Unlocking Provisions . . .

are mechanisms that enable investors to disengage their financial arrangements with management. One typical unlocking provision is a buy-sell agreement, which allows an investor to force management either to buy the investor’s shares at a price he sets or sell its own shares to the investor for the same price. Another provision creates a mechanism through which either management or the investor can force the other to sell its interest in the company to a third party or buy the stock of the other party. Typically, this arrangement allows either management or the investor to accept a third party’s offer to buy the company’s assets or the stock of both shareholders in the company. The other party must then either buy the first party’s shares at the per-share price contained in the third party offer or sell his interest, along with the interests of the other shareholder, to the third party. See: Buy-Sell Agreements, Exits, Liquidity Agreements.