Drafting an Omnibus Agreement


    Omnibus is defined as “of, relating to, or providing for many things at once” and “containing or including many items”. An Omnibus Agreement is a combination of these definitions: it is an agreement, usually between several parties, that relates to everyone, is usually for the benefit of everyone, and addresses many different areas all in one agreement. Similar to a Memorandum of Understanding, or “MOU”, an Omnibus Agreement can relate to any number of business areas, be it loan contracts, partnership agreements, or Joint Venture Agreements.

    A common purpose of an Omnibus Agreement is to memorialize and confirm an understanding among several parties in respect to a joint business venture. Drafters of these agreements will want to cover all the bases of the partnership and all the terms the parties have agreed to.

    Usually, the parties will agree that any business opportunity appropriate for the new partnership will be offered to the general partnership and will not be usurped by any one member. There will be of course be exceptions which must be identified as well. An Omnibus Agreement setting forth an understanding in respect to the creation of a general partnership will generally contain the following articles and provisions:

    I. Recitals. The recitals section of an Omnibus Agreement to create a partnership is very important. These recitals will set forth the general purpose of the agreement and the desires of the parties to evidence their understanding in respect to the new business arrangement. Essentially, both parties will be participating in a general partnership and will promise not to engage in business opportunities that are of the type the partnership was setup to engage in.

    II. Definitions. Since an Omnibus Agreement is primarily for the purpose of confirming an understanding among several parties, the Definitions section is particularly important. Key terms such as “affiliate”, “group member”, “partnership group” and “sponsor” must be clearly defined.

    III. Business Opportunities. The key here is to spell out that as long as one of the parties to the agreement participates in the control of the newly created General Partnership, that party and its affiliates shall be prohibited from, directly or indirectly, owning, operating, or investing in any business that competes with the partnership. This provision be called the “Restricted Business.” Another provision in this article titled “Exceptions” should provide for a method by which the parties may mutually agree to approve a party’s foray into the Restricted Business. It is not uncommon for the parties to create a “Conflicts Committee” to deal with these exceptions.

    IV. Indemnification. It is important to include an indemnification provision, whereby all the parties to the agreement, jointly and severally, agree to indemnify, defend, and hold harmless the new partnership for a certain period of time. The parties must agree to cover all losses by the partnership due to any investigation, claim, or violation. Procedures affecting this indemnification should also be discussed.

    V. Miscellaneous. In order to make the contract fully enforceable, boilerplate contract provisions should be included addressing issues such as governing law, notice, termination, assignment, modification, and severability.

    These are the key aspects of an Omnibus Agreement to create a general partnership amongst several different parties. Understandably, an experienced transactional attorney should be consulted throughout the process.

    Source by Mark Warner