**"Global Private Equity Investing Conference 2008: Structuring Winning Partnership Terms"**

1. Global Private EquityInvesting ConferenceStructuring Winning Partnership Terms and Conditions April 4, 2008 Glendale, AZ Heather M. Stone Partner; Head of Fund Formation

2. Structural Overview • Partnerships • Careful with other entities, particularly if you have non-U.S. activities (LLCs) • Multiple layers to accomplish multiple goals • Economics • Tax efficiency (U.S. and other) • Control

3. Limited Partner Limited Partner Limited Partner $ $ $ FundLimited Partnership 2% Contract Advisory Committee Management Company, LLC 20% Carried 1% ($) Class A Non-Manager Partner/Member GP/Manager General PartnerLP/LLC Class A Non-Manager Partner/Member GP/Manager Class A Non-Manager Partner/Member Class B Non-Manager Partner/Member GP/Manager • Very Basic Organizational Framework

4. Fund X Organizational Structure

5. What Are Key Terms? • Capital commitment of GP • Investment limitations • Restrictions on the GPs or Manager(s) • Management fee • Key man provisions • Clawbacks (GP, individual GPs/Managers and LPs) • Distribution waterfalls • No fault remedies, removal of GP • Confidentiality/FOIA

6. Capital Commitment of the GPs • How much is it? • Increasing trend • How is it paid? • Cash or “other”? • As a GP or as an LP? Addressing risks and tax efficiency concerns

7. Investment Limitations • Single company • Public securities – how defined? • “Foreign” – how defined? • Other pooled vehicles • Coordinate with preferred investment structures • Hostile deals • Reinvestment • Caps (during and after commitment period) • Impact of UBTI/ECI and other restrictions

8. Restrictions on the GPs • Cross-fund investing • Co-investments • Conflicts generally • New fund restrictions • Any new funds? • new lines of business • Percent of commitments • coordinate with reserves, expenses, suspensions and terminations

9. Management Fee • How much? • How calculated? • Defaults? • After end of investment period • Ramp ups and step downs • Offsets • Capital contributions, deferrals • Budgeted fees and budgets generally

10. Key Man Provisions • Who are key? Individuals? Groups? • What is trigger? • Active involvement • Substantially all of business time • Criminal behavior – removal a cure? • Cease to be a member • Automatic, Advisory Board vote, LP vote, combination? • What is remedy? • Suspension • Termination • Impact on fees

11. Clawbacks - GP • Why necessary? • Amount • Net of taxes or tax distributions? • Carry forward and back? • Multi-tiered for preferred return? • Timing • Liquidation • Interim true-ups • Several vs. joint and several; caps • Escrows, guarantees, holdbacks • Not just an LP issue anymore • Departures, retention, etc.

12. Clawbacks - LP • When appropriate? • Limits • Amount • Timing • after distribution is made • after fund has liquidated

13. Distribution Waterfalls • Amount of carry – tiers in the marketplace • Preferred returns – true or vanishing? • When does GP get carry? • Commitments vs. contributions vs. other • Venture vs. buyout • Catch-ups • Hurdles • Coordinate with escrows, holdbacks, true-ups • Allocations of expenses

14. No Fault Remedies – Removal of GP • Circumstances – geographic differences • Triggers – lower trigger for cause? • What is remedy? • Termination of investment period • Termination of fund • Removal? • Coordinate with • Key man provisions • Time commitment restrictions, etc.

15. Confidentiality; FOIA • Where are we today? • Longer and more complicated side letters • Remedies for breach • Geographic differences • Start managing disclosure now

16. Tips for Effective Fund Raising • START EARLY • IT TAKES LONGER THAN YOU THINK…

17. Tips for Effective Fund Raising • Roles and responsibilities • Terms • Managing LP expectations • Companion funds • Managing the process • Timing • Avoid the traps for the unwary

18. Roles and Responsibilities • Establish the team • Assign responsibilities • Terms • PPM • Contacts with LPs • Due diligence requests • Document comments

19. Terms • Understand “market” • How does it relates to how you operate? • Review your positioning relative to market • Understand LP’s perspective • Determine what really matters

20. Managing LP Expectations • Plan ahead • Establish method for allocations • Understand expectations • Pre-sell terms

21. Friends, Family and Entrepreneur Funds • Purpose • Expand network of resources • Deal flow • Due diligence • Significant marketing effort to do correctly • Involves everyone in the firm • Split marketing among GP “sponsors” • Administratively time consuming

22. Managing the Process • Database • Current investors • Prospects • Rank likely prospects • Maintain detailed notes of each contact • Allocation system • Summarize LP comments • Respond in a coordinated way • Don’t negotiate against yourself

23. Timing • Set realistic expectations • Allow 1-1/2 to 2 months from documents to close • Talk to investors before they read the documents • Keep promises to a minimum until you have reviewed points with counsel – don’t negotiate against yourself

24. Timing • THE DAY AFTER CLOSING • START PLANNING FOR THE NEXT FUND…

25. Traps for the Unwary • Not being conservative – timing and performance • Not reporting performance consistently • Sweeping failures under the rug • Not disclosing all relevant information on valuations (assumptions, methodology, etc.) • Using performance data from a prior fund • Making off-the-cuff predictions • Publicity

26. THANK YOU! • Heather M. Stone • Partner • Head of Fund Formation Group • Edwards Angell Palmer & Dodge LLP • hstone@eapdlaw.com • (617) 951-3331 • www.eapdlaw.com