used as a substitute for equity-like structures like a SAFE, convertible note, or equity. It is not debt, doesn't have a fixed repayment schedule, doesn't require a personal guarantee."
A New York Shared Earnings Agreement between a fund and a company is a contractual agreement that outlines the terms and conditions governing the shared distribution of profits or earnings between the two entities. It serves as a mechanism for aligning interests and incentivizing both parties towards the success and growth of the company. In such an agreement, the fund typically provides financial support or investments to the company in exchange for a share in the company's profits. The terms and details of the agreement vary based on various factors such as the nature of the fund, the company's industry, and the goals and expectations of both parties involved. The agreement may outline the specific percentage or portion of profits that the fund is entitled to, which is often determined based on the initial capital invested or the agreed-upon terms. Additionally, it may define the distribution frequency, whether it is on a quarterly, semi-annual, or annual basis. Furthermore, the agreement might include provisions for how the fund's share of profits will be calculated, taking into account factors such as expenses, taxes, and any other applicable costs. This serves to ensure transparency and fairness in the distribution process. New York Shared Earnings Agreements between funds and companies can come in various types, tailored to the specific needs and objectives of the involved parties. Some common variations include: 1. Equity-based Shared Earnings Agreement: In this type of agreement, the fund receives a share of the company's ownership equity, entitling the fund to a proportional portion of future profits. 2. Revenue-based Shared Earnings Agreement: Rather than being tied to equity, this agreement determines the fund's share of earnings based on the company's revenue. A predetermined percentage of revenue is allocated as the fund's share, regardless of the company's profitability. 3. Hybrid Shared Earnings Agreement: This type combines elements of equity-based and revenue-based agreements, allowing the fund to enjoy both profit-sharing from equity and a percentage of revenue. 4. Performance-based Shared Earnings Agreement: In certain cases, the fund's share of earnings may be contingent upon the company achieving specific performance targets or milestones. This incentivizes the company to meet or exceed predetermined goals, aligning the interests of both parties. It is important for both the fund and the company to consult legal professionals experienced in New York-specific regulations and ensure compliance with all applicable laws when drafting and executing a Shared Earnings Agreement. Careful consideration of the various types and terms of the agreement is crucial to fostering a mutually beneficial and sustainable partnership between the fund and the company.
