Draft Side Letter Mfns

Skill: Draft Side Letters with MFN Cascade Analysis

1. Subject-matter triage

• Treat the side letters as the primary deliverable and the memo and disclosure schedule as support deliverables.
• Start by identifying the universe of LPs, the request letters applicable to each LP, the governing fund documents, and the side-letter policy.
• Determine which requested provisions are truly investor-specific, which are duplicative across LPs, and which are candidates for MFN treatment.
• Separate drafting work from analysis work: the side letters should reflect the final approved position, while the memo should explain how each request was treated and why.
• If any requested term appears to affect fund-level economics, allocation mechanics, or investment-process flexibility, analyze it as a policy and cascade issue rather than only as a drafting edit.

2. Failure modes the skill is correcting

• The drafter merges all LP requests into one generic treatment and loses investor-by-investor distinctions.
• MFN scope is treated as a formality, causing in-scope items and carved-out items to be mixed in the disclosure schedule.
• Side letters omit basic transactional completeness, such as consistent dates, governing law, defined parties, recitals, and signature blocks.
• The campaign memo describes requests at a high level but does not tie each one back to the governing policy, the operating documents, and prior-fund practice.
• Cross-LP conflicts are not resolved as conflicts; competing requests are drafted as though they can all be granted without adjustment.
• Above-policy requests are buried in the draft rather than flagged for decision.
• The MFN cascade analysis is not usable because it does not trace which granted provisions could be elected by which other LPs.

3. Legal frameworks / domain conventions that apply

• Side-letter hierarchy: The fund LPA, subscription materials, and side-letter policy control the outer bounds of what can be granted; side letters should conform to those documents rather than silently override them.
• MFN scope: Only provisions within the applicable MFN clause can be carried into another LP’s election set. Carve-outs should be treated as excluded unless the governing documents clearly say otherwise.
• Policy compliance: Where the policy allows a request, draft it cleanly and narrowly; where the request exceeds policy, identify the excess and decide whether to recommend rejection, narrowing, or a special approval path.
• Investor-specific accommodations: Regulatory, tax, governance, and status-based accommodations often justify narrow drafting, but the memo should distinguish true accommodation from a commercially negotiated enhancement.
• Cross-LP consistency: If more than one LP seeks the same exclusive or first-priority treatment, the documents and memo should resolve the conflict using a defined allocation or sequencing logic rather than assuming parallel effectiveness.
• Formal completeness: Each side letter should read as a standalone agreement with defined parties, date, recitals, operative provisions, governing law, counterparts if needed, and signature blocks.
• Controlling authority: For every legal proposition relied on, anchor the analysis to the governing fund documents, the side-letter policy, and any cited market or prior-fund authority in the source set; do not state a treatment as settled without naming the controlling document or rule.

4. Analytical scaffolds

• Step 1 — Enumerate the LP set. List each investor separately before analysis so each request package and each MFN consequence can be tracked without collapsing multiple parties into one pass.
• Step 2 — Build a request matrix. For each LP, map each requested provision to: policy status, MFN status, prior-fund support, and any known conflict with another LP’s request.
• Step 3 — Classify each request. Distinguish: within-policy and grantable; within-policy but needs narrowing; outside-policy but potentially supportable by precedent; and outside-policy with no support.
• Step 4 — Resolve conflicts and sensitivities. For competing co-investment, fee, reporting, excuse, tax, or governance requests, identify the clash and select a workable drafting or sequencing solution.
• Step 5 — Draft the side letters. Translate the approved position into clean agreement language for each LP, preserving internal consistency with the LPA and policy.
• Step 6 — Prepare the campaign summary memo. Organize by LP, then by request, and explain the decision path, the policy fit, the precedent fit, the MFN consequence, and any remaining open issue.
• Step 7 — Build the MFN cascade. For each LP with MFN rights, identify every in-scope provision granted to another LP that could be elected, and exclude carved-out items from the election universe.
• Step 8 — Produce the disclosure schedule. Make the schedule readable by provision category and grantor LP so a recipient can determine what is available for election without reverse-engineering the side letters.

5. Vertical / structural / temporal relationships

• Track the campaign as a sequence: request intake, policy screen, draft position, cross-LP reconciliation, final side-letter execution, then MFN disclosure.
• Treat later-granted provisions as potentially cascading into earlier LPs only to the extent the MFN clause and timing mechanics allow.
• Where the same subject matter appears across multiple LPs, preserve the difference between a broad form right, a narrow carve-out, and a one-off negotiated exception.
• If the fund documents or policy create timing windows for notice or election, reflect those windows in the memo and align the disclosure schedule to the relevant closing or delivery sequence.
• If an accommodation depends on status, activity, or investment type, make the condition explicit so the right does not expand beyond the intended vertical slice of the fund’s activity.

6. Output structure conventions

• Primary deliverable first: draft the side letters first, and only then prepare the memo and MFN disclosure schedule.
• Side letters document: include one section per LP, with the approved business terms, consistent formal opening and closing language, governing law, and signature blocks for the GP and the LP.
• Campaign summary memo: use a company-campaign structure that runs LP by LP, then closes with a concise MFN cascade analysis and a list of open items or recommended approvals.
• MFN disclosure schedule: organize by LP recipient and provision category, showing only provisions that fall within MFN scope and clearly omitting carved-out items.
• Keep drafting language operational, not descriptive: the documents should contain the operative clauses, not summaries of what the clauses would say.
• Before finishing, confirm that side-letters.docx, campaign-summary-memo.docx, and mfn-disclosure-schedule.docx are each populated with substantive content rather than placeholders or narrative-only descriptions.