Rollover Purchase Agreement
Rule 506 exemption. The vast majority of private offers of securities, including share rollover, are structured so that they can benefit from the exemption from the state`s safe harbor in accordance with Rule 506. One good thing about section 506 is that there is a federal securities registration law. Under Rule 506, issuers can raise an unlimited money supply from an unlimited number of “accredited investors” or up to 35 unreased investors. Consideration should be given to limiting rollover participants to accredited investors. The term “accredited investor” is defined in Rule 501 of Regulation D and includes: members of the target company`s management team who accept working capital make the equivalent of a minority stake in the purchaser. These potential participants should certainly consider implementing a certain degree of financial and legal diligence, focusing on the purchaser`s balance sheet, the company`s proposed business plan for the target entity, the proposed structure of the debt structure and equity of the PE company for debt redemption and other physical and intangible factors. If the target company is a platform acquisition for the PE business, it is legitimate to ask what THE PE expansion plans envisage through complementary acquisitions or other capital mergers. If the target company is purchased as an add-on to an existing platform holding company, it is useful to consider the financial and commercial performance and prospects of the portfolio company. One way to look at how to approach this topic is to know how much due care participants would enter if they made a cash investment in the buyer to match the value of their expected rollover equity investment. All this is said with the understanding that the degree of attention to the seller`s due diligence will likely vary depending on whether the total purchase price is considered great or only acceptable and the percentage of the overall valuation of the agreement is exceeded. When applying Rule 701 in conjunction with an employee capital repayment plan, issuers should provide participants with copies of the written plan, relevant corporate governance documents (e.g. B articles, statutes, LLC agreement, shareholder agreement) as well as any other information about the company that might be important to investors to know.