[a] Lowered Valuation
[b] Staggered Financing
[c] Increased Liquidation Preferences
[d] Participating Preferred Stock
[e] Anti-Dilution Provisions
[f] Redemption Rights
[g] Dividends
[h] Protective Provisions
[i] Directors and Management
[2] Legal Structures for Implementing Down-Rounds
[a] Simple Down-Round
[b] “Reset” Financings
[c] “Pay-to-Play”
[d] Performance Deals
[e] Senior Debt as an Alternative
[f] The Role of Bridge Financings
[3] Liability Issues in Down-Rounds
[a] General Claims Against Corporate Directors
[b] Special Concerns for Interested Directors
[c] Controlling Shareholder Liability
[4] Down-Rounds: Exhibit A
[a] Down-Round Liquidation Preference Provision
[b] Exhibit A-II: Participating Preferred Stock Provision
[c] Exhibit A-III: Down-Round Protective Provisions
[d] Exhibit A-IV: Full Ratchet Anti-Dilution Provision
[e] Exhibit A-V: Sample “Pay-to-Play” Provision
[5] Down-Rounds: Exhibit B - Anti-Dilution Rights
[a] Exhibit B-I: Series A Anti-Dilution Waiver
[b] Exhibit B-II: Series A Broad-Based Weighted-Average Anti-Dilution Rights Triggered
[c] Exhibit B-III: Full Rachet Anti-Dilution Protection Rights Triggered
[6] Down-Rounds: Exhibit C—Bridge Financing Term Sheet (Convertible Note with Warrants)
§ 4.02 Venture Financing and the Concept of Fiduciary Duty
§ 4.03 The Burnout Transaction Illustrated
§ 4.04 Multiple Series of Securities
§ 4.05 Fiduciary Duty in Corporate Governance: Public Corporations
[1] Competitive Bids
[2] Fairness Opinions
[3] The Special Committee of Disinterested Directors
§ 4.06 Fiduciary Duty in the Close Corporation Context
[1] The Incorporated Partnership Theory
[2] The Balancing Approach Business Purpose vs. Reasonable Expectations
[a] The Journal of Corporation Law
[b] Reasonable Expectations
[c] Less Harmful Means
[3] Focus on Wrongful or Oppressive Conduct
[a] Remedial Approach to Fiduciary Duty: Focus on Wrongful Conduct
[b] Statutory Relief Against Wrongful Conduct: Oppression Statutes
[c] Burnouts So Unsupported by Consideration that the Stock is Deemed “Watered”
[4] Duty of Care: Delaware Directors Be Careful
[5] Liability After Disney
[6] Update on Disney: Decision on the Merits
§ 4.06A Procedures for Protecting VC-Nominated Directors of Portfolio Companies
[1] Section 102(b)(7)
[2] Second Opinions
[3] Written Consent
[4] Ratification
[5] Complete Minutes
[6] Role of the Board Member
§ 4.07 Dilutive Recapitalization
[1] Business Exigency Defense
[2] Offers to Participate as a Defense
[3] Special Committee
[4] Fairness Opinions
[5] Cases Considering Motive: The Primary Purpose Test
[6] Price Adequacy
[7] Academic Views
§ 4.08 Defenses to Burn Outs: “Up the Ladder” Warrants
§ 4.09 Six Rules for VC Backed Directors of Portfolio Companies
[1] If the Corporation is Organized in Delaware, Make Sure the Certificate Adopts Section 102(b)(7)
[2] Any Controversial Matter May Require Consultation With An Independent Consultant
[3] Do Not Act By Written Consent If You Can Avoid It
[4] Ratification Is Not Very Effective
[5] Keep Complete Minutes
[6] Upon Joining the Board as the VC’s Nominee, Obtain Agreement on Your Role
§ 4.10 Side Letters and Special Treatment of LP’s: Problems and Commentary

Chapter 5: The Placement Memorandum
§ 5.01 Preparation and Content of Placement Memorandum
§ 5.02 Model Placement Memorandum (Series A Round)
[1] Risk Factors
[2] “Bespeaks Caution” Doctrine
[3] Private Securities Litigation Reform Act
[a] Trends in Securities Litigation
[i] State Court Filings
[ii] Dispositions
[iii] Settlement Size
[iv] Settlement Variation
[4] Adjusted Statements and Projections
[5] Business Disclosures: Suggested Areas to Cover
[6] Impact on Valuation Issues
[7] Ten Tips to Magnetize the Business Plan
§ 5.03 Model Placement Agent Agreement
[1] Placement Agents
[2] Referral Letter Agreement
[3] Placement Agents v. Finders

Chapter 6: Portfolio Companies: Anti-Dilution and Compensation Issues
§ 6.01 Historical Background of Venture Capital Finance
§ 6.02 The Death Spiral or The Infinite Regress
[1] Series A Financing
[2] Series B Financing
[3] Series C Financing
[4] Series D Financing
[a] First Iteration
[b] Second Iteration
[c] Third Iteration
[7] The Solution
§ 6.03 Section 409A of the Internal Revenue Code
[1] Overview
[2] Final Regulations
[3] Plans Included
[4] Traditional Nonqualified Deferred Compensation Plans
[a] Requirements of 409A
[i] Plan Must Include Terms
[ii] 409A Savings Clause Is Not Sufficient
[iii] 409A NQDC Time of Establishment
[5] Initial Deferral Elections
[a] Subsequent Changes in the Time and Form of Payment
[b] Permissible Payment Events
[c] Separation from Service
[d] Separation Pay Arrangements
[e] Other Separation Pay Exceptions to Deferred Compensation
[f] Payment Date Requirements for Specified Employees
[g] Disability
[h] Death
[i] Specified Time or Fixed Schedule
[j] Change in Ownership or Effective Control of a Corporation
[k] Unforeseeable Emergency
[l] Additional Guidelines for Permissible Payment Events
[m] Prohibition of Accelerated Payments
[6] Short -Term Deferral
[7] Stock Issues
[a] Stock Rights in General
[i] Application to NSOs and SARs
[ii] Service Recipient Stock
[b] Modification of a Stock Right
[c] Extension of a Stock Right
[d] Valuation of Stock Subject to Stock Rights
[i] Public Company Stock
[ii] Private Company Stock
[e] Presumptive Valuation Methods
[f] Independent Appraisal
[g] “Start-Up Company” Exception
[h] Formula Prices
[8] Recent Notices
[9] IRS Provides Relief for Unintentional Operational Violations of Section 409A
§ 6.04 Conclusion

Chapter 7: Survey of Value of Deal Terms to Venture Capitalists
§ 7.01 Introduction to the Survey
[1] Survey Methodology
[2] Overview
[3] Venture Capital Glossary
§ 7.02 Survey Design
§ 7.03 Survey Results
[1] Background Questions
[2] Consideration Questions
[3] Survey Results: Protection of the VC’s Interest
[4] Commentary on the Results
§ 7.04 Conclusion
§ 7.05 Industry Standard Deal Terms for Private Equity and Venture Capital: 29 Answers and Best Practices
§ 7.05A Private Equity In The Crosshairs
[1] Challenges to Valuation Methodologies
[2] Questions Regarding Business Methods
§ 7.06 [Reserved]
§ 7.07 [Reserved]
§ 7.08 [Reserved]
§ 7.09 [Reserved]
§ 7.10 [Reserved]
§ 7.11 [Reserved]
§ 7.12 [Reserved]
§ 7.13 [Reserved]
§ 7.14 [Reserved]
§ 7.15 [Reserved]
§ 7.16 [Reserved]
§ 7.17 Fenwick & West: Venture Capital Survey Silicon Valley First Quarter 2014
§ 7.18 Fenwick & West: Venture Capital Survey Silicon Valley Second Quarter 2014
§ 7.19 Fenwick & West: Venture Capital Survey Silicon Valley Third Quarter 2014
§ 7.20 Fenwick & West: Venture Capital Survey Silicon Valley Fourth Quarter 2014
§ 7.21 The VCExperts IT/Software Industry Report
§  7.22 Fenwick & West: Venture Capital Survey Silicon Valley Second Quarter 2015
§  7.23 Fenwick & West: Venture Capital Survey Silicon Valley Third Quarter 2015
§  7.24 Fenwick & West: Venture Capital Survey Silicon Valley Fourth Quarter 2015
§  7.25 Fenwick & West: Venture Capital Survey Silicon Valley First Quarter 2016
§  7.26 Fenwick & West: Venture Capital Survey Silicon Valley Second Quarter 2016
§  7.27 Fenwick & West: Venture Capital Survey Silicon Valley Third Quarter 2016

Chapter 8: Anatomy of a Cram Down: Selected Documents from a Series AA Financing
§ 8.01 Anatomy of a Round Cramming Down the Prior Series of Preferred
§ 8.02 Closing Agenda
§ 8.03 Consent of the Board of Directors
§ 8.04 Consent of the Stockholders
§ 8.05 Waiver of Anti-Dilution Adjustment
§ 8.06 [Fifth] Amended and Restated Certificate of Incorporation
§ 8.07 Series AA Preferred Stock Purchase and Exchange Agreement
§ 8.08 [Fifth] Amended and Restated Stockholders Agreement
§ 8.09 Amended and Restated Registration Rights Agreement
§ 8.10 Certificate of the Secretary
§ 8.11 Compliance Certificate
§ 8.12 Transmittal Letter
§ 8.13 Joinder Agreement to the Series AA Preferred Stock Purchase and Exchange Agreement
§ 8.14 Joinder Agreement to Fifth Amended and Restated Stockholders Agreement
§ 8.15 Joinder Agreement to the Amended and Restated Registration Rights Agreement
§ 8.16 [Sixth] Amended and Restated Certificate of Incorporation
§ 8.17 Alternative Term Sheet B Round (Cram Down Features)
§ 8.18 Term Sheet, E Round: Selected Clauses Specific to Cram Downs
§ 8.19 Benchmark Capital v. CIBC: Parent Subsidiary Merger Enables a ‘Cram Down’ Despite An Ostensible Veto
[1] A Brief Look Back
[2] Benchmark Capital v. CIBC: Drafting Matters
[3] Conclusion

Chapter 9: Revising Expectations: The Future of Venture Capital and Entrepreneurship
§  9.01 Introduction
§ 9.02 The New World
[1] Competition
[2] Market Opportunities
[3] Returns
[4] Valuations
[5] Talent
§ 9.03 Challenges for the Future
[1] Big Funds
[2] Corporate Investors
[3] Angel Investors
[4] Boutique Funds
§ 9.04 Resetting Expectations
[1] On the Investor Side
[2] On the Entrepreneur Side
[3] Exits
§ 9.05 [RESERVED]
§ 9.06 Hidden Traps: Rewards-Based Crowdfunding
§  9.07 Critical Change in Section 1202 of the Tax Law
§  9.08 IRS Tax Section 1202: Excluding Your Gains on Small Business Investments
§  9.09 Explanation Of A Special Purpose Vehicle (SPV)
[1] Introduction
[2] Model LLC Agreement of a Pledge Fund Special Purpose Vehicle
§  9.10 Nine Reasons Your Start-Up Needs Patents
§  9.11 Economics 101
§  9.12 What Makes a Good Business Plan?
§  9.13 Employee Stock Ownership: Empowering It Through A New Law
§  9.14 The Entrepreneur’s Shares: A Balanced Approach To Founder’s Equity
§  9.15 What You Need to Get Done Now If You Want to Sell Your Company
§  9.16 Why You Should Be Using a Board of Advisors and How to Get the Most Benefit From It
§  9.17 Form of Stock Incentive Plan
§  9.18 Form of Master Services Agreement with Statement of Work
§  9.19 Form of Non-Disclosure Agreement with Amendment No. 1

Chapter 10: Delaware Guidelines
§ 10.01 Delaware Reinforces the Limits on Indemnification Claims
[1] Levy v. HLI Operating Company, Inc.
[2] Schoon v. Troy Corp.
[3] The Takeaway from Levy and Schoon
[4] Potential Contractual Workarounds
[5] Backstop Indemnity from Portfolio Company to the Private Equity Sponsor
[6] Other Contractual Protections at the Sponsor Level
§ 10.02 Delaware’s Duty of Disclosure
[1] Discount Rate Used for DCF Valuation
[2] Failure to Disclose Free Cash-Flow Estimates
[3] Disclosure of Arrangements with Incumbent Management
[4] Conclusion
§ 10.03 Designating Delaware’s Court of Chancery as the Exclusive Jurisdiction for Intra-Corporate Disputes
[1] Introduction
[2] Is a Provision for Exclusive Jurisdiction in Delaware Enforceable?
[3] Placement of Forum Selection Provisions—Charter or Bylaws?
[4] Additional Considerations
§ 10.04 Delaware M&A Guidelines
[1] In re Southern Peru Copper Corp. Shareholder Derivative Litigation
[a] Factual and Procedural Background
[b] Judicial Analysis
[2] In re Openlane, Inc. Shareholders Litigation
[a] Factual and Procedural Background
[b] Judicial Analysis
§ 10.05 [Reserved]
§  10.06 Delaware Court of Chancery Clarifies Application of Business Judgment Review in Post-Closing Merger Context
§ 10.07 [Reserved]
§ 10.08 [Reserved]
§ 10.09 KKR Financial—Strong Confirmation by Delaware Chancery Court of Its Preference for Business Judgment Review Whenever Possible
§ 10.10 Delaware Formally Adopts Proposed Statutory Amendments Governing Mergers Following the Completion of a Tender Offer
§ 10.11 It’s Not Just A Delaware Thing: Other Courts Are Also Questioning Disclosure-Only Settlements In M&A Litigation

Chapter 11: Board of Director Issues
§ 11.01 Good Corporate Governance: Best Practices for Creating Value
[1] Board Composition
[2] Board Agenda
[3] Board Packages
[4] Board Meetings
[5] Executive Sessions
[6] Committees
[7] Chairman/CEO Split
[8] Identify Risks and Put in Place Oversight Procedures
§ 11.02 Note on Indemnification
§ 11.03 Model Agreement of Indemnification of Directors and Officers
§ 11.04 Model Indemnification Agreement (Compact Model Form)
[1] Introduction
[2] Indemnification Agreement
§ 11.05 Model Indemnification Trust Agreement
§ 11.06 Indemnity for Investment Professionals
§ 11.07 The Fiduciary Duties of Directors in Negotiated Contractual Terms to Redeem Stock
[1] New Delaware Cases
[2] Colorado Law
§ 11.08 Controlling Stockholder Transactions and Applying Entire Fairness Analysis
[1] Gentile v. Rossette
[a] Background
[b] The Court’s Analysis
[i] The Debt Conversion
[ii] The Put Option
[2] In re CNX Gas Corporation Shareholders Litigation
[3] Gentile Lessons and CNX Considerations
[a] “Unified” Standard for Freeze-Out Transactions
[b] Use of Special Committees or Independent Advisors
§ 11.09 [Reserved]
§ 11.10 Contractual Nature of Preferred Stockholder Rights
[1] Background
[2] The Court’s Analysis
[a] Breach of Contract Claim
[b] Breach of Fiduciary Duty Claim
[3] Ninth Circuit Holds That Debt Can Be Recharacterized as Equity
[a] In re Fitness Holdings International, Inc.
[i] Background
[ii] The Ninth Circuit’s Decision
[iii] Recharacterization Standards Applied Outside of the Ninth Circuit
[iv] Implications of Fitness Holdings
§ 11.11 [Reserved]
§ 11.12 Mergers and Compensation
[1] Application of Revlon Standard to Half Cash/Half Stock Merger
[a] Background
[b] Analysis
[1A] Revisiting the Rules of the Road in Revlon-Land
[2] Reverse Triangular Merger May Violate Contractual Non-Assignment Provision
[3] Section 409A Severance Plans and Other Deferred Compensation Programs
[a] Common Design Impacted
[b] Surprise Interpretation by the IRS
[c] How to “Fix” the Problem
[d] Service Recipient Reporting Requirements
[e] Correction of All Plans with Substantially Similar Document Failures
[f] Relief Not Available if Service Provider and Certain Service Recipients Under Examination
[4] Proposed Clarifications to Million Dollar Compensation Deduction Limit
[a] Exemption Requirements for Stock Options and Stock Appreciation Rights
[b] Transition Relief for Newly Public Companies
[5] Carried Interest Legislation
[a] Status of Carried Interest Legislation in Congress
[b] Summary of Legislation
[i] Ordinary Income and Loss Disallowance
[ii] Dispositions and Gain Recognition
[iii] Indirect Dispositions of Investment Services Partnership Interests
[iv] Qualified Capital
[v] Applicable Percentage
[vi] “Straight Up” Exception
[vii] Self-Employment Tax
[c] Implications for Partnerships
§ 11.13 [Reserved]
§ 11.14 Forms for Board of Director Issues
[1] Equity Incentive Plan (Form)
[2] Convertible Promissory Note - Interest Payable in Common Stock (Form)
§ 11.15 Fiduciary Duties of Fund Control Persons
[1] Introduction
[2] Weavering v. Peterson
[3] Paige Capital Management, LLC v. Lerner Master Fund, LLC
§ 11.16 The Dodd-Frank Act
[1] Advisory Votes on Executive Compensation
[a] Dodd-Frank Act Requirements
[b] The SEC’s Implementing Rules
[i] Say-on-Pay Votes
[ii] Say-on-Frequency Votes
[iii] Exemption for Smaller Reporting Companies
[2] Additional Requirements
[3] Say-on-Golden Parachute Vote
[4] Implementing Say-On-Pay, Say-on-Frequency and Say-on-Golden Parachute
[a] Disclosure for Say-on-Pay
[b] Engagement for Say-on-Pay Votes
[i] Direct Interaction with Shareholders
[ii] The Use of Additional Soliciting Material
[c] Say-on-Frequency Recommendations and Voting
[d] Say-on-Golden Parachute Compensation
[5] Compensation Committee Independence and the Use of Compensation Advisers
[a] The SEC’s Proposed Rules
[i] Compensation Committee Independence and Authority
[ii] Compensation Adviser Independence
[iii] Proposed Exemptions and Applicability of Listing Standards
[iv] Proposed Disclosures Regarding Compensation Consultants
[6] Expanded Compensation Disclosure
[a] Disclosure of Pay versus Performance
[b] Disclosure of CEO Pay versus Median Employee Pay
[c] Disclosure of Employee or Director Hedging Policies
[7] Additional Governance Provisions
[a] Compensation Recovery
[b] Separation of Chairman and CEO Positions
[c] Broker Discretionary Voting
[d] Proxy Access
[8] Specialized Corporate Disclosure
[a] Conflict Minerals Disclosure
[i] Mine Safety Disclosure
[b] Payments to Governments by Certain Resource Extraction Companies
§ 11.17 Ability of Corporation to Redeem Preferred Stock
§ 11.18 [Reserved]
§ 11.19 Appraisal as the Exclusive Remedy in Connection With a Short Form Merger
§ 11.20 [Reserved]
§ 11.21 Limiting Private Equity Fund Exposure to the ERISA Obligations of Portfolio Companies
[1] ERISA Controlled Group Liability
[2] The PBGC’s Perspective on Private Equity Funds and ERISA Liability
[3] Sun Capital’s Reassertion of PE Fund Independence from ERISA Liabilities
[4] Implications
§ 11.22 FTC Warns Investors Against “Abuse” of Investment-Only HSR Exemption
[1] Factual Background
[2] ”Passive Investment” HSR Filing Exemption Did Not Apply
[3] Lessons from the Biglari Case
§ 11.23 [Reserved]
§ 11.24 [Reserved]
§ 11.25 The Use of Unregistered Broker-Dealers by Investment Advisers
[1] Background
[2] SEC Orders and Settlements
[3] Practical Considerations
§ 11.26 An Ounce of Prevention - Some Guidance for Target Boards
[1] Adviser Conflicts
[2] Projections
[3] NDAs and Standstills
[4] Motivations
§ 11.27 FATCA and Its New Effective Dates
[1] U.S. Private Fund
[2] Non-U.S. Private Fund or U.S. Private Fund with Non-U.S. Feeder, AIV, or Blocker Entity
[3] U.S. Private Fund or U.S. Portfolio Company Borrowing from Non-U.S. Lender
§ 11.28 [Reserved]
§ 11.29 [Reserved]
§ 11.30 [Reserved]
§ 11.31 [Reserved]
§ 11.32 [Reserved]
§ 11.33 A Key Reminder to Directors of Delaware Corporations When Granting Equity Awards under an Equity Incentive Plan
§ 11.34 Regulation A+ Takes Effect on June 19, 2015: Making the Grade?
§  11.35 SEC Enforcement Action Related to Private Equity Fees and Expenses
§  11.36 SEC Action Against Private Fund Adviser Highlights Importance of Proper Expense Apportionment
§ 11.37 FinTech Companies Face Big Privacy Challenges in 2016
§ 11.38 Seniority Matters

Index
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Joseph W. Bartlett
Joseph W. Bartlett is Of Counsel in the New York office of Sullivan & Worcester LLP. A former Undersecretary of Commerce, law clerk to Chief Justice Earl Warren and President of the Boston Bar Association, Mr. Bartlett graduated from Stanford Law School, where he was president of the Law Review. He is the author of articles and books on venture capital and is Courtesy Professor at Cornell University, The Johnson School of Business. He has been an Acting Professor of law at Stanford University and an Adjunct Professor at New York University School of Law. Mr. Bartlett is admitted to practice in New York, Massachusetts and Washington, D.C.
Ross P. Barrett
Ross Barrett is a Co-founder, President & COO of VC Experts, Inc. and a Partner at VCE Capital, Inc., which manages two venture funds (Louisiana Ventures, LP and TVP, LP). He received his masters degree in taxation from New York University School of Law and his J.D. from Louisiana State University School of Law. A former legislative aide on Capitol Hill specializing in risk assessment and regulatory reform, Mr. Barrett is the author of numerous articles on venture capital. Mr. Barrett sits on the Board of Mark Ventures, LLC, a New York based venture capital fund.
Michael Butler
Mike Butler is with TPG-Axon Capital. Previously he was a Corporate Associate at Ropes & Gray LLP in New York where he worked with a variety of venture capital funds, private equity funds and start-up companies, and provides assistance on formation, transaction structuring and negotiation and tax issues. Mr. Butler received his law degree from New York University Law School in 2003 and his LLM in Taxation from NYU’s Graduate Tax Program in 2005.
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