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."
The Massachusetts Shared Earnings Agreement (SEA) between Fund & Company is a legal contract that outlines the terms and conditions regarding the distribution of profits between a fund and a company operating in Massachusetts. This agreement is entered into when a fund invests in a company and seeks to share in the company's future earnings. The primary purpose of the Massachusetts SEA is to establish a fair and mutually beneficial arrangement for both the fund and the company. The agreement sets forth the percentage of the company's profits that will be shared between the two parties and the specific terms governing the distribution of these earnings. There can be several types of Massachusetts Shared Earnings Agreements between Fund & Company, depending on the specific circumstances and objectives of the parties involved. Some common types of SEA include: 1. Fixed Percentage Agreement: This type of SEA stipulates a predetermined percentage of the company's profits that will be shared with the fund. The fixed percentage is typically agreed upon during the negotiation and stays constant throughout the term of the agreement. 2. Performance-Based Agreement: In this type of SEA, the distribution of earnings is based on the company's performance, such as achieving specific financial targets, profitability milestones, or revenue thresholds. The agreement may outline different percentages based on varying degrees of performance. 3. Tiered Agreement: A tiered SEA involves the establishment of multiple levels or tiers specifying the percentage of shared earnings based on different performance thresholds. For example, the fund may receive a higher percentage of profits if the company surpasses a certain revenue target. 4. Hybrid Agreement: This type of SEA combines elements of fixed percentage and performance-based agreements. It may include a base fixed percentage of shared earnings and additional percentages based on achieving predetermined milestones or targets. Regardless of the type of SEA, the agreement commonly includes other key terms such as the duration of the agreement, the method of computation for the company's earnings, the timing of profit distribution, and any restrictions or limitations on the fund's participation in the company's management or decision-making process. It is crucial for both the fund and the company to carefully negotiate, draft, and review the Massachusetts Shared Earnings Agreement to ensure clarity, fairness, and compliance with applicable laws and regulations. Seeking professional legal advice and conducting thorough due diligence are recommended when entering into such agreements.
