ANNEXURE TO INVITATION TO TENDER AND TENDER SPECIFICATION
FOR THE APPOINTMENT OF A FUND MANAGER TO DELIVER THE FINANCE FOR BUSINESS NORTH EAST MICROLOAN FUND
TENDER REFERENCE: OJEU 2014/TBC
(1)NORTH EAST FINANCE (SUBCO) LIMITED
(2)[SUCCESSFUL BIDDER] LIMITED
Draft Fund Management Agreementrelating to the Finance for Business North East Microloan Fund
IMPORTANT NOTE:
This draft contract is substantially the form which the successful bidder will be required to enter into. Some contract terms will be derived from the Tender Proposal Document of the successful bidder (which will also be annexed to, and form part of, this contract) but the terms cannot be negotiated or varied – and no requests from bidders to amend the terms of this draft will be considered. Terms may be modified if necessary to reflect the requirements of NEF’s funders or if necessary to ensure compliance with applicable laws and regulations.
CONTENTS
ClausePage
1.DEFINITIONS AND INTERPRETATION
2.APPOINTMENT AND TERM OF APPOINTMENT
3.AVAILABLE AMOUNTS
4.COMPLIANCE WITH INVESTMENT PROFILE, LAWS ETC.
5.INVESTMENT MANAGEMENT SERVICES
6.ADDITIONAL SERVICES
7.BASIS OF DEALING
8.RECORDS AND DATA PROTECTION
9.BANK ACCOUNTS
10.INVESTMENT PARTIES
11.LENDING AND BORROWING
12.RATIFICATION
13.REMUNERATION AND EXPENSES
14.NON EXCLUSIVITY
15.POWER TO DELEGATE
16.INSTRUCTIONS
17.ADMINISTRATION
18.CONFLICTS OF INTEREST
19.REPORTING
20.REPRESENTATIONS AND WARRANTIES
21.LIABILITY AND INDEMNITIES
22.INSURANCE
23.COMPLAINTS
24.RELATIONSHIP AND DISPUTE RESOLUTION
25.TERMINATION
26.CONFIDENTIALITY
27.FREEDOM OF INFORMATION
28.ASSIGNMENT
29.VARIATION
30.NOTICES
31.FURTHER ASSURANCE
32.ENTIRE AGREEMENT
33.SEVERANCE
34.RIGHTS OF THIRD PARTIES
35.COUNTERPARTS
36.LAW AND JURISDICTION
SCHEDULE 1
REMUNERATION AND EXPENSES
SCHEDULE 2
INVESTMENT AND OPERATIONAL GUIDELINES
INVESTMENT APPROVAL PROCESS
SCHEDULE 4
AVAILABLE AMOUNTS
SCHEDULE 5
FORM OF DRAWDOWN NOTICE
SCHEDULE 6
ADJUSTMENT OF AVAILABLE AMOUNTS
SCHEDULE 7
EXCLUDED SECTORS AND STATE AID RESTRICTED SECTORS
PART 1 - Excluded Sectors
PART 2 - State Aid Restricted Sectors
REQUIREMENTS OF THE FUNDING AGREEMENT LETTER(S)
THE MANAGER’S TENDER
APPENDIX 3
CONFLICT OF INTEREST POLICY FOR PRODUCT FUNDS
ANNEXURE
FUNDING AGREEMENT
THIS AGREEMENT is made on 2014
BETWEEN
(1)NORTH EAST FINANCE (SUBCO) LIMITED (incorporated in England and Wales with company registration number 07039229) whose registered office is at 1 St James’ Gate, Newcastle upon Tyne, NE1 4AD (the “Fund”); and
(2)[ ] LIMITED (incorporated in [ ] with company registration number [ ]) whose registered office is at [ ] (the “Manager”).
BACKGROUND:
(A)The Fund was incorporated on 13 October 2009 as a company limited by shares.
(B)The Fund wishes to appoint the Manager to continue the operation of the North East Microloan Fund: to lend money on commercial terms to individuals and new and existing businesses; to help stimulate business start-up and growth in the North East of England and to remit the returns to the Fund.
(C)In operating the North East Microloan Fund, the Manager shall: source, evaluate and complete Investments; monitor and collect payments from, or otherwise realise, Investments and provide certain financial and administrative services to the Fund, all in accordance with the terms of this Agreement.
(D)The Manager shall also assume responsibility for the collection of payments, and for maximising returns from, the portfolio of North East Microloan Fund Investments which was acquired by the previous fund manager on behalf of the Fund.
1.DEFINITIONS AND INTERPRETATION
1.1.In this Agreement, unless the context otherwise requires, the following words and expressions have the meanings shown below:
“Advisory Board” / the Advisory Board of the Holding Fund relating to the North East JEREMIE Programme;“Assignment Agreement” / the agreement between the Fund and the EIB pursuant to which all the rights of the Fund under this Agreement are assigned by way of security to the EIB;
“Associate” / in respect of any company (“Company A”), any subsidiary of Company A, any holding company of Company A, any subsidiary of such a holding company and any other person whose business or domestic relationship with Company A may reasonably be expected to give rise to a community of interest between them which may involve a conflict of interest in dealings with third parties. (For the purposes of this definition, the terms “subsidiary” and “holding company” shall be as defined in Section 1159 Companies Act 2006);
“Available Amounts” / the aggregate amounts available for drawdown and investment by the Fund as set out in Schedule 4, as may be varied by the Holding Fund from time to time in accordance with Schedule 6;
“BBB” / the British Business Bank, part of (and in its capacity as representative of) the UK government Department for Business, Innovation and Skills and any successor with responsibility for the single programme funding which One North East committed to the Holding Fund pursuant to the Funding Agreement Letters;
“Block Exemption” / Commission Regulation (EC) No. 1407/2013 declaring certain categories of aid compatible with the Common Market in application of Articles 87 and 88 of the Treaty of Rome and any Commission Regulation subsequent to the date of this Agreement which states on its face that it replaces that Commission Regulation;
“Board” / the Board of Directors of the Fund;
“Borrower” or “Borrowers” / the individuals or SMEs who or which have received an Investment;
“Business Day” / any day other than Saturday, Sunday or any other day which is a public or bank holiday in England;
“Business Plan” / as defined in clause 6.1.2;
“CEO” / the Chief Executive Officer of the Manager, being [ ], or such replacement Chief Executive Officer as is approved under clause 4.8 of this Agreement;
“Change in Control” / shall occur in respect of the Manager where (other than with the prior written consent of each of the Fund and the Holding Fund):
(a)Control of the Manager is obtained (whether directly or as a result of obtaining Control of one or more other persons) by any person who did not at the date of this Agreement hold Control (whether directly or as a result of having Control of one or more other persons) of the Manager; or
(b)a person who has Control (whether directly or as a result of having Control of one or more other persons) of the Manager at any time during the term of this Agreement ceases to have Control (whether directly or as a result of having Control of one or more other persons) of the Manager;
“Contract Notice” / the advertisement published by the Holding Fund in the Official Journal of the European Union on [ ] 2014 in respect of the contract for fund management services for the Finance for Business North East Microloan Fund;
“Contracting Authorities” / (a)the Fund, the Holding Fund and any company in the same group as the Fund or the Holding Fund;
(b)the UK government, including (but not limited to) its Departments for Communities and Local Government and for Business, Innovation and Skills and any organisation controlled or funded by them including (without limitation) the British Business Bank;
(c)the local authorities of County Durham, Tyne & Wear, Northumberland and Tees Valley;
(d)any body, fund or organisation in receipt of public monies.
“Control” / in relation to the Manager, the power (whether by means of holding shares, possessing voting power, exercising contractual powers in or over the Manager or any other person or otherwise) to ensure that its affairs are conducted in accordance with the wishes of the person holding the power;
“Data Controller” / as defined in the DPA;
“Data Processor” / as defined in the DPA;
“DPA” / Data Protection Act;
"Drawdown Notice" / a written note of drawdown from the Manager to the Holding Fund, substantially in the form set out in Schedule 5 or in such other form as is agreed between the Fund and the Manager;
“Effective Date” / the date of this Agreement;
“EI Regulations” / the Environmental Information Regulations 2004;
“EIB” / European Investment Bank;
“EIB Facility” / the credit facility provided under the Finance Contract;
“ERDF” / the North East of England European Regional Development Fund Programme 2007 to 2013, for whichthe UK government Department for Communities and Local Government is the managing authority;
“Excluded Sectors” / those sectors or activities which are ineligible for ERDF or EIB support listed in Part 1 of Schedule 7 which may be varied from time to time by notice from the Holding Fund to the Fund and the Manager, to reflect the applicable exclusions determined by ERDF, EIB or any other relevant body;
“FCA Rules” / the Financial Conduct Authority Handbook;
“Finance Contract” / the credit agreement dated 27 November 2009 between the EIB and the Holding Fund, pursuant to which a loan facility is provided to the Holding Fund for the purpose of funding, among other things, the Investments;
“FOIA” / the Freedom of Information Act 2000;
“Funders” / means ERDF, EIB, BBB, RGF and any other funders and/or programmes which provide the Holding Fund with funding out of which the Available Amounts are made available to the Fund;
“Funding Agreement Letters” / the funding letters to the directors of the Holding Fund dated 20 and 24 November 2009 and 15 December 2009 setting out the terms upon which grant assistance will be given to the Holding Fund out of ERDF and UK government funds – and any subsequent funding letters in terms of which ERDF, RGF or BBB provide grant assistance to the Holding Fund;
“Fund’s Assets” / all of the Investments and any other assets of the Fund acquired on behalf of the Fund by the Manager or the Original Manager;
“Fund’s Bank Accounts” / accounts opened in the name of the Fund and operated by the Fund in accordance with the Microloan Fund Funding Agreement;
“Governing Documents” / the Memorandum and Articles of Association of the Fund and the Microloan Fund Funding Agreement;
“Holding Fund” / North East Finance (Holdco) Limited incorporated in England and Wales with registered number 07000577;
“Information Commissioner” / as defined in the DPA;
“Investment and Operational Guidelines” or “IOGs” / the investment and operational guidelines of the Fund as set out in Schedule 2 or as the case may be any additional or substitute investment and operational guidelines notified by the Holding Fund to the Fund and the Manager from time to time;
“Investment” or “Investments” / loans made by the Manager and by the Original Manager in the name of and on behalf of the Fund;
“Investment Approval Process” / the process by which the Manager assesses loan applications as set out in the section headed “Investment Approval Process” in Schedule 3 or, as the case may be, any additional or substitute investment approval process agreed in writing between the Fund and the Manager from time to time;
“Investment Period” / the period commencing on the Effective Date and ending on 31 December 2015 or such earlier date as is agreed by the Fund and the Manager;
“Investment Profile” / the Fund’s investment profile, as set out under that heading in the IOGs and detailed in the Business Plan;
“Key Person” / [ ] and [ ] or the replacement(s) of any such person approved in accordance with Clauses 4.7 and 4.8 of this Agreement;
“Manager’s Tender” / the Manager’s tender documentation, on the basis of which it has been appointed under this Agreement, as attached to this Agreement as Appendix 2;
“Mandatory Outputs” / the Fund’s Mandatory Outputs, as set out under that heading in the IOGs;
“Memorandum and Articles of Association” / the memorandum and articles of association of the Fund;
“Microloan Fund Funding Agreement” / the agreement dated on or around the date of this Agreement between the Fund and the Holding Fund, in substantially the same form as set out in the Annexure to this Agreement, relating to the drawdown and payment of monies in relation to the Microloan Fund, the maintenance of Microloan Fund bank accounts and related matters;
“Microloan Fund Returns Account” / the bank account of the Fund with this name held with Barclays Bank and having account number 83112926;
“Money Laundering Regulations” / the Money Laundering Regulations 2007;
“North East JEREMIE Programme” / the initiative of the European Commission and the European Investment Bank Group through which the UK government, the ERDF and the EIB have providedinvestment capital to the Holding Fund to invest in SMEs in the regions via sub-funds including the Microloan Fund;
“Objectives” / the Fund’s objectives, as set out under that heading in the IOGs;
“Original Manager” / means Tyne & Wear Enterprise Trust Limited (trading as Entrust) and any company in its group;
“Outputs” / the Mandatory Outputs and the Target Outputs;
“Personal Data” / as defined in the DPA;
“Pre-Existing Portfolio” / the portfolio of Investments as at the Effective Date which was acquired on behalf of and in the name of the Fund by the Original Manager;
“Prohibited Act” / (a)offering or agreeing to give any employee or director of the Holding Fund any gift or consideration of any kind (but excluding routine hospitality in the course of normal day to day business dealings between the parties relating to this Agreement) as an inducement or reward:
(i)for doing or not doing (or for having done or not having done) any act in relation to the obtaining or performance of this Agreement or any other contract with the Holding Fund;
(ii)for showing or not showing favour or disfavour to any person in relation to this Agreement or any other contract with the Holding Fund;
(b)committing any offence:
(i)under the Prevention of Corruption Acts 1889-1916 or the Bribery Act 2010; or
(ii)under legislation creating offences in respect of fraudulent acts; or
(iii)at common law in respect of fraudulent acts in relation to this Agreement or any other contract with the Agency; or
(iv)defrauding or attempting to defraud or conspiring to defraud the Fund or the Holding Fund;
“Region” / the North East Region of England comprising Northumberland, Tyne & Wear, County Durham and Tees Valley;
“Related Product Funds” / means any subsidiaries of the Holding Fund or limited partnerships in which the Holding Fund is admitted as a limited partner;
“RGF” / the Regional Growth Fund programme of the UK government, administered by the Department for Communities and Local Government;
“Sensitive Personal Data” / as defined in the DPA;
“SME” or “small and medium sized enterprise” / means a small to medium sized enterprise as set out in the ‘General Block Exemption Regulation’ (European Commission Regulation (EC) No 800/2008), or in any European Commission regulation which amends or replaces it.
“State-Aid Restricted Sectors” / those sectors listed in Article 1(1) of the Block Exemption as listed in Part 2 of Schedule 7 which may be varied from time to time by notice from the Holding Fund to the Fund and the Manager, to reflect the applicable requirements of the European Commission or any other relevant body;
"State Aid Rules" / Articles 107 to 109 of the Treaty for the Functioning of the European Union, and European Commission and Council Directives, Regulations and Guidelines citing any of those Articles as its Treaty base;
“Target Outputs” / the Fund’s target outputs, to be delivered by the Manager, as set out under that heading in the IOGs;
"UK Reference Rate" / the base rate of interest for the UK as calculated and published by the European Commission in accordance with the Communication from the Commission on the revision of the method for setting the reference and discount rules (OJ C 14, 19/1/2008 page 6);
“Unitary Authority” / the local authority responsible for local government functions with its relevant area;
1.2.In this Agreement the headings are for ease of reference only and shall not affect construction or interpretation.
1.3.In this Agreement, unless the context otherwise requires, references to Clauses, the Schedules and the Appendix are references to the Clauses, the Schedules and the Appendix to this Agreement.
1.4.The Schedules shall be deemed to be incorporated in and form part of this Agreement.
1.5.In this Agreement references to any statute include subordinate legislation made pursuant to it and references to any statutes, statutory instruments, rules or regulations should mean those statutes, statutory instruments, rules or regulations as from time to time modified, amended, substituted or replaced.
2.APPOINTMENT AND TERM OF APPOINTMENT
2.1.The Fund hereby appoints the Manager to be the investment manager of the Fund in relation to the Finance for Business North East Microloan Fund with effect from the Effective Date, to invest the Available Amounts and to secure repayments from Borrowers, with full power and authority on behalf of the Fund subject to any relevant restrictions and provisions of this Agreement:
2.1.1.to source and evaluate applications for loans from individuals, micro and small companies and to advance loans to such applicants, in accordance with the Investment and Operational Guidelines;
2.1.2.in furtherance of the preceding paragraph, to identify, evaluate and negotiate loan opportunities, to prepare and approve loan agreements and to make Investments falling within the IOGs, and to secure the repayment of capital and interest from Borrowers or to otherwise dispose of Investments for the account of the Fund, and to enter into loan agreements or execute loan agreements on behalf of the Fund accordingly (in each case, whether personally or through an attorney or other agent);
2.1.3.to monitor the performance of and, where appropriate, to exercise all rights conferred upon the Fund under the terms of any loan agreement or otherwise in respect of a Borrower and to liaise with, consult, assist or procure assistance to be given to Borrowers and generally to take any action the Manager considers appropriate for the protection of the assets of the Fund;
2.1.4.to monitor the performance of, and take all appropriate steps to maximise the returns from, all Borrowers – including all Borrowers within the Pre-Existing Portfolio in respect of which the Original Manager did not fully write off the Investment prior to the Effective Date;
2.1.5.to make Investments by drawing down the Available Amounts, which the Manager shall do by submitting a Drawdown Notice to the Fund at least 5 Business Days prior to the anticipated completion date of the Investment;
2.1.6.to enter into, make and perform such contracts, agreements and other undertakings, on behalf of the Fund in connection with Investments or proposed Investments and to do all such other acts as it may deem necessary and advisable or as may be incidental to the conduct of the business of the Fund in accordance with this Agreement;