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Part Two - Introduction to Fee-Tails. What are they?

July 25, 2012  
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By: David Brown, EMDA Director and Founding President and Partner at WeirFoulds LLP

In the last edition of Exempt Market Update, in the article Engagement Letter Best Practices - Part One, I focused on the importance of specifically delineating whether the mandate is exclusive or non-exclusive in an EMD’s Engagement Letter. Having discussed the critical reasons for that delineation, there is another important reason to discuss: what is commonly known in North America as the "fee-tail” and in Europe as the "tail gunner”.

The fee-tail or tail gunner is, in our experience, one of the least understood provisions of the EMD’s Engagement Letter and deserves to be understood in order to have a proper understanding (and optimal drafting) of the EMD’s Engagement Letter.The fee-tail or tail gunner, let’s stick to "fee-tail” for now, is a provision in the EMDs Engagement Letter relating to termination provisions. Commonly, if an EMD’s Engagement Letter is terminated by either the EMD or the Issuer, and a transaction is consummated within the designated "tail period” after termination (typically 12 to 24 months) with a party whom has been "introduced” (more on that later) by the EMD to the Issuer then the EMD will remain entitled to its full fees. In essence the fee tail triggers payment to the EMD as if the EMDs Engagement Letter was never terminated.

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