Exhibit 10.2

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF
THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE
COMMISSION AS REQUIRED BY RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.

 

 

 

 

 

 

 

Form of Side Letter

 

[site_0.jpg]

December 28, 2016

Dear Willow Oak Asset Management:

 

This side letter agreement (this “Side Letter”) is being entered into by Willow
Oak Asset Management, LLC (the “Investor”) and Alluvial Capital Management, LLC
(the “General Partner”), for itself and on behalf of Alluvial Fund, LP, to which
it serves as general partner and investment adviser, in connection with the
Investor’s investment in Alluvial Fund, LP as set forth herein. Capitalized
terms that are used but not defined in this Side Letter shall have the
respective meanings ascribed to such terms in Alluvial Fund, LP’s Confidential
Private Placement Memorandum, Limited Partnership Agreement, or Subscription
Agreement, in each case, as in effect on the date of this Side Letter
(collectively, the “Fund Documents”).

 

1.              No Incentive Fees. Notwithstanding any provision contained in
the Fund Documents, the Investor’s Capital Account shall not be subject to any
incentive fee.

 

2.              Most Favored Nation. None of the General Partner or any of its
affiliates shall enter into, effective on or after the date of this Side Letter,
any side letter or similar agreement or understanding (an “Other Agreement”)
with any current or prospective investor in Alluvial Fund, LP or any Future Fund
(as defined below) that would grant to such investor any more favorable fee
terms than those set forth in Section 1 hereof (No Incentive Fees), unless the
Investor is provided with: (x) reasonable advance notice of the proposed Other
Agreement; (y) any agreements or other materials relevant to understanding the
terms of the proposed Other Agreement; and (z) the opportunity, after time to
consider of no less than 60 days, to receive the more favorable fee terms
included in the proposed Other Agreement. The General Partner represents and
warrants that it has disclosed to the Investor all side letters and similar
agreements or understandings with respect to Alluvial Fund, LP, any Future Fund
or their investors or their prospective investors that would, if effective on or
after the date of this Side Letter, trigger the Investor’s rights as described
in this Section.

 

3.              Capacity Rights. The Investor may in its sole discretion make
Capital Contributions exceeding the Seed Investment, and such Capital
Contributions shall be subject to the terms of Section 1 hereof (No Incentive
Fees).

 

 

 

 

4.              Exclusivity. The General Partner agrees that, during the term of
this Side Letter, neither it nor of any its affiliates shall directly or
indirectly launch, organize, sponsor, manage or advise any pooled investment
vehicle other than Alluvial Fund, LP, whether publicly or privately offered
(each, a “Future Fund,” and collectively, the “Future Funds”), without first
providing the Investor the right of first refusal with regards to participation
in any Future Fund. Any participation offer shall include the opportunity to
negotiate in good faith of the General Partner or any of its affiliates and the
Investor or any of its affiliates of a seeding arrangement with respect to such
Future Fund, which includes the terms of Section 2 (Most Favored Nation) and
Section 3 (Capacity Rights) hereof. If the Investor chooses to participate in
such Future Fund, and regardless of whether such a seeding arrangement is
entered into, the terms of Section 6 hereof (Fee Share), shall also apply to any
management fees or incentive fees earned by the General Partner or any of its
affiliates with respect to such Future Fund; provided, however, that the
Investor or its affiliates have paid or have agreed to pay 100% of the
organizational fees, costs and expenses of such Future Fund, including, without
limitation, legal expenses, which shall be reasonable, and which shall be
communicated in advance to the Investor or such affiliate to the extent
reasonably practicable. In addition, during the term of this Side Letter, the
General Partner shall not into, or cause Alluvial Fund, LP, to enter into, a fee
sharing arrangement with respect to any management fees or incentive fees paid
by Alluvial Fund, LP, except as set forth in Section 6 hereto (Fee Share).
Investor may choose to participate in any Future Fund in its sole discretion,
according to the terms herein. If Investor chooses not to participate in a
Future Fund, both the General Partner and Investor retain their respective
rights as defined in this Side Letter.

 

5.              Funding. The Investor shall make the following incremental
Capital Contributions to Alluvial Fund, LP, the timing of such Capital
Contributions subject to waiver by the Investor in its sole discretion:
$2,500,000 in four equal installments - December 31, 2016, March 31, 2017, June
30, 2017 and September 30, 2017 - for an aggregate Capital Contribution of
$10,000,000 (the “Seed Investment”). The Investor, in its sole discretion, may
accelerate the foregoing schedule; provided, however, that it does so in
$2,500,000 increments.

 

6.              Fee Share.

 

(a)   In consideration for the Investor’s Seed Investment in Alluvial Fund, LP,
the General Partner shall pay to the Investor an amount equal to [***] of the
management fees and incentive fees received by the General Partner, if any, from
Alluvial Fund, LP, which shall be payable to the Investor in arrears within 30
Business Days from the end of the month in which such fees were received. If
this Side Letter is terminated on a date other than the last day of the relevant
calculation period with respect to such fees, the Investor shall receive a pro
rata share of the management fees and the incentive fees based upon the ratio of
the number of days in the relevant calculation period for such fees under the
Limited Partnership Agreement and the number of days in such period that this
Side Letter was effective.

 

(b)  Notwithstanding any of the foregoing, no share of any management fees or
incentive fees earned by the General Partner shall be due to the Investor with
respect to any initial Capital Contributions made by any separately-managed
portfolios, which are advised by the General Partner as of the date of this Side
Letter (each, an “Existing Client”); provided, however, that the Investor shall
be entitled to a [***] share of any management fees and incentive fees received
by the General Partner with respect to any additional Capital Contributions made
to Alluvial Fund, LP by any Existing Client; provided, further, that if any
Existing Client begins a new account with Alluvial Fund, LP (e.g., an IRA,
joint, or trust account), the Investor shall be entitled to its full [***] share
of any management fees and incentive fees received by the General Partner with
respect to such new account.

 

 

2

 

 

(c)   Notwithstanding any of the foregoing, the Investor’s share of any
management fees and incentive fees otherwise due shall be reduced on a pro rata
basis by that portion of the Seed Investment that has been received by Alluvial
Fund, LP at the beginning of the relevant calculation period for such fees. For
example, assuming a management fee and incentive fee is charged to Alluvial
Fund, LP, and in respect of a fee calculation period beginning January 31, 2017,
and where, as of January 1, 2017 (the beginning of such fee calculation period),
the Investor has contributed $2,500,000 of the Seed Investment to Alluvial Fund,
LP, the Investor shall be entitled to a [***] share of any management fees and
incentive fees earned by the General Partner (subject to Section 6(b) hereof),
or ¼ of the amount otherwise due to the Investor, to reflect that it had
contributed ¼ of the Seed Investment (as of the beginning of such calculation
period).

 

7.              Lockup. Notwithstanding any restrictions contained in the Fund
Documents, the Investor shall be entitled to withdraw all or any portion of any
share of its management fees or incentive fees from its Capital Account as of
June 30 and December 31 of each calendar year; provided, however, that the
Investor may not make any withdrawal from its Capital Account (whether with
respect to the Seed Investment or its share of any management fees or incentive
fees) until its Capital Account balance exceeds $50,000,000, and in that case
any partial withdrawals may not reduce the Investor’s Capital Account balance
below $50,000,000; provided, further, that a full withdrawal may be made at any
time in accordance with the terms of the Fund Documents and Section 13 hereof
(Term and Termination) provided, further, that a full withdrawal shall not be
permitted prior to a date five years after the effective date of this Side
Letter. Notwithstanding the foregoing or any term in the Fund Documents, the
Investor shall be permitted to withdraw any portion of its Capital Account
(whether with respect to the Seed Investment or its share of any management fees
or incentive fees), for the sole reason to prevent the Investor, its parent, or
any of their affiliates, from registering as an “investment company” under the
Investment Company Act of 1940, as amended, or registering as an “investment
adviser” under the Investment Advisers Act of the 1940, as amended, or under the
securities laws of any state securities authority, or otherwise where doing so
would prevent the Investor, its parent or any of their affiliates from
experiencing a materially adverse tax, legal or pecuniary consequence as a
result of its continued investment in Alluvial Fund, LP.

 

8.              Key Man Event. In the event that David Waters, Jr. is no longer
actively involved in the day-to-day management of Alluvial Fund, LP for any
reason for 90 consecutive days, the Investor, in its sole discretion, may
replace the General Partner as the general partner of Alluvial Fund, LP, or
appoint a new general partner. In such case, the Investor’s share of the
management fees and incentive fees paid pursuant to Section 6 hereof (Fee Share)
shall increase to [***], with David Waters, Jr. or his beneficiaries or assigns
receiving the remaining [***]. In such case, the parties hereto undertake to
enter into such definitive documentation as may be necessary or advisable to
memorialize the foregoing, including, without limitation, amended or modified
Fund Documents.

 

9.              Start-up Costs. The Investor acknowledges and agrees that it
will be responsible for 100% of the organizational fees, costs and expenses of
Alluvial Fund, LP, including, without limitation, legal expenses. The Investor
may, but shall not be required to, pay such fees, costs and expenses with
respect to any Future Fund.

 

10.           Fund Documents. In the event of any conflict between the terms of
this Side Letter and the Fund Documents, the parties acknowledge that the terms
of this Side Letter shall prevail.

 

11.           Nature of Relationship. Nothing in this Side Letter, including,
without limitation, Section 6 hereof (Fee Share) shall give the Investor any
power or authority to govern or otherwise make decisions for or on behalf of
Alluvial Fund, LP or the General Partner. Nothing in this Side Letter shall be
deemed to establish a joint venture or general partnership between the Investor
on the one hand, and the General Partner and/or Alluvial Fund, LP, on the other
hand.

 

 

3

 

 

12.           Further Assurances. The parties to this Side Letter shall (and
shall cause any entities under their respective control to) cooperate with each
other to execute and deliver any other documents and do all further acts and
things as may reasonably be necessary to carry out the intent of the parties
under this Side Letter.

 

13.           Term and Termination. This Side Letter shall remain in full force
and effect so long as the Investor remains a Limited Partner in Alluvial Fund,
LP, and shall automatically terminate upon the complete withdrawal from Alluvial
Fund, LP by the Investor. In addition, the parties may choose to terminate this
Side Letter at any time in a written instrument signed by each of them.

 

14.           Amendments; No Waiver. This Side Letter may not be amended or
supplemented, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.

 

15.           Assignment. No party to this Side Letter may assign any of its
rights or obligations under this Side Letter without the prior written consent
of each party hereto.

 

16.           Governing Laws; Jurisdiction. This Side Letter shall be construed
in accordance with and governed by the laws of the State of New York, without
reference to its principles of conflicts of laws or those of any other State.
Each party hereto hereby submits to the jurisdiction of the courts of the State
of New York and the Federal Courts in and for the Southern District of New York
(collectively, the “New York Courts”) in connection with any action or
proceeding relating to this Side Letter and any other document executed in
connection herewith. Each party agrees that any action or proceeding involving
any dispute arising out of or in connection with this Side Letter shall be
brought only in the New York Courts.

 

17.           Severability. If any term or provision of this Side Letter is held
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Side Letter or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Side Letter so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

18.           Counterparts. This Side Letter may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument, and may be in pdf or
other form of electronic copy.

 

19.           Section Headings. All section headings herein are for convenience
of reference only and are not part of this Side Letter, and no construction or
reference shall be derived therefrom.

 

20.           Confidentiality. The parties agree that the terms of this Side
Letter are confidential. The parties shall not divulge or publicize the terms
hereof except as may be necessary to enforce the promises, covenants and/or
understandings contained herein or as either party may be required to do so by
law, court order, subpoena or other judicial action or governmental authorities;
provided, that in such event, the disclosing party will seek appropriate
confidentiality of those portions of this Side Letter for which confidential
treatment is typically permitted by the relevant governmental authority.

 

 

(Signature Page Follows)

 

4

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Side Letter to be duly
executed as of the date first set forth above.

 

 

ALLUVIAL FUND, LP

 

By: _____________________

Name: David Waters, Jr.

Title: _____________________

 

Willow Oak Asset Management, LLC

 

By: Sitestar Corporation, its sole member

 

By: _____________________

Name: Steven L. Kiel

Title: Chief Executive Officer,

Chief Financial Officer and Director

 

(Signature Page to Side Letter)