PRIVATE PLACEMENTS: From Term Sheets to Offering Materials to Closing Leslie A. Drockton, Partner Benesch, Friedlander, Coplan & Aronoff LLP

Overview Capital Commitments are on a pace to surpass $220 billion this year, approximately half of which are committed to mega-funds (more than $5 billion in commitments).Through the first half of the year investors committed $113.35 billion to 117 funds. US EBITDA multiples have fallen from 10.7x in 2016 to 10.5x through the second quarter. Deal flow in U.S. through the second quarter: 866 deals ($151.1 billion, estimated). Slightly below 2016 levels.

Overview (cont.) Exits decreased to 474 deals ($102.3 billion). Firms are raising capital faster in 2017. Buy-out funds that closed in 2017 spent an average of 8 months between launch and first close (12 months in 2016 and 13 months in 2015). Time between launch and initial close is down to 6 months (7 months in 2015).

Overview (cont.) Average buy-out fund closed with an average of 120% of its target commitments. Buy-out funds currently have $540 billion to deploy, which will provide challenges for the industry. Both family offices and institutional investors are allocating more resources to private equity.

Planning Assemble the Team Know your limitations Accountants Lawyers Financial Intermediaries Bankers/Lenders Consultants Know your limitations Existing agreements Non-Disclosure agreements Regulatory restrictions

Planning (cont.) Self-Evaluation Understand the market and terms Develop your business plan or investment thesis Develop an investor profile and target list Research your potential investors Set up an electronic data room Develop your time-line and process Consider warehousing of deals Check references on advisors

Structure Entity Structure Tax Considerations Limited Partnership (traditional PE fund structure) Limited Liability Company C-Corporation Tax Considerations Limited Offering Exemption General Solicitation (Jobs Act) Pre-existing Relationships Use of intermediaries to establish pre-existing relationship

Structure (cont.) Terms Understand what is market Consideration of regulatory pressures on your terms and documents Vet the key terms with advisors Co-investments Revisit your prior agreements ILPA (Institutional Limited Partners Association) Standards Guiding principles alignment of interest, governance and transparency Announced at the beginning of the year Phase II of its Private Equity Transparency initiative which is focused on increasing global adoption of its reporting templates

Regulatory Considerations Securities Laws the Securities Act of 1933, as amended (Section 3(b) or 4(2)) Regulation D Safe Harbor/State Law Preemption State Securities Laws (Blue Sky Laws) Accredited Investor Bad Actors 10b-5 Investment Advisers Act of 1940, as amended Investment Advisers have a fiduciary duty to act in the best interests of their clients Qualified Client Attribution Rules Family Office Exemption Venture Capital Exemption Private Fund Exemption

Regulatory Considerations (cont.) Investment Company Act of 1940, as amended Qualified Purchasers 100 Beneficial Owners (3(C)(1)) Attribution Rules (formed for the purpose of investing in the fund, 10% holder and vehicles where the holders can self direct)

Regulatory Considerations (cont.) SEC Enforcement and Exam Trends Valuations Undisclosed fees Trade allocations Insider trading Conflicts Securities Act of 1934, as amended Compensating fund employees for fund raising and M & A activity Use of Placement Agents

Regulatory Considerations (cont.) Commodity Exchange Act Rescission of a central regulatory exemption for private fund advisers. If you engage in interest hedging activities registration as a commodity pool operator may be required. ERISA Heightened fiduciary obligations for funds who are considered to hold plan assets. Significant participation test (25%). VCOC and REOC exemption

Regulatory Considerations (cont.) Other AML Policies OFAC

Documentation Term Sheet/Executive Summary Opportunity Principals Performance Economics Disclaimers Use it as an opportunity to test the waters Use charts and graphs Be strategic with disclosure; keep it brief

Documentation (cont.) Confidential Offering Memorandum Dual Purpose: Compliance and Marketing Style and substance varies depending on the target audience, deal structure, distribution channels and securities law exemption Primary goal is to satisfy disclosure obligations Disclosure regarding the nature, character and risk factors relating to your offering

Documentation (cont.) Governing Documents Other Materials Limited Partnership Agreement General Partner organization documents Other Materials Side Letters Subscription Documents/Questionnaires If you are engaged in a general solicitation under the safe harbor you have heightened obligations with respect to verifying “accredited investor” stratus

Documentation (cont.) Non-Disclosure Agreements Management Agreements Custody Agreements Privacy Policy Co-Investment Policies Allocation Policy Compliance Program Purchase Agreement Direct Participation Programs

Closing Finalize Negotiations Multiple Closings Manage Expectations/Communication with Investors is key Confirm completion of subscription materials Qualify investors Escrow Log/Document receipt of subscription materials and funds from investors Preparation of securities filings 10351191v1

Practical Advice Be patient; spend the time in the planning stage Understand the market Know your investors You have to build relationships before you need them Communicate Focus on the opportunity Don’t ever fake an answer Don’t overpromise on delivery of materials Be consistent with your message Avoid blind solicitations