8-K
Beneficient (BENF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuantto Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 5, 2023
Beneficient
(Exact Nameof Registrant as Specified in Charter)
| Nevada | 001-41715 | 72-1573705 |
|---|---|---|
| (State or Other Jurisdictionof Incorporation) | (Commission<br><br><br>File Number) | (I.R.S. EmployerIdentification No.) |
325 North St. Paul Street, Suite 4850
Dallas, Texas 75201
(Address of Principal Executive Offices, and Zip Code)
(214) 445-4700
Registrant’s Telephone Number, Including Area Code
The Beneficient Company Group, L.P.
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br> |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br> |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | TradingSymbol(s) | Name of each exchangeon which registered |
|---|---|---|
| Shares of Class A common stock, par value $0.001 per share | BENF | The Nasdaq Stock Market LLC |
| Warrants, each whole warrant exercisable for one share of Class A common stock, par value $0.001 per share, and one share of Series A convertible preferred stock, par value $0.001 per share | BENFW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
INTRODUCTORY NOTE
On June 7, 2023, Beneficient (f/k/a/ The Beneficient Company Group, L.P. (“BCG”)), a Nevada corporation (the “Company”), completed its previously announced business combination (the “Business Combination”) with Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) pursuant to that certain Business Combination Agreement, dated September 21, 2022, by and among Avalon, BCG, Beneficient Merger Sub I, Inc., a Delaware corporation and direct, wholly-owned subsidiary of BCG (“Merger Sub I”), and Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of BCG (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”) (as amended, the “Business Combination Agreement” and such transactions described therein, the “Transactions”). Capitalized terms used and not otherwise defined in this Current Report on Form 8-K (this “Current Report”) have the meanings set forth in the Business Combination Agreement.
Pursuant to the terms of the Business Combination Agreement, on June 6, 2023, following a series of recapitalization transactions as further described below, BCG converted from a Delaware limited partnership to a Nevada corporation (the “Conversion”) and changed its name to “Beneficient.” On June 7, 2023, Merger Sub I merged with and into Avalon (the “Avalon Merger”), with Avalon surviving the Avalon Merger (the “Avalon Merger Surviving Company”) as a wholly owned subsidiary of the Company. Within two weeks following confirmation of the Avalon Merger, the Avalon Merger Surviving Company will merge with and into Merger Sub II (the “LLC Merger,” together with the Avalon Merger, the “Mergers”) with Merger Sub II surviving the LLC Merger as a wholly-owned subsidiary of the Company.
| Item 1.01. | Entry into a Material Definitive Agreement. |
|---|
Amendment to HCLP Credit Agreement
On June 5, 2023, Beneficient Company Holdings, L.P., a Delaware limited partnership and wholly-owned subsidiary of the Company (“BCH”), entered into (a) that certain Consent and Amendment No. 6 to Second Amended and Restated Credit Agreement (the “First Lien Amendment”), which amended the Second Amended and Restated Credit Agreement dated as of August 13, 2020, among BCH, HCLP Nominees L.L.C., a Delaware limited liability company (“HCLP”) and the other parties thereto, and (b) that certain Consent and Amendment No. 6 to
Second Amended and Restated Second Lien Credit Agreement (the “Second Lien Amendment,” and together with the First Lien Amendment, the “Amendments”), which amended the Second Amended and Restated Second Lien Credit Agreement dated as of August 13, 2020 among BCH, HCLP and the other parties thereto. Among other things, the Amendments (i) allow for the consummation of the Transactions pursuant to the Business Combination Agreement, and effective as of the Avalon Merger Effective Date (as defined herein) (ii) amend the definition of “Change of Control” (as defined therein), and (iii) provide that Beneficient will be the “Parent” thereunder.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Amendments, which are attached hereto as Exhibits 10.1 and 10.2 to this Current Report and are incorporated herein by reference.
Recapitalization of BCG
On June 6, 2023, immediately prior to the Conversion, BCG was recapitalized (the “BCG Recapitalization”) as follows: (i) the limited partnership agreement of BCG was amended to create one new subclass of BCG common units, the Class B Common Units (the “BCG Class B Common Units”), and the existing common units were renamed the Class A Common Units (the “BCG Class A Common Units”); and (ii) certain holders of the Preferred Series A Subclass 1 Unit Accounts of BCH (the “BCH Preferred A-1 Unit Accounts”) entered into conversion and exchange agreements (the “BCG Conversion and Exchange Agreements”) with BCG and BCH, pursuant to which they converted certain BCH Preferred A-1 Unit Accounts to Class S Ordinary Units of BCH (the “BCH Class S Ordinary Units”), which BCH Class S Ordinary Units were contributed to BCG in exchange for BCG Class A Common Units. Pursuant to the Conversion, the BCG Class A Common Units converted into 1.25 shares of Beneficient Class A common stock, par value $0.001 per share (“Beneficient Class A common stock”), and the BCG Class B Common Units converted into 1.25 shares of Beneficient Class B common stock, par value $0.001 per share (“Beneficient Class B common stock” and together with the Beneficient Class A common stock, the “Beneficient common stock”). The Beneficient Class B common stock is convertible into Beneficient Class A common stock on a one-for-one basis at the election of the holder thereof and is entitled to 10 votes per share in all matters on which stockholders of Beneficient generally are entitled to vote.
The following table provides additional information on the securities contributed and exchanged by each of Beneficient Holdings Inc. (“BHI”), Bruce W. Schnitzer and Hicks Holdings Operating, LLC.
| Name | Converted CapitalAccount Balance ofBCH Preferred A-1Units Accounts | BCH Class SOrdinary UnitsReceived | BCG Class B UnitsReceived | |||
|---|---|---|---|---|---|---|
| BHI | $ | 177,194,830 | 14,175,586 | 14,175,586 | ||
| Bruce W. Schnitzer | $ | 987,605 | 79,008 | 79,008 | ||
| Hicks Holdings Operating, LLC | $ | 13,222,077 | 1,057,766 | 1,057,766 | ||
| Total | $ | 191,404,512 | **** | 15,312,360 | **** | 15,312,360 |
The following table provides additional information on the securities contributed and exchanged by each of Bruce W. Schnitzer and Richard W. Fisher.
| Name | Converted CapitalAccount Balance ofBCH Preferred A-1Unit Accounts | BCH Class SOrdinary UnitsReceived | BCG Class A UnitsReceived | |||
|---|---|---|---|---|---|---|
| Bruce W. Schnitzer | $ | 734,053 | 658,724 | 658,724 | ||
| Richard W. Fisher | $ | 1,721,658 | 737,733 | 737,733 | ||
| Total | $ | 2,455,711 | **** | 1,396,457 | **** | 1,396,457 |
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the BCG Conversion and Exchange Agreements, copies of which are attached hereto as Exhibits 10.3, 10.4, 10.5 and 10.6 to this Current Report and are incorporated herein by reference. Additional information concerning material relationships between the Company, BHI, Bruce W. Schnitzer and Hicks Holdings Operating, LLC is set forth in the section of BCG’s Registration Statement on Form S-4 (File No. 333-268741), as amended (the “Registration Statement”), initially filed on December 9, 2022, titled “Certain Beneficient Relationships and Related Party Transactions,” which information is incorporated herein by reference.
Contribution and First Amended and Restated Limited Liability Agreement of Beneficient Company Group, L.L.C.
On June 6, 2023, BCG converted from a Delaware limited partnership to a Nevada corporation (the “Conversion”), renamed itself “Beneficient” and adopted its articles of incorporation and bylaws. On June 6, 2023, following the BCG Recapitalization and the Conversion, the Company, as the sole member of Beneficient Company Group, L.L.C. (“Ben LLC”), adopted the First Amended and Restated Limited Liability Company Agreement of Ben LLC (the “Ben LLC A&R LLCA”). The Ben LLC A&R LLCA establishes managing member interests and non-managing members interests, referred to as the Class A Units of Ben LLC. Beneficient is designated as the sole managing member. In addition, certain additional amendments were made which principally focused on the management of Ben LLC by the managing member. After the adoption of the Ben LLC A&R LLCA, Beneficient contributed to Ben LLC all of the BCH limited partnership interests and general partnership interests held by Beneficient (the “Contribution”), and Ben LLC became the general partner of BCH and the holder of 100% of the outstanding Class A Units of BCH.
Additional information about the Ben LLC A&R LLCA is set forth in the section of BCG’s Registration Statement, titled “Description of the First Amended and Restated Limited Liability Agreement of Beneficient Company Group, L.L.C.,” which information is incorporated herein by reference. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Ben LLC A&R LLCA, which is attached hereto as Exhibit 4.2 to this Current Report and is incorporated herein by reference.
Closing of Business Combination
At the Avalon Merger Effective Time, each share of Avalon common stock issued and outstanding immediately prior to the Avalon Merger Effective Time automatically converted into one share of Beneficient Class A common stock and one share of Beneficient Series A Convertible Preferred Stock, par value $0.001 per share (the “Beneficient Series A preferred stock”). Additionally, at the Avalon Merger Effective Time, pursuant to the terms of the Warrant Agreement Amendment, each Avalon Warrant automatically converted into a Beneficient Warrant.
In the Avalon Merger, the Company issued (i) an aggregate of approximately 7,971,864 shares of Beneficient Class A common stock to the former holders of Class A Common Stock of Avalon, par value $0.0001 per share (“Avalon Class A common stock”), and Class B Common Stock of Avalon, par value $0.0001 per share (“Avalon Class B common stock”), outstanding immediately prior to the Avalon Merger Effective Time and (ii) an aggregate of approximately 2,796,864 shares of Beneficient Series A preferred stock to non-redeeming Avalon Class A stockholders, and the Avalon Warrants converted into an aggregate of 23,625,000 Beneficent Warrants. Immediately after the Business Combination, approximately 188,674,282 shares of Beneficient Class A common stock were issued and outstanding, 19,140,451 shares of Beneficient Class B common stock were issued and outstanding, approximately 2,796,864 shares of Beneficient Series A preferred stock were issued and outstanding and 23,757,500 Beneficient Warrants were issued and outstanding. Because the Beneficient Series A preferred stock is not expected to be listed on Nasdaq, the Beneficient Series A preferred stock terms provide that upon its issuance, each share of Beneficient Series A preferred stock will automatically convert into one-quarter of a share of Beneficient Class A common stock, or an aggregate of approximately 699,216 additional shares of Beneficient Class A common stock. Following such Conversion, there will be approximately 189,373,498 shares of Beneficient Class A common stock outstanding following the Business Combination.
The Company expects the Beneficient Class A common stock to begin trading on the Nasdaq Global Market under the symbol “BENF” on June 8, 2023. The Company expects the Beneficient Warrants to begin trading on the Nasdaq Capital Market under the symbol “BENFW” on June 8, 2023.
The foregoing descriptions do not purport to be complete and are qualified in their entirety by the text of the Business Combination Agreement, which is attached hereto as Exhibit 2.1 to this Current Report and is incorporated herein by reference.
Eighth Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P.
On June 7, 2023, the Eighth Amended and Restated Limited Partnership Agreement of BCH (the “BCH LPA”) was adopted and became effective upon the consummation of the Business Combination. The BCH LPA amended the existing BCH LPA, to, among other things, make certain revisions facilitating the Business Combination and the related Transactions, including replacing BCG as the general partner of BCH with Ben LLC following the Conversion and the Contribution. Following the effectiveness of the BCH LPA, the units of BCH consist of five classes: (i) the BCH Class A Units, (ii) the BCH Class S Ordinary Units, (iii) the BCH Class S Preferred Units, (iv) the BCH FLP Unit Accounts and (v) the BCH Preferred Series Unit Accounts (each as defined in the BCH LPA).
The BCH FLP Unit Accounts are further subdivided into BCH FLP-1 Unit Accounts, with specific rights set forth in the BCH LPA and which shall initially represent 50.5% (excluding the BCH FLP-3 Unit Accounts) of the BCH FLP Unit Accounts, with the balance, initially representing 49.5% (excluding the BCH FLP-3 Unit Accounts) of the BCH FLP Unit Accounts, being the BCH FLP-2 Unit Accounts, and the remainder being the BCH FLP-3 Unit Accounts (each as defined in the BCH LPA). Additionally, the Preferred Series Unit Accounts were further subdivided into Preferred Series A Subclass 0 Unit Accounts (“BCH Preferred A-0 Unit Accounts”), BCH Preferred A-1 Unit Accounts, and Preferred Series C Subclass 1 Unit Accounts (“BCH Preferred C-1 Unit Accounts”), in each case, with such rights as expressly provided in the BCH LPA. In addition, certain additional amendments were made which (i) reduced and delayed the preferred returns on certain preferred units of BCH, (ii) delayed the date upon which the BCH Preferred A-1 Unit Accounts could be converted until January 1, 2025, subject to certain exceptions, (iii) amended the conversion prices applicable to the BCH Preferred A-0 Unit Accounts and BCH Preferred A-1 Unit Accounts and (iv) amended the provisions for the allocation of the carrying value adjustments so that 50.5% of each allocation will be made to the BCH FLP-1 Unit Accounts and 49.5% to the BCH FLP-2 Unit Accounts.
Additional information about the BCH LPA is set forth in the section of the Registration Statement titled “Description of the Eighth Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P.,” which information is incorporated herein by reference. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the BCH LPA, which is attached hereto as Exhibit 4.8 to this Current Report and is incorporated herein by reference.
Exchange Agreement
Pursuant to the terms of the BCH LPA, which became effective upon the consummation of the Business Combination, certain units of BCH may be exchanged from time to time and subject to certain terms and conditions for shares of Beneficient Class A common stock following the Conversion. To facilitate the exchange of such BCH units and to set forth certain terms and conditions for such exchange, the Company entered into that certain Exchange Agreement (the “Exchange Agreement”), dated June 7, 2023, by and among the Company, Ben LLC and BCH.
The number of shares of Beneficient Class A common stock issuable upon any such exchange governed by the Exchange Agreement will be determined pursuant to the BCH LPA and related agreements. Beneficient may delay the issuance of any shares of Beneficient Class A common stock following the Conversion, unless the issuance of such securities is registered under the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities laws or Beneficient has determined that the issuance of such securities would be exempt from registration.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement, which is attached hereto as Exhibit 4.4 to this Current Report and is incorporated herein by reference.
Amendment to Warrant Agreement
In connection with the Avalon Merger, the Company assumed the obligations of Avalon under that certain Warrant Agreement, dated October 5, 2021, by and between Avalon and Continental Stock Transfer & Trust Company (the “Warrant Agreement”) pursuant to the terms of the Amendment to the Warrant Agreement, dated June 7, 2023, by and between the Company, Avalon and Continental Stock Transfer & Trust Company (the “Warrant Agreement Amendment”). Under the terms of the Warrant Agreement Amendment, at the effective time of the Avalon Merger (the “Avalon Merger Effective Time”), all of the outstanding warrants of Avalon entitling the holder thereof to purchase one share of Avalon Class A common stock, at an exercise price of $11.50 per share (subject to adjustment) (the “Avalon Warrants”) became a warrant to purchase one share of Beneficient Series A preferred stock (Avalon Warrants as converted, the “Beneficient Warrants”).
The Warrant Agreement Amendment also provides that those certain Avalon Warrants issued in a private placement at the time of the consummation of Avalon’s initial public offering (the “Avalon Private Warrants” and as converted, the “Beneficient Private Warrants”) waived the right to receive Beneficient Series A preferred stock upon exercise of a Beneficient Private Warrant unless such exercise is after the later of (x) 90 days after the closing of the Business Combination (“Closing”) and (y) 30 days after Beneficient has an effective registration statement under the Securities Act with respect to the issuance of shares of Beneficient Class A common stock and Beneficient Series A preferred stock upon exercise of the Beneficient Warrants and the Beneficient Private Warrants (the “Series A Preferred Stock Conversion Date”).
The foregoing description of the Warrant Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Warrant Agreement and the Warrant Agreement Amendment, copies of which are attached hereto as Exhibits 4.1.1 and 4.1.2, respectively, to this Current Report and are incorporated herein by reference.
Stockholders Agreement
In connection with the consummation of the Transactions, the Company and certain persons who became holders of Beneficient Class B common stock as a result of the BCG Recapitalization, the Conversion and the Avalon Merger entered into a Stockholders Agreement (the “Stockholders Agreement”), which became effective at the Avalon Merger Effective Time.
Pursuant to the Stockholders Agreement, the holders of Beneficient Class B common stock (the “Class B Holders”) shall have the right to elect at least five directors to the Company’s board of directors (the “Board” and the directors elected by the Class B Holders, the “Class B Directors”), and the Board will be required to establish and maintain (i) a compensation committee, (ii) a nominating committee, (iii) an executive committee and (iv) a community reinvestment committee (collectively, the “Board Committees”). The Stockholders Agreement also provides that each of the Board Committees will be comprised of no more of four members, and at least two (2) members shall be Class B Directors designated by the majority of the Class B Directors and the remaining members shall be designated by the directors elected by holders of Beneficient Class A common stock and Beneficient Class B common stock, voting together as a single class. The majority of the Class B Directors also have the right to designate the chair of each of the Board Committees. The foregoing description of the Stockholders Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stockholders Agreement, a copy of which is attached hereto as Exhibit 4.3 to this Current Report and is incorporated herein by reference.
Registration Rights Agreements
GWG Registration Rights Agreement
On August 10, 2018, BCG and GWG Holdings Inc. (“GWG”) entered into the Registration Rights Agreement related certain securities held by GWG in BCG, which provided GWG with certain customary registration rights (the “GWG Registration Rights Agreement”). The registrable securities under the GWG Registration Rights Agreement would include the shares of Beneficient Class A common stock issuable upon the conversion of the BCG Class A Common Units, Preferred B-2 Unit Accounts pursuant to the Conversion and the BCH Preferred C-1 Unit Accounts. Pursuant to the GWG Registration Rights Agreement, GWG is entitled to certain customary demand registration, shelf takedown and piggyback registration rights, subject to certain customary limitations (including with respect to minimum offering size and a maximum number of demands and underwritten shelf takedowns within certain periods). The agreement remains in effect until the earlier of the date GWG is permitted to sell all registrable securities under Rule 144 or until the registrable securities are sold. The foregoing description of the GWG Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the GWG Registration Rights Agreement, a copy of which is attached hereto as Exhibit 4.5 to this Current Report and is incorporated herein by reference.
Hatteras Registration Rights Agreement
On December 7, 2021, BCG entered into the Hatteras Registration Rights Agreement with certain holders party thereto (collectively, “Hatteras”), pursuant to which, Hatteras was provided certain registration rights related to Preferred B-2 Unit Accounts of BCG (the “Preferred B-2 Unit Accounts”) (the “Hatteras Registration Rights Agreement”). The registrable securities under the Hatteras Registration Rights Agreement would include the shares of Beneficient Class A common stock issuable upon the conversion of the Preferred B-2 Unit Accounts pursuant to the Conversion. The Hatteras Registration Rights Agreement provides the holders with certain demand registration, shelf takedown and piggyback registration rights with respect to the registrable securities, subject to certain customary limitations (including with respect to the maximum number of securities and a maximum number of demands and underwritten shelf takedowns within certain periods). The Hatteras Registration Rights Agreement remains in effect until the earlier of the seventh anniversary of the closing of the initial issuance of the Preferred B-2 Unit Accounts or, as to the holders party thereto or any permitted transferees of such holders, on such date on which all registrable securities owned by such holders or any permitted transferees of such holders cease to be registrable securities. In connection with the Business Combination, the Company assumed the Hatteras Registration Rights Agreement. The foregoing description of the Hatteras Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Hatteras Registration Rights Agreement, a copy of which is attached hereto as Exhibit 4.6 to this Current Report and is incorporated herein by reference.
BenLegacy Holder Registration Rights Agreement
In connection with the consummation of the Transactions, the Company, Avalon Acquisition Holdings, LLC (the “Avalon Sponsor”) and the directors and executive officers of the Company, and other direct and indirect holders of BCH entered into a Registration Rights Agreement (the “Ben Legacy Holder Registration Rights Agreement”) containing certain registration rights for their Beneficient Class A common stock and the shares of Beneficient Class A common stock underlying the Beneficent Class B common stock. Under the Ben Legacy Holder Registration Rights Agreement, as soon as it is permitted to do so, the Company shall file a shelf registration statement to register the resale of certain shares of Beneficient Class A common stock and maintain its effectiveness until all registrable securities have been sold or may be sold in a single transaction pursuant to Rule 144 without volume limitation or current public information. Holders of registrable securities shall be entitled to demand and piggyback registration rights, subject to certain conditions set forth in the Ben Legacy Holder Registration Rights Agreement.
The foregoing description of the Ben Legacy Holder Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Ben Legacy Holder Registration Rights Agreement, a copy of which is attached hereto as Exhibit 4.7 to this Current Report and is incorporated herein by reference.
Recent Financings Registration Rights Agreement
In connection with the Recent Financings (as described herein), the Company granted certain customary registration rights to the investors receiving the securities comprising the Recent Financing Units.
Lockup Agreements
B-1 and B-2 HolderLock-Up Agreement
Pursuant to the Business Combination Agreement and the BCG limited partnership agreement, it was contemplated that certain holders of Preferred Series B-1 Unit Accounts of BCG (the “BCG Preferred Series B-1 Unit Accounts”) and Preferred Series B-2 Unit Accounts who became holders of Beneficient Class A common stock as a result of the Transactions would enter into a lock-up agreement (the “B-1 and B-2 Lock-Up Agreement”) with the Company, pursuant to which each such holder would agree not to transfer Beneficient Class A common stock or securities convertible into Beneficient Class A common stock held or subsequently acquired by such holder for the applicable lock-up period. For such holders, the applicable lock-up period would begin as of Closing and ends on the earlier (x) one (1) year following the Closing and (y) the date after the Closing on which the Company consummates a liquidation, merger, share exchange, reorganization or other similar transaction with an unaffiliated third party that results in all of the Company’s shareholders having the right to exchange their equity holdings in Company for cash, securities or other property; provided that 25% of such holder’s shares shall be released from lockup on each of the 91st, 181st and 271st day following the Closing. GWG did not execute the B-1 and B-2 Lock-Up Agreement, and the requirement for the other holders of BCG Preferred Series B-2 Unit Accounts was waived.
Beneficient Legacy Holder Lock-Up Agreement
The Company and certain executive officers of BCG and directors of the general partner of BCG who became holders of Beneficient Class A common stock as a result of the Transactions entered into a lock-up agreement (“Beneficient Legacy Lock-Up Agreement”), dated June 7, 2023, pursuant to which each such holder agreed not to transfer Beneficient Class A common stock or securities convertible into Beneficient Class A common stock held or subsequently acquired by such holder for the applicable lock-up period. For such holders, the applicable lock-up period began as of the Closing and ends on earlier of (x) six (6) months of the date of the Closing, (y) the date after the 150th day following the Closing on which the closing price of the Beneficient Class A common stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, share consolidations, subdivisions, share dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least 150 days after the Closing, and (z) the date after the Closing on which the Company consummates a liquidation, merger, share exchange, reorganization or other similar transaction with an unaffiliated third party that results in all of the Company’s shareholders having the right to exchange their equity holdings in Company for cash, securities or other property;provided that 250 shares of Beneficient Class A common stock shall be free from lock-up for each holder. The foregoing description of the Beneficient Legacy Lock-Up Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Beneficient Legacy Lock-Up Agreement, a form of which is attached hereto as Exhibit 10.9 and is incorporated herein by reference.
Amendment to Letter Agreement
Concurrently with the execution of the Business Combination Agreement, BCG, Avalon and the Avalon Sponsor entered into the Amendment to Letter Agreement (the “Amendment to Letter Agreement”), and in connection with the Closing, certain officers and directors of Avalon entered into Amendments to Letter Agreement, under which the parties agreed, among other things, to amend those certain Letter Agreements, dated October 5, 2021 (the “Original Agreements”), with Avalon, to reflect the Transactions contemplated by the Business Combination Agreement, including without limitation, by (i) adding Beneficient as a party to the Original Agreement and (ii) updating the defined terms of the Original Agreement to reflect the Business Combination and the transactions contemplated by the Business Combination Agreement. Among other things, pursuant to the Original Agreements, the Avalon Sponsor, officers and directors of Avalon agreed not to transfer the shares of Avalon Class B common stock, (the Avalon Class B common stock and together with
the Avalon Class A common stock, the “Avalon common stock”), they held under the earliest of: (1) one year after the Closing, (2) the date following the Closing on which Avalon completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Avalon’s stockholders having the right to exchange their shares of Avalon common stock for cash, securities or other property and (3) the date following the Closing that the closing price of Avalon’s common stock equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing. Pursuant to the Amendment to Letter Agreement, such lockup provision will apply to the shares of Beneficient Class A common stock received by such parties pursuant to the Transactions.
The Avalon Sponsor also consented to an amendment to the terms of the Avalon Private Warrants to waive the right to receive Beneficient Series A preferred stock upon exercise of a Beneficient Private Warrant unless such exercise is after the Series A Preferred Stock Conversion Date.
The foregoing description of the Amendment to the Letter Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the form of the Amendment to the Letter Agreement, a copy of which is attached hereto as Exhibit 10.10 and is incorporated herein by reference.
Sponsor Extended Lock-Up Agreement
The Avalon Sponsor agreed to an extended lock-up on certain shares of its Class A common stock (the “Sponsor Extended Lock-Up Agreement”). Concurrently with the execution of the Business Combination Agreement, BCG and the Avalon Sponsor entered into the Sponsor Extended Lock-Up Agreement, pursuant to which the Avalon Sponsor agreed, among other things, that subject to certain exceptions, the Avalon Sponsor may not make a Prohibited Transfer (as defined in the Sponsor Extended Lock-Up Agreement) of 1,500,000 shares of Beneficient Class A common stock to be received or securities convertible into Beneficient Class A common stock held or subsequently acquired by Avalon Sponsor during the period commencing on the Closing and ending on the earliest of (x) December 31, 2029, (y) the date after December 31, 2024 on which the closing price of the Beneficient common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within any 30 trading day period following December 31, 2024, and (z) the date after the Closing on which Beneficient consummates a liquidation, merger, share exchange, reorganization or other similar transaction with an unaffiliated third party that results in all of Beneficient’s shareholders having the right to exchange their equity holdings in Beneficient for cash, securities or other property. The Avalon Sponsor will be permitted to transfer such shares under the Sponsor Extended Lock-Up Agreement: (i) at a price greater than $18.00 per share beginning 180 days after the Closing, (ii) beginning on January 1, 2025, at a price of $10.50 or greater, and (iii) in each of 2028 and 2029, 20% of the shares initially covered by the Sponsor Extended Lock-Up Agreement at any price.
The foregoing description of the Sponsor Extended Lock-Up Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Sponsor Extended Lock-Up Agreement, a copy of which is attached hereto as Exhibit 10.11 and is incorporated herein by reference.
Indemnification Agreements
On June 7, 2023, the Company entered into indemnification agreements (each an “Indemnification Agreement”) with each of Brad K. Heppner, Peter T. Cangany, Jr., Richard W. Fisher, Derek L. Fletcher, Thomas O. Hicks, Emily B. Hill, Dennis P. Lockhart, Bruce W. Schnitzer and James G. Silk, each of whom is a director of the Company following the Business Combination, and Gregory W. Ezell, Jeff Welday, Maria S. Rutledge, Scott Wilson, Samuel Hikspoors, and David B. Rost, each of whom is an officer of the Company following the Business Combination. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Nevada law against liabilities that may arise by reason of their service to the Company, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The foregoing description of the Indemnification Agreement is a summary only and is qualified in its entirety by reference to the Indemnification Agreement, a form of which is attached hereto as Exhibit 10.12 and is incorporated herein by reference.
Second Amended and Restated Bradley Capital Agreement
In connection with the Closing, BCG’s existing Services Agreement by and among Bradley Capital Company, L.L.C. (“Bradley Capital”), Beneficient Management Counselors, L.L.C., BCG and BCH, effective June 1, 2017 (as amended, the “Bradley Capital Agreement”), was replaced by a Second Amended and Restated Services Agreement (the “Second A&R Bradley Capital Agreement”) with the Company as a party. The Second A&R Bradley Capital Agreement is substantially similar to the existing Bradley Capital Agreement, subject to certain changes as follows. The Executive Committee (as defined in the Second A&R Bradley Capital Agreement) reference was revised to refer to the Executive Committee of the Board, and the Second A&R Bradley Capital Agreement expressly states that it shall in no way limit the authority of Board to appoint and remove officers of the Company, including its chief executive officer. The term of the Second A&R Bradley Capital Agreement extends through December 31, 2023, with an annual one-year renewal provision thereafter. The termination provision was revised so that the agreement may be terminated upon the approval of all members of the Executive Committee, excluding Brad K. Heppner if he is then serving on the Executive Committee. The base fee was increased to $460,000 per quarter and the supplemental fee was increased to $180,000 per quarter, with each fee remaining subject to an annual inflation adjustment. In addition, revisions were made to the limitation of liability and indemnification provisions to reflect the applicability of the corporation laws of Nevada to Beneficient.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Second A&R Bradley Capital Agreement, which is attached hereto as Exhibit 10.13 to this Current Report and is incorporated herein by reference.
Forward Purchase Agreement
On June 5, 2023, BCG entered into a Prepaid Forward Purchase Agreement, as amended by and between BCG and RiverNorth SPAC Arbitrage Fund, L.P. (the “Purchaser”), pursuant to which the Purchaser has agreed to, among other things, effect certain purchases of shares of Avalon Class A common stock that would have been redeemed in connection with the special meeting of Avalon’s stockholders (the “Special Meeting”) to approve the transactions contemplated Business Combination Agreement (the “Forward Purchase Agreement”).
Pursuant to the Forward Purchase Agreement, Purchaser has agreed to purchase shares of Avalon Class A common stock (the “AVAC FPA Shares”) at a purchase price per share of $10.57(for aggregate consideration of approximately $20,000,000). The AVAC FPA Shares will not be redeemed in connection with the Special Meeting and will convert into shares of Beneficient Class A common stock and Beneficient Series A preferred stock upon consummation of the Business Combination. The Beneficient Series A preferred stock will convert in accordance with its terms to shares of Beneficient Class A common stock, and Purchaser will hold an aggregate of 2,956,480 shares of Beneficient Class A common stock following such conversion in respect of the AVAC FPA Shares (such shares of Beneficient Class A common stock, the “FPA Shares”).
The approximately $20,000,000 in proceeds (the “Disbursed Amount”) in respect of the FPA Shares will be disbursed from the Avalon trust account following the consummation of the Business Combination. $5,000,000 of the Disbursed Amount will be disbursed to Beneficient, with the remaining aproximately $20,000,000 (the “Reserve Amount”) to be disbursed to Purchaser to be held by Purchaser until the Maturity Date (as defined below) or until its earlier release per the terms of the Forward Purchase Agreement.
The Forward Purchase Agreement provides for two categories of FPA Shares: (i) 1,064,333 FPA Shares shall be categorized as “Purchased Shares” (the “Purchased Shares”) and (ii) the remaining 1,892,147 FPA Shares shall be categorized as “Prepaid Forward Shares” (the “Prepaid Forward Shares”). If by the 10th anniversary of the close of the Business Combination, Purchaser has received less than $5,000,000, in gross proceeds from, and Purchaser has used good faith efforts to sell, the Purchased Shares, Beneficient has agreed to cause BCH to issue Purchaser an amount of BCH Preferred Series A-0 Unit Accounts (or such other senior most preferred security of Beneficient) as consideration for any shortfall amounts less than $4,982,762 from the sale of the Purchased Shares. Purchaser has agreed for the first six months following the Business Combination not to sell any Purchased Shares below $5.00 per share or to sell more than 10% of the daily trading volume of the Beneficient Class A common stock if the volume weighted average price of the Beneficient Class A common stock is between $5.00 and $8.00 for any such trading day.
For a period of two years following the closing of the Business Combination (the date on which such two-year period ends, the “Maturity Date”), Purchaser may sell the Prepaid Forward Shares at a price not lower than $10.88 per share. Upon consummation of any sales of Prepaid Forward Shares, Purchaser must remit $10.57 per share from the Reserve Amount to Beneficient. At the Maturity Date, any remaining Reserve Amounts shall be retained by the Purchaser and any unsold Prepaid Forward Shares shall be remitted to Beneficient.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
|---|
The information set forth under Item 1.01 of this Current Report in the section titled “Amendment to HCLP Credit Agreement” is incorporated in this Item 2.03 by reference.
| Item 3.02. | Unregistered Sales of Equity Securities. |
|---|
The information set forth in Item 1.01 with respect to the Initial Recapitalization and the Conversion is incorporated herein by reference into this Item 3.02.
On December 1, 2022, the Company, through its subsidiary, entered into agreements to finance liquidity transactions with respect to alternative assets with a net asset value (“NAV”) of approximately $5.3 million as of the date of the relevant financing agreement (the “Recent Financings”). Pursuant to such transactions, the Company’s customized trust vehicles agreed to acquire alternative assets, and in exchange for such alternative assets, the customers agreed to receive units at a price of $10.00 of NAV (calculated as of December 1, 2022) per unit, with each unit consisting of (i) one share of Beneficient Class A common stock and (ii) one-fourth (1/4) of a Beneficient Warrant (the units, the “Recent Financings Units”). The Recent Financings closed in connection with the Closing, and the Company issued the investor 530,000 shares of Beneficient Class A common stock and 132,500 Beneficient Warrants. The issuance of the Recent Financing Units pursuant to the Recent Financings were not registered under the Securities Act, and the Recent Financing Units were issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
On June 7, 2023, Maxim Group LLC (“Maxim”) agreed to purchase 274,500 shares of Beneficient Class A common stock in exchange for a portion of its deferred underwriting commission for the initial public offering of Avalon. The issuance of such shares to Maxim were not registered under the Securities Act and were issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
| Item 3.03. | Material Modification to Rights of Security Holders. |
|---|
The information set forth in Items 1.01 and 5.03 is incorporated herein by reference into this Item 3.03.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;Compensatory Arrangements of Certain Officers. |
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Board of Directors
In connection with the Closing, Brad K. Heppner, Thomas O. Hicks, Richard W. Fisher, Bruce W. Schnitzer, Peter T. Cangany, Jr., Emily B. Hill, Dennis P. Lockhart, James G. Silk and Derek L. Fletcher were appointed to the Company’s Board of Directors, and Brad K. Heppner was appointed as chairman of the Board of Directors. The Class A Directors (as defined in the Stockholders Agreement) are Peter T. Cangany, Jr., Emily B. Hill, Dennis P. Lockhart and Richard W. Fisher. The Class B Directors (as defined in the Stockholders Agreement) are Brad Heppner, Bruce W. Schnitzer, Thomas O. Hicks, James G. Silk and Derek L. Fletcher. Additional information with respect to the Board of Directors regarding, among other things, their background, board committee membership, independence, arrangement for election, family relationships, related party transactions and compensatory arrangements is set forth in the sections of the Registration Statement titled “Management after the Business Combination,” “Certain Beneficient Relationships and Related Party Transactions” and “Director Compensation,” which such information is incorporated herein by reference.
Director Agreements
In connection with the Closing, the Company entered into termination agreements that terminated existing director agreements with each of Messrs. Silk, Fletcher and Ms. Hill, although each director remains a director following the Closing (such agreements to terminate, the “Director Termination Agreements”). The foregoing descriptions of the Director Termination Agreements do not purport to be complete and are qualified in their entirety by reference to the Director Termination Agreements, which are attached hereto as Exhibit 10.14, Exhibit 10.15 and Exhibit 10.16 to this Current Report and are incorporated herein by reference.
Also in connection with the Closing, the Company entered into consulting agreements with each of Messrs. Hicks, Schnitzer and Fisher to replace and supersede their respective director agreements (the “Consulting Agreements”). Pursuant to the Consulting Agreements, each of Messrs. Hicks, Schnitzer and Fisher agreed to mentor, advise and support Beneficient and its related entities regarding its business of providing services, insurance, liquidity and financing for alternative asset holders and will each receive an annual cash fee of $150,000 per year. Such consulting fee will be in addition to the annual cash retainer Messrs. Hicks, Schnitzer and Fisher receive under the director compensation program. The Consulting Agreements acknowledge the continuing effectiveness of certain provisions in the director agreements regarding equity awards previously awarded to Messrs. Hicks, Schnitzer and Fisher under their respective previous director agreements. The Consulting Agreements have an initial term of one (1) year and will automatically renew for successive one (1) year terms unless sooner terminated in accordance with their terms. In the event the initial or any renewal term is terminated before it expires due to a removal or because Messrs. Hicks, Schnitzer and Fisher is not re-elected or re-appointed, in each case without cause (as defined in the consulting agreement), the annual consulting fee will continue to be paid through the end of the initial or renewal term, as applicable. In connection with the consulting agreements, Messrs. Hicks, Schnitzer and Fisher agreed to confidentiality and intellectual property protection provisions. The foregoing descriptions do not purport to be complete and are qualified in their entirety by reference to the Consulting Agreements, which are attached hereto as Exhibit 10.17, Exhibit 10.18 and Exhibit 10.19 to this Current Report and are incorporated herein by reference.
Executive Officers
Additional information with respect to our executive officers, among other things, their background, board family relationships, related party transactions and compensatory arrangements is set forth in the sections of the Registration Statement titled “Management after the Business Combination,” “Certain Beneficient Relationships and Related PartyTransactions” and “Executive Compensation,” which such information is incorporated herein by reference.
Compensation Plans
Effective as of the Conversion, the Company adopted the Beneficient 2023 Long-Term Incentive Plan (the “2023 Plan”). The number of shares of Beneficient Class A common stock available under the 2023 Plan will be 15% of the total number of shares issued and outstanding or then issuable upon the conversion of outstanding securities of the Company as of the date of the Conversion. Notwithstanding the foregoing, on the first trading date of each calendar quarter (the “Adjustment Date”), the number of shares of Beneficient Class A common stock available under the 2023 Plan shall be increased so that the total number of shares issuable under the 2023 Plan shall be equal to the lesser of (i) 200,000,000 shares, and (ii) 15% of the total number of shares issued and outstanding or then issuable upon the conversion of outstanding securities of the Company or its subsidiaries, as determined as of the Adjustment Date, provided that no such adjustment shall have any effect on the ISO Limit (as defined in the 2023 Plan), except for any adjustments summarized therein.
Additionally, the Company adopted the Third Amendment to the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan (as amended, the “BMP Plan”) to amend certain provisions of the BMP Plan to reflect the Conversion, among other things. Additional information regarding the 2023 Plan and BMP Plan is set forth in the section of the Registration Statement titled “Executive Compensation,” which such information is incorporated herein by reference. The foregoing descriptions of the 2023 Plan and the BMP Plan do not purport to be complete and are qualified in their entirety by reference to the plans, which are attached hereto as Exhibit 10.7 and Exhibit 10.8 to this Current Report, respectively, and are incorporated herein by reference.
| Item 5.03. | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
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In connection with the Conversion, the Company adopted articles of incorporation (“Articles of Incorporation”), a certificate of designation for the Beneficient Series A preferred stock (“Certificate of Designation”) and bylaws (“Bylaws”). The Articles of Incorporation, Certificate of Designation and the Bylaws are attached hereto as Exhibit 3.1.1, Exhibit 3.1.2 and Exhibit 3.2, respectively, to this Current Report and are incorporated herein by reference. Additional information with respect to Articles of Incorporation, Certificate of Designation and the Bylaws is set forth in the section of the Registration Statement titled “Description of Securities of Beneficient,” which such information is incorporated herein by reference.
| Item 8.01. | Other Events. |
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On June 7, 2023, Avalon issued a press release announcing the receipt of the vote necessary to approve the Business Combination. Effective as of the Avalon Merger Effective Time, certain stockholders of Avalon validly exercised their redemption rights and redeemed 18,058,386 shares of Avalon common stock (the “Redemption Shares”), which were converted into the right to receive from Avalon, in cash, a pro rata portion of the funds in Avalon’s trust account (the “Trust Account”). As a result, approximately $191,032,807 was removed from the Trust Account to pay such stockholders for the Redemption Shares. As of the Avalon Merger Effective Time, all Redemption Shares ceased to be outstanding and were automatically cancelled and retired and each holder of a Redemption Share ceased to have any rights with respect thereto, except the right to receive the cash payment in respect thereof from Avalon referred to in the immediately preceding sentence.
| Item 9.01. | Financial Statements and Exhibits. |
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(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BENEFICIENT | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| Dated: June 8, 2023 |
EX-3.1(1)
Exhibit 3.1.1
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov www.nvsilverflume.gov ABOVE SPACE IS FOR OFFICE USE ONLY Formation—Profit Corporation NRS 89—Articles of Incorporation NRS 78—Articles of Incorporation Domestic Corporation NRS 80—Foreign Corporation Professional Corporation 78A Formation—Close Corporation (Name of Close Corporation MUST appear in the below heading) Articles of Formation of ______________________________________________ a close corporation (NRS 78A) TYPE OR PRINT—USE DARK INK ONLY—DO NOT HIGHLIGHT 1. Name of Entity: (If foreign, name in home jurisdiction) 2. Registered Agent Commercial Registered Agent Noncommercial (name and address Registered below) Office (title or and Position address with below) Entity for Service Agent:(name only below) of Process: (Check only one box) Name of Registered Agent OR Title of Office or Position with Entity Nevada Street Address City Zip Code Nevada Mailing Address (if different from street address) City Zip Code 2a. Certificate of I hereby accept appointment as Registered Agent for the above named Entity. If the registered agent is Acceptance of unable to sign the Articles of Incorporation, submit a separate signed Registered Agent Acceptance form. Appointment of Registered Agent: X __________________________________________________________________________ Authorized Signature of Registered Agent or On Behalf of Registered Agent Entity Date 3. Governing Board: (NRS 78A, close corporation This corporation is a close corporation operating with a board of directors Yes OR No only, check one box; if yes, complete article 4 below) 4. Names and 1) Addresses of the Name Country Board of Directors/ Trustees or Stockholders Street Address City State Zip/Postal Code (NRS 78: Board of Directors/ 2) Trustees is required. NRS 78a: Required if the Close Name Country Corporation is governed by a board of directors. NRS 89: Required to have the Original stockholders and Street Address City State Zip/Postal Code directors. A certificate from the 3) regulatory board must be submitted showing that each Name Country individual is licensed at the time of filing. See instructions) Street Address City State Zip/Postal Code 5. Jurisdiction of incorporation: 5a. Jurisdiction of 5b. I declare this entity is in good standing in Incorporation: (NRS the jurisdiction of its incorporation. 80 only) Page 1 of 2 This form must be accompanied by appropriate fees. Revised: 10/9/2019
BARBARA K. CEGAVSKE Secretary of State Formation -202 North Carson Street Carson City, Nevada 89701-4201 Profit Corporation (775) 684-5708 Website: www.nvsos.gov Continued, Page 2 www.nvsilverflume.gov 6. Benefit By selecting “Yes” you are indicating that the corporation is organized as a Corporation: benefit corporation pursuant to NRS Chapter 78B with a purpose of creating a Yes (For NRS 78, NRS 78A, and NRS general or specific public benefit. The purpose for which the benefit corporation is 89, optional. See instructions.) created must be disclosed in the below purpose field. 7. Purpose/Profession to be practiced: (Required for NRS 80, NRS 89 and any entity selecting Benefit Corporation. See instructions.) 8. Authorized Number of Authorized shares with Par value: Par value: $ Shares: Number of Common shares with Par value: Par value: $ (Number of shares corporation is authorized to issue) Number of Preferred shares with Par value: Par value: $ Number of shares with no par value: If more than one class or series of stock is authorized, please attach the information on an additional sheet of paper. 9. Name and Officer I declare, to the best of my knowledge under penalty of perjury, that the information contained Signature of: making the statement or herein is correct and acknowledge that pursuant to NRS 239.330, it is a category C felony to Authorized Signer for knowingly offer any false or forged instrument for filing in the Office of the Secretary of State. NRS 80. Name, Address and Signature of the Name Country NRS 78, Incorporator for 78A, and 89. NRS 89—Address City State Zip/Postal Code Each Organizer/ Incorporator must be a . X _________________________________________ (attach additional page if necessary) licensed professional AN INITIAL LIST OF OFFICERS MUST ACCOMPANY THIS FILING Please include any required or optional information in space below: (attach additional page(s) if necessary) This form must be accompanied by appropriate fees. Page 2 of 2 Revised: 10/9/2019
ATTACHMENT TO
ARTICLES OF INCORPORATION
OF
BENEFICIENT,
a Nevada corporation
ARTICLE IV
BOARD OFDIRECTORS
(continued)
Section 1. General Powers. The Corporation elects to be run by a board of directors of the Corporation (the “Board”). The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as otherwise provided by law.
Section 2. Number of Directors. Subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock (as defined herein), the number of directors of the Corporation shall be fixed from time to time exclusively by resolution of the Board; provided that the initial number of directors of the Corporation shall be nine (9). No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.
Section 3. Initial Directors. The names and addresses of the initial members of the Board are as follows:
| NAME | ADDRESS |
|---|---|
| Brad K. Heppner | 112 North Curry Street, Carson City, NV 89703 |
| Peter T. Cangany, Jr. | 112 North Curry Street, Carson City, NV 89703 |
| Richard W. Fisher | 112 North Curry Street, Carson City, NV 89703 |
| Derek L. Fletcher | 112 North Curry Street, Carson City, NV 89703 |
| Thomas O. Hicks | 112 North Curry Street, Carson City, NV 89703 |
| Emily B. Hill | 112 North Curry Street, Carson City, NV 89703 |
| Dennis P. Lockhart | 112 North Curry Street, Carson City, NV 89703 |
| James G. Silk | 112 North Curry Street, Carson City, NV 89703 |
| Bruce W. Schnitzer | 112 North Curry Street, Carson City, NV 89703 |
Section 4. Election. Subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock, the directors shall be elected at each annual meeting of stockholders; provided that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal.
(a) If on the record date for notice of any meeting of stockholders of the Corporation at which directors are to be elected by the holders of Common Stock, (i) the aggregate number of outstanding shares of Class B Common Stock is at least twenty-five percent (25%) of the number of shares of Class B Common Stock outstanding on the date hereof, or (ii) if the condition in preceding clause (i) is not satisfied, the aggregate capital account balances with respect to the limited partner interests in Beneficient Company Holdings, L.P., a Delaware limited partnership, held by the Class B Holders is an amount that is at least twenty percent (20%) of the aggregate capital account balances of such limited partner interests on the date hereof (the condition in either clause (i) or clause (ii) being referred to as the “Class B Threshold”), then:
i. Holders of shares of Class B Common Stock, voting as a separate class, shall be entitled to elect that number of directors which constitutes fifty-one percent (51%) (rounded up to the nearest whole number) of the total number of authorized directors on the Board (the “Class B Directors”).
ii. Holders of shares of Class A Common Stock and holders of shares of Class B Common Stock, voting together as a single class, shall be entitled to elect all remaining directors on the Board (the “Class A Directors”).
(b) If on the record date for notice of any meeting of stockholders of the Corporation at which directors are to be elected by the holders of Common Stock, the aggregate number of outstanding shares of Class B Common Stock does not meet the Class B Threshold, then holders of Common Stock shall vote together as a single class with respect to the election of directors.
Section 5. Vacancies. Subject to Article IV, Section 4, to the rights, if any, of the holders of any outstanding class or series of Preferred Stock, and to the terms and conditions of the Stockholders Agreement, to be entered into, by and among the Corporation and the stockholders named therein (the “Stockholders Agreement”), any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative majority vote of the directors then in office, or by a sole remaining director, and shall not be filled by the stockholders; provided, however, that any vacancy in the office of a Class B Director shall be filled solely by the holders of the Class B Common Stock, voting as a separate class, or, in the absence of a stockholder vote, by a vote of the remaining Class B Directors; provided further, that if (i) any increase in the number of directors results in the Class B Directors representing less than fifty-one percent (51%) (rounded up to the nearest whole number) of the directors, and (ii) at the time of such increase, the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, then the newly created directorship resulting from such increase shall be filled by the holders of the Class B Common Stock, voting as a separate class, or, in the absence of a stockholder vote, by a vote of the remaining Class B Directors. Any director elected to fill a vacancy in the office of a director or elected to fill a newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be elected and qualified.
Section 6. Voting. Directors shall all have one vote per director on all matters brought before the Board; provided, however, that in the event of a vacancy in the office of a Class B Director, each Class B Director shall have the number of votes per Class B Director equal to (i) the total number of Class B Director seats divided by (ii) the number of Class B Director seats that are not then vacant.
Section 7. Removal. Subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock and the terms and conditions of the Stockholders Agreement, if the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, (i) a Class A Director may be removed from office at any time by an affirmative vote of the stockholders representing not less than two-thirds of the voting power of the outstanding Common Stock that is entitled to vote for the election of directors at an annual or special meeting duly noticed and called in accordance with these Articles of Incorporation (as amended from time to time, including the terms of any duly filed certificate of designation related thereto, these “Articles”) or the Bylaws of the Corporation (the “Bylaws”), voting together as a single class, and (ii) a Class B Director may be removed from office at any time by an affirmative vote of the stockholders representing not less than two-thirds of the voting power of the outstanding Class B Common Stock that is entitled to vote at an annual or special meeting duly noticed and called in accordance with these Articles or the Bylaws, voting as a separate class. If the aggregate number of outstanding shares of Class B Common Stock does not meet the Class B Threshold, then, subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock, any director may be removed by an affirmative vote of the stockholders representing not less than two-thirds of the voting power of the outstanding Common Stock that is entitled to vote for the election of directors at an annual or special meeting duly called in accordance with these Articles or the Bylaws, voting as a single class.
Section 8. Stockholder Nominations and Introduction of Business. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the Bylaws.
Section 9. Election of Directors. The election of directors of the Corporation need not be by written ballot except to the extent provided in the Bylaws.
ARTICLE VIII
AUTHORIZED SHARES
(continued)
Section 1. Capital Stock
(a) Number of Authorized Shares. The total number of shares of all classes of capital stock that the Corporation is authorized to issue is 1,770,000,000 shares, consisting of: (i) 1,500,000,000 shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”); (ii) 20,000,000 shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”); and (iii) 250,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). The term “Common Stock” shall mean, collectively, the Class A Common Stock and the Class B Common Stock.
(b) Increase or Decrease in Authorized Capital Stock. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by the affirmative vote of the holders of at least a majority of the voting power of the Corporation’s then outstanding capital stock entitled to vote thereon, unless a separate vote of any such holders is required pursuant to the terms of any certificate of designations for a series of Preferred Stock, irrespective of the provisions of Sections 78.2055 and 78.207 of the NRS or any successor provision thereof.
(c) No Cumulative Voting. Holders of a class or series of capital stock of the Corporation shall not be entitled to cumulate their votes in any election of directors in which they are entitled to vote and shall not, unless specifically provided in a certificate of designation for such class or series, be entitled to any preemptive rights to acquire shares of any class or series of capital stock of the Corporation.
(d) Facts or Events Ascertainable Outside of Articles of Incorporation. Any of the voting powers, designations, preferences, limitations, restrictions and relative rights of any class or series of stock of the Corporation may be made dependent upon any fact or event which may be ascertained outside these Articles if the manner in which a fact or event may operate upon the voting powers, designations, preferences, limitations, restrictions and relative rights is stated in these Articles, all to the fullest extent permitted by the NRS.
(e) Certain Distributions. Notwithstanding anything to the contrary in these Articles or in the Bylaws, the Corporation is hereby specifically allowed to make any distribution that otherwise would be prohibited by Section 78.288(2)(b) of the NRS.
Section 2. Common Stock. The powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations and restrictions of the Common Stock are as follows:
(a) Ranking. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board upon any issuance of the Preferred Stock of any series.
(b) Voting. Subject to Article IV and except as otherwise provided by these Articles or as provided by law, or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall have the exclusive right to vote on all matters (including the election of directors pursuant to Article IV) submitted to a vote or for the consent (if action by written consent of the stockholders is not prohibited at such time under these Articles) of the stockholders of the Corporation. Except as otherwise expressly provided herein or required by applicable law, each holder of Class A Common Stock shall have the right to one (1) vote per share of Class A Common Stock held of record by such holder, and each holder of Class B Common Stock shall have the right to ten (10) votes per share of Class B Common Stock held of record by such holder. Notwithstanding any other provision of these Articles to the contrary, the holders of Common Stock shall not be entitled to vote on any amendment to these Articles (including any Preferred Stock Designation (as defined below)) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to these Articles (including any Preferred Stock Designation) or Chapter 78 of the NRS.
(c) Voluntary Conversion.
i. Each share of Class B Common Stock will be convertible, at the option of the holder thereof, into one fully paid and non-assessable share of Class A Common Stock. Any such conversion may be effected by any holder of Class B Common Stock by surrendering such holder’s certificate or certificates for the Class B Common Stock to be converted, duly endorsed, at the office of the Corporation or any transfer agent for the Class B Common Stock, together with a written notice to the Corporation at such office that such holder elects to convert all or a specified number of shares of Class B Common Stock represented by such certificate or certificates and stating the name or names in which such holder desires the certificate or certificates representing shares of Class A Common Stock to be issued and, if less than all of the shares of Class B Common Stock represented by one certificate are to be converted, the name or names in which such holder desires the certificate representing such remaining shares of Class B Common Stock to be issued. If required by the Corporation, any certificate representing shares surrendered for conversion in accordance with this Section will be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder of such shares or the duly authorized representative of such holder, and will, if required by the last sentence of Subsection (b) below, be accompanied by payment, or evidence of payment, of applicable issue or transfer taxes. Promptly thereafter, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees, a certificate or certificates representing the number of shares of Class A Common Stock to which such holder will be entitled as herein provided. If less than all of the shares of Class B Common Stock represented by any one certificate are to be converted, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees a new certificate representing the shares of Class B Common Stock not converted. Such conversion will be deemed to have been made at the close of business on the date of receipt by the Corporation or any such transfer agent of the certificate or certificates, notice and, if required, instruments of transfer and payment or evidence of payment of taxes referred to above, and the person or persons entitled to receive the Class A Common Stock issuable on such conversion will be treated for all purposes as the record holder or holders of such Class A Common Stock on that date. A number of shares of Class A Common Stock equal to the number of shares of Class B Common Stock outstanding from time to time will be set aside and reserved for issuance upon conversion of shares of Class B Common Stock. Shares of Class A Common Stock are not convertible into shares of any other class or series of Common Stock.
ii. The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of certificates representing shares of Class A Common Stock on conversion of shares of Class B Common Stock pursuant to this Section. The Corporation will not, however, be required to pay any tax that may be payable in respect of any issue or delivery of certificates representing any shares of Class A Common Stock in a name other than that in which the shares of Class B Common Stock so converted were registered and no such issue or delivery will be made unless and until the person or entity requesting the same has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid.
(d) Automatic Conversion. If any holder of Class B Common Stock shall have transferred any shares of Class B Common Stock, other than a Permitted Transfer (as defined below), each such transferred share of Class B Common Stock will be automatically converted into one fully paid and non-assessable share of Class A Common Stock. As used herein, “Permitted Transfer” means a sale, transfer or assignment of Class B Common Stock to (i) an existing holder of Class B Common Stock as of the date on which the shares of Class B Common Stock were initially issued by the Corporation or such existing holder’s Affiliate Transferee or (ii) to an Affiliate Transferee, so long as the holder of such shares of Class B Common Stock as of the date such shares of Class B Common Stock were initially issued by the Corporation retains (A) the power (whether exclusive or shared) to vote or direct the voting of such shares by proxy, voting agreement or otherwise and (B) control over the disposition of such shares. As used herein, “Affiliate Transferee” means any other Person that directly or indirectly through one or more intermediaries Controls (as defined in Article XVI), is Controlled by, or is under common Control with, a holder of shares Class B Common Stock as of the date such shares of Class B Common Stock were initially issued by the Corporation or a trust for the benefit such holder. Notwithstanding the foregoing, if, at any time after a Permitted Transfer to an Affiliate Transferee pursuant to this paragraph, such Affiliate Transferee no longer meets the definition of Affiliate Transferee, each such transferred share of Class B Common Stock will be automatically converted into one fully paid and non-assessable share of Class A Common Stock.
(e) Dividends. Subject to applicable law and the rights, if any, of the holders of any outstanding class or series of Preferred Stock, the holders of shares of Common Stock shall be entitled, on a per share basis, to receive such dividends and other distributions of cash, property, shares of capital stock or rights to acquire shares of capital stock of the Corporation when, as and if declared thereon by the Board from time to time with respect to Common Stock out of assets or funds of the Corporation legally available therefor; provided, however, that in the case of any dividends in Common Stock, the Class A Common Stock shall be entitled only to receive Class A Common Stock and the Class B Common Stock shall be entitled only to receive Class B Common Stock. In no event shall the shares of either Class A Common Stock or Class B Common Stock be split, divided, or combined unless the outstanding shares of the other class shall be proportionately split, divided or combined.
(f) Liquidation. In the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, the holders of shares of Common Stock shall be entitled, pro rata on a per share basis, to all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock, subject to applicable law and the rights, if any, of the holders of any outstanding class or series of Preferred Stock. For purposes of this paragraph, unless otherwise provided with respect to any then outstanding series of Preferred Stock, the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the assets of the Corporation or a consolidation or merger of the Corporation with one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger) shall not be deemed to be a liquidation, dissolution or winding up, either voluntary or involuntary.
(g) No Preemptive or Subscription Rights. No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.
Section 3. Preferred Stock. The Board is hereby authorized to provide, by resolution or resolutions adopted by the Board, for the issuance of Preferred Stock from time to time in one or more classes and/or series, and by filing a certificate of designation pursuant to the applicable law of the State of Nevada (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish the number of shares of each such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions, relative rights and distinguishing designation of each such class or series, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, of any of the shares of each such class or series, all to the fullest extent permitted by Chapter 78 of the NRS, or any successor law(s) of the State of Nevada. Without limiting the generality of the foregoing, the Board is authorized to provide that shares of a class or series of Preferred Stock:
(a) are entitled to cumulative, partially cumulative or noncumulative dividends or other distributions payable in cash, capital stock or indebtedness of the Corporation or other property, at such times and in such amounts as are set forth in the Preferred Stock Designation establishing such class or series or as are determined in a manner specified in the Preferred Stock Designation;
(b) are entitled to a preference with respect to payment of dividends over one or more other classes and/or series of capital stock of the Corporation;
(c) are entitled to a preference with respect to any distribution of assets of the Corporation upon its liquidation, dissolution or winding up over one or more other classes and/or series of capital stock of the Corporation in such amount as is set forth in the Preferred Stock Designation establishing such class or series or as is determined in a manner specified in the Preferred Stock Designation;
(d) are redeemable, convertible or exchangeable at the option of the Corporation and/or on a mandatory basis for cash, capital stock or indebtedness of the Corporation or other property, at such times or upon the occurrence of such events, and at such prices, as are set forth in the resolutions of the Board establishing such class or series or as are determined in a manner specified in the Preferred Stock Designation;
(e) are entitled to the benefits of such sinking fund, if any, as is required to be established by the Corporation for the redemption and/or purchase of such shares by the resolutions of the Board establishing such class or series;
(f) are convertible at the option of the holders thereof into shares of any other class or series of capital stock of the Corporation, at such times or upon the occurrence of such events, and upon such terms, as are set forth in the resolutions of the Board establishing such class or series or as are determined in a manner specified in the Preferred Stock Designation;
(g) are exchangeable at the option of the holders thereof for cash, capital stock or indebtedness of the Corporation or other property, at such times or upon the occurrence of such events, and at such prices, as are set forth in the resolutions of the Board establishing such class or series or as are determined in a manner specified in the Preferred Stock Designation;
(h) are entitled to such voting rights, if any, as are specified in the resolutions of the Board establishing such class or series (including, without limiting the generality of the foregoing, the right to elect one or more directors voting alone as a single class or series or together with one or more other classes and/or series of Preferred Stock, if so specified by the Preferred Stock Designation) at all times or upon the occurrence of specified events;
(i) are subject to restrictions on the issuance of additional shares of Preferred Stock of such class or series or of any other class or series, or on the reissuance of shares of Preferred Stock of such class or series or of any other class or series, or on increases or decreases in the number of authorized shares of Preferred Stock of such class or series or of any other class or series;
(j) are superior or rank equally or are junior to any other series of Preferred Stock to the extent permitted by law; and
(k) are otherwise authorized to the fullest extent permissible under the NRS.
Section 4. Power to Sell and Purchase Shares. Subject to the requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such consideration, as the Board shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issuance or sale of the same number of shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase all or any part of any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class, and as otherwise permitted by law.
Section 5. Rights and Options. The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.
ARTICLE X
LIABILITY AND INDEMNIFICATION
To the fullest extent permitted by Section 78.138 of the NRS or any successor provision of Nevada law, no director or officer shall be personally liable to the Corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer. No amendment to, or modification or repeal of, this Article X shall adversely affect any right or protection of a director or of any officer, employee or agent of the Corporation existing hereunder with respect to any act or omission occurring prior to such amendment, modification or repeal. The Corporation is authorized to indemnify and to advance expenses to each current, former or prospective director, officer, employee or agent of the Corporation to the fullest extent permitted by the Bylaws and Sections 78.7502 and 78.751 of the NRS, or any successor provision of Nevada law allowing greater indemnification or advancement of expenses.
ARTICLE XI
MATTERS RELATING TO STOCKHOLDERS
Section 1. No Action by Written Consent. Prior to the Avalon Merger Effective Time (as such term is defined in that certain Business Combination Agreement, by and among Avalon Acquisition, Inc., The Beneficient Company Group, L.P., Beneficient Merger Sub I, Inc. and Beneficient Merger Sub II, LLC (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”)), any action required or permitted to be taken by stockholders of the Corporation may be taken by written consent without a meeting with the approval of the holders of outstanding capital stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting at which all shares of capital stock entitled to vote thereon were present and voted. Any time after the Avalon Merger Effective Time (as such term is defined in the Business Combination Agreement), and subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock, any action required or permitted to be taken by stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders and may not be effected by written consent without a meeting; provided, however, that if the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, then any action required or permitted to be taken by the holders of Class B Common Stock may be effected by an action by written consent in lieu of a meeting with the approval of the holders of outstanding Class B Common Stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting at which all shares of Class B Common Stock entitled to vote thereon were present and voted.
Section 2. Special Meetings of Stockholders. Subject to the rights, if any, of the holders of any outstanding class or series of Preferred Stock, special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, or the President of the Corporation upon direction of the Board pursuant to a resolution adopted by a majority of the Board, and may not be called by another person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
ARTICLE XII
AMENDMENTS
Section 1. Amendment to Articles. The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in these Articles, in the manner, and subject to approval by stockholders, as now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided that any amendment to Article IV, Article X, Article XI, Article XII, Article XIV, Article XV or Article XVI shall be effective only upon the affirmative vote of the holders of Common Stock and Preferred Stock then outstanding representing two-thirds or more of the votes eligible to be cast in an election of directors; provided further, that if the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, then any amendment to Article IV, Article VIII, Article X, Article XI, Article XII, Article XIV, Article XV or Article XVI shall be effective only upon the affirmative vote of the holders of Class B Common Stock then outstanding representing a majority of the votes eligible to be cast in an election of directors.
Section 2. Amendment to Bylaws. In furtherance and not in limitation of the powers conferred upon it by law, the Board is expressly authorized and empowered to adopt, amend and repeal the Bylaws. Notwithstanding the foregoing, in addition to any affirmative vote of the holders of any class or series of Preferred Stock required pursuant to a Preferred Stock Designation, the Bylaws may also be amended, altered or repealed and new Bylaws may be adopted by the affirmative vote of the holders of a majority of the voting power of the Corporation entitled to vote thereon.
Section 3. Severability. If any provision or provisions of these Articles shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of these Articles (including, without limitation, each portion of any paragraph of these Articles containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of these Articles
(including, without limitation, each such portion of any paragraph of these Articles containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by law.
ARTICLE XIII
EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada, shall, to the fullest extent permitted by law, be the exclusive forum for any or all actions, suits, proceedings, whether civil, administrative or investigative or that asserts any claim or counterclaim (each, an “Action”), (a) brought in the name or right of the Corporation or on its behalf; (b) asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders; (c) arising or asserting a claim pursuant to any provision of NRS Chapters 78 or 92A or any provision of these Articles or the Bylaws; (d) to interpret, apply, enforce or determine the validity of these Articles or the Bylaws; or (e) asserting a claim governed by the internal affairs doctrine. In the event that the Eighth Judicial District Court of Clark County, Nevada does not have jurisdiction over any such Action, then any other state district court located in the State of Nevada shall be the exclusive forum for such Action. In the event that no state district court in the State of Nevada has jurisdiction over any such Action, then a federal court located within the State of Nevada shall be the exclusive forum for such Action. Notwithstanding the foregoing, the provisions of this Article XIII shall not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Additionally, unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, against the Corporation or any of the Corporation’s directors, officers, other employees or agents. Any person or entity that acquires any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to all of the provisions of this Article XIII.
ARTICLE XIV
ACQUISITION OF CONTROLLING INTEREST
The Corporation expressly elects not to be governed by the provisions of Sections 78.378 through 78.3793, inclusive, of the NRS.
ARTICLE XV
COMBINATIONS WITH INTERESTED STOCKHOLDERS
The Corporation expressly elects not to be governed by the provisions of Sections 78.411 through 78.444, inclusive, of the NRS.
ARTICLE XVI
CERTAINBUSINESS OPPORTUNITIES
Section 1. Certain Acknowledgements; Definitions.
(a) In recognition and anticipation that:
i. directors and officers of the Corporation may serve as directors, officers, employees and agents of any other corporation, company, partnership, association, firm or other entity, including, without limitation, Subsidiaries and Affiliates of the Corporation (“Other Entity”),
ii. the Corporation, directly or indirectly, may engage in the same, similar or related lines of business as those engaged in by any Other Entity and other business activities that overlap with or compete with those in which such Other Entity may engage,
iii. the Corporation may have an interest in the same areas of business opportunity as any Other Entity, and
iv. the Corporation may engage in material business transactions with any Other Entity and its Affiliates, including, without limitation, receiving services from, providing services to or being a significant customer or supplier to such Other Entity and its Affiliates, and that the Corporation and such Other Entity or one or more of their respective Subsidiaries or Affiliates may benefit from such transactions, and as a consequence of the foregoing, it is in the best interests of the Corporation that the rights of the Corporation, and the duties of any directors or officers of the Corporation (including any such Persons who are also directors, officers or employees of any Other Entity), be determined and delineated, as set forth herein, in respect of (A) any transactions between the Corporation and its Subsidiaries or Affiliates, on the one hand, and such Other Entity and its Subsidiaries or Affiliates, on the other hand, and (B) any potential transactions or matters that may be presented to officers or directors of the Corporation, or of which such officers or directors may otherwise become aware, which potential transactions or matters may constitute business opportunities of the Corporation or any of its Subsidiaries or Affiliates.
(b) In recognition of the benefits to be derived by the Corporation through its continued contractual, corporate and business relations with any Other Entity and of the benefits to be derived by the Corporation by the possible service as directors or officers of the Corporation and its Subsidiaries of Persons who may also serve from time to time as directors, officers or employees of any Other Entity, the provisions of this Article XVI will, to the fullest extent permitted by law, regulate and define the conduct of the business and affairs of the Corporation in relation to such Other Entity and its Affiliates, and as such conduct and affairs may involve such Other Entity’s respective directors, officers or employees, and the powers, rights, duties and liabilities of the Corporation and its officers and directors in connection therewith and in connection with any Potential Business Opportunity (as defined below) of the Corporation.
(c) Any Person purchasing, receiving or otherwise becoming the owner of any shares of capital stock of the Corporation, or any interest therein, will be deemed to have notice of and to have consented to the provisions of this Article XVI. References in this Article XVI to “directors,” “officers” or “employees” of any Person will be deemed to include those Persons who hold similar positions or exercise similar powers and authority with respect to any Other Entity that is a limited liability company, partnership, joint venture or other non-corporate entity.
(d) Definitions for Article XVI. For purposes of this Article XVI, the following terms have the meanings set forth below:
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with such Person.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by agreement, or otherwise. The terms “Controls”, “Controlled” and “Controlling” will have corresponding meanings.
“Person” means a natural person, corporation, limited liability company, partnership, joint venture, trust, unincorporated association or other legal entity.
“Subsidiary” when used with respect to any Person, means any other Person (1) of which (x) in the case of a corporation, at least (A) 50% of the equity or (B) 50% of the voting interests are owned or Controlled, directly or indirectly, by such first Person, by any one or more of its Subsidiaries, or by such first Person and one or more of its Subsidiaries or (y) in the case of any Person other than a corporation, such first Person, one or more of its Subsidiaries, or such first Person and one or more of its Subsidiaries (A) owns at least 50% of the equity interests thereof or (B) has the power to elect or direct the election of at least 50% of the members of the governing body thereof or otherwise has Control over such organization or entity; or (2) that is required to be consolidated with such first Person for financial reporting purposes under U.S. Generally Accepted Accounting Principles, as in effect from to time.
Section 2. Duties of Directors and Officers Regarding Potential Business Opportunities; No Liability for Certain Acts or Omissions. If a director or officer of the Corporation is offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business opportunity for the Corporation or any of its Subsidiaries or Affiliates, in which the Corporation could, but for the provisions of this Article XII, have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “Potential Business Opportunity”):
(a) such director or officer will, to the fullest extent permitted by law, have no duty or obligation to refer such Potential Business Opportunity to the Corporation, or to refrain from referring such Potential Business Opportunity to any Other Entity, or to give any notice to the Corporation regarding such Potential Business Opportunity (or any matter related thereto),
(b) such director or officer will not be liable to the Corporation or any of its Subsidiaries or any of its stockholders, as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation or any of its Subsidiaries, or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to or otherwise inform the Corporation or any of its Subsidiaries regarding such Potential Business Opportunity or any matter relating thereto,
(c) any Other Entity may engage or invest in, independently or with others, any such Potential Business Opportunity,
(d) the Corporation shall not have any right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom, and
(e) the Corporation shall have no interest or expectancy, and hereby specifically renounces any interest or expectancy, in any such Potential Business Opportunity, unless both the following conditions are satisfied: (i) such Potential Business Opportunity was expressly offered to a director or officer of the Corporation solely in his or her capacity as a director or officer of the Corporation or as a director or officer of any Subsidiary of the Corporation and (ii) such opportunity relates to a line of business in which the Corporation or any of its Subsidiaries is then directly engaged.
Section 3. Amendment of Article XVI. No alteration, amendment or repeal, or adoption of any provision inconsistent with, any provision of this Article XVI will have any effect upon:
(a) any agreement between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, that was entered into before the time of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “Amendment Time”), or any transaction entered into in connection with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time,
(b) any transaction entered into between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, before the Amendment Time,
(c) the allocation of any business opportunity between the Corporation or any Subsidiary or Affiliate thereof and any Other Entity before the Amendment Time, or
(d) any duty or obligation owed by any director or officer of the Corporation or any Subsidiary of the Corporation (or the absence of any such duty or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).
BARBARA K. CEGAVSKE Secretary of State Initial List and State 202 North Carson Street Carson City, Nevada 89701-4201 Business License (775) 684-5708 Application Website: www.nvsos.gov www.nvsilverflume.gov Initial List of Officers, Managers, Members, General Partners, Managing Partners, or Trustees: NAME OF ENTITY TYPE OR PRINT ONLY—USE DARK INK ONLY—DO NOT HIGHLIGHT IMPORTANT: Read instructions before completing and returning this form. Please indicate the entity type (check only one): Corporation This corporation is publicly traded, the Central Index Key number is: Nonprofit Corporation (see nonprofit sections below) Limited-Liability Company Limited Partnership Limited-Liability Partnership Limited-Liability Limited Partnership (If formed at the same time as the Limited Partnership) Business Trust Additional Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers, may be listed on a supplemental page. CHECK ONLY IF APPLICABLE Pursuant to NRS Chapter 76, this entity is exempt from the business license fee. 001—Governmental Entity 006—NRS 680B.020 Insurance Co, provide license or certificate of authority number For nonprofit entities formed under NRS Chapter 80: entities without 501(c) nonprofit designation are required to maintain a state business license, the fee is $200.00. Those claiming an exemption under 501(c) designation must indicate by checking box below. Pursuant to NRS Chapter 76, this entity is a 501(c) nonprofit entity and is exempt from the business license fee. Exemption code 002 For nonprofit entities formed under NRS Chapter 81: entities which are Unit-owners’are association excluded or from Religious, the requirement charitable, to fraternal obtain a or other organization that qualifies as a tax-exempt organization pursuant to 26 U.S.C. § 501(c) state business license. Please indicate below if $ this entity for falls under one of these categories by marking the appropriate box. If the entity does not fall under either of these categories please submit 200.00 the state business license. Unit-owners’ Association Religious, charitable, fraternal or other organization that qualifies as a tax-exempt organization pursuant to 26 U.S.C. § 501(c) For nonprofit entities formed under NRS Chapter 82 and 80: Charitable Solicitation Information—check applicable box Does the Organization intend to solicit charitable or tax deductible contributions? No – no additional form is required Yes – the “Charitable Solicitation Registration Statement” is required. The Organization claims exemption pursuant to NRS 82A.210—the “Exemption From Charitable Solicitation Registration Statement” is required ** Failure to include the required statement form will result in rejection of the filing and could result in late fees.** Page 1 of 2 Revised: 1/1/2019
BARBARA K. CEGAVSKE Secretary of State Initial List and State 202 North Carson Street Carson City, Nevada 89701-4201 Business License (775) 684-5708 Application—Continued Website: www.nvsos.gov www.nvsilverflume.gov Officers, Managers, Members, General Partners, Managing Partners or Trustees: CORPORATION, INDICATE THE PRESIDENT, OR EQUIVALENT OF: Title: Name Country Address City State Zip/Postal Code CORPORATION, INDICATE THE SECRETARY, OR EQUIVALENT OF: Title: Name Country Address City State Zip/Postal Code CORPORATION, INDICATE THE TREASURER, OR EQUIVALENT OF: Title: Name Country Address City State Zip/Postal Code CORPORATION, INDICATE THE DIRECTOR: Name Country Address City State Zip/Postal Code None of the officers or directors identified in the list of officers has been identified with the fraudulent intent of concealing the identity of any person or persons exercising the power or authority of an officer or director in furtherance of any unlawful conduct. I declare, to the best of my knowledge under penalty of perjury, that the information contained herein is correct and acknowledge that pursuant to NRS 239.330, it is a category C felony to knowingly offer any false or forged instrument for filing in the Office of the Secretary of State. X Signature of Officer, Manager, Managing Title Date Member, General Partner, Managing Partner, Trustee, Member, Owner of Business, Partner or Authorized Signer FORM WILL BE RETURNED IF UNSIGNED. Page 2 of 2 Revised: 1/1/2019
INITIAL LIST AND STATE BUSINESS LICENSE APPLICATION
OF
BENEFICIENT
(CONTINUED)
| NAME AND ADDRESS | TITLE |
|---|---|
| Peter T. Cangany, Jr. | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Richard W. Fisher | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Derek L. Fletcher | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Thomas O. Hicks | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Emily B. Hill | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Dennis P. Lockhart | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| James G. Silk | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 | |
| Bruce W. Schnitzer | Director |
| 112 North Curry Street | |
| Carson City, NV 89703 |
EX-3.1(2)
Exhibit 3.1.2
| Filed in the Office of | Business Number |
|---|---|
 |
E32494422023-9 |
| Filing Number | |
| 20233249676 | |
| Secretary of State | Filed On |
| State Of Nevada | 6/6/2023 2:34:00 PM |
| Number of Pages | |
| 4 | |
| BARBARA K. CEGAVSKE<br> <br>Secretary ofState<br> <br>202 North Carson Street<br> <br>Carson City,Nevada 89701-4201<br> <br>(775) 684-5708<br><br><br>Website: www.nvsos.gov | |
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Certificate, Amendment or Withdrawal of Designation
NRS 78.1955, 78.1955(6)
☒ Certificate of Designation
☐ Certificate of Amendment to Designation - Before Issuance of Class or Series
☐ Certificate of Amendment to Designation - After Issuance of Class or Series
☐ Certificate of Withdrawal of Certificate of Designation
TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT
| 1. Entity information: | Name of entity: |
|---|---|
| Beneficient | |
| Entity or Nevada Business Identification Number (NVID): E32494422023-9 | |
| 2. Effective date and time: | For Certificate of<br>Designation or<br> <br>Amendment to Designation<br>Only Date:<br> Time:<br><br><br>(Optional):<br> <br> (must not be later than 90 days after the certificate is filed) |
| 3. Class or series of stock: (Certificate of Designation only) | The class or series of stock being designated<br>within this filing:<br> <br><br> <br>Series A Convertible Preferred<br>Stock |
| 4. Information for amendment of class or series of stock: | The original class or series of stock being amended within this filing: |
| 5. Amendment of class or series of stock: | ☐ Certificate of Amendment to Designation- Before Issuance of Class or Series<br><br><br>As of the date of this certificate no shares of the class or series of stock have been<br>issued. |
| ☐ Certificate of Amendment to Designation- After Issuance of Class or Series<br><br><br>The amendment has been approved by the vote of stockholders holding shares in the<br>corporation entitling them to exercise a majority of the voting power, or such greater proportion of the voting power as may be required by the articles of incorporation or the certificate of designation. | |
| 6. Resolution:<br><br><br>Certificate of Designation and Amendment to Designation only) | By resolution of the board of directors pursuant<br>to a provision in the articles of incorporation this certificate establishes OR amends the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights of the following class or series of<br>stock.*<br> <br><br> <br>BE IT RESOLVED, that pursuant to the authority conferred on the Board of<br>Directors of this Corporation by the Articles of Incorporation, a series of Preferred Stock, $0.001 par value, of the Corporation be and hereby is established and created, and that the designation and number of shares thereof and the voting and<br>other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions are as provided as in the document attached hereto. |
| 7. Withdrawal: | Designation being<br> <br> <br> Date of |
| Withdrawn:<br> <br> <br> Designation: | |
| No shares of the class or series of stock being withdrawn are outstanding. | |
| The resolution of the board of directors<br>authorizing the withdrawal of the certificate of designation establishing the class or series of stock: * | |
| 8. Signature:(Required) | X /s/ David Rost<br> <br> <br> Date: 6/6/23<br> <br>Signature<br>of Officer |
| * Attach additional page(s) if necessary | Page 1 of 1 |
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| This form must be accompanied by appropriate fees. | Revised: 1/1/2019 |
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLEPREFERRED STOCK
OF
BENEFICIENT
(Pursuantto NRS 78.1955)
Beneficient, a corporation organized and existing under the laws of the State of Nevada (the “Corporation”), does hereby certify that, pursuant to the authority conferred on its board of directors (the “Board of Directors”) by its articles of incorporation (the “Articles of Incorporation”) and in accordance with Section 78.1955 of the Nevada Revised Statutes, the Board of Directors adopted the following resolution establishing a series of fifty million (50,000,000) shares of Preferred Stock of the Corporation designated as Series A Convertible Preferred Stock.
BE IT RESOLVED, that pursuant to the authority conferred on the Board of Directors of this Corporation by the Articles of Incorporation, a series of Preferred Stock, $0.00 1 par value, of the Corporation be and hereby is established and created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:
Designation and Number. A series of Preferred Stock, designated as Series A Convertible Preferred Stock (“Series A Preferred Stock”), is hereby established. The number of authorized shares of Series A Preferred Stock shall initially be fifty million (50,000,000) shares.
No Sinking Fund. There shall be no sinking fund for the payment of dividends or liquidation preferences on Series A Preferred Stock or the redemption of any shares thereof.
Rank. Series A Preferred Stock will, with respect to rights upon liquidation, dissolution or winding up of the Corporation, rank: (a) senior to (i) all classes or series of the Corporation’s common stock, and (ii) any future equity securities issued by the Corporation, the terms of which do not specifically provide that such equity securities rank senior to Series A Preferred Stock with respect to rights upon liquidation, dissolution or winding up of the Corporation (the Corporation’s common stock and all other classes or series of capital stock listed in this clause (a) being referred to herein collectively as “Junior Stock”); and (b) junior to all existing and future indebtedness of the Corporation.
Liquidation Preference. In the event of any liquidation or dissolution of the Corporation, no distributions of available funds and assets will be made to the holders of Junior Stock until the holders of Series A Preferred Stock receive an amount equal to $0,001 per share of Series A Preferred Stock (the “Liquidation Preference”).
4.1 Adjustment. For purposes of this Section 4, in the event that the shares of Series A Preferred Stock have not been converted into shares of the Corporation’s Class A Common Stock, par value $0,001 per share (“Class A Common Stock”), and in the event that the Corporation either: (1) subdivides (by stock split, reclassification or otherwise) the outstanding shares of Series A Preferred Stock into a greater number of shares of Series A Preferred Stock; or (2) combines or consolidates (by reverse stock split) the outstanding shares of Series A Preferred Stock into a smaller number of shares of Series A Preferred Stock, then the Liquidation Preference shall be proportionately decreased or increased, as appropriate, simultaneously with the occurrence of such event.
4.2 Consolidation or Merger of the Corporation. The consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation, trust or entity with or into the Corporation, or the sale, lease, exchange offer, tender offer or any other transfer, or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
4.3 No Further Rights. After payment of the full amount of the Liquidation Preference, the holders of Series A Preferred Stock will have no right or claim to any of the remaining assets of the Corporation by virtue of their ownership of Series A Preferred Stock.
No Voting Rights. Except as required by law, the holders of Series A Preferred Stock shall not be entitled to vote at any meeting of the stockholders for election of members of the Board of Directors of the Corporation or for any other purpose or otherwise to participate in any action taken by the Corporation or the stockholders thereof, or to receive notice of any meeting of stockholders.
Redemption. The outstanding shares of Series A Convertible Preferred Stock may be redeemed at any time by the Corporation after the Conversion Date (as defined in Section 7 below). The Series A Preferred Stock shall be redeemed at the Liquidation Preference by providing to the holders of Series A Preferred Stock prior written notice of no less than seven (7) calendar days. For the avoidance of doubt, the Series A Preferred Stock shall only be subject to redemption following the Conversion Date.
Optional Conversion. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, into one-fourth (1/4) of a share of Class A Common Stock (the “Conversion Rate”) on, and only on, the later of (i) 90 days after the Closing Date (as defined in that certain Business Combination Agreement dated September 21, 2022 by and among Avalon Acquisition Inc., Beneficient Merger Sub I, Inc., Beneficient Merger Sub II, LLC, and The Beneficient Company Group, L.P.) and (ii) 30 days after a registration statement under the Securities Act of 1933, as amended, has been declared effective with respect to the issuance of the Class A Common Stock upon the exercise of the warrants, with each warrant entitling the holder thereof to purchase at a purchase price of $1 1.50 per share, one share of Class A Common Stock and one share of Series A Preferred Stock (the “Conversion Date”); provided that prior to the Conversion Date, if at the time a share of Series A Preferred Stock is issued, the Series A Preferred Stock is not listed on The Nasdaq Stock Market, LLC, then such shares of Series A Preferred Stock shall automatically and immediately upon issuance convert into shares of Class A Common Stock at the Conversion Rate. Each holder of Series A Preferred Stock shall be deemed to have elected to convert such shares of Series A Preferred Stock into shares of Class A Common Stock pursuant to its optional conversion right under this Section 7 unless such holder has delivered written notice addressed to investor relations of the Corporation in accordance with Section 8 hereof two business days prior to the Conversion Date that such holder has chosen not to elect to participate in the optional conversion. After the Conversion Date, the Series A Preferred Stock shall have no conversion rights. The Corporation shall not issue any fractional shares of Class A Common Stock upon conversion of shares of Series A Preferred Stock. If the conversion would result in the issuance of a fraction of a share of Class A Common Stock, the Company shall round such fraction of a share of Class A Common Stock up to the nearest whole share.
7.1 Adjustment for Reclassification, Exchange, and Substitution. If at any time or from time to time after the date upon which the first share of Series A Preferred Stock was issued by the Corporation (the “Original Issue Date”), the shares of Class A Common Stock issuable upon the conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, reorganization, merger, exchange, consolidation, sale of assets or otherwise (other than by a Class A Common Stock Event (as defined below) or a stock dividend or distribution provided for elsewhere in this Section 7), then, in any such event, the Series A Preferred Stock shall thereafter convert into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, reorganization, merger, exchange, consolidation, sale of assets or other change by a holder of the number of shares of Class A Common Stock into which such shares of Series A Preferred Stock would have been converted immediately prior to such recapitalization, reclassification, reorganization, merger, exchange, consolidation, sale of assets or other change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.
7.2 Adjustment Upon Class A Common Stock Event. In the event that a Class A Common Stock Event occurs at any time or from time to time after the Original Issue Date, the conversion ratio in effect immediately prior to such event shall, simultaneously with the occurrence of such Class A Common Stock Event, be proportionately decreased or increased, as appropriate. The conversion ratio shall be readjusted in the same manner upon the happening of each subsequent Class A Common Stock Event.
7.3 Class A Common Stock Event. As used herein, the term “Class A Common Stock Event” means: (1) the declaration or payment of any dividend or other distribution on the Class A Common Stock, without consideration, payable to one or more stockholders in additional shares of Class A Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive, directly or indirectly, additional shares of Class A Common Stock; (2) a subdivision (by stock split, reclassification or otherwise) of the outstanding shares of Class A Common Stock into a greater number of shares of Class A Common Stock; or (3) a combination or consolidation (by reverse stock split) of the outstanding shares of Class A Common Stock into a smaller number of shares of Class A Common Stock.
- Notice. Except as may otherwise be provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt of such notice or four business days after the mailing of such notice, if sent by registered mail, with postage pre-paid, addressed: (a) if to the Corporation, to the attention of its corporate secretary or to an agent of the Corporation designated as permitted by the Corporation’s Articles of Incorporation, as amended; (b) if to any holder of Series A Preferred Stock, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of the Corporation’s transfer agent); or (c) to such other address as the Corporation or holder, as the case may be, shall have designated by notice similarly given.
EX-3.2
Exhibit 3.2
BYLAWS
OF
BENEFICIENT, ****
a Nevada corporation
(Effective as of June 6, 2023)
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal office and place of business of Beneficient, a Nevada corporation (the “Corporation”), shall be at such location within or without the State of Nevada as determined from time to time by resolution of the board of directors of the Corporation (the “Board of Directors”).
Section 1.2 Other Offices. Other offices and places of business either within or without the State of Nevada may be established from time to time by resolution of the Board of Directors or as the business of the Corporation may require. The street address of the Corporation’s registered agent is the registered office of the Corporation in Nevada.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date and at such time as may be designated from time to time by the Board of Directors. At the annual meeting, directors shall be elected and any other business may be transacted as may be properly brought before the meeting pursuant to these Bylaws (as amended from time to time, these “Bylaws”). The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders.
Section 2.2 Special Meetings.
(a) Subject to any rights of stockholders set forth in the articles of incorporation of the Corporation (as amended from time to time, the “Articles of Incorporation”), special meetings of the stockholders may be called only in the manner set forth in these Bylaws by the persons designated in the Articles of Incorporation. The notice for every special meeting shall state the place (if any), date, hour and purposes of the meeting. Except as otherwise required by law, only the purposes specified in the notice of the special meeting shall be considered or dealt with at such special meeting. The Board of Directors may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board of Directors.
(b) No business shall be acted upon at a special meeting of stockholders except as set forth in the notice of the meeting.
Section 2.3 Place of Meetings. Meetings of stockholders may be held at such place, either within or without the State of Nevada, as may be designated in the notice of meeting. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communications, including by such electronic communications, videoconferencing, teleconferencing or other available technology (collectively, “Remote Technology”) to the fullest extent permitted by the Nevada Revised Statutes (as amended from time to time, the “NRS”). The Board of Directors may also, in its sole discretion, determine that stockholders and proxy holders may
attend and participate by means of Remote Technology in a stockholder meeting held at a designated place. As to any meeting where attendance and participation by Remote Technology authorized by the Board of Directors in its sole discretion (including any meeting held solely by Remote Technology), and subject to such guidelines and procedures as the Board of Directors may adopt for any meeting, stockholders and proxy holders not physically present at such meeting of the stockholders shall be entitled to: (i) participate in any such meeting of the stockholders; and (ii) be deemed present in person and vote at such meeting of the stockholders whether such meeting is to be held at a designated place or solely by means of Remote Technology, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of Remote Technology is a stockholder or proxy holder, (B) the Corporation shall implement reasonable measures to provide stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of Remote Technology, a record of such vote or other action shall be maintained by the Corporation. Participation in a meeting by means of Remote Technology pursuant to this Section constitutes presence in person at the meeting.
Section 2.4 Notice of Meetings; Waiver of Notice.
(a) The chief executive officer, if any, the president, any vice president, the secretary, an assistant secretary or any other individual designated by the Board of Directors shall sign and deliver or cause to be delivered to the stockholders written notice of any stockholders’ meeting not less than ten (10) nor more than sixty (60) days before the meeting. The notice shall state the place, date and time of the meeting, the means of Remote Technology, if any, by which the stockholders or the proxies thereof shall be deemed to be present and vote and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The notice shall be delivered in accordance with, and shall contain or be accompanied by such additional information as may be required by, the NRS.
(b) In the case of an annual meeting, subject to Section 2.13, any proper business may be presented for action, except that (i) if a proposed plan of merger, conversion or exchange is submitted to a vote, the notice of the meeting must state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger, conversion or exchange and must contain or be accompanied by a copy or summary of the plan; and (ii) if a proposed action creating dissenter’s rights is to be submitted to a vote, the notice of the meeting must state that the stockholders are or may be entitled to assert dissenter’s rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
(c) A copy of the notice shall be personally delivered or mailed postage prepaid to each stockholder of record at the address appearing on the records of the Corporation. Upon mailing, service of the notice is complete, and the time of the notice begins to run from the date upon which the notice is deposited in the mail. If the address of any stockholder does not appear upon the records of the Corporation or is incomplete, it will be sufficient to address any notice to such stockholder at the registered office of the Corporation. Notwithstanding the foregoing and in addition thereto, any notice to stockholders given by the Corporation pursuant to Chapters 78 or 92A of the NRS, the Articles of Incorporation or these Bylaws may be given pursuant to the forms of Electronic Transmission (as defined below) listed herein, if such forms of transmission are consented to in writing by the stockholder receiving such electronically transmitted notice and such consent is filed by the secretary in the corporate records. Notice shall be deemed given (i) by facsimile when directed to a number consented to by the stockholder to receive notice, (ii) by e-mail when directed to an e-mail address consented to by the stockholder to receive notice, (iii) by posting on an electronic network together with a separate notice to the stockholder of the specific posting on the later of the specific posting or the giving of the separate notice or (iv) by any other Electronic Transmission as consented to by and when directed to the stockholder. The stockholder consent necessary to permit
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Electronic Transmission to such stockholder shall be deemed revoked and of no force and effect if (A) the Corporation is unable to deliver by Electronic Transmission two consecutive notices given by the Corporation in accordance with the stockholder’s consent and (B) the inability to deliver by Electronic Transmission becomes known to the secretary, assistant secretary, transfer agent or other agent of the Corporation responsible for the giving of notice.
(d) The written certificate of an individual signing a notice of meeting, setting forth the substance of the notice or having a copy thereof attached thereto, the date the notice was mailed or personally delivered to the stockholders and the addresses to which the notice was mailed, shall be prima facie evidence of the manner and fact of giving such notice and, in the absence of fraud, an affidavit of the individual signing a notice of a meeting that the notice thereof has been given by a form of Electronic Transmission shall be prima facie evidence of the facts stated in the affidavit.
(e) For purposes of these Bylaws, “Electronic Transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Section 2.5 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to (i) notice of and to vote at any meeting of stockholders or any adjournment thereof, (ii) receive payment of any distribution or the allotment of any rights, or (iii) exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, if applicable.
(b) If no record date is fixed, the record date for determining stockholders: (i) entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any postponement of any meeting of stockholders to a date not more than sixty (60) days after the record date or to any adjournment of the meeting; provided that the Board of Directors may fix a new record date for the adjourned meeting and must fix a new record date if the meeting is adjourned to a date more than 60 days later than the date set for the original meeting.
Section 2.6 Quorum; Adjourned Meetings.
(a) Unless the Articles of Incorporation provide for a different proportion, stockholders holding at least a majority of the voting power of the Corporation’s capital stock, represented in person or by proxy (regardless of whether the proxy has authority to vote on all matters), are necessary to constitute a quorum for the transaction of business at any meeting. If, on any issue, voting by classes or series is required by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at least a majority of the voting power, represented in person or by proxy (regardless of whether the proxy has authority to vote on all matters), within each such class or series is necessary to constitute a quorum of each such class or series.
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(b) If a quorum is not represented, a majority of the voting power represented or the individual acting as chair of the meeting may adjourn the meeting from time to time until a quorum shall be represented. The individual acting as chair of the meeting may, for any or no reason, from time to time, adjourn or recess any meeting of stockholders. At any such adjourned meeting at which a quorum shall be represented, any business may be transacted which might otherwise have been transacted at the adjourned meeting as originally called. When a stockholders’ meeting is adjourned to another time or place hereunder, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. However, if a new record date is fixed for the adjourned meeting, notice of the adjourned meeting must be given to each stockholder of record as of the new record date. The stockholders present at a duly convened meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the departure of enough stockholders to leave less than a quorum of the voting power.
Section 2.7 Voting.
(a) Unless otherwise provided in the NRS, the Articles of Incorporation, these Bylaws or any resolution providing for the issuance of preferred stock adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of the Articles of Incorporation, each stockholder of record, or such stockholder’s duly authorized proxy, shall be entitled to one (1) vote for each share of voting stock standing registered in such stockholder’s name at the close of business on the record date.
(b) Except as otherwise provided in these Bylaws, all votes with respect to shares (including pledged shares) standing in the name of an individual at the close of business on the record date shall be cast only by that individual or such individual’s duly authorized proxy. With respect to shares held by a representative of the estate of a deceased stockholder, or a guardian, conservator, custodian or trustee, even though the shares do not stand in the name of such holder, votes may be cast by such holder upon proof of such representative capacity. In the case of shares under the control of a receiver, the receiver may vote such shares even though the shares do not stand of record in the name of the receiver but only if and to the extent that the order of a court of competent jurisdiction which appoints the receiver contains the authority to vote such shares. If shares stand of record in the name of a minor, votes may be cast by the duly appointed guardian of the estate of such minor only if such guardian has provided the Corporation with written proof of such appointment.
(c) With respect to shares standing of record in the name of another corporation, partnership, limited liability company or other legal entity on the record date, votes may be cast: (i) in the case of a corporation, by such individual as the bylaws of such other corporation prescribe, by such individual as may be appointed by resolution of the board of directors of such other corporation or by such individual (including, without limitation, the officer making the authorization) authorized in writing to do so by the chair of the board, if any, the chief executive officer, if any, the president or any vice president of such other corporation; and (ii) in the case of a partnership, limited liability company or other legal entity, by an individual representing such stockholder upon presentation to the Corporation of satisfactory evidence of his or her authority to do so.
(d) Notwithstanding anything to the contrary contained herein and except for the Corporation’s shares held in a fiduciary capacity, the Corporation shall not vote, directly or indirectly, shares of its own stock owned or held by it, and such shares shall not be counted in determining the total number of outstanding shares entitled to vote.
(e) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote does vote any of such stockholder’s shares affirmatively and fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held.
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(f) With respect to shares standing of record in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, spouses as community property, tenants by the entirety, voting trustees or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship in respect to the same shares, votes may be cast in the following manner:
(i) If only one person votes, the vote of such person binds all.
(ii) If more than one person casts votes, the act of the majority so voting binds all.
(iii) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation, these Bylaws, the NRS, or other applicable law provide for a different proportion, action by the stockholders entitled to vote on a matter is approved by and is the act of the stockholders if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless voting by classes or series is required for any action of the stockholders by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, in which case the number of votes cast in favor of the action by the voting power of each such class or series must exceed the number of votes cast in opposition to the action by the voting power of each such class or series; provided, however, that, the election of directors shall be decided by the affirmative vote of the holders of at least a plurality of the votes of the outstanding shares of the applicable class or series of common stock entitled to elect directors pursuant to the Articles of Incorporation present in person or represented by proxy at the meeting and entitled to vote in an election of directors, unless otherwise expressly provided by the Articles of Incorporation or in any policy adopted by the Board of Directors. The stockholders do not have the right to cumulate their votes for the election of directors.
Section 2.8 Proxies. At any meeting of stockholders, any holder of shares entitled to vote may designate, in a manner permitted by the laws of the State of Nevada, another person or persons to act as a proxy or proxies. If a stockholder designates two or more persons to act as proxies, then a majority of those persons present at a meeting has and may exercise all of the powers conferred by the stockholder or, if only one is present, then that one has and may exercise all of the powers conferred by the stockholder, unless the stockholder’s designation of proxy provides otherwise. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the laws of the State of Nevada.
Section 2.9 No Action Without A Meeting. Except as provided in the Articles of Incorporation or as required under applicable law, no action shall be taken by the stockholders except at an annual or special meeting of stockholders called and noticed in the manner required by these Bylaws. Except as provided in the Articles of Incorporation, the stockholders may not in any circumstance take action by written consent; provided, however, that if the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold (each as defined in Section 2.13(h)), then any action required or permitted to be taken by the holders of Class B Common Stock may be effected by an action by written consent in lieu of a meeting with the approval of the holders of outstanding Class B Common Stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting at which all shares of Class B Common Stock entitled to vote thereon were present and voted.
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Section 2.10 Organization.
(a) Meetings of stockholders shall be presided over by the chair of the Board of Directors, or, in the absence of the chair, by the vice chair of the Board of Directors, if any, or if there be no vice chair or in the absence of the vice chair, by the chief executive officer, if any, or if there be no chief executive officer or in the absence of the chief executive officer, by the president, or, in the absence of the president, or, in the absence of any of the foregoing persons, by a chair designated by the Board of Directors, or by a chair chosen at the meeting by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast. The individual acting as chair of the meeting may delegate any or all of his or her authority and responsibilities as such to any director or officer of the Corporation present in person at the meeting. The secretary, or in the absence of the secretary an assistant secretary, shall act as secretary of the meeting, but in the absence of the secretary and any assistant secretary the chair of the meeting may appoint any person to act as secretary of the meeting. The order of business at each such meeting shall be as determined by the chair of the meeting. The chair of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, (i) the establishment of procedures for the maintenance of order and safety, (ii) limitation on participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the chair of the meeting shall permit, (iii) limitation on the time allotted for consideration of each agenda item and for questions or comments by meeting participants, (iv) restrictions on entry to such meeting after the time prescribed for the commencement thereof and (v) the opening and closing of the voting polls. The Board of Directors, in its discretion, or the chair of the meeting, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot.
(b) The chair of the meeting may appoint one or more inspectors of elections. The inspector or inspectors may (i) ascertain the number of shares outstanding and the voting power of each; (ii) determine the number of shares represented at a meeting and the validity of proxies or ballots; (iii) count all votes and ballots; (iv) determine any challenges made to any determination made by the inspector(s); and (v) certify the determination of the number of shares represented at the meeting and the count of all votes and ballots.
(c) Only such persons who are nominated in accordance with the procedures set forth in Section 2.12 shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in Section 2.12. If any proposed nomination or business was not made or proposed in compliance with Section 2.12 (including compliance with the requirements of Section 2.13), then the Board of Directors or the chair of the meeting shall have the power to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. If the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.10, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or Electronic Transmission of the writing) delivered to the Corporation prior to the making of such nomination or proposal at such meeting by such stockholder stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders.
Section 2.11 Consent to Meetings. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called, noticed or convened and except that attendance
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at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice, to the extent such notice is required, if such objection is expressly made at the time any such matters are presented at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice or consent, except as otherwise provided in these Bylaws.
Section 2.12 Director Nominations and Business Conducted at Meetings of Stockholders. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) by or at the direction of the Board of Directors or the chair of the Board of Directors or (ii) by any stockholder of the Corporation who is entitled to vote on such matter at the meeting, who complied with the procedures set forth in Section 2.13 and who was a stockholder of record at the time such notice is delivered to the secretary of the Corporation. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders, which has been called and held pursuant to the requirements of Section 2.2, and at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors or any committee thereof or (ii) by any stockholder of the Corporation who is entitled to vote on such matter at the meeting, who complied with the procedures set forth in Section 2.13 and who was a stockholder of record at the time such notice is delivered to the secretary of the Corporation. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors for the particular class or series of director (as provided in the Articles of Incorporation) to be voted on at the applicable meeting may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 2.13 shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day prior to such special meeting and not earlier than the close of business on the later of: (x) the 120th day prior to such special meeting or (y) the tenth (10th) day following the date of Public Disclosure of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the Public Disclosure of an adjournment or postponement of a special meeting commence a new time period (or extend any notice time period).
Section 2.13 Advance Notice of Director Nominations and Stockholder Proposals by Stockholders.
(a) Timely Notice. At a meeting of the stockholders, only such nominations of persons for the election of directors and such other business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, nominations or such other business must be: (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or any committee thereof, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or any committee thereof, or (iii) otherwise properly brought before an annual meeting by a stockholder who is a stockholder of record of the Corporation at the time such notice of meeting is delivered, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.13. In addition, any proposal of business (other than the nomination of persons for election to the Board of Directors) must be a proper matter for stockholder action. For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder, the stockholder or stockholders of record intending to propose the business (the “Proposing Stockholder”) must have given timely notice thereof pursuant to this Section 2.13(a) or Section 2.13(c), as applicable, in writing to the secretary of the Corporation even if such matter is already the subject of any notice to the stockholders or Public Disclosure. For purposes of this Section 2.13 “Public Disclosure” means a disclosure made in a press release reported by a national news service or in a document filed by the Corporation with the Securities and Exchange Commission (“SEC”) and other regulatory agencies pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
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Act”), or other applicable securities laws. To be timely, a Proposing Stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation: (x) not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day in advance of the anniversary of the previous year’s annual meeting if such meeting is to be held on a day which is not more than 30 days in advance of the anniversary of the previous year’s annual meeting or not later than 70 days after the anniversary of the previous year’s annual meeting; and (y) with respect to any other annual meeting of stockholders, not later than the close of business on the tenth (10th) day following the date of Public Disclosure of the date of such meeting. In no event shall the Public Disclosure of an adjournment or postponement of an annual meeting commence a new notice time period (or extend any notice time period).
(b) Stockholder Nominations. For the nomination of any person or persons for election to the Board of Directors, a Proposing Stockholder’s notice to the secretary of the Corporation shall set forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) any self-identified diversity characteristics of each nominee, including regarding gender, race and ethnicity, and LGBTQ+ status, pursuant to the rules of the SEC or any securities exchange(s) on which the Corporation’s securities are listed, (iv) the number of shares of capital stock of the Corporation which are owned of record and beneficially by each such nominee (if any), (v) a description of all arrangements, agreements, proxies or understandings between the Proposing Stockholder and each such nominee and any other person or persons (naming such person or persons) pursuant to which such nominations are to be made by the Proposing Stockholder, (vi) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such Proposing Stockholder or any Stockholder Associated Person (as defined below) of such Proposing Stockholder, on the one hand, and each proposed nominee, or his or her associates, on the other hand, (vii) any such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed, under Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder, (viii) the consent of the nominee to being named in the proxy statement as a nominee and to serving as a director if elected, (ix) a written representation by the nominee proposed in such notice that such nominee currently intends to serve the full term for which such nominee would be standing for election, if elected, and (x) as to the Proposing Stockholder: (A) the name and address, as they appear on the Corporation’s books, of the Proposing Stockholder and the name and address of any Stockholder Associated Person covered by clauses (B), (C) or (D) below, (B) the class and number of shares of the Corporation which are directly and indirectly held of record or are Beneficially Owned (as defined below) by the Proposing Stockholder or by any Stockholder Associated Person and the date(s) on which such stock was acquired, (C) a description of any agreement, arrangement, proxy or understanding with respect to such nomination between or among the Proposing Stockholder and any Stockholder Associated Persons, and any other person or entity (including their names) in connection with the nomination of any person as a director of the Corporation and any material relationships, within the last three (3) years, between the nominee and his or her affiliates and such Proposing Stockholder or any Stockholder Associated Person, (D) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder’s notice by, or on behalf of, the Proposing Stockholder or any Stockholder Associated Persons, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the Proposing Stockholder or any of its affiliates or associates with respect to shares of stock of the Corporation, (E) a written representation that the Proposing Stockholder is a holder of record of shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (F) a written representation whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding
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capital stock required to approve the nomination and/or otherwise to solicit proxies from stockholders in support of the nomination, (G) a written representation whether the Proposing Stockholder intends to appear in person or by proxy at the meeting to propose the business described in its notice, and (H) a written representation of all voting equity investments and positions as a director or officer, if any, held by such nominee in any competitor of the Corporation (as such term is defined under Section 8 of the Clayton Antitrust Act of 1914, as amended) within the three (3) years preceding the submission of the Proposing Stockholder’s notice. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require in order to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
In addition, to be eligible to be a nominee pursuant to this Section 2.13, a person must deliver, in accordance with the time periods prescribed for delivery of notice under this Section 2.13, the following to the secretary at the principal executive offices of the Corporation (collectively, the “Nominee Information”):
(1) a fully completed and signed written questionnaire with respect to the background and qualifications of such nominee (which questionnaire shall be provided by such nominee to the secretary of the Corporation upon the Corporation’s written request); and
(2) a written representation and agreement (in the form provided by the secretary of the Corporation upon written request) that such nominee (i) is not and will not become a party to (w) any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with such person’s nomination or candidacy for director that has not been disclosed to the Corporation, (x) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question as a director (a “Voting Commitment”) that has not been disclosed to the Corporation, (y) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable Legal Requirements (as defined below), or (z) any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation, and (ii) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected or re-elected as a director of the Corporation, and intends to comply, with these Bylaws, the Corporation’s Code of Conduct, and any other publicly available Corporation policies and guidelines applicable to directors of the Corporation.
In addition to the information set forth above, any Proposing Stockholder making a nomination pursuant to this Section 2.13 shall provide to the Corporation such additional information that the Corporation may reasonably request from time to time regarding such Proposing Stockholder, any Stockholder Associated Person thereof or the nominee, including such information to determine the eligibility or qualifications of the nominee to serve as a director or an independent director or that could be material to a reasonable stockholder’s understanding of the qualifications and/or independence, or lack thereof, of the nominee to serve as a director of the Corporation. In addition, any stockholder who submits a notice pursuant to this Section 2.13(b) is required to update and supplement the information disclosed in such notice, if necessary, in accordance with Section 2.13(f). At the request of the Board of Directors, any person nominated by a stockholder for election as a director shall furnish to the secretary of the Corporation all such information that is required to be set forth in the stockholder’s notice of nomination which pertains to such nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.13(b). If any information submitted pursuant
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to this Section 2.13(b) by any Proposing Stockholder proposing one or more nominees for election as a director at a meeting of stockholders is inaccurate in any material respect, such information shall be deemed not to have been provided in accordance with this Section 2.13(b). The presiding person at the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the presiding person should so determine, such person shall so declare at the meeting, and the defective nomination shall be disregarded.
(c) Other Stockholder Proposals. For all business other than director nominations, a Proposing Stockholder’s notice to the secretary of the Corporation shall set forth as to each matter the Proposing Stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting, the text of the proposed business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), the reasons for conducting such business at the annual meeting, and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is being made, (ii) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder and (iii) the information required by Section 2.13(b)(ix). Any Proposing Stockholder who submits a notice pursuant to Sections 2.13(b) or 2.13(c) is required to update and supplement the information disclosed in such notice, if necessary, in accordance with Section 2.13(f).
(d) Proxy Rules. The foregoing notice requirements of Section 2.13(c) shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with the applicable rules and regulations promulgated under Section 14(a) of the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.
(e) Effect of Noncompliance. Notwithstanding anything in these Bylaws to the contrary: (i) no nominations shall be made or business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.13, and (ii) unless otherwise required by law, if a Proposing Stockholder intending to propose business or make nominations at an annual meeting pursuant to this Section 2.13 does not provide the information required under this Section 2.13 to the Corporation within five (5) business days following the later of the record date for such meeting or the date notice of the record date is first publicly disclosed, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation. The requirements of this Section 2.13 shall apply to any business or nominations to be brought before an annual meeting by a stockholder whether such business or nominations are to be included in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act or presented to stockholders by means of an independently financed proxy solicitation. The requirements of this Section 2.13 are included to provide the Corporation notice of a stockholder’s intention to bring business or nominations before an annual meeting and shall in no event be construed as imposing upon any stockholder the requirement to seek approval from the Corporation as a condition precedent to bringing any such business or make such nominations before an annual meeting.
(f) Update and Supplement of Stockholder’s Notice. Any stockholder who submits a notice of proposal for business or nomination for election pursuant to this Section 2.13 is required to update and supplement the information disclosed in such notice, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for determining the stockholders entitled to notice of the meeting of stockholders and as of the date that is ten (10) business
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days prior to such meeting of the stockholders or any adjournment or postponement thereof, and such update and supplement shall be delivered to the secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting of stockholders (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting of stockholders or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting of stockholders or any adjournment or postponement thereof).
(g) Definitions. As used in these Bylaws, (x) the term “Stockholder Associated Person” means, with respect to any stockholder, (i) any person acting in concert with such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (iii) any person controlling, controlled by or under common control with any stockholder, or any Stockholder Associated Person identified in clauses (i) or (ii) above, (y) the term “Legal Requirements” means any state, federal or other laws or other legal requirements, including the rules, regulations and listing standards of any securities exchange(s) on which the Corporation’s securities are listed, and (z) the term “Beneficially Owned” has the meaning provided in Rules 13d-3 and 13d-5 under the Exchange Act.
(h) Class B Stockholders. Notwithstanding the foregoing, if (i) the aggregate number of outstanding shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”), is at least twenty-five percent (25%) of the number of shares of Class B Common Stock outstanding on the date hereof, or (ii) if the condition in preceding clause (i) is not satisfied, the aggregate capital account balances with respect to the limited partner interests in Beneficient Company Holdings, L.P., a Delaware limited partnership, held by the Class B Holders is an amount that is at least twenty percent (20%) of the aggregate capital account balances of such limited partner interests on the date hereof (the condition in either clause (i) or clause (ii) being referred to as the “Class B Threshold”), then the holders of Class B Common Stock shall not be required to comply with this Section 2.13 in connection with the nomination of the directors elected by the holders of Class B Common Stock pursuant to the Articles of Incorporation (the “Class B Directors”).
ARTICLE III
DIRECTORS
Section 3.1 General Powers; Performance of Duties. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as otherwise provided in Chapter 78 of the NRS or the Articles of Incorporation. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled.
Section 3.2 Number, Tenure, and Qualifications. The Board of Directors shall consist of at least five (5) individuals and not more than fifteen (15) individuals, with the number of directors within the foregoing fixed minimum and maximum established and changed from time to time solely by resolution adopted by the Board of Directors without amendment to these Bylaws or the Articles of Incorporation. Each director shall hold office until his or her successor shall be elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his or her term of office. No provision of this Section 3.2 shall restrict the right of the Board of Directors to fill vacancies or the right of the stockholders to remove directors, each as provided in these Bylaws.
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Section 3.3 Chair of the Board. The Board of Directors shall elect a chair of the Board of Directors from the members of the Board of Directors who shall preside at all meetings of the Board of Directors and stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board of Directors, these Bylaws or as provided by law; provided, however, that if, at the time of the election of the chair of the Board of Directors, the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, then the Class B Directors shall elect the chair of the Board of Directors.
Section 3.4 Vice Chair of the Board. The Board of Directors may elect a vice chair of the Board of Directors from the members of the Board of Directors who shall preside at all meetings of the Board of Directors and stockholders at which he or she shall be present and the chair is not present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board of Directors, these Bylaws or as provided by law; provided, however, that if, at the time of the election of the vice chair of the Board of Directors, the aggregate number of outstanding shares of Class B Common Stock meets the Class B Threshold, then the Class B Directors shall elect the vice chair of the Board of Directors.
Section 3.5 Removal and Resignation of Directors. A director may be removed from the Board of Directors by the stockholders of the Corporation only as provided in the Articles of Incorporation. Any director may resign effective upon giving written notice, unless the notice specifies a later time for effectiveness of such resignation, to the chair of the Board of Directors, the president or the secretary, or in the absence of all of them, any other officer of the Corporation.
Section 3.6 Vacancies. Vacancies on the Board of Directors shall be filled in the manner provided in the Articles of Incorporation.
Section 3.7 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such places, if any, within or without the State of Nevada and at such times as the Board of Directors may from time to time determine.
Section 3.8 Special Meetings. Special meetings of the Board of Directors may be called, in writing, by the chair of the Board of Directors, the chief executive officer, if any, the president, or two or more directors (or the sole director, if applicable).
Section 3.9 Notice of Meetings. There shall be delivered to each director at the address appearing for him or her on the records of the Corporation at least twenty-four (24) hours before the time of such meeting or, if the meeting is called by the chair of the Board of Directors, at least two (2) hours before the time of such meeting, a copy of a written notice of any special meeting designating the time, date and place (if any) thereof (i) by delivery of such notice personally, (ii) by mailing such notice postage prepaid, (iii) by facsimile, (iv) by overnight courier, or (v) by Electronic Transmission or electronic writing, including, without limitation, e-mail. If mailed to an address inside the United States, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. If mailed to an address outside the United States, the notice shall be deemed delivered four (4) business days following the date the same is deposited in the United States mail, postage prepaid. If sent via overnight courier, the notice shall be deemed delivered the business day following the delivery of such notice to the courier. If sent via facsimile, the notice shall be deemed delivered upon sender’s receipt of confirmation of the successful transmission. If sent by Electronic Transmission (including, without limitation, e-mail), the notice shall be deemed delivered when directed to the e-mail address of the director appearing on the records of the Corporation. If the address of any director is incomplete or does not appear upon the records of the Corporation, it will be sufficient to address any notice to such director at the registered office of the Corporation. Any director may waive notice of any meeting, and the attendance of a director at a meeting and oral consent entered on the minutes of such meeting shall constitute waiver of notice of the meeting unless such director objects, prior to the transaction of any business, that the meeting was not lawfully called, noticed or convened. Attendance for the express purpose of objecting to the transaction of business thereat because the meeting was not properly called or convened shall not constitute presence or a waiver of notice for purposes hereof. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.
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Section 3.10 Quorum; Adjourned Meetings.
(a) So long as at least one Class B Director is present, a majority of the directors then in office, at a meeting duly assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called.
Section 3.11 Manner of Acting. Unless a larger number is required by law or by the Articles of Incorporation, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present is the act of the Board of Directors.
Section 3.12 Meetings Through Electronic Communications. Members of the Board of Directors or of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by any means of Remote Technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other) and utilized by the Corporation. If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a director or member of the committee, as the case may be, and (b) provide the directors or members of the committee a reasonable opportunity to participate in the meeting and to vote on matters submitted to the directors or members of the committee, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 3.12 constitutes presence in person at the meeting.
Section 3.13 Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all of the members of the Board of Directors or the committee. The written consent may be signed manually or electronically (or by any other means then permitted under the NRS), and may be so signed in counterparts, including, without limitation, facsimile or email counterparts, and shall be filed with the minutes of the proceedings of the Board of Directors or committee.
Section 3.14 Powers and Duties; Committees.
(a) Except as otherwise restricted by Chapter 78 of the NRS or the Articles of Incorporation, the Board of Directors has full control over the business and affairs of the Corporation. The Board of Directors may delegate any of its authority to manage, control or conduct the business of the Corporation to any standing or special committee, or to any officer or agent, and to appoint any persons to be agents of the Corporation with such powers, including the power to subdelegate, and upon such terms as it deems fit.
(b) The Board of Directors may, by resolution passed by a majority of the Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Subject to applicable law and to the extent provided in the resolution of the Board of Directors, any such committee shall have and may exercise all the powers of the Board of Directors in the
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management of the business and affairs of the Corporation. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. In the absence of a provision by the Board of Directors or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, unless the committee has only one or two members, in which case a quorum shall be one member, or unless a greater quorum is established by the Board of Directors. The vote of a majority of the members present at a meeting of the committee at the time of such vote if a quorum is then present shall be the act of such committee. All members of such committees shall hold their committee offices at the pleasure of the Board of Directors, and the Board of Directors may abolish any committee at any time. Each such committee shall report its action to the Board of Directors who shall have power to rescind any action of any committee without retroactive effect. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required.
Section 3.15 Compensation. The Board of Directors, without regard to personal interest, may establish the compensation of directors for services in any capacity. All directors shall receive their expenses, if any, of attendance at meetings of the Board of Directors or any committee thereof. If the Board of Directors establishes the compensation of directors pursuant to this Section 3.15, such compensation is presumed to be fair to the Corporation unless proven unfair by a preponderance of the evidence.
Section 3.16 Organization. Meetings of the Board of Directors shall be presided over by the chair of the Board of Directors, or in the absence of the chair of the Board of Directors by the vice chair, if any, or in his or her absence by a chair chosen at the meeting. The secretary, or in the absence, of the secretary an assistant secretary, shall act as secretary of the meeting, but in the absence of the secretary and any assistant secretary, the chair of the meeting may appoint any person to act as secretary of the meeting. The order of business at each such meeting shall be as determined by the chair of the meeting.
Section 3.17 Outside Attendance at Meetings. Directors representing at least one half of the current members of the Board of Directors or the relevant committee of the Board of Directors may seek to invite any individuals (including officers, employees or outside advisers or experts) to attend a portion of any meeting of the Board of Directors or such relevant committee thereof at which relevant anticipated business is discussed, subject to forty-eight (48) hours’ advance notice (or such lesser notice as may be waived by the chair of the meeting of the Board of Directors or the relevant committee thereof) to the chair of the meeting of the Board of Directors or the relevant committee thereof for a proper purpose relevant to the anticipated business for any meeting of the Board of Directors (or any committee thereof). Following receipt of a notice seeking to invite any individuals (including officers, employees or outside advisers or experts) to attend a portion of any meeting of the Board of Directors or such relevant committee thereof at which such relevant anticipated business is discussed, the chair of the meeting of the Board of Directors or the relevant committee thereof shall determine (in their sole discretion) whether inviting such individuals is proper and relevant to the anticipated business for the relevant meeting of the Board of Directors (or any committee thereof). Individuals (other than a director) shall only be permitted to attend a meeting of the Board of Directors (or any committee thereof) if the chair of the meeting of the Board of Directors or the relevant committee thereof determines (in their sole discretion) that such individuals attending the relevant meeting of the Board of Directors (or any committee thereof) is proper and relevant to the anticipated business for the relevant meeting of the Board of Directors (or any committee thereof).
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ARTICLE IV
OFFICERS
Section 4.1 Election. The Board of Directors shall elect or appoint a president, a secretary and a treasurer or the equivalents of such officers. Such officers shall serve until their respective successors are elected or appointed and qualified or until their earlier resignation or removal. The Board of Directors may from time to time, by resolution, elect or appoint such other officers and agents as it may deem advisable, who shall hold office at the pleasure of the Board of Directors, and shall have such powers and duties and be paid such compensation as may be directed by the Board of Directors. Any individual may hold two or more offices.
Section 4.2 Removal; Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors with or without cause. Any officer may resign at any time upon written notice to the Corporation. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the Corporation and such officer or agent.
Section 4.3 Vacancies. Any vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office.
Section 4.4 Chief Executive Officer. The Board of Directors may elect or appoint a chief executive officer who, subject to the supervision and control of the Board of Directors, shall have the ultimate responsibility for the management and control of the business and affairs of the Corporation, and perform such other duties and have such other powers which are delegated to him or her by the Board of Directors, these Bylaws or as provided by law.
Section 4.5 President. The president shall be the chief executive officer of the Corporation unless the Board of Directors elects or appoints different individuals to hold such positions. The president, subject to the supervision and control of the Board of Directors and the chief executive officer, if applicable, shall in general actively supervise and control the business and affairs of the Corporation. The president shall keep the Board of Directors and the chief executive officer, if applicable, fully informed as the Board of Directors or the chief executive officer, if applicable, may request and shall consult the Board of Directors and chief executive officer, if applicable, concerning the business of the Corporation. The president shall perform such other duties and have such other powers which are delegated and assigned to him or her by the Board of Directors, the chief executive officer, if applicable, these Bylaws or as provided by law.
Section 4.6 Vice Presidents. The Board of Directors may elect or appoint one or more vice presidents. In the absence or disability of the president, or at the president’s request, the vice president or vice presidents, in order of their rank as fixed by the Board of Directors, and if not ranked, the vice presidents in the order designated by the Board of Directors, or in the absence of such designation, in the order designated by the chief executive officer, if any, or the president, shall perform all of the duties of the president, and when so acting, shall have all the powers of, and be subject to all the restrictions on the president. Each vice president shall perform such other duties and have such other powers which are delegated and assigned to him or her by the Board of Directors, the chief executive officer, if any, the president, these Bylaws or as provided by law.
Section 4.7 Secretary. The secretary shall attend all meetings of the stockholders, the Board of Directors and any committees thereof, and shall keep, or cause to be kept, the minutes of proceedings thereof in books provided for that purpose. He or she shall keep, or cause to be kept, a register of the stockholders of the Corporation and shall be responsible for the giving of notice of meetings of the stockholders, the Board of Directors and any committees, and shall see that all notices are duly given in
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accordance with the provisions of these Bylaws or as required by law. The secretary shall be custodian of the corporate seal, if any, the records of the Corporation, the stock certificate books, transfer books and stock ledgers (which may, however, be kept by any transfer or other agent of the Corporation), and such other books and papers as the Board of Directors or any appropriate committee may direct. The secretary shall perform all other duties commonly incident to his or her office and shall perform such other duties which are assigned to him or her by the Board of Directors, the chief executive officer, if any, the president, these Bylaws or as provided by law.
Section 4.8 Assistant Secretaries. An assistant secretary shall, at the request of the secretary, or in the absence or disability of the secretary, perform all the duties of the secretary. He or she shall perform such other duties as are assigned to him or her by the Board of Directors, the chief executive officer, if any, the president, the secretary, these Bylaws or as provided by law.
Section 4.9 Treasurer. The treasurer, subject to the order of the Board of Directors, shall have the care and custody of, and be responsible for, all of the money, funds, securities, receipts and valuable papers, documents and instruments of the Corporation, and all books and records relating thereto. The treasurer shall keep, or cause to be kept, full and accurate books of accounts of the Corporation’s transactions, which shall be the property of the Corporation, and shall render financial reports and statements of condition of the Corporation when so requested by the Board of Directors, the chair of the Board of Directors, if any, the chief executive officer, if any, or the president. The treasurer shall perform all other duties commonly incident to his or her office and such other duties as may, from time to time, be assigned to him or her by the Board of Directors, the chief executive officer, if any, the president, these Bylaws or as provided by law. If a chief financial officer of the Corporation has not been appointed, the treasurer may be deemed the chief financial officer of the Corporation.
Section 4.10 Assistant Treasurers. An assistant treasurer shall, at the request of the treasurer, or in the absence or disability of the treasurer, perform all the duties of the treasurer. He or she shall perform such other duties which are assigned to him or her by the Board of Directors, the chief executive officer, if any, the president, the treasurer, these Bylaws or as provided by law.
Section 4.11 Execution of Negotiable Instruments, Deeds and Contracts. All (i) checks, drafts, notes, bonds, bills of exchange, and orders for the payment of money of the Corporation, (ii) deeds, mortgages, proxies, powers of attorney and other written contracts, documents, instruments and agreements to which the Corporation shall be a party and (iii) assignments or endorsements of stock certificates, registered bonds or other securities owned by the Corporation shall be signed in the name of the Corporation by such officers or other persons as the Board of Directors may from time to time designate. The Board of Directors may authorize the use of the facsimile signatures of any such persons. Any officer of the Corporation shall be authorized to attend, act and vote, or designate another officer or an agent of the Corporation to attend, act and vote, at any meeting of the owners of any entity in which the Corporation may own an interest or to take action by written consent in lieu thereof. Such officer or agent, at any such meeting or by such written action, shall possess and may exercise on behalf of the Corporation any and all rights and powers incident to the ownership of such interest.
ARTICLE V
CAPITALSTOCK
Section 5.1 Issuance. Shares of the Corporation’s authorized capital stock shall, subject to any provisions or limitations of the laws of the State of Nevada, the Articles of Incorporation or any contracts or agreements to which the Corporation may be a party, be issued in such manner, at such times, upon such conditions and for such consideration as shall be prescribed by the Board of Directors.
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Section 5.2 Stock Certificates and Uncertificated Shares.
(a) Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by (i) the chief executive officer, if any, the president, or a vice president, and (ii) the secretary, an assistant secretary, the treasurer or the chief financial officer, if any, of the Corporation (or any other two officers or agents so authorized by the Board of Directors), certifying the number of shares of stock owned by him, her or it in the Corporation, unless the Board of Directors authorizes the issuance of uncertificated shares of some or all of any or all classes or series of the Corporation’s stock. Any such issuance of uncertificated shares shall have no effect on existing certificates for shares until such certificates are surrendered to the Corporation, or on the respective rights and obligations of the stockholders. Whenever any such certificate is countersigned or otherwise authenticated by a transfer agent or a transfer clerk and by a registrar (other than the Corporation), then a facsimile of the signatures of any corporate officers or agents, the transfer agent, transfer clerk or the registrar of the Corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. In the event that any officer or officers who have signed, or whose facsimile signatures have been used on any certificate or certificates for stock cease to be an officer or officers because of death, resignation or other reason, before the certificate or certificates for stock have been delivered by the Corporation, the certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed the certificate or certificates, or whose facsimile signature or signatures have been used thereon, had not ceased to be an officer or officers of the Corporation.
(b) Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written statement certifying the number and class (and the designation of the series, if any) of the shares owned by such stockholder in the Corporation and any restrictions on the transfer or registration of such shares imposed by the Articles of Incorporation, these Bylaws, any agreement among stockholders or any agreement between the stockholders and the Corporation, and, at least annually thereafter, the Corporation shall provide to such stockholders of record holding uncertificated shares, a written statement confirming the information contained in such written statement previously sent. Except as otherwise expressly provided by the NRS, the rights and obligations of the stockholders of the Corporation shall be identical whether or not their shares of stock are represented by certificates.
(c) Each certificate representing shares shall state the following upon the face thereof: the name of the state of the Corporation’s organization; the name of the person to whom issued; the number and class of shares and the designation of the series, if any, which such certificate represents; the par value of each share, if any, represented by such certificate or a statement that the shares are without par value. Certificates of stock shall be in such form consistent with law as shall be prescribed by the Board of Directors. No certificate shall be issued until the shares represented thereby are fully paid. In addition to the foregoing, all certificates evidencing shares of the Corporation’s stock or other securities issued by the Corporation shall contain such legend or legends as may from time to time be required by Chapter 78 of the NRS, and/or such other federal, state or local laws or regulations then in effect.
Section 5.3 Surrendered; Lost or Destroyed Certificates. All certificates surrendered to the Corporation, except those representing shares of treasury stock, shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any stockholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the Corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and, if required by the Board of Directors, an indemnity bond in an amount satisfactory to the Board of Directors or an authorized officer which amount may be in excess of the current market value of the stock, and upon such terms as the treasurer, other officer who is so authorized, or the Board of Directors shall require which shall indemnify the Corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate.
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Section 5.4 Replacement Certificate. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the Corporation or it becomes desirable for any reason, in the discretion of the Board of Directors, including, without limitation, the merger of the Corporation with another Corporation or the conversion or reorganization of the Corporation, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive distributions or exercise any other rights of stockholders of record until the holder has complied with the order, but the order operates to suspend such rights only after notice and until compliance.
Section 5.5 Transfer of Shares. No transfer of stock shall be valid as against the Corporation except on surrender and cancellation of any certificate(s) therefor accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer in the records of the Corporation.
Section 5.6 Transfer Agent; Registrars. The Board of Directors may appoint one or more transfer agents, transfer clerks and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agents, transfer clerks and/or registrars of transfer.
Section 5.7 Miscellaneous. The Board of Directors shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the Corporation’s stock.
ARTICLE VI
DISTRIBUTIONS
Distributions may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of Directors and may be paid in money, shares of corporate stock, property or any other medium not prohibited under applicable law. The Board of Directors may fix in advance a record date, in accordance with and as provided in Section 2.5, prior to the distribution for the purpose of determining stockholders entitled to receive any distribution.
ARTICLE VII
RECORDS AND REPORTS; CORPORATE SEAL; FISCAL YEAR
Section 7.1 Records. All original records of the Corporation shall be kept at the principal office of the Corporation by or under the direction of the secretary or at such other place or by such other person as may be prescribed by these Bylaws or the Board of Directors. Any records maintained by the Corporation in the regular course of its business may be maintained on any information storage device or method that can be converted into clearly legible paper form within a reasonable time. The Corporation shall convert any records so kept on the written request of any person entitled to inspect such records pursuant to applicable law.
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Section 7.2 Corporate Seal. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the Corporation shall have the authority to affix the seal to any document requiring it.
Section 7.3 Fiscal Year-End. The fiscal year-end of the Corporation shall be such date as may be fixed from time to time by resolution of the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article, (A) “Indemnitee” means each director, officer or employee of the Corporation who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any Proceeding (as defined below), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of, or in any other capacity for, another corporation, partnership, joint venture, limited liability company, trust, or other enterprise; and (B) “Proceeding” means any threatened, pending, or completed action, suit or proceeding (including, without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative, or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the laws of the State of Nevada, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding; provided that such Indemnitee either is not liable pursuant to NRS 78.138 or acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any Proceeding that is criminal in nature, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the Indemnitee is liable pursuant to NRS 78.138 or did not act in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, or that, with respect to any criminal proceeding he or she had reasonable cause to believe that his or her conduct was unlawful. The Corporation shall not indemnify an Indemnitee for any claim, issue or matter as to which the Indemnitee has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for any amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the Proceeding was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such amounts as the court deems proper. Except as so ordered by a court and for advancement of expenses pursuant to this Section, indemnification may not be made to or on behalf of an Indemnitee if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of law and was material to the cause of action. Notwithstanding anything to the contrary contained in these Bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, that such director or officer incurred in his or her capacity as a stockholder.
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(iii) Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be a director, officer or employee of the Corporation or member, manager or managing member of a predecessor limited liability company or affiliate of such limited liability company or a director, officer, employee, partner, member, manager or fiduciary of, or to serve in any other capacity for, another corporation or any partnership, joint venture, limited liability company, trust, or other enterprise and shall inure to the benefit of his or her heirs, executors and administrators.
(iv) The expenses of Indemnitees must be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as such expenses are incurred and in advance of the final disposition of the Proceeding, upon receipt of an undertaking by or on behalf of such Indemnitee to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. To the extent that an Indemnitee is successful on the merits or otherwise in defense of any Proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred in by him or her in connection with the defense.
(b) Indemnification of Employees and Other Persons. The Corporation may, by action of the Board of Directors and to the extent provided in such action, indemnify employees, agents and other persons as though they were Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided in this Article shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation or these Bylaws, agreement, vote of stockholders or directors, or otherwise.
(d) Insurance. The Corporation may purchase and maintain insurance or make other financial arrangements on behalf of any Indemnitee for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer or employee, or arising out of his or her status as such, whether or not the Corporation has the authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements which may be made by the Corporation may include, but are not limited to, the following (i) the creation of a trust fund; (ii) the establishment of a program of self-insurance; (iii) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the Corporation; and (iv) the establishment of a letter of credit, guarantee or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud, or a knowing violation of law, except with respect to advancement of expenses or indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any insurance or other financial arrangement made on behalf of a person pursuant to this Section 8.1 may be provided by the Corporation or any other person approved by the Board of Directors, even if all or part of the other person’s stock or other securities is owned by the Corporation. In the absence of fraud, (i) the decision of the Board of Directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this Section 8.1 and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (ii) the insurance or other financial arrangement is not void or voidable and does not subject any director approving it to personal liability for his action; even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement.
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Section 8.2 Amendment. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article VIII which is adverse to any Indemnitee shall apply to such Indemnitee only on a prospective basis, and shall not limit the rights of an Indemnitee to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment.
ARTICLE IX
CHANGES IN NEVADA LAW
References in these Bylaws to the laws of the State of Nevada or the NRS or to any provision thereof shall be to such law as it existed on the date these Bylaws were adopted or as such law thereafter may be changed; provided that (i) in the case of any change which expands the liability of directors or officers or limits the indemnification rights or the rights to advancement of expenses which the Corporation may provide in Article VIII, the rights to limited liability, to indemnification and to the advancement of expenses provided in the Articles of Incorporation and/or these Bylaws shall continue as theretofore to the extent permitted by law; and (ii) if such change permits the Corporation, without the requirement of any further action by stockholders or directors, to limit further the liability of directors or limit the liability of officers or to provide broader indemnification rights or rights to the advancement of expenses than the Corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law.
ARTICLE X
AMENDMENT OR REPEAL
Section 10.1 Amendment of Bylaws.
(a) Board of Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to amend or repeal these Bylaws or to adopt new bylaws.
(b) Stockholders. Notwithstanding Section 10.1(a), these Bylaws may be amended or repealed in any respect, and new bylaws may be adopted, in each case by the affirmative vote of the holders of at least a majority of the outstanding voting power of the Corporation, voting together as a single class.
[Remainder of Page Intentionally Left Blank]
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CERTIFICATION
The undersigned, as the duly elected Secretary of Beneficient, a Nevada corporation (the “Corporation”), does hereby certify that the Board of Directors of the Corporation adopted the foregoing Bylaws as of June 6, 2023.
| /s/ David B. Rost |
|---|
| David B. Rost, Secretary |
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EX-4.1(2)
Exhibit 4.1.2
AMENDMENT TO WARRANT AGREEMENT
THIS AMENDMENT TO WARRANT AGREEMENT (this “Amendment”) is made and entered into as of June 7, 2023, by and among (i)Avalon Acquisition Inc., a Delaware corporation (the “SPAC”), (ii)Beneficient, a Nevada corporation, (successor by way of statutory conversion to The Beneficient Company Group, L.P., a Delaware limited partnership (“BCG”)) (the “Company”), and (iii)Continental Stock Transfer & Trust Company, a New York limited purpose trust company, as warrant agent (the “Agent”). Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Warrant Agreement (as defined below) (and if such term is not defined in the Warrant Agreement, then the Business Combination Agreement (as defined below)).
RECITALS
WHEREAS, SPAC and the Agent are parties to that certain Warrant Agreement, dated as of October 5, 2021 (as amended, including without limitation by this Amendment, the “Warrant Agreement”), pursuant to which the Agent agreed to act as the SPAC’s warrant agent with respect to the issuance, registration, transfer, exchange, redemption and exercise of (i) warrants to purchase shares of Class A common stock of the SPAC, par value $0.0001 per share (the “SPAC Class A common stock”), underlying the units of the SPAC issued in SPAC’s initial public offering (“IPO”) (the “Public Warrants”), (ii) warrants to purchase shares of SPAC Class A common stock underlying the units of SPAC acquired by Avalon Acquisition Holdings LLC (the “Sponsor”), in a private placement concurrent with the IPO (the “Sponsor Private Warrants”), (iii) warrants to purchase shares of SPAC Class A common stock underlying the units of SPAC issuable to the Sponsor or an affiliate of the Sponsor or certain officers and directors of SPAC upon conversion of up to $1,500,000 of working capital loans (the “Working CapitalWarrants”), and (iv) all other warrants issued by SPAC after the IPO, in connection with or following the Transactions (the “Post-IPO Warrants” and together with the Public Warrants, the Sponsor Private Warrants, and the Working Capital Warrants, the “Warrants”);
WHEREAS, on September 21, 2022, (i) SPAC, (ii) BCG, (iii) Beneficient Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Merger Sub I”), and (iv) Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of the Company (“Merger Sub II”), entered into that certain Business Combination Agreement (as it may be amended after the date hereof, the “Business Combination Agreement”);
WHEREAS, pursuant to the Business Combination Agreement, upon the consummation of the SPAC Merger (as defined below) contemplated thereby (the “Closing”), among other matters and subject to the terms and conditions thereof, (i) Merger Sub I will merge with and into SPAC, with SPAC continuing as the surviving entity (the “SPACMerger” and together with the other transactions contemplated by the Business Combination Agreement, the “Transactions”), and as a result of which, among other matters, (x) SPAC shall become a wholly owned subsidiary of the Company and (y) each issued and outstanding share of SPAC Class A common stock immediately prior to the Avalon Merger Effective Time shall no longer be outstanding and shall automatically be cancelled, in exchange for the right of the holder thereof to receive one share of Company Class A Common Shares and one share of Company Series A Preferred Stock, with each share of Company Series A Preferred Stock that is outstanding automatically converting into one-fourth (1/4) of a share of Company Class A Common Shares on (and only on) the later of (x) 90 days after the Closing Date and (y) 30 days after the Company has an effective registration statement under the Securities Act with respect to the issuance of the Company Class A Common Shares upon exercise of the Public Warrants and the Private Placement Warrants (the “Conversion Date”), all upon the terms and subject to the conditions set forth in the Business Combination Agreement and in accordance with the provisions of applicable law and (ii) following consummation of the SPAC Merger, the surviving company of the SPAC Merger will merge with and into Merger Sub II, with Merger Sub II surviving (the “LLC Merger” and, together with the Avalon Merger, the “Mergers”);
WHEREAS, pursuant to the requirements of Section 9.8 of the Warrant Agreement, the holders of a majority of the Private Placement Warrants have consented to an amendment to the Warrant Agreement providing that if the Private Placement Warrants are exercised on or prior to the Conversion Date, upon exercise of a Private Placement Warrant, the holder shall only be entitled to receive Company Class A Common Shares and shall not be entitled to receive any Company Series A Preferred Stock;
WHEREAS, upon consummation of the SPAC Merger, as provided in Section 4.5 of the Warrant Agreement, each of the issued and outstanding Warrants will no longer be exercisable for shares of SPAC Class A common stock, but instead will be exercisable (subject to the terms and conditions of the Warrant Agreement as amended hereby) for the same number of Company Class A Common Shares and the same number of shares of Company Series A Preferred Stock; provided that the holders of Private Placement Warrants shall not receive any Company Series A Preferred Stock upon exercise of a Private Placement Warrant unless the Private Placement Warrant is exercised after the Conversion Date;
WHEREAS, the Company Class A Common Shares and Company Series A Preferred Stock constitute an Alternative Issuance as defined in said Section 4.5;
WHEREAS, all references to “Class A common stock” in the Warrant Agreement (including all Exhibits thereto) shall mean shares of Class A common stock, par value $0.001 per share, of the Company (together with any other securities of the Company or any successor entity issued in consideration of (including as a stock split, dividend or distribution) or in exchange for any of such securities, “Company Common Shares”);
WHEREAS, the board of directors of SPAC has determined that the consummation of the transactions contemplated by the Business Combination Agreement will constitute a Business Combination (as defined in the Warrant Agreement); and
WHEREAS, in connection with the Mergers, SPAC desires to assign all of its right, title and interest in the Warrant Agreement to the Company, and the Company wishes to accept such assignment and assume all the liabilities and obligations of SPAC under the Warrant Agreement with the same force and effect as if the Company were initially a party to the Warrant Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Assignment and Assumption; Consent.
(a) Assignment and Assumption. SPAC hereby assigns to the Company all of SPAC’s right, title and interest in and to the Warrant Agreement and the Warrants (each as amended hereby) as of the Effective Time. The Company hereby assumes, and agrees to pay, perform, satisfy and discharge in full, as the same become due, all of SPAC’s liabilities and obligations under the Warrant Agreement and the Warrants (each as amended hereby) arising from and after the Effective Time with the same force and effect as if the Company were initially a party to the Warrant Agreement and the Warrants.
(b) Consent. The Warrant Agent hereby consents to the assignment of the Warrant Agreement and the Warrants by SPAC to the Company and the assumption by the Company of the SPAC’s obligations under the Warrant Agreement and the Warrants pursuant to Section 1.1 hereof effective as of the effective time of the SPAC Merger (the “Effective Time”), and to the continuation of the Warrant Agreement and Warrants in full force and effect from and after the Effective Time, subject at all times to the Warrant Agreement and Warrants (each as amended hereby) and to all of the provisions, covenants, agreements, terms and conditions of the Warrant Agreement and this Agreement.
2. Amendments to Warrant Agreement. The parties hereto hereby agree to the following amendments to the Warrant Agreement:
(a) Defined Terms. The defined terms in this Amendment, including in the preamble and recitals hereto, and the definitions incorporated by reference from the Business Combination Agreement, are hereby added to the Warrant Agreement as if they were set forth therein.
(b) Preamble. The preamble of the Warrant Agreement is hereby amended by deleting “Avalon Acquisition Inc., a Delaware corporation” and replacing it with “Beneficient, a Nevada corporation”. As a result thereof, all references to the “Company” in the Warrant Agreement shall be amended such that they refer to the Company rather than SPAC.
(c) Reference to Company Common Shares. All references to “Class A common stock” in the Warrant Agreement (including all Exhibits thereto) shall mean Company Common Shares.
(d) Issuance of Preferred Stock. The Warrant Agreement is hereby amended to add a new Section 3.3.6 to the Warrant Agreement as follows:
3.3.6 Issuance of Preferred Stock. Upon exercise of a Warrant, for every Company Common Share for which a Warrant is exercised, the Registered Holder shall also be entitled to receive one share of Company Series A Preferred Stock; provided that the Registered Holder of a Private Placement Warrant shall not be entitled to receive any shares of Company Series A Preferred Stock upon the exercise of a Private Placement Warrant unless such exercise is after the Conversion Date.
(e) Notices. Section 9.2 of the Warrant Agreement is hereby amended to delete the address of the Company for notices under the Warrant Agreement and instead add the following address for notices to Company:
| If to the Company to:<br> <br><br><br><br>Beneficient<br> <br>c/o The Beneficient Company Group, L.P.<br><br><br>325 N Saint Paul St., Suite 4850<br> <br>Dallas, Texas 75201<br><br><br>Attn: General Counsel<br> <br>Email:<br>LegalNotices@beneficient.com | with a copy (which will not constitute notice) to:<br> <br><br><br><br>Haynes and Boone, LLP<br> <br>2323 Victory Ave., Suite 700<br><br><br>Dallas, TX 75219<br> <br>Attn: Matthew L. Fry<br><br><br>Telephone No.: 214-651-5443<br><br><br>Email: matt.fry@haynesboone.com |
|---|
3. Effectiveness. Notwithstanding anything to the contrary contained herein, this Amendment shall only become effective upon the Closing. In the event that the Business Combination Agreement is terminated in accordance with its terms prior to the Closing, this Amendment and all rights and obligations of the parties hereunder shall automatically terminate and be of no further force or effect.
4. Miscellaneous. Except as expressly provided in this Amendment, all of the terms and provisions in the Warrant Agreement are and shall remain in full force and effect, on the terms and subject to the conditions set forth therein. This Amendment does not constitute, directly or by implication, an amendment or waiver of any provision of the Warrant Agreement, or any other right, remedy, power or privilege of any party thereto, except as expressly set forth herein. Any reference to the Warrant Agreement in the Warrant Agreement or any other agreement, document, instrument or certificate entered into or issued in connection therewith, shall hereinafter mean the Warrant Agreement as the case may be, as amended by this Amendment (or as such agreement may be further amended or modified in accordance with the terms thereof). The terms of this Amendment shall be governed by, enforced and construed and interpreted in a manner consistent with the provisions of the Warrant Agreement, as it applies to the amendments to the Warrant Agreement herein, including without limitation Section 9 of the Warrant Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, each party hereto has caused this Amendment to Warrant Agreement to be signed and delivered by its respective duly authorized officer as of the date first above written.
SPAC:
| AVALON ACQUISITION INC. | |
|---|---|
| By: | /s/ S. Craig Cognetti |
| Name: | S. Craig Cognetti |
| Title: | Chief Executive Officer |
| The Company: | |
| BENEFICIENT | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| Agent: | |
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY | |
| By: | /s/ Douglas Reed |
| Name: | Douglas Reed |
| Title: | Vice President of Account Administration |
Signature Page to Amendment to Warrant Agreement
EX-4.2
Exhibit 4.2
FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
BENEFICIENT COMPANY GROUP, L.L.C.
A Delaware Limited Liability Company
TABLE OF CONTENTS
| Page | |||
|---|---|---|---|
| ARTICLE I DEFINITIONS | 1 | ||
| Section 1.1. | Definitions | 1 | |
| Section 1.2. | Construction | 10 | |
| ARTICLE II ORGANIZATION | 10 | ||
| Section 2.1. | Member | 10 | |
| Section 2.2. | Formation | 11 | |
| Section 2.3. | Name | 11 | |
| Section 2.4. | Registered Office; Registered Agent; Principal Office; Other Offices | 11 | |
| Section 2.5. | Purpose and Business | 11 | |
| Section 2.6. | Powers | 12 | |
| Section 2.7. | Power of Attorney | 12 | |
| Section 2.8. | Term | 13 | |
| Section 2.9. | Title to Company Assets | 13 | |
| Section 2.10. | No State-Law Partnership | 13 | |
| ARTICLE III RIGHTS OF MEMBERS | 14 | ||
| Section 3.1. | Limitation of Liability | 14 | |
| Section 3.2. | Management of Business | 14 | |
| Section 3.3. | Outside Activities of the Members | 14 | |
| Section 3.4. | Rights of Non-Managing Members | 14 | |
| ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF MEMBERSHIP INTERESTS | 15 | ||
| Section 4.1. | Certificates | 15 | |
| Section 4.2. | Mutilated, Destroyed, Lost or Stolen Certificates | 16 | |
| Section 4.3. | Record Holders | 17 | |
| Section 4.4. | Transfer Generally | 17 | |
| Section 4.5. | Registration and Transfer of Membership Interests | 17 | |
| Section 4.6. | Transfer of the Managing Member’s Managing Member Interests | 18 | |
| Section 4.7. | Restrictions on Transfers | 19 | |
| Section 4.8. | Citizenship Certificates; Non-citizen Assignees | 19 | |
| Section 4.9. | Redemption of Membership Interests of Non-citizen Assignees | 20 | |
| Section 4.10. | Redemption of Non-Managing Member Interests in the Managing Member’s Discretion | 22 |
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| ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF MEMBERSHIP INTERESTS | 22 | |
|---|---|---|
| Section 5.1. | Contributions by the Managing Member | 22 |
| Section 5.2. | Interest and Withdrawal | 22 |
| Section 5.3. | Company Securities Generally | 22 |
| Section 5.4. | Preemptive Rights | 24 |
| Section 5.5. | Splits and Combinations | 24 |
| Section 5.6. | Fully Paid and Non-Assessable Nature of Membership Interests | 25 |
| Section 5.7. | Additional Capital Contributions | 25 |
| ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS | 25 | |
| Section 6.1. | Establishment and Maintenance of Capital Accounts | 25 |
| Section 6.2. | Allocations | 26 |
| Section 6.3. | Requirement and Characterization of Distributions; Distributions to Record Holders | 27 |
| Section 6.4. | Allocated Fees and Expenses | 27 |
| ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS | 28 | |
| Section 7.1. | Management | 28 |
| Section 7.2. | Company Group Assets; Managing Member’s Authority | 31 |
| Section 7.3. | Reimbursement of the Managing Member | 32 |
| Section 7.4. | Outside Activities | 33 |
| Section 7.5. | Loans from the Managing Member; Loans or Contributions from the Company; Contracts with the Managing Member and its Affiliates | 34 |
| Section 7.6. | Indemnification | 34 |
| Section 7.7. | Liability of Indemnitees | 37 |
| Section 7.8. | Modification of Duties; Standards of Conduct; Resolution of Conflicts of Interest | 38 |
| Section 7.9. | Other Matters Concerning the Managing Member | 41 |
| Section 7.10. | Purchase or Sale of Company Securities | 41 |
| Section 7.11. | Reliance by Third Parties | 42 |
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| ARTICLE VIII BOOKS, RECORDS AND ACCOUNTING | 42 | |
|---|---|---|
| Section 8.1. | Records and Accounting | 42 |
| Section 8.2. | Fiscal Year | 43 |
| ARTICLE IX TAX MATTERS | 43 | |
| Section 9.1. | Tax Returns and Information | 43 |
| Section 9.2. | Tax Elections | 43 |
| Section 9.3. | Tax Controversies | 43 |
| Section 9.4. | Withholding | 44 |
| Section 9.5. | Tax Status | 44 |
| ARTICLE X ADMISSION OF MEMBERS | 45 | |
| Section 10.1. | Admission of Additional Members | 45 |
| Section 10.2. | Admission of Successor Managing Member | 46 |
| ARTICLE XI WITHDRAWAL OR REMOVAL OF MEMBERS | 46 | |
| Section 11.1. | Member Withdrawal | 46 |
| Section 11.2. | No Removal of the Managing Member | 46 |
| ARTICLE XII DISSOLUTION AND LIQUIDATION | 47 | |
| Section 12.1. | Dissolution | 47 |
| Section 12.2. | Liquidator | 47 |
| Section 12.3. | Liquidation | 47 |
| Section 12.4. | Cancellation of Certificate of Formation | 48 |
| Section 12.5. | Return of Contributions | 49 |
| Section 12.6. | Waiver of Partition | 49 |
| Section 12.7. | Capital Account Restoration | 49 |
| ARTICLE XIII AMENDMENT OF AGREEMENT; MEETINGS; RECORD DATE | 49 | |
| Section 13.1. | Amendments | 49 |
| Section 13.2. | Amendment Procedures | 49 |
| Section 13.3. | Amendment Requirements | 50 |
| Section 13.4. | Meetings | 50 |
| Section 13.5. | Notice of a Meeting | 50 |
| Section 13.6. | Record Date | 50 |
| Section 13.7. | Postponement and Adjournment | 50 |
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| Section 13.8. | Waiver of Notice; Approval of Meeting; Approval of Minutes | 51 |
|---|---|---|
| Section 13.9. | Quorum and Voting | 51 |
| Section 13.10. | Conduct of a Meeting | 52 |
| Section 13.11. | Action Without a Meeting | 52 |
| Section 13.12. | Voting and Other Rights | 53 |
| ARTICLE XIV MERGER | 53 | |
| Section 14.1. | Authority | 53 |
| Section 14.2. | Procedure for Merger, Consolidation or Other Business Combination | 54 |
| Section 14.3. | Abandonment of Merger, Consolidation or Other Business Combination; Conversion of the Company into another Limited Liability Entity | 55 |
| Section 14.4. | Certificate of Merger or Consolidation | 55 |
| Section 14.5. | Amendment of Company Agreement | 55 |
| Section 14.6. | Effect of Merger | 56 |
| Section 14.7. | Merger of Subsidiaries | 56 |
| ARTICLE XV GENERAL PROVISIONS | 56 | |
| Section 15.1. | Addresses and Notices | 56 |
| Section 15.2. | Further Action | 57 |
| Section 15.3. | Binding Effect; Third Party Beneficiaries | 57 |
| Section 15.4. | Integration | 57 |
| Section 15.5. | Creditors | 58 |
| Section 15.6. | Waiver | 58 |
| Section 15.7. | Counterparts | 58 |
| Section 15.8. | Applicable Law | 58 |
| Section 15.9. | Forum Selection | 58 |
| Section 15.10. | Invalidity of Provisions | 59 |
| Section 15.11. | Consent of Members | 59 |
| Section 15.12. | Facsimile Signatures | 59 |
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FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BENEFICIENT COMPANYGROUP, L.L.C.
This First Amended and Restated Limited Liability Company Agreement of Beneficient Company Group, L.L.C., a Delaware limited liability company (the “Company”), is entered into effective as of June 6, 2023 (the “Effective Date”), by and between the Persons executing this Agreement as of the Effective Date as Members, and each other Person who becomes a Member of the Company and becomes a party to this Agreement.
WHEREAS, The Beneficient Company Group, L.P. (the “Initial Member”) previously entered into that certain Limited Liability Company Agreement dated as of December 8, 2022 (the “Prior Agreement”);
WHEREAS, the Initial Member has converted from a Delaware limited partnership to Beneficient, a Nevada corporation; and
WHEREAS, the parties desire to enter into this First Amended and Restated Limited Liability Company Agreement (the “Agreement”) to amend the Prior Agreement as herein provided.
NOW THEREFORE, in consideration of the covenants, conditions and agreements contained herein, the parties hereto agree to amend and restate the Prior Agreement, as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein):
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Agent” has the meaning assigned to such term in Section 5.3(d).
“Agreement” means this First Amended and Restated Limited Liability Company Agreement of Beneficient Company Group, L.L.C. as it may be amended, supplemented or restated from time to time.
“Allocated Payments” has the meaning assigned to such term in Section 6.4.
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“Associate” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.
“Ben Holdings” means Beneficient Company Holdings, L.P.
“Ben Holdings Class A Units” means the Class A Units of Ben Holdings.
“Ben Holdings LPA” means the Eighth Amended and Restated Limited Partnership Agreement of Ben Holdings, as amended from time to time in accordance with its terms.
“Beneficial Owner” has the meaning assigned to such term in Rules 13d-3 and 13d-5 under the Securities Exchange Act (and “Beneficially Own” shall have a correlative meaning).
“Beneficient” means Beneficient, a Nevada corporation.
“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close.
“Capital Account” has the meaning assigned to such term in Section 6.1(a).
“Capital Contribution” means any cash or cash equivalents or other property valued at its fair market value that a Member has contributed or contributes to the Company pursuant to this Agreement.
“Carrying Value” means, with respect to any Company asset, the asset’s adjusted basis for U.S. federal income tax purposes, except that the initial carrying value of assets contributed to the Company shall be their respective gross fair market values on the date of contribution as determined by the Managing Member, and the Carrying Values of all Company assets shall be adjusted to equal their respective fair market values, in accordance with the rules set forth in United States Treasury Regulation Sections 1.704-1(b)(2)(iv)(f) (including the issuance of a Noncompensatory Option), except as otherwise provided herein, as of: (a) the date of the acquisition of any additional Membership Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the date of the distribution of more than a de minimis amount of Company assets to a Member in exchange for a Membership Interest; (c) the date a Membership Interest is relinquished to the Company; (d) the date that the Company issues more than a de minimis Membership Interest to a new Member in exchange for services; or (e) any other date specified in the United States Treasury Regulations; provided however that adjustments pursuant to clauses (a), (b) (c), (d) and (e) above shall be made only if such adjustments are deemed necessary or appropriate by the Managing Member to reflect the relative economic interests of the Members. The Carrying Value of any Company asset distributed to any Member shall be adjusted immediately before such distribution to equal its fair market value. In the case of any asset that has a Carrying Value that differs from its adjusted tax basis, Carrying Value shall be adjusted by the amount of depreciation calculated for purposes of the definition of “Net Income (Loss)” rather than the amount of depreciation determined for U.S. federal income
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tax purposes, and depreciation shall be calculated by reference to Carrying Value rather than tax basis once Carrying Value differs from tax basis. For the avoidance of doubt, adjustments to the Carrying Value, as defined here, of any assets held directly or indirectly by the Company (including interests in, or assets held through, Subsidiaries treated as corporations for U.S. federal income tax purposes) shall be made in a manner reasonably determined by the Managing Member in its reasonable discretion to reflect the overall allocations among the Company and its Subsidiaries. In the event of the issuance of Membership Interests or increases to applicable Capital Account balances pursuant to the exercise of a Noncompensatory Option where the right to share in Company capital represented by such Membership Interest differs from the consideration paid to acquire and exercise such option, the Carrying Value of each Company property immediately after the issuance of such Membership Interest shall be adjusted upward or downward to reflect any unrealized gain or unrealized loss attributable to such Company property and the Capital Accounts of the Members shall be adjusted in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(s); provided, further, that in the event of an issuance of Membership Interests for a de minimis amount of cash or contributed property, in the event of an issuance of a Noncompensatory Option to acquire a de minimis Membership Interest, or in the event of an issuance of a de minimis amount of Membership Interests as consideration for the provision of services, the Managing Member may determine that such adjustments are unnecessary for the proper administration of the Company. If, upon the occurrence of a revaluation event described in this definition of Carrying Value, a Noncompensatory Option of the Company is outstanding, the Company shall adjust the Carrying Value of each Company property in accordance with Treasury Regulation Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2). In determining such unrealized gain or unrealized loss, the aggregate cash amount and fair market value of all Company assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of additional Membership Interests (or, in the case of a revaluation event resulting from the exercise of a Noncompensatory Option, immediately after the issuance of the Membership Interests acquired pursuant to the exercise of such Noncompensatory Option if required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(1)) shall be determined by the Managing Member using such reasonable method of valuation as it may adopt.
“Certificate” means a certificate issued in global form in accordance with the rules and regulations of the Depositary or in such other form as may be adopted by the Managing Member, issued by the Company evidencing ownership of one or more Units or a certificate, in such form as may be adopted by the Managing Member, issued by the Company evidencing ownership of one or more other Company Securities.
“Certificate of Formation” means the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware as referenced in Section 2.2, as such Certificate of Formation may be amended, supplemented or restated from time to time.
“Citizenship Certification” means a properly completed certificate in such form as may be specified by the Managing Member by which a Member certifies that it (and if it is a nominee holding for the account of another Person, that to the best of its knowledge such other Person) is an Eligible Citizen.
“Class A Common Stock” means the Class A common stock, par value $0.001 per share, of Beneficient.
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“Class A Units” means Units of Membership Interests designated as Class A Units and representing a fractional part of the Non-Managing Member Interests of all Non-Managing Members and having the rights and obligations specified with respect to Class A Units in this Agreement.
“Class B Common Stock” means the Class B common stock, par value $0.001 per share, of Beneficient.
“Closing Price” for any day means the last sale price on such day, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted for trading on the principal National Securities Exchange on which such Membership Interests of such class are listed or admitted to trading or, if such Membership Interests of such class are not listed or admitted to trading on any National Securities Exchange, the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the primary reporting system then in use in relation to such Membership Interest of such class, or, if on any such day such Membership Interests of such class are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in such Membership Interests of such class selected by the Managing Member, or if on any such day no market maker is making a market in such Membership Interests of such class, the fair value of such Membership Interests on such day as determined by the Managing Member.
“Code” means the U.S. Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.
“Commission” means the U.S. Securities and Exchange Commission.
“Common Stock” means the Class A Common Stock and the Class B Common Stock.
“Company” means Beneficient Company Group, L.L.C., a Delaware limited liability company.
“Company Group” means the Company, Ben Holdings and all of their Subsidiaries treated as a single consolidated entity.
“Company Sale” means, unless otherwise determined by the Managing Member in its reasonable discretion, the sale, exchange, or other disposition, or sale of control, in one or more related transactions (transactions occurring within any 36-month period shall be deemed to be related unless determined otherwise by the Managing Member in its reasonable discretion), of or over, (a) the Company, (b) 40% or more of the Company’s total assets (by value), or (c) assets of any direct or indirect Subsidiary of the Company; provided, that such sales(s), exchange(s), or other disposition(s) represents more than 40% of the Company’s total assets (by value).
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“Company Security” means any equity interest in the Company (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Company), including without limitation, the Class A Common Units.
“Consenting Parties” has the meaning assigned to such term in Section 15.9.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. “Controlling” and “Controlled” shall have correlative meanings.
“Current Market Price” as of any date of any class of Membership Interests means the average of the daily Closing Prices per Membership Interest of such class for the 20 consecutive Trading Days immediately prior to such date.
“Delaware LLC Act” means the Delaware Limited Liability Company Act, as amended, supplemented or restated from time to time and any successor to such statute.
“Depositary” means, with respect to any Units evidenced by Certificates issued in global form, The Depository Trust Company and its successors and permitted assigns.
“Dispute” has the meaning assigned to such term in Section 15.9.
“Effective Date” has the meaning set forth in the preamble.
“Eligible Citizen” means a Person qualified to own interests in real property in jurisdictions in which any Group Member does business or proposes to do business from time to time, and whose status as a Member the Managing Member determines does not or would not subject such Group Member to a significant risk of cancellation or forfeiture of any of its properties or any interest therein.
“Exchange Agreement” means one or more exchange agreements providing for the exchange of partnership interests, membership interests or other securities issued by the Company, Ben Holdings or other members of the Company Group for shares of Class A Common Stock or the distribution of cash in lieu of shares of Class A Common Stock.
“Fiscal Year” has the meaning assigned to such term in Section 8.2.
“Further Guidance” means any (i) statutory amendments, (ii) temporary, proposed, or final Treasury Regulations or similar regulations or rules, (iii) notice, announcement, revenue ruling, revenue procedure, or similar authority or guidance, or (iv) administrative, judicial, or legislative interpretations, in each case, issued by a taxing authority with respect to the Partnership Tax Audit Rules and including any successor or additional provisions.
“Group” means a Person that with or through any of its Affiliates or Associates has any contract, arrangement, understanding or relationship for the purpose of acquiring, holding, voting, exercising investment power or disposing of any Company Securities with any other Person that Beneficially Owns, or whose Affiliates or Associates Beneficially Own, directly or indirectly, Membership Interests.
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“Group Member” means a member of the Company Group.
“Indemnitee” means (a) any Managing Member, (b) any former Managing Member, (c) the Initial Member, (d) any Person who is or was a tax matters partner (or partnership representative or designated individual), an officer or a director of the Managing Member, any former Managing Member or any Group Member, (e) any officer or director of the Managing Member or any former Managing Member who is or was serving at the request of the Managing Member or any former Managing Member as an officer, director, employee, member, partner, tax matters partner (or partnership representative or designated individual), agent, fiduciary or trustee of another Person; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, and (f) any Person the Managing Member designates as an “Indemnitee” for purposes of this Agreement.
“Initial Member” has the meaning assigned to such term in the recitals.
“Interest Designation” has the meaning assigned to such term in Section 5.3(b).
“Liquidation Date” means the date on which any event giving rise to the dissolution of the Company occurs.
“Liquidator” means the Managing Member or one or more Persons as may be selected by the Managing Member to perform the functions described in Section 12.2 as liquidating trustee of the Company within the meaning of the Delaware LLC Act.
“Managing Member” means Beneficient, and its successors and assigns that are admitted to the Company as the managing member of the Company, in its capacity as the managing member of the Company, pursuant to the terms of this Agreement. The Managing Member is the sole managing member of the Company and the sole holder of the Managing Member Interest. The Managing Member shall constitute a “manager” (as that term is defined in the Delaware LLC Act) of the Company.
“Managing Member Interest” means the non-economic management and ownership interest of the Managing Member in the Company (in its capacity as a managing member without reference to any other Membership Interest held by it) and includes any and all benefits to which a Managing Member is entitled as provided in this Agreement, together with all obligations of a Managing Member to comply with the terms and provisions of this Agreement.
“Members” means the Managing Member and the Non-Managing Members. “Member” shall refer to any one of the Members. The Members together shall constitute the “members” (as that term is defined in the Delaware LLC Act) of the Company.
“Membership Interest” means, as applicable, the Managing Member Interest and any Non-Managing Member Interests.
“Merger Agreement” has the meaning assigned to such term in Section 14.1.
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“National Securities Exchange” means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act or any successor thereto and any other securities exchange (whether or not registered with the Commission under Section 6(a) of the Securities Exchange Act) or an automatic quotation system that the Managing Member shall designate as a National Securities Exchange with respect to any Company Securities for purposes of this Agreement.
“Net Income (Loss)” for any Fiscal Year (or other fiscal period) means the taxable income or loss of the Company for such period as determined in accordance with the accounting method used by the Company for U.S. federal income tax purposes with the following adjustments: (i) any income of the Company that is exempt from U.S. federal income taxation and not otherwise taken into account in computing Net Income (Loss) shall be added to such taxable income or loss; (ii) if the Carrying Value of any asset differs from its adjusted tax basis for U.S. federal income tax purposes, any depreciation, amortization or gain or loss resulting from a disposition of such asset shall be calculated with reference to such Carrying Value; (iii) upon an adjustment to the Carrying Value of any asset, pursuant to the definition of Carrying Value, the amount of the adjustment shall be included as gain or loss in computing such taxable income or loss; and (iv) any expenditures of the Company not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income (Loss) pursuant to this definition shall be treated as deductible items.
“Non-citizen Assignee” means a Person who the Managing Member has determined does not constitute an Eligible Citizen and as to whose Membership Interests the Managing Member has become the Member, pursuant to Section 4.8.
“Noncompensatory Option” has the meaning set forth in Treasury Regulations Section 1.721-2(f).
“Non-Managing Member Interest” means an interest of a Non-Managing Member in the Company (or by a Person that would be a Non-Managing Member if properly admitted as such in accordance with this Agreement), including such Person’s right, as applicable, (i) to a distributive share of net income, net losses, and other items of income, gain, loss, and deduction of the Company; (ii) to a distributive share of the assets of the Company; (iii) to vote on, consent to, or otherwise participate in any decision of the Non-Managing Members as provided in this Agreement; and (iv) to any and all other benefits to which a Non-Managing Member may be entitled as provided in this Agreement or the Delaware LLC Act. Except to the extent otherwise expressly set forth herein, for purposes of this Agreement and the Delaware LLC Act, the Non-Managing Member Interests shall constitute a single class or group of membership interests.
“Non-Managing Members” means all of the Persons executing this Agreement or a joinder hereto in a capacity other than Managing Member or hereafter admitted to the Company as a Non-Managing Member as provided in this Agreement, but shall not include any Person who has ceased to be a Non-Managing Member of the Company.
“Opinion of Counsel” means a written opinion of counsel or, in the case of tax matters, a qualified tax advisor (who may be regular counsel or tax adviser, as the case may be, to the Company or the Managing Member or any of its Affiliates) acceptable to the Managing Member.
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“Outstanding” means, with respect to Membership Interests, all Membership Interests that are issued by the Company and reflected as outstanding on the books and records as of the date of determination; provided that any Non-Managing Member Interest held by a Non-Managing Member shall not, except as expressly set forth in this Agreement or as required by law, be entitled to vote and shall not be considered to be Outstanding when sending notices of a meeting of Members to vote on any matter (unless otherwise required by this Agreement or by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement or the Delaware LLC Act.
“Partnership Tax Audit Rules” means Subchapter C of Chapter 63 of the Code, currently Code Sections 6221 through 6241, together with any (i) similar provision of state, local or non-U.S. tax laws, or (ii) Further Guidance.
“Percentage Interest” means, as of any date of determination, (a) as to a holder of any class or series of Units, the product obtained by multiplying (i) 100% by (ii) the quotient obtained by dividing (x) the number of Units of such class or series held by such holder by (y) the total number of outstanding Units of such class or series, and (b) as to the Members, or as to a holder of any class or series of Membership Interests that are not designated as a Unit, the relative portion of the Capital Account balance of such Member, or of any such class or series of Membership Interests held by such holder, expressed as a percentage.
“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association (including any group, organization, co-tenancy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).
“Prior Agreement” has the meaning assigned to such term in the recitals.
“Pro Rata” means, unless otherwise provided in this Agreement, (a) when used with respect to each category of Units, or any class, accounts or series thereof, apportioned equally among all designated Units (or categories, classes or series thereof) or, with respect to any Membership Interest that is not designated as a Unit, in accordance with Capital Account balances with respect to such Membership Interests, or any class or accounts thereof and (b) when used with respect to Members, apportioned among all Members in accordance with their relative portion of the Capital Account balance of all Members. For the avoidance of doubt, Pro Rata apportionments under this Agreement are made without conversion or exchange of any outstanding Membership Interests.
“Quarter” means, unless the context requires otherwise, a fiscal quarter of the Company or, with respect to the final fiscal quarter of the Company, the relevant portion of such fiscal quarter.
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“Record Date” means the date and time established by the Managing Member pursuant to this Agreement or, if applicable, the Liquidator pursuant to Section 12.2, for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Members or entitled to vote by ballot or give approval of Company action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Members or (b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer or other business of the Company. For the avoidance of doubt, Section 13.6 of this Agreement shall not apply to any Record Date set by the Managing Member for purposes of determining the identity of Record Holders entitled to receive any report or distribution or participate in any offer.
“Record Holder” means the Person in whose name a Membership Interest is registered on the books of the Company or, if such books are maintained by the Transfer Agent, on the books of the Transfer Agent, in each case, as of the Record Date.
“Redeemable Interests” means any Membership Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 4.9.
“Registration Statement” means the Registration Statement of Beneficient on Form S-4 or such other form as may be filed (and amended or supplemented from time to time) by Beneficient with the Commission under the Securities Act and/or Securities Exchange Act to register the issuance of the Class A Common Stock of Beneficient under the Securities Act and/or Securities Exchange Act in connection with the consummation of the transactions contemplated by that certain Business Combination Agreement dated September 21, 2022 by and among Avalon Acquisition Inc., Beneficient Merger Sub I, Inc., Beneficient Merger Sub II, LLC and BCG.
“Securities Act” means the U.S. Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute.
“Securities Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute.
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person, at the date of determination, (i) is a general partner of such partnership, (ii) owns more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class), directly or indirectly, or (iii) otherwise controls such partnership, directly or indirectly, (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, (i) has at least a majority ownership interest, (ii) has the power to elect or direct the election of a majority of the directors or other governing body of such Person, or (iii) otherwise controls such Person or (d) any other Person the financial information of which is consolidated by such Person for financial reporting purposes under U.S. GAAP.
“Surviving Business Entity” has the meaning assigned to such term in Section 14.2(b).
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“Trading Day” means a day on which the principal National Securities Exchange on which the Membership Interests of any class are listed or admitted to trading is open for the transaction of business or, if Membership Interests of a class are not listed or admitted to trading on any National Securities Exchange, a day on which banking institutions in New York City generally are open.
“transfer” has the meaning assigned to such term in Section 4.4(a).
“Transfer Agent” means such bank, trust company or other Person (including the Managing Member or one of its Affiliates) as shall be appointed from time to time by the Managing Member to act as registrar and transfer agent for Company Securities; provided that if no Transfer Agent is specifically designated for any Company Securities, the Managing Member shall act in such capacity.
“Unit” means a Membership Interest that is designated as a “Unit” and shall include the Class A Units.
“Unitholders” means the holders of Units.
“U.S. GAAP” means U.S. generally accepted accounting principles consistently applied.
Section 1.2. Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) the terms “include,” “includes,” “including” or words of like import shall be deemed to be followed by the words “without limitation;” and the terms “hereof,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The Managing Member has the power to construe and interpret this Agreement and to act upon any such construction or interpretation. To the fullest extent permitted by law, any construction or interpretation of this Agreement by the Managing Member, any action taken pursuant thereto and any determination made by the Managing Member shall, in each case, be conclusive and binding on all Record Holders, each other Person or Group who acquires an interest in a Membership Interest and all other Persons for all purposes.
ARTICLE II
ORGANIZATION
Section 2.1. Member. Beneficient, successor by way of the statutory conversion of the Initial Member, continues to be admitted as the sole Managing Member and sole Non-Managing Member of the Company upon execution of this Agreement. The books and records of the Company shall be amended from time to time to reflect the admission and withdrawal of Members and the transfer or assignment of Membership Interests pursuant to the terms of this Agreement.
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Additional Persons may be admitted to the Company as Members from time to time on such terms and conditions as may be determined by the Managing Member.
Section 2.2. Formation. **** The Company has been formed as a limited liability company pursuant to the provisions of the Delaware LLC Act. All Membership Interests shall constitute personal property of the owner thereof for all purposes and a Member has no interest in specific Company property.
Section 2.3. Name. **** The name of the Company shall be Beneficient Company Group, L.L.C. The Company’s business may be conducted under any other name or names as determined by the Managing Member, including the name of the Managing Member. The words “Limited Liability Company,” “L.L.C.,” “LLC” or similar words or letters shall be included in the Company’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The Managing Member may change the name of the Company at any time and from time to time by filing an amendment to the Certificate of Formation (and upon any such filing this Agreement shall be deemed automatically amended to change the name of the Company) and shall notify the Members of such change in the next regular communication to the Members.
Section 2.4. Registered Office; Registered Agent; Principal Office; Other Offices. Unless and until changed by the Managing Member by filing an amendment to the Certificate of Formation (and upon any such filing this Agreement shall be deemed automatically amended to change the registered office and the registered agent of the Company) the registered office of the Company in the State of Delaware is located at c/o Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware 19808, and the registered agent for service of process on the Company in the State of Delaware at such registered office is Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware 19808. The principal office of the Company is located at 325 N. St. Paul Street, Suite 4850, Dallas TX 75201 or such other place as the Managing Member may from time to time designate by notice to the Members. The Company may maintain offices at such other place or places within or outside the State of Delaware as the Managing Member deems necessary or appropriate.
Section 2.5. Purpose and Business. The purpose and nature of the business to be conducted by the Company shall be to (a) act as the general partner and a limited partner of Ben Holdings, (b) engage directly in, or enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the Managing Member and that lawfully may be conducted by a limited liability company organized pursuant to the Delaware LLC Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Company pursuant to the agreements relating to such business activity; and (c) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member. To the fullest extent permitted by law, the Managing Member shall have no duty (including any fiduciary duty) or obligation whatsoever to the Company, any Member or any other Person bound by this Agreement to propose or approve the conduct by the Company of any business and may, free of any duty (including any fiduciary duty) or obligation whatsoever to the Company or any other Person bound by this Agreement, decline to propose or approve the conduct by the Company of any business and, in so declining to propose or approve, shall not be deemed to have breached this Agreement, any other agreement contemplated hereby, the Delaware LLC Act or any other provision of law, rule or regulation or equity.
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Section 2.6. Powers. The Company shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 2.5 and for the protection and benefit of the Company to the maximum extent permitted.
Section 2.7. Power of Attorney.
(a) Each Non-Managing Member and Record Holder hereby constitutes and appoints the Managing Member and, if a Liquidator (other than the Managing Member) shall have been selected pursuant to Section 12.2, the Liquidator, severally (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Formation and all amendments or restatements hereof or thereof and any resolution, consent, approval, voting ballot, voting certification or other voting mechanism) that the Managing Member or the Liquidator determines to be necessary or appropriate to conduct the purposes of the Company as provided in Section 2.5 as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (B) all amendments to this Agreement adopted in accordance with the terms hereof and all certificates, documents and other instruments that the Managing Member or the Liquidator determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the Managing Member or the Liquidator determines to be necessary or appropriate to reflect the dissolution and termination of the Company pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments (including this Agreement and the Certificate of Formation and all amendments or restatements hereof or thereof) relating to the admission, withdrawal, removal or substitution of any Member pursuant to, or other events described in, this Agreement; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Company Securities issued pursuant to Section 5.3; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger or consolidation or similar certificate) relating to a merger, consolidation, combination or conversion of the Company pursuant to Article XIV or otherwise in connection with a change of jurisdiction of the Company.
Nothing contained in this Section 2.7(a) shall be construed as authorizing the Managing Member to amend, change or modify this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement.
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(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, shall not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Non-Managing Member or Record Holder and the transfer of all or any portion of such Non-Managing Member’s or Record Holder’s Membership Interest and shall extend to such Non-Managing Member’s or Record Holder’s heirs, successors, assigns and personal representatives. Each such Non-Managing Member or Record Holder hereby agrees to be bound by any representation made by the Managing Member or the Liquidator acting in good faith pursuant to such power of attorney; and each such Non-Managing Member or Record Holder, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Managing Member or the Liquidator taken in good faith under such power of attorney. Each Non-Managing Member and Record Holder shall execute and deliver to the Managing Member or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the Managing Member or the Liquidator may request in order to effectuate this Agreement and the purposes of the Company.
Section 2.8. Term. The term of the Company shall be perpetual, unless and until it is dissolved in accordance with the provisions of Article XII. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation as provided in the Delaware LLC Act.
Section 2.9. Title to Company Assets. Title to Company assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively, shall have any ownership interest in such Company assets or any portion thereof. Title to any or all of the Company assets may be held in the name of the Company, the Managing Member, one or more of its Affiliates or one or more nominees, as the Managing Member may determine. The Managing Member hereby declares and warrants that any Company assets for which record title is held in the name of the Managing Member or one or more of its Affiliates or one or more nominees shall be held by the Managing Member or such Affiliate or nominee for the use and benefit of the Company in accordance with the provisions of this Agreement; provided however, that the Managing Member shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the Managing Member determines that the expense and difficulty of conveyancing makes transfer of record title to the Company impracticable) to be vested in the Company as soon as reasonably practicable; provided further that prior to the withdrawal of the Managing Member or as soon thereafter as practicable, the Managing Member shall use reasonable efforts to effect the transfer of record title to the Company and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the Managing Member. All Company assets shall be recorded as the property of the Company in its books and records, irrespective of the name in which record title to such Company assets is held.
Section 2.10. No State-Law Partnership. Nothing stated in this Agreement may be interpreted or construed so as to treat or consider the Company as a partnership, limited partnership, or joint venture for general state law purposes, and no Member of the Company may be considered a partner or joint venturer of the Company, the Managing Member, or any other Member. Notwithstanding the preceding sentence, if the Company has more than one member under the Code, the Company shall be treated as a partnership for federal and state taxation purposes, and no Person has any power or authority whatsoever to take any action or to refrain from taking any action that would have the effect of precluding the application of Subchapter K of the Code and corresponding provisions of state tax law to the Company and the Members; provided that if the Company is deemed to have only one member for federal income tax purposes then the Company shall be disregarded as an entity separate from such Member for so long as the Company is deemed to have a single member under the Code.
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ARTICLE III
RIGHTS OF MEMBERS
Section 3.1. Limitation of Liability. The Members shall have no liability under this Agreement except as expressly provided in this Agreement or as required by the Delaware LLC Act.
Section 3.2. Management of Business. Other than the Managing Member, in its capacity as such, no Member shall participate in the operation, management or control (within the meaning of the Delaware LLC Act) of the Company’s business, transact any business in the Company’s name or have the power to sign documents for or otherwise bind the Company.
Section 3.3. Outside Activities of the Members. Each Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company, including business interests and activities in direct competition with the Company Group or an Affiliate of a Group Member, and, to the fullest extent permitted by law, none of the same shall constitute a breach of this Agreement or any duty (including fiduciary duties) otherwise existing at Law, in equity or otherwise to the Company or any Member. Neither the Company nor any of the other Members shall have any rights by virtue of this Agreement in any business interests or activities of any Member. The rights that any Member has under this Section 3.3 shall not prejudice the rights that such Member may have under any other provision of this Agreement.
Section 3.4. Rights of Non-Managing Members.
(a) To the fullest extent permitted by law and notwithstanding any other provision of this Agreement or any agreement contemplated herein or applicable provisions of law or equity or otherwise, including the Delaware LLC Act, pursuant to Section 18-305(g) of the Delaware LLC Act, the Non-Managing Members shall only have such rights to obtain information relating to the Company as is expressly provided in this Section 3.4(a), and the Non-Managing Members acknowledge that they do not have any other rights to obtain information relating to the Company or access to books and records of the Company under Section 18-305 of the Delaware LLC Act, including, without limitation, the list of names and current addresses of the other Members of the Company. Except as limited by Sections 3.4(b) and 3.4(c), each Non-Managing Member shall have the right, for a purpose that is reasonably related to such Non-Managing Member’s interest as a Non-Managing Member in the Company, upon reasonable written demand stating the purpose of such demand and at such Non-Managing Member’s own expense, to obtain a copy of this Agreement and the Certificate of Formation and all amendments hereto and thereto, together with a copy of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate Formation and all amendments hereto and thereto have been executed.
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(b) The Managing Member may keep confidential from the Non-Managing Members, for such period of time as the Managing Member determines, (i) any information that the Managing Member reasonably believes to be in the nature of trade secrets, and (ii) other information the disclosure of which the Managing Member believes (A) is not in the best interests of the Company Group, (B) could damage the Company Group or its business or (C) that any Group Member is required by law or by agreement with any third party to keep confidential.
(c) Notwithstanding any other provision of this Agreement or Section 18-305 of the Delaware LLC Act, each of the Non-Managing Members and each other Person who acquires an interest in a Company Security hereby agrees to the fullest extent permitted by law that they do not have rights to receive information from the Company or any Indemnitee for the purpose of determining whether to pursue litigation or assist in pending litigation against the Company or any Indemnitee relating to the affairs of the Company except pursuant to the applicable rules of discovery relating to litigation commenced by such Person.
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF MEMBERSHIP INTERESTS
Section 4.1. Certificates.
(a) Notwithstanding anything otherwise to the contrary herein, unless the Managing Member shall determine otherwise in respect of some or all of any or all classes of Membership Interests, Membership Interests shall not be evidenced by certificates. Certificates that may be issued shall be executed on behalf of the Company by the Managing Member (and by any two appropriate officers of Company or any two appropriate officers of the Managing Member on behalf of the Company).
(b) No Certificate evidencing any Membership Interests shall be valid for any purpose until it has been countersigned by, and registered on the books and records of, the Transfer Agent; provided however that if the Managing Member elects to issue Certificates evidencing any Membership Interests in global form, the Certificates evidencing such Membership Interests shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Certificates evidencing such Membership Interests have been duly registered in accordance with the directions of the Company. Any or all of the signatures required on the Certificate may be by facsimile. If any Managing Member or Transfer Agent (or officer thereof) who shall have signed or whose facsimile signature shall have been placed upon any such Certificate shall have ceased to be such Managing Member or Transfer Agent (or officer thereof) before such Certificate is issued by the Company, such Certificate may nevertheless be issued by the Company with the same effect as if such Person were such Managing Member or Transfer Agent (or officer thereof) at the date of issue. Certificates for any Membership Interests shall be uniquely numbered and shall be entered on the books and records of the Company as they are issued and shall exhibit the Record Holder’s name and number.
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Section 4.2. Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate evidencing any Membership Interests is surrendered to the Transfer Agent or any mutilated Certificate evidencing other Company Securities is surrendered to the Managing Member, the appropriate officers of the Company or the Managing Member on behalf of the Managing Member on behalf of the Company shall execute, and, if applicable, the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of Company Securities as the Certificate so surrendered.
(b) The appropriate officers of the Company or of the Managing Member on behalf of the Managing Member on behalf of the Company shall execute and deliver, and, if applicable, the Transfer Agent shall countersign a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to the Managing Member, that a previously issued Certificate has been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate before the Managing Member has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(iii) if requested by the Managing Member, delivers to the Managing Member a bond, in form and substance satisfactory to the Managing Member, with surety or sureties and with fixed or open penalty as the Managing Member may direct to indemnify the Company, the Managing Member and, if applicable, the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the Managing Member.
If a Record Holder fails to notify the Managing Member within a reasonable period of time after it has notice of the loss, destruction or theft of a Certificate, and a transfer of the Membership Interests represented by the Certificate is registered before the Company, the Managing Member or the Transfer Agent receives such notification, to the fullest extent permitted by law, the Record Holder shall be precluded from making any claim against the Company, the Managing Member or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this Section 4.2, the Managing Member may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent, if applicable) reasonably connected therewith.
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Section 4.3. Record Holders. The Company and the Managing Member shall be entitled to recognize the Record Holder as the owner with respect to any Membership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Membership Interest on the part of any other Person, regardless of whether the Company or the Managing Member shall have actual or other notice thereof, except as otherwise required by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Membership Interests are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Membership Interests, as between the Company on the one hand, and such other Persons on the other, such representative Person shall be the Record Holder of such Membership Interest.
Section 4.4. Transfer Generally.
(a) The term “transfer***,***” when used in this Agreement with respect to a Membership Interest, shall be deemed to refer to a transaction (i) by which the Managing Member assigns its Managing Member Interest to another Person who becomes the Managing Member, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any other disposition by law or otherwise or (ii) by which the holder of a Non-Managing Member Interest assigns such Non-Managing Member Interest to another Person, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.
(b) No Membership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Membership Interest not made in accordance with this Article IV shall be null and void.
(c) No Non-Managing Member (other than any Non-Managing Member Interest held by the Managing Member) may transfer any Non-Managing Member Interest, in whole or in part, without the prior written consent of the Managing Member (which may be granted or withheld in its sole discretion); provided, further, that notwithstanding the foregoing and subject to the provisions of Section 4.7, a Non-Managing Member may transfer any of such Member’s Non-Managing Member Interest pursuant to and in accordance with an Exchange Agreement.
(d) Nothing contained in this Agreement shall be construed to prevent a disposition by the Managing Member of its Managing Member Interest or any disposition by any stockholder of the Managing Member of any or all of the issued and outstanding stock or other interests in the Managing Member.
Section 4.5. Registration and Transfer of Membership Interests.
(a) The Managing Member shall keep or cause to be kept on behalf of the Company a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Company will provide for the registration and transfer of Membership Interests. The Managing Member shall from time to time appoint a Transfer Agent as registrar and transfer agent for the purpose of registering any Membership Interests and transfers of such Membership Interests as herein provided. In the absence of manifest error, the register kept by, or on behalf of, the Company shall be conclusive as to the identity of the holders of Membership Interests. Upon surrender of a Certificate for registration of transfer of any
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Membership Interests evidenced by a Certificate, and subject to the provisions of Section 4.5(b), the appropriate officers of the Company or of the Managing Member on behalf of the Managing Member on behalf of the Company shall execute and deliver, and, as applicable, the Transfer Agent shall countersign and deliver, in the name of the Record Holder or the designated transferee or transferees, to the extent and as required pursuant to the Record Holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Membership Interests as were evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.8, the Company shall not recognize any transfer of Membership Interests evidenced by Certificates until the Certificates evidencing such Membership Interests are surrendered for registration of transfer. No charge shall be imposed by the Company for such transfer; provided that as a condition to the issuance of any new Certificate under this Section 4.5, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto.
(c) By acceptance of the transfer of any Membership Interests in accordance with this Section 4.5 and not otherwise in breach of Section 4.4(c), each transferee of a Membership Interest (including any nominee holder or agent or representative acquiring such Membership Interests for the account of another Person) (i) shall be admitted to the Company as a Member with respect to the Membership Interests so transferred or issued to such transferee or other recipient when any such transfer or admission is reflected in the books and records of the Company, without execution of this Agreement, (ii) shall be bound by the terms of this Agreement, without execution of this Agreement, (iii) shall become the Record Holder of the Membership Interests so transferred or issued, (iv) shall grant powers of attorney to the Managing Member, any Liquidator of the Company and each of their authorized officers, as provided herein, and (v) shall make the consents, acknowledgements and waivers contained in this Agreement. The transfer of any Membership Interests and the admission of any new Member shall not constitute an amendment to this Agreement.
(d) No transfer of a Membership Interest shall entitle the transferee to receive distributions or to any other rights to which the transferor was entitled until the transferee becomes a Member pursuant to Section 4.5(c).
(e) Subject to (i) the foregoing provisions of this Section 4.5, (ii) Section 4.3, (iii) Section 4.4, (iv) Section 4.7, (v) with respect to any class or series of Membership Interests, the provisions of any Interest Designation or amendment to this Agreement establishing such class or series, (vi) any contractual provisions binding on any Member and (vii) provisions of applicable law including the Securities Act, Membership Interests shall be freely transferable. Membership Interests may also be subject to any transfer restrictions contained in any employee related policies or equity benefit plans, programs or practices adopted on behalf of the Company or any Group Member.
Section 4.6. Transfer of the Managing Member’s Managing Member Interests.
(a) Subject to Section 4.6(b) below, the Managing Member may transfer all or any part of its Managing Member Interest to another Person without the approval of any other Members.
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(b) Notwithstanding anything herein to the contrary, no transfer by the Managing Member of all or any part of its Managing Member Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the Managing Member under this Agreement and to be bound by the provisions of this Agreement, (ii) the Company receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Member, and (iii) such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership or membership interest held by the Managing Member as the general partner or managing member, if any, of each other Group Member. In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.2, be admitted to the Company as a Managing Member effective immediately prior to the transfer of such Managing Member Interest and the business of the Company shall continue without dissolution.
Section 4.7. Restrictions on Transfers.
(a) Except as provided in Section 4.7(c) below, but notwithstanding the other provisions of this Article IV, no transfer of any Membership Interests shall be made if such transfer would (i) violate the then applicable U.S. federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Company under the laws of the jurisdiction of its formation, or (iii) cause the Company to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed).
(b) The Managing Member may impose restrictions on the transfer of Membership Interests if it receives an Opinion of Counsel that such restrictions are necessary or advisable to avoid a significant risk of the Company becoming taxable as a corporation or otherwise becoming taxable as an entity for U.S. federal income tax purposes. The Managing Member may impose such restrictions by amending this Agreement.
(c) Nothing contained in this Article IV, or elsewhere in this Agreement, shall preclude the settlement of any transactions involving Membership Interests entered into through the facilities of any National Securities Exchange on which such Membership Interests are listed for trading.
Section 4.8. Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any law or regulation that, in the determination of the Managing Member, creates a substantial risk of cancellation or forfeiture of any property in which the Group Member has an interest based on the nationality, citizenship or other related status of a Non-Managing Member, the Managing Member may request any Non-Managing Member to furnish to the Managing Member, within 30 days after receipt of such request, an executed Citizenship Certification or such other information concerning its nationality, citizenship or other related status (or, if the Non-Managing Member is a nominee holding for the account of another Person, the nationality, citizenship or other related status of such Person) as the Managing Member may request. If a Non-Managing Member fails to furnish to the Managing Member within the aforementioned 30-day period such Citizenship Certification
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or other requested information or if upon receipt of such Citizenship Certification or other requested information the Managing Member determines, with the advice of counsel, that a Non-Managing Member is not an Eligible Citizen, the Membership Interests owned by such Non-Managing Member shall be subject to redemption in accordance with the provisions of Section 4.9. The Managing Member also may require that the status of any such Non-Managing Member be changed to that of a Non-citizen Assignee and, thereupon, the Managing Member shall be substituted for such Non-citizen Assignee as the Non-Managing Member in respect of its Membership Interests.
(b) The Managing Member shall, in exercising any voting rights in respect of Non-Managing Member Interests held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Non-Managing Members (including the Managing Member) in respect of Non-Managing Member Interests other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter.
(c) Upon dissolution of the Company, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 12.3 but shall be entitled to the cash equivalent thereof, and the Company shall provide cash in exchange for an assignment of the Non-citizen Assignee’s share of the distribution in kind. Such payment and assignment shall be treated for Company purposes as a purchase by the Company from the Non-citizen Assignee of his Non-Managing Member Interest (representing its right to receive its share of such distribution in kind).
(d) At any time after he can and does certify that he has become an Eligible Citizen, a Non-citizen Assignee may, upon application to the Managing Member, request that with respect to any Non-Managing Member Interests of such Non-citizen Assignee not redeemed pursuant to Section 4.9, such Non-citizen Assignee be admitted as a Non-Managing Member, and upon approval of the Managing Member, such Non-citizen Assignee shall be admitted as a Non-Managing Member and shall no longer constitute a Non-citizen Assignee and the Managing Member shall cease to be deemed to be the Non-Managing Member in respect of the Non-citizen Assignee’s Non-Managing Member Interests.
Section 4.9. Redemption of Membership Interests of Non-citizen Assignees.
(a) If at any time a Non-Managing Member fails to furnish a Citizenship Certification or other information requested within the 30-day period specified in Section 4.8(a), or if upon receipt of such Citizenship Certification or other information the Managing Member determines, with the advice of counsel, that a Non-Managing Member is not an Eligible Citizen, the Managing Member, may cause the Company to, unless the Non-Managing Member establishes to the satisfaction of the Managing Member that such Non-Managing Member is an Eligible Citizen or has transferred his Non-Managing Member Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship Certification to the Managing Member prior to the date fixed for redemption as provided below, redeem the Membership Interest of such Non-Managing Member as follows:
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(i) The Managing Member shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Non-Managing Member, at his last address designated on the records of the Company or the Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon the redemption of the Redeemable Interests (or, if later in the case of Redeemable Interests evidenced by Certificates, upon surrender of the Certificates evidencing such Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank) and that on and after the date fixed for redemption no further allocations or distributions to which the Non-Managing Member would otherwise be entitled in respect of the Redeemable Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be an amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Membership Interests of the class to be so redeemed multiplied by the number of Membership Interests of each such class included among the Redeemable Interests. The redemption price shall be paid as determined by the Managing Member, in cash or by delivery of a promissory note of the Company in the principal amount of the redemption price, bearing interest at the prime lending rate prevailing on the date fixed for redemption as published by The Wall Street Journal, payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date.
(iii) The Non-Managing Member or his duly authorized representative shall be entitled to receive the payment for Redeemable Interests at the place of payment specified in the notice of redemption on the redemption date (or, if later in the case of Redeemable Interests evidenced by Certificates, upon surrender by or on behalf of the Non-Managing Member, at the place specified in the notice of redemption, of the Certificates evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank).
(iv) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Membership Interests; provided however, that pursuant to Section 7.11 the Redeemable Interests may be held in treasury.
(b) The provisions of this Section 4.9 shall also be applicable to Membership Interests held by a Member as nominee of a Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.9 shall prevent the recipient of a notice of redemption from transferring its Membership Interest before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the Managing Member shall withdraw the notice of redemption, provided the transferee of such Membership Interest certifies to the satisfaction of the Managing Member in a Citizenship Certification that it is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date.
(d) Redemption Proceeds. Notwithstanding anything in Section 4.8 or Section 4.9 to the contrary, no proceeds shall be delivered to a Person to whom the delivery of such proceeds would violate applicable law, and in such case and in lieu thereof, the proceeds shall be delivered to a segregated and blocked account maintained by the Company for the eventual benefit of such Person upon the payment or delivery of such proceeds to such Person ceasing to violate applicable law, if such point occurs.
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Section 4.10. Redemption of Non-Managing Member Interests in the Managing Member’s Discretion. If at any time the Managing Member determines that the redemption of all or a portion of a Non-Managing Member Interest is necessary or desirable under this Agreement or any applicable law, rule or regulation, then the Managing Member may cause the Company to redeem all or a portion of the Membership Interest of such Non-Managing Member. Under these circumstances, the Managing Member will cause such redemption consistent with the procedures set out in Section 4.9.
ARTICLE V
CAPITALCONTRIBUTIONS AND ISSUANCE OF MEMBERSHIP INTERESTS
Section 5.1. Contributions by the Managing Member. The Managing Member, in its capacity as such, shall not be obligated to make any Capital Contributions to the Company.
Section 5.2. Interest and Withdrawal. No interest on Capital Contributions shall be paid by the Company. No Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions are made pursuant to this Agreement or upon dissolution of the Company and then in each case only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Member shall have priority over any other Member either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Members agree within the meaning of Section 18-502(b) of the Delaware LLC Act.
Section 5.3. Company Securities Generally.
(a) The Company may issue additional Company Securities and options, rights, warrants and appreciation rights relating to Company Securities for any Company purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the Managing Member shall determine, except as expressly provided otherwise in this Agreement, all without the approval of any Non-Managing Members, including pursuant to any Exchange Agreement, or pursuant to any conversion or exchange provision contained in the Ben Holdings LPA. The Company may reissue any Company Securities and options, rights, warrants and appreciation rights relating to Company Securities held by the Company in treasury for any Company purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the Managing Member shall determine, all without the approval of any Non-Managing Member. Upon any issuance of Company Securities pursuant to any Exchange Agreement or a conversion provision contained in this Agreement or contained in the Ben Holdings LPA, the Managing Member shall determine the disposition or allocation of any interests (including in any capital account) in Ben Holdings as necessary or appropriate in connection with such conversion.
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As of the date of this Agreement, one class of Units out of the Non-Managing Member Interests has been designated: the Class A Units.
(b) Each additional Membership Interest authorized to be issued by the Company pursuant to Section 5.3(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Membership Interests), as shall be fixed by the Managing Member and reflected in a document approved by the Managing Member (each an “Interest Designation”), including (i) subject to redemption and if so, the time, manner and price of such redemption, (ii) entitled to receive distributions (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the distributions payable on any other class or series of Membership Interests, as specified therein; (iii) the rights upon dissolution and liquidation of the Company; (iv) whether, and the terms and conditions upon which, the Company may or shall be required to redeem the Membership Interest (including sinking fund provisions); (v) whether such Membership Interest is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which each Membership Interest will be issued, evidenced by Certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Membership Interest; and (viii) the right, if any, of the holder of each such Membership Interest to vote on Company matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Membership Interest. An Interest Designation (or any resolution of the Managing Member amending any Interest Designation) shall be included among the permanent records of the Company, and shall be annexed to, and constitute part of, this Agreement. Unless otherwise provided in the applicable Interest Designation, the Managing Member may at any time increase or decrease the amount of Membership Interests or Units of any class or series, but not below the amount of Membership Interests or number of Units or Capital Account balances of such class or series then Outstanding.
(c) The Managing Member is hereby authorized to take all actions that it determines to be necessary, appropriate or advisable in connection with (i) each issuance of Company Securities and options, rights, warrants and appreciation rights relating to Company Securities pursuant to this Section 5.3, including the admission of additional Members in connection therewith and any related amendment of this Agreement, and (ii) all additional issuances of Company Securities and options, rights, warrants and appreciation rights relating to Company Securities. The Managing Member shall determine the relative rights, powers and duties of the holders of Membership Interests, Units or other Company Securities or options, rights, warrants or appreciation rights relating to Company Securities being so issued. The Managing Member is authorized to do all things that it determines to be necessary, appropriate or advisable in connection with any future issuance of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities, including compliance with any statute, rule, regulation or guideline of any governmental agency or any National Securities Exchange on which the Units or other Company Securities or options, rights, warrants or appreciation rights relating to Company Securities are listed for trading.
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(d) Notwithstanding anything else in this Agreement to the contrary, the Company (i) shall issue a Class A Unit for each share of Common Stock outstanding and each such Class A Unit shall track, on a one-to-one basis, the Common Stock of Beneficient, and (ii) shall cause Ben Holdings to issue a Ben Holdings Class A Unit for each Class A Unit of the Company outstanding and all such Ben Holdings Class A Units issued shall track, on a one-to-one basis, the Class A Units of the Company. Without limitation of the foregoing, the Company (A) shall cause the redemption or cancellation, as appropriate, of Class A Units to reflect the redemption or cancellation of any shares of Common Stock and shall not permit any Class A Units to be redeemed or cancelled unless and until corresponding shares of Common Stock are first redeemed or cancelled, and (B) shall cause Ben Holdings to redeem or cancel, as appropriate, a Ben Holdings Class A Unit to reflect the redemption or cancellation of each Class A Unit of the Company. Notwithstanding anything else in this Agreement to the contrary, the Company shall be entitled to and take all such actions necessary to, and the Managing Member shall cause the Company to, issue Class A Units of the Company, without any preemptive, preferential or other similar rights with respect to such issuance by any Person, as necessary or appropriate in connection with the exchange of any units of Ben Holdings pursuant to the terms of the applicable exchange provisions of the Ben Holdings LPA and/or any applicable Exchange Agreement governing exchanges of units of Ben Holdings, in each case subject to receipt by Beneficient or the Company, as applicable, of the applicable units of Ben Holdings in connection therewith, in each case as agreed by the Company under the Ben Holdings LPA.
Section 5.4. Preemptive Rights. Unless otherwise determined by the Managing Member, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Membership Interest, whether unissued, held in treasury or hereafter created.
Section 5.5. Splits and Combinations.
(a) Subject to Section 5.5(d), the Company may make a Pro Rata distribution of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities to all Record Holders or may effect a subdivision or combination of Company Securities so long as, after any such event, each Member shall have the same Percentage Interest in the Company as before such event, and any amounts calculated on a per Unit basis or stated as a number of Units are proportionately adjusted retroactive to the beginning of the Company.
(b) Whenever such a distribution, subdivision or combination of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities is declared, the Managing Member shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall provide notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The Managing Member also may cause a firm of independent public accountants selected by it to calculate the number of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The Managing Member shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.
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(c) Promptly following any such distribution, subdivision or combination, the Company may issue Certificates to the Record Holders of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities as of the applicable Record Date representing the new number of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities held by such Record Holders, or the Managing Member may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Company Securities Outstanding or outstanding options, rights, warrants or appreciation rights relating to Company Securities, the Company shall require, as a condition to the delivery to a Record Holder of any such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.
(d) The Company shall not be required to issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 5.5(d), the Managing Member may determine that each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).
Section 5.6. Fully Paid and Non-Assessable Nature of Membership Interests. All Membership Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Membership Interests in the Company, except as such non-assessability may be affected by Sections 18-607 or 18-804 of the Delaware LLC Act or this Agreement.
Section 5.7. Additional Capital Contributions. Each Member has contributed cash or property to the Company in the amount set forth as the Capital Contribution of such Member on the books and records of the Company. No Member shall be required to make additional Capital Contributions to the Company without the written consent of such Member or permitted to make additional Capital Contributions to the Company without the written consent of the Managing Member. The Company may admit additional Members from time to time as provided in Section 10.1 or otherwise.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1. Establishment and Maintenance of Capital Accounts.
(a) If the Company has more than one Member under the Code, there shall be established and maintained for each Member on the books of the Company a capital account (each being a “Capital Account”). Each Capital Contribution by any Member, if any, shall be credited to the Capital Account of such Member on the date such Capital Contribution is made to the Company. In addition, each Member’s Capital Account shall be (a) credited with (i) such Member’s allocable share of any Net Income (or items thereof) of the Company, and (ii) the amount of any Company liabilities that are assumed by the Member or secured by any Company property distributed to the Member and (b) debited with (i) the amount of distributions (and deemed distributions) to such Member of cash or the fair market value of other property so distributed, (ii) such Member’s allocable share of Net Loss (or items thereof) of the Company, and (iii) the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by the Member to the Company. Any references in any section of this Agreement to the Capital Account of a Member shall be deemed to refer to such Capital Account as the same may be credited or debited from time to time as set forth above. In the event of any Transfer of any interest in the Company in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.
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(b) Any other item which is required to be reflected in a Member’s Capital Account under Section 704(b) of the Code and the United States Treasury Regulations promulgated thereunder or otherwise under this Agreement shall be so reflected.
(c) The Managing Member shall make such adjustments to Capital Accounts as it determines to be appropriate to ensure allocations are made in accordance with a Member’s interest in the Company. Interest shall not be payable on Capital Account balances. The Company Capital Accounts shall be maintained in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv) and, to the extent not inconsistent with such regulations, the provisions of this Agreement.
(d) The Capital Account of the holder of Managing Member Interests shall at all times be zero, except to the extent such holder also holds Non-Managing Member Interests.
(e) The Company has issued to the Members who have made, on or prior to the date hereof, Capital Contributions, in exchange therefor, the number and type of Membership Interests as specified in the books and records of the Company.
Section 6.2. Allocations*.*
(a) Net Income and Loss Allocations. Except as otherwise determined by the Managing Member in order to comply with the Code or applicable regulations thereunder, if the Company has more than one Member under the Code, Net Income (Loss) (including items thereof) of the Company for each Fiscal Year of the Company shall, unless otherwise provided in an Interest Designation or otherwise in connection with the issuance of any Membership Interest, be allocated among the Members, Pro Rata.
(b) The Managing Member shall allocate adjustments as applicable and consistent with provisions of the definition of “Carrying Value” and related terms as among the various classes of equity securities/partnership interests in Ben Holdings.
(c) The Managing Member shall determine all matters concerning allocations for tax purposes not expressly provided for herein. For the proper administration of the Company and for the preservation of uniformity of Membership Interests (or any portion or class or classes thereof), the Managing Member may (i) interpret or amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of United States Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of Membership Interests (or any portion or class or classes thereof), and (ii) adopt and employ or modify such conventions and methods as the Managing Member determines to be appropriate for (A) the determination for tax purposes of items of income, gain, loss, deduction and credit and the allocation of such items among Members and between transferors and transferees under this Agreement and pursuant to the Code and the United States Treasury Regulations promulgated thereunder, (B) the determination of the identities and tax classification of Members, (C) the
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valuation of Company assets and the determination of tax basis, (D) the allocation of asset values and tax basis, (E) the adoption and maintenance of accounting methods and (F) taking into account differences between the Carrying Values of Company assets and such assets’ adjusted tax basis pursuant to Section 704(c) of the Code and the United States Treasury Regulations promulgated thereunder.
(d) Allocations that would otherwise be made to a Member under the provisions of this Article VI shall instead be made to the beneficial owner of Membership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Company in accordance with Section 6031(c) of the Code or any other method determined by the Managing Member.
Section 6.3. Requirement and Characterization of Distributions; Distributions to Record Holders.
(a) The Managing Member may authorize distributions by the Company to the Members, which distributions, subject to the terms and provisions of any class or series of Membership Interests as subsequently issued by the Company, shall be allocated pro rata to Class A Units of the Company in accordance with the Members’ respective Percentage Interests in respect of such Class A Units.
(b) The Managing Member may treat taxes paid by the Company on behalf of, or amounts withheld with respect to, all or less than all of the Members, as a distribution of cash to such Members.
(c) Notwithstanding Section 6.3(a), in the event of the dissolution of the Company or a Company Sale, all receipts received during or after the Quarter in which the Liquidation Date occurs shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.3.
(d) Each distribution in respect of a Membership Interest shall be paid by the Company, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Membership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Company’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.
(e) Notwithstanding any provision to the contrary contained in this Agreement, the Company, and the Managing Member on behalf of the Company, shall not be required to make a distribution to a Member or a Record Holder if such distribution would violate the Delaware LLC Act or other applicable law.
Section 6.4. Allocated Fees and Expenses*.* Notwithstanding any other provision of this Agreement to the contrary (including Section 5.3(d)), the Company may pay or otherwise satisfy any fees, expenses, and/or other payments required to be paid by the Company (the “Allocated Payments”) including, without limitation, any fees, expenses, and/or costs attributable to the Class A Units, from distributions received in respect of, or attributable to, the Class A Units by the Company arising out of its interests in Ben Holdings, and such Allocated Payments may be
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allocated as determined by the Managing Member, acting on behalf of the Company, to Class A Units of the Company. In the event the Company pays or otherwise satisfies Allocated Payments from distributions received in respect of, or attributable to, the Class A Units from Ben Holdings, the amount of distributions owed by the Company to the Record Holders in respect of the applicable Class A Units of the Company (including any Class A Units of the Company that track the Ben Holdings Class A Units) shall be reduced by a pro rata amount per Class A Unit equivalent to such Allocated Payments, notwithstanding any other provision of this Agreement.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1. Management.
(a) The Managing Member shall conduct, direct and manage all activities of the Company. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Company shall be exclusively vested in the Managing Member, and no Non-Managing Member shall have any management power over the business and affairs of the Company. In addition to the powers now or hereafter granted a managing member of a limited liability company under applicable law or that are granted to the Managing Member under any other provision of this Agreement, the Managing Member shall have full power and authority to do all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Company, to exercise all powers set forth in Section 2.6 and to effectuate the purposes set forth in Section 2.5, including without limitation the following:
(i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible or exchangeable into Company Securities or options, rights, warrants or appreciation rights relating to Company Securities, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Company or the merger or other combination of the Company with or into another Person;
(iv) the use of the assets of the Company (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Company Group, the lending of funds to other Persons; the repayment or guarantee of obligations of any Group Member or other Person and the making of capital contributions to any Group Member or other Person;
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(v) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Company under contractual arrangements to all or particular assets of the Company, with the other party to the contract to have no recourse against the Managing Member or its assets other than its interest in the Company, even if same results in the terms of the transaction being less favorable to the Company than would otherwise be the case);
(vi) the declaration and payment of distributions of cash or other assets to Members;
(vii) the selection and dismissal of employees (including employees having such titles as the Managing Member may determine) and agents, outside attorneys, accountants, advisors, consultants and contractors and the determination of their compensation and other terms of employment or hiring and the creation and operation of employee benefit plans, employee programs and employee practices;
(viii) the maintenance of insurance for the benefit of the Company Group, the Members and Indemnitees;
(ix) the formation of, or acquisition or disposition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, limited liability companies, corporations or other entities or relationships (including the acquisition of interests in, and the contributions of property to, the Company’s Subsidiaries from time to time), subject to the restrictions set forth in Section 2.5;
(x) the control of any matters affecting the rights and obligations of the Company, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expenses and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Membership Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 4.7);
(xiii) the issuance, purchase, sale or other acquisition or disposition of Company Securities or options, rights, warrants or appreciation rights relating to Company Securities;
(xiv) the undertaking of any action in connection with the Company’s participation in the management of the Company Group through its directors, officers or employees or the Company’s direct or indirect ownership of the Group Members, including, without limitation, all things described in or contemplated by the Registration Statement and the agreements described in or filed as exhibits to the Registration Statement;
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(xv) cause to be registered for resale under the Securities Act and applicable state or non-U.S. securities laws, any securities of, or any securities convertible or exchangeable into securities of, the Company held by any Person, including the Managing Member or any Affiliate of the Managing Member;
(xvi) the registration under the Securities Act and any other applicable securities laws of any offer, issuance, sale or resale of Membership Interests or other securities issued or to be issued by the Company (including any resale of Membership Interests or other securities by Members or other securityholders);
(xvii) the filing of a petition under any bankruptcy, insolvency or similar Law;
(xviii) the execution and delivery of agreements with Affiliates of the Managing Member to render services to, or receive services from, a Group Member; and
(xix) the undertaking of a conversion, merger or conveyance in accordance with Article XIV.
(b) In exercising its authority under this Agreement, the Managing Member may, but shall be under no obligation or duty to, take into account the tax consequences to any Member (including the Managing Member) of any action taken (or not taken) by it. The Managing Member and the Company shall not have any liability to a Member for monetary damages, equitable relief or otherwise for losses sustained, liabilities incurred or benefits not derived by such Member in connection with such decisions.
(c) Notwithstanding any other provision of this Agreement, the Delaware LLC Act or any applicable law, rule or regulation, each of the Members and each other Person who may acquire an interest in Company Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Ben Holdings LPA and the other agreements that may be described in or filed as exhibits to the Registration Statement that are related to the transactions contemplated by the Registration Statement; (ii) agrees that the Company and the Managing Member (on its own behalf and/or on behalf of the Company) are authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement, in each case in such form and with such terms as it shall determine, without any further act, approval or vote of the Members or the other Persons who may acquire an interest in Company Securities; (iii) to the fullest extent permitted by law, approves the existence of the conflicts of interest described in or contemplated by the Registration Statement or other document provided to the Members and waives such conflicts of interest; and (iv) agrees that the execution, delivery or performance by the Managing Member, any Group Member or any Affiliate of any of them, of this Agreement or any agreement authorized or permitted under this Agreement, shall not constitute a breach by the Managing Member of any duty that the Managing Member may owe the Company or the Non-Managing Members or any other Persons under this Agreement (or any other agreements) or of any duty existing at law, in equity or otherwise.
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(d) Certificate of Formation. The Initial Member has caused the Certificate of Formation to be filed with the Secretary of State of the State of Delaware as required by the Delaware LLC Act, such filing being hereby confirmed, ratified and approved in all respects. The Managing Member is authorized to cause to be filed such other certificates or documents that the Managing Member determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited liability company) in the State of Delaware or any other state in which the Company may elect to do business or own property. To the extent the Managing Member determines such action to be necessary or appropriate, the Managing Member is authorized to file amendments to and restatements of the Certificate of Formation and do all things to maintain the Company as a limited liability company under the laws of the State of Delaware or of any other state in which the Company may elect to do business or own property.
(e) Officers. Without limiting the generality of the foregoing provisions of this Section 7.1, the Managing Member is authorized to appoint officers of the Company and to delegate to the officers’ responsibilities for the day-to-day business of the Company or as otherwise delegated or authorized by the Managing Member. Subject to the elimination or modification of duties (including fiduciary duties in Section 7.8), unless the Managing Member decides otherwise, if an officer’s title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authority and duties that are normally associated with that office, subject to any specific delegation or limitation of authority and duties made pursuant to this Section 7.1. The salaries or other compensation, if any, of officers and other employees and agents of the Company shall be determined by the Managing Member at any time. Any officer may resign as such or be removed by the Managing Member at any time. Such resignation or removal shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Managing Member. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Designation of an officer shall not of itself create any contract rights.
Section 7.2. Company Group Assets; Managing Member’s Authority.
(a) The Managing Member shall have the sole power and authority to effectuate the sale, lease, exchange or other disposition of any, all or substantially all of the assets of the Company Group (including, but not limited to, the exercise or grant of any conversion, option, privilege, subscription right or any other right available in connection with the assets of the Company Group), taken as a whole, in a single transaction or a series of related transactions without the approval of the holders of the Non-Managing Member Interests. Without the approval of holders of a majority of the voting power of Outstanding Non-Managing Member Interests, the Managing Member shall not, on behalf of the Company, except as permitted under Section 4.6, elect or cause the Company to elect a successor managing member of the Company. The Company shall not directly conduct any active businesses, operations or activities, and all active businesses, operations or activities of the Company Group shall be conducted through Ben Holdings by Group Members other than the Company, in each case consistent with the rights, including economic rights, provided to the holders of interests in Ben Holdings. Without the consent of the Managing Member, the Company shall not, and shall cause any Group Member not to, (i) form, create or otherwise acquire (or permit the formation, creation or acquisition of) any new or additional Group Members or (ii) amend or otherwise modify the operating documents of any Group Member in a
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manner that the Managing Member determines to be materially adverse to the holders of interests in such Group Members. Whenever the Company, on its own behalf or while acting as general partner of Ben Holdings, makes any determination relating to the Company, Ben Holdings or any Affiliate or Subsidiary thereof, regarding any charitable contributions or any other use or involvement of a charity in the business of the Company, Ben Holdings or any Affiliate or Subsidiary thereof, such determination on behalf of the Company shall be made by the Managing Member, and shall not be, and is not, delegated to any officer or agent of the Company, Ben Holdings or any Affiliate or Subsidiary thereof.
(b) In the event that the Managing Member determines the Company should seek relief pursuant to Section 7704(e) of the Code to preserve the status of the Company as a partnership for U.S. federal (and applicable U.S. state) income tax purposes, the Company and each Member shall agree to adjustments required by the U.S. tax authorities, and the Company shall pay such amounts as required by the U.S. tax authorities, to preserve the status of the Company as a partnership for U.S. federal (and applicable U.S. state) income tax purposes.
Section 7.3. Reimbursement of the Managing Member.
(a) Except as provided in this Section 7.3 and elsewhere in this Agreement, the Managing Member shall not be compensated for its services as general partner or managing member of any Group Member.
(b) The Company shall pay, or cause to be paid, all costs, fees, operating expenses and other expenses of the Company (including the costs, fees and expenses of attorneys, accountants or other professionals and the compensation of all personnel providing services to the Company) incurred in pursuing and conducting, or otherwise related to, the activities of the Company. The Company shall also bear and/or reimburse the Managing Member for (i) any costs, fees or expenses incurred by the Managing Member in connection with serving as the Managing Member and (ii) all other expenses allocable to the Company Group or otherwise incurred by the Managing Member in connection with operating the Company Group’s business (including expenses allocated to the Managing Member by its Affiliates). To the extent that the Managing Member determines that such expenses are related to the business and affairs of the Managing Member that are conducted through the Company Group (including expenses that relate to the business and affairs of the Company Group and that also relate to other activities of the Managing Member), the Managing Member may cause the Company to pay or bear all expenses of the Managing Member, including without limitation, costs of securities offerings not borne directly by Members, board of directors compensation and meeting costs, salary, bonus, incentive compensation and other amounts paid to any Person, including Affiliates of the Managing Member, to perform services for the Company Group or for the Managing Member, cost of periodic reports to Members, litigation costs and damages arising from litigation, accounting and legal costs and franchise taxes, provided that the Company shall not pay or bear any income tax obligations of the Managing Member. Reimbursements pursuant to this Section 7.3 shall be in addition to any reimbursement to the Managing Member as a result of indemnification pursuant to Section 7.6. Without limiting the foregoing, the directors, officers, employees and other agents of the Managing Member shall have the right to use the facilities and other resources of the Company as determined by the Managing Member, the Managing Member shall have no obligation to allocate any expense or other cost to the Managing Member or any other Person, and such use shall not constitute a breach by the Managing Member of any duty that the Managing Member may owe the Company or the Members or any other Persons under this Agreement (or any other agreements) or of any duty existing at law, in equity or otherwise.
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Section 7.4. Outside Activities.
(a) Notwithstanding anything to the contrary in this Agreement, each Indemnitee shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty otherwise existing at law, in equity or otherwise to any Group Member or any Member, Record Holder or Person who acquires an interest in a Company Security. None of the Company, any Member or any other Person shall have any rights by virtue of this Agreement or the relationship established hereby in any business ventures of any Indemnitee.
(b) Notwithstanding anything to the contrary in this Agreement, (i) the engagement in competitive activities by any Indemnitees in accordance with the provisions of this Section 7.4 is hereby approved by the Company, all Members and all Persons acquiring an interest in a Company Security, (ii) it shall not be a breach of this Agreement (including any contractual standard of care set forth in Section 7.8 or elsewhere in this Agreement) or a breach of the Managing Member’s or any other Indemnitee’s duties or any other obligation of any type whatsoever of the Managing Member or any other Indemnitee if the Managing Member or any other Indemnitee engages in any such business interests or activities in preference to or to the exclusion of any Group Member or their respective Affiliates, (iii) the Managing Member and the Indemnitees shall have no obligation hereunder or as a result of any duty otherwise existing at law, in equity or otherwise or as a result of any contractual standard of care set forth in Section 7.8 or elsewhere in this Agreement to present business opportunities to any Group Member or their respective Affiliates, (iv) the doctrine of “corporate opportunity” or other analogous doctrine shall not apply to the Managing Member or any other Indemnitee and (v) the Indemnitees (including the Managing Member) shall not be liable to the Company, any Member, Record Holder or any other Person who acquires an interest in a Company Security by reason that such Indemnitee or Indemnitees (including the Managing Member) pursues or acquires a business opportunity for itself, directs such opportunity to another Person, does not communicate such opportunity or information to any Group Member or their respective Affiliates or uses information in the possession of a Group Member or their respective Affiliates to acquire or operate a business opportunity.
(c) The Managing Member and any of its Affiliates may acquire Membership Interests or other Company Securities or options, rights, warrants or appreciation rights relating to Company Securities, or any other securities issued by the Company or any other member of the Company Group, and, except as otherwise expressly provided in this Agreement, shall be entitled to exercise all rights of a Managing Member or Member, as applicable, relating to such Membership Interests or other Company Securities or options, rights, warrants or appreciation rights relating to Company Securities.
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Section 7.5. Loans from the Managing Member; Loans or Contributions from the Company; Contracts with the Managing Member and its Affiliates.
(a) The Managing Member or any of its Affiliates may, but shall be under no obligation to, lend to any Group Member, and any Group Member may borrow from the Managing Member or any of its Affiliates, funds needed or desired by the Group Member on terms to which the Managing Member agrees in good faith.
(b) Any Group Member (including the Company) may lend or contribute to any other Group Member, and any Group Member may borrow from any other Group Member (including the Company), funds on terms and conditions determined by the Managing Member. The foregoing authority shall not create any right or benefit in favor of any Group Member or any other Person.
(c) The Managing Member may itself, or may enter into an agreement with any of its Affiliates to, render services to a Group Member or to the Managing Member in the discharge of its duties as managing member of the Company on terms to which the Managing Member agrees to in good faith. The Managing Member intends to engage Affiliates to render services to Group Members and the Managing Member on terms determined by the Managing Member in good faith and such transactions shall not constitute a breach of this Agreement or any other agreement contemplated hereby or otherwise applicable provision of law or in equity.
(d) The Company may transfer assets to joint ventures, other partnerships, corporations, limited liability companies or other business entities in which it is or thereby becomes a participant on terms to which the Managing Member agrees in good faith.
(e) The Managing Member or any of its Affiliates may sell, transfer or convey any property to, or purchase any property from, the Company, directly or indirectly, on terms to which the Managing Member agrees in good faith.
(f) Each of Beneficient Management Partners, L.P. and Beneficient Holdings, Inc. will be entitled to a profit participation in Ben Holdings, which profit participation will reduce profits to which the Company would otherwise be entitled, and such profit participation may be reinvested, directly or indirectly in the Company (or other members of the Company Group) and convertible into securities of Beneficient or any Group Member, in each case as provided in the Ben Holdings LPA and the Exchange Agreement.
Section 7.6. Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Section 7.6, all Indemnitees shall be indemnified and held harmless by the Company on an after tax basis from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all threatened, pending or completed claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, and whether formal or informal and including appeals, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee whether arising from acts or omissions to act occurring on, before or after the date of this
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Agreement; provided that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 7.6, the Indemnitee acted or omitted from acting in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful; provided, however, that an Indemnitee, when acting or omitting from acting in such Person’s sole discretion as permitted by this Agreement shall not be deemed to have acted or omitted to act in bad faith solely by reason of having acted or omitted from acting in its sole discretion. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.6(j), the Company shall be required to indemnify a Person described in such sentence in connection with any claim, demand, action, suit or proceeding (or part thereof) commenced by such Person only if (x) the commencement of such claim, demand, action, suit or proceeding (or part thereof) by such Person was authorized by the Managing Member or (y) there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that such Person was entitled to indemnification by the Company pursuant to Section 7.6(j). The indemnification of an Indemnitee of the type identified in clause (g) of the definition of Indemnitee shall be secondary to any and all indemnification to which such person is entitled from the relevant other Person and will only be paid to the extent the primary indemnification is not paid and the proviso set forth in the first sentence of this Section 7.6(a) does not apply; provided that such other Person shall not be entitled to contribution or indemnification from or subrogation against the Company, unless otherwise mandated by applicable law. If, notwithstanding the foregoing sentence, the Company makes an indemnification payment or advances expenses to such an Indemnitee entitled to primary indemnification, the Company shall be subrogated to the rights of such Indemnitee against the Person or Persons responsible for the primary indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.6(a) in appearing at, participating in or defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to a final and non-appealable determination that the Indemnitee is not entitled to be indemnified upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it ultimately shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.6. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.6(j), the Company shall be required to indemnify a Person described in such sentence in connection with any claim, demand, action, suit or proceeding (or part thereof) commenced by such Person only if (x) the commencement of such claim, demand, action, suit or proceeding (or part thereof) by such Person was authorized by the Managing Member or (y) there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that such Person was entitled to indemnification by the Company pursuant to Section 7.6(j).
(c) The indemnification provided by this Section 7.6 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, insurance, pursuant to any vote of the holders of Outstanding Membership Interests entitled to vote on such matter, as a matter of law, in equity or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity.
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(d) The Company may purchase and maintain (or reimburse the Managing Member or its Affiliates for the cost of) insurance, on behalf of the Managing Member, its Affiliates, the other Indemnitees and such other Persons as the Managing Member shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Company Group’s activities or such Person’s activities on behalf of the Company Group regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.6, (i) the Company shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Company also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; (ii) excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute “fines” within the meaning of Section 7.6(a); and (iii) any action taken or omitted by an Indemnitee with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Company.
(f) Any indemnification pursuant to this Section 7.6 shall be made only out of the assets of the Company. The Managing Member shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Company to enable it to effectuate such indemnification. Except as required by Section 18-607 and Section 18-804 of the Delaware LLC Act, in no event may an Indemnitee subject the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.6 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.6 are for the benefit of the Indemnitees and their heirs, successors, assigns, executors and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.6 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Company, nor the obligations of the Company to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.6 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
(j) If a claim for indemnification (following the final disposition of the action, suit or proceeding for which indemnification is being sought) or advancement of expenses under this Section 7.6 is not paid in full within thirty (30) days after a written claim therefor by any Indemnitee has been received by the Company, such Indemnitee may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expenses of prosecuting such claim, including reasonable attorneys’ fees. In any such action the Company shall have the burden of proving that such Indemnitee is not entitled to the requested indemnification or advancement of expenses under applicable law.
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(k) This Section 7.6 shall not limit the right of the Company, to the extent and in the manner permitted by law, to indemnify and to advance expenses to, and purchase and maintain insurance on behalf of, Persons other than Indemnitees.
(l) Notwithstanding anything to the contrary set forth in this Section 7.6, any indemnification or advancement obligation of the Company under this Agreement shall only be satisfied to the extent that the Company will remain solvent, as determined by the Managing Member, after payment of such obligations, and thereafter any such obligation shall terminate.
Section 7.7. Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement, under the Delaware LLC Act or any other law, rule or regulation or at equity, no Indemnitee shall be liable to the Company, the Members or any other Persons who have acquired interests in the Company Securities or are bound by this Agreement, for any losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising as a result of any act or omission of an Indemnitee, or for any breach of contract (including breach of this Agreement) or any breach of duties (including breach of fiduciary duties, if any) whether arising hereunder, at law, in equity or otherwise, unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question the Indemnitee acted or omitted from acting in bad faith or engaged in fraud or willful misconduct, or, with respect to any criminal conduct, with the knowledge that its conduct was unlawful; provided, however, that an Indemnitee, when acting or omitting from acting in such Person’s sole discretion as permitted by this Agreement shall not be deemed to have acted or omitted from acting in bad faith solely by reason of having acted or omitted from acting in its sole discretion. The Company, the Members, the Record Holders and any other Person who acquires an interest in a Company Security, each on their own behalf and on behalf of the Company, waives, to the fullest extent permitted by law, any and all rights to seek punitive damages or damages based upon any Federal, State or other income (or similar) taxes paid or payable by any such Member, Record Holder or other Person.
(b) The Managing Member may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its officers and agents, and the Managing Member shall not be responsible for any misconduct, negligence or wrongdoing on the part of any such officer or agent appointed by the Managing Member in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Company, the Members, the Record Holders or any Person who acquires an interest in a Company Security, any Indemnitee acting in connection with the Company’s business or affairs shall not be liable, to the fullest extent permitted by law, to the Company, to any Member, to any Record Holder or to any other Person who acquires an interest in a Company Security for such Indemnitee’s reliance on the provisions of this Agreement.
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(d) Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted, and provided such Person became an Indemnitee hereunder prior to such amendment, modification or repeal.
Section 7.8. Modification of Duties; Standards of Conduct; Resolution of Conflicts of Interest.
(a) Notwithstanding any other provision of this Agreement, to the extent that, at law or in equity, the Managing Member or any other Indemnitee would have duties (including fiduciary duties) to the Company, to another Member, to any Person who acquires an interest in a Membership Interest or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by law, and replaced by the duties expressly set forth herein. Such elimination of duties (including fiduciary duties) is approved by the Company, each of the Members, each other Person who acquires an interest in a Membership Interest and each other Person bound by this Agreement. Whenever in this Agreement or any other agreement contemplated hereby one or more Indemnitees or other Persons are permitted to or required to make (or omit to make) a decision in their “sole discretion”, in making or omitting to make such decision, such Person shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Company, the Members, or any other Person (including any creditor of the Company), and shall not be subject to any other or different standards imposed by this Agreement or otherwise existing at law, in equity or otherwise. Notwithstanding the immediately preceding sentence, whenever in this Agreement or any other agreement contemplated hereby the Managing Member, or one or more of the Indemnitees or other Persons are permitted or required to make (or omit from making or taking) a decision or action: (i) in “good faith” or (ii) pursuant to any provision not subject to an express standard of “sole discretion” (regardless of whether there is a reference to good faith), then the Managing Member and the other Indemnitee(s) or such other Person(s) shall act or omit from acting in “good faith” and shall not be subject to any other or different standard under this Agreement or otherwise existing at law, in equity or otherwise and any decision or action made or taken or omitted to be made or taken in good faith shall not be a breach of this Agreement or any other agreement contemplated hereby or otherwise applicable provision of law or in equity. The foregoing standards provided for in this Agreement are the sole and exclusive standards governing any such determinations, actions and omissions of the Managing Member or other Indemnitees, and no such Person shall be subject to any fiduciary duty or other duty or obligation, or any other, different or higher standard (all of which duties, obligations and standards are hereby waived and disclaimed) under this Agreement or any other agreement contemplated hereby, or under the Delaware LLC Act or any other law, rule or regulation or at equity. For all purposes of this Agreement (including Section 7.5) and notwithstanding any applicable provision of law or in equity, a determination or other action or failure to act by one or more Indemnitees or other Persons conclusively will be deemed to be made, taken or omitted to be made or taken in “good faith” (i) unless the Indemnitee(s) or such other Person(s) (excluding the Managing Member), as applicable, subjectively believed such determination, action or failure to act was adverse to the interests of the
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Company or (ii) with respect to the Managing Member, such determination, action or failure to act was approved by a majority of the Board of Directors or a committee thereof, and such Persons subjectively believed such determination, action or failure to act was not adverse to the interests of the Company. In any proceeding brought by or on behalf of the Company, any Member, any Record Holder, any other Person who acquires an interest in a Company Security or any other Person who is bound by this Agreement challenging an action, determination or failure to act, notwithstanding any provision of law or equity to the contrary, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act did not satisfy the applicable standard of conduct, if any, pursuant to this Agreement. To the fullest extent permitted by law, any action or determination taken or made by one or more Indemnitees or other Persons which is not in breach of this Agreement shall be deemed taken or determined in compliance with this Agreement, the Delaware LLC Act and any other applicable fiduciary requirements.
(b) Whenever the Managing Member, acting in its capacity as the managing member of the Company, or any Affiliate or any Associate of the Managing Member makes a determination or takes or omits to take any action in such capacity, whether or not under this Agreement or any other agreement or circumstance contemplated hereby or otherwise, then, unless a lesser standard is provided for under this Agreement, the Managing Member, or such Affiliates or Associates causing it to do so, shall make such determination or take or fail to take any action in its good faith.
(c) Whenever the Managing Member, not acting in its capacity as the managing member of the Company, or any Affiliate or Associate of the Managing Member makes a determination or takes or omits to take action in such capacity, whether or not under this Agreement or any other agreement or circumstance contemplated hereby or otherwise, then, to the fullest extent permitted by law, the Managing Member, or such Affiliates or Associates causing it to do so, shall make such determination or take or fail to take any action free of any fiduciary duty or duty of good faith or other duty or obligation existing at law, at equity or otherwise whatsoever to the Company, any Member, any Record Holder, any other Person who acquires an interest in the Company or any other Person who is bound by this Agreement, and the Managing Member, or such Affiliates or Associates causing it to do so, shall not, to the fullest extent permitted by law, be required to act in good faith or pursuant to any fiduciary or other duty or standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware LLC Act or any other law, rule or regulation or at equity.
(d) For purposes of Section 7.8(b) and Section 7.8(c) of this Agreement, “acting in its capacity as the managing member of the Company” means and is solely limited to, the Managing Member exercising its authority as a managing member under this Agreement, other than when it is “acting in its individual capacity.” For purposes of this Agreement, “acting in its individual capacity” means: (i) any action by the Managing Member or its Affiliates other than through the exercise of the Managing Member of its authority as a managing member under this Agreement; and (ii) any action or inaction by the Managing Member by the exercise (or failure to exercise) of its rights, powers or authority under this Agreement that are modified by : (A) the phrase “at the option of the Managing Member,” (B) the phrase “in its sole discretion” or “in its discretion” or (iii) some variation of the phrases set forth in clauses (i) and (ii). For the avoidance of doubt, whenever the Managing Member votes, acquires Membership Interests or transfers its Membership Interests, or refrains from voting or transferring its Membership Interests, it shall be deemed to be “acting in its individual capacity.”
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(e) Unless a lesser standard is provided in this Agreement, whenever a potential conflict of interest exists or arises between the Managing Member or any of its Affiliates or Associates, on the one hand, and the Company, any Group Member, any Member, any other Person who acquires an interest in a Company Security or any other Person who is bound by this Agreement, on the other, any resolution or course of action by the Managing Member or its Affiliates or Associates in respect of such conflict of interest shall conclusively be deemed approved by the Company, all of the Members, each Person who acquires an interest in a Company Security and any other Person bound hereby and shall not constitute a breach of this Agreement or any agreement contemplated herein, or of any duty (including any fiduciary duty) existing at law, in equity or otherwise or obligation whatsoever if the resolution or course of action in respect of such conflict of interest is approved by the Managing Member in good faith. The Managing Member shall be authorized in connection with its resolution of any conflict of interest to consider such factors as it determines to be relevant, reasonable or appropriate under the circumstances. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or equity, the existence of the conflicts of interests described in the Registration Statement are hereby approved by all Members and shall not constitute a breach of this Agreement or any such duty.
(f) Notwithstanding anything to the contrary in this Agreement, the Managing Member and its Affiliates shall have no duty or obligation, express or implied, to (i) sell or otherwise dispose of any asset of the Company Group other than in the ordinary course of business or (ii) permit any Group Member to use any facilities or assets of the Managing Member and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the Managing Member or any of its Affiliates to enter into such contracts shall be made in good faith.
(g) The Non-Managing Members, any other Person who acquires an interest in a Membership Interest and any other Person bound by this Agreement hereby authorize the Managing Member, on behalf of the Company as a partner or member of a Group Member, to approve of actions by the general partner or managing member of such Group Member similar to those actions permitted to be taken by the Managing Member pursuant to this Section 7.8.
(h) The Non-Managing Members, any other Person who acquires an interest in a Membership Interest and any other Person bound by this Agreement expressly acknowledge that the Managing Member is under no obligation to consider the separate interests of such Person (including, without limitation, the tax consequences to such Person) in deciding whether to cause the Company to take (or decline to take) any actions, and that the Managing Member shall not be liable to the Members, any other Person who acquires an interest in a Membership Interest and any other Person bound by this Agreement for monetary damages or equitable relief for losses sustained, liabilities incurred or benefits not derived by Members in connection with such decisions.
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(i) Notwithstanding any other provision of this Agreement, to the extent that any provision of this Agreement, including the provisions of this Section 7.8, (i) restricts or otherwise modifies or eliminates the duties (including fiduciary duties), obligations and liabilities of the Managing Member, any Member or any other Indemnitee otherwise existing at law or in equity or (ii) constitutes a waiver or consent by the Company, the Members or any other Person who acquires an interest in a Company Security to any such restriction, modification or elimination, such provision shall be deemed to have been approved by the Company, all of the Members, and each other Person who has acquired an interest in a Company Security.
Section 7.9. Other Matters Concerning the Managing Member.
(a) The Managing Member and any other Indemnitee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(b) The Managing Member and any Indemnitee may rely upon the records of the Company and upon any information, report, statement, advice or opinion presented by another managing member of the Company, an officer or employee of the Company or the Managing Member, committees of the Company or the Managing Member, Members, or by any other Person as to matters the Managing Member or any Indemnitee reasonably believes are within such other Person’s professional or expert competence, including, legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in good faith reliance upon any information, report, statement, advice or opinion (including an Opinion of Counsel) of such Persons as to matters that the Managing Member or such Indemnitee believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such information, report, statement, advice or opinion.
(c) The Managing Member shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers or any duly appointed attorney or attorneys-in-fact. Each such officer or attorney shall, to the extent provided by the Managing Member, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the Managing Member hereunder. Notwithstanding anything set forth herein or in any previous delegation to an officer or agent of the Managing Member or the Company, all powers granted to the Managing Member under this Agreement are hereby specifically delegated to and retained by the Managing Member and shall not be, and are not, delegated to any officer or agent of the Company, any Group Member, or any Affiliate or Subsidiary thereof.
Section 7.10. Purchase or Sale of Company Securities. The Managing Member may cause the Company or any other Group Member to purchase or otherwise acquire Company Securities or options, rights, warrants or appreciation rights relating to Company Securities. As long as Company Securities or options, rights, warrants or appreciation rights relating to Company Securities are held by any Group Member, such Company Securities or options, rights, warrants or appreciation rights relating to Company Securities shall not be considered Outstanding for any purpose, except as otherwise provided herein. Notwithstanding anything to the contrary in this Agreement or the Delaware LLC Act, (i) any Company Securities or options, rights, warrants or appreciation rights relating to Company Securities acquired by the Company shall not be canceled
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and shall be held in treasury until such time as any or all of such Membership Interests are canceled by the Managing Member, and (ii) for all purposes of this Agreement, Company Securities or options, rights, warrants or appreciation rights relating to Company Securities held in treasury (A) shall not be considered to be Outstanding, (B) shall have a Percentage Interest equal to 0%, (C) shall be reissuable by the Company, (D) shall not be allocated Net Income (Loss) pursuant to any provision of this Agreement; (E) shall not be entitled to distributions in accordance with any provision of this Agreement, and (F) the holders thereof, in their capacities as such, shall not be entitled to vote nor to be counted for quorum purposes.
Section 7.11. Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Company shall be entitled to assume that the Managing Member and any officer of the Company or of the Managing Member purporting to act on behalf of and in the name of the Company has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Company and to enter into any authorized contracts on behalf of the Company, and such Person shall be entitled to deal with the Managing Member or any such officer as if it were the Company’s sole party in interest, both legally and beneficially. To the fullest extent permitted by law, the Company, each Non-Managing Member and each other Person who has acquired an interest in a Company Security hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the Managing Member or any such officer in connection with any such dealing. In no event shall any Person dealing with the Managing Member or any such officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the Managing Member or any such officer. Each and every certificate, document or other instrument executed on behalf of the Company by the Managing Member or any such officer shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Managing Member or any such officer executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company.
ARTICLE VIII
BOOKS, RECORDS AND ACCOUNTING
Section 8.1. Records and Accounting. The Managing Member shall keep or cause to be kept at the principal office of the Company or any other place designated by the Managing Member appropriate books and records with respect to the Company’s business, including all books and records necessary to provide to the Members any information required to be provided pursuant to this Agreement. Any books and records maintained by or on behalf of the Company in the regular course of its business, including the record of the Record Holders of Membership Interests or other Company Securities or options, rights, warrants or appreciation rights relating to Company Securities, books of account and records of Company proceedings, may be kept on, or be in the form of, computer disks, hard drives, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Company shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP. Section 18-305(a) of the Delaware LLC Act shall not apply to the Company and no Non-Managing Member shall have any rights thereunder.
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Section 8.2. Fiscal Year. The fiscal year of the Company (each, a “Fiscal Year”) shall be the twelve-month period ending March 31. The Managing Member may change the Fiscal Year of the Company at any time and from time to time in each case as may be required or permitted under the Code or applicable United States Treasury Regulations and shall notify the Members of such change in the next regular communication to the Members.
ARTICLE IX
TAXMATTERS
Section 9.1. Tax Returns and Information. As soon as reasonably practicable after the end of each Fiscal Year (which each of the Members and each other Person who acquires an interest in a Company Security hereby acknowledges and agrees may be later than the otherwise applicable due date of the tax return of such Member or other Person), the Company shall send to each Member a copy of tax documentation required to be delivered to each such Member under applicable law with respect to such Fiscal Year. The Company also shall provide the Members with such other information as may be reasonably required in the discretion of the Managing Member for purposes of allowing the Members to prepare and file their own U.S. federal, state and local tax returns. Each Member shall be required to report for all tax purposes consistently with such information provided by the Company. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for U.S. federal income tax purposes.
Section 9.2. Tax Elections. The Managing Member shall determine whether to make, refrain from making or revoke any and all elections permitted by the tax laws of the United States, the several states and other relevant jurisdictions.
Section 9.3. Tax Controversies.
Subject to the provisions hereof, if the Company has more than one Member under the Code, then the Managing Member is designated as the Tax Matters Partner (as defined in the Code) and the “partnership representative” of the Company for any tax period subject to the provisions of Section 6223 of the Code, as amended by the Partnership Tax Audit Rules, as well as for purposes of any state, local, or non-U.S. tax law (in either capacity, the “Tax Matters Partner”). The Tax Matters Partner shall appoint an individual as a designated individual to the extent required under the Partnership Tax Audit Rules. The Tax Matters Partner (and designated individual, as applicable) may resign at such time permitted under the Partnership Tax Audit Rules. In the event of the resignation of the Tax Matters Partner, the Managing Member shall appoint a new Tax Matters Partner, and in the event of the resignation of the designated individual, the Tax Matters Partner shall appoint a new designated individual. The Tax Matters Partner is authorized to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith, and
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otherwise exercise the rights and powers of a partnership representative under the Partnership Tax Audit Rules, subject to this Section 9.3. Each Member agrees to cooperate with the Managing Member and to do or refrain from doing any or all things required by the Managing Member to conduct such proceedings.
In respect of tax years in which the Partnership Tax Audit Rules are in effect and applicable to the Company, the Members acknowledge and agree that it is the intention of the Members to minimize any obligations of the Company to pay taxes and interest in connection with any audit of the Company, including, by means of any available elections under Section 6226 of the Code and/or the Members filing amended returns under Section 6225(c)(2) of the Code, in each case as provided by the Partnership Tax Audit Rules. The Members agree to cooperate in good faith, including without limitation by timely providing information reasonably requested by the Tax Matters Partner and making elections and filing amended returns reasonably requested by the Tax Matters Partner, and the Tax Matters Partner shall make such elections as it determines in its discretion, to give effect to the preceding sentence. The Company shall make any payments it may be required to make under the Partnership Tax Audit Rules and, in the Tax Matters Partner’s reasonable discretion, allocate any such payment among the current or former Members of the Company for the “reviewed year” to which the payment relates in a manner that reflects the current or former Members’ respective interests in the Company for such “reviewed year” and any other factors taken into account in determining the amount of the payment (with the intent of apportioning the payment in the same manner as if the Company had made the election under Section 6226 of the Code and the payment had been assessed directly against such Member). To the extent payments are made by the Company on behalf of or with respect to a current Member in accordance with this Section 9.3, such amounts shall, at the election of the Tax Matters Partner, (i) be applied to and reduce the next distribution(s) otherwise payable to such Member under this Agreement or (ii) be paid by the Member to the Company within thirty (30) days of written notice from the Tax Matters Partner requesting the payment. In addition, if any such payment is made on behalf of or with respect to a former Member, that Member shall pay over to the Company an amount equal to the amount of such payment made on behalf of or with respect to it within thirty (30) days of written notice from the Tax Matters Partner requesting the payment. The provisions contained in this Section 9.3 shall survive the dissolution of the Company and the withdrawal of any Member or the Transfer of any Member’s interest in the Company.
Section 9.4. Withholding. Notwithstanding any other provision of this Agreement, the Managing Member is authorized to take any action that may be required or be necessary or appropriate to cause the Company or any other Group Member to comply with any withholding requirements established under the Code or any other U.S. federal, state, local or non-U.S. law including pursuant to Sections 1441, 1442, 1445, 1446 and 3406 of the Code. To the extent that the Company is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Member (including by reason of Section 1446 of the Code), the Managing Member shall treat the amount withheld as a distribution of cash pursuant to Section 6.1 in the amount of such withholding from such Member.
Section 9.5. Tax Status. Notwithstanding anything to the contrary contained herein, following such time as the Company has more than one Member under the Code, the Managing Member will cause the Company to (a) undertake all necessary steps to preserve the Company’s status as a partnership for U.S. federal tax purposes and (b) not undertake any activity or make any
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investment or fail to take any action that will (i) cause the Company to earn or to be allocated income other than qualifying income as defined in Section 7704(d) of the Code, except to the extent permitted under Section 7704(c)(2) of the Code, or (ii) jeopardize its status as a partnership for U.S. federal income tax purposes; provided, however, that if the Managing Member determines that it is no longer in the interests of the Company to continue as a partnership for U.S. federal income tax purposes, the Managing Member may (A) elect to treat the Company as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes or may effect such change by merger or conversion or otherwise under applicable law and (B) make any changes to this Agreement that are necessary to implement the foregoing clause (A).
ARTICLE X
ADMISSIONOF MEMBERS
Section 10.1. Admission of Additional Members.
(a) By acceptance of the transfer of any Membership Interests in accordance with this Section 10.1 or the issuance of any Membership Interests in accordance herewith (including in a merger, consolidation or other business combination pursuant to Article XIV), and except as provided in Section 4.8, each transferee or other recipient of a Membership Interest (including any nominee holder or an agent or representative acquiring such Membership Interests for the account of another Person) (i) shall be admitted to the Company as a Member with respect to the Membership Interests so transferred or issued to such Person when any such transfer or issuance is reflected in the books and records of the Company, with or without execution of this Agreement, (ii) shall become bound by the terms of, and shall be deemed to have agreed to be bound by, this Agreement, (iii) shall become the Record Holder of the Membership Interests so transferred or issued, (iv) represents that the transferee or other recipient has the capacity, power and authority to enter into this Agreement, (v) grants the powers of attorney set forth in this Agreement and (vi) makes the consents, acknowledgments and waivers contained in this Agreement. The transfer of any Membership Interests and/or the admission of any new Member shall not constitute an amendment to this Agreement. A Person may become a Record Holder without the consent or approval of any of the Members. A Person may not become a Member without acquiring a Membership Interest. The rights and obligations of a Person who is a Non-citizen Assignee shall be determined in accordance with Section 4.8.
(b) The name and mailing address of each Record Holder shall be listed on the books and records of the Company maintained for such purpose by the Company or the Transfer Agent. The Managing Member shall update the books and records of the Company from time to time as necessary to reflect accurately the information therein (or shall cause the Transfer Agent to do so, as applicable). A Membership Interest may be represented by a Certificate, as provided in Section 4.1.
(c) Any transfer of a Membership Interest shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a Member pursuant to this Section 10.1.
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(d) Except as otherwise provided in the Delaware LLC Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.
(e) Except to the extent expressly provided in this Agreement (including any Interest Designation), (i) no Member shall be entitled to the withdrawal or return of any capital contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution of the Company may be considered as such by Law and then only to the extent provided for in this Agreement; (ii) no Member shall have priority over any other Member either as to the return of any capital contributions or as to distributions; (iii) no interest shall be paid by the Company on any capital contributions; and (iv) no Non-Managing Member, in its capacity as such, shall participate in the operation, management or control of the Company’s business, transact any business in the Company’s name or have the power to sign documents for or otherwise bind the Company by reason of being a Non-Managing Member.
Section 10.2. Admission of Successor Managing Member.
(a) A transferee of or successor to all of the Managing Member Interest pursuant to Section 4.6 who is proposed to be admitted as a successor Managing Member shall be admitted to the Company as the Managing Member effective immediately prior to the transfer of such Managing Member’s Managing Member Interest (represented by Managing Member Membership Interest) pursuant to Section 4.6; provided however, that no such successor managing member shall be admitted to the Company in accordance with Section 4.6 of this Agreement until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission.
Any such successor or additional managing member, as the case may be, is hereby authorized to and shall, subject to the terms hereof, carry on the business of the Company without dissolution.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF MEMBERS
Section 11.1. Member Withdrawal. No Member shall have the power or right to withdraw or otherwise resign from the Company prior to the dissolution and winding up of the Company, except pursuant to a transfer in accordance with the applicable provisions of Article IV. When a transferee of a Member’s Membership Interest becomes a Record Holder of the Membership Interest so transferred, such transferring Member shall cease to be a Member with respect to the Membership Interest so transferred. A Member shall not cease to be a Member as a result of the bankruptcy of such Member or as a result of any other events specified in Section 18-304 of the Delaware LLC Act.
Section 11.2. No Removal of the Managing Member. The Non-Managing Members shall have no right to remove or expel, with or without cause, the Managing Member.
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ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1. Dissolution. The Company shall not be dissolved by the admission of additional Non-Managing Members or by the admission of a successor Managing Member in accordance with the terms of this Agreement. The Company shall dissolve, and its affairs shall be wound up, upon:
(a) an election to dissolve the Company by the Managing Member;
(b) the entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Delaware LLC Act; or
(c) at any time there are no Members, unless the Company is continued without dissolution in accordance with the Delaware LLC Act.
Section 12.2. Liquidator. Upon dissolution of the Company in accordance with the provisions of this Article XII, the Managing Member shall act, or select one or more Persons to act as Liquidator. If the Managing Member is acting as Liquidator, it shall not be entitled to receive any additional compensation for acting in such capacity. If a Person other than the Managing Member acts as Liquidator, such Liquidator (1) shall be entitled to receive such compensation for its services as may be approved by the Managing Member, (2) shall agree not to resign at any time without 15 days’ prior notice to the Members and (3) may be removed at any time, with or without cause, by notice of removal approved by the Managing Member. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the Managing Member. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Managing Member under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.2) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Company as provided for herein.
Section 12.3. Liquidation. The Liquidator shall proceed to dispose of the assets of the Company, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Members, subject to Section 18-804 of the Delaware LLC Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public or private sale or by distribution in kind to one or more Members on such terms as the Liquidator and such Member or Members may agree. If any property is distributed in kind, the Member receiving the property shall be deemed for purposes of Section 12.3(c) to have received cash equal to its fair
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market value; and contemporaneously therewith, appropriate distributions of cash (to the extent any cash is available) must be made to the other Members. The Liquidator may defer liquidation or distribution of the Company’s assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Company’s assets would be impractical or would cause undue loss to the Members. The Liquidator may distribute the Company’s assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Members.
(b) Discharge of Liabilities. Liabilities of the Company include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 12.2) and amounts to Members otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment.
(c) Liquidation Distributions. Upon dissolution, the Company shall not be terminated and shall continue until the winding up of the affairs of the Company is completed. Upon the winding up of the Company, the Managing Member or the Liquidator shall take full account of the assets and liabilities of the Company and shall, unless the Managing Member determines otherwise, liquidate the assets of the Company as promptly as is consistent with obtaining the fair value thereof. Then, the proceeds of any liquidation or, in the case of any Company Sale, the Sale Proceeds shall be applied and distributed in the following order:
(i) first, other than in the case of a Company Sale, to the satisfaction of debts and liabilities of the Company (including satisfaction of all indebtedness to Members and/or their Affiliates to the extent otherwise permitted by law) including the expenses of liquidation, and including the establishment of any reserve which the Liquidator shall deem reasonably necessary for any contingent, conditional or unmatured liabilities or obligations of the Company (“Contingencies”). Any such reserve may be paid over by the Liquidation Agent to any attorney-at-law, or acceptable party, as escrow agent, to be held for disbursement in payment of any Contingencies and, at the expiration of such period as shall be deemed advisable by the Liquidation Agent for distribution of the balance in the manner hereinafter provided in this Section 12.3; and
(ii) second, the remaining proceeds, if any (the “Liquidating Proceeds”), shall be distributed to the Members in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 12.3(c)) for the taxable period of the Company during which the liquidation of the Company occurs (with such date of occurrence being determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable period (or, if later, within 90 days after said date of such occurrence).
Section 12.4. Cancellation of Certificate of Formation. Upon the completion of the distribution of Company cash and other property as provided in Section 12.3 in connection with the liquidation of the Company, the Certificate of Formation shall be cancelled in accordance with the Delaware LLC Act and all qualifications of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Company shall be taken.
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Section 12.5. Return of Contributions. The Managing Member shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Company to enable it to effectuate, the return of the Capital Contributions of the Members or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Company assets.
Section 12.6. Waiver of Partition. To the maximum extent permitted by law, each Member hereby waives any right to partition of the Company property.
Section 12.7. Capital Account Restoration*.* No Member shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Company or otherwise.
ARTICLE XIII
AMENDMENT OF AGREEMENT; MEETINGS; RECORD DATE
Section 13.1. Amendments. This Agreement may be amended, supplemented, waived or modified by the written consent of the Managing Member in its sole discretion without the approval of any other Member or other Person; provided that except as otherwise provided herein, no amendment to this Agreement may:
(a) modify the limited liability of any Member or enlarge the obligations of any Member without the consent of such Member, unless such enlargement of obligations may be deemed to have occurred as a result of an amendment approved pursuant to Section 13.1(b); or.
(b) have a material adverse effect on the rights or preferences of any class of Membership Interests in a disproportionate manner in relation to other classes of Membership Interests without the approval of the holders of a majority of the voting power of the Outstanding Membership Interests of the class affected.
Section 13.2. Amendment Procedures. Except as provided in Sections 5.3, Section 13.3, Section 14.5 and any subsequently adopted Interest Designations, all amendments to this Agreement shall be made in accordance with the requirements of this Section 13.2. Amendments to this Agreement may be proposed only by the Managing Member. A proposed amendment pursuant to this Section 13.2 shall be effective upon its approval by the Managing Member and, to the extent the approval of any Members is required pursuant to Section 13.1, upon the receipt of such necessary approval. If such an amendment is proposed and the approval of any Members is required, the Managing Member shall seek the written approval of the requisite percentage of the voting power of Outstanding Membership Interest from which such approval is required or call a meeting of the Members to consider and vote on such proposed amendment, in each case in accordance with the other provisions of this Article XIII. The Managing Member shall notify all Record Holders upon final adoption of any such proposed amendments.
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Section 13.3. Amendment Requirements(a) . Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that requires the vote or consent of Members holding, or holders of, a percentage of the voting power of Outstanding Membership Interests (including Non-Managing Member Interests owned by the Managing Member and its Affiliates) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of Members or holders of Outstanding Membership Interests whose aggregate Outstanding Membership Interests constitute not less than the voting or consent requirement sought to be reduced.
Section 13.4. Meetings. All acts of Members to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Members may only be called by the Managing Member. Within 60 days after the date upon which the Managing Member calls such meeting or within such greater time as may be reasonably necessary for the Company to comply with any statutes, rules, regulations, listing, agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the Managing Member shall send a notice of the meeting to the Non-Managing Members either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the Managing Member on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting.
Section 13.5. Notice of a Meeting. Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class or classes of Membership Interests for which a meeting is proposed in writing by mail or other means of written communication in accordance with Section 15.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication.
Section 13.6. Record Date. For purposes of determining the Members entitled to notice of or to vote at a meeting of the Members or to give approvals without a meeting as provided in Section 13.11 the Managing Member may set a Record Date, which shall not be less than 10 days nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Membership Interests are listed for trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Members are requested in writing by the Managing Member to give such approvals (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Membership Interests are listed for trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern). If the Managing Member does not set a Record Date, then (a) the Record Date for determining the Members entitled to notice of or to vote at a meeting of the Members shall be the close of business on the Business Day immediately preceding the day on which notice is given, and (b) the Record Date for determining the Members entitled to give approvals without a meeting shall be the date the first written approval is deposited with the Company in care of the Managing Member in accordance with Section 13.11.
Section 13.7. Postponement and Adjournment. Prior to the date upon which any meeting of Members is to be held, the Managing Member may postpone such meeting one or more times for any reason by giving notice to each Member entitled to vote at the meeting so postponed of the place, date and hour at which such meeting would be held. Such notice shall be given not fewer
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than two days before the date of such meeting and otherwise in accordance with this Article XIII. When a meeting is postponed, a new Record Date need not be fixed unless such postponement shall be for more than 45 days. Any meeting of Members may be adjourned by the Managing Member one or more times for any reason, including the failure of a quorum to be present at the meeting with respect to any proposal or the failure of any proposal to receive sufficient votes for approval. No Member vote shall be required for any adjournment. A meeting of Members may be adjourned by the Managing Member as to one or more proposals regardless of whether action has been taken on other matters. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8. Waiver of Notice; Approval of Meeting; Approval of Minutes. The transactions of any meeting of Members, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice if a quorum is present either in person or by proxy. Attendance of a Member at a meeting shall constitute a waiver of notice of the meeting, except (i) when the Member attends the meeting solely for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business at such meeting because the meeting is not lawfully called or convened, and takes no other action, and (ii) that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting.
Section 13.9. Quorum and Voting.
(a) The Non-Managing Members holding a majority of the voting power of the Outstanding Non-Managing Member Interests of the class or classes for which a meeting has been called (including Non-Managing Member Interests deemed owned by the Managing Member) represented in person or by proxy shall constitute a quorum at a meeting of Non-Managing Members of such class or classes unless any such action by the Non-Managing Members requires approval by Non-Managing Members holding a greater percentage of the voting power of such Non-Managing Member Interests, in which case the quorum shall be such greater percentage. At any meeting of the Non-Managing Members duly called and held in accordance with this Agreement at which a quorum is present, the act of Non-Managing Members holding a majority of the Percentage Interests of the Non-Managing Members (or the class or series for which such action is required) shall be deemed to constitute the act of all Non-Managing Members (or class or series thereof), unless a greater or different percentage is required with respect to such action under this Agreement, in which case the act of the Non-Managing Members (or class of series thereof) holding Outstanding Non-Managing Member Interests that in the aggregate represent at least such greater or lesser percentage of the voting power shall be required. The Non-Managing Members present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Non-Managing Members to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of the voting power of Outstanding Non-Managing Member Interests
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specified in this Agreement (including Outstanding Non-Managing Member Interests deemed owned by the Managing Member). In the absence of a quorum any meeting of Non-Managing Members may be adjourned from time to time by the affirmative vote of Non-Managing Members holding at least a majority of the voting power of the Outstanding Non-Managing Member Interests present and entitled to vote at such meeting (including Outstanding Non-Managing Member Interests deemed owned by the Managing Member) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7.
(b) Notwithstanding any provision of this Agreement, to the fullest extent permitted by law, in connection with any vote of a specified percentage of the voting power of the Non-Managing Member Interests requested by the Managing Member or required by this Agreement, a Non-Managing Member that does not cast a vote at a meeting of Non-Managing Members will be treated as non-voting interests for purposes of such matter and, as a result, the Non-Managing Member Interests held by such Person will not be included in either the numerator or denominator for determining if the requisite approval was obtained.
Section 13.10. Conduct of a Meeting. The Managing Member shall have full power and authority concerning the manner of conducting any meeting of the Members or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The Managing Member shall designate a Person to serve as chairman of any meeting, who shall, among other things, be entitled to exercise the powers of the Managing Member set forth in this Section 13.10, and the Managing Member shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Company maintained by the Managing Member. The Managing Member may make such other regulations consistent with applicable law and this Agreement as it may deem necessary or advisable concerning the conduct of any meeting of the Members or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals, proxies and votes in writing.
Section 13.11. Action Without a Meeting. If authorized by the Managing Member, any action that may be taken at a meeting of the Non-Managing Members may be taken without a meeting, without a vote and without prior notice, if consented to in writing or by electronic transmission by Non-Managing Members owning not less than the minimum percentage of the voting power of the Outstanding Non-Managing Member Interests (including Non-Managing Member Interests deemed owned by the Managing Member) that would be necessary to authorize or take such action at a meeting at which all the Non-Managing Members were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Membership Interests or a class thereof are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Non-Managing Members who have not consented. The Managing Member may specify that any written ballot, if any, submitted to Non-Managing Members for the purpose of taking any action without a meeting shall be returned to the Company within the time period, which shall be not less than 20 days, specified by
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the Managing Member. If a ballot returned to the Company does not vote all of the Non-Managing Member Interests held by the Non-Managing Members, the Company shall be deemed to have failed to receive a ballot for the Non-Managing Member Interests that were not voted. Nothing contained in this Section 13.11 shall be deemed to require the Managing Member to solicit all Non-Managing Members in connection with a matter approved by the requisite percentage of the voting power of Non-Managing Members or other holders of Outstanding Non-Managing Member Interests acting by written consent or consent by electronic transmission without a meeting.
Section 13.12. Voting and Other Rights.
(a) Only those Record Holders of Outstanding Membership Interests on the Record Date set pursuant to Section 13.6 shall be entitled to notice of, and to vote at, a meeting of Members or to act with respect to matters as to which the holders of the Outstanding Membership Interests have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Membership Interests shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Membership Interests. Each Unit shall entitle the holder thereof to one vote for each Unit held of record by such holder as of the relevant Record Date.
(b) With respect to Membership Interests that are held for a Person’s account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Membership Interests are registered, such other Person shall, in exercising the voting rights in respect of such Membership Interests on any matter, and unless the arrangement between such Persons provides otherwise, vote such Membership Interests in favor of, and at the direction of, the Person who is the Beneficial Owner, and the Company shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3.
(c) With respect to any matter that is subject to a vote by, or approval or consent of, any Record Holder of Outstanding Membership Interest on the Record Date who (x) receives notice of such matter from the Company and (y) does not object to such matter in writing to the Company within ten (10) Business Days of receipt of such notice, shall be deemed to have voted affirmatively to, approved, and provided consent for, such matter.
ARTICLE XIV
MERGER
Section 14.1. Authority. The Managing Member shall have the sole power and authority to approve the merger, consolidation or other combination of the Company with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts, unincorporated businesses or any other Person permitted by the Delaware LLC Act, including a partnership whether general or limited (including a limited liability partnership or limited liability limited partnership) without the approval of the holders of the Non-Managing Member Interests. Subject to the prior approval by the Managing Member, notwithstanding any provision of this Agreement or the Delaware LLC Act, the Company may
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merge or consolidate or otherwise combine with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts, unincorporated businesses or other Person permitted by the Delaware LLC Act, including a partnership (whether general or limited (including a limited liability partnership or a limited liability limited partnership)), pursuant to a written agreement of merger, consolidation or other business combination (“Merger Agreement”) in accordance with this Article XIV.
Section 14.2. Procedure for Merger, Consolidation or Other Business Combination. Merger, consolidation or other business combination of the Company pursuant to this Article XIV requires only the prior consent of the Managing Member, notwithstanding any provision of this Agreement or the Delaware LLC Act. If the Managing Member shall determine to consent to the merger, consolidation or other business combination, the Managing Member shall approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge, consolidate or combine;
(b) The name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger, consolidation or other business combination (the “Surviving Business Entity”);
(c) The terms and conditions of the proposed merger, consolidation or other business combination;
(d) The manner and basis of converting or exchanging the equity securities of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any equity, securities or rights of any constituent business entity are not to be converted or exchanged solely for, or into, cash, property or equity interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or interests, rights, securities or obligations of any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other Person (other than the Surviving Business Entity) which the holders of such equity interests, securities or rights are to receive upon conversion of, or in exchange for, their interests, securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property equity interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other Person (other than the Surviving Business Entity), or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate of formation, certificate or limited partnership agreement, operating agreement or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger, consolidation or other business combination;
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(f) The effective time of the merger, consolidation or other business combination which may be the date of the filing of the certificate of merger or consolidation or similar certificate pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided that if the effective time of such transaction is to be later than the date of the filing of such certificate, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate and stated therein); and
(g) Such other provisions with respect to the proposed merger, consolidation or other business combination that the Managing Member determines to be necessary or appropriate.
Section 14.3. Abandonment of Merger, Consolidation or Other Business Combination; Conversion of the Company into another Limited Liability Entity.
(a) After approval of any merger, consolidation or other business combination by the Managing Member, and at any time prior to the filing of the certificate of merger or consolidation or similar certificate pursuant to Section 14.4, the merger, consolidation or other business combination may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement.
(b) Notwithstanding anything else contained in this Article XIV or otherwise in this Agreement, the Managing Member is permitted, without Non-Managing Member approval, to convert the Company into a new limited liability entity or to merge the Company into, or convey all of the Company’s assets to, another limited liability entity, which shall be newly formed and shall have no assets, liabilities or operations at the time of such merger or conveyance other than those it receives from the Company or those arising from its incorporation or formation; provided that (A) the Managing Member has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Member, (B) the primary purpose of such conversion, merger or conveyance is to effect a mere change in the legal form of the Company into another limited liability entity, and (C) the Managing Member determines that the governing instruments of the new entity provide the Members and the Managing Member with substantially the same rights and obligations as are herein contained.
Section 14.4. Certificate of Merger or Consolidation. Upon the approval by the Managing Member of a Merger Agreement and the merger, consolidation or business combination contemplated thereby, a certificate of merger or consolidation or similar certificate shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware LLC Act.
Section 14.5. Amendment of Company Agreement. Pursuant to Section 18-209(f) of the Delaware LLC Act, an agreement of merger, consolidation or other business combination approved in accordance with this Article XIV may (a) effect any amendment to this Agreement or (b) effect the adoption of a new limited liability company agreement for a limited liability company if it is the Surviving Business Entity. Any such amendment or adoption made pursuant to this Section 14.5 shall be effective at the effective time or date of the merger, consolidation or other business combination.
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Section 14.6. Effect of Merger.
(a) At the effective time of the certificate of merger or consolidation or similar certificate:
(i) all of the rights, privileges and powers of each of the business entities that has merged, consolidated or otherwise combined, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity and after the merger, consolidation or other business combination shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger, consolidation or other business combination;
(iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it.
(b) A merger, consolidation or other business combination effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another.
Section 14.7. Merger of Subsidiaries. Article XIV does not apply to mergers of Subsidiaries of the Company. Mergers of Subsidiaries are within the exclusive authority of the Managing Member.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1. Addresses and Notices.
(a) Any notice, demand, request, report, document or proxy materials required or permitted to be given or made to a Member under this Agreement shall be in writing and shall be deemed given or made when delivered in person, when sent by first class United States mail or by other means of written communication to the Member at the address in Section 15.1(b), or when made in any other manner, including by press release, if permitted by applicable law.
(b) Any payment, distribution or other matter to be given or made to a Member hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, when delivered in person or upon sending of such payment, distribution or other matter to the Record Holder of such Company Securities at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Company, regardless of any claim of any Person who may have an interest in such Company Securities by reason of any assignment or otherwise.
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(c) Notwithstanding the foregoing, if (i) a Member shall consent to receiving notices, demands, requests, reports, documents or proxy materials via electronic mail or by the Internet or (ii) the rules of the Commission shall permit any report or proxy materials to be delivered electronically or made available via the Internet, any such notice, demand, request, report or proxy materials shall be deemed given or made when delivered or made available via such mode of delivery.
(d) An affidavit or certificate of making of any notice, demand, request, report, document, proxy material, payment, distribution or other matter in accordance with the provisions of this Section 15.1 executed by the Managing Member, the Transfer Agent, their agents or the mailing organization shall be prima facie evidence of the giving or making of such notice, demand, request, report, document, proxy material, payment, distribution or other matter. If any notice, demand, request, report, document, proxy material, payment, distribution or other matter given or made in accordance with the provisions of this Section 15.1 is returned marked to indicate that it was unable to be delivered, such notice, demand, request, report, documents, proxy materials, payment, distribution or other matter and, if returned by the United States Postal Service (or other physical mail delivery mail service outside the United States of America), any subsequent notices, demands, requests, reports, documents, proxy materials, payments, distributions or other matters shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Company of a change in his address) or other delivery if they are available for the Member at the principal office of the Company for a period of one year from the date of the giving or making of such notice, demand, request, report, document, proxy material, payment, distribution or other matter to the other Members. Any notice to the Company shall be deemed given if received in writing by the Managing Member at the principal office of the Company designated pursuant to Section 2.4. The Managing Member may rely and shall be protected in relying on any notice or other document from a Member or other Person if believed by it to be genuine.
Section 15.2. Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.3. Binding Effect; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. The Indemnitees and their heirs, executors, administrators and successors shall be entitled to receive the benefits of this Agreement. Except as provided in this Section 15.3, nothing in this Agreement shall be deemed to create any right in any Person (other than any Indemnitee) not a party hereto, this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person (other than any Indemnitee) and no Person (other than an Indemnitee) shall be a third party beneficiary of this Agreement.
Section 15.4. Integration. This Agreement and any related side letters (it being agreed that the Managing Member or the Company may enter into written agreements with Members in connection with their admission or status as Members that modify or supplement the terms of this Agreement with respect to such Members and in the event of a conflict between this Agreement and such side letter, the terms of such side letter shall control as between the Company, the Managing Member and the Member party to such side letter) constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
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Section 15.5. Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Company.
Section 15.6. Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 15.7. Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Membership Interest pursuant to Section 10.1 without execution hereof.
Section 15.8. Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
Section 15.9. Forum Selection. The Company, each Member, each Record Holder, each other Person who acquires an interest in a Company Security and each other Person who is bound by this Agreement, only with respect to such Person’s membership interest in the Company and not with respect to such Person’s interest in any Affiliate of the Company notwithstanding any consolidation of the Company and such Affiliate pursuant to GAAP or any other accounting standard, or any applicable rule, law or regulation (collectively, the “Consenting Parties” and each a “Consenting Party”) (i) irrevocably agrees that, unless the Managing Member shall otherwise agree in writing, any claims, suits, actions or proceedings arising out of or relating in any way to this Agreement or any Membership Interest (including, without limitation, any claims, suits or actions under or to interpret, apply or enforce (A) the provisions of this Agreement, including without limitation the validity, scope or enforceability of this Section 15.9, (B) the duties, obligations or liabilities of the Company to the Members or the Managing Member, or of the Members or the Managing Member to the Company, or among Members, (C) the rights or powers of, or restrictions on, the Company, the Non-Managing Members or the Managing Member, (D) any provision of the Delaware LLC Act or other similar applicable statutes, (E) any other instrument, document, agreement or certificate contemplated either by any provision of the Delaware LLC Act relating to the Company or by this Agreement or (F) the federal securities laws of the United States or the securities or antifraud laws of any international, national, state, provincial, territorial, local or other governmental or regulatory authority, including, in each case, the applicable rules and regulations promulgated thereunder (regardless of whether such Disputes (x) sound in contract, tort, fraud or otherwise, (y) are based on common law, statutory, equitable, legal or other grounds, or (z) are derivative or direct claims)) (a “Dispute”), shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction; (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding; (iii) irrevocably agrees not to, and waives any right to,
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assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper; (iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding; (v) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice thereof; provided that nothing in clause (v) hereof shall affect or limit any right to serve process in any other manner permitted by law; (vi) irrevocably waives any and all right to trial by jury in any such claim, suit, action or proceeding; (vii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate; (viii) agrees that if a Dispute that would be subject to this Section 15.9 if brought against a Consenting Party is brought against an employee, officer, director, agent or indemnitee of such Consenting Party or its affiliates (other than Disputes brought by the employer or principal of any such employee, officer, director, agent or indemnitee) for alleged actions or omissions of such employee, officer, director, agent or indemnitee undertaken as an employee, officer, director, agent or indemnitee of such Consenting Party or its affiliates, such employee, officer, director, agent or indemnitee shall be entitled to invoke this Section 15.9, and (ix) agrees that if such Consenting Person does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought in any such claim, suit, action or proceeding sought by such Consenting Person, then such Consenting Person shall be obligated to reimburse the Company and its Affiliates for all fees, costs and expenses of every kind and description, including but not limited to all reasonable attorneys’ fees and other litigation expenses, that the Company and its Affiliates may incur in connection with such claim, suit, action or proceeding.
Section 15.10. Invalidity of Provisions.
(a) If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
(b) If a provision is held to be invalid as written, then it is the intent of the Persons bound by this Agreement that the court making such a determination interpret such provision as having been modified to the least extent possible to find it to be binding, it being the objective of the Persons bound by this Agreement to give the fullest effect possible to the intent of the words of this Agreement.
Section 15.11. Consent of Members. Each Member hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Members, such action may be so taken upon the concurrence of less than all of the Members and each Member shall be bound by the results of such action.
Section 15.12. Facsimile Signatures. The use of facsimile or pdf signatures affixed in the name and on behalf of the Transfer Agent on Certificates, if any, representing Class A Units is expressly permitted by this Agreement.
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[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date:
| MANAGING MEMBER: | |
|---|---|
| BENEFICIENT | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
| NON-MANAGING MEMBERS: | |
| --- | --- |
| BENEFICIENT | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
EX-4.3
Exhibit 4.3
STOCKHOLDERS AGREEMENT
DATED AS OF JUNE 6, 2023
AMONG
BENEFICIENT,
BENEFICIENT HOLDINGS INC.,
HICKS HOLDINGS OPERATING, LLC AND
BRUCE SCHNITZER
TABLE OF CONTENTS
| Page | |||
|---|---|---|---|
| Article I. INTRODUCTORY MATTERS | 1 | ||
| Section 1.01 | Defined Terms | 1 | |
| Section 1.02 | Construction | 5 | |
| Article II. CORPORATE GOVERNANCE MATTERS | 5 | ||
| Section 2.01 | Board of Directors | 5 | |
| Section 2.02 | Other Rights of Stockholder Designees | 8 | |
| Section 2.03 | Compliance of Stockholder Designees | 8 | |
| Section 2.04 | Controlled Company Status | 8 | |
| Section 2.05 | Matters Requiring Class B Holder Approval | 8 | |
| Section 2.06 | Shares Covered | 9 | |
| Article III. RIGHT OF FIRST REFUSAL | 9 | ||
| Section 3.01 | Grant | 9 | |
| Section 3.02 | Notice | 10 | |
| Section 3.03 | Exercise of Right of First Refusal | 10 | |
| Section 3.04 | Forfeiture of Rights | 10 | |
| Section 3.05 | Closing | 10 | |
| Section 3.06 | Failure to Comply | 11 | |
| Article IV. GENERAL PROVISIONS | 11 | ||
| Section 4.01 | Effectiveness; Termination | 11 | |
| Section 4.02 | Representations of Class B Holders | 11 | |
| Section 4.03 | Notices | 11 | |
| Section 4.04 | Amendment; Waiver | 11 | |
| Section 4.05 | Further Assurances | 12 | |
| Section 4.06 | Assignment | 12 | |
| Section 4.07 | Third Parties | 12 | |
| Section 4.08 | Governing Law | 12 | |
| Section 4.09 | Jurisdiction; Waiver of Jury Trial | 13 | |
| Section 4.10 | Default, Remedies and Specific Performance | 13 | |
| Section 4.11 | Entire Agreement | 13 | |
| Section 4.12 | Severability | 13 | |
| Section 4.13 | Table of Contents, Headings and Captions | 14 | |
| Section 4.14 | Counterparts | 14 | |
| Section 4.15 | No Recourse | 14 | |
| Section 4.16 | Pledges | 14 | |
| Section 4.17 | Adjustments | 14 |
i
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, this “Agreement”), dated as of June 6, 2023 is made and entered into by and among Beneficient, a Nevada corporation (the “Company”), Beneficient Holdings Inc. (“Class B Holder 1”), Hicks Holdings Operating, LLC (“Class B Holder 2”) and Bruce Schnitzer (“Class B Holder 3” and, together with Class B Holder 1 and Class B Holder 2, the “Class B Holders”). Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Business Combination Agreement (as defined below).
RECITALS
WHEREAS, on September 21, 2022, The Beneficient Company Group, L.P., a Delaware limited partnership (“BCG”), Beneficient Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of BCG, Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of BCG, and Avalon Acquisition Inc., a Delaware corporation, entered into that certain Business Combination Agreement (as it may be amended after the date hereof, the “Business Combination Agreement”);
WHEREAS, on June 6, 2023, BCG converted into the Company, a Nevada corporation, pursuant to a statutory conversion (the “Conversion”), and pursuant to the Conversion, the Class B Holders Beneficially Own 100% of the shares of Class B common stock, par value $0.001 per share, of the Company (“Class B Common Stock”); and
WHEREAS, in anticipation of the consummation of the transactions contemplated by the Business Combination Agreement (the “Closing”) and pursuant to the terms thereof, the Persons party hereto are entering into this Agreement on the date hereof, to be effective upon the Closing (the “Effective Date”), to set forth certain understandings between such Persons with respect to certain governance and other matters of the Company following the Closing.
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Persons party hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
INTRODUCTORY MATTERS
Section 1.01 Defined Terms. In addition to the terms defined elsewhere herein, the following terms have the following meanings when used herein with initial capital letters:
“Action” means any demand, action, claim, suit, countersuit, arbitration, inquiry, subpoena, case, litigation, proceeding or investigation (whether civil, criminal, administrative or investigative) by or before any court or grand jury, any Governmental Authority or any arbitration or mediation tribunal.
“Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof.
“Agreement” has the meaning set forth in the Preamble hereto.
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“Articles of Incorporation” means the Articles of Incorporation of the Company, as amended, restated and/ or amended and restated from time to time.
“Associate” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; and (b) any trust or other estate in which such Person has, directly or indirectly, at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity.
“BCG” has the meaning set forth in the Recitals hereto.
“BCH” means Beneficient Company Holdings, L.P., a Delaware limited partnership and non-wholly owned subsidiary of the Company.
“BCH Partnership Agreement” has the meaning set forth in Section 2.05.
“Ben LLC” means Beneficient Company Group, L.L.C., a Delaware limited liability company and wholly owned subsidiary of the Company.
“Beneficially Own” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act. “Board” means the board of directors of the Company.
“Business Combination Agreement” has the meaning set forth in the Recitals hereto.
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the State of New York.
“Cause” means with respect to a Chief Executive Officer or any other executive officer of the Company, the entry by a court of competent jurisdiction of a final and non-appealable judgment determining that a Chief Executive Officer or any other executive officer of the Company acted or engaged in actual fraud or willful malfeasance.
“Class A CommonStock” means the Class A common stock, par value $0.001 per share, of the Company. “Class B Common Stock” has the meaning set forth in the Recitals hereto.
“Class B Holder 1” has the meaning set forth in the Preamble hereto. “Class B Holder 2” has the meaning set forth in the Preamble hereto. “Class B Holder 3” has the meaning set forth in the Preamble hereto.
“Class B Holders” has the meaning set forth in the Preamble hereto and, as the context may require, will also include any Permitted Transferee.
“Class BThreshold” has the meaning set forth in Section 2.01Section 2.01.
“Class B Holder 1 Threshold” has the meaning set forth in Section 2.01.
“Class B Holder 2 Threshold” has the meaning set forth in Section 2.01.
“Class B Holder 3Threshold” has the meaning set forth in Section 2.01.
2
“Closing” has the meaning set forth in the Recitals hereto.
“Common Stock” means shares of Class A common stock, par value $0.001 per share, of the Company, shares of Class B Common Stock and any securities of the Company into which such shares are converted or reclassified or for which such shares are exchanged.
“Community Reinvestment Committee” has the meaning set forth in Section 2.01. “Company” has the meaning set forth in the Preamble hereto.
“Compensation Committee” has the meaning set forth in Section 2.01.
“control” (including its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of a Person.
“Conversion” has the meaning set forth in the Recitals hereto. “Director” means any member of the Board.
“EffectiveDate” has the meaning set forth in the Recitals hereto.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“Executive Committee” has the meaning set forth in Section 2.01.
“Exercising Class B Holders” has the meaning set forth in Section 3.03.
“Government Approval” means any authorization, consent, approval, waiver, exception, variance, order, exemption, publication, filing, declaration, concession, grant, franchise, agreement, permission, permit, or license of, from, or with any Governmental Authority, the giving of notice to, or registration with, any Governmental Authority, or any other action in respect of any Governmental Authority.
“Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau, arbitral panel or court, whether domestic, foreign, multinational, or supranational exercising executive, legislative, judicial, regulatory, self-regulatory or administrative functions of or pertaining to government and any executive official thereof.
“Governmental Order” means any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Authority.
“Law” means any applicable U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, income Tax treaty, Governmental Order, requirement or rule of law (including common law) or other binding directives promulgated, issued, entered into or taken by any Governmental Authority.
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“Necessary Action” means, with respect to any Person and a specified result, all actions (to the extent such actions are not prohibited by applicable Law, within such Person’s control that do not directly conflict with any rights expressly granted to such Person pursuant to this Agreement, the Business Combination Agreement, the Articles of Incorporation or the bylaws) reasonably necessary and desirable within his, her or its control to cause such result, including, without limitation (i) calling special meetings of the Board or the stockholders of the Company, (ii) voting or providing a proxy with respect to the Shares Beneficially Owned by such Person, (iii) voting in favor of the adoption of stockholders’ resolutions and amendments to the Articles of Incorporation or bylaws, including executing written consents in lieu of meetings with respect thereto, (iv) requesting members of the Board (to the extent such members were elected, nominated or designated by the Person obligated to undertake such action) to act (subject to any applicable fiduciary duties) in a certain manner or causing them to be removed in the event they do not act in such a manner and (v) making, or causing to be made, with Governmental Authorities, all filings, registrations or similar actions that are required to achieve such a result.
“Nominating Committee” has the meaning set forth in Section 2.01. “Non-Recourse Party” has the meaning set forth in Section 4.15. “OfferingClass B Holder” has the meaning set forth in Section 3.01.
“Optional Conversion” means a voluntary conversion of shares of Class B Common Stock into shares of Class A Common Stock not as a result of a Transfer in accordance with the provisions of the Articles of Incorporation.
“PermittedTransferee” has the meaning set forth in Section 4.06.
“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act and any Governmental Authority.
“Proposed Transfer” has the meaning set forth in Section 3.01. “Proposed Transfer Notice” has the meaning set forth in Section 3.02.
“Proposed Transfer Shares” means the shares of Class B Common Stock that a Class B Holder proposes to Transfer or to subject to an Optional Conversion in a Proposed Transfer subject to the provisions of Article III.
“Proposed Transferee” means any Person to whom an Offering Class B Holder proposes to make a Proposed Transfer.
“Right of First Refusal” has the meaning set forth in Section 3.01. “ROFRNotice” has the meaning set forth in Section 3.03. “ROFR Period” has the meaning set forth in Section 3.03.
“ROFR Price” means (a) if the Class A Common Stock is actively traded on a national securities exchange, the closing price per share of Class A Common Stock on the most recent trading day before the delivery of the Proposed Transfer Notice or (b) if the Class A Common Stock is not actively traded on a national securities exchange, (i) if the Proposed Transfer is an Optional Conversion, a good faith estimate of the fair value of a share of Class A Common Stock by the board of directors of the Company or (ii) if the Proposed Transfer is a Transfer, the price per share of Class A Common Stock of the proposed transfer.
“Significant Subsidiary” means any Subsidiary of the Company that constitutes a “significant subsidiary” under Rule 1-02(w) of Regulation S-K of the Securities Act of 1933, as amended.
“Subsidiary” of any Person means any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, which is directly or indirectly controlled by such Person or one or more of its respective Subsidiaries.
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“Tax” means any federal, state, local or foreign income, gross receipts, branch profits, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, ad valorem, value added, alternative or add-on minimum or estimated tax or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not.
“Transfer” (including its correlative meanings, “Transferor”, “Transferee” and “Transferred”) shall mean, with respect to any security, directly or indirectly, to sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a security interest in, offer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any economic, voting or other rights in or to such security. When used as a noun, “Transfer” shall have such correlative meaning as the context may require.
Section 1.02 Construction. The language used in this Agreement will be deemed to be the language chosen by the Persons party hereto to express their mutual intent, and no rule of strict construction will be applied against any Person party hereto. Unless the context otherwise requires: (a) “or” is disjunctive but not exclusive, (b) words in the singular include the plural, and in the plural include the singular, and (c) the words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to sections of this Agreement unless otherwise specified.
ARTICLE II.
CORPORATE GOVERNANCE MATTERS
Section 2.01 Board of Directors.
(a) Unless otherwise determined by Class B Holders holding a majority of the outstanding shares of the Class B Common Stock, for so long as the Class B Threshold is met, the Board shall be comprised of at least nine (9) Directors, with holders of Class B Common Stock having the right to elect at least five (5) of such Directors. For (i) so long as the aggregate number of outstanding shares of Class B Common Stock is at least twenty-five percent (25%) of the number of shares of Class B Common Stock outstanding on the Effective Date, or (ii) if the condition in preceding clause (i) is not satisfied, so long as the aggregate capital account balances with respect to the limited partner interests in BCH held by the Class B Holders is an amount that is at least twenty percent (20%) of the aggregate capital account balances of such limited partner interests on the Effective Date (the condition in either clause (i) or clause (ii) being referred to as the “Class B Threshold”), each Class B Holder agrees to designate the Directors set forth below (collectively, the “Class B Directors”):
(i) provided that Class B Holder 1 or its Permitted Transferee continues to hold (A) at least twenty- five percent (25%) of the number of shares of Class B Common Stock held by Class B Holder 1 on the Effective Date, or (ii) if the condition in preceding clause (A) is not satisfied, the aggregate capital account balances with respect to the limited partner interests in BCH held by Class B Holder 1 is an amount that is at least twenty percent (20%) of the aggregate capital account balances of the limited partner interests in BCH held by Class B Holder 1 on the Effective Date (the condition in either clause (A) or clause (B) being referred to as the “Class B Holder 1 Threshold”), three (3) individuals designated by Class B Holder 1, who shall initially be Brad Heppner, James Silk and Derek Fletcher;
(ii) provided that Class B Holder 2 or its Permitted Transferee continues to hold (A) at least twenty- five percent (25%) of the number of shares of Class B Common Stock held by Class B Holder 2 on the Effective Date, or (ii) if the condition in preceding clause (A) is not satisfied, the aggregate capital account balances with respect to the limited partner interests in BCH held by Class B Holder 2 is an amount that is at
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least twenty percent (20%) of the aggregate capital account balances of the limited partner interests in BCH held by Class B Holder 2 on the Effective Date (the condition in either clause (A) or clause (B) being referred to as the “Class B Holder 2 Threshold”), one (1) individual designated by Class B Holder 2, who shall initially be Thomas Hicks; provided, however, that if Thomas Hicks declines to serve as a Director, then the Director designated by Class B Holder 2 will be Mack Hicks; provided, further, that if Mack Hicks declines to serve as a Director, then Class B Holder 1 shall designate such Director;
(iii) provided that Class B Holder 3 or its Permitted Transferee continues to hold (A) at least twenty- five percent (25%) of the number of shares of Class B Common Stock held by Class B Holder 3 on the Effective Date, or (ii) if the condition in preceding clause (A) is not satisfied, the aggregate capital account balances with respect to the limited partner interests in BCH held by Class B Holder 3 is an amount that is at least twenty percent (20%) of the aggregate capital account balances of the limited partner interests in BCH held by Class B Holder 3 on the Effective Date (the condition in either clause (A) or clause (B) being referred to as the “Class B Holder 3 Threshold”), one (1) individual designated by Class B Holder 3, who shall initially be Bruce Schnitzer; provided, however, that if Bruce Schnitzer declines to serve as a Director, then the Director designated by Class B Holder 3 will be Eliza Schnitzer; provided, further, that if Eliza Schnitzer declines to serve as a Director, then Class B Holder 1 shall designate such Director;
(iv) in the event that Class B Holder 2 ceases to satisfy the Class B Holder 2 Threshold, then (A) the number of Directors that Class B Holder 2 shall have the right to designate pursuant to Section 2.01(a)(ii) shall be reduced to zero (0), (B) Class B Holder 2 shall cause the Director designated by Class B Holder 2 to resign and (C) Class B Holder 1 shall designate the Director to fill the resulting vacancy;
(v) in the event that Class B Holder 3 ceases to satisfy the Class B Holder 3 Threshold, then (A) the number of Directors that Class B Holder 3 shall have the right to designate pursuant to Section 2.01(a)(iii) shall be reduced to zero (0), (B) Class B Holder 3 shall cause the Director designated by Class B Holder 3 to resign and (C) Class B Holder 1 shall designate the Director to fill the resulting vacancy; and
(vi) in the event that the Board determines to increase or decrease the total number of Directors serving on the Board, the Persons party hereto shall work together in good faith to promptly amend this Agreement to determine the effect of such increase or decrease on the designation rights of the Class B Holders set forth in this Agreement; provided that if the number of Class B Directors increases from five (5) to six (6), the Class B Holder 1 shall have the right to designate such additional Class B Director.
(b) For so long as the Class B Threshold is met, the majority of the Class B Directors shall designate the chairperson and vice chairperson of the Board.
(c) The Company and the Class B Holders shall take all Necessary Action to cause the election of the Directors as set forth in this Section 2.01 (including by nominating and appointing Class B Directors or, to the extent permitted under the Company’s organizational documents and applicable Law, removing Class B Directors (at the request of the Class B Holder entitled under Section 2.01(a) to designate such Class B Director) and promptly filling any vacancies created by reason of death, disability, retirement, removal or resignation of the Class B Directors with a new Class B Director designated by the Class B Holder entitled under Section 2.01(a) to designate such Class B Director).
(d) In connection with any meeting of the holders of Class B Common Stock called for the purpose of electing Directors, however called, or at any adjournment or postponement thereof, or in any other circumstances upon which a vote, consent or other approval (including by written consent) is sought or obtained by or from the holders of Class B Common Stock, the Company shall (i) include in the slate of nominees recommended by the Board for election at such meeting as Class B Directors, the Class B Directors, (ii) nominate and recommend such individual to be elected as a Director as provided herein and include such recommendation in the proxy statement (or consent solicitation or similar document) of the Company relating to the election of Directors, and (iii) solicit proxies or consents in favor thereof to the same extent, and in a manner no less favorable, as the Company solicits proxies or consents in favor of the other nominees of the Board.
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(e) Neither the Company nor any Class B Holder shall take action to remove or cause the removal of any Class B Director, other than with the consent of the Class B Holder entitled under Section 2.01(a) to designate such Class B Director.
(f) The Board shall establish and maintain a compensation committee (the “Compensation Committee”) which, unless previously agreed to by the Class B Holders holding a majority of the Class B Common Stock held by the Class B Holders, shall be comprised of no more than four (4) Directors, with such powers as may be delegated to the Compensation Committee from time to time by the Board by resolution (or charter adopted thereby). At least two (2) members of the Compensation Committee shall be Class B Directors designated by the majority of the Class B Directors and the remaining members shall be designated by the Directors elected by holders of Class A Common Stock and Class B Common Stock, voting together as a single class. The majority of the Class B Directors shall designate one member of the Compensation Committee to be its chairperson. In the event of a tied vote on any matter brought before the Compensation Committee, the Board resolution or charter adopted thereby establishing the Compensation Committee shall provide that the chairperson of the Compensation Committee shall have the tiebreaking vote. The Board shall have the right to remove a member of the Compensation Committee with or without cause, and upon the removal or resignation of a member of the Compensation Committee that is a Class B Director, the Board shall appoint a replacement to the Compensation Committee meeting the requirements of this Section 2.01(f).
(g) The Board shall establish and maintain a nominating committee (the “Nominating Committee”) which, unless previously agreed to by the Class B Holders holding a majority of the Class B Common Stock held by the Class B Holders, shall be comprised of no more than four (4) Directors, with such powers as may be delegated to the Nominating Committee from time to time by the Board by resolution (or charter adopted thereby). At least two (2) members of the Nominating Committee shall be Class B Directors designated by the majority of the Class B Directors and the remaining members shall be designated by the Directors elected by holders of Class A Common Stock and Class B Common Stock, voting together as a single class. The majority of the Class B Directors shall designate one member of the Nominating Committee to be its chairperson. In the event of a tied vote on any matter brought before the Nominating Committee, the Board resolution or charter adopted thereby establishing the Nominating Committee shall provide that the chairperson of the Nominating Committee shall have the tiebreaking vote. The Board shall have the right to remove a member of the Nominating Committee with or without cause, and upon the removal or resignation of a member of the Nominating Committee that is a Class B Director, the Board shall appoint a replacement to the Nominating Committee meeting the requirements of this Section 2.01(g).
(h) The Board shall establish and maintain an executive committee (the “Executive Committee”) which, unless previously agreed to by the Class B Holders holding a majority of the Class B Common Stock held by the Class B Holders, shall be comprised of no more than four (4) Directors, with such powers as may be delegated to the Executive Committee from time to time by the Board by resolution (or charter adopted thereby). At least two (2) members of the Executive Committee shall be Class B Directors designated by the majority of the Class B Directors and the remaining members shall be designated by the Directors elected by holders of Class A Common Stock and Class B Common Stock, voting together as a single class. The majority of the Class B Directors shall designate one member of the Executive Committee to be its chairperson. In the event of a tied vote on any matter brought before the Executive Committee, the Board resolution or charter adopted thereby establishing the Executive Committee shall provide that the chairperson of the Executive Committee shall have the tiebreaking vote. The Board shall have the right to remove a member of the Executive Committee with or without cause, and upon the removal or resignation of a member of the Executive Committee that is a Class B Director, the Board shall appoint a replacement to the Executive Committee meeting the requirements of this Section 2.01(h).
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(i) The Board shall establish and maintain a community reinvestment committee (the “Community Reinvestment Committee”) which, unless previously agreed to by the Class B Holders holding a majority of the Class B Common Stock held by the Class B Holders, shall be comprised of no more than four (4) members, with such powers as may be delegated to the Community Reinvestment Committee from time to time by the Board by resolution (or charter adopted thereby). The Board may appoint individuals that are not Directors or employees of the Company as members of the Community Reinvestment Committee; provided, however, that at least two (2) members on the Community Reinvestment Committee shall be designated by the majority of the Class B Directors and the remaining members shall be designated by the Directors elected by holders of Class A Common Stock and Class B Common Stock, voting together as a single class. The majority of the Class B Directors shall designate one member of the Community Reinvestment Committee to be its chairperson and one member of the Committee as its Lead Committee Member. In the event of a tied vote on any matter brought before the Community Reinvestment Committee, the Board resolution or charter adopted thereby establishing the Community Reinvestment Committee shall provide that the Lead Committee Member of the Community Reinvestment Committee shall have the tiebreaking vote. The Board shall have the right to remove a member of the Community Reinvestment Committee with or without cause, and upon the removal or resignation of a member of the Community Reinvestment Committee that is a Class B Director, the Board shall appoint a replacement to the Community Reinvestment Committee meeting the requirements of this Section 2.01(i).
Section 2.02 Other Rights of Stockholder Designees. Each Class B Director serving on the Board shall be entitled to the same rights and privileges applicable to all other members of the Board generally or to which all such members of the Board are entitled. In furtherance of the foregoing, the Company shall indemnify, exculpate, and reimburse fees and expenses of each Class B Director and provide each Class B Director with director and officer insurance to the same extent it indemnifies, exculpates, reimburses and provides insurance for the other members of the Board pursuant to the Articles of Incorporation, bylaws or other organizational document of the Company, applicable Law or otherwise, which indemnification shall provide that the Company is the indemnitor of first resort.
Section 2.03 Compliance of Stockholder Designees. The Class B Holders shall use commercially reasonable efforts to cause the Class B Directors to comply with any qualification requirements for Directors set forth in the Articles of Incorporation, bylaws or other organizational document of the Company, and all policies, procedures, processes, codes, rules, standards and guidelines applicable to Directors, including the Company’s code of business conduct and ethics, any related person transactions approval policy, any securities trading policies, any Directors’ confidentiality policy and any corporate governance guidelines, and preserve the confidentiality of the Company’s business information, including the discussions of matters considered in meetings of the Board or any committee thereof, at all times that such Class B Director serves as a Director; provided, however, that the Company understands and agrees that any Class B Director may disclose information he or she obtains while serving as a member of the Board to any Class B Holder that has delivered a confidentiality agreement to the Company acceptable to the Company in its sole discretion and that the Class B Directors do not owe a duty to the Company not to disclose such information to the Class B Holders.
Section 2.04 Controlled Company Status. The Company shall take all commercially reasonable actions to remain a “controlled company” as defined in Rule 5615(c)(1) of the Nasdaq Listing Rules for as long as the Class B Threshold is met.
Section 2.05 Matters Requiring Class B Holder Approval. In addition to any vote or consent of the Board or the stockholders of the Company required by Law, without the approval of the stockholders holding at least a majority of the voting power of the Class B Common Stock, the Company shall not authorize, approve or ratify:
(a) distributions of Available Cash (as defined in the Limited Partnership Agreement of BCH (the “BCH PartnershipAgreement”)) that exceed 2% of the aggregate book value of Class A Units (as defined in the BCH Partnership Agreement) and Class S Units (as defined in the BCH Partnership Agreement) (or, if such Equity Securities (as defined in the BCH Partnership Agreement) are listed on a national securities exchange or quoted in an automated quotation system, 2% of the aggregate market value of Class A Units and Class S Units);
(b) the entry into a material or a commercially substantive debt financing arrangement by the Company, Ben LLC or any of their respective Subsidiaries, including, without limitation, debt financing arrangements (including any security interest with respect thereto) with an aggregate principal amount that exceeds 20% of Ben LLC’s consolidated gross assets (without duplication, and excluding the assets of any trust that is a consolidated subsidiary for financial reporting purposes including, without limitation, a “custody trust,” “collective trust,” “liquid trust,” and “funding trust”) or any materially or commercially substantive change to, or action with respect to, such a debt financing arrangement, including, without limitation, any material or commercially substantive amendment, supplement, waiver or modification thereto;
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(c) except in connection with any trust instrument or product offered by the Company or any Subsidiary thereof, the issuance by the Company or any Subsidiary thereof, in one transaction or a series of related transactions, of any membership interest or other equity securities in such entity that would (i) represent, after such issuance, or upon conversion, exchange or exercise, as the case may be, at least 5% on a fully diluted basis, as converted, exchanged or exercised basis, of any class of equity securities of the Company or any Subsidiary thereof, pursuant to a single issuance or a series of issuances over a three-year rolling time period or (ii) have designations, preferences, rights, priorities or powers that are more favorable than those of the outstanding capital stock of the Company or the applicable Subsidiary;
(d) make any determination with respect to the amount of, or any adjustment to, the Carrying Value (as defined in the BCH Partnership Agreement) of BCH pursuant to the BCH Partnership Agreement unless such determination is approved by the Audit Committee;
(e) the amendment, supplement, waiver, or modification of the Company’s Articles of Incorporation or Bylaws, the Ben LLC Limited Liability Company Agreement or the BCH Partnership Agreement;
(f) the exchange or disposition of a majority or more of the assets (including, without limitation, through merger, sale or other combination), taken as a whole, of the Company or any Subsidiary thereof in a single transaction or a series of related transactions other than an exchange or disposition to one or more Affiliates;
(g) the execution by the Company or any Subsidiary thereof of any contracts or of any amendment, supplement, waiver or modification of any existing contract which would materially change the nature of the business of the Company and its Affiliates, other than those contracts disclosed in the Company’s Registration Statement on Form S-4 filed with the Securities and Exchange Commission in connection with the transactions contemplated by the Business Combination Agreement;
(h) the liquidation or dissolution of, or the initiation of voluntary bankruptcy proceedings for, the Company or any Significant Subsidiary thereof; and
(i) any determination under Section 3.05(b) of the BCH Partnership Agreement regarding the selection or termination of any charity.
Section 2.06 Shares Covered. This Agreement shall cover all of the shares of Class B Common Stock now owned or hereafter acquired by the Class B Holders while this Agreement remains in effect.
ARTICLE III.
RIGHT OF FIRST REFUSAL
Section 3.01 Grant. Subject to the terms of this Article III, each Class B Holder grants to each other Class B Holder the right, but not the obligation, to purchase (a “Right of First Refusal”) all or any portion of the Proposed Transfer Shares that such Class B Holder (the “OfferingClass B Holder”) proposes to (a) Transfer in a transaction that would result in the automatic conversion of such shares of Class B Common Stock into shares of Class A Common Stock in accordance with the provisions of the Articles of Incorporation to (b) effect an Optional Conversion (each such Transfer or Optional Conversion, a “Proposed Transfer”), on substantially the same terms and conditions as those offered to the Proposed Transferee; provided that the consideration payable
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upon the exercise of any Right of First Refusal pursuant to this Article III may consist of Preferred Series A Subclass 1 Unit Accounts of BCH in an amount then convertible into the same number of shares of Class A Common Stock into which the Proposed Transfer Shares would be converted in the Proposed Transfer, or, at the option of the Exercising Class B Holder, an amount in cash per share equal to the ROFR Price. The delivery and subsequent conversion of any Preferred Series A Subclass 1 Unit Accounts of BCH transferred pursuant to the terms of this Article III shall be subject to the terms and provisions of the BCH Partnership Agreement.
Section 3.02 Notice. Each Offering Class B Holder proposing to make a Proposed Transfer must promptly, and in no event later than fifteen (15) days prior to any consummation of such Proposed Transfer, deliver a written notice (the “Proposed Transfer Notice”) to each of the original Class B Holders (or any of their respective previously designated Persons). Each such original Class B Holder shall be responsible for delivering a copy of such Proposed Transfer Notice to its respective Permitted Transferees. The Proposed Transfer Notice shall contain the material terms and conditions of the Proposed Transfer, including the number of Proposed Transfer Shares, whether the Proposed Transfer is an Optional Conversion or a Transfer, the price, the form of the consideration, the intended date of the Proposed Transfer and the identity of the Proposed Transferee, if applicable. The Proposed Transfer Notice shall constitute the Offering Class B Holder’s offer to Transfer the Proposed Transfer Shares to the other Class B Holders, which offer shall be irrevocable until the expiration of the ROFR Period.
Section 3.03 Exercise of Right of First Refusal. Upon receipt of a Proposed Transfer Notice, each Class B Holder shall have five (5) days (the “ROFR Period”) to exercise its right to purchase all or its pro rata portion (based upon the total number of shares of Class B Common Stock held by the Class B Holders other than the Offering Class B Holder) by delivery of a written notice (a “ROFR Notice”) to the Offering Class B Holder and the Company specifying the maximum number of Proposed Transfer Shares the Exercising Class B Holder elects to purchase, up to all of the Proposed Transfer Shares. If the exercises of options to purchase in the ROFR Notices exceed the number of Proposed Transfer Shares available, the Proposed Transfer Shares shall be allocated among those Class B Holders that submitted a ROFR Notice (the “Exercising Class B Holders”) pro rata based upon the total number of shares of Class B Common Stock held by the Exercising Class B Holders.
Section 3.04 Forfeiture of Rights. If a Class B Holder does not timely exercise its Right of First Refusal pursuant to this Article III, such Class B Holder shall be deemed to have waived its right to purchase any portion of the Proposed Transfer Shares pursuant to this Article III. In the event the other Class B Holders do not exercise their Right of First Refusal to purchase all of the Proposed Transfer Shares, the Offering Class B Holder shall be free to sell convert all, but not less than all, of the remaining available Proposed Transfer Shares on terms and conditions substantially similar to (and in no event more favorable than) the terms and conditions set forth in the Proposed Transfer Notice, it being agreed that any such sale or conversion shall be consummated within thirty (30) days following the date upon which the Proposed Transfer Notice is delivered (which may be extended for a reasonable period of time, not to exceed sixty (60) days, to the extent necessary to obtain any required Government Approvals). If the Offering Class B Holder does not sell or convert all such remaining available Proposed Transfer Shares within such period of time, any such sale, conversion or other Proposed Transfer shall again be subject to the Right of First Refusal on the terms set forth in this Article III.
Section 3.05 Closing. The closing of the purchase of the Proposed Transfer Shares by the Exercising Class B Holders shall occur on the latest of (i) the date specified in the Proposed Transfer Notice and (ii) the date that is ten (10) days following the expiration of the ROFR Period. The purchase price for the shares of Proposed Transfer Shares shall be paid, at the election of each Exercising Class B Holder, either (i) in cash, or (ii) by an assignment from the Exercising Class B Holder to the Offering Class B Holder of Preferred Series A Subclass 1 Unit Accounts of BCH in the amount set forth in Section 3.01. Any Proposed Transfer Shares and any Preferred Series A Subclass 1 Unit Accounts of BCH transferred pursuant to this Article III shall be free and clear of all liens and encumbrances other than those that arise under the terms of this Agreement, the Articles of Incorporation and BCH Partnership Agreement, as appliable, and those arising under applicable state or federal securities Laws, and any conversion of any Preferred Series A Subclass 1 Unit Accounts of BCH delivered pursuant to the terms of the Article III shall be subject to the terms and provisions of the BCH Partnership Agreement.
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Section 3.06 Failure to Comply. Any Proposed Transfer not made in accordance with the terms of this Article III shall be null and void ab initio, and shall not be recorded on the books of the Company or its transfer agent and shall not be recognized by the Company.
ARTICLE IV.
GENERALPROVISIONS
Section 4.01 Effectiveness; Termination. This Agreement shall not be effective until the Closing. Following the Closing and subject to the early termination of any provision as a result of an amendment to this Agreement agreed to by the Company and the Class B Holders as provided under Section 4.04, this Agreement (other than this Article IV) shall terminate at the earlier of (a) the date on which the Class B Threshold is no longer satisfied and (b) the date following the Closing on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property. In the event the Business Combination Agreement is terminated in accordance with its terms, this Agreement shall automatically terminate and be of no further force or effect.
Section 4.02 Representations of Class B Holders. Each of the Class B Holders individually represents and warrants to the Company and the other Class B Holders that: (a) the Class B Holder is a limited liability company validly existing and in good standing under the laws of the state of its jurisdiction of formation; (b) the Class B Holder has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; (c) the execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized and approved by all required action on the part of the Class B Holder; and (d) this Agreement has been duly and validly executed and delivered by the Class B Holder, and (assuming due authorization, execution, and delivery by the other parties hereto) this Agreement constitutes a legal, valid, and binding obligation of the Class B Holder, enforceable against the Class B Holder in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditor’s rights generally, and subject to general principles of equity).
Section 4.03 Notices. Any notice, designation, request, request for consent or consent provided for in this Agreement shall be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third Business Day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to David Rost, General Counsel, 325 North St. Paul Street, Suite 4850, Dallas, Texas 75201, and, if to any Class B Holder, at such Class B Holder’s address as indicated on the Company’s records. Any Person party hereto may change its address for notice at any time and from time to time by written notice to the other Persons party hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 4.03.
Section 4.04 Amendment; Waiver.
(a) The terms and provisions of this Agreement may be modified or amended only with the written approval of the Company and the Class B Holders holding a majority of the shares of Class B Common Stock then held by Class B Holders.
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(b) Except as expressly set forth in this Agreement, neither the failure nor delay on the part of any Person party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.
(c) No Person party hereto shall be deemed to have waived any claim arising out of this Agreement, or any right, remedy, power or privilege under this Agreement, unless the waiver of such claim, right, remedy, power or privilege is expressly set forth in a written instrument duly executed and delivered on behalf of such Person, and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
(d) Any Person party hereto may unilaterally waive any of its rights hereunder in a signed writing delivered to the Company.
Section 4.05 Further Assurances. The Persons party hereto will sign such further documents, cause such meetings to be held, resolutions passed, exercise their votes and do and perform and cause to be done such further acts and things necessary, proper or advisable in order to give full effect to this Agreement and every provision hereof. To the fullest extent permitted by Law, the Company shall not directly or indirectly take any action that is intended to, or would reasonably be expected to result in, the Class B Holders being deprived of the rights contemplated by this Agreement.
Section 4.06 Assignment. This Agreement may not be assigned without the express prior written consent of the other Persons party hereto, and any attempted assignment, without such consents, will be null and void; provided, however, that, without the prior written consent of any other Person party hereto, the Class B Holders may assign their respective rights and obligations under this Agreement, in whole or in part, to any Transferee of shares of Class B Common Stock that is (i) an existing Class B Holder or (ii) an Affiliate of such Class B Holder, in each case so long as such Transferee, if not already a party to this Agreement, executes and delivers to the Company a joinder to this Agreement substantially in the form of Exhibit A hereto evidencing its agreement to become a party to, and to be bound to the same extent as the Class B Holders by all of the provisions of, this Agreement (a “Permitted Transferee”); provided that, in addition to any legends required by Law, each certificate representing the shares of Class B Common Stock so transferred shall bear a legend substantially in the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND ITS CLASS B STOCKHOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.”
This Agreement will inure to the benefit of and be binding on the Persons party hereto and their respective successors and permitted assigns.
Section 4.07 Third Parties. Except as provided for in Section 4.15 with respect to any Non-Recourse Party, this Agreement does not create any rights, claims or benefits inuring to any Person that is not a party hereto nor create or establish any third party beneficiary hereto.
Section 4.08 Governing Law. THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION BASED UPON, ARISING OUT OF, OR RELATED TO THIS AGREEMENT, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF LAWS OF ANOTHER JURISDICTION.
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Section 4.09 Jurisdiction; Waiver of Jury Trial.
(a) Any Action seeking to enforce any provision of, or based upon, arising out of or related to, this Agreement shall be brought against any of the Persons party hereto in any Nevada state or United States federal court in Clark County, Nevada, and each of the Persons party hereto hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such Action and waives any objection to venue laid therein. Process in any such Action may be served on any Person party hereto anywhere in the world, whether within or without the jurisdiction of any such court.
(b) EACH OF THE PERSONS PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE HEREBY IRREVOCABLY, UNCONDITIONALLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHT SUCH PERSON MAY HAVE TO A TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT.
Section 4.10 Default, Remedies and Specific Performance.
(a) Default. A party’s neglect, refusal or failure to perform any material term or obligation under this Agreement when due shall constitute a default under this Agreement.
(b) Remedies. The parties hereto shall have, and may exercise, any and all remedies at law or in equity for breach of this Agreement, including, but not limited to, specific performance, declaratory relief and monetary damages. With respect to a breach of Section 2.05, the Class B Holders, may, in addition to and not in derogation of any other remedy, seek specific provisional remedies, at their sole and exclusive option, including, but not limited to, the appointment of a receiver or examiner and preliminary injunctive relief.
(c) Specific Performance. Each Person party hereto acknowledges and agrees that in the event of any breach of this Agreement by any of them, the other Persons party hereto would be irreparably harmed and could not be made whole by monetary damages. Each Person party hereto accordingly agrees to waive the defense in any action for specific performance that a remedy at Law would be adequate and that the Persons party hereto, in addition to any other remedy to which they may be entitled at Law or in equity, shall be entitled to specific performance of this Agreement without the posting of a bond.
(d) Attorneys’ Fees and Costs. In addition to any damages otherwise recoverable, the prevailing party in any action brought to enforce the terms of this Agreement shall be entitled to an award of reasonable attorneys’ fees and costs incurred.
Section 4.11 Entire Agreement. This Agreement sets forth the entire understanding of the Persons party hereto with respect to the subject matter hereof. There are no agreements, representations, warranties, covenants or understandings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all other prior agreements and understandings between the Persons party hereto with respect to such subject matter.
Section 4.12 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance or in any jurisdiction, shall be held to be invalid or unenforceable to any extent, (i) the remainder of this Agreement shall not be affected thereby, and each other provision hereof shall be valid and enforceable to the fullest extent permitted by Law, (ii) as to such Person or circumstance or in such jurisdiction such provision shall be reformed to be valid and enforceable to the fullest extent permitted by Law and (iii) the application of such provision to other Persons or circumstances or in other jurisdictions shall not be affected thereby.
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Section 4.13 Table of Contents, Headings and Captions. The table of contents, headings, subheadings and captions contained in this Agreement are included for convenience of reference only, and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof.
Section 4.14 Counterparts. This Agreement and any amendment hereto may be signed in any number of separate counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, but all of which taken together shall constitute one agreement (or amendment, as applicable).
Section 4.15 No Recourse. This Agreement may only be enforced against, and any claim or cause of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, the transactions contemplated hereby or the subject matter hereof may only be made against the Persons party hereto and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, shareholder, agent, attorney or representative of any Person party hereto or any past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, agent, attorney or representative of any of the foregoing (each, a “Non-Recourse Party”) shall have any liability for any obligations or liabilities of the Persons party hereto or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby. Without limiting the rights of any Person party hereto against the other Persons party hereto, in no event shall any party or any of its Affiliates seek to enforce this Agreement against, make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Non-Recourse Party.
Section 4.16 Pledges. Upon request of any Class B Holder at any time in which the Class B Holder wishes to pledge, hypothecate or grant security interests in any or all of the shares of Common Stock held by it, including to banks or financial institutions as collateral or security for loans, advances or extensions of credit, the Company shall reasonably cooperate with the Class B Holder, at the sole cost and expense of the Class B Holder, in taking action reasonably necessary to facilitate any such pledge, hypothecation or grant, including delivery of customary letter agreements to lenders that such lenders may reasonably request (which may include customary agreements by the Company in respect of the exercise of remedies by such lenders).
Section 4.17 Adjustments. All references in this Agreement to shares of Common Stock shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, reclassifications, recapitalizations, reorganizations and the like occurring after the date hereof.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Persons party hereto have executed this Stockholders Agreement on the day and year first above written.
| BENEFICIENT | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| BENEFICIENT HOLDINGS INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| HICKS HOLDINGS OPERATING, LLC | |
| By: | /s/ Thomas O. Hicks |
| Name: | Thomas O. Hicks |
| Title: | Sole Member |
| BRUCE SCHNITZER | |
| By: | /s/ Bruce Schnitzer |
| Name: | Bruce Schnitzer |
[Signature Page to Stockholders Agreement]
EXHIBIT A
FORM OF JOINDER TO STOCKHOLDERS AGREEMENT
, 20
Reference is made to the Stockholders Agreement, dated as of June 7, 2023, by and among Beneficient, a Nevada corporation, Beneficient Holdings Inc., Hicks Holdings Operating, LLC and Bruce Schnitzer (as amended from time to time, the “StockholdersAgreement”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Stockholders Agreement.
Each of the Company and each undersigned holder of shares of the Company (each, a “New Class BHolder”) agrees that this Joinder to the Stockholders Agreement (this “Joinder”) is being executed and delivered for good and valuable consideration.
Each undersigned New Class B Holder hereby agrees to and does become party to the Stockholders Agreement as a Class B Holder. This Joinder shall serve as a counterpart signature page to the Stockholders Agreement and by executing below each undersigned New Class B Holder is deemed to have executed the Stockholders Agreement with the same force and effect as if originally named a party thereto.
This Joinder may be executed in multiple counterparts, including by means of facsimile or electronic signature, each of which shall be deemed an original, but all of which together shall constitute the same instrument.
Exhibit A
IN WITNESS WHEREOF, the undersigned have duly executed this joinder as of the date first set forth above.
| [NEW CLASS B STOCKHOLDER] |
|---|
| By: |
| Name: |
| Title: |
| BENEFICIENT |
| By: |
| Name: |
| Title: |
Exhibit A
EX-4.4
Exhibit 4.4
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this “Agreement”), dated as of June 7, 2023, is entered into by and among Beneficient, a Nevada corporation (“Beneficient”), Beneficient Company Group, L.L.C., a Delaware limited liability company (“Ben LLC”) and Beneficient Company Holdings, L.P. (“BCH”).
WHEREAS, The Beneficient Company Group. L.P. (“BCG”) previously formed Ben LLC as its sole member and served as its managing member;
WHEREAS, BCG subsequently converted from a Delaware limited partnership to a Nevada corporation and in connection therewith changed its name to Beneficient (the “Conversion”);
WHEREAS, in connection with the Conversion, Beneficient, as then general partner of BCH, adopted the Eighth Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (the “BCH Eighth A&R LPA”), which provides for the exchange of certain limited partner interests in BCH for shares of the Class A Common Stock (as defined below) in Beneficient;
WHEREAS, following the Conversion, Beneficient contributed 100% of its general partner and limited partner interests in BCH to Ben LLC (the “Contribution”); and
WHEREAS, the parties desire to enter into this Agreement to provide, together with the terms and conditions of the BCH Eighth A&R LPA, for certain rights and obligations with respect to the exchange of such limited partner interests in BCH for shares of the Class A Common Stock of Beneficient from time to time.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
“Agreement” has the meaning set forth in the preamble of this Agreement.
“Articles of Incorporation” means, with respect to the Issuer as of any date, the Articles of Incorporation, as amended, of the Issuer as in effect on such date.
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“Available Shares” has the meaning set forth in Section 2.5(b).
“BCG” has the meaning set forth in the recitals of this Agreement.
“BCH” has the meaning set forth in the preamble of this Agreement.
“BCH Eighth A&R LPA” has the meaning set forth in the recitals to this Agreement, as it may be amended, supplemented or restated from time to time.
“Ben LLC” has the meaning set forth in the preamble of this Agreement.
“Beneficient” has the meaning set forth in the preamble of this Agreement.
“Business Day” means each day that is not a Saturday, Sunday or Federal holiday.
“Class A Common Stock” means the Class A Common Stock, $0.001 par value per share, of the Issuer.
“Class S Ordinary Units” means the limited partner interests in BCH designated as the “Class S Ordinary Units.”
“Code” means the Internal Revenue Code of 1986, as amended.
“Contribution” has the meaning set forth in the recitals to this Agreement.
“Conversion” has the meaning set forth in the recitals to this Agreement.
“Exchange” has the meaning set forth in Section 2.1(a) of this Agreement.
“Fiscal Quarter” means, as applicable, a three-month period commencing on January 1, April 1, July 1 or October 1.
“Group Partnership” means, initially, BCH and any successor thereto, and shall also include any future partnership that is a subsidiary of Beneficient and designated as a Group Partnership pursuant to Section 3.1.
“GroupPartnership Agreement” means, with respect to BCH, the BCH Eighth A&R LPA, as may be amended, supplemented or restated from time to time and, with respect to any future Group Partnership, the limited partnership agreement of such future Group Partnership.
“Group Partnership General Partner” means, with respect to BCH, Ben LLC, and any successor thereto and, with respect to any future Group Partnership, the general partner of such future Group Partnership).
“Group Partnership Interests” means, with respect to BCH, the Class S Ordinary Units, the Preferred Series C Subclass 1 Unit Accounts and any subsequently established class of limited partnership interests in BCH that are exchangeable for shares of Class A Common Stock and, with respect to any future Group Partnership, the limited partnership interests of such future Group Partnership that are exchangeable for shares of Class A Common Stock.
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“Issuer” means Beneficient and any successor thereto.
“Limited Partner” means each Person that is as of the date of this Agreement or becomes from time to time hereafter (i) a limited partner of a Group Partnership pursuant to the terms of the applicable Group Partnership Agreement and (ii) a holder of a Group Partnership Interest. For purposes of this Agreement, Beneficient Management Partners, L.P. shall be considered a Limited Partner.
“Notice” has the meaning set forth in Section 2.2(a).
“Person” means an individual, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization, association (including any group, organization, co-tenancy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).
“Preferred Series C Subclass 1Unit Accounts” means the limited partner interests in BCH designated as the “Preferred Series Subclass 1 Unit Accounts.”
“Public Offering” means a public offering of shares of Class A Common Stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, other than pursuant to a registration statement on Form S-4 or Form S-8 or any similar or successor form.
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person, at the date of determination, (i) is a general partner of such partnership, (ii) owns more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class), directly or indirectly, or (iii) otherwise controls such partnership, directly or indirectly, (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, (i) has at least a majority ownership interest, (ii) has the power to elect or direct the election of a majority of the directors or other governing body of such Person, or (iii) otherwise controls such Person or (d) any other Person the financial information of which is consolidated by such Person for financial reporting purposes under accounting principles generally accepted in the United States.
“Transfer Agent” means such bank, trust company or other Person as shall be appointed from time to time by the Issuer to act as registrar and transfer agent for the Class A Common Stock.
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ARTICLE II
EXCHANGE OF GROUP PARTNERSHIP INTEREST
Section 2.1 Exchange of Group Partnership Interest.
(a) Subject to the provisions of the Group Partnership Agreement and to the provisions of Section 2.2 hereof, a Limited Partner shall be entitled to exchange Group Partnership Interests for the delivery of that number of shares of Class A Common Stock (acquired from the Issuer) as determined in accordance with the applicable Group Partnership Agreement (any such exchange, an “Exchange”).
(b) On the date any Exchange of Group Partnership Interests is effective, all rights of the Limited Partner as holder of such exchanged Group Partnership Interests shall cease, and the Limited Partner shall be treated for all purposes as having then become the record holder of the shares of Class A Common Stock that are the subject of the Exchange.
(c) For the avoidance of doubt, any Exchange of Group Partnership Interests shall, in addition to the terms and conditions hereof, be subject to the provisions of the Group Partnership Agreement.
Section 2.2 Exchange Procedures.
(a) A Limited Partner may exercise the right to Exchange its Group Partnership Interests from time to time by providing not less than sixty-one (61) days’ prior written notice (a “Notice”) of the Exchange to the Group Partnership General Partner and the Issuer substantially in the form of Exhibit A hereto and as may otherwise be required by the applicable Group Partnership Agreement; provided, that such sixty-one (61) day notice period shall not be applicable to any Exchange of the Preferred Series C Subclass 1 Unit Accounts. Each such Notice shall be duly executed by such Limited Partner and delivered during normal business hours at the principal executive offices of the Group Partnership General Partner and the Issuer or such other manner agreeable to the Group Partnership General Partner.
(b) In respect of each Exchange for which a Notice has been provided pursuant to Section 2.2(a):
(i) With respect to any Exchange of Class S Ordinary Units to Class A Common Stock, the Exchange shall occur on the date that is the latter to occur of (A) the date that is the expiration of the sixty-one (61) day Notice period, unless waived as provided below, (B) the third business day after the date of the earnings release by Beneficient covering the Fiscal Quarter in which the Notice is provided; or (C) the first day following the earnings release by Beneficient covering the Fiscal Quarter in which the Notice is provided that directors and executive officers of Beneficient are permitted to trade under the applicable policies of Beneficient relating to trading by directors and executive officers.
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(ii) If at any time after the date the Notice is given and prior to the date of the Exchange, the Issuer commences a Public Offering or determines that it is reasonably likely to commence a Public Offering within ninety (90) days following such Exchange, the Issuer and the Group Partnership may cancel, at their sole option, all Exchanges for which a Notice has been given.
(iii) If a registration statement filed with the Securities and Exchange Commission in respect of shares of Class A Common Stock to be issued pursuant to an Exchange is not effective on the day prior to and day of the scheduled date of any such Exchange, the Issuer and the Group Partnership may cancel, at their option, all Exchanges that are contemplated to be made pursuant to such registration statement for which a Notice has been given.
Beneficient may, at its sole discretion, waive (i) the requirement of the sixty-one (61) day Notice period and only require the delivery of the Notice and/or (ii) the requirement that the date of the Exchange occur on the date specified in Section 2.1(b)(i) above.
(c) Each Limited Partner beneficially owning the Group Partnership Interests seeking to exercise its right to an Exchange pursuant to this Agreement and the applicable Group Partnership Agreement shall be required to execute and deliver such documents or agreements as reasonably necessary to effectuate the Exchange, including a written assignment and acceptance agreement with respect to such Group Partnership Interests prior to such Exchange, which assignment and acceptance agreement shall be delivered during normal business hours at the registered office of the Issuer or such other manner agreeable to the Issuer.
(d) As promptly as practicable following a Limited Partner’s surrender of Group Partnership Interests in connection with effecting an Exchange in the manner provided in this Article II, the Group Partnership and the Issuer shall cause the Limited Partner to be issued the number of shares of Class A Common Stock issuable upon such Exchange determined in accordance with this Agreement and the applicable Group Partnership Agreement.
Section 2.3 Blackout Periods and Ownership Restrictions. Notwithstanding anything to the contrary, a Limited Partner shall not be entitled to Exchange its Group Partnership Interests, and the Issuer and the Group Partnership shall have the right to refuse to honor any request for an Exchange of Group Partnership Interests, (i) if any such Exchange is not permitted under the terms of any insider trading policy of the Issuer applicable to the employees and directors of the Issuer or its subsidiaries and the Limited Partner is subject to such insider trading policy, (ii) at any time or during any period if the Issuer or the Group Partnership shall determine, based on the advice of counsel (including advice provided by counsel employed by the Issuer or Group Partnership), that there may be material non-public information that may affect the trading price per share of Class A Common Stock at such time or during such period, (iii) if such Exchange would be prohibited under applicable law or regulation, or (iv) to the extent such Exchange would not be permitted under the terms and provisions of the applicable Group Partnership Agreement.
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Section 2.4 Reclassifications. In the event of a reclassification or other similar transaction as a result of which the shares of Class A Common Stock are converted into another security, then a Limited Partner, as the case may be, shall, unless otherwise provided in the applicable Group Partnership Agreement, be entitled to receive upon Exchange the amount of such security that the Limited Partner would have received if such Exchange had occurred immediately prior to the effective date of such reclassification or other similar transaction. Except as may be required in the immediately preceding sentence, no adjustments in respect of distributions shall be made upon the Exchange of any Group Partnership Interest.
Section 2.5 Shares of Class A Common Stock to be Issued.
(a) The Issuer covenants that if any shares of Class A Common Stock require registration with or approval of any governmental authority under any foreign, U.S. federal or state law before such shares of Class A Common Stock may be issued upon Exchange pursuant to this Article II, the Issuer shall use commercially reasonable efforts to cause such shares of Class A Common Stock to be duly registered or approved, as the case may be. The Issuer shall use commercially reasonable efforts to list the shares of Class A Common Stock required to be delivered upon Exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the outstanding shares of Class A Common Stock may be listed or traded at the time of such delivery. Nothing contained herein shall be construed to preclude the Issuer or the Group Partnership from satisfying their obligations in respect of any Exchange of the Group Partnership Interests by delivery of shares of Class A Common Stock which are held in the treasury of the Issuer or the Group Partnership or any of their subsidiaries.
(b) The maximum number of shares of the Class A Common Stock that the Issuer may be required to issue at any one time pursuant to the provisions of this Agreement shall not exceed that number of shares of Class A Common Stock equal to (i) the number of shares of Class A Common Stock then authorized for issuance pursuant to the Articles of Incorporation, less (ii) the sum of (A) the number of shares of Class A Common Stock issued as of such date, plus (B) the number of shares of Class A Common Stock reserved for issuance by the Issuer (including, without limitation, any shares reserved for issuance or subject to outstanding awards granted pursuant to The Beneficient Company Group, L.P. 2018 Equity Incentive Plan and Beneficient’s 2023 Long-Term Incentive Plan, or any successor plans thereto) other than in connection with any exchange of the Class S Ordinary Units, including any other securities of the Group Partnership that are convertible into Class S Ordinary Units (the “Available Shares”). If on the date a Notice is provided the Issuer does not have a sufficient number of Available Shares to complete the Exchange described in such Notice, the Issuer shall, subject to the terms of this Agreement, complete such requested Exchange to the extent possible based upon the then Available Shares (if more than one Notice is provided on any day, the Available Shares shall be allocated among the Limited Partners submitting such Notices based upon the number of Exchange Interests (as defined in the Notice) specified in the Notice for Exchange). The Issuer shall further take commercially reasonable efforts to (i) amend the Articles of Incorporation to increase the number of authorized shares of Class A Common Stock to a number reasonably determined by the Issuer’s board of directors (including obtaining requisite shareholder approval under applicable law), and (ii) prepare and file with the national securities exchange on which the Class A Common Stock is then listed an additional shares listing application covering a number of shares of Class A Common Stock at least equal to the remaining shares issuable upon such Notice(s). Nothing contained herein shall be construed to preclude the Issuer from satisfying its obligations with respect to an Exchange by delivery of shares of Class A Common Stock which are held in treasury by the Issuer or by delivery of purchased shares of Class A Common Stock (which may or may not be held in treasury by the Issuer).
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Section 2.6 Taxes. The delivery of shares of Class A Common Stock upon Exchange of Group Partnership Interests shall be made without charge to any Limited Partner for any stamp or other similar tax in respect of such issuance.
ARTICLE III
GENERALPROVISIONS
Section 3.1 Amendment. The provisions of this Agreement may be amended by the affirmative vote or written consent of each of the Issuer and the Group Partnership. No amendment to this Agreement shall be required (i) to the extent any entity becomes a successor of any of the foregoing parties or (ii) to reflect the addition of a future Group Partnership, which addition may be effectuated through the execution by such entity of an addendum to this Agreement pursuant to which such entity agrees to be bound hereby as a Group Partnership.
Section 3.2 Addresses and Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by electronic mail (delivery receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 3.2):
| (a) | If to the Group Partnership General Partner, to: |
|---|
Beneficient Company Group, L.L.C.
325 N. St. Paul Street, Suite 4850
Dallas, Texas 75201
Attn: General Counsel
Electronic Mail: legalnotices@beneficient.com
| (b) | If to the Group Partnership, to: |
|---|
Beneficient Company Holdings, L.P.
c/o Beneficient Company Group, L.L.C.
325 N. St. Paul Street, Suite 4850
Dallas, Texas 75201
Attn: General Counsel
Electronic Mail: legalnotices@beneficient.com
| (c) | If to the Issuer, to: |
|---|
Beneficient
325 N. St. Paul Street, Suite 4850
Dallas, Texas 75201 Attn: General Counsel
Electronic Mail: legalnotices@beneficient.com
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Section 3.3 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 3.4 Binding Effect. This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns. Each Limited Partner is intended to be a third-party beneficiary of this Agreement and shall be entitled to enforce the terms of this Agreement, subject to any obligations applicable to such Limited Partner. Other than as expressly provided herein, nothing in this Agreement will be construed to give any person other than the parties to this Agreement and, as set forth herein, the Limited Partners, any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
Section 3.5 Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 3.6 Integration. This Agreement, together with any applicable Group Partnership Agreement, constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
Section 3.7 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 3.8 Dispute Resolution. The provisions of Section 11.10 of the Group Partnership Agreement shall apply, mutatismutandis, to the parties of this Agreement and any Limited Partner with respect to any claims, suits, actions or proceedings arising out of or relating to this Agreement.
Section 3.9 Counterparts. This Agreement may be executed and delivered (including by means of email with scan attachment) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 3.9.
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Section 3.10 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to principles of conflicts of law.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered, all as of the date first set forth above.
| BENEFICIENT | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
| BENEFICIENT COMPANY HOLDINGS, L.P. | |
| By: Beneficient Company Group, L.L.C., its general partner | |
| By: | Beneficient, **** its managing member |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
| BENEFICIENT COMPANY GROUP, L.L.C. | |
| By: | Beneficient, its managing member |
| By: | /s/James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
[Signature Page to Exchange Agreement]
EXHIBIT A
[FORM OF]
NOTICE OF EXCHANGE
Beneficient
Beneficient Company Group, L.L.C.
Beneficient Company Holdings, L.P.
325 N. St. Paul Street, Suite 4850
Dallas, Texas 75201
Attn: General Counsel
Reference is hereby made to the Exchange Agreement (the “Exchange Agreement”), among Beneficient, Beneficient Company Group, L.L.C. (“Ben LLC”) and Beneficient Company Holdings, L.P. (“BCH”), as amended from time to time, and to the Eighth Amended and Restated Limited Partnership Agreement (the “BCHLPA”) of Beneficient Company Holdings, L.P., as amended from time to time.
The undersigned (the “ExchangingLimited Partner”) desires to exchange the number of units or designated amount of Group Partnership Interests set forth on the line below the signature below (the “Exchange Interests”) for shares of Class A Common Stock of Beneficient (“Class A Common Stock”) pursuant to an Exchange (as defined in the Exchange Agreement). Accordingly, the Exchanging Limited Partner hereby gives notice to BCH and Beneficient of its election to exchange its Exchange Interests for shares of Class A Common Stock in an Exchange pursuant to Section 2.2 of the Exchange Agreement.
Pursuant to the foregoing, the Exchanging Limited Partner hereby represents, warrants, and covenants to the Issuer, Ben LLC and each Group Partnership that:
(a) The Exchanging Limited Partner is acquiring the Class A Common Stock for its own account and for investment purposes only, and not with a view to the distribution or resale thereof, in whole or in part, in violation of applicable securities laws.
(b) The Exchanging Limited Partner is in such a financial condition that it has no need for liquidity with respect to the Class A Common Stock and no need to dispose of any portion of the Class A Common Stock acquired hereby to satisfy any existing or contemplated undertaking or indebtedness. The Exchanging Limited Partner hereby represents that, at the present time, the Investor could afford a complete loss of its investment in the Class A Common Stock.
(c) The Exchanging Limited Partner understands that no federal or state governmental agency or authority, including the Securities and Exchange Commission, has approved or disapproved of the Class A Common Stock.
Exhibit A
Exchange Agreement
(d) The Exchanging Limited Partner acknowledges that the Issuer and applicable Group Partnership have made available to the Exchanging Limited Partner the opportunity to ask questions and receive answers concerning the Issuer and the Class A Common Stock, and to obtain any additional information which Issuer possesses or can acquire without unreasonable effort or expense and has received any and all information requested.
(e) No representations or warranties have been made to the Exchanging Limited Partner concerning the Issuer, its business, or the Class A Common Stock by the Issuer, Ben LLC or the applicable Group Partnership, or any agent, officer, or employee of any of them, or by any other person, and in making such Exchange, the Exchanging Limited Partner is not relying on any information other than the results of the Exchanging Limited Partner’s own independent investigation and due diligence. In this regard, the Exchanging Limited Partner has made its own inquiry and analysis (on its own or with the assistance of others) with respect to the Issuer and its business, the Class A Common Stock, and other material factors affecting the Class A Common Stock. Based on such information and analysis, the Exchanging Limited Partner has been able to make an informed decision to enter into the Exchange and acquire the Class A Common Stock.
(f) The Exchanging Limited Partner is a sophisticated investor and has such knowledge and experience in financial and business matters that the Exchanging Limited Partner is capable of evaluating the merits and risks of an investment in the Class A Common Stock. To the extent necessary, the Exchanging Limited Partner has retained, at its own expense, and relied upon, appropriate professional advice regarding the investment, tax, and legal merits and consequences of the ownership of the Class A Common Stock.
By executing and delivering this notice, the Exchanging Limited Partner agrees to be bound by the terms and provisions of the Exchange Agreement as if the Exchanging Limited Partner was an original party thereto.
| Exchanging Limited Partner |
|---|
| By: |
| Name: |
| Title: |
| Exchange Interests: |
Exhibit A
Exchange Agreement
EX-4.7
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of June 7, 2023, by and among (i) Beneficient, a Nevada corporation (the “Company”), successor by way of statutory conversion to The Beneficient Company Group, L.P., a Delaware limited partnership (“BCG”), (ii) Avalon Acquisition Holdings LLC (the “Avalon Sponsor”), (iii) the holders of Class B Common Stock, par value par value $0.001 per share, of the Company (the “Class B CommonStock”) immediately following the Mergers (as defined below) signatory hereto (the “Class B Holders”) and (iv) any current or future holder of interests in Beneficient Company Holdings, L.P., a Delaware limited partnership (“BCH”), or Beneficient Company Group, L.L.C., a Delaware limited liability company (“Ben LLC”), that hereafter becomes a party to this Agreement pursuant to Section 14(d) of this Agreement (together with the Avalon Sponsor and the Class B Holders, the “Investors”). The Company and the Investors are sometimes collectively referred to herein as the “Parties” and individually as a “Party.”
WHEREAS, the Company, Beneficient Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of BCG (“Merger Sub I”), Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of BCG (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”), and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”);
WHEREAS, in connection with the Business Combination Agreement, (i) the Company will convert from a Delaware limited partnership to Beneficient, a Nevada corporation (the “Conversion,” and all references herein to the Company are to the Company after the Conversion), (ii) immediately following confirmation of the Conversion, Merger Sub I will merge with and into Avalon (the “Avalon Merger”), with Avalon surviving the Avalon Merger (the “Avalon Merger Surviving Company”) as a wholly owned subsidiary of the Company, and (ii) within two weeks following confirmation of the Avalon Merger, the Avalon Merger Surviving Company will merge with and into Merger Sub II (the “LLC Merger,” together with the Avalon Merger, the “Mergers”) with Merger Sub II surviving the LLC Merger as a wholly-owned subsidiary of the Company;
WHEREAS, in connection with the transactions contemplated by the Business Combination Agreement, the Company will become subject to the reporting requirements of the Exchange Act, and certain securities of the Company will be registered under the Securities Act; and
WHEREAS, in connection with the Mergers, the Parties desire to enter into this Agreement for the purpose of, among others, providing the registration rights set forth in this Agreement to the Investors, and this Agreement shall only be effective as of the Closing (as defined in the Business Combination Agreement).
NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Section 1. Resale Registration.
(a) The Company shall use commercially reasonable efforts to file as soon as it is permitted by the rules and regulations promulgated by the Securities and Exchange Commission (the “Commission”) to do so, and to cause to be declared effective as soon as practicable thereafter, a registration statement on Form S-3 or any similar short-form registration statement, in each case, covering the resale of all the Registrable Securities (as determined as of two (2) Business Days prior to such filing) (any such registration statement filed pursuant to this Section 1(a), a “Resale Shelf”); provided that the Parties acknowledge and agree that the sale of any Registrable Securities registered under such Resale Shelf may be subject to restrictions imposed by lock-up or holdback
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restrictions, including those pursuant to any then effective lock-up agreement, and/or applicable securities laws. Such Resale Shelf shall provide for the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, the Investors named therein holding a majority of the then-outstanding number of Registrable Securities.
(b) The Company agrees to use commercially reasonable efforts to cause such Resale Shelf, or another shelf registration statement that includes all Registrable Securities, to remain effective until the earlier of (i) the date on which Investors cease to hold any Registrable Securities and (ii) the date on which all Registered Securities held by the Investors become eligible for sale in a single transaction pursuant to Rule 144 under the Securities Act without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1) of the Securities Act, as set forth in a written opinion letter to such effect, addressed, delivered and reasonably acceptable to the Company and the applicable transfer agent of the Registrable Securities (the “Resale Shelf Expiration Date”). The Company shall use its commercially reasonable efforts to provide a draft of the Resale Shelf to the Investors holding Registrable Securities for review (but not comment) at least three (3) Business Days in advance of filing the Resale Shelf; provided that, for the avoidance of doubt, in no event shall the Company be required to delay or postpone the filing of any such Resale Shelf as a result of or in connection with any Investor’s review. Notwithstanding the foregoing, if the Commission prevents the Company from including any or all of the Registrable Securities proposed to be registered under a Resale Shelf due to limitations on the use of Rule 415 of the Securities Act for the resale of Registrable Securities by the applicable Investors or otherwise, such Resale Shelf shall register for resale the maximum number of Registrable Securities as is permitted. In such event, the number of Registrable Securities to be registered for each selling Investor named in the Resale Shelf shall be reduced pro rata among all such selling Investors, and as promptly as practicable after being permitted to register additional Registrable Securities under Rule 415 under the Securities Act, the Company shall amend the Resale Shelf or file a new Resale Shelf to register such Registrable Securities not included in the initial Resale Shelf and use its commercially reasonable efforts to cause such amendment or Resale Shelf to become effective as promptly as practicable. Registration Expenses of the holders of Registrable Securities in the Resale Shelf shall be paid by the Company, whether or not any such offering is completed.
(c) The Company shall use its reasonable efforts to keep all such Resale Shelfs filed pursuant to this Section 1 continuously effective under the Securities Act, including by filing successive replacement or renewal registration statements in accordance with this Section 1, in order to permit the prospectus forming a part thereof to be usable by the Investors until the earlier of (i) the Resale Shelf Expiration Date and (ii) such shorter period as all the holder(s) of securities under a Resale Shelf (or their designee(s)), as applicable), may agree in writing.
(d) At any time and from time to time that a Resale Shelf is effective, if a holder of Registrable Securities requests (i) the registration under the Securities Act of additional Registrable Securities pursuant to such Resale Shelf or (ii) that such holder be added as a selling stockholder in such Resale Shelf, the Company shall as promptly as practicable amend or supplement the Resale Shelf to cover such additional Registrable Securities and/or holder.
(e) Beginning on January 1, 2025, if one or more Resale Shelfs are not on file and effective with the Commission registering the resale of the Registrable Securities, the Investors (other than the Avalon Sponsor) holding at least a majority of the then-outstanding number of Registrable Securities held by all Investors may request that the Company file a registration statement on Form S-1 or any successor form or similar long-form registration statement (a “Long-Form Registration”) covering the resale of all the Registrable Securities (as determined as of two (2) Business Days prior to such filing). If a Long-Form Registration is required pursuant to this Section 1(e), the term “Resale Shelf” as used in this Agreement shall also be deemed to include such Long- Form Registration.
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Section 2. Demand Registrations.
(a) Requests for Underwritten Takedowns. Subject to Section 2(b) below, the other terms and conditions of this Agreement and the restrictions imposed by any then effective lock-up agreement, at any time following the effectiveness of a Resale Shelf pursuant to Section 1, the Investors (other than the Avalon Sponsor) holding at least a majority of the then-outstanding number of Registrable Securities held by all Investors may request that the Company file a prospectus or prospectus supplement to a Resale Shelf covering the sale of all or a portion of their Registrable Securities in an underwritten offering (each such request, a “Demand Notice”); provided that Investors entitled to participate in an Underwritten Takedown shall only include Investors whose Registrable Securities are included in such Resale Shelf or may be included therein without the need for a post-effective amendment to such Resale Shelf (other than an automatically effective amendment). All underwritten offerings requested pursuant to this Section 2(a) by the holders of Registrable Securities are referred to herein as an “Underwritten Takedown.” Each Demand Notice shall specify the number of Registrable Securities requested to be offered. No prospectus or prospectus supplement will be filed, and no Underwritten Takedown will be consummated, if the number of Registrable Securities requested to be offered (including pursuant to the following sentence) is fewer than such number of shares of Class A Common Stock with a price to the public (net of any underwriters’ discounts or commissions) of $25,000,000. Within ten (10) days after receipt of any Demand Notice, the Company shall give written notice of such Demand Notice to all other Investors and, subject to the terms of Section 2(b), the other terms and conditions of this Agreement and the restrictions imposed by any then effective lock-up agreement, shall include in such Underwritten Takedown (and in all related registrations and qualifications under state blue sky laws and in compliance with other registration requirements) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within thirty (30) days after the delivery of the Company’s notice. The Company shall pay all Registration Expenses with respect to Underwritten Takedowns, whether or not any such offering is completed.
(b) Priority on Demand Registrations. If the managing underwriters in an Underwritten Takedown advise the Company in writing that in their reasonable opinion, the number of securities requested to be included in such offering exceeds the number of securities which marketing factors permit to be sold in such offering, then the Company shall include in such offering only that number of Registrable Securities that in the opinion of such underwriters marketing factors permit to be sold in such offering, and the Registrable Securities that are included in such offering shall be allocated pro rata among the respective holders thereof with the following priority: (i) first, the securities of the holders who exercised their rights pursuant to Section 2(a), allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder, (ii) second, the securities the Company proposes to sell, and (iii) third, the securities of other persons or entities that the Company is obligated to register in a registration pursuant to separate written contractual arrangements with such persons.
(c) Restrictions on Demand Registrations. The Company shall not be obligated to effect any Underwritten Takedown within six (6) months of receipt of a prior Demand Notice. The Company may postpone the filing, or suspend the use, of a prospectus or prospectus supplement for an Underwritten Takedown if the board of directors of the Company (the “Board”) determines in its good faith judgment, and the Company furnishes to the Investors exercising such Underwritten Takedown rights a certificate from the chief executive officer of the Company certifying, as applicable, that such Underwritten Takedown would require the Company to make an Adverse Disclosure; provided that in such event, the Investors initially requesting such Underwritten Takedown shall be entitled to withdraw such request and, if such request is withdrawn with respect to an Underwritten Takedown, such Demand Notice shall not count as a Demand Notice received by the Company for purposes of the first sentence of this Section 2(c), and the Company shall nonetheless pay all Registration Expenses in connection with such offering; provided further, that the Company shall not register any securities for its own account or that of any other Investor during such postponement or suspension period other than pursuant to: (i) a Resale Shelf (including any amendments, supplements or any other filings related thereto); (ii) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (iii) a registration on any form that does not include substantially
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the same information as would be required to be included in a prospectus or prospectus supplement covering the sale of the Registrable Securities pursuant to this Section 2; or (iv) a registration in which the only shares of Class A Common Stock being registered are shares of Class A Common Stock issuable upon conversion of debt securities that are also being registered. The Company may not delay an Underwritten Takedown or suspend the use of a prospectus or prospectus supplement pursuant to this Section 2(c) more than twice in any period of twelve (12) consecutive months, and the duration of any one suspension or postponement may not exceed ninety (90) days. For purposes of this Agreement, “Adverse Disclosure” means public disclosure of MNPI which, in the Board’s reasonable judgment, after consultation with outside counsel to the Company, (i) would be required to be made in any report or prospectus included in a registration statement or prospectus supplement thereto filed with the Commission by the Company so that such report, prospectus or prospectus supplement would not be materially misleading; (ii) would not be required to be made at such time but for the filing, use or continued use of such report, prospectus or prospectus supplement; and (iii) such disclosure would be materially adverse to the Company, any pending transaction involving the Company or any transaction currently proposed by or under consideration by the Company.
(d) Selection of Underwriters. The holders of a majority of the Registrable Securities being sold in the applicable Underwritten Takedown shall have the right to select the investment banker(s) and manager(s) to administer such offering, subject to the prior written approval of the Company.
(e) Termination of Registration Rights. The rights of any holder of Registrable Securities to request an Underwritten Takedown of such Registrable Securities pursuant to this Section 2 shall terminate on the Resale Shelf Expiration Date. The provisions of Section 8 and Section 10 shall survive any termination.
Section 3. Piggyback Registrations.
(a) Right to Piggyback.
(i) If the Company proposes to register any shares of Class A Common Stock under the Securities Act after the one (1) year anniversary of the Closing (other than (A) pursuant to a registration on Form S-8 or Form S-4, or any successor forms, relating to equity securities issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company, (B) for the issuance of shares in respect of BHI Securities or BMP Securities or an equity plan of BHI or BPM, (C) for the offer of products of the Company or its subsidiaries, (D) in connection with a direct or indirect business combination involving the Company and another Person, (E) for an exchange offer or offering of securities solely to the existing shareholders of the Company or its subsidiaries, (F) for an offering of debt that is convertible into equity securities of the Company, (G) for a dividend reinvestment plan or similar plan) and (H) pursuant to a registration statement required to be filed, pursuant to Chapter 11 of Title 11 of the United States Code and/or applicable non-bankruptcy law, in accordance with a Chapter 11 plan of an current or former equity holder of the Company, whether for sale solely for its own account (a “Primary Registration”) or for the account of any other Person, the Company shall at such time give prompt notice (the “Piggyback Notice”) to each Investor at least twenty (20) Business Days prior to the anticipated filing date of the registration statement relating to such registration. Such notice shall set forth such Investor’s rights under this Section 3(a) and shall offer such Investor the opportunity to include in such registration statement the number of Registrable Securities proposed to be registered as each such holder may request (a “PiggybackRegistration”), subject to the provisions of Section 3(c) and Section 3(d) of this Agreement, the other terms and conditions of this Agreement and the restrictions imposed by any then effective lock-up agreement; provided that the Avalon Sponsor shall only have the right to include its Registrable Securities in such registration statement if another Investor has requested to include its Registrable Securities in such registration statement. In no event shall a Piggyback Registration be considered an Underwritten Takedown for purposes of Section 2.
(ii) Upon the request of any Investor made within ten (10) Business Days of the Piggyback Notice (which request shall specify the number of Registrable Securities intended to be registered by such Investor) and the minimum price, if any, below which such Investor will not sell such Registrable Securities (which minimum price, if any, may be subsequently waived or changed in the discretion of the Investor), the Company shall
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include, or if an underwritten offering, shall cause the underwriter(s) to include, all Registrable Securities that the Company has been so requested to include by all such Investors, and shall use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been so requested to register by all such Investors, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that, if such registration involves an underwritten offering, all such Investors requesting to be included in the Company’s registration must sell their Registrable Securities to be registered to the underwriters selected by the Company pursuant to Section (3)(e) (or, if applicable, the holder(s) on whose behalf the registration statement was initially being filed) on the same terms and conditions as apply to the Company (or such holder(s)).
(b) Piggyback Expenses. Registration Expenses of the holders of Registrable Securities shall be paid by the Company in all piggyback underwritten offerings, whether or not any such offering is completed.
(c) Priority on Primary PiggybackRegistrations. If a Piggyback Registration is an underwritten primary offering on behalf of the Company and the managing underwriters advise the Company in writing that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number of Registrable Securities which marketing factors permit to be sold in such offering, then the Company shall include in such offering only that number of securities that in the opinion of such underwriters marketing factors permit to be sold in such offering, with priority for inclusion to be determined as follows: (i) first, the securities the Company proposes to sell, (ii) second, a number of Registrable Securities requested to be included in such registration allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder, and (iii) third, any securities entitled to registration rights pursuant to separate written contractual arrangements.
(d) Priority on Secondary Piggyback Registrations. If a Piggyback Registration is an underwritten secondary offering on behalf of holders of the Company’s securities (other than holders of Registrable Securities) and the managing underwriters advise the Company in writing that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number of securities which marketing factors permit to be sold in such offering, then the Company shall include in such offering only that number of securities which in the opinion of such underwriters marketing factors permit to be sold in such offering, with priority for inclusion to be determined as follows: (i) first, the securities that such other holders of the Company’s securities propose to sell, (ii) second, a number of Registrable Securities requested to be included in such registration allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder, and (iii) third, the securities the Company proposes to sell.
(e) Selection of Underwriters. If any Piggyback Registration that is a Primary Registration is an underwritten offering, the Company shall select the investment banker(s) and manager(s) for such offering.
(f) Withdrawal. Any holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the underwriter or underwriters (if any) of his, her or its intention to withdraw such Registrable Securities from such Piggyback Registration up to (i) in the case of a Piggyback Registration not involving an offering using a registration statement on Form S-3 or another similar short-form registration statement, one (1) day prior to the effective date of the applicable registration statement or (ii) in the case of any Piggyback Registration involving an offering using a Form S-3 or another similar short-form registration statement, one (1) day prior to the expected pricing date of such offering. The Company (whether on its own good-faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
(g) Termination of Registration Rights. The rights of any holder of Registrable Securities to request inclusion of such Registrable Securities pursuant to this Section 3 shall terminate on the Resale Shelf Expiration Date. The provisions of Section 8 and Section 10 shall survive any termination.
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Section 4. Underwriter’s Lockup. Each Investor agrees that, in connection with any underwritten offering of Class A Common Stock or other equity securities of the Company, and upon the request of the managing underwriter in such offering (the “Underwriter’s Lockup”), such Investor shall not, Transfer any Registrable Securities without the prior written consent of the Company or such managing underwriter or underwriters during the period beginning seven (7) days before and ending sixty (60) days (or, in either case, such lesser period as may be permitted by the Company or such managing underwriter or underwriters) after the pricing date of such underwritten offering, subject to any exceptions permitted by such managing underwriter or underwriters. The Company may impose stop-transfer instructions with respect to shares of Class A Common Stock (or other securities) to effect the Underwriter’s Lockup. Each Investor agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.
Section 5. Registration Procedures. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement (including pursuant to a Resale Shelf), the Company shall use its commercially reasonable efforts to effect the registration, offering and the sale of such Registrable Securities hereunder in accordance with the intended method of disposition thereof as promptly as is practicable, and pursuant thereto the Company shall as reasonably practicable:
(a) in accordance with the Securities Act and all applicable rules and regulations promulgated thereunder, prepare and file with the Commission a registration statement, and all amendments and supplements thereto and related prospectuses as may be necessary to comply with applicable securities laws, with respect to such Registrable Securities, make all required filings required in connection therewith and (if the Registration Statement is not automatically effective upon filing) use its commercially reasonable efforts to cause such registration statement to become effective;
(b) notify each holder of Registrable Securities of (i) the issuance by the Commission of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose or any other regulatory authority preventing or suspending the use of any preliminary or final prospectus or the initiation or threatening of any proceedings for such purposes, (ii) the receipt by the Company or its counsel of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (iii) the effectiveness of each registration statement filed hereunder;
(c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus or prospectus supplement used in connection therewith as may be necessary to keep such registration statement effective for a period (the “Effectiveness Obligation Period”) ending on the earlier of (i) when all of the Registrable Securities covered by such registration statement have been disposed of in accordance with the intended methods of disposition by the sellers thereof as set forth in such registration statement and (ii) the Resale Shelf Expiration Date (but in any event not before the expiration of any longer period required under the Securities Act or, if such registration statement relates to an underwritten offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of securities thereunder by any underwriter or dealer), and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;
(d) furnish to each seller of Registrable Securities thereunder such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus and any prospectus supplement), each Free-Writing Prospectus and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;
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(e) use its commercially reasonable efforts to register or qualify, and cooperate with such holders, the underwriters, if any, and their respective counsel, such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller or underwriter, if any, or their respective counsel reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5(e), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction);
(f) except to the extent prohibited by applicable law and subject to entry into a customary confidentiality agreement or arrangement, make available after reasonable advance notice during business hours at the offices where such information is normally kept for inspection by each such holder any underwriter participating in any distribution pursuant to such registration, and any attorney, accountant or other agent retained by such holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as such parties may reasonably request in connection with customary due diligence and drafting sessions, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such holder, underwriter, attorney, accountant or agent in connection with the same; provided, however, that information obtained hereunder shall be used by such persons only for purposes of conducting such due diligence or drafting sessions;
(g) promptly notify in writing each such holder at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading in light of the circumstances then existing, and, at the request of any such seller, the Company promptly shall prepare, file with the Commission and furnish to each such seller a reasonable number of copies of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided that each holder of the Registrable Securities, upon receipt of any notice from the Company of any event of the kind described in this Section 5(g), shall forthwith discontinue disposition of the Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder is advised in writing by the Company that the use of the prospectus may be resumed and is furnished with a supplemented or amended prospectus as contemplated by this Section 5(g), and if so directed by the Company, such holder shall deliver to the Company all copies, other than permanent file copies then in such holder’s possession, of the prospectus covering such Registrable Securities at the time of receipt of such notice; provided, further, that such obligation shall only apply during the Effectiveness Obligation Period;
(h) use its commercially reasonable efforts to prepare and file promptly with the Commission, and notify such holders of Registrable Securities prior to the filing of, such amendments or supplements to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, when any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, if any such holders of Registrable Securities or any underwriter for any such holders is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations promulgated thereunder, the Company shall use its commercially reasonable efforts to prepare promptly upon request of any such holder or underwriter such amendments or supplements to such registration statement and prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations; provided that, such obligation shall only apply during the Effectiveness Obligation Period;
(i) use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which the Class A Common Stock is then listed or quoted;
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(j) provide and cause to be maintained a transfer agent, registrar and CUSIP number for all such Registrable Securities from and after a date not later than the effective date of such registration statement;
(k) take all reasonable actions to ensure that any Free-Writing Prospectus prepared by or on behalf of the Company in connection with any Underwritten Takedown or Piggyback Registration hereunder complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that such obligation shall only apply during the Effectiveness Obligation Period;
(l) use its reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of any Registration Statement or of any order preventing or suspending the use of any preliminary or final prospectus and in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or the issuance of any order suspending or preventing the use of any related prospectus or suspending the qualification of any equity securities included in such registration statement for offering or sale in any jurisdiction, the Company shall use its commercially reasonable efforts to promptly obtain the withdrawal or lifting of such order, including through the filing of a registration statement or amending or supplementing the prospectus, if necessary;
(m) obtain (i) a cold comfort letter from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters and (ii) opinions of counsel from the Company’s counsel in customary form and covering such matters of the type customarily covered in a public issuance of securities, in each case, (A) in form and substance reasonably satisfactory to the underwriters and addressed to the managing underwriters and (B) as the holders of a majority of the Registrable Securities included in such registration reasonably request;
(n) if the registration involves the registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its commercially reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the underwriter in any underwritten offering and otherwise to facilitate, cooperate with and participate in each proposed offering contemplated herein and customary selling efforts related thereto; and
(o) otherwise use its commercially reasonable efforts to take all other steps necessary to effect the registration, marketing and sale of such Registrable Securities contemplated hereby.
Section 6. Certain Obligations of Holders of RegistrableSecurities. Each holder of Registrable Securities that sells such securities pursuant to a registration under this Agreement agrees as follows:
(a) Such holder shall cooperate with the Company (as reasonably requested by the Company) in connection with the preparation of the applicable registration statement and prospectus included therein and any supplement or amendment thereto, and, for so long as the Company is obligated to file and keep effective such registration statement, each holder of Registrable Securities that is participating in such registration shall provide to the Company, in writing, for use in the applicable registration statement and prospectus included therein and any supplement or amendment thereto, all such information regarding such holder and its plan of distribution of such securities as may be reasonably necessary to enable the Company to prepare the registration statement and prospectus included therein and any supplement or amendment thereto covering such securities, to maintain the currency and effectiveness thereof and otherwise to comply with all applicable requirements of law in connection therewith. If such holder fails to timely cooperate with the Company in accordance with this Section 6(a), the Company will not be required to include such holder’s Registrable Securities in the applicable registration.
(b) During such time as a holder of Registrable Securities may be engaged in a distribution of such securities, such holder shall distribute such securities under the registration statement solely in the manner described in the registration statement.
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(c) Each Person that is participating in any registration under this Agreement, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(g), shall immediately discontinue the disposition of its securities of the Company pursuant to the registration statement until such Person’s receipt of the copies of a supplemented or amended prospectus as contemplated by Section 5(g). In the event the Company has given any such notice, the applicable time period set forth in Section 5(c) during which a registration statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to this Section 6(c) to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 5(g).
Section 7. Registration Expenses.
(a) All expenses incurred by the Company in complying with its obligations pursuant to this Agreement, including all registration, qualification and filing fees, fees and expenses of compliance with securities or blue sky laws, filing expenses, printing expenses, messenger and delivery expenses, fees and disbursements of custodians and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding underwriting fees, discounts and commissions) and other Persons retained by the Company (all such expenses being herein called “RegistrationExpenses”), shall be borne by the Company as provided in this Agreement, and the Company also shall pay all of its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed. Notwithstanding anything to the contrary contained herein, each seller of Registrable Securities pursuant to a registration under this Agreement shall bear and pay all underwriting discounts, selling commissions and stock transfer taxes and fees and expenses of counsel for any participating holder (other than the fees and expenses of counsel included in Registration Expenses or pursuant to Section 7(b) below) applicable to the securities sold for such seller’s account.
(b) In connection with each Resale Shelf, Underwritten Takedown and Piggyback Registration, the Company shall reimburse the holders of Registrable Securities included in such registration for the reasonable and documented fees and disbursements of one (1) counsel chosen by the holders of a majority of the Registrable Securities requesting inclusion in such registration, subject to the approval of the Company of such counsel (which approval shall not be unreasonably withheld, conditioned or delayed) for the purpose of rendering a legal opinion on behalf of such holders in connection with any Resale Shelf, Underwritten Takedown or Piggyback Registration.
(c) To the extent any expenses relating to a registration hereunder are not required to be paid by the Company, each holder of Registrable Securities included (or requested to be included) in any registration hereunder shall pay those expenses allocable to the registration (or proposed registration) of such holder’s Registrable Securities so included (or requested to be included), and any expenses not so allocable shall be borne by all sellers of Registrable Securities requested to be included in such registration in proportion to the aggregate selling price of the Registrable Securities to be so registered.
Section 8. Indemnification.
(a) The Company shall indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities, its officers, directors, members, managers, partners, agents, Affiliates and employees, each investment manager or investment adviser of such holder and each Person who acts on behalf of or controls such holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against all losses, claims, actions, damages, liabilities and expenses caused by, resulting from, arising out of or based upon any of the following statements, omissions or violations by the Company: (i) any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus, preliminary prospectus, offering
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circular, Free-Writing Prospectus or similar document (including any related registration statement, notification, or the like), or any amendment thereof or supplement thereto or any document incorporated by reference therein incident to any registration, qualification, compliance or sale effected pursuant to this Agreement, (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any other similar federal, state or common law or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and to reimburse such Persons, as incurred, any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, except to the extent that the same are caused by or based upon or related to any untrue statement (or alleged untrue statement) or omission (or alleged omission) made in reliance upon and in conformity with any Investor Information (as defined below). In connection with an underwritten offering, the Company shall indemnify any underwriters or deemed underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities (or to such lesser extent that may be agreed to between the underwriters and the Company).
(b) In connection with any registration in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company and the managing underwriter in writing such information and affidavits as the Company or the managing underwriter reasonably requests (such information, the “Investor Information”) for use in connection with any such registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus, offering circular, Free-Writing Prospectus or similar document (including any related registration statement, notification, or the like), or any amendment thereof or supplement thereto or any document incorporated by reference therein incident to any registration, qualification, compliance or sale effected pursuant to this Agreement and, to the fullest extent permitted by law, shall indemnify and hold harmless the Company, its directors, officers, agents and each Person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus, offering circular, Free-Writing Prospectus or similar document (including any related registration statement, notification, or the like), or any amendment thereof or supplement thereto or any document incorporated by reference therein incident to any registration, qualification, compliance or sale effected pursuant to this Agreement and any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder expressly for use therein and in reliance upon and in conformity with the Investor Information expressly for use therein and has not been corrected in a subsequent writing prior to or concurrently with the sale of Registrable Securities to the Person asserting the claim; provided that the obligation to indemnify shall be individual, not joint and several, for each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. It is understood and agreed that the indemnification obligations of each holder pursuant to any underwriting agreement entered into in connection with any registration statement shall be limited to the obligations contained in this Section 8(b). The Company agrees not to file or make any amendment to any registration statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus used in connection therewith, that refers to any holder covered thereby by name or otherwise identifies such holder as the holder of any securities of the Company without the consent of such holder (such consent not to be unreasonably withheld or delayed), unless and to the extent such disclosure is required by law.
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(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not actually and materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party by giving written notice of the same. The indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without the consent of the indemnifying party (which consent shall not be unreasonably withheld or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one (1) counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one (1) separate counsel, chosen by the holders of a majority of the Registrable Securities included in the registration by such conflicting indemnified parties, at the expense of the indemnifying party. No indemnifying party, in the defense of such claim or litigation, shall, except with the consent of each indemnified party, consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof (A) the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation in form and substance reasonably satisfactory to such indemnified party, and (B) a statement as to or an admission of fault, culpability or a failure to act by or on behalf of such indemnified party, and provided that any sums payable in connection with such settlement are paid by the indemnifying party. The indemnifying party shall not be liable hereunder for any amount paid or payable or incurred pursuant to or in connection with any judgment entered or settlement effected with the consent of an indemnified party unless the indemnifying party has also consented to such judgment or settlement (such consent not to be unreasonably withheld, conditioned or delayed).
(d) Each Party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 8(a) or Section 8(b) are held a court of competent jurisdiction to be unavailable to or insufficient to hold harmless an indemnified party in respect of or is otherwise unenforceable with respect to any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact has been made by or relates to information supplied by such indemnifying party or indemnified party, whether the violation of the Securities Act or any other federal or state securities law or rule or regulation promulgated thereunder applicable to the Company and relating to any action or inaction required of the Company in connection with any registration of securities was perpetrated by the indemnifying party or the indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the holders or any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 8(c), defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The sellers’ obligations in this Section 8(d) to contribute shall be several in proportion to the amount of securities registered by them and not joint and shall be limited for each seller to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Securities effected pursuant to such registration; provided that in no event shall the aggregate amounts payable by any such seller by way of indemnity or contribution under this Section 8(d) and when combined with any amounts payable under Section 8(b) exceed the net proceeds from the offering actually received by such seller from the sale of Registrable Securities effected pursuant to such registration.
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(e) The indemnification and contribution provided for under this Agreement shall be in addition to any other rights to indemnification and contribution that any indemnified party may have pursuant to law or contract and shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party.
(f) The indemnities provided in this Section 8 shall survive the Transfer of any Registrable Securities by such holder.
(g) The provisions of this Section 8 shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party or any officer, director or controlling person of such indemnified party.
Section 9. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person’s Registrable Securities on the basis provided in any underwriting arrangements in form customary for transactions of this type approved by the holders of a majority of the Registrable Securities to be sold in the contemplated offering (including pursuant to any over-allotment or “green shoe” option requested by the underwriters, provided that no holder of Registrable Securities shall be required to sell more than the number of Registrable Securities such holder has requested to include) and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
Section 10. Rule 144 Reporting. With a view to making available to the holders of Registrable Securities the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company, following the date hereof, agrees to use its reasonable efforts to:
(a) make and keep current public information available, within the meaning of Rule 144 (or any similar or analogous rule) promulgated under the Securities Act, at all times after the Company has become subject to the reporting requirements of the Exchange Act;
(b) file with the Commission, in a timely manner, all reports and other documents required of the Company under the Securities Act and Exchange Act (after the Company has become subject to such reporting requirements); and
(c) so long as a holder owns any Registrable Securities, furnish to such holder upon reasonable request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time commencing one-hundred eighty (180) days after the date hereof).
Section 11. Other Agreements. At all times after the Company has filed a registration statement with the Commission pursuant to the requirements of either the Securities Act or the Exchange Act, the Company shall use its commercially reasonable efforts to file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder and shall take such further action as the Investors may reasonably request, all to the extent required to enable such Persons to sell securities pursuant to (a) Rule 144 or any similar rule or regulation hereafter adopted by the Commission or (b) a registration statement on Forms S-1 or S-3 or any similar registration form hereafter adopted by the Commission, provided that, in each case, the delivery of any legal opinions may be subject to receipt by the Company and/or its transfer agent of customary representations of the applicable holder, which are satisfactory to the Company and its transfer agent, as applicable. The foregoing agreements in this Section 11 shall not apply to a “take private” or other transaction in which the shares of Class A Common Stock cease to be registered under the Exchange Act, so long as such transaction is approved by the Board.
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Section 12. Term. This Agreement shall become effective upon the Closing and shall terminate upon the earlier to occur of (a) the date as of which all of the Registrable Securities have been sold pursuant to a registration statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)), (b) the date as of which all Registrable Securities have been sold under Rule 144 under the Securities Act and (c) the date as of which all Registrable Securities cease to be Registrable Securities. The provisions of Section 8 and Section 10 shall survive any termination.
Section 13. Definitions.
“Affiliate” means, as applied to any Person, means any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person, provided that “Affiliate” shall not include any “portfolio company” (as such term is commonly used in the private equity industry) and with respect to any Person that is managed or controlled by a private equity company or investment firm (a “Sponsor”), the limited partners of the funds which own interests in such Person shall not be deemed Affiliates of such Person unless such limited partners are controlled by the Sponsor for such Person. The term “Affiliated” shall have the correlative meaning. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“BHI” means Beneficient Holdings, Inc., a Delaware corporation.
“BHI Securities” means securities of BCH that are Transferred to the holders of interests of BHI in respect of such interests.
“BMP” means Beneficient Management Partners, L.P., a Delaware limited partnership.
“BMP Securities” means securities of BCH that are Transferred to the holders of interests of BMP in respect of such interests.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Class A CommonStock” means the Class A common stock, par value $0.001 per share, of Beneficient, a Nevada Corporation, or any securities into which such shares convert.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time-to-time thereunder.
“Free-WritingProspectus” means a free-writing prospectus, as defined in Rule 405 promulgated under the Securities Act.
“MNPI” means material non-public information within the meaning of Regulation FD promulgated under the Exchange Act, which shall in any case include the receipt of any notice delivered by the Company under this Agreement, including pursuant to Section 2 or Section 3 hereof and the information contained in any such notice.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“Registrable Securities” means (a) shares of Class A Common Stock that are issuable upon conversion or exchange of (i) securities of BCH, including BMP Securities and BHI Securities, but excluding the Preferred Series C Subclass 1 Unit Accounts of BCH and any securities issued in respect thereof, (ii) securities of Ben LLC and (iii) shares of Class B Common Stock and (b) shares of Class A Common Stock beneficially owned by the
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Avalon Sponsor. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (A) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been Transferred in accordance with such registration statement; (B) such securities shall have been otherwise Transferred; or (C) such securities may be sold under Rule 144 without volume limitation or current public information requirements. As to Registrable Securities that are issuable in exchange for BMP Securities, such securities shall also cease to be Registrable Securities at such time that the Company, in its sole discretion, files a registration statement registering the exchange of Class A Common Stock for such BMP Securities and such registration statement has been declared effective; provided that if for any reason such registration statement is unavailable for the exchange of BMP Securities, for the period of unavailability, such shares of Class A Common Stock shall be Registrable Securities.
“Rule 144,” “Rule 174,” “Rule 405” and “Rule415” mean, in each case, such rule promulgated under the Securities Act (or any successor provision) by the Commission, as the same shall be amended from time to time, or any successor rule then in force.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated from time-to-time thereunder.
“Transfer” shall mean to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any interest owned by a person or any interest (including a beneficial interest) in, or the ownership, control or possession of, any interest owned by a Person.
Section 14. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement.
(b) Remedies. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The Parties acknowledge and agree that any Party would be irreparably harmed by, and money damages would not be an adequate remedy for, any breach of the provisions of this Agreement and that, in addition to any other rights and remedies existing in its favor, any Party shall be entitled to specific performance and/or other injunctive relief from any court of law or equity of competent jurisdiction (without posting any bond or other security) in order to enforce or prevent violation of the provisions of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may be amended, and any provision of this Agreement may be waived, only upon the prior written consent of (i) the Company and (ii) the holders of a majority of the Registrable Securities; provided that no amendment that materially adversely and disproportionately impacts an Investor compared to other Investors under this Agreement shall be effective against an Investor without the consent of such Investor or the holders of a majority of the Registrable Securities of the Investors that are similarly materially adversely and disproportionately impacted. No course of dealing between or among the Parties (including the failure of any Party to enforce any of the provisions of this Agreement) shall be deemed effective to modify, amend, waive or discharge any part of this Agreement or any rights or obligations of any Party under or by reason of this Agreement, and the failure of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach.
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(d) Successors and Assigns; Joinder. Neither this Agreement nor any of the covenants and agreements herein or rights, interests or obligations hereunder may be assigned or delegated by any Investor to any other Person without the consent of the Company, which consent may be withheld in its sole discretion (which consent may not unreasonably be withheld in connection with an estate planning transaction or a transfer to an Affiliate). For the avoidance of doubt, the Transfer of Registrable Securities shall not entitle such transferee to any rights or interests hereunder without the consent of the Company, which consent may be withheld in its sole discretion (which consent may not unreasonably be withheld in connection with an estate planning transaction or a transfer to an Affiliate). Neither this Agreement nor any of the covenants and agreements herein or rights, interests or obligations hereunder may be assigned or delegated by the Company, except in connection with a purchase of all or substantially all of the Company’s assets, or to any successor by way of merger, consolidation or similar transaction. The Company (in its form as a corporation as of the Closing) shall not convert or otherwise reorganize directly or indirectly into a limited liability company or another form of entity unless the successor entity, by way of merger, consolidation or similar transaction, expressly assumes the obligations of the Company pursuant to this Agreement. No holder of interests in BCH or Ben LLC shall become a Party to this Agreement or be entitled to the rights of the Investors hereunder unless and until the Company receives the written agreement of such holder, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement).
(e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held to be prohibited by or illegal or unenforceable under applicable law in any respect by a court of competent jurisdiction, such provision shall be ineffective only in such jurisdiction and to the extent of such prohibition or illegality or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement in such jurisdiction or any provisions of this Agreement in any other jurisdiction.
(f) Counterparts. This Agreement and any amendments hereto, to the extent signed and delivered in counterparts (any one of which need not contain the signatures of more than one Party hereto or thereto, but all such counterparts together shall constitute one and the same Agreement) by means of a facsimile machine or electronic transmission in portable document format (pdf), shall be treated in all manner and respects as an original thereof and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person. At the request of any Party hereto, each other Party hereto shall re-execute original forms hereof and deliver them to all other Parties hereto. No Party hereto shall raise the use of a facsimile machine or electronic transmission in pdf to deliver a signature or the fact that any signature or document was transmitted or communicated through the use of facsimile machine or electronic transmission as a defense to the formation of a contract, and each such Party forever waives any such defense.
(g) Descriptive Headings; Interpretation. The headings and captions used in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the word “including” herein shall mean “including without limitation.” Any reference to the masculine, feminine or neuter gender shall be deemed to include any gender or all three as appropriate.
(h) Governing Law; Jurisdiction; Agreement for Service. This Agreement, and all claims or causes of action based upon, arising out of or related to this Agreement or the transactions contemplated herein, shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Texas. Each of the Parties irrevocably and unconditionally submits to the exclusive jurisdiction of the state and federal district courts sitting in Dallas County, Texas, for the purposes of any proceeding, claim, demand, action or cause of action (a) arising under this Agreement or the transactions contemplated hereby or (b) in any way connected with or related or incidental to the dealings of the Parties in respect of this Agreement, and irrevocably and unconditionally waives any objection to the laying of venue of any such proceeding in any such court, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such proceeding has been brought in an inconvenient forum. Each Party hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any proceeding claim, demand, action or cause of action against such Party (i) arising under this Agreement or the transactions contemplated hereby or
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(ii) in any way connected with or related or incidental to the dealings of the Parties in respect of this Agreement, (A) any claim that such Party is not personally subject to the jurisdiction of the courts as described in this Section 14(h) for any reason, (B) that such Party or such Party’s property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (C) that (x) the proceeding, claim, demand, action or cause of action in any such court is brought against such Party in an inconvenient forum, (y) the venue of such proceeding, claim, demand, action or cause of action against such Party is improper or (z) this Agreement, the transactions contemplated hereby, or the subject matter hereof, may not be enforced against such Party in or by such courts. Each Party agrees that service of any process, summons, notice or document by registered mail to such Party’s respective address set forth in Section 14(j) shall be effective service of process for any such proceeding, claim, demand, action or cause of action.
(i) WAIVER OF TRIAL BY JURY. THE PARTIES EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY PROCEEDING, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH PROCEEDING, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 14(I).
(j) Notice. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given) by delivery in person, by e-mail (having obtained electronic delivery confirmation thereof (i.e., an electronic record of the sender that the e-mail was sent to the intended recipient thereof without an “error” or similar message that such e-mail was not received by such intended recipient)), or by registered or certified mail (postage prepaid, return receipt requested) (upon receipt thereof) to the other Parties as follows:
If to the Company:
325 N Saint Paul St., Suite 4850
Dallas, Texas 75201
Attn: General Counsel
E-mail: LegalNotices@beneficient.com
with a copy (which shall not constitute notice) to:
Haynes and Boone, LLP
2323 Victory Avenue, Suite 700
Attn: Matthew Fry
E-mail: Matt.Fry@haynesboone.com
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If to any Investor, at the address indicated in such Investor’s signature page to this Agreement.
(k) Rights Cumulative. The rights and remedies of each of the Parties under this Agreement shall be cumulative and not exclusive of any rights or remedies which a Party would otherwise have hereunder at law or in equity or by statute, and no failure or delay by either Party in exercising any right or remedy shall not impair any such right or remedy or operate as a waiver of such right or remedy, and neither shall any single or partial exercise of any power or right preclude a Party’s other or further exercise thereof or the exercise of any other power or right.
(l) No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
(m) Entire Agreement. This Agreement and the other agreements and instruments referred to herein contain the complete agreement between the Parties with respect to the subject matter hereof and thereof and supersede any prior understandings, agreements and representations by or between the Parties hereto (whether written or oral) that may have related to the subject matter hereof or thereof in any way.
(n) Effectiveness. Except for that certain warrant agreement dated October 5, 2021, by and between Avalon Sponsor and Continental Stock Transfer & Trust Company, a New York limited purpose trust company, as warrant agent, which the Company shall assume in connection with the transactions contemplated by the Business Combination Agreement, this Agreement shall only be effective as of the Closing (as defined in the Business Combination Agreement) and shall be terminated and of no force and effect if the Business Combination Agreement is terminated.
Section 15. MNPI Provisions.
(a) Each Investor acknowledges that the provisions of Sections 2, 3 and 5 of this Agreement may require certain communications to be made by the Company or other Investors to such Investor that may result in such Investor and its Representatives (as defined below) acquiring MNPI (which may include, solely by way of illustration, the fact that an offering of the Company’s securities is pending or the number of Company securities or the identity of the selling stockholders) (such communications, “MNPI Communications”); provided that the Company will notify each Investor entitled to notice or who received an MNPI Communication if any proposed registration or offering for which an MNPI Communication has been delivered pursuant to this Agreement has been terminated or aborted to the extent the knowledge of such registration or offering constitutes MNPI.
(b) Each Investor agrees that it will maintain the confidentiality of MNPI in MNPI Communications delivered to it and, to the extent such Investor is not a natural person, such confidential treatment shall be in accordance with procedures adopted by it in good faith to protect confidential information of third parties delivered to such Investor (“Policies”); provided that the obligation to maintain confidentiality of MNPI in MNPI Communications shall cease when the information in the MNPI Communications (i) is known or becomes known to the public in general (other than as a result of a breach of this Section 15(b) by such Investor or its Representatives), or (ii) is or has been made known or disclosed to the Investor by a third party not known by such Investor to be in breach of any obligation of confidentiality such third party may have to the Company; provided further that an Investor may deliver or disclose MNPI in such MNPI Communications to (1) its affiliates, its and its affiliates’ respective directors, officers, employees, partners, members, agents, attorneys, consultants and financial and other advisors, and potential sources of capital (including potential limited partners) (collectively, the “Representatives”), but solely to the extent such disclosure reasonably relates to its evaluation of exercise of its rights under this Agreement and the sale of any Registrable Securities in connection with the subject of the notice, (2) any federal, state, national, foreign or other regulatory or self-regulatory authority having jurisdiction over such stockholder, or (3) any Person if necessary to effect compliance with any law, rule,
17
regulation, investigation, audit, request or order applicable to such Investor, including in response to any subpoena or other legal process, audit or examinations; provided further, that in the case of clause (1), the recipients of such MNPI in such MNPI Communications are subject to the Policies or agree to or are otherwise obligated to hold confidential the MNPI in a manner substantially consistent with the terms of this Section 15 and that in the case of clauses (2) and (3), such Investor promptly notifies the Company of such disclosure to the extent such Investor is legally permitted to give such notice and it is reasonably practicable; provided further, that no such notice shall be required where disclosure is made (x) in response to a general request by a regulatory or self-regulatory authority or (y) in connection with a routine audit or examination by a bank examiner or auditor and such audit or examination does not reference the Company or this Agreement.
(c) Each Investor, by its execution of this Agreement, hereby acknowledges that it is aware that the U.S. securities laws prohibit any Person who has MNPI about a company from purchasing or selling, directly or indirectly, securities of such company (including entering into hedge transactions involving such securities), or from communicating such information to any other Person in certain circumstances.
(d) Each Investor shall have the right, at any time and from time to time (including after receiving information regarding any potential underwritten offering), to elect not to receive MNPI Communications that the Company or any other Investors otherwise are required to deliver pursuant to this Agreement by delivering to the Company a written statement signed by such Investor that it does not want to receive any MNPI Communications (an “Opt-Out Request”); in which case, and notwithstanding anything to the contrary in this Agreement, the Company and other Investors shall not be required to, and shall not, deliver any MNPI Communications for which the Investor has indicated in an Opt-Out Request that it does not want to receive hereunder to the extent that such MNPI Communications would reasonably be expected to result in an Investor acquiring MNPI. An Opt-Out Request may state a date on which it expires or, if no such date is specified, shall remain in effect until the Investor notifies the Company that it withdraws the Opt-Out Request, and the Investor may, in its sole discretion, determine the scope and applicability of the Opt-Out Request as set forth in an Opt-Out Request. An Investor who previously has given the Company an Opt-Out Request may update or revoke such request at any time, and there shall be no limit on the ability of an Investor to issue, update and revoke subsequent Opt-Out Requests; provided that each Investor shall use commercially reasonable efforts to minimize the administrative burden on the Company arising in connection with any such Opt-Out Requests.
* * * * *
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IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this Registration Rights Agreement as of the date first written above.
| COMPANY: | |
|---|---|
| BENEFICIENT | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
| AVALON SPONSOR: | |
| AVALON ACQUISITION HOLDINGS LLC | |
| By: | /s/ Craig Cognetti |
| Name: | S. Craig Cognetti |
| Title: | Chief Executive Officer |
| Address: | 2 Embarcadero, 8^th^ Floor |
| San Francisco, CA 94111 | |
| CLASS B HOLDERS: | |
| BENEFICIENT HOLDINGS INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| Address: | 325 N. Saint Paul Street, Suite 4850 |
| Dallas, TX 75201 | |
| HICKS HOLDINGS OPERATING, LLC | |
| By: | /s/ Thomas O. Hicks |
| Name: | Thomas O. Hicks |
| Title: | Member |
| Address: | 2200 Ross Avenue, 50^th^ Floor |
| Dallas, TX 75201 | |
| /s/ Bruce W. Schnitzer | |
| BRUCE W. SCHNITZER | |
| Address: | 174 West Street |
| Litchfield, CT 06759 |
Signature Page to Registration Rights Agreement
EX-4.8
Exhibit 4.8
EIGHTH AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF
BENEFICIENT COMPANY HOLDINGS, L.P.
Dated as of June 7, 2023
THE PARTNERSHIP UNITS OF BENEFICIENT COMPANY HOLDINGS, L.P. HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAWS OF ANY STATE, PROVINCE OR ANY OTHER APPLICABLE SECURITIES LAWS AND ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH UNITS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR PROVINCE, AND ANY OTHER APPLICABLE SECURITIES LAWS; (II) THE TERMS AND CONDITIONS OF THIS EIGHTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT; AND (III) ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BETWEEN THE GENERAL PARTNER AND THE APPLICABLE LIMITED PARTNER. THE UNITS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS; THIS LIMITED PARTNERSHIP AGREEMENT; AND ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BY THE GENERAL PARTNER AND THE APPLICABLE LIMITED PARTNER. THEREFORE, PURCHASERS AND OTHER TRANSFEREES OF SUCH UNITS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT OR ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.
Table of Contents
| Page | |||
|---|---|---|---|
| ARTICLE I. DEFINITIONS | 1 | ||
| Section 1.01. | Definitions | 1 | |
| ARTICLE II. FORMATION, TERM, PURPOSE AND POWERS | 15 | ||
| Section 2.01. | Formation | 15 | |
| Section 2.02. | Name | 15 | |
| Section 2.03. | Term | 15 | |
| Section 2.04. | Offices | 15 | |
| Section 2.05. | Agent for Service of Process; Existence and Good Standing; Foreign Qualification | 15 | |
| Section 2.06. | Business Purpose | 16 | |
| Section 2.07. | Powers of the Partnership | 16 | |
| Section 2.08. | Partners; Admission of New Partners | 16 | |
| Section 2.09. | Withdrawal | 16 | |
| Section 2.10. | Investment Representations of Partners | 16 | |
| ARTICLE III. MANAGEMENT | 16 | ||
| Section 3.01. | General Partner | 16 | |
| Section 3.02. | Compensation | 17 | |
| Section 3.03. | Expenses | 17 | |
| Section 3.04. | Officers | 17 | |
| Section 3.05. | Additional Subsidiaries; Charities | 18 | |
| Section 3.06. | Authority of Partners | 18 | |
| Section 3.07. | Action by Written Consent or Ratification | 19 | |
| ARTICLE IV. DISTRIBUTIONS | 19 | ||
| Section 4.01. | Preferred Series A Subclass 1 Unit Accounts Distributions | 19 | |
| Section 4.02. | Discretionary Distributions | 19 | |
| Section 4.03. | Tax and Other Distributions and Redemptions | 20 | |
| Section 4.04. | Liquidation Distribution | 21 | |
| Section 4.05. | Disproportionate Distributions | 21 | |
| Section 4.06. | Limitations on Distribution | 21 | |
| Section 4.07. | Distribution of Sales Proceeds | 22 | |
| Section 4.08. | Preferred Series A Subclass 0 Guaranteed Payment | 22 | |
| ARTICLE V. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; TAX ALLOCATIONS; TAX<br>MATTERS | 22 | ||
| Section 5.01. | Capital Contributions | 22 | |
| Section 5.02. | Capital Accounts | 22 | |
| Section 5.03. | Additional Capital Contributions | 23 | |
| Section 5.04. | Allocations of Profits and Losses | 23 | |
| Section 5.05. | Special Allocations | 27 | |
| Section 5.06. | Tax Allocations | 28 | |
| Section 5.07. | Tax Advances | 28 | |
| Section 5.08. | Tax Matters | 29 | |
| Section 5.09. | Other Allocation Provisions | 29 | |
| Section 5.10. | Subclass 2 FLP Unit Accounts | 29 | |
| ARTICLE VI. BOOKS AND RECORDS; REPORTS | 30 | ||
| Section 6.01. | Books and Records | 30 |
(i)
| Page | |||
|---|---|---|---|
| ARTICLE VII. PARTNERSHIP UNITS | 30 | ||
| Section 7.01. | Units | 30 | |
| Section 7.02. | Register | 32 | |
| Section 7.03. | Registered Partners | 32 | |
| Section 7.04. | Issuance of Additional Class S Units | 32 | |
| Section 7.05. | Conversion of Class S Preferred Units | 33 | |
| Section 7.06. | Exchange of Class S Ordinary Units | 33 | |
| Section 7.07. | Combinations of Fractional Class S Units | 33 | |
| Section 7.08. | Conversion of Preferred Series Unit Accounts | 34 | |
| Section 7.09. | Redemption of Preferred Series A Subclass 0 Unit Accounts | 34 | |
| Section 7.10. | Preemptive Rights | 35 | |
| Section 7.11. | Additional Issuances and Indebtedness | 36 | |
| Section 7.12. | Adjustments to Conversion Price; Elective Conversion Upon Partnership Sale or Dissolution | 36 | |
| Section 7.13. | Redemption Limitation | 37 | |
| ARTICLE VIII. TRANSFER RESTRICTIONS | 37 | ||
| Section 8.01. | Limited Partner Transfers | 37 | |
| Section 8.02. | Mandatory Exchanges | 37 | |
| Section 8.03. | Encumbrances | 37 | |
| Section 8.04. | Further Restrictions | 37 | |
| Section 8.05. | Rights of Assignees | 38 | |
| Section 8.06. | Admissions, Withdrawals and Removals | 38 | |
| Section 8.07. | Admission of Assignees as Substitute Limited Partners | 39 | |
| Section 8.08. | Withdrawal and Removal of Limited Partners | 39 | |
| Section 8.09. | Indirect Transfer to an Equity Holder | 39 | |
| ARTICLE IX. DISSOLUTION, LIQUIDATION AND TERMINATION | 39 | ||
| Section 9.01. | No Dissolution | 39 | |
| Section 9.02. | Events Causing Dissolution | 39 | |
| Section 9.03. | Distribution upon Dissolution | 40 | |
| Section 9.04. | Time for Liquidation | 41 | |
| Section 9.05. | Termination | 41 | |
| Section 9.06. | Claims of the Partners | 41 | |
| Section 9.07. | Survival of Certain Provisions | 41 | |
| ARTICLE X. LIABILITY AND INDEMNIFICATION | 41 | ||
| Section 10.01. | Liability of Partners | 41 | |
| Section 10.02. | Indemnification | 42 | |
| Section 10.03. | Exculpation | 44 | |
| ARTICLE XI. MISCELLANEOUS | 44 | ||
| Section 11.01. | Severability | 44 | |
| Section 11.02. | Notices | 45 | |
| Section 11.03. | Cumulative Remedies | 45 | |
| Section 11.04. | Binding Effect | 45 | |
| Section 11.05. | Interpretation | 45 | |
| Section 11.06. | Counterparts | 46 | |
| Section 11.07. | Further Assurances | 46 | |
| Section 11.08. | Entire Agreement | 46 |
(ii)
| Page | |||
|---|---|---|---|
| Section 11.09. | Governing Law | 46 | |
| Section 11.10. | Dispute Resolution | 46 | |
| Section 11.11. | Expenses | 48 | |
| Section 11.12. | Amendments and Waivers | 48 | |
| Section 11.13. | No Third Party Beneficiaries | 49 | |
| Section 11.14. | Headings | 49 | |
| Section 11.15. | Power of Attorney | 49 | |
| Section 11.16. | Separate Agreements; Schedules | 50 | |
| Section 11.17. | Partnership Status | 50 | |
| Section 11.18. | Delivery by Email | 50 |
ANNEXES:
Annex A Form of Joinder Agreement
(iii)
EIGHTH AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF
BENEFICIENTCOMPANY HOLDINGS, L.P.
This EIGHTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) of Beneficient Company Holdings, L.P. (the “Partnership”) is made as of the 7th day of June , 2023 (the “Effective Date”), by and among Beneficient Company Group, L.L.C., a limited liability company formed under the laws of the State of Delaware, as general partner, and the Limited Partners of the Partnership. Capitalized terms used and not otherwise defined have the meanings set forth in Section 1.01.
WHEREAS, the Partnership was formed as a limited partnership pursuant to the Act, by the filing of a Certificate of Limited Partnership (the “Certificate”) with the Office of the Secretary of State of the State of Delaware and the execution of the Limited Partnership Agreement of the Partnership dated as of May 14, 2010, which Limited Partnership Agreement was (i) initially amended and restated pursuant to that certain Amended and Restated Limited Partnership Agreement of the Partnership dated as of September 1, 2017, (ii) subsequently amended and restated pursuant to that certain Second Amended and Restated Limited Partnership Agreement of the Partnership dated as of December 27, 2018, (iii) further amended and restated pursuant to that certain Third Amended and Restated Limited Partnership Agreement of the Partnership dated as of February 1, 2019; (iv) further amended and restated pursuant to that certain Fourth Amended and Restated Limited Partnership Agreement of the Partnership dated as of April 26, 2019, as amended by that First Amendment effective as of April 26, 2019; (v) further amended and restated pursuant to that certain Fifth Amended and Restated Limited Partnership Agreement of the Partnership dated as of July 15, 2020, (vi) further amended and restated pursuant to that certain Sixth Amended and Restated Limited Partnership Agreement of the Partnership dated as of March 31, 2021, and (vii) further amended and restated pursuant to that certain Seventh Amended and Restated Limited Partnership Agreement of the Partnership dated as of November 12, 2021 (the “Existing Agreement”); and
WHEREAS, the parties hereto desire to enter into this Eighth Amended and Restated Limited Partnership Agreement of the Partnership to amend the Existing Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements herein made and intending to be legally bound hereby, the parties hereto agree to amend and restate the Existing Agreement in its entirety to read as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used herein without definition have the following meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):
“Act” means, the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Section 17-101, et seq., as it may be amended from time to time.
“Additional Credit Amount” has the meaning set forth in Section 4.03(c).
“Adjusted Capital Account Balance” means, with respect to each Partner, the balance in such Partner’s Capital Account adjusted: (a) by taking into account the adjustments, allocations and distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6); and (b) by adding to such balance such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5), and any amounts such Partner is obligated to restore pursuant to any provision of this Agreement or by applicable Law. The foregoing definition of Adjusted Capital Account Balance is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
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“Affiliate” means, with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person.
“Agreement” has the meaning set forth in the preamble of this Agreement.
“Alternative Asset Financing Portfolio” means the portfolio of illiquid financial and alternative assets, including investments in private equity funds, mezzanine funds, venture capital funds, private real estate, gated hedge funds, life settlements and other similar financial and alternative assets, to be loaned against or acquired by the Partnership or its Subsidiaries in the ordinary course of the Partnership’s trust products and services business.
“Amended Tax Amount” has the meaning set forth in Section 4.03(c).
“Annual Conversion Amount” means, with respect to any holder, an amount, determined as of such measurement period, equal to (a) the Sub-Capital Account attributable to the Preferred Series A Unit Accounts held by such holder as of January 1, 2025, multiplied by (b) the Annual Factor, minus (c) the aggregate amount of such holder’s Sub-Capital Account attributable to any Preferred Series A Unit Accounts previously converted pursuant to Section 7.08.
“Annual Factor” means (a) 20%, if the Annual Conversion Amount is being calculated for calendar year 2025; (b) 40%, if the Annual Conversion Amount is being calculated for calendar year 2026; (c) 60%, if the Annual Conversion Amount is being calculated for calendar year 2027; (d) 80%, if the Annual Conversion Amount is being calculated for calendar year 2028; or (e) 100%, if the Annual Conversion Amount is being calculated for calendar year 2029 or thereafter; provided, that if the Preferred Series A Subclass 1 Unit Conversion Price is equal to or greater than $18.00 on December 31 of any such calendar year, then the Annual Factor for the Preferred Series A Subclass 1 Unit Account shall be 100% on and following such date.
“Assignee” has the meaning set forth in Section 8.05.
“Assumed Tax Rate” means the highest effective marginal combined U.S. federal, state and local income tax rate (including the rate of taxes under Section 1411 of the Code) for a Fiscal Year prescribed for an individual resident in New York, New York (taking into account (a) the non-deductibility of expenses subject to the limitations described in Sections 67 and 68 of the Code and (b) the character (e.g., long-term or short-term capital gain or ordinary or exempt income) of the applicable income, but not taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes). For the avoidance of doubt, the Assumed Tax Rate will be the same for all Partners.
“Available Cash” means, with respect to any fiscal period, the amount of cash on hand which the General Partner, in its reasonable discretion, deems available for distribution to the Partners, taking into account all debts, liabilities and obligations of the Partnership then due and amounts which the General Partner, in its reasonable discretion, deems reasonably necessary or advisable to expend or retain for working capital or to place into reserves for customary and usual claims with respect to the Partnership’s operations and for anticipated debts, liabilities and obligations of the Partnership, in each case, which shall be consistent with the previously approved annual budget of the Partnership, if any.
“Available Redeeming Cash” for purposes of Section 7.09, shall be an amount equal to no less than 50% of the Partnership’s distributable cash flow, calculated quarterly, derived from cash flows from operations, plus cash inflows from financings less Tax Distributions required to be made pursuant to Section 4.03.
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“Avalon” means Avalon Acquisition, Inc.
“Base Rate” means the SOFR Rate plus 0.5% (2.00% per annum).
“BCG” means The Beneficient Company Group, L.P., a Delaware limited partnership.
“Ben LLC” means Beneficient Company Group, L.L.C., a Delaware limited liability company.
“Ben LLC Class A Unit” means the Class A Units of Ben LLC.
“BEN UBTI Blockers” means Ben Markets Corporate Holdings, L.L.C.; Beneficient Capital Holdings, L.L.C.; Beneficient Corporate Holdings, L.L.C.; and any future direct or indirect Subsidiary of the Partnership established as a corporation for U.S. federal income tax purposes to result in no incurrence of UBTI at the Partnership or the Issuer, as applicable, as reasonably determined by the General Partner.
“Book Difference Allocation Amount” means, at any time, an amount equal to (a) the product of (i) the amount of the aggregate capital account balances, as of the time of computation, of all outstanding Class A Units and Class S Units plus the amount of the upward adjustment to Carrying Value as of such time (including the value of property or cash contributed to the Partnership in connection with the event giving rise to the adjustment to Carrying Value) and (ii) 15%, minus (b) the aggregate amount previously allocated under Section 5.04(d)(i).
“Business Combination Agreement” means that certain Business Combination Agreement dated as of September 21, 2022, by and among Beneficient Merger Sub I, Inc., Beneficient Merger Sub II, Inc., The Beneficient Company Group, L.P., and Avalon, as amended from time to time.
“Capital Account” means the separate capital account maintained for each Partner in accordance with Section 5.02(a).
“Capital Contribution” means, with respect to any Partner, the aggregate amount of money contributed to the Partnership and the Carrying Value of any property (other than money), net of any liabilities assumed by the Partnership upon contribution or to which such property is subject to or was contributed to the Partnership pursuant to Article V.
“Carrying Value” means, with respect to any Partnership asset, the asset’s adjusted basis for U.S. federal income tax purposes, except that the initial carrying value of assets contributed to the Partnership shall be their respective gross fair market values on the date of contribution as determined by the General Partner, and the Carrying Values of all Partnership assets shall be adjusted to equal their respective fair market values, in accordance with the rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(f) (including the issuance of a Noncompensatory Option), except as otherwise provided herein, as of: (a) the date of the acquisition of any additional Partnership interest by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the date of the distribution of more than a de minimis amount of Partnership assets to a Partner; (c) the date a Partnership interest is relinquished to the Partnership; (d) the date of any adjustment to carrying value under the agreement of limited partnership of the General Partner; or (e) any other date specified in the Treasury Regulations; provided, however, that adjustments pursuant to clauses (a), (b) (c), (d) and (e) above shall not be made if the General Partner, in its reasonable discretion, decides such changes are not necessary or appropriate to reflect the relative economic interests of the Partners. The Carrying Value of any Partnership asset distributed to any Partner shall be adjusted immediately before such distribution to equal its fair market value. In the case of any asset that has a Carrying Value that differs from its adjusted tax basis, Carrying Value shall be adjusted by the amount of depreciation calculated for purposes of the definition of “Profits” and “Losses” rather than the amount of depreciation determined for U.S. federal income tax purposes, and depreciation shall be calculated by reference to Carrying Value rather than tax basis once Carrying Value differs from tax basis. For the avoidance of doubt, adjustments to the Carrying Value, as defined here, of any assets held directly or
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indirectly by the Partnership (including interests in, or assets held through, Subsidiaries treated as corporations for U.S. federal income tax purposes) shall be made in a manner reasonably determined by the General Partner in its reasonable discretion to reflect the overall allocations among the Partnership and its Subsidiaries. In the event of the issuance of Units pursuant to the exercise of a Noncompensatory Option where the right to share in Partnership capital represented by such Unit differs from the consideration paid to acquire and exercise such option, the Carrying Value of each Partnership property immediately after the issuance of such Unit shall be adjusted upward or downward to reflect any unrealized gain or unrealized loss attributable to such Partnership property and the Capital Accounts of the Partners shall be adjusted in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(s); provided, further, that in the event of an issuance of Units for a de minimis amount of cash or contributed property, in the event of an issuance of a Noncompensatory Option to acquire a de minimis Partnership interest, or in the event of an issuance of a de minimis amount of Partnership interests as consideration for the provision of services, the General Partner may determine that such adjustments are unnecessary for the proper administration of the Partnership. If, upon the occurrence of a revaluation event described in this definition of Carrying Value, a Noncompensatory Option of the Partnership is outstanding, the Partnership shall adjust the Carrying Value of each Partnership property in accordance with Treasury Regulation Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2). In determining such unrealized gain or unrealized loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of additional Partnership interests (or, in the case of a revaluation event resulting from the exercise of a Noncompensatory Option, immediately after the issuance of the Units acquired pursuant to the exercise of such Noncompensatory Option if required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(1)) shall be determined by the General Partner using such reasonable method of valuation as it may adopt.
“Certificate” has the meaning set forth in the recitals of this Agreement.
“Class” means the classes of Units into which the interests in the Partnership may be classified or divided from time to time by the General Partner in its reasonable discretion pursuant to the provisions of this Agreement. As of the date of this Agreement, the only Classes are the Class A Units, the Class S Units, the FLP Unit Accounts and the Preferred Series Unit Accounts. Subclasses within a Class shall not be separate Classes for purposes of this Agreement or the Act.
For all purposes hereunder and under the Act, only such Classes expressly established under this Agreement, including by the General Partner in accordance with this Agreement, shall be deemed to be a class of limited partner interests in the Partnership. For the avoidance of doubt, to the extent that the General Partner holds limited partner interests of any Class, the General Partner shall not be deemed to hold a separate Class of such interests from any other Limited Partner because it is the General Partner.
“Class A Common Stock” means the Class A common stock, par value $0.001, of the Issuer.
“Class A Units” means the Units of partnership interest in the Partnership designated as the “Class A Units” herein and having the rights pertaining thereto as are set forth in this Agreement.
“Class B Common Stock” means the Class B common stock, par value $0.001, of the Issuer.
“Class S Ordinary Units” means Units of partnership interest in the Partnership designated as the “Class S Ordinary Units” herein and having the rights pertaining thereto as are set forth in this Agreement and convertible into Class A Common Stock in accordance with an applicable Exchange Agreement and Section 7.06.
“Class S Preferred Units” means Units of partnership interest in the Partnership designated as the “Class S Preferred Units” herein and having the rights pertaining thereto as are set forth in this Agreement and convertible into Class S Ordinary Units in accordance with Section 7.05.
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“Class S Units” means the Class S Ordinary Units and the Class S Preferred Units.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Common Stock” means the Class A Common Stock and the Class B Common Stock of the Issuer.
“Consenting Party” has the meaning set forth in Section 11.10(a).
“Contingencies” has the meaning set forth in Section 9.03(a).
“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.
“Conversion Amount” has the meaning set forth in Section 7.08(b).
“Conversion Capital Account” has the meaning set forth in Section 5.05(h)(i).
“CPI-U” means the seasonally adjusted Consumer Price Index for All Urban Consumers published by the U.S. Bureau of Labor Statistics.
“Credit Amount” has the meaning set forth in Section 4.03(c).
“Creditable Non-U.S. Tax” means a non-U.S. tax paid or accrued for United States federal income tax purposes by the Partnership, in either case to the extent that such tax is eligible for credit under Section 901(a) of the Code. A non-U.S. tax is a Creditable Non-U.S. Tax for these purposes without regard to whether a Partner receiving an allocation of such non-U.S. tax elects to claim a credit for such amount. This definition is intended to be consistent with the term “creditable foreign tax” in Treasury Regulations Section 1.704-1(b)(4)(viii), and shall be interpreted consistently therewith.
“Departing General Partner” means a former General Partner from and after the effective date of any withdrawal of such former General Partner pursuant to Section 8.06.
“Disabling Event” means the General Partner ceasing to be the general partner of the Partnership pursuant to Section 17-402 of the Act.
“Dispute” has the meaning set forth in Section 11.10(a).
“Effective Date” has the meaning set forth in the preamble of this Agreement.
“Encumbrance” means any mortgage, hypothecation, claim, lien, encumbrance, conditional sales or other title retention agreement, right of first refusal, preemptive right, pledge, option, charge, security interest or other similar interest, easement, judgment or imperfection of title of any nature whatsoever.
“Equity Securities” means (a) Units or other equity interests in the Partnership (including Class A Units, Class S Units, Preferred Series Unit Accounts and FLP Unit Accounts or other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the General Partner, including rights, powers and/or duties senior to existing classes and groups of Units and other equity interests in the Partnership), (b) obligations, evidences of Indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Partnership and (c) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Partnership.
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“ERISA” means The Employee Retirement Income Security Act of 1974, as amended.
“Excess” has the meaning set forth in Section 7.04(b)(iv).
“Excess Amount” has the meaning set forth in Section 5.05(h)(iv).
“Excess EBITDA Margin” means the lesser of (i) 50% of the total GAAP revenue of the Partnership or a Subsidiary of the Partnership (without duplication), excluding Net Financing Revenue and any income allocation associated with a Subsidiary that is (A) taxable as a corporation for U.S. federal income tax purposes, or (B) a trust that is a consolidated subsidiary for financial reporting purposes including, without limitation, a “custody trust,” “collective trust,” “liquid trust” and “funding trust,” and (ii) an amount of total GAAP revenue that will cause the Profit Margin to equal 20%, treating amounts included as Excess EBITDA Margin as an expense in calculating such Profit Margin.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Agreement” means one or more exchange agreements providing for the exchange of the Partnership’s partnership units or other securities issued by partners, members or other equity holders, as applicable, of the General Partner, the Partnership and any of their Subsidiaries for Class A Common Stock (in lieu of common units following the statutory conversion of BCG into the Issuer), or the distribution of cash in lieu of Class A Common Stock.
“Exchange Transaction” means an exchange of Units or other securities for Class A Common Stock (in lieu of common units following the statutory conversion of BCG into the Issuer) or cash pursuant to, and in accordance with, an applicable Exchange Agreement or, if the Issuer and the exchanging Limited Partner shall mutually agree, a Transfer of Units to the Issuer, the Partnership or any of their Subsidiaries for other consideration.
“Excluded Amounts” means amounts allocated pursuant to Section 5.04(c).
“Executive Committee” means the Executive Committee of the Board of Directors of the Issuer constituted in accordance with the governing documents of Issuer or, in the event there is no such Executive Committee, a committee composed of those members (or the duly appointed successors of those members) who served on the Executive Committee immediately before the Executive Committee ceased to exist.
“Existing Agreement” has the meaning set forth in the recitals of this Agreement.
“Final Tax Amount” has the meaning set forth in Section 4.03(c).
“Fiscal Quarter” means, as applicable, a three-month period commencing on January 1, April 1, July 1 or October 1.
“Fiscal Year” means, unless otherwise determined by the General Partner in its reasonable discretion in accordance with Section 11.12, the twelve-month period commencing on April 1 and ending on March 31.
“FLP Unit Account” means an account having the rights and obligations specified in this Agreement and convertible into Class S Units in accordance with Section 7.04. References to “FLP Unit Accounts” include Subclass 1, Subclass 2 and Subclass 3 FLP Unit Accounts. For the avoidance of doubt, FLP Unit Accounts are not Class A Units, Class S Units or Preferred Series Unit Accounts.
“GAAP” means accounting principles generally accepted in the United States of America as in effect from time to time.
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“General Partner” means Beneficient Company Group, L.L.C., a limited liability company formed under the laws of the State of Delaware, or any additional and/or successor general partner admitted to the Partnership in accordance with the terms of this Agreement, acting in its capacity as a general partner of the Partnership.
“GP LLC Agreement” means the Limited Liability Agreement of the General Partner, as such agreement may be amended, supplemented or restated from time to time.
“GP Triggering Event” has the meaning set forth in Section 9.02.
“Guaranteed Series A-0 Payment” has the meaning set forth in Section 4.08.
“Hypothetical Class S Preferred Opening Capital Account Balance” means the Hypothetical Class S Preferred Opening Capital Account Balance as determined in accordance with the Partnership’s previous partnership agreements, as amended and restated, associated with a holder’s Class S Preferred Units as of the Effective Date increased (a) for the period from and after the Effective Date through December 31, 2024, the balance of the Sub-Capital Account associated with a holder’s Class S Preferred Units as of the first day of a particular Fiscal Quarter, calculated on a compounded basis as if such Class S Preferred Units had been increased by any amounts actually allocated pursuant Section 5.04(a)(viii), in each case, after making appropriate adjustments for any redemptions, conversions and distributions and excluding any allocations of Loss; and, (b) for the period from and after January 1, 2025, the balance of the Sub-Capital Account associated with a holder’s Class S Preferred Units as of the first day of a particular Fiscal Quarter, calculated on a compounded basis as if such Class S Preferred Units had been increased by an amount equal to the Quarterly Class S Preferred Return for all previous Fiscal Quarters from and after January 1, 2025, after making appropriate adjustments for any redemptions, conversions and distributions and excluding any allocations of Profit or Loss; provided, however, that, in each case, in the event that any Class S Preferred Unit is to be converted or redeemed on a date that is not the first day of a Fiscal Quarter, then such applicable Hypothetical Class S Preferred Opening Capital Account Balance shall be determined as of such date, taking into account the proportionate Quarterly Class S Preferred Return for such period.
“Hypothetical Preferred Opening Capital Account Balance” means the Hypothetical Preferred Opening Capital Account Balance as determined in accordance with the Partnership’s previous partnership agreements, as amended and restated, associated with a holder’s Preferred Series Unit Account as of the Effective Date increased by (a) in the case of each of the Preferred Series A Subclass 1 Unit Accounts (i) for the period from and after the Effective Date through December 31, 2024, the balance of the Sub-Capital Account associated with a holder’s Preferred Series A Subclass 1 Unit Account as of the first day of a particular Fiscal Year or Fiscal Quarter, as applicable, calculated on a compounded basis as if such Preferred Series A Subclass 1 Unit Account had been increased by amounts actually allocated pursuant to Section 5.04(a)(iv), in each case, after making appropriate adjustments for any redemptions, conversions and distributions (including, for clarity, any distribution pursuant to Section 4.01) and excluding any allocations of Loss, and (ii) for the period from and after January 1, 2025, the balance of the Sub-Capital Account associated with a holder’s Preferred Series A Subclass 1 Unit Account as of the first day of a particular Fiscal Year or Fiscal Quarter, as applicable, calculated on a compounded basis as if such Preferred Series A Subclass 1 Unit Account has been increased by the applicable Quarterly Preferred Series A Return for all previous Fiscal Quarters from and after January 1, 2025, in each case after making appropriate adjustments for any redemptions, conversions and distributions (including, for clarity, any distribution pursuant to Section 4.01) and excluding any allocations of Profit or Loss, and (b) in the case of each of the Preferred Series C Subclass 1 Unit Accounts, the balance of the Sub-Capital Account associated with a holder’s Preferred Series C Subclass 1 Unit Account as of the first day of a particular Fiscal Year or Fiscal Quarter, as applicable, calculated on a compounded basis as if such Preferred Series C Subclass 1 Unit Account has been increased by the applicable Quarterly Preferred Series C Subclass 1 Return for all previous Fiscal Quarters, in each case after making appropriate adjustments for any redemptions, conversions and distributions and excluding any allocations of Profit or Loss; provided, that, in each case, in the event that any Preferred Series
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Unit Account is to be converted or redeemed on a date that is not the first day of a Fiscal Year or Fiscal Quarter, as applicable, then the Hypothetical Preferred Opening Capital Account Balance shall be determined as of such date, taking into account the proportionate amounts allocated pursuant to Section 5.04(a)(iv), Quarterly Preferred Series A Return or Quarterly Preferred Series C Subclass 1 Return, as applicable, for such period, in each case after making appropriate adjustments for any redemptions, conversions and distributions (including, for clarity, any distribution pursuant to Section 4.01) and excluding, as applicable pursuant to clauses (a) and (b) above, any allocations of Profit or Loss.
“Incapacity” means, with respect to any Person, the bankruptcy, dissolution, termination, entry of an order of incompetence, or the insanity, permanent disability or death of such Person.
“Indebtedness” means the long-term indebtedness of the Partnership and its Subsidiaries, on a consolidated basis, as set forth on the most recent quarterly or annual financial statements of the Partnership.
“Indemnitee” means (a) the General Partner, (b) any current or former managing member of the General Partner, (c) any Departing General Partner and any current or former general partner or member of any Departing General Partner, (d) any additional or substitute General Partner, (e) any Person who is or was a tax matters partner (or partnership representative or designated individual), officer or director of the Partnership, the General Partner, any Departing General Partner or any additional or substitute General Partner or of the general partner of the General Partner or any Departing General Partner, (f) any Limited Partner, (g) any officer or director of the General Partner, any Departing General Partner or any additional or substitute General Partner who is or was serving at the request of the General Partner or any additional or substitute General Partner as an officer, director, employee, member, partner, tax matters partner (or partnership representative or designated individual), agent, fiduciary or trustee of another Person; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, (h) any Person the General Partner in its reasonable discretion designates as an “Indemnitee” for purposes of this Agreement (which such designation may be made at any time, including after any liability arises) and (i) any heir, executor or administrator with respect to Persons named in clauses (a) through (h).
“Inflation Adjustment Amount” means for a given holder of Units, as of any determination date, the percentage change, if positive, to the CPI-U from (a) the date of the last allocation of Profits to such holder to (b) such determination date.
“Issuer” means Beneficient, a corporation formed under the laws of the State of Nevada (or any successor thereto), as successor by way of statutory conversion of BCG.
“Law” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authority therefrom with jurisdiction over the Partnership or any Partner, as the case may be.
“Limited Partner” means each of the Persons from time to time listed as a limited partner in the books and records of the Partnership, and, for purposes of Section 8.01, Section 8.02, and Section 8.03, acting in their capacity as a limited partner of the Partnership.
“Liquidating Proceeds” has the meaning set forth in Section 9.03(b).
“Liquidation Agent” has the meaning set forth in Section 9.03.
“Minimum Retained Earnings” means, at any time of measurement, an amount equal to (a) the sum of the Hypothetical Preferred Opening Capital Account Balances for all applicable Preferred Series Unit Accounts, plus (b) the sum of the Hypothetical Class S Preferred Opening Capital Account Balances for all then issued and outstanding Class S Preferred Units, plus (c) the sum of all capital contributions made by Class A Units, and plus (d) the aggregate amount of any Carrying Value adjustments related to such Classes of Units pursuant to Section 5.04(d) and Section 5.04(e).
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“NAV” means the net asset value (calculated by the Partnership in accordance with its customary procedures) of the Partnership’s Alternative Asset Financing Portfolio, plus, without duplication, all cash held or controlled by the Partnership or its Affiliates (as of the date of determination).
“Net Financing Revenue” means the net Profits or Losses from any activities of the Partnership earned directly, or indirectly, as a result of any financing activities of the Partnership or its Subsidiaries (without duplication), and excluding, for the avoidance of doubt, any net Profits or Losses deriving from any other activities of the Partnership or its Subsidiaries, including, but not limited to, any fees or reimbursement of expenses in connection with trustee or custodial services or functions, or insurance or insurance-related operations (regardless of eliminations due to consolidation) and the net financing revenues attributable to the fund interests set out on Exhibit A attached hereto.
“Net Taxable Income” has the meaning set forth in Section 4.03(a).
“90-Day Average SOFR” means the most recent 90-Day Average Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the publication date most recently prior to each Fiscal Quarter.
“Noncompensatory Option” has the meaning set forth in Treasury Regulations Section 1.721-2(f).
“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations Section 1.704-2(b). The amount of Nonrecourse Deductions of the Partnership for a Fiscal Year equals the net increase, if any, in the amount of Partnership Minimum Gain of the Partnership during that Fiscal Year, determined according to the provisions of Treasury Regulations Section 1.704-2(c).
“Officer” means each Person designated in writing as an officer of the Partnership by the General Partner pursuant to and in accordance with the provisions of Section 3.04, subject to any resolutions of the General Partner appointing such Person as an officer of the Partnership or relating to such appointment.
“Partner Nonrecourse Debt Minimum Gain” means an amount with respect to each partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b)(4)) equal to the Partnership Minimum Gain that would result if such partner nonrecourse debt were treated as a nonrecourse liability (as defined in Treasury Regulations Section 1.752-1(a)(2)) determined in accordance with Treasury Regulations Section 1.704-2(i)(3).
“Partner Nonrecourse Deductions” has the meaning ascribed to the term “partner nonrecourse deductions” set forth in Treasury Regulations Section 1.704-2(i)(2).
“Partners” means, at any time, each person listed as a Partner (including the General Partner) on the books and records of the Partnership, in each case for so long as he, she or it remains a partner of the Partnership as provided hereunder.
“Partnership” has the meaning set forth in the preamble of this Agreement.
“Partnership Minimum Gain” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
“Partnership Register” has the meaning set forth in Section 2.08.
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“Partnership Sale” means, unless otherwise determined by the General Partner in its reasonable discretion, the sale, exchange, or other disposition, or sale of control, in one or more related transactions (transactions occurring within any 36-month period shall be deemed to be related unless determined otherwise by the General Partner in its reasonable discretion), of or over, (a) the Partnership, (b) 40% or more of the Partnership’s total assets (by value), or (c) assets of any direct or indirect Subsidiary of the Partnership; provided that such sale(s), exchange(s), or other disposition(s) represents more than 40% of the Partnership’s total assets (by value).
“Partnership Tax Audit Rules” means the provisions of Subchapter C of Chapter 63 of the Code, currently Code Section 6221 through 6241 (together with any subsequent amendments thereto, Treasury Regulations promulgated thereunder, and published administrative interpretations thereof).
“Person” means any individual, estate, corporation, partnership, limited partnership, limited liability company, limited company, joint venture, trust, unincorporated or governmental organization or any agency or political subdivision thereof.
“Preemptive Holder” has the meaning set forth in Section 7.10(a).
“Preemptive Investor Portion” means, with respect to any Preemptive Holder, that proportion that the Class S Ordinary Units then held by such Preemptive Holder (including all Class S Ordinary Units then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of any other Equity Securities then held by such Preemptive Holder) bears to the total Class S Ordinary Units of the Partnership then outstanding (assuming full conversion and/or exercise, as applicable, of all other Equity Securities then outstanding).
“Preemptive Rights Notice” has the meaning set forth in Section 7.10(b).
“Preferred Series A Subclass 0 Unit Accounts” has the meaning set forth in Section 7.01(a).
“Preferred Series A Subclass 0 Unit Conversion Amount” has the meaning set forth in Section 7.08(a).
“Preferred Series A Subclass 0 Unit Conversion Price” means the average of (i) $10.50, and (ii) (x) if the Class A Common Stock is listed on a national securities exchange. the volume-weighted average closing price of a share of Class A Common Stock as reported on the exchange on which the Class A Common Stock is traded for the twenty (20) days immediately prior to the applicable Quarterly Exchange Date, or (y) if the Class A Common Stock is not listed on a national securities exchange, then the volume-weighted average closing price of a share of Class A Common Stock as quoted on the automated quotation system on which the Class A Common Stock is quoted (including applicable tiers of the over-the-counter market maintained by the OTC Market Group, Inc.) for the twenty (20) days immediately prior to the applicable Quarterly Exchange Date (collectively, the “VWAP Price”); provided that, for the period from the Effective Date through December 31, 2027, the Preferred Series A Subclass 0 Unit Conversion Price as of any Quarterly Exchange Date shall not be less than $10.50.
“Preferred Series A Subclass 0 Unit Initial Amount” means, for each holder of Preferred Series A Subclass 0 Unit Accounts, such holders’ initial opening Preferred Series A Subclass 0 Unit Account balance as specified in the Partnership’s records for such holder (after giving effect to any conversions in connection with the consummation of the transactions contemplated by the Business Combination Agreement).
“Preferred Series A Subclass 0 Unit Quarterly Cap Amount” means, for each holder of Preferred Series A Subclass 0 Unit Accounts, twelve and one half percent (12.5%) of the Capital Account balance of such holders’ Preferred Series A Subclass 0 Initial Amount for any rolling twelve (12) month period.
“Preferred Series A Subclass 1 Unit Accounts” has the meaning set forth in Section 7.01(a).
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“Preferred Series A Subclass 1 Unit Conversion Amount” has the meaning set forth in Section 7.08(b).
“Preferred Series A Subclass 1 Unit Conversion Price” means the average closing price of a share of Class A Common Stock as reported on the exchange on which the Class A Common Stock is traded for the thirty (30) day period ended immediately prior to the applicable Quarterly Exchange Date, or if the Class A Common Stock is not listed on a national securities exchange, then the average closing price of a share of Common Stock as quoted on the automated quotation system on which the Class A Common Stock is quoted (including applicable tiers of the over-the-counter market maintained by the OTC Market Group, Inc.) for the thirty (30) day period ended immediately prior to the applicable Quarterly Exchange Date; provided that, for the period from the Effective Date through December 31, 2027, the Preferred Series A Subclass 1 Unit Conversion Amount shall not be less than $10.50.
“Preferred Series A Unit Accounts” means the (a) Preferred Series A Subclass 0 Unit Accounts and (b) Preferred Series A Subclass 1 Unit Accounts.
“Preferred Series C Subclass 1 Unit Accounts” has the meaning set forth in Section 7.01(a).
“Preferred Series Unit Account” means an account representing an interest in the Partnership designated as a “Preferred Series Unit Account” herein and having the rights pertaining thereto as are set forth in this Agreement. For the avoidance of doubt, Preferred Series Unit Accounts are not Class A Units, Class S Units, or FLP Unit Accounts. Preferred Series Unit Accounts shall include Preferred Series A Subclass 0 Unit Accounts, Preferred Series A Subclass 1 Unit Accounts and Preferred Series C Subclass 1 Unit Accounts.
“Primary Indemnification” has the meaning set forth in Section 10.02(a).
“Pro Rata” means, unless otherwise provided in this Agreement, (a) when used with respect to each category of Units, or any class, accounts or series thereof, apportioned equally among all designated Units (or categories, classes or series thereof) or in accordance with Sub-Capital Account balances with respect to the Preferred Series Unit Accounts and FLP Unit Accounts, and, to the extent applicable, the General Partner interest, in accordance with their relative Total Percentage Interests and (b) when used with respect to Partners, apportioned among all Partners in accordance with their relative Total Percentage Interests. For the avoidance of doubt, Pro Rata apportionments under this Agreement are made without conversion of any outstanding Class S Preferred Units into Class S Ordinary Units.
“Profits” and “Losses” means, for each Fiscal Year or other period, the taxable income or loss of the Partnership, or particular items thereof (including, for the avoidance of doubt, with respect to the sale or other disposition of any Subsidiary of the Partnership or of assets used in the operation of the Partnership), determined in accordance with the accounting method used by the Partnership for U.S. federal income tax purposes with the following adjustments: (a) all items of income, gain, loss or deduction allocated pursuant to Section 5.05 shall not be taken into account in computing such taxable income or loss; (b) any income of the Partnership that is exempt from U.S. federal income taxation and not otherwise taken into account in computing Profits and Losses shall be added to such taxable income or loss; (c) if the Carrying Value of any asset differs from its adjusted tax basis for U.S. federal income tax purposes, any gain or loss resulting from a disposition of such asset shall be calculated with reference to such Carrying Value; (d) if the Carrying Value of any asset differs from its adjusted tax basis for U.S. federal income tax purposes, the amount of depreciation, amortization or cost recovery deductions with respect to such asset for purposes of determining Profits and Losses, if any, shall be an amount which bears the same ratio to such Carrying Value as the U.S. federal income tax depreciation, amortization or other cost recovery deductions bears to such adjusted tax basis (provided that if the U.S. federal income tax depreciation, amortization or other cost recovery deduction is zero, the General Partner may use any reasonable method for purposes of determining depreciation, amortization or other cost recovery deductions in calculating Profits and Losses); and (e) except for the items in clause (a) above, any expenditures of the Partnership not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Profits and Losses pursuant to this definition shall be treated as deductible items.
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“Profit Margin” means the quotient of (i) the GAAP earnings before income, taxes, interest, depreciation and amortization (“EBITDA”) of the Partnership, including any direct or indirect Subsidiary (without duplication), divided by (ii) the total GAAP revenue of the Partnership, including any direct or indirect Subsidiary (without duplication), excluding any amount considered Net Financing Revenue related in calculating both clauses (i) and (ii) above.
“Quarterly Class S Preferred Rate” means the Base Rate; provided that the Quarterly Class S Preferred Rate shall be waived and shall not accrue during the period from the Effective Date until December 31, 2024, except to the extent any allocation of income is permitted under Section 5.04(a)(viii).
“Quarterly Class S Preferred Return” means for any given Fiscal Quarter (or portion thereof, for which a pro-rated Quarterly Class S Preferred Return shall apply), the amount equal to a Class S Preferred Unit holder’s Hypothetical Class S Preferred Opening Capital Account Balance, multiplied by the Quarterly Class S Preferred Rate.
“Quarterly Exchange Date” means, for each Fiscal Quarter following the Effective Date, the date that is the later to occur of either: (i) the third business day after the date of an earnings release for the prior Fiscal Quarter; or (ii) the first day following the earnings release for the prior Fiscal Quarter that directors and executive officers of the Issuer are permitted to trade under the applicable policies of the Issuer relating to trading by directors and executive officers.
“Quarterly Preferred Series A Rate” means the Base Rate; provided, that the Quarterly Preferred Series A Rate shall be waived and shall not accrue during the period from the Effective Date until December 31, 2024, except to the extent of any allocation of income permitted under Section 5.04(a)(iv) in which event the holders of the Preferred Series A Subclass 1 Unit Accounts may request a distribution pursuant to Section 4.01 and, if such distribution is not requested, such amount shall be accrued for purposes of determining the Total Preferred Series A Return.
“Quarterly Preferred Series A Return” means, with respect to Preferred Series A Subclass 1 Unit Accounts, for any given Fiscal Quarter (or portion thereof, for which a pro-rated Quarterly Preferred Series A Return shall apply), the product of (i) the amount equal to such Preferred Series A Subclass 1 Unit Account holder’s Hypothetical Preferred Opening Capital Account Balance, multiplied by (ii) the Quarterly Preferred Series A Rate.
“Quarterly Preferred Series C Subclass 1 Rate” means a fraction the numerator of which is (a) the sum of the Inflation Adjustment Amount, plus the 0.75%, and the denominator of which is (b) 1 minus the Assumed Tax Rate based on the Partnership’s most recently filed IRS form 1065.
“Quarterly Preferred Series C Subclass 1 Return” means, with respect to Preferred Series C Subclass 1 Unit Accounts, for any given Fiscal Quarter (or portion thereof, for which a pro-rated Quarterly Preferred Series C Subclass 1 Return shall apply), the product of (i) the amount equal to such Preferred Series C Subclass 1 Unit Account holder’s Hypothetical Preferred Opening Capital Account Balance, multiplied by (ii) the Quarterly Preferred Series C Subclass 1 Rate.
“Sales Proceeds” has the meaning set forth in Section 4.07.
“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Similar Law” means any law or regulation that could cause the underlying assets of the Partnership to be treated as assets of a Limited Partner by virtue of its limited partner interest in the Partnership and thereby subject the Partnership and the General Partner (or other persons responsible for the investment and operation of the Partnership’s assets) to laws or regulations that are similar to the fiduciary responsibility or prohibited transaction provisions contained in Title I of ERISA or Section 4975 of the Code.
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“SOFR Rate” means the 90-day Average SOFR divided by four.
“SPAC” means a special purpose acquisition entity which has completed an initial public offering resulting in the equity interests of such entity being listed on a securities exchange, and does not conduct any material business or maintain any material assets (other than cash).
“Sub-Capital Account” means a separate sub-account maintained with respect to a Partner’s Capital Account in accordance with Section 5.02.
“Subclass 1 FLP Unit Accounts” has the meaning set forth in Section 7.01(a).
“Subclass 2 FLP Unit Accounts” has the meaning set forth in Section 7.01(a).
“Subclass 3 FLP Unit Accounts” has the meaning set forth in Section 7.01(a).
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person, at the date of determination, (i) is a general partner of such partnership, (ii) owns more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class), directly or indirectly, or (iii) otherwise controls such partnership, directly or indirectly, (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, (i) has at least a majority ownership interest, (ii) has the power to elect or direct the election of a majority of the directors or other governing body of such Person, or (iii) otherwise controls such Person or (d) any other Person the financial information of which is consolidated by such Person for financial reporting purposes under GAAP.
“Substitute GP” has the meaning set forth in Section 9.02.
“Tax Advances” has the meaning set forth in Section 5.07.
“Tax Amount” has the meaning set forth in Section 4.03(a).
“Tax Distributions” has the meaning set forth in Section 4.03(a).
“Tax Matters Partner” has the meaning set forth in Section 5.08(a).
“Total Class S Preferred Return” means the amount calculated by summing a Class S Preferred Unit holder’s Quarterly Class S Preferred Returns for each Fiscal Quarter.
“Total Percentage Interest” means, with respect to any Partner, the quotient obtained by dividing the number of Units, or any class thereof, then owned by such Partner by the number of Units, or any class thereof, then owned by all Partners. For the avoidance of doubt, Total Percentage Interest is computed (i) with respect to any Preferred Series Unit Account, on an as converted basis, and (ii) without conversion of any outstanding Class S Preferred Units into Class S Ordinary Units.
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“Total Preferred Series A Return” means the amount calculated by summing a Preferred Series A Unit Account holder’s Quarterly Preferred Series A Returns for each Fiscal Quarter; provided, that any Quarterly Preferred Series A Return that is not allocated pursuant to Section 5.04(a)(iv) during the period from the Effective Date through December 31, 2024 will not be included in the Total Preferred Series A Return.
“Total Preferred Series C Return” means the amount calculated by summing a Preferred Series C Subclass 1 Unit Account holder’s Quarterly Preferred Series C Subclass 1 Returns for each Fiscal Quarter.
“Trading Price” means, as of any date, (i) if the Class A Common Stock is listed on a national securities exchange, the closing price on such date of one share of Class A Common Stock, as reported on the primary exchange on which the shares of Class A Common Stock are traded, or (ii) if the Class A Common Stock is not listed on a national securities exchange, the closing price on such date as quoted on the automated quotation system on which the Class A Common Stock is quoted (including applicable tiers of the over-the-counter market maintained by OTC Market Group, Inc.).
“Transfer” means, in respect of any Unit, property or other asset, any sale, assignment, transfer, distribution, exchange, mortgage, pledge, hypothecation or other disposition thereof, whether voluntarily or by operation of Law, directly or indirectly, in whole or in part, including, without limitation, the exchange of any Unit for any other security.
“Transferee” means any Person that is a permitted transferee of a Partner’s interest in the Partnership, or part thereof.
“Treasury Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“UBTI” means unrelated business taxable income or unrelated business debt financed income as defined in Sections 512 and 514 of the Code.
“Unit Price” means, at all times after the Effective Date, the Trading Price.
“Units” means the Class A Units, the Class S Units, the FLP Unit Accounts, the Preferred Series Unit Accounts and any other Class of Units or Unit Accounts that is established in accordance with this Agreement, which shall constitute interests in the Partnership as provided in this Agreement and under the Act, entitling the holders thereof to the relative rights, title and interests in the profits, losses, deductions and credits of the Partnership at any particular time as set forth in this Agreement, and any and all other benefits to which a holder thereof may be entitled as a Partner as provided in this Agreement, together with the obligations of such Partner to comply with all terms and provisions of this Agreement, including, solely where applicable, the General Partner interest.
“UPA” means the Preferred Series C Unit Purchase Agreement, effective as of July 15, 2020 entered into by and among GWG Holdings, Inc., a Delaware corporation, The Beneficient Company Group, L.P., a Delaware limited partnership, and Beneficient Company Holdings, L.P., a Delaware limited partnership.
“VWAP Price” has the meaning set forth in the definition of Preferred Series A Subclass 0 Unit Conversion Price.
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ARTICLE II.
FORMATION, TERM, PURPOSE AND POWERS
Section 2.01. Formation. The Partnership was formed as a limited partnership under the provisions of the Act by the filing on May 14, 2010 of the Certificate. If requested by the General Partner, the Limited Partners shall promptly execute all certificates and other documents consistent with the terms of this Agreement necessary for the General Partner to accomplish all filing, recording, publishing and other acts as may be appropriate to comply with all requirements for (a) the formation and operation of a limited partnership under the laws of the State of Delaware, (b) if the General Partner deems it advisable, the operation of the Partnership as a limited partnership, or partnership in which the Limited Partners have limited liability, in all jurisdictions where the Partnership proposes to operate and (c) all other filings required to be made by the Partnership. The rights, powers, duties, obligations and liabilities of the Partners shall be determined pursuant to the Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Partner are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control. The execution and filing of the Certificate and each amendment thereto is hereby ratified, approved and confirmed by the Partners.
Section 2.02. Name. The name of the Partnership shall be, and the business of the Partnership shall be conducted under the name of, “Beneficient Company Holdings, L.P.,” and all Partnership business shall be conducted in that name or in such other names that comply with applicable Law as the General Partner in its reasonable discretion may select from time to time. Subject to the Act, the General Partner may change the name of the Partnership (and amend this Agreement to reflect such change) at any time and from time to time without the consent of any other Person. Prompt notification of any such change shall be given to all Partners.
Section 2.03. Term. The term of the Partnership commenced on the date of the filing of the Certificate, and the term shall continue until the dissolution of the Partnership in accordance with Article IX. The existence of the Partnership shall continue until cancellation of the Certificate in the manner required by the Act.
Section 2.04. Offices. The Partnership may have offices at such places either within or outside the State of Delaware as the General Partner from time to time may select. As of the date hereof, the principal place of business and office of the Partnership is located at 325 N. St. Paul Street, Suite 4850, Dallas, Texas 75201.
Section 2.05. Agent for Service of Process; Existence and Good Standing; Foreign Qualification.
(a) The Partnership’s registered agent and registered office for service of process in the State of Delaware shall be as set forth in the Certificate, as the same may be amended by the General Partner from time to time.
(b) The General Partner may take all action which may be necessary or appropriate (i) for the continuation of the Partnership’s valid existence as a limited partnership under the laws of the State of Delaware (and of each other jurisdiction in which such existence is necessary to enable the Partnership to conduct the business in which it is engaged) and (ii) for the maintenance, preservation and operation of the business of the Partnership in accordance with the provisions of this Agreement and applicable Laws and regulations. The General Partner may file or cause to be filed for recordation in the proper office or offices in each other jurisdiction in which the Partnership is formed or qualified, such certificates (including certificates of limited partnership and fictitious name certificates) and other documents as are required by the applicable statutes, rules or regulations of any such jurisdiction or as are required to reflect the identity of the Partners. The General Partner may cause the Partnership to comply, to the extent procedures are available and those matters are reasonably within the control of the Officers, with all requirements necessary to qualify the Partnership to do business in any jurisdiction other than the State of Delaware.
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Section 2.06. Business Purpose. The Partnership was formed for the object and purpose of, and the nature and character of the business to be conducted by the Partnership is, engaging in any lawful act or activity for which limited partnerships may be formed under the Act.
Section 2.07. Powers of the Partnership. Subject to the limitations set forth in this Agreement, the Partnership will possess and may exercise all of the powers and privileges granted to it by the Act, including, without limitation, the ownership and operation of the assets and other property contributed to the Partnership by the Partners, by any other Law or this Agreement, together with all powers incidental thereto, so far as such powers are necessary or convenient to the conduct, promotion or attainment of the purpose of the Partnership set forth in Section 2.06.
Section 2.08. Partners; Admission of New Partners. Each of the Persons listed in the books and records of the Partnership as a partner of the Partnership on the date hereof, by virtue of the execution of this Agreement, is admitted as a partner (general or limited, as applicable and noted in the books and records) of the Partnership. A list of the Partners of the Partnership reflecting their respective Capital Account balances (including Hypothetical Preferred Opening Capital Account Balances) as determined in accordance with this Agreement as of the date hereof is set forth in the books and records of the Partnership (the “Partnership Register”). The rights, duties and liabilities of the Partners shall be as provided in the Act, except as is otherwise expressly provided herein, and the Partners consent to the variation of such rights, duties and liabilities as provided herein. Subject to Section 8.07 with respect to substitute Limited Partners, a Person may be admitted from time to time as a new Limited Partner upon the issuance of Units in accordance with this Agreement. Each new Limited Partner shall execute and deliver to the General Partner an appropriate supplement, substantially in the form attached hereto as Annex A, to this Agreement pursuant to which the new Limited Partner agrees to be bound by the terms and conditions of the Agreement, as it may be amended from time to time. A new General Partner or substitute General Partner may be admitted to the Partnership solely in accordance with Section 8.06 or Section 9.02(e). The General Partner shall amend the books and records of the Partnership, including the Partnership Register of the Partnership, to reflect any changes to the current Partners or Transfers made subsequent to this Agreement, in each case in accordance with this Agreement.
Section 2.09. Withdrawal. No Partner shall have the right to withdraw as a Partner of the Partnership other than following the Transfer of all Units owned by such Partner in accordance with Article VIII or conversion of all their Units pursuant to an Exchange Transaction in accordance with this Agreement.
Section 2.10. Investment Representations of Partners. Each Partner hereby represents, warrants and acknowledges to the Partnership that: (a) such Partner has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Partnership and is making an informed investment decision with respect thereto; (b) such Partner is acquiring interests in the Partnership for investment only and not with a view to, or for resale in connection with, any distribution to the public or public offering thereof; and (c) the execution, delivery and performance of this Agreement have been duly authorized by such Partner.
ARTICLE III.
MANAGEMENT
Section 3.01. General Partner.
(a) The business, property and affairs of the Partnership shall be managed under the sole, absolute and exclusive direction of the General Partner, which may from time to time delegate authority to Officers or to others to act on behalf of the Partnership.
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(b) Without limiting the foregoing provisions of this Section 3.01, the General Partner shall have the general power to manage or cause the management of the Partnership (which may be delegated to Officers of the Partnership), including, without limitation, the following powers:
(i) to execute and deliver or to authorize the execution and delivery of contracts, deeds, leases, licenses, instruments of transfer and other documents on behalf of the Partnership;
(ii) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, Indebtedness and other liabilities, the issuance of evidences of indebtedness and the incurring of any other obligations;
(iii) to establish and enforce limits of authority and internal controls with respect to all personnel and functions;
(iv) to engage attorneys, consultants and accountants for the Partnership;
(v) to develop or cause to be developed accounting procedures for the maintenance of the Partnership’s books of account; and
(vi) to do all such other acts as shall be authorized in this Agreement or by the Partners in writing from time to time.
Section 3.02. Compensation. The General Partner shall not be entitled to any compensation for services rendered to the Partnership in its capacity as General Partner.
Section 3.03. Expenses. The Partnership shall pay, or cause to be paid, all costs, fees, operating expenses and other expenses of the Partnership (including the costs, fees and expenses of attorneys, accountants or other professionals) incurred in pursuing and conducting, or otherwise related to, the activities of the Partnership. The Partnership shall also, in the reasonable discretion of the General Partner, bear and/or reimburse the General Partner for (a) any costs, fees or expenses incurred by the General Partner in connection with serving as the General Partner, (b) all other expenses allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership’s business (including expenses allocated to the General Partner by its Affiliates) and (c) all costs, fees or expenses owed directly or indirectly by the Partnership or the General Partner to the Issuer pursuant to their reimbursement obligations under, or which are otherwise allocated to the General Partner pursuant to, the GP LLC Agreement. To the extent that the General Partner determines in its reasonable discretion that such expenses are related to the business and affairs of the General Partner that are conducted through the Partnership and/or its Subsidiaries (including expenses that relate to the business and affairs of the Partnership and/or its Subsidiaries and that also relate to other activities of the General Partner), the General Partner may cause the Partnership to pay or bear all expenses of the General Partner, including, without limitation, compensation and meeting costs of any board of directors or similar body of the General Partner, any salary, bonus, incentive compensation and other amounts paid to any Person including Affiliates of the General Partner to perform services for the Partnership, litigation costs and damages arising from litigation, accounting and legal costs and franchise taxes, provided that the Partnership shall not pay or bear any income tax obligations of the General Partner. Reimbursements pursuant to this Section 3.03 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 10.02.
Section 3.04. Officers. Subject to the direction and oversight of the General Partner, the day-to-day administration of the business of the Partnership may be carried out by persons who may be designated in writing as Officers by the General Partner, with titles including but not limited to “assistant secretary,” “assistant treasurer,” “chairman,” “chief executive officer,” “chief financial officer,” “chief operating officer,” “chief risk officer,” “director,” “general counsel,” “general manager,” “managing director,” “president,” “principal accounting officer,” “secretary,” “senior chairman,” “senior managing director,” “treasurer,” “vice chairman” or “vice president,” and as and to the extent authorized by the General Partner. The Officers of the Partnership shall have such titles and powers and perform such duties as shall be determined from time to time by the General Partner and otherwise as shall customarily pertain to such offices. Any number of offices may be held by the
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same person. In its reasonable discretion, the General Partner may choose not to fill any office for any period as it may deem advisable. All Officers and other persons providing services to or for the benefit of the Partnership shall be subject to the supervision and direction of the General Partner and may be removed, with or without cause, from such office by the General Partner and the authority, duties or responsibilities of any employee, agent or officer of the Partnership may be suspended by the General Partner from time to time, in each case in the reasonable discretion of the General Partner. The General Partner shall not cease to be a general partner of the Partnership as a result of the delegation of any duties hereunder. No Officer of the Partnership, in its capacity as such, shall be considered a general partner of the Partnership by agreement, as a result of the performance of its duties hereunder or otherwise. Notwithstanding anything set forth herein or in any previous delegation to an Officer of the Partnership, all powers granted to the Board of Directors of the Issuer pursuant to the GP LLC Agreement relating to the Partnership or specifically granted to the General Partner under this Agreement are hereby specifically delegated to and retained by the General Partner in its reasonable discretion and shall not be, and are not, delegated to any Officer. Notwithstanding anything set forth herein or in any previous delegation to an Officer of the Partnership, no Officer may make any decisions for, or bind the Partnership unless such Officer has been specifically delegated such authority in writing by the General Partner.
Section 3.05. Additional Subsidiaries; Charities.
(a) Whenever the Partnership makes any determination relating to the formation, creation or other acquisition of (or permitting the formation, creation or acquisition of) any new or additional direct or indirect Subsidiary, such determination on behalf of the Partnership shall be made by the General Partner in its reasonable discretion and shall not be, and is not, delegated to any Officer. Without limitation of the foregoing, the Partnership shall establish and structure each new or additional direct or indirect Subsidiary in a manner that maintains the allocation of Excluded Amounts as contemplated in Section 5.04(c), and the Partnership shall cause the governing documents of such Subsidiary (including the allocation of proceeds from the sale, exchange or disposition of such Subsidiary) to maintain the allocation of Excluded Amounts as contemplated in Section 5.04(c), such determinations on behalf of the Partnership shall be made by the General Partner in its reasonable discretion and shall not be, and is not, delegated to any Officer.
(b) Whenever the Partnership makes any determination relating to the Partnership, the Issuer or any Affiliate or Subsidiary thereof regarding any charitable contributions or any other use or involvement of a charity in the business of the Partnership, the Issuer or any Affiliate or Subsidiary thereof, such determination on behalf of the Partnership shall be made by the General Partner in its reasonable discretion and shall not be, and is not, delegated to any Officer.
Section 3.06. Authority of Partners.
(a) No Limited Partner, in its capacity as such, shall participate in or have any control over the business of the Partnership. Except as expressly provided herein, the Units do not confer any rights upon the Limited Partners to participate in the affairs of the Partnership described in this Agreement. Except as expressly provided herein, no Limited Partner shall have any right to vote on any matter involving the Partnership or any other matter that a limited partner might otherwise have the ability to vote on or consent with respect to under the Act, at law, in equity or otherwise. Notwithstanding the foregoing, Limited Partners, voting as a single class, shall have the right to vote on any merger, consolidation, combination or conversion of the Partnership. The conduct, control and management of the Partnership shall be vested exclusively in the General Partner. In all matters relating to or arising out of the conduct of the operation of the Partnership, the decision of the General Partner shall be the decision of the Partnership. Except as required or permitted by Law, or expressly provided in the ultimate sentence of this Section 3.06(a) or by separate agreement with the Partnership, no Partner who is not also a General Partner (and acting in such capacity) shall take any part in the management or control of the operation or business of the Partnership in its capacity as a Partner, nor shall any Partner who is not also a General Partner (and acting in such capacity) have any right, authority or power to act for or on behalf of or bind the Partnership in his or its capacity as a Partner in any respect or assume any obligation or responsibility of the
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(c) third, Pro Rata to the holders of Class S Preferred Units, up to the sum of the unpaid Total Class S Preferred Return applicable to such Class S Preferred Units, until the cumulative amount of distributions under this Section 4.02(c) and Tax Distributions under Section 4.03 made to the holders of Class S Preferred Units are equal to the unpaid Total Class S Preferred Return; and
(d) thereafter, to all holders of Units, pro rata in accordance with their respective positive Capital Account balances in respect of such Units; provided, however, that without the prior written consent of a majority of the Executive Committee, the General Partner shall not authorize distributions pursuant to this Section 4.02(d) to the extent such distributions would result in the amount of liquid assets of the Partnership being less than the Minimum Retained Earnings.
Section 4.03. Tax and Other Distributions and Redemptions.
(a) If taxable income (including any income allocable under Section 704(c) of the Code) of the Partnership for a Fiscal Year will give rise to taxable income for Partners, including income derived as a result of allocations previously made to a Partner under Section 5.04(d) and, to the extent related to contributions made on or prior to June 30, 2018, including income resulting from a reduction in a Partner’s share of liabilities under Section 752 of the Code or other constructive but not actual distribution to a Partner in excess of that Partner’s basis in its Partnership interest (“Net Taxable Income”), the General Partner (i) will cause the Partnership to distribute to holders of FLP Unit Accounts (other than the holder of the Subclass 3 FLP Unit Account), Class S Units and Preferred Series Unit Accounts, and (ii) with the prior written consent of a majority of the Executive Committee, may cause the Partnership to distribute to holders of Class A Units, cash (the “Tax Distributions”) with respect to each such Unit, Preferred Series Unit Account or FLP Unit Account, as applicable, in an amount equal to the excess of the Tax Amount with respect to such Unit (or FLP Unit Account or Preferred Series Unit Account) over the amount of other distributions previously made with respect to such Unit or FLP Unit Account or Preferred Series Unit Account, as applicable, by the Partnership during such Fiscal Year; provided that, the General Partner may in its reasonable discretion (but subject to the prior written consent of the applicable Unit or Preferred Series Unit Account or FLP Unit Account holder) redeem an amount of Class A Units or Class S Units of any such holder for cash representing up to that holder’s Net Taxable Income on the holder’s Class A Units or Class S Units, as appropriate, as such holder’s Tax Distribution (any such redemption to occur after all adjustments required under Section 5.04 and Section 7.04 have been made). Any Units redeemed pursuant to the previous sentence shall be valued based on Unit Price as of the date of redemption. A redemption under this Section 4.03(a) shall not be considered a non-pro rata distribution to which Section 4.05 applies. The Tax Distributions payable with respect to any Fiscal Year shall be computed based upon the General Partner’s estimate of the highest allocable Net Taxable Income to the Unit in the hands of the applicable Partner in accordance with Article V, multiplied by the Assumed Tax Rate (the “Tax Amount”). For purposes of computing the Tax Amount, the effect of any benefit under Section 734(b) or 743(b) of the Code will be ignored. If as of the end of any Fiscal Year (with the day before an event giving rise to Sales Proceeds being treated as the last day of the then-current Fiscal Year) the Capital Account balance in respect of any Subclass 3 FLP Unit Accounts is positive, the General Partner will cause the Partnership to distribute to holders of Subclass 3 FLP Unit Accounts cash in the amount of such Capital Account balance in respect of such applicable Subclass 3 FLP Unit Accounts, and such Capital Account balance shall be reduce to zero upon such distribution. Notwithstanding anything to the contrary in this Agreement, in the event that the Partnership or any taxing authority determines that any amount accrued but not paid to a Partner constitutes a “guaranteed payment” (within the meaning of Section 707(c) of the Code), the Partner shall be entitled to receive Tax Distributions under this Section 4.03(a) calculated using ordinary income tax rates rather than the Assumed Tax Rate which Tax Distribution shall be treated as an advance against the accrued but unpaid amount.
(b) To the extent related to contributions made on or prior to June 30, 2018, and without duplication of any distribution to be made to a Partner under Section 4.03(a) in respect of a reduction in a share of liabilities, to the extent that a Partner directly, indirectly or as part of an overall plan transfers outstanding indebtedness of the Partnership to the Partnership, such Partner shall be entitled to a distribution equal to the excess of (i) the product of a fraction, the numerator of which is one and the denominator of which is one minus the Assumed Tax Rate, and the amount of such indebtedness over (ii) the amount of such indebtedness.
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(c) Tax Distributions with respect to any Unit shall be calculated and paid no later than one day prior to each quarterly due date for the payment by corporations on a calendar year of estimated taxes under the Code in the following manner: (i) for the first quarterly period, 25% of the Tax Amount with respect to such Unit; (ii) for the second quarterly period, 50% of the Tax Amount with respect to such Unit, less the prior Tax Distributions with respect to such Unit for the Fiscal Year; (iii) for the third quarterly period, 75% of the Tax Amount with respect to such Unit, less the prior Tax Distributions with respect to such Unit for the Fiscal Year; and (iv) for the fourth quarterly period, 100% of the Tax Amount with respect to such Unit, less the prior Tax Distributions with respect to such Unit for the Fiscal Year. Following each Fiscal Year, and no later than one day prior to the due date for the payment by corporations of income taxes for such Fiscal Year, the General Partner shall make an amended calculation of the Tax Amount with respect to each Unit for such Fiscal Year (the “Amended Tax Amount”), and shall cause the Partnership to distribute a cash Tax Distribution with respect to each Unit to the extent that the Amended Tax Amount with respect to such Unit so calculated (less other distributions made with respect to such Unit during such Fiscal Year) exceeds the cumulative Tax Distributions previously made by the Partnership with respect to such Unit in respect of such Fiscal Year. If the Amended Tax Amount with respect to such Unit is less than the cumulative Tax Distributions previously made with respect to such Unit by the Partnership in respect of the relevant Fiscal Year, then the difference (the “Credit Amount”) shall be applied against, and shall reduce, the amount of Tax Distributions with respect to such Unit made for subsequent Fiscal Years. Within 30 days following the date on which the Partnership files a tax return on Form 1065, the General Partner shall make a final calculation of the Tax Amount with respect to each Unit of such Fiscal Year (the “Final Tax Amount”) and shall cause the Partnership to distribute a cash Tax Distribution with respect to each Unit to the extent that the Final Tax Amount with respect to such Unit so calculated exceeds the Amended Tax Amount with respect to such Unit. If the Final Tax Amount with respect to any Unit is less than the Amended Tax Amount with respect to such Unit in respect of the relevant Fiscal Year, then the difference (“Additional Credit Amount”) shall be applied against, and shall reduce, the amount of Tax Distributions with respect to such Unit made for subsequent Fiscal Years. Any Credit Amount and Additional Credit Amount applied against future Tax Distributions shall be treated as an amount actually distributed pursuant to this Section 4.03(c) for purposes of the computations herein.
Section 4.04. Liquidation Distribution. Distributions made upon dissolution of the Partnership shall be made as provided in Section 9.03.
Section 4.05. Disproportionate Distributions. If there is a non-liquidating distribution that is not Pro Rata among Class A Units, Class S Ordinary Units and Class S Preferred Units (on an as-converted basis), then the number of outstanding Units will be increased or decreased, as appropriate, to reflect such disproportionate distribution as determined by the General Partner in its reasonable discretion. Neither a distribution pursuant to Section 4.02 nor a redemption pursuant to Section 4.03(a) shall be considered a non-Pro Rata distribution to which this Section 4.05 applies.
Section 4.06. Limitations on Distribution. Notwithstanding any provision to the contrary contained in this Agreement, (i) the General Partner shall not make a Partnership distribution to any Partner if such distribution would violate the Act or other applicable Law and (ii) until such time that there are no Preferred Series C Subclass 1 Unit Accounts outstanding, without the prior consent of a majority in interest of the holders of Preferred Series C Subclass 1 Unit Accounts, the General Partner shall not authorize any distributions by the Partnership, and the Partnership shall not make any distribution to any Partner, other than distributions pursuant to Section 4.01, Section 4.03, Section 4.04 and Section 4.07.
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Section 4.07. Distribution of Sales Proceeds. Any distribution of net consideration received from a Partnership Sale (the “Sales Proceeds”) shall be made, in each case only following and being reduced for the full payment of any required Guaranteed Series A-0 Payment and in respect of such Fiscal Quarter pursuant to Section 4.08 has been paid (with the day before an event giving rise to Sales Proceeds being treated as the last day of the then-current Fiscal Quarter), in the following order after application of Section 5.04 through Section 5.07 (applied (x) after increasing each Partner’s Capital Account and Sub-Capital Account by the amount of such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, and (y) taking into account any Profit and Loss of the Partnership through the date of the distribution (including any gains or losses from the event giving rise to the Sales Proceeds)) and Section 7.04:
(a) first, Pro Rata to the holders of Preferred Series A Subclass 0 Unit Accounts in an amount equal to the positive Sub-Capital Account balances attributable to such Preferred Series A Subclass 0 Unit Accounts;
(b) second, Pro Rata and pari passu (i) to the holders of Preferred Series A Subclass 1 Unit Accounts in an amount equal to the positive Sub-Capital Account balances attributable to such Preferred Series A Subclass 1 Unit Accounts and (ii) to the holders of Preferred Series C Subclass 1 Unit Accounts in an amount equal to the positive Sub-Capital Account attributable to such Preferred Series C Subclass 1 Unit Accounts;
(c) third, Pro Rata to the holders of Class S Preferred Units in an amount equal to the positive Capital Account balances attributable to such Class S Preferred Units; and
(d) fourth, Pro Rata to the holders of the Class A Units and Class S Ordinary Units in an amount equal to the positive Capital Account balances attributable to such Units.
Section 4.08. Preferred Series A Subclass 0 Guaranteed Payment. Promptly at the end of each Fiscal Quarter (with the day before an event giving rise to Sales Proceeds being treated as the last day of the then-current Fiscal Quarter), unless waived by a majority in interest of the Preferred Series A Subclass 0 Unit Accounts, the Partnership will make a “guaranteed payment” (within the meaning of Section 707(c) of the Code) (the “Guaranteed Series A-0 Payment”) to each Preferred Series A Subclass 0 Unit Account holder equal to the product of (a) the then-current Capital Account balance of such Preferred Series A Subclass 0 Unit Accounts, multiplied by (b) 1.5%, plus any previously due but unpaid Guaranteed Series A-0 Payment pursuant to this Section 4.08.
ARTICLE V.
CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS; TAX ALLOCATIONS; TAX
MATTERS
Section 5.01. Capital Contributions. The Partnership has issued to the Partners who have made, on or prior to the date hereof, Capital Contributions, in exchange therefor, the number and type of Class A Units, Class S Units, Preferred Series Unit Accounts, Subclass 1 FLP Unit Accounts and Subclass 3 FLP Unit Accounts as specified in the books and records of the Partnership.
Section 5.02. Capital Accounts.
(a) Notwithstanding anything herein to the contrary, a separate capital account (a “Capital Account”) shall be established and maintained for each Partner in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv). Sub-Capital Accounts shall be established for each holder of Units other than Class A Units to reflect the allocations to the holder’s Capital Account for the FLP Unit Account, the Class S Ordinary Units, the Class S Preferred Units or the Preferred Series Unit Account, as appropriate. The Capital Account of each Partner shall be credited with such Partner’s Capital Contributions, if any, all Profits allocated to such Partner pursuant to Section 5.04, any items of income or gain which are specially allocated pursuant to Section 5.05, and any amount as indicated in Section 7.04; and shall be debited with all Losses allocated to such Partner pursuant to Section 5.04, any items of loss or deduction of the Partnership specially allocated to such
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(ix) ninth, to the holders of Class A Units, Class S Ordinary Units and Class S Preferred Units, pro rata among them based on the number of Units of such Classes held by each of them.
(b) Loss of the Partnership Excluding Excluded Amounts. Unless otherwise specified in this Section 5.04(b), all Losses of the Partnership (excluding Excluded Amounts) shall be allocated as follows, in each case, pro rata in accordance with the number of the applicable Class of Units held, or Sub-Capital Account balance in the case of Preferred Series Unit Accounts, on the last day of each Fiscal Quarter, and the day before an event giving rise to Sales Proceeds will be treated as the last day of a Fiscal Quarter:
(i) first, to the holders of Class A Units and Class S Ordinary Units in an amount equal to the Capital Account balances associated with such Units, pro rata among them based on such Capital Account balances;
(ii) second, to the holders of Class S Preferred Units in an amount equal to the Capital Accounts associated with such Units;
(iii) third, to the holders of Preferred Series C Subclass 1 Unit Accounts in an amount equal to the Capital Accounts associated with the Preferred Series C Subclass 1 Unit Accounts;
(iv) fourth, to the holders of Preferred Series A Subclass 1 Unit Accounts in an amount equal to the Capital Accounts associated with the Preferred Series A Subclass 1 Unit Accounts;
(v) fifth, to the holders of Preferred Series A Subclass 0 Unit Accounts in an amount equal to the Capital Accounts associated with the Preferred Series A Subclass 0 Unit Accounts; and
(vi) sixth, to the holders of Class A Units, Class S Ordinary Units and Class S Preferred Units, pro rata among them based on the number of Units of such Classes held by each of them.
(c) Allocation of Excluded Amounts. All Excluded Amounts of the Partnership shall be allocated as follows on the last day of each Fiscal Quarter, and the day before an event giving rise to Sales Proceeds will be treated as the last day of a Fiscal Quarter:
(i) The Profit earned from (A) 15% of the Net Financing Revenue and (B) the Excess EBITDA Margin shall be allocated to the holders of FLP Unit Accounts (other than the holders of the Subclass 3 FLP Unit Accounts) (1) 50.5% to the holder of the Subclass 1 FLP Unit Accounts and (2) 49.5% to the holder of the Subclass 2 FLP Unit Accounts, in each case on a pro rata basis based on existing Capital Account balances of such Subclass 1 FLP Unit Accounts or Subclass 2 FLP Unit Accounts, as applicable. For the avoidance of doubt, (i) where there is sufficient applicable taxable income, an allocation of Profits of Net Financing Revenue will be of the same underlying character as such taxable income, and (ii) otherwise, such allocation of Profits of Net Financing Revenue shall constitute a taxable capital shift.
(ii) The Profit earned from 5% of the Net Financing Revenue shall be allocated to the holders of the Subclass 3 FLP Unit Accounts on a pro rata basis based on existing Capital Account balances of such Subclass 3 FLP Unit Accounts; provided, however, that the amount allocated under this clause (ii) in respect of any Fiscal Quarter shall be limited to 10% of the average annualized stated interest (to the extent constituting Net Financing Revenue) of the quarterly average of new loans issued by any Subsidiaries of the Partnership during the previous twelve Fiscal Quarters. For the avoidance of doubt, (i) where there is sufficient applicable taxable income, an allocation of Profits of Net Financing Revenue will be of the same underlying character as such taxable income, and (ii) otherwise, such allocation of Profits of Net Financing Revenue shall constitute a taxable capital shift.
(iii) 100% of the amounts distributed from any BEN UBTI Blocker to the Partnership shall be allocated to the holders of Class A Units after taking into account any amounts allocated under Section 5.04(a) in respect of such Fiscal Quarter in determining if the applicable amount required to be allocated has been already satisfied in whole or in part and disregarding any such portion of Section 5.04(a) in respect of any other class of Units.
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(d) Except as provided herein, upon an upward adjustment to the Carrying Value of any asset pursuant to the definition of Carrying Value, such adjustment (which, for the avoidance of doubt, shall not include (A) the value of property or cash contributed to the Partnership in connection with the event giving rise to the adjustment to Carrying Value; or (B) any property or cash contributed to the Partnership prior to June 1, 2018) shall be allocated:
(i) first, among the holders of FLP Unit Accounts (other than the Subclass 3 FLP Unit Accounts) (1) 50.5% to the holder of the Subclass 1 FLP Unit Accounts and (2) 49.5% to the holder of the Subclass 2 FLP Unit Accounts, in each case on a pro rata basis based on existing Capital Account balances of such Subclass 1 FLP Unit Accounts and Subclass 2 FLP Unit Accounts, as applicable, in an amount equal to the Book Difference Allocation Amount;
(ii) second, based on a methodology reasonably determined by the General Partner, among the Class A Units and Class S Units (on an as-converted basis) in the amount necessary to cause the Capital Account balances of each series of Class A Units to be equal and to cause the Capital Account balances of each series of Class S Units (on an as-converted basis) to be equal; and
(iii) third, as to all upward adjustments not allocated pursuant to clauses (i) and (ii) of this Section 5.04(d), Pro Rata among all Units, except the Preferred Series Unit Accounts and FLP Unit Accounts, issued and outstanding immediately prior to the adjustment to Carrying Value.
(e) Losses attributable to a downward adjustment to the Carrying Value of any asset shall be allocated Pro Rata among all holders of Units (except the Preferred Series Unit Accounts and the FLP Unit Accounts).
(f) Notwithstanding any other provision herein except for Section 5.04(h), Profits generated in connection with Sales Proceeds shall be allocated as follows:
(i) first, Pro Rata among the FLP Unit Accounts up to, in the aggregate, a proportion of the Sales Proceeds equal to the proportion that aggregate allocations under Section 5.04(c) were made to FLP Unit Accounts, compared to aggregate allocations to all Class A Units and Class S Units under Section 5.04(a) and Section 5.04(c), in each case during the four Fiscal Quarters (not including the deemed Fiscal Quarter end pursuant to Section 5.04(a) through Section 5.04(c)) preceding the sale, exchange or disposition giving rise to such Sales Proceeds, provided, that (A) the FLP Unit Accounts shall not be allocated Profits and Losses generated in connection with Sales Proceeds in an amount greater than an amount equal to 50% of such Sales Proceeds, (B) notwithstanding this Section 5.04(f)(i), the FLP Unit Accounts shall be allocated an amount equal to no less than 15% of the Profits generated in connection with the Sales Proceeds and (C) any amounts allocable to the FLP Unit Accounts pursuant to this Section 5.04(f)(i) shall be allocable solely to the Subclass 1 FLP Unit Accounts;
(ii) second, Pro Rata among the Preferred Series A Subclass 0 Unit Accounts until the cumulative amount of Profits allocated to such Preferred Series A Subclass 0 Unit Accounts is equal to the excess of (1) the aggregate amount of Loss previously allocated to such Preferred Series A Subclass 0 Unit Accounts pursuant to Section 5.04(b)(v) over (2) the aggregate amount of Profit previously allocated to the Preferred Series A Subclass 0 Unit Accounts pursuant to Section 5.04(a)(ii).
(iii) third, Pro Rata among the Preferred Series A Subclass 1 Unit Accounts until the cumulative amount of Profits allocated to such Preferred Series A Subclass 1 Unit Accounts is equal to the excess of (1) the aggregate amount of Loss previously allocated to such Preferred Series A Subclass 1 Unit Accounts pursuant to Section 5.04(b)(iv) over (2) the aggregate amount of Profit previously allocated to the Preferred Series A Subclass 1 Unit Accounts pursuant to Section 5.04(a)(iii) and Section 5.04(a)(iv);
(iv) fourth, Pro Rata among the Preferred Series C Subclass 1 Unit Accounts until the cumulative amount of Profits allocated to such Preferred Series C Subclass 1 Unit Accounts is equal to the excess of (A) the aggregate amount of Loss previously allocated to such Preferred Series C Subclass 1 Unit Accounts pursuant to Section 5.04(b)(iii) over (B) the aggregate amount of Profit previously allocated to the Preferred Series C Subclass 1 Unit Accounts pursuant to Sections 5.04(a)(v) and 5.04(a)(vi);
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(v) fifth, Pro Rata among the Preferred Series A Subclass 1 Unit Accounts up to and in proportion to the amounts necessary to cause the applicable Sub-Capital Account balance attributable to such Preferred Series A Subclass 1 Unit Account to equal the Hypothetical Preferred Opening Capital Account Balance of such Preferred Series A Subclass 1 Unit Account;
(vi) sixth, Pro Rata among the Preferred Series C Subclass 1 Unit Accounts up to and in proportion to the amounts necessary to cause the applicable Sub-Capital Account balance attributable to such Preferred Series C Subclass 1 Unit Accounts to equal the Hypothetical Preferred Opening Capital Account Balance of such Preferred Series C Subclass 1 Unit Accounts;
(vii) seventh, pro rata among the Class S Preferred Units up to and in proportion to the greater of (A) the amounts necessary to cause the applicable holder’s Sub-Capital Account balance attributable to such Class S Preferred Units to equal the Hypothetical Class S Preferred Opening Capital Account Balance related to such Class S Preferred Units and (B) an amount equal to the sum of (1) the applicable holder’s Hypothetical Class S Preferred Opening Capital Account Balance, minus such holder’s Capital Contribution, minus any amounts previously allocated to such holders pursuant to Sections 5.04(a)(vii) and 5.04(a)(viii), and (2) any amounts previously allocated pursuant to Section 5.04(b) (ii); and
(viii) eighth, pro rata between the Class A Units and Class S Ordinary Units in proportion to the aggregate allocations that were made to the Class A Units and Class S Ordinary Units under Section 5.04(a)(ix) and Section 5.04(c), in each case, during the four Fiscal Quarters (not including the deemed Fiscal Quarter end pursuant to Section 5.04(a) and Section 5.04(c)) preceding the sale, exchange or disposition giving rise to such Sales Proceeds.
(g) Notwithstanding any other provision herein, Losses generated in connection with Sales Proceeds shall be allocated as follows:
(i) first, pro rata among the Class A Units and Class S Ordinary Units in an amount equal to their remaining positive Capital Account balances, pro rata between them in an amount equal to their remaining positive Capital Account balances;
(ii) second, Pro Rata among the Class S Preferred Units in an amount equal to their remaining positive Capital Account balances;
(iii) third, Pro Rata among the Preferred Series C Subclass 1 Unit Accounts in an amount equal to their remaining positive Capital Account balances;
(iv) fourth, Pro Rata among the Preferred Series A Subclass 1 Unit Accounts in an amount equal to their remaining Capital Account balances;
(v) fifth, Pro Rata among the Preferred Series A Subclass 0 Unit Accounts in an amount equal to their remaining positive Capital Account balances; and
(vi) sixth, Pro Rata among the Class A Units and Class S Ordinary Units, Pro Rata among them based on the number of Units held by each of them.
(h) Cancellation of Indebtedness Income. The General Partner shall first allocate items of cancellation of indebtedness income (within the meaning of Section 61(a)(12) of the Code) to the Class A Units and to the extent that any such allocation is restricted by the principles set forth in Internal Revenue Service Revenue Ruling 92-97, 1992-2 C.B. 124, the remainder shall be allocated among the Classes of Units in such manner as the General Partner deems appropriate and in accordance with the Partners’ interest in the Partnership.
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Section 5.05. Special Allocations. Notwithstanding any other provision in this Article V:
(a) Minimum Gain Chargeback. If there is a net decrease in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain (determined in accordance with the principles of Treasury Regulations Sections 1.704-2(d) and 1.704-2(i)) during any Partnership taxable year, the Partners shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to their respective shares of such net decrease during such year, determined pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5). The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f). This Section 5.05(a) is intended to comply with the minimum gain chargeback requirements in such Treasury Regulations Sections and shall be interpreted consistently therewith; including that no chargeback shall be required to the extent of the exceptions provided in Treasury Regulations Sections 1.704-2(f) and 1.704-2(i)(4).
(b) Qualified Income Offset. If any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the deficit balance in such Partner’s Adjusted Capital Account Balance created by such adjustments, allocations or distributions as promptly as possible; provided that an allocation pursuant to this Section 5.05(b) shall be made only to the extent that a Partner would have a deficit Adjusted Capital Account Balance in excess of such sum after all other allocations provided for in this Article V have been tentatively made as if this Section 5.05(b) were not in this Agreement. This Section 5.05(b) is intended to comply with the “qualified income offset” requirement of the Code and shall be interpreted consistently therewith.
(c) Gross Income Allocation. If any Partner has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Partner is obligated to restore, if any, pursuant to any provision of this Agreement, and (ii) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 5.05(c) shall be made only if and to the extent that a Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article V have been tentatively made as if Section 5.05(b) and this Section 5.05(c) were not in this Agreement.
(d) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to the Partners in accordance with their respective Total Percentage Interests.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated to the Partner who bears the economic risk of loss with respect to the liability to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(j).
(f) Creditable Non-U.S. Taxes. Creditable Non-U.S. Taxes for any taxable period attributable to the Partnership, or an entity owned directly or indirectly by the Partnership, shall be allocated to the Partners in proportion to the Partners’ distributive shares of income (including income allocated pursuant to Section 704(c) of the Code) to which the Creditable Non-U.S. Tax relates (under principles of Treasury Regulations Section 1.904-6). The provisions of this Section 5.05(f) are intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(4)(viii), and shall be interpreted consistently therewith.
(g) Ameliorative Allocations. Any special allocations of income or gain pursuant to Section 5.05(b) or Section 5.05(c) shall be taken into account in computing subsequent allocations pursuant to Section 5.04 and this Section 5.05(g), so that the net amount of any items so allocated and all other items allocated to each Partner shall, to the extent possible, be equal to the net amount that would have been allocated to each Partner if such allocations pursuant to Section 5.05(b) or Section 5.05(c) had not occurred.
(h) Preferred Series C Subclass 1 Unit Account Capital Accounts; Special Provisions.
(i) A separate account shall be maintained with respect to the Preferred Series C Subclass 1 Unit Accounts (the “Conversion Capital Account”). The Conversion Capital Account shall be maintained in an identical manner to the Capital Account, subject to the adjustments set forth in this Section 5.05(h).
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(ii) The allocations of Profits, Losses and items of income, gain, loss and deduction set forth in this Section 5.05, other than this Section 5.05(h), shall be used solely to maintain the Conversion Capital Account. Such allocations shall not be used for purposes of maintaining the Capital Accounts, or allocations of taxable amounts, to the holders of the Preferred Series C Subclass 1 Unit Accounts.
(iii) For all purposes of this Agreement, other than maintaining the Conversion Capital Account, including maintaining the Capital Account of the Preferred Series C Subclass 1 Unit Accountholders, and the tax allocations set forth in Section 5.06 hereof, Profit, Losses and items of income, gain, loss and deduction shall be allocated in the same amounts and proportions to the holders of the Preferred Series C Subclass 1 Unit Account as if the Preferred Series C Subclass 1 Unit Accounts were Preferred Series A Subclass 1 Unit Accounts.
(iv) Following the exchange of any Preferred Series C Subclass 1 Unit Account for Class A Common Stock (in lieu of common units following the statutory conversion of BCG into the Issuer) pursuant to the terms of the UPA, the excess of the Capital Account of such Preferred Series C Subclass 1 Unit Account over the Conversion Capital Account of such Preferred Series C Subclass 1 Unit Account shall be referred to as an (“Excess Amount”). For each tax period following the creation of an Excess Amount, Profit, or income or gain, shall be specially allocated, pursuant to the principals of Treasury Regulations Section 1.704-1(b)(4)(x), to the Preferred Series A Subclass 1 Unit Accounts, prior to any amount of Profit, income or gain being allocated to any other class of Units (other than the Preferred Series A Subclass 0 Unit Accounts) or Limited Partners until such special allocations equal, in the aggregate, such Excess Amount.
Section 5.06. Tax Allocations. For income tax purposes, each item of income, gain, loss and deduction of the Partnership shall be allocated among the Partners in the same manner as the corresponding items of Profits and Losses and specially allocated items are allocated for Capital Account purposes; provided that in the case of any asset the Carrying Value of which differs from its adjusted tax basis for U.S. federal income tax purposes, income, gain, loss and deduction with respect to such asset shall be allocated solely for income tax purposes in accordance with the principles of Sections 704(b) and (c) of the Code (in any manner determined by the General Partner and permitted by the Code and Treasury Regulations) so as to take account of the difference between the Carrying Value and adjusted basis of such asset; provided, further, that the Partnership shall use the traditional method with curative allocations (as provided in Treasury Regulations Section 1.704-3(c)) for all Section 704(c) allocations, limited to allocations of income or gain from the disposition of Partnership property where allocations of depreciation deductions have been limited by the ceiling rule throughout the term of the Partnership). If, as a result of an exercise of a Noncompensatory Option to acquire an interest in the Partnership, a Capital Account reallocation is required under Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(3), the Partnership shall make corrective allocations pursuant to Treasury Regulations Section 1.704-1(b)(4)(x).
Section 5.07. Tax Advances. To the extent the General Partner reasonably believes that the Partnership is required by law to withhold or to make tax payments on behalf of or with respect to any Partner or the Partnership is subjected to tax itself by reason of the status of any Partner (“Tax Advances”), the General Partner may withhold such amounts and make such tax payments as so required. All Tax Advances made on behalf of a Partner shall be repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Partner. For all purposes of this Agreement such Partner shall be treated as having received the amount of the distribution that is equal to the Tax Advance. Unless otherwise agreed in writing by the General Partner, each Partner hereby agrees to indemnify and hold harmless the Partnership and the other Partners from and against any liability (including, without limitation, any liability for taxes, penalties, additions to tax or interest other than any penalties, additions to tax or interest imposed as a result of the Partnership’s failure to withhold or make a tax payment on behalf of such Partner, which withholding or payment is required pursuant to applicable Law but only to the extent amounts sufficient to pay such taxes were not timely distributed to the Partner pursuant to Section 4.02) with respect to income attributable to or distributions or other payments to such Partner.
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Section 5.08. Tax Matters.
(a) The General Partner shall be the initial “tax matters partner” within the meaning of Section 6231(a)(7) of the Code, and the General Partner, or its designee, shall be the “partnership representative” within the meaning of Section 6223 of the Code for tax years commencing after December 31, 2017 (each of the “tax matters partner” and the “partnership representative”, the “Tax Matters Partner”). The Tax Matters Partner shall appoint an individual as a designated individual to the extent required under the Partnership Tax Audit Rules. The Tax Matters Partner (and designated individual, as applicable) may resign at such time permitted under the Partnership Tax Audit Rules. In the event of the resignation of the Tax Matters Partner, the General Partner shall appoint a new Tax Matters Partner, and in the event of the resignation of the designated individual, the Tax Matters Partner shall appoint a new designated individual. The Partnership shall file as a partnership for federal, state, provincial and local income tax purposes, except where otherwise required by Law. All elections required or permitted to be made by the Partnership, and all other tax decisions and determinations relating to federal, state, provincial or local tax matters of the Partnership, shall be made by the Tax Matters Partner, in consultation with the Partnership’s attorneys and/or accountants. Tax audits, controversies and litigations shall be conducted under the direction of the Tax Matters Partner. The Tax Matters Partner shall keep the other Partners reasonably informed as to any tax actions, examinations or proceedings relating to the Partnership and shall submit to the other Partners, for their review and comment, any settlement or compromise offer with respect to any disputed item of income, gain, loss, deduction or credit of the Partnership. As soon as reasonably practicable after the end of each Fiscal Year, the Partnership shall send to each Partner a copy of U.S. Internal Revenue Service Schedule K-1, and any comparable statements required by applicable U.S. state or local income tax Law as a result of the Partnership’s activities or investments, with respect to such Fiscal Year. The Partnership also shall provide the Partners with such other information as may be reasonably requested for purposes of allowing the Partners to prepare and file their own tax returns.
(b) In respect of tax years commencing after December 31, 2017, the Partners acknowledge and agree that it is the intention of the Partners to minimize any obligations of the Partnership to pay taxes and interest in connection with any audit of the Partnership, including, by means of any available elections under Section 6226 of the Code and/or the Partners filing amended returns under Section 6225(c)(2) of the Code, in each case as amended by the Partnership Tax Audit Rules. The Partners agree to cooperate in good faith, including without limitation by timely providing information reasonably requested by the Tax Matters Partner and making elections and filing amended returns reasonably requested by the Tax Matters Partner, and the Tax Matters Partner shall make such elections as it determines in its discretion, to give effect to the preceding sentence. The Partnership shall make any payments it may be required to make under the Partnership Tax Audit Rules and, in the Tax Matters Partner’s reasonable discretion, allocate any such payment among the current or former Partners of the Partnership for the “reviewed year” to which the payment relates in a manner that reflects the current or former Partners’ respective interests in the Partnership for such “reviewed year” and any other factors taken into account in determining the amount of the payment (with the intent of apportioning the payment in the same manner as if the Partnership had made the election under Section 6226 of the Code and the payment had been assessed directly against such Partner).
Section 5.09. Other Allocation Provisions. Certain of the foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such regulations. In addition to amendments effected in accordance with Section 11.12 or otherwise in accordance with this Agreement, Section 5.03, Section 5.04 and Section 5.05 may also, so long as any such amendment does not materially change the relative economic interests of the Partners, be amended at any time by the General Partner if necessary, in the opinion of tax counsel to the Partnership, to comply with such regulations or any applicable Law.
Section 5.10. Subclass 2 FLP Unit Accounts. Subclass 2 FLP Unit Accounts are intended to qualify as “profits interests” within the meaning of Revenue Procedure 93-27 as clarified by Revenue Procedure 2001-43.
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None of the Partners being issued Subclass 2 FLP Unit Accounts shall make Capital Contributions in connection with the acquisition of such Subclass 2 FLP Unit Accounts and the Partnership shall treat such Partners as holding “profits interests” for all purposes of this Agreement with respect to such Subclass 2 FLP Unit Accounts. In the event that the Internal Revenue Service issues any additional guidance concerning the taxation of the Subclass 2 FLP Unit Accounts that are intended to qualify as “profits interests” after the execution of this Agreement, the General Partner shall take any action required by such guidance, including the filing of tax elections thereunder and the adoption of additional provisions to this Agreement that are binding on the Partnership and the Partners under Delaware Law, to achieve the same tax treatment for such Subclass 2 FLP Unit Accounts as is applicable on the date of execution of this Agreement.
ARTICLE VI.
BOOKS AND RECORDS; REPORTS
Section 6.01. Books and Records.
(a) At all times during the continuance of the Partnership, the Partnership shall prepare and maintain separate books of account for the Partnership in accordance with GAAP.
(b) Except as limited by Section 6.01(c), each Limited Partner shall have the right to receive, for a purpose reasonably related to such Limited Partner’s interest as a Limited Partner in the Partnership, upon reasonable written demand stating the purpose of such demand and at such Limited Partner’s own expense:
(i) a copy of the Certificate and this Agreement and all amendments thereto and hereto, together with a copy of the executed copies of all powers of attorney pursuant to which the Certificate and this Agreement and all amendments thereto and hereto have been executed; and
(ii) promptly after their becoming available, copies of the Partnership’s federal income tax returns for the three most recent years.
(c) The General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its reasonable discretion, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner believes is not in the best interests of the Partnership, could damage the Partnership or its business or that the Partnership is required by Law or by agreement with any third party to keep confidential. In addition, notwithstanding any provision in this Agreement to the contrary, no Limited Partner shall have any right to, and the General Partner may in its reasonable discretion keep confidential, all books and records and any other information of the Partnership or its Affiliates or their equity owners that was generated prior to September 1, 2017 or that otherwise relates to facts, circumstances, events, actions or communications occurring prior to September 1, 2017.
ARTICLE VII.
PARTNERSHIP
UNITS
Section 7.01. Units.
(a) Classes. Interests in the Partnership shall be represented by Units. The Units initially are comprised of five Classes hereby designated as “Class A Units”, “Class S Ordinary Units”, “Class S Preferred Units”, “FLP Unit Accounts” and “Preferred Series Unit Accounts” and the FLP Unit Accounts are further subdivided into subclass 1 (“Subclass 1 FLP Unit Accounts”), with such rights as expressly set forth herein and which shall initially represent 50.5% of the FLP Unit Accounts (excluding the Subclass 3 FLP Unit Accounts),
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with the balance, initially representing 49.5% of the FLP Unit Accounts (excluding the Subclass 3 FLP Unit Accounts), being deemed subclass 2 (“Subclass 2 FLP Unit Accounts”), and the remainder being deemed subclass 3 (“Subclass 3 FLP Unit Accounts”). The Preferred Series Unit Accounts are further subdivided into Series A subclass 0 (“Preferred Series A Subclass 0 Unit Accounts”), Series A subclass 1 (“Preferred Series A Subclass 1 Unit Accounts”), and Series C subclass 1 (the “Preferred Series C Subclass 1 Unit Accounts”), in each case, with such rights as expressly set forth herein.
The Class A Units were previously subdivided under the Existing Agreement into subclass 1 (the “Subclass 1 Class A Units”) and subclass 2 (the “Subclass 2 Class A Units”). Effective as of the Effective Date of this Agreement, the Class A Units shall no longer be subdivided and the Subclass 1 Class A Units and the Subclass 2 Class A Units shall be referred to as Class A Units with such rights as expressly set forth herein and each such Class A Unit shall have a Capital Account balance equal to the Capital Account balance of the previous Subclass 1 Class A Unit or Subclass 2 Class A Unit, as applicable.
(b) In connection with each issuance of a Class of Units, the General Partner, at its discretion, may issue a new series of such Class. The General Partner in its reasonable discretion may establish and issue, from time to time in accordance with such procedures as the General Partner shall determine from time to time, additional Units, in one or more Classes or series of Units, or other Partnership securities, at such price, and with such designations, preferences and relative, participating, optional or other special rights, powers and duties (which may be senior to existing Units, Classes and series of Units or other Partnership securities), as shall be determined by the General Partner without the approval of any Partner or any other Person who may acquire an interest in any of the Units, including (i) the right of such Units to share in Profits and Losses or items thereof; (ii) the right of such Units to share in Partnership distributions; (iii) the rights of such Units upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem such Units (including sinking fund provisions); (v) whether such Units are issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Units will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Total Percentage Interest as to such Units; (viii) the terms and conditions of the issuance of such Units (including, without limitation, the amount and form of consideration, if any, to be received by the Partnership in respect thereof, the General Partner being expressly authorized, in its reasonable discretion, to cause the Partnership to issue such Units for less than fair market value); and (ix) the right, if any, of the holder of such Units to vote on Partnership matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Units.
(c) Notwithstanding anything else in this Agreement to the contrary, the Partnership shall issue a Class A Unit for each Ben LLC Class A Unit outstanding, and each such Class A Unit shall track, on a one-to-one basis, the corresponding Ben LLC Class A Unit. Without limitation of the foregoing, the Partnership (i) shall cause the redemption or cancellation, as appropriate, of Class A Units to reflect the redemption or cancellation of any Ben LLC Class A Unit (with appropriate adjustments, if necessary, made pursuant to Section 4.05), and (ii) shall not permit any Class A Unit to be redeemed or cancelled unless and until corresponding Ben LLC Class A Units are first redeemed or cancelled.
(d) The General Partner in its reasonable discretion, without the approval of any Partner or any other Person, is authorized (i) to issue Units or other Partnership securities of any newly established Class or any existing Class to Partners or other Persons who may acquire an interest in the Partnership and admit such Persons as limited partners of the Partnership and (ii) to amend this Agreement to reflect the creation of any such new Class, the issuance of Units or other Partnership securities of such Class, and the admission of any Person as a Partner which has received Units or other Partnership securities.
(e) Except as expressly provided in this Agreement to the contrary, any reference to “Units” shall include the Class A Units, Class S Units, FLP Unit Accounts, Preferred Series Unit Accounts and Units of any other Class, subclass or series that may be established in accordance with this Agreement. All Units of a particular Class or subclass shall have identical rights in all respects as all other Units of such Class or subclass, except in each case as otherwise specified in this Agreement.
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Section 7.02. Register. The register of the Partnership shall be the definitive record of ownership of each Unit and all relevant information with respect to each Partner. Unless the General Partner shall determine otherwise, Units shall be uncertificated and recorded in the books and records of the Partnership.
Section 7.03. Registered Partners. The Partnership shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Act or other applicable Law.
Section 7.04. Issuance of Additional Class S Units.
(a) Immediately after an allocation pursuant to Section 5.04(d)(i) and prior to an allocation pursuant to Section 5.04(d)(ii) and Section 5.04(d)(iii), the Sub-Capital Account balance associated with the Subclass 1 FLP Unit Account and the Subclass 2 FLP Unit Account of each holder thereof shall be reduced by the amount so allocated, and in exchange therefor:
(i) such holder shall be issued the number of Class S Ordinary Units (including, if applicable, fractional Units) equal to the amount of such reduction divided by the Unit Price on the date of such exchange; and
(ii) the Sub-Capital Account of such newly issued Class S Ordinary Units shall be credited with an amount equal to the amount by which such holder’s Sub-Capital Account associated with its Subclass 1 FLP Unit Account or Subclass 2 FLP Unit Account was reduced as described in clause (a).
(b) On a quarterly basis, after the application of Section 7.04(a), or immediately preceding a distribution of Sales Proceeds under Section 4.07 or any distribution under Section 4.02, and after any allocations under Section 5.04(a), Section 5.04(c), and Section 5.04(f) have been made, if the Sub-Capital Account balance associated with the FLP Unit Account (other than the Subclass 3 FLP Unit Accounts) of each holder thereof is positive, such Sub-Capital Account shall be reduced to zero, and in exchange therefor:
(i) such holder of an FLP Unit Account (other than the Subclass 3 FLP Unit Accounts) shall be issued an equal number of Class S Ordinary Units and Class S Preferred Units (including, if applicable, fractional Units) necessary to provide such holder with an additional number of Class S Ordinary Units and Class S Preferred Units that, in the aggregate, equal (A) the balance of the holder’s Sub-Capital Account associated with its FLP Unit Account divided by (B) the Unit Price on the date of such exchange;
(ii) the Sub-Capital Accounts of such newly issued Class S Ordinary Units and Class S Preferred Units shall each be credited with an amount equal to one-half the amount by which such holder’s Sub-Capital Account associated with its FLP Unit Account was reduced as described in this Section 7.04(b);
(iii) notwithstanding anything to the contrary elsewhere in this Agreement, the Class S Units issued pursuant to this Section 7.04(b) may not be disposed of by any holder thereof before July 1 of the year following the year in which such Class S Units are issued;
(iv) if the total Profit allocated during the four Fiscal Quarters of a Fiscal Year under Section 5.04(c) exceeds the cumulative Profit for such Fiscal Year that would have been allocated under Section 5.04(c) had Profit been allocated on an annual, rather than quarterly, basis (such excess, the “Excess”), then Class S Ordinary Units and Class S Preferred Units (an equal number of each) with an aggregate Unit Price (as of the date such Units were issued under this Section 7.04(b)) equal to the Excess shall be cancelled no later than June 30 of the year following such Fiscal Year; and
(v) any Tax Distributions made under Section 4.03 that are attributable to the excess described in Section 7.04(b)(iv) shall be considered to create negative Sub-Capital Account balances associated with the FLP Unit Accounts and such balances shall first be offset by future allocations of Profit prior to conversion of the FLP Unit Accounts into Class S Ordinary Units and Class S Preferred Units.
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(c) Immediately after an allocation of income, from revenue streams not associated with Net Financing Revenue, pursuant to Section 5.04(a)(ix), the Sub-Capital Account balances associated with the Class S Units of each holder thereof shall be reduced by the amount so allocated, and in exchange therefor:
(i) such holder shall be issued an equal number of Class S Ordinary Units and Class S Preferred Units (including, if applicable, fractional Units) necessary to provide such holder with an additional number of Class S Ordinary Units and Class S Preferred Units that, in the aggregate, equal (A) the amount of such reduction divided by (B) the Unit Price on the date of such exchange; and
(ii) the Sub-Capital Accounts of such newly issued Class S Ordinary Units and Class S Preferred Units shall each be credited with an amount equal to one half of the amount by which such holder’s Sub-Capital Accounts associated with its Class S Units were reduced as described in this Section 7.04(c).
(d) Issuance of Additional Class S Preferred Units. On a quarterly basis, the Sub-Capital Account balance associated with the Class S Preferred Units of each holder thereof shall be reduced by the amount of Profit (if any) allocated to such holder pursuant to Section 5.04(a)(vii) and (viii) for that quarter, and in exchange therefor such holder shall be issued the number of Class S Preferred Units (including, if applicable, fractional Units) equal to (i) the amount of such reduction divided by (ii) the Unit Price on the date of such exchange.
Section 7.05. Conversion of Class S Preferred Units. Class S Preferred Units may be converted into Class S Ordinary Units (including, if applicable, fractional Units) on a quarterly basis upon the election of a holder of Class S Preferred Units by written notice to the Partnership. Upon such an election, such holder shall receive 1.0 Class S Ordinary Unit for every 1.2 Class S Preferred Units converted. In connection with such conversion, each converted Class S Preferred Unit shall be cancelled and its Capital Account reduced to zero, and the Capital Account of such newly issued Class S Ordinary Unit shall be credited with an amount equal to the amount by which the Capital Accounts of the applicable Class S Preferred Units were reduced. For the avoidance of doubt, Class S Ordinary Units issued pursuant to this Section 7.05 may be contemporaneously converted into Class A Common Stock in accordance with Section 7.06.
Section 7.06. Exchange of Class S Ordinary Units. Whole Class S Ordinary Units may be exchanged with Class A Common Stock of the Issuer on a quarterly basis upon the election of a holder of Class S Ordinary Units by written notice to the Partnership and the Issuer. Upon such an election, each Class S Ordinary Unit shall be exchanged with one share of Class A Common Stock of the Issuer. In connection with such exchange, each exchanged Class S Ordinary Unit shall be cancelled and its Capital Account reduced to zero, and the Partnership shall issue a number of Class A Units to Ben LLC, in its capacity as a Limited Partner (or other party as determined by the General Partner as appropriate) equal to the number of exchanged Class S Ordinary Units and the Capital Account of such newly issued Class A Units shall be credited with an amount equal to the amount by which the Capital Accounts of the exchanged Class S Ordinary Units were reduced. Any exchange of Class S Ordinary Units into Class A Common Stock of the Issuer shall also be subject to the applicable Exchange Agreement. Fractional Class S Ordinary Units may be surrendered to the Partnership in exchange for cash in an amount equal to the Unit Price upon the election of a direct or indirect holder of Class S Ordinary Units that holds no whole Class S Ordinary Units, subject to the approval of the Issuer. The Issuer and the Partnership shall take such actions as are reasonably necessary to effect such exchange at such time.
Section 7.07. Combinations of Fractional Class S Units. At any time that the outstanding fractional Class S Preferred Units or Class S Ordinary Units, calculated separately, associated with a holder of such Class S Units equal, in the aggregate, greater than a whole Class S Unit, then the Partnership shall combine such Class S Units to give the holder whole Class S Units and a fractional Class S Unit representing the remainder of the combined Class S Units. After any such combination, each Partner shall have the same Total Percentage Interest in the Partnership as before such event, and any amounts calculated on a per Unit basis or stated as a number of Units shall not be adjusted.
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Section 7.08. Conversion of Preferred Series Unit Accounts.
(a) Preferred Series A Subclass 0 Unit Accounts.
(i) At any time on or after January 1, 2023, with respect to any Preferred Series A Subclass 0 Unit Accounts, the holder of such Preferred Series A Subclass 0 Unit Account may convert an amount of the Sub-Capital Account associated with such Preferred Series A Subclass 0 Unit Account, in whole or in part (a “Preferred Series A Subclass 0 Unit Conversion Amount”), into Class S Ordinary Units (including, if applicable, fractional Units) on the next Quarterly Exchange Date upon the holder’s written notice to the Partnership 60 days prior to the applicable Quarterly Exchange Date; provided that, 60 days’ prior notice is not required for conversion into Class S Ordinary Units and the contemporaneous exchange with Class A Common Stock in accordance with Section 7.08(c) on the first Quarterly Exchange Date that such Preferred Series A Subclass 0 Unit Account is eligible to be converted.
(ii) At any time on or after January 1, 2023, in each Fiscal Quarter, a holder of Preferred Series A Subclass 0 Unit Accounts may elect to convert an amount of Preferred Series A Subclass 1 Unit Accounts with a Sub-Capital Account equal to an amount up to the applicable Preferred Series A Subclass 0 Unit Quarterly Cap Amount into Preferred Series A Subclass 0 Unit Accounts with Capital Account balance equal to the Sub-Capital Account balance so converted; provided that, in no event shall such holder convert an amount of their Preferred Series A Subclass 1 Unit Accounts, on an aggregate basis, in excess of fifty percent (50%) of such holder’s Preferred Series A Subclass 0 Unit Initial Amount.
(b) Preferred Series A Subclass 1 Unit Accounts. At any time on or after January 1, 2025, a holder of Preferred Series A Subclass 1 Unit Accounts may, in any calendar year, elect to convert an amount of Preferred Series A Subclass 1 Unit Accounts with a Sub-Capital Account equal to such holder’s Annual Conversion Amount (the amount of any Preferred Series A Unit Accounts so converted, the “Preferred Series A Subclass 1 Unit Conversion Amount” and collectively with a Preferred Series A Subclass 0 Unit Conversion Amount, a “Conversion Amount”), into Class S Ordinary Units (including, if applicable, fractional Units) on the next Quarterly Exchange Date upon the holder’s written notice to the Partnership 60 days prior to the applicable Quarterly Exchange Date; provided that, 60 days’ prior notice is not required for conversion into Class S Ordinary Units and the contemporaneous exchange with Class A Common Stock in accordance with Section 7.08(c) on the first Quarterly Exchange Date that such Preferred Series A Subclass 1 Unit Accounts is eligible to be converted.
(c) Upon a conversion of a Preferred Series Unit Account into Class S Ordinary Units pursuant to Section 7.08(a) or Section 7.08(b), as applicable, the holder of such Preferred Series Unit Account shall be issued Class S Ordinary Units in an amount equal to (i) the Conversion Amount divided by (ii) either (A) in the case of the Preferred Series A Subclass 0 Unit Account, the Preferred Series A Subclass 0 Unit Conversion Price and (B) in the case of the Preferred Series A Subclass 1 Unit Account, the Preferred Series A Subclass 1 Unit Conversion Price. In connection with the conversion, each of the Sub-Capital Account balance and the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series Unit Accounts shall be reduced by the Conversion Amount and the newly issued Class S Ordinary Units shall be credited with the Conversion Amount pro rata in accordance with such newly issued Class S Ordinary Units. For the avoidance of doubt, Class S Ordinary Units issued pursuant to this Section 7.08 may be contemporaneously exchanged into Class A Common Stock in accordance with Section 7.06.
(d) Preferred Series C Subclass 1 Unit Accounts. Holders of the Preferred Series C Subclass 1 Unit Accounts shall have, hereunder, the optional conversion and exchange rights in respect of such Preferred Series C Subclass 1 Unit Accounts as are set forth in Section 3 of the UPA, as if such provisions were part of this Agreement.
Section 7.09. Redemption of Preferred Series A Subclass 0 Unit Accounts. At any time on or after January 1, 2023, in each Fiscal Quarter, a holder of Preferred Series A Subclass 0 Unit Accounts may elect to redeem an amount of Preferred Series A Subclass 0 Unit Accounts with a Sub-Capital Account equal to an amount up to the applicable Preferred Series A Subclass 0 Unit Quarterly Cap Amount; provided that, in no event
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shall such holder redeem more than fifty percent (50%) of the Capital Account balance of such holder’s Preferred Series A Subclass 0 Unit Initial Amount on an aggregate basis. Promptly following a redemption notice a holder of Preferred Series A Subclass 0 Unit Accounts, the Partnership shall mandatorily redeem the applicable amount of Preferred Series A Subclass 0 Unit Accounts. In exchange for the redemption of the Preferred Series A Subclass 0 Unit Accounts, the Partnership shall distribute Available Redeeming Cash Pro Rata to the holders of the Preferred Series A Subclass 0 Unit Accounts then being redeemed until such time as the Sub-Capital Accounts associated with Preferred Series A Subclass 0 Unit Accounts have been reduced by the requested amount. In the event that Available Redeeming Cash is insufficient to redeem all applicable Preferred Series A Subclass 0 Unit Accounts that are to be redeemed for cash, the Partnership shall, on a quarterly basis, redeem additional Preferred Series A Subclass 0 Unit Accounts until all such Preferred Series A Subclass 0 Unit Accounts have been redeemed.
Section 7.10. Preemptive Rights.
(a) Except for the issuance or sale of Equity Securities (i) either directly or indirectly (including through Beneficient Management Partners, L.P.) to officers, employees, directors or consultants of the Partnership or its Subsidiaries pursuant to an incentive equity plan, agreement or arrangement previously approved by BCG, as general partner of the Partnership, or by Affiliates of BCG, and as in effect as of the Effective Date, (ii) to officers, employees, directors or consultants of the Issuer, General Partner, the Partnership or their respective Subsidiaries pursuant to an incentive equity plan, agreement or arrangement approved by the General Partner and, if necessary, the Board of Directors of the Issuer, or a committee thereof, (iii) in connection with the conversion or exchange of any of the Partnership’s outstanding Equity Securities into another class of Equity Securities on terms made available to all holders of the same class of such outstanding Equity Securities, (iv) in connection with an acquisition of another company, business or assets (whether by merger, recapitalization, consolidation, reorganization, combination or otherwise) by the Partnership or any of its Subsidiaries, (v) upon the exercise or conversion or exchange of any Equity Securities, options, warrants, rights or securities outstanding on the Effective Date or issued after the Effective Date in compliance with the provisions of this Section 7.10, (vi) in connection with obligations of the Partnership to any exchange trust or any other product of the Partnership that requires the issuance of any Equity Securities, (vii) issued as a general partner interest to an additional General Partner or substitute General Partner, or (viii) on or prior to the Effective Date and, if the Partnership authorizes the issuance or sale of any Equity Securities of the Partnership (other than as a dividend on outstanding Equity Securities of the Partnership), the Partnership shall offer to sell to each holder of a Preferred Series A Unit Account (each, a “Preemptive Holder”) a portion of such Equity Securities equal to the Preemptive Investor Portion. Each such Preemptive Holder shall be entitled to purchase such Equity Securities at the same price and on the same terms as such Equity Securities are to be offered to the prospective purchaser. The purchase price for all Equity Securities offered to each such Preemptive Holder shall be payable in cash by wire transfer of immediately available funds.
(b) In connection with the issuance or sale of any Equity Securities to which the preemptive rights described in this Section 7.10 apply, the Partnership will deliver to each Preemptive Holder, as soon as reasonably practicable under the circumstances giving rise to the preemptive rights described in this Section 7.10, a written notice (the “Preemptive Rights Notice”) describing (i) the Equity Securities being offered, (ii) the purchase price and the payment terms of the Equity Securities being offered (including the date the Partnership is requesting delivery of funds with respect thereto), and (iii) such holder’s percentage allotment.
(c) In order to exercise its preemptive rights under this Section 7.10, each Preemptive Holder must deliver a written notice to the Partnership describing its election hereunder (which election may be with respect to all or any portion of the Equity Securities it has a right to purchase hereunder) no later than twenty (20) days after receipt of the Preemptive Rights Notice.
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(d) Notwithstanding anything to the contrary set forth herein, in lieu of offering to any Preemptive Holder any Equity Securities to which the preemptive rights described in this Section 7.10 apply at the time such Equity Securities are offered, the Partnership may comply with the provisions of this Section 7.10 by making an offer to sell to each such Preemptive Holder the number of such Equity Securities that such holder would be entitled to purchase under Section 7.10(a) promptly after a sale is effected. In such event, for all purposes of this Section 7.10, the number of such Equity Securities that each such Preemptive Holder shall be entitled to purchase under Section 7.10(a) shall be determined taking into consideration the actual number of Equity Securities sold so as to achieve the same economic effect as if such offer would have been made prior to such sale.
(e) The rights under this Section 7.10 will terminate upon the date that there are no Preferred Series A Subclass 1 Unit Accounts outstanding.
Section 7.11. Additional Issuances and Indebtedness. Without the prior written consent of holders of a majority of then outstanding Preferred Series A Unit Accounts:
(a) none of the Partnership nor any of its Subsidiaries shall (i) issue any Equity Securities or (ii) incur, create, issue, assume, guarantee or otherwise become liable for any indebtedness that, in any such case, is senior in any respect to, or (except to the extent permitted pursuant to Section 7.11(b)) pari passu with, any right of distribution, redemption, repayment, repurchase or other payment relating to the Preferred Series A Unit Accounts; and
(b) prior to the conversion of all of the Preferred Series A Unit Accounts, the Partnership shall not directly or indirectly incur any additional long-term indebtedness, unless, (i) after giving effect to the incurrence thereof on a pro forma basis, the sum of all Indebtedness and such long-term indebtedness would not exceed 55% of the Partnership’s NAV plus cash on hand at the Issuer, the Partnership and its subsidiaries, and (ii) at the time of incurrence, the aggregate balance of the Partnership’s (including controlled Subsidiaries) Indebtedness plus such additional long-term indebtedness does not exceed 40% of the sum of the net asset value of the collateral underlying the loan portfolio of the Partnership and its Subsidiaries plus cash on hand at the Issuer, Partnership and its Subsidiaries.
Section 7.12. Adjustments to Conversion Price; Elective Conversion Upon Partnership Sale or Dissolution.
(a) If the Partnership at any time subdivides (by any stock split, dividend, recapitalization or otherwise) one or more classes of its respective outstanding Units into a greater number of Units, the applicable conversion price in effect immediately prior to such subdivision will be proportionately reduced. If the Partnership at any time combines (by combination, reverse stock split or otherwise) one or more classes of its respective outstanding Units into a smaller number of Units, the applicable conversion price in effect immediately prior to such combination will be proportionately increased.
(b) Subject to the terms of this Section 7.12(b), Class S Preferred Units may be converted into Class S Ordinary Units immediately prior to consummation of a Partnership Sale or an event giving rise to Liquidating Proceeds. The General Partner or Liquidation Agent, as the case may be, shall use commercially reasonable efforts to provide each holder of Class S Preferred Units with at least ten days’ notice of a Partnership Sale or an event giving rise to Liquidating Proceeds, which notice shall include a summary of the material terms of such Partnership Sale or event to allow such holder to make a decision regarding whether to elect to convert its, his or her Class S Preferred Units. Holders of Class S Preferred Units may irrevocably elect to convert all (but not less than all) of their respective Class S Preferred Units into Class S Ordinary Units (including, if applicable, fractional Units) pursuant to Section 7.05 by delivering a written notice to the General Partner or Liquidation Agent, as the case may be, within five days of delivery of the notice referenced in the immediately preceding sentence.
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Section 7.13. Redemption Limitation. Without the prior written consent of holders of a majority of then outstanding Preferred Series A Unit Accounts, and except as otherwise provided herein, the Partnership shall not redeem any other class or series of equity securities, whether pursuant to optional or mandatory redemption rights or otherwise, unless and until the holders of Preferred Series A Unit Accounts have been paid or redeemed in full an amount equal to the Hypothetical Preferred Opening Capital Account Balances associated with such Preferred Series A Unit Accounts. Notwithstanding the foregoing, this Section 7.13 shall not prevent the Partnership from redeeming (a) Units in connection with obligations of the Partnership to any exchange trust, (b) Class S Units, so long as the consideration used to redeem such Class S Units is a publicly traded security of an Affiliate or (c) redemptions pursuant to and in accordance with Section 4.03 and Section 4.05 and any conversion, exchange or redemption of any Units in which the redeemed party retains the same economic interest (other than any tax-related differences) in the Partnership or the Issuer, as the case may be, and in which the holders of Preferred Series A Unit Accounts retain priority in redemption and distributions (in each case to the maximum extent contemplated by this Agreement) over any such new economic interest.
ARTICLE VIII.
TRANSFER
RESTRICTIONS
Section 8.01. Limited Partner Transfers. Each Limited Partner may Transfer Units in Exchange Transactions pursuant to, and in accordance with, the Exchange Agreement (provided that such Exchange Transactions shall be effected in compliance with policies that the General Partner may adopt or promulgate from time to time (including policies requiring the use of designated administrators or brokers)). Each holder of a Preferred Series Unit Account may further Transfer all or any portion of its Preferred Series Unit Account to an estate-planning vehicle or other Person without the consent of the General Partner.
Section 8.02. Mandatory Exchanges. The General Partner may not cause to be Transferred in an Exchange Transaction any Limited Partner Units without the written consent of the holder of such Units.
Section 8.03. Encumbrances. No Limited Partner or Assignee may create an Encumbrance with respect to all or any portion of its Units (or any beneficial interest therein) other than Encumbrances that run in favor of the Limited Partner unless the General Partner consents in writing thereto, which consent may be given or withheld, or made subject to such conditions as are determined by the General Partner, in the General Partner’s reasonable discretion. Consent of the General Partner shall be withheld until the holder of the Encumbrance acknowledges the terms and conditions of this Agreement. Any purported Encumbrance that is not in accordance with this Agreement shall be, to the fullest extent permitted by law, null and void. Notwithstanding any other provision of this Agreement to the contrary and in furtherance of the foregoing, no holder of a Class A Unit may encumber or Transfer, in whole or in part, such Class A Unit to the extent such Encumbrance or Transfer would cause such Class A Unit to cease to track to a corresponding Ben LLC Class A Unit.
Section 8.04. Further Restrictions.
(a) Notwithstanding any contrary provision in this Agreement, the General Partner may impose such forfeiture provisions, Transfer restrictions or other similar provisions with respect to any Units that are outstanding as of the date of this Agreement or are created thereafter, with the written consent of the holder of such Units or pursuant to an amendment to this Agreement adopted in accordance with Section 11.12. Such requirements, provisions and restrictions need not be uniform and may be waived or released by the General Partner in its reasonable discretion with respect to all or a portion of the Units owned by any one or more Limited Partners at any time and from time to time, and shall not constitute the breach of any duty hereunder or otherwise existing at law, in equity or otherwise.
(b) Notwithstanding any contrary provision in this Agreement, in no event may any Transfer of a Unit be made by any Limited Partner or Assignee if:
(i) such Transfer is made to any Person who lacks the legal right, power or capacity to own such Unit;
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(ii) such Transfer would require the registration of such transferred Unit or of any Class of Unit pursuant to any applicable U.S. federal or state securities laws (including, without limitation, the Securities Act or the Exchange Act) or other non-U.S. securities laws (including Canadian provincial or territorial securities laws) or would constitute a non-exempt distribution pursuant to applicable provincial or state securities laws;
(iii) such Transfer would cause (i) all or any portion of the assets of the Partnership to (A) constitute “plan assets” (under ERISA, the Code or any applicable Similar Law) of any existing or contemplated Limited Partner, or (B) be subject to the provisions of ERISA, Section 4975 of the Code or any applicable Similar Law, or (ii) the General Partner to become a fiduciary with respect to any existing or contemplated Limited Partner, pursuant to ERISA, any applicable Similar Law, or otherwise;
(iv) to the extent requested by the General Partner, the Partnership does not receive such legal and/or tax opinions and written instruments (including, without limitation, copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as an Assignee) that are in a form satisfactory to the General Partner, as determined in the General Partner’s reasonable discretion; or
(v) the General Partner shall determine in its reasonable discretion that such Transfer would pose a material risk that the Partnership would be a “publicly traded partnership” as defined in Section 7704 of the Code.
In addition, notwithstanding any contrary provision in this Agreement, to the extent the General Partner shall determine that interests in the Partnership do not meet the requirements of Treasury Regulations Section 1.7704-1(h), the General Partner may impose such restrictions on the Transfer of Units or other interests in the Partnership as the General Partner may determine in its reasonable discretion to be necessary or advisable so that the Partnership is not treated as a publicly traded partnership taxable as a corporation under Section 7704 of the Code.
(c) Any Transfer in violation of this Article VIII shall, to the fullest extent permitted by law, be deemed null and void ab initio and of no effect.
Section 8.05. Rights of Assignees. Subject to Section 8.04(b), the Transferee of any permitted Transfer pursuant to this Article VIII will be an assignee only (“Assignee”), and only will receive, to the extent transferred, the distributions and allocations of income, gain, loss, deduction, credit or similar item to which the Partner that transferred its Units would be entitled, and such Assignee will not be entitled or enabled to exercise any other rights or powers of a Partner, such other rights, and all obligations relating to, or in connection with, such interest remaining with the transferring Partner. The transferring Partner will remain a Partner even if it has transferred all of its Units to one or more Assignees until such time as the Assignee(s) is admitted to the Partnership as a Partner pursuant to Section 8.07.
Section 8.06. Admissions, Withdrawals and Removals.
(a) No Person may be admitted to the Partnership as an additional General Partner or substitute General Partner without the prior written consent of each incumbent General Partner, which consent may be given or withheld, or made subject to such conditions as are determined by each incumbent General Partner, in each case in the reasonable discretion of each incumbent General Partner. A General Partner will not be entitled to Transfer all of its Units or to withdraw from being a General Partner of the Partnership unless another General Partner shall have been admitted hereunder (and not have previously been removed or withdrawn).
(b) No Limited Partner will be removed or entitled to withdraw from being a Partner of the Partnership except in accordance with Section 8.08. Any additional General Partner or substitute General Partner admitted as a general partner of the Partnership pursuant to this Section 8.06 is hereby authorized to, and shall, continue the Partnership without dissolution.
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(c) Except as otherwise provided in Article IX or the Act, no admission, substitution, withdrawal or removal of a Partner will cause the dissolution of the Partnership. To the fullest extent permitted by law, any purported admission, withdrawal or removal that is not in accordance with this Agreement shall be null and void.
Section 8.07. Admission of Assignees as Substitute Limited Partners. An Assignee will become a substitute Limited Partner only if and when each of the following conditions is satisfied:
(a) the General Partner consents in writing to such admission, which consent may be given or withheld, or made subject to such conditions as are determined by the General Partner, in each case in the General Partner’s reasonable discretion;
(b) if required by the General Partner, the General Partner receives written instruments (including, without limitation, copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as a substitute Limited Partner) that are in a form satisfactory to the General Partner (as determined in its reasonable discretion);
(c) if required by the General Partner, the General Partner receives an opinion of counsel satisfactory to the General Partner to the effect that such Transfer is in compliance with this Agreement and all applicable Law; and
(d) if required by the General Partner, the parties to the Transfer, or any one of them, pays all of the Partnership’s reasonable expenses connected with such Transfer (including, but not limited to, the reasonable legal and accounting fees of the Partnership).
Section 8.08. Withdrawal and Removal of Limited Partners. Subject to Section 8.05, if a Limited Partner ceases to hold any Units, then such Limited Partner shall cease to be a Limited Partner and to have the power to exercise any rights or powers of a Limited Partner (hereunder or under applicable Law), and shall be deemed to have withdrawn from the Partnership.
Section 8.09. Indirect Transfer to an Equity Holder. For the avoidance of doubt, subject to Section 8.04(b), in order to effectuate a Transfer of Units by a Limited Partner to an equity holder of such Limited Partner, a Limited Partner may Transfer Units to a Subsidiary of such Limited Partner and transfer its ownership in such Subsidiary to the Limited Partner’s equity holder. Notwithstanding Section 8.07(a), Section 8.07(b) and Section 8.07(c), but subject to Section 8.07(d), upon the Transfer of the Units by a Limited Partner to a Subsidiary thereof, such Subsidiary shall be automatically admitted as a Limited Partner upon its execution of a counterpart signature page to this Agreement.
ARTICLE IX.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 9.01. No Dissolution. Except as required by the Act, the Partnership shall not be dissolved solely by reason of the admission of additional Partners or withdrawal of Partners in accordance with the terms of this Agreement. The Partnership may be dissolved, liquidated, wound up and terminated only pursuant to the provisions of this Article IX, and the Partners, to the fullest extent permitted by law, hereby irrevocably waive any and all other rights they may have to cause a dissolution of the Partnership or a sale or partition of any or all of the Partnership assets.
Section 9.02. Events Causing Dissolution. The Partnership shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events:
(a) the entry of a decree of judicial dissolution of the Partnership under Section 17-802 of the Act upon the finding by a court of competent jurisdiction that it is not reasonably practicable to carry on the business of the Partnership in conformity with this Agreement;
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(b) any event which makes it unlawful for the business of the Partnership to be carried on by the Partners;
(c) the written consent of all Partners;
(d) at any time there are no limited partners, unless the Partnership is continued in accordance with the Act;
(e) the Incapacity or removal of the General Partner or the occurrence of a Disabling Event with respect to the General Partner; provided that the Partnership will not be dissolved or required to be wound up in connection with any of the events specified in this Section 9.02(e) if: (i) at the time of the occurrence of such event there is at least one other general partner of the Partnership who is hereby authorized to, and elects to, carry on the business of the Partnership; or (ii) all remaining Limited Partners consent to or ratify the continuation of the business of the Partnership and the appointment of another general partner of the Partnership, effective as of the event that caused the General Partner to cease to be a general partner of the Partnership, within 120 days following the occurrence of any such event, which consent shall be deemed (and if requested each Limited Partner shall provide a written consent or ratification) to have been given for all Limited Partners if the holders of more than 50% of the Units then outstanding agree in writing to so continue the business of the Partnership; or
(f) the determination of the General Partner in its reasonable discretion.
Notwithstanding any other provision of this Agreement (including Section 8.06 hereof) or the Act, upon the Incapacity or removal of the General Partner, the occurrence of a Disabling Event with respect to the General Partner, or upon the occurrence of any other event that causes the General Partner to withdraw as, or cease to be, the general partner of the Partnership (each, a “GP Triggering Event”), Issuer (or in the event that the Board of Directors of the Issuer determines that Issuer should not serve in such capacity, a nominee selected by the Board of Directors of the Issuer (other than the Issuer)) shall, without any action of any other Person, be automatically admitted as a general partner of the Partnership (a “Substitute GP”) upon the execution by such Substitute GP of a counterpart signature page to this Agreement. Such Substitute GP shall be deemed admitted to the Partnership as a general partner of the Partnership effective immediately prior to the occurrence of such GP Triggering Event. The Substitute GP, solely in its capacity as General Partner, shall have no interest in the profits, losses and capital of the Partnership and will have no right to receive any distributions of Partnership assets. Upon admission of a Substitute GP in accordance with the foregoing, such Substitute GP is hereby authorized to, and elects to, carry on the business of the Partnership in accordance with the terms of this Agreement and the Act, and the Partnership shall continue without dissolution.
Section 9.03. Distribution upon Dissolution. Upon dissolution, the Partnership shall not be terminated and shall continue until the winding up of the affairs of the Partnership is completed. Upon the winding up of the Partnership, the General Partner, or any other Person designated by the General Partner (the “Liquidation Agent”), shall take full account of the assets and liabilities of the Partnership and shall, unless the General Partner determines otherwise, liquidate the assets of the Partnership as promptly as is consistent with obtaining the fair value thereof. The Sub-Capital Account balances of the FLP Unit Accounts (other than the Subclass 3 FLP Unit Accounts) shall automatically be converted into Class S Units according to Section 7.04. Then, the proceeds of any liquidation shall be applied and distributed in the following order:
(a) first, to the satisfaction of debts and liabilities of the Partnership (including satisfaction of all indebtedness to Partners and/or their Affiliates to the extent otherwise permitted by law) including the expenses of liquidation, and including the establishment of any reserve which the Liquidation Agent shall deem reasonably necessary for any contingent, conditional or unmatured liabilities or obligations of the Partnership (“Contingencies”). Any such reserve may be paid over by the Liquidation Agent to any attorney-at-law, or acceptable party, as escrow agent, to be held for disbursement in payment of any Contingencies and, at the expiration of such period as shall be deemed advisable by the Liquidation Agent for distribution of the balance in the manner hereinafter provided in this Section 9.03; and
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(b) second, the remaining proceeds, if any (the “Liquidating Proceeds”), shall be distributed pursuant to Section 4.07 (substituting “Liquidating Proceeds” for “Sales Proceeds”).
Section 9.04. Time for Liquidation. A reasonable amount of time shall be allowed for the orderly liquidation of the assets of the Partnership and the discharge of liabilities to creditors so as to enable the Liquidation Agent to minimize the losses attendant upon such liquidation.
Section 9.05. Termination. The Partnership shall terminate when all of the assets of the Partnership, after payment of or due provision for all debts, liabilities and obligations of the Partnership, shall have been distributed to the holders of Units in the manner provided for in this Article IX, and the Certificate shall have been cancelled in the manner required by the Act.
Section 9.06. Claims of the Partners. The Partners shall look solely to the Partnership’s assets for the return of their Capital Contributions, and if the assets of the Partnership remaining after payment of or due provision for all debts, liabilities and obligations of the Partnership are insufficient to return such Capital Contributions, the Partners shall have no recourse against the Partnership or any other Partner or any other Person. No Partner with a negative balance in such Partner’s Capital Account shall have any obligation to the Partnership or to the other Partners or to any creditor or other Person to restore such negative balance during the existence of the Partnership, upon dissolution or termination of the Partnership or otherwise, except to the extent required by the Act.
Section 9.07. Survival of Certain Provisions. Notwithstanding anything to the contrary in this Agreement, this Section 9.07 and the provisions of Section 10.01, Section 10.02, Section 11.09 and Section 11.10 shall survive the termination of the Partnership.
ARTICLE X.
LIABILITY AND INDEMNIFICATION
Section 10.01. Liability of Partners.
(a) No Limited Partner and no Affiliate, manager, member, employee or agent of a Limited Partner shall be liable for any debt, obligation or liability of the Partnership or of any other Partner or have any obligation to restore any deficit balance in its Capital Account solely by reason of being a Partner of the Partnership, except to the extent required by the Act.
(b) Notwithstanding any other provision of this Agreement, to the extent that, at law or in equity, the General Partner or any other Indemnitee would have duties (including fiduciary duties) to the Partnership, to another Partner, to any Person who acquires an interest in a Partnership interest or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by law, and replaced with the duties expressly set forth herein. The elimination of duties (including fiduciary duties) and replacement thereof with the duties or standards expressly set forth herein are approved by the Partnership, each of the Partners and each other Person bound by this Agreement. Whenever in this Agreement or any other agreement contemplated hereby one or more Indemnitees or other Persons are permitted to or required to make a decision (i) in their “discretion” or (ii) pursuant to any provision not subject to an express standard of “good faith” (regardless of whether there is a reference to “discretion” or any other standard), then the Indemnitee(s) or such other Person(s), as applicable, in making such decision, shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Partnership, the Partners, or any other Person (including any creditor of the Partnership), and shall not be subject to any other or different standards imposed by this Agreement or otherwise existing at law, in equity or otherwise. Notwithstanding the
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immediately preceding sentence, if a decision or action under this Agreement is to be made or taken by one or more Indemnitees or other Persons in “good faith”, the Indemnitee(s) or such other Person(s) shall act in “good faith” and shall not be subject to any other or different standard under this Agreement or otherwise existing at law, in equity or otherwise and any decision or action made or taken or omitted to be made or taken in good faith shall not be a breach of this Agreement or any other agreement contemplated hereby or otherwise applicable provision of law or in equity. For all purposes of this Agreement and notwithstanding any applicable provision of law or in equity, a determination or other action or failure to act by one or more Indemnitees or other Persons conclusively will be deemed to be made, taken or omitted to be made or taken in “good faith” unless the Indemnitee(s) or such other Person(s), as applicable, subjectively believed such determination, action or failure to act was adverse to the interests of the Partnership. The belief of a majority of the Board of Directors of Issuer or committee thereof shall be deemed to be the belief of the Board of Directors of Issuer or such committee. In any proceeding brought by the Partnership, any Limited Partner or any other Person who is bound by this Agreement challenging an action, determination or failure to act, notwithstanding any provision of law or equity to the contrary, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act did not satisfy the applicable standard of conduct pursuant to this Agreement. To the fullest extent permitted by law, any action or determination taken or made by one or more Indemnitees or other Persons which is not in breach of this Agreement shall be deemed taken or determined in compliance with this Agreement, the Act and any other applicable fiduciary requirements.
(c) To the extent that, at law or in equity, any Partner (including without limitation, the General Partner) has duties (including fiduciary duties) and liabilities relating thereto to the Partnership, to another Partner or to another Person who is a party to or is otherwise bound by this Agreement, the Partners (including without limitation, the General Partner) acting under this Agreement will not be liable to the Partnership, to any such other Partner or to any such other Person who is a party to or is otherwise bound by this Agreement, for their good faith reliance on the provisions of this Agreement.
(d) The General Partner and any other Indemnitees may consult with legal counsel, accountants and financial or other advisors and any act or omission suffered or taken by such Person on behalf of the Partnership in accordance with the advice or opinion of such counsel, accountants or financial or other advisors shall be conclusively presumed to have been done or omitted in good faith in accordance with such advice or opinion so long as such counsel or accountants or financial or other advisors were selected with reasonable care.
Section 10.02. Indemnification.
(a) Indemnification. To the fullest extent permitted by law, as the same exists or may hereafter be amended (but in the case of any such amendment, only to the extent that such amendment permits the Partnership to provide broader indemnification rights than such law permitted the Partnership to provide prior to such amendment), the Partnership shall indemnify any Indemnitee who was or is made or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding (brought in the right of the Partnership or otherwise), whether civil, criminal, administrative, arbitrative or investigative, and whether formal or informal, including appeals, by reason of his or her or its status as an Indemnitee or by reason of any action alleged to have been taken or omitted to be taken by Indemnitee in such capacity, from and against all loss and liability suffered and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement reasonably incurred by such Indemnitee in connection with such action, suit or proceeding, including appeals; provided that such Indemnitee shall not be entitled to indemnification hereunder if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 10.02, the Indemnitee acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitees’ conduct was unlawful; provided, further, that if any employee of the Partnership, the Issuer or any Affiliate brings any action, suit or proceedings against the Partnership, the General Partner or any Affiliate of the foregoing, such employee shall not be entitled to indemnification under this Section 10.02, unless the General Partner in its reasonable discretion consents thereto. The indemnification of an Indemnitee of the type
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identified in clause (d) of the definition of Indemnitee shall be secondary to any and all indemnification to which such Indemnitee is entitled from the relevant other Person (including any payment made to such Indemnitee under any insurance policy issued to or for the benefit of such Person or Indemnitee) (the “Primary Indemnification”), and will only be paid to the extent the Primary Indemnification is not paid and/or does not provide coverage (e.g., a self-insured retention amount under an insurance policy). No such Person shall be entitled to contribution or indemnification from or subrogation against the Partnership. The indemnification of any other Indemnitee shall, to the extent not in conflict with such policy, be secondary to any and all payment to which such Indemnitee is entitled from any relevant insurance policy issued to or for the benefit of the Partnership or any Indemnitee.
(b) Advancement of Expenses. To the fullest extent permitted by law, the Partnership shall promptly pay expenses (including attorneys’ fees) incurred by any Indemnitee in appearing at, participating in or defending any action, suit or proceeding in advance of the final disposition of such action, suit or proceeding, including appeals, upon presentation of an undertaking on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this Section 10.02 or otherwise.
(c) Unpaid Claims. If a claim for indemnification (following the final disposition of such action, suit or proceeding) or advancement of expenses under this Section 10.02 is not paid in full within 30 days after a written claim therefor by any Indemnitee has been received by the Partnership, such Indemnitee may file proceedings to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Partnership shall have the burden of proving that such Indemnitee is not entitled to the requested indemnification or advancement of expenses under applicable Law.
(d) Insurance.
(i) To the fullest extent permitted by law, the Partnership may purchase and maintain insurance on behalf of any person described in Section 10.02(a) against any liability asserted against such person, whether or not the Partnership would have the power to indemnify such person against such liability under the provisions of this Section 10.02 or otherwise.
(ii) In the event of any payment by the Partnership under this Section 10.02, the Partnership shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee from any relevant other Person or under any insurance policy issued to or for the benefit of the Partnership, such relevant other Person, or any Indemnitee. Each Indemnitee agrees to execute all papers required and take all action necessary to secure such rights, including the execution of such documents as are necessary to enable the Partnership to bring suit to enforce any such rights in accordance with the terms of such insurance policy or other relevant document. The Partnership shall pay or reimburse all expenses actually and reasonably incurred by the Indemnitee in connection with such subrogation.
(iii) The Partnership shall not be liable under this Section 10.02 to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines and amounts paid in settlement, and excise taxes with respect to an employee benefit plan or penalties) if and to the extent that the applicable Indemnitee has otherwise actually received such payment under this Section 10.02 or any insurance policy, contract, agreement or otherwise.
(e) Non-Exclusivity of Rights. The provisions of this Section 10.02 shall be applicable to all actions, claims, suits or proceedings made or commenced after the date of this Agreement, whether arising from acts or omissions to act occurring before or after its adoption. The provisions of this Section 10.02 shall be deemed to be a contract between the Partnership and each person entitled to indemnification under this Section 10.02 (or legal representative thereof) who serves in such capacity at any time while this Section 10.02 and the relevant provisions of applicable Law, if any, are in effect, and any amendment, modification or repeal hereof shall not
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affect any rights or obligations then existing with respect to any state of facts or any action, suit or proceeding then or theretofore existing, or any action, suit or proceeding thereafter brought or threatened based in whole or in part on any such state of facts. If any provision of this Section 10.02 shall be found to be invalid or limited in application by reason of any law or regulation, it shall not affect the validity of the remaining provisions hereof. The rights of indemnification provided in this Section 10.02 shall neither be exclusive of, nor be deemed in limitation of, any rights to which any person may otherwise be or become entitled or permitted by contract, this Agreement or as a matter of law, both as to actions in such person’s official capacity and actions in any other capacity, it being the policy of the Partnership that indemnification of any person whom the Partnership is obligated to indemnify pursuant to Section 10.02 shall be made to the fullest extent permitted by law.
(f) Notwithstanding anything to the contrary set forth in this Section 10.02, any indemnification or advancement obligation of the Partnership under this Agreement shall only be satisfied to the extent that the Partnership will remain solvent, as determined by the General Partner in its reasonable discretion, after payment of such obligations, and thereafter any such obligation shall terminate.
For purposes of this Section 10.02, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Partnership” shall include any service as a director, officer, employee or agent of the Partnership which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries.
This Section 10.02 shall not limit the right of the Partnership, to the extent and in the manner permitted by law, to indemnify and to advance expenses to, and purchase and maintain insurance on behalf of, persons other than persons described in Section 10.02(a).
Section 10.03. Exculpation.
Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable to the Partnership, the Partners or any other Persons who are bound by this Agreement, for any losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising as a result of any act or omission of an Indemnitee, or for any breach of contract (including breach of this Agreement) or any breach of duties (including breach of fiduciary duties, if any) whether arising hereunder, at law, in equity or otherwise, unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud or willful misconduct.
ARTICLE XI.
MISCELLANEOUS
Section 11.01. Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
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Section 11.02. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given and made (i) the date such notice, request, claim, demand or other communication is served by delivery in person upon the Person for whom it is intended, (ii) the date sent if delivered by electronic mail (provided, that for such electronic mail to be deemed to have been given on the date it is sent, a copy of such notice, request, claim, demand or other communication is also furnished on such date to a nationally recognized overnight courier for next business day delivery), (iii) three business days after mailing if sent by certified or registered mail, return receipt requested, or (iv) one business day after being furnished to a nationally recognized overnight courier for next business day delivery, in each case to the Person at the applicable address or electronic mail address set forth below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.02):
| (a) | If to the Partnership, to: |
|---|
Beneficient Company Holdings,
L.P. c/o Beneficient Company
Group, L.L.C. 325 N. St. Paul
Street, Suite 4850 Dallas, Texas 75201
Attention: General Counsel
Electronic mail: legalnotices@beneficient.com
| (b) | If to any Partner, to: |
|---|
Beneficient Company Group,
L.L.C. 325 N. St. Paul Street, Suite
4850 Dallas, Texas 75201
Attention: General Counsel
Electronic mail: legalnotices@beneficient.com
The Beneficient Company Group, L.P. shall use commercially reasonable efforts to forward any such communication to the applicable Partner’s address or electronic mail address as shown in the Partnership’s books and records.
| (c) | If to the General Partner, to: |
|---|
Beneficient Company Group,
L.L.C. 325 N. St. Paul Street, Suite
4850 Dallas, Texas 75201
Attention: General Counsel
Electronic mail: legalnotices@beneficient.com
Section 11.03. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by Law.
Section 11.04. Binding Effect. This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns.
Section 11.05. Interpretation. Throughout this Agreement, nouns, pronouns and verbs shall be construed as masculine, feminine, neuter, singular or plural, whichever shall be applicable. Unless otherwise specified, all references herein to “Articles,” “Sections” and paragraphs shall refer to corresponding provisions of this Agreement. Each party hereto acknowledges and agrees that the parties hereto have participated collectively in the negotiation and drafting of this Agreement and that he or she or it has had the opportunity to draft, review and edit the language of this Agreement; accordingly, it is the intention of the parties that no presumption for or against any party arising out of drafting all or any part of this Agreement will be applied in any dispute relating to, in connection with or involving this Agreement. Accordingly, the parties hereby waive to the fullest extent permitted by law the benefit of any rule of law or any legal decision that would require that in cases of uncertainty, the language of a contract should be interpreted most strongly against the party who drafted such language.
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Section 11.06. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 11.06.
Section 11.07. Further Assurances. Each Limited Partner shall perform all other acts and execute and deliver all other documents as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
Section 11.08. Entire Agreement. This Agreement and the UPA, as referenced herein, constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
Section 11.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the principles of conflicts of law.
Section 11.10. Dispute Resolution.
(a) The Partnership, and each Partner, each other Person who acquires a Unit or other interest in the Partnership and each other Person who is bound by this Agreement (collectively, the “Consenting Parties” and each a “Consenting Party”) (i) irrevocably agrees that, unless the General Partner shall otherwise agree in writing, any claims, suits, actions or proceedings arising out of or relating in any way to this Agreement or any interest in the Partnership (including, without limitation, any claims, suits or actions under or to interpret, apply or enforce (A) the provisions of this Agreement, including without limitation the validity, scope or enforceability of this Section 11.10(a) or the arbitrability of any Dispute (as defined below), (B) the duties, obligations or liabilities of the Partnership to the Partners, or of the Partners to the Partnership, or among Partners, (C) the rights or powers of, or restrictions on, the Partnership, or any Partner, (D) any provision of the Act or other similar applicable statutes, (E) any other instrument, document, agreement or certificate contemplated either by any provision of the Act relating to the Partnership or by this Agreement or (F) the federal securities laws of the United States or the securities or antifraud laws of any international, national, state, provincial, territorial, local or other governmental or regulatory authority, including, in each case, the applicable rules and regulations promulgated thereunder (regardless of whether such Disputes (x) sound in contract, tort, fraud or otherwise, (y) are based on common law, statutory, equitable, legal or other grounds, or (z) are derivative or direct claims)) (a “Dispute”), shall be finally settled by arbitration conducted by three arbitrators (or, in the event the amount of quantified claims and/or estimated monetary value of other claims contained in the applicable request for arbitration is less than $3.0 million, by a sole arbitrator) in Wilmington, Delaware in accordance with the Rules of Arbitration of the International Chamber of Commerce (including the rules relating to costs and fees) existing on the date of this Agreement except to the extent those rules are inconsistent with the terms of this Section 11.10, and that such arbitration shall be the exclusive manner pursuant to which any Dispute shall be resolved; (ii) agrees that this Agreement involves commerce and is governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. and any applicable treaties governing the recognition and enforcement of international arbitration agreements and awards; (iii) agrees to take all steps necessary or advisable, including the execution of documents to be filed with the International Court of Arbitration or the International Centre for ADR in order to properly submit any Dispute for arbitration pursuant to this Section 11.10(a); (iv) irrevocably waives, to the
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fullest extent permitted by law, any objection it may have or hereafter have to the submission of any Dispute for arbitration pursuant to this Section 11.10(a) and any right to lay claim to jurisdiction in any venue; (v) agrees that (A) the arbitrator(s) shall be U.S. lawyers, U.S. law professors and/or retired U.S. judges and all arbitrators, including the president of the arbitral tribunal, may be U.S. nationals and (B) the arbitrator(s) shall conduct the proceedings in the English language; (vi) agrees that except as required by law (including any disclosure requirement to which the Partnership may be subject under any securities law, rule or regulation or applicable securities exchange rule or requirement) or as may be reasonably required in connection with ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm or challenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall not disclose any awards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party in the proceedings not otherwise in the public domain; (vii) irrevocably agrees that, unless the General Partner and the relevant named party or parties shall otherwise mutually agree in writing, (A) the arbitrator(s) may award declaratory or injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party’s individual claim, (B) SUCH CONSENTING PARTY MAY BRING CLAIMS ONLY IN ITS INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF, CLASS REPRESENTATIVE OR CLASS MEMBER, OR AS A PRIVATE ATTORNEY GENERAL, IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING, and (C) the arbitrator(s) may not consolidate more than one person’s claims, and shall not have authority otherwise to preside over any form of a representative or class or consolidated proceeding or entertain any claim on behalf of a person who is not a named party, nor shall any arbitrator have authority to make any award for the benefit of, or against, any person who is not a named party; and (viii) agrees that if a Dispute that would be arbitrable under this Agreement if brought against a Consenting Party is brought against an employee, officer, director, agent or indemnitee of such Consenting Party or its Affiliates (other than Disputes brought by the employer or principal of any such employee, officer, director, agent or indemnitee) for alleged actions or omissions of such employee, officer, director, agent or indemnitee undertaken as an employee, officer, director, agent or indemnitee of such Consenting Party or its Affiliates, such employee, officer, director, agent or indemnitee shall be entitled to invoke this arbitration agreement. Notwithstanding Section 11.01, each provision of this Section 11.10(a) shall be deemed material, and shall not be severable and this Section 11.10(a) shall be enforced only in its entirety. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.
(b) Notwithstanding the provisions of Section 11.10(a), any Consenting Party may bring an action or special proceeding for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, or enforcing an arbitration award and, for the purposes of this paragraph (b), each Consenting Party (i) irrevocably agrees that, unless the General Partner consents in writing to the selection of an alternative forum, any such action or special proceeding shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction; (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such action or special proceeding; (iii) irrevocably agrees not to, and waives any right to, assert in any such action or special proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such action or special proceeding is brought in an inconvenient forum, or (C) the venue of such action or special proceeding is improper; (iv) expressly waives any requirement for the posting of a bond by a party bringing such action or special proceeding; (v) consents to process being served in any such action or special proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice thereof; provided that nothing in clause (v) hereof shall affect or limit any right to serve process in any other manner permitted by law;
(vi) IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUCH CLAIM, SUIT, ACTION OR PROCEEDING; and
(vii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate.
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(c) If the arbitrator(s) shall determine that any Dispute is not subject to arbitration, or the arbitrator(s) or any court or tribunal of competent jurisdiction shall refuse to enforce any provision of Section 11.10(a) or shall determine that any Dispute is not subject to arbitration as contemplated thereby, then, and only then, shall the alternative provisions of this Section 11.10(c) be applicable. Each Consenting Party, to the fullest extent permitted by law, (i) irrevocably agrees that unless the General Partner consents in writing to the selection of an alternative forum, any Dispute shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction over such Dispute; (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding; (iii) irrevocably agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper; (iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding;
(v) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice thereof; provided that nothing in clause (v) hereof shall affect or limit any right to serve process in any other manner permitted by law; and
(vi) IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUCH CLAIM, SUIT, ACTION OR PROCEEDING; and
(vii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate. The parties acknowledge that the fora designated by this Section 11.10(c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.
Section 11.11. Expenses. Except as otherwise specified in this Agreement, the Partnership shall be responsible for all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with its operation.
Section 11.12. Amendments and Waivers.
(a) Subject to this Section 11.12, this Agreement may be amended, supplemented, waived or modified by the General Partner in its reasonable discretion without the approval of any Limited Partner or other Person; provided that no amendment may materially and adversely affect the rights of a holder of Units, as such, other than on a pro rata basis with other holders of Units of the same Class without the prior written consent of such holder (or, if there is more than one such holder that is so affected, without the prior written consent of a majority in interest of such affected holders in accordance with their holdings of such Class of Units); provided, further, that no amendment may be made that would materially and adversely affect the rights of a particular Class without the prior written consent of a majority in interest of the holders of such Class; provided, further, that no amendment may be made that would materially and adversely affect the rights of the Subclass 3 FLP Unit Accounts without the prior written consent of a majority in interest by Capital Account balance of the holders of such Subclass 3 FLP Unit Accounts; provided, further, that no amendment may be made to Section 4.01 hereof without the prior written consent of Beneficient Holdings, Inc.; provided, further, however, that notwithstanding the foregoing, the General Partner may, without the written consent of any Limited Partner or any other Person, amend, supplement, waive or modify any provision of this Agreement or the Partnership Register and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (i) any amendment, supplement, waiver or modification that the General Partner determines to be necessary or appropriate in connection with the creation, authorization or issuance of Units or any Class or series of equity interest in the Partnership pursuant to Section 7.01 (and subject to compliance with Section 7.10); (ii) the admission, substitution, withdrawal or removal of Partners in accordance with this Agreement, including pursuant to Section 7.01; (iii) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership; (iv) any amendment, supplement, waiver or modification that the General Partner determines in its reasonable discretion to be necessary or appropriate to address changes in U.S. federal income tax regulations, legislation or
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interpretation; and/or (v) a change in the Fiscal Year or taxable year of the Partnership and any other changes that the General Partner determines to be necessary or appropriate as a result of a change in the Fiscal Year or taxable year of the Partnership including a change in the dates on which distributions are to be made by the Partnership. For the avoidance of doubt, any amendment to Section 4.01, Section 4.02, the first sentence of Section 5.03, Section 5.04, Section 5.06, Section 7.02 (to the extent such amendment requires Units to be certificated), Section 7.08, Section 7.09, Section 7.10, Section 7.11, Section 7.12, Section 7.13, or, to the extent related to any of the foregoing, Section 1.01, in each case that in any way affects the rights of the holder(s) of any class of Preferred Series Unit Accounts shall be deemed to materially affect the rights of the holder(s) of such Class. Subject to any requirement herein to seek the consent of a particular Class, if consent from multiple holders is required to be obtained pursuant to this Section 11.12(a), then the consent of a majority in interest (calculated on an as converted basis, assuming all such holders had converted the Equity Securities held by them to Class A Units) of all such holders shall constitute the consent of all such holders. If an amendment has been approved in accordance with this Agreement, such amendment shall be adopted and effective with respect to all Partners. Upon obtaining such approvals as may be required by this Agreement, and without further action or execution on the part of any other Partner or other Person, any amendment to this Agreement may be implemented and reflected in a writing executed solely by the General Partner and the Limited Partners shall be deemed a party to and bound by such amendment.
(b) Notwithstanding anything in this Agreement to the contrary, in addition to any required approval of any holder or Class pursuant to Section 11.12(a), any amendment, supplement, waiver or modification of the definitions of “Minimum Retained Earnings” or Section 4.01, shall require the approval of the Executive Committee.
(c) No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of time specified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law.
(d) Except as may be otherwise required by law in connection with the winding-up, liquidation, or dissolution of the Partnership, each Partner hereby irrevocably waives any and all rights that it may have to maintain an action for judicial accounting or for partition of any of the Partnership’s property.
Section 11.13. No Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and successors and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement (other than pursuant to Section 10.02); provided, however, that each employee, officer, director, agent or indemnitee of any Consenting Party or its Affiliates is an intended third party beneficiary of Section 11.10(a) and shall be entitled to enforce its rights thereunder.
Section 11.14. Headings. The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.
Section 11.15. Power of Attorney. Each Limited Partner, by its execution hereof, hereby makes, constitutes and appoints the General Partner as its true and lawful agent and attorney in fact, with full power of substitution and full power and authority in its name, place and stead, to make, execute, sign, acknowledge, swear to, record and file: (a) this Agreement and any amendment to this Agreement that has been adopted as herein provided; (b) the original certificate of limited partnership of the Partnership and all amendments thereto required or permitted by law or the provisions of this Agreement; (c) all certificates and other instruments (including consents and ratifications which the Limited Partners have agreed to provide upon a matter receiving the agreed support of the Limited Partners) deemed advisable by the General Partner to carry out the provisions
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of this Agreement (including the provisions of Section 8.03) and Law or to permit the Partnership to become or to continue as a limited partnership or partnership wherein the Limited Partners have limited liability in each jurisdiction where the Partnership may be doing business; (d) all instruments that the General Partner deems appropriate to reflect a change or modification of this Agreement or the Partnership in accordance with this Agreement, including, without limitation, the admission of additional Limited Partners or substituted Limited Partners pursuant to the provisions of this Agreement;
(e) all conveyances and other instruments or papers deemed advisable by the General Partner to effect the liquidation and termination of the Partnership; and (f) all fictitious or assumed name certificates required or permitted (in light of the Partnership’s activities) to be filed on behalf of the Partnership. It is expressly intended by each Limited Partner that the power of attorney granted by this Section 11.15 is coupled with an interest, shall be irrevocable, and shall survive and not be affected by the subsequent death, disability or incapacity of such Limited Partner (or if such Limited Partner is a corporation, partnership, trust, association, limited liability company or other legal entity, by the dissolution or termination thereof).
Section 11.16. Separate Agreements; Schedules. Notwithstanding any other provision of this Agreement, including Section 11.12, the General Partner may, or may cause the Partnership to, without the approval of any Limited Partner or other Person, enter into separate subscription, letter or other agreements with individual Limited Partners with respect to any matter, which have the effect of establishing rights under, or altering, supplementing or amending the terms of, this Agreement. The parties hereto agree that any terms contained in any such separate agreement shall govern with respect to such Limited Partner(s) party thereto notwithstanding the provisions of this Agreement. The General Partner may from time to time execute and deliver to the Limited Partners schedules which set forth information contained in the books and records of the Partnership and any other matters deemed appropriate by the General Partner. Such schedules shall be for information purposes only and shall not be deemed to be part of this Agreement for any purpose whatsoever.
Section 11.17. Partnership Status. The parties intend to treat the Partnership as a partnership for U.S. federal income tax purposes.
Section 11.18. Delivery by Email. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of an email with scan attachment, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of an email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of an email as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense.
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[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement or have caused this Agreement to be duly executed by their respective authorized officers, in each case as of the Effective Date.
| GENERAL PARTNER: | ||
|---|---|---|
| BENEFICIENT COMPANY GROUP, L.L.C. | ||
| By: | Beneficient, its managing member | |
| By: | /s/James G. Silk | |
| Name: | James G. Silk | |
| Title: | Executive Vice President & Chief Legal Officer |
[Signature Page to 8th A&R LPA of Beneficient Company Holdings, L.P.]
| BENEFICIENT HOLDINGS, INC., solely with respect to Section 4.01 | ||
|---|---|---|
| **** | BENEFICIENT HOLDINGS, INC. | |
| By: | /s/Jamie Crable | |
| Name: | Jamie Crable | |
| Title: | Authorized Signatory |
[Signature Page to 8th A&R LPA of Beneficient Company Holdings, L.P.]
Annex A
JOINDER AGREEMENT
Reference is made to the Eighth Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (the “Partnership”), dated as of , 2023 (as amended, the “Agreement”). All capitalized, but undefined terms used in this joinder agreement (this “Joinder Agreement”) shall have the meanings assigned to them in the Agreement.
By executing this Joinder Agreement, [Insert Name of New Limited Partner] (the “New Limited Partner”), hereby agrees that effective upon the execution of this Joinder Agreement by each of the parties hereto, it shall be bound by all of the terms and conditions of the Agreement and shall become a party to the Agreement. The execution by the New Limited Partner of this Joinder Agreement shall constitute its execution of a counterpart signature page to the Agreement.
Upon the execution of this Joinder Agreement by each of the parties hereto, the New Limited Partner shall be admitted as a Limited Partner of the Partnership effective as of [Insert Date].
IN WITNESS WHEREOF, the parties hereto have executed this Joinder Agreement as of ,
20 . [SIGNATURE BLOCK OF NEW LIMITED PARTNER]
Acceptedand Agreed by:
GENERAL PARTNER:
BENEFICIENT COMPANY GROUP, L.L.C.
| By: |
|---|
| Name: |
| Title: |
Annex A
EXHIBIT A
Exchange Fund Portfolio Interests
Exhibit A
EX-10.1
Exhibit 10.1
CONSENT AND AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS CONSENT AND AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of June 5, 2023 is entered into by and among BENEFICIENT COMPANY HOLDINGS, L.P. (the “Borrower”), THE BENEFICIENT COMPANY GROUP, L.P. (“Parent”), and HCLP NOMINEES, L.L.C. (“HCLP”), as Lender under the Credit Agreement (as defined below) (in such capacity, the “Lender”) and as Senior Creditor and Subordinated Creditor under the Subordination Agreement (as defined in the Existing Credit Agreement).
W I T N E S S E T H
WHEREAS, Borrower, the Lender, and the Parent are party to that certain Second Amended and Restated Credit Agreement, dated as of August 13, 2020 (as modified by that certain Consent No. 1 to Second Amended and Restated Credit Agreement, dated as of January 20, 2021 and effective as of September 30, 2020, as amended by that certain Amendment No. 1 to Second Amended and Restated Credit Agreement, dated as of March 10, 2021, as amended by that certain Amendment No. 2 to Loan Documents, dated as of June 28, 2021, as amended by that certain Consent and Amendment No. 3 to Second Amended and Restated Credit Agreement dated as of November 3, 2021 and effective as of July 15, 2021, as modified by that certain Consent No. 2 to Second Amended and Restated Credit Agreement dated as of March 24, 2022, as amended by that certain Consent and Amendment No. 4 to Second Amended and Restated Credit Agreement dated as of March 24, 2022, as amended by that certain Amendment No. 5 to Second Amended and Restated Credit Agreement dated as of February 15, 2023, and as modified by that certain Consent No. 3 to Second Amended and Restated Second Lien Credit Agreement dated as of March 10, 2023, and as otherwise amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”, and the Existing Credit Agreement as amended by this Amendment, the “Credit Agreement”);
WHEREAS, Parent and Borrower have informed the Lender that Parent intends to consummate the transactions described in the Registration Statement on Form S-4 (Registration Number 333-268741) filed by the Parent with the Securities and Exchange Commission (the “SEC”) on December 9, 2022, as amended by Amendment No. 1 filed with the SEC on January 23, 2023, Amendment No. 2 filed with the SEC on March 6, 2023, Amendment No. 3 filed with the SEC on April 19, 2023, Amendment No. 4 filed with the SEC on May 8, 2023 and Amendment No. 5 filed with the SEC on May 11, 2023 (such transactions, collectively, the “De-Spac Transactions”), and Borrower has requested that Lender consent to the De-Spac Transactions; and
WHEREAS, subject to the terms and conditions set forth herein, the Lender has agreed to (a) consent to the De-Spac Transactions, and (b) otherwise amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
Defined Terms. All initially capitalized terms used herein (including the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Credit Agreement. Unless the context otherwise requires, all defined terms in the preamble and recitals of this Amendment when used in this Amendment shall have the meanings ascribed thereto in the preamble and recitals of this Amendment.
Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 2:
“Released Claims” means any and all actions, causes of action, judgments, executions, suits, debts, claims, demands, controversies, liabilities, obligations, damages and expenses of any and every character (whether known or unknown, liquidated or unliquidated, absolute or contingent, acknowledged or disputed, direct or indirect), at law or in equity, of whatsoever kind or nature (including claims of usury), whether heretofore or hereafter accruing, for or because of any matter or things done, omitted or suffered to be done by any of the Released Persons prior to and including the date hereof that in any way directly or indirectly arise out of or in any way are connected to (a) any of the Loan Documents or any Default or Event of Default thereunder, (b) any negotiation, discussion, enforcement action, agreement or failure to agree related to any Loan Document or any Default or Event of Default thereunder, or (c) any action, event, occurrence, or omission otherwise related to the rights, duties, obligations and relationships among the Borrower and Lender.
“Released Persons” means Lender and its respective employees, agents, attorneys, officers, partners, shareholders, affiliates, accountants, consultants, and directors, and their respective successors and assigns.
Consent. Subject to the satisfaction (or waiver in writing by the Lender) of the conditions precedent set forth in Section 5 hereof, the Lender hereby consents to the De-Spac Transactions.
Amendment to Existing Credit Agreement. Subject to the satisfaction (or waiver in writing by the Lender) of the conditions precedent set forth in Section 5 hereof, effective as of the Merger Date, the Existing Credit Agreement shall be amended as follows:
The Existing Credit Agreement and Schedule 1.01A to the Existing Credit Agreement (excluding the Appendices, Schedules (except with respect to Schedule 1.01A) and Exhibits attached thereto) shall be amended to delete the stricken text (indicated textually in the same manner as the following example: ~~strickentext~~) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) set forth in the pages of the Credit Agreement attached as Exhibit A hereto.
- Conditions Precedent to Amendment. The satisfaction (or waiver in writing by the Lender) of each of the following shall constitute conditions precedent to the effectiveness of this Amendment:
(a) Lender shall have received this Amendment duly executed by the parties thereto;
(b) the effectiveness of a consent and amendment to the Second Lien Credit Agreement on substantially similar terms to this Amendment in form acceptable to Lender;
(c) after giving effect to the transactions contemplated by this Amendment, no event shall have occurred and be continuing that would constitute an Event of Default;
(d) all representations and warranties made by Borrower or any Affiliate thereof in any Loan Document shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of time of the effectiveness hereof as if such representations and warranties had been made as of the time of the effectiveness hereof (except to the extent that any such representation or warranty was made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such specific date); and
(e) Borrower shall have paid, in connection with such Loan Documents, all reasonable and documented fees and reimbursements to be paid to Lender pursuant to any Loan Documents, or otherwise due Lender and including the reasonable and documented fees, expenses, and disbursements of Holland & Knight LLP.
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- Representations and Warranties. The Borrower and the Parent represent and warrant to the Lender that:
(a) the representations and warranties of the Borrower, the Parent, each Subsidiary Guarantor, and each DST set forth in the Loan Documents (as modified by this Amendment) are true and correct in all material respects (or in all respects if the applicable representation and warranty is qualified by a Material Adverse Effect or any other materiality qualifier) on and as of the date hereof (after giving effect to this Amendment), except to the extent that such representations and warranties are by their terms made as of a specified date, in which case they are true and correct in all material respects (or in all respects if the applicable representation and warranty is qualified by a Material Adverse Effect or any other materiality qualifier) as of such specified date;
(b) immediately after giving effect to this Amendment, no Event of Default has occurred and is continuing;
(c) this Amendment has been duly executed and delivered by the Borrower and the Parent;
(d) this Amendment and the Credit Agreement (as modified by this Amendment), constitute legal, valid and binding obligations of the Borrower and the Parent, enforceable against such Person in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law; and
(e) the execution and delivery by the Borrower and the Parent of this Amendment and the performance by the Borrower and Parent of this Amendment and the Credit Agreement (as modified by this Amendment), have been duly authorized by all necessary corporate or other organizational action, and (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (ii) will not violate any material requirement of law applicable to the Borrower and Parent, (iii) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or the Parent or the assets of the Borrower or the Parent, or give rise to a right thereunder to require any payment to be made by the Borrower or the Parent, and (iv) will not result in the creation or imposition of any Lien on any asset of the Borrower, Parent or any Subsidiary, except Liens created pursuant to the Loan Documents and the Second Lien Loan Documents.
GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL . THIS AMENDMENT SHALL BESUBJECT TO THE PROVISIONS REGARDING GOVERNING LAW; JURISDICTION; AND WAIVER OF JURY TRIAL SET FORTH IN SECTIONS 9.14 AND 9.15 OF THE CREDIT AGREEMENT, AND SUCHPROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.
RELEASE OF CLAIMS . TO INDUCE THE LENDER TO ENTER INTOTHIS AMENDMENT, EACH OF THE BORROWER AND THE PARENT HEREBY (A) REPRESENTS AND WARRANTS THAT AS OF THE DATE OF THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THELOAN DOCUMENTS, AND WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES, OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF THIS AMENDMENT, (B) RELEASES AND FOREVER DISCHARGES THE
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RELEASED PERSONS FROM ANY AND ALL RELEASED CLAIMS, AND (C) COVENANTS NOT TO ASSERT (AND NOT TO ASSIST OR ENABLE ANY OTHER PERSON TO ASSERT) ANY RELEASED CLAIM AGAINSTANY RELEASED PERSON. THE BORROWER AND THE PARENT EACH ACKNOWLEDGES AND AGREES THAT SUCH RELEASE IS A GENERAL RELEASE OF ANY AND ALL RELEASED CLAIMS THAT CONSTITUTES A FULL AND COMPLETE SATISFACTION FOR ALL OR ANY ALLEGED INJURIES OR DAMAGES ARISINGOUT OF OR IN CONNECTION WITH THE RELEASED CLAIMS, ALL OF WHICH ARE HEREIN COMPROMISED AND SETTLED.
Amendments. This Amendment cannot be altered, amended, changed or modified in any respect except in accordance with Section 9.01 of the Credit Agreement.
Counterpart Execution. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or other electronic transmission (i.e., a “pdf”) shall be effective as delivery of a manually executed counterpart hereof.
- Continuing Effectiveness; Etc.
(a) Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the Existing Credit Agreement as modified hereby and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Existing Credit Agreement as modified hereby.
(b) Except as specifically amended hereby, and subject to the consent set forth herein, the Existing Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. The Borrower and the Parent each (i) agrees that, except as specifically provided herein, this Amendment and the transactions contemplated hereby shall not limit or diminish the obligations of the Borrower arising under or pursuant to the Credit Agreement or the other Loan Documents to which it is a party, (ii) reaffirms its obligations under the Credit Agreement and each and every other Loan Document to which it is a party and (iii) reaffirms (x) all Liens on the Collateral which have been granted by it in favor of the Lender pursuant to any of the Loan Documents and (y) all filings made with any Governmental Authority in connection with such Liens, as applicable. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AMENDMENT OR OTHERWISE, NOTHING IN THIS AMENDMENT EXTINGUISHES, NOVATES OR RELEASES ANY RIGHT, CLAIM, LIEN, SECURITY INTEREST OR ENTITLEMENT OF ANY OF THE LENDER CREATED BY OR CONTAINED IN THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS NOR IS THE BORROWER NOR PARENT NOR ANY OTHER PARTY RELEASED FROM ANY COVENANT, WARRANTY OR OBLIGATION CREATED BY OR CONTAINED HEREIN OR THEREIN.
(c) Except with respect to the subject matter hereof, including the consent and amendments specifically set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Lender nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.
(d) This Amendment shall constitute a Loan Document under the Credit Agreement.
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Integration. This Amendment, together with the other Loan Documents and the other documents contemplated hereby, contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.
Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Headings. Section headings in this Amendment are included herein for convenience or reference only and shall not constitute a part of this Amendment for any other purpose.
Representation. The parties hereto acknowledge that Lender has selected Holland & Knight LLP as its legal counsel in connection with the preparation and negotiation of this Amendment. Borrower and Parent acknowledge that Holland & Knight LLP has not represented it in connection with the preparation and negotiation of this Amendment, and Holland & Knight LLP shall owe no duties directly to Borrower or Parent. Each of Borrower and Parent confirms that it has been advised (and given adequate time) to consult with its own legal and tax advisors regarding this Amendment and the Loan Documents.
[Remainder of Page Intentionally Left Blank;
Signature Page(s) Follow(s).]
5
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P., as Borrower | ||
|---|---|---|
| By: | /s/ David Rost | |
| Name: | David Rost | |
| Title: | General Counsel | |
| THE BENEFICIENT COMPANY GROUP, L.P., as Parent | ||
| By: | /s/ David Rost | |
| Name: | David Rost | |
| Title: | General Counsel |
Signature Page to
Consent and Amendment No. 6 to Second Amended and Restated Credit Agreement
| HCLP NOMINEES, L.L.C., as the Lender, and as Senior Creditor and Subordinated Creditor under the Subordination Agreement | ||
|---|---|---|
| By: | CROSSMARK MASTER HOLDINGS, LLC, its Manager | |
| By: | /s/ David Wickline | |
| Name: | David Wickline | |
| Title: | Manager |
Signature Page to
Consent and Amendment No. 6 to Second Amended and Restated Credit Agreement
EXHIBIT A
Amended Credit Agreement
[See attached]
EX-10.2
Exhibit 10.2
CONSENT AND AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT
THIS CONSENT AND AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT (this “Amendment”), dated as of June 5, 2023 is entered into by and among BENEFICIENT COMPANY HOLDINGS, L.P. (the “Borrower”), THE BENEFICIENT COMPANY GROUP, L.P. (“Parent”), and HCLP NOMINEES, L.L.C. (“HCLP”), as Lender under the Credit Agreement (as defined below) (in such capacity, the “Lender”) and as Senior Creditor and Subordinated Creditor under the Subordination Agreement (as defined in the Existing Credit Agreement).
W I T N E S S E T H
WHEREAS, Borrower, the Lender, and the Parent are party to that certain Second Amended and Restated Second Lien Credit Agreement, dated as of August 13, 2020 (as modified by that certain Consent No. 1 to Second Amended and Restated Second Lien Credit Agreement, dated as of January 20, 2021 and effective as of September 30, 2020, as amended by that certain Amendment No. 1 to Second Amended and Restated Second Lien Credit Agreement, dated as of March 10, 2021, as amended by that certain Amendment No. 2 to Loan Documents, dated as of June 28, 2021, as amended by that certain Consent and Amendment No. 3 to Second Amended and Restated Second Lien Credit Agreement dated as of November 3, 2021 and effective as of July 15, 2021, as modified by that certain Consent No. 2 to Second Amended and Restated Second Lien Credit Agreement dated as of March 24, 2022, as amended by that certain Consent and Amendment No. 4 to Second Amended and Restated Credit Agreement dated as of March 24, 2022, as amended by that certain Amendment No. 5 to Second Amended and Restated Second Lien Credit Agreement dated as of February 15, 2023, and as modified by that certain Consent No. 3 to Second Amended and Restated Second Lien Credit Agreement dated as of March 10, 2023, and as otherwise amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”, and the Existing Credit Agreement as amended by this Amendment, the “Credit Agreement”);
WHEREAS, Parent and Borrower have informed the Lender that Parent intends to consummate the transactions described in the Registration Statement on Form S-4 (Registration Number 333-268741) filed by the Parent with the Securities and Exchange Commission (the “SEC”) on December 9, 2022, as amended by Amendment No. 1 filed with the SEC on January 23, 2023, Amendment No. 2 filed with the SEC on March 6, 2023, Amendment No. 3 filed with the SEC on April 19, 2023, Amendment No. 4 filed with the SEC on May 8, 2023 and Amendment No. 5 filed with the SEC on May 11, 2023 (such transactions, collectively, the “De-Spac Transactions”), and Borrower has requested that Lender consent to the De-Spac Transactions; and
WHEREAS, subject to the terms and conditions set forth herein, the Lender has agreed to (a) consent to the De-Spac Transactions, and (b) otherwise amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
Defined Terms. All initially capitalized terms used herein (including the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Credit Agreement. Unless the context otherwise requires, all defined terms in the preamble and recitals of this Amendment when used in this Amendment shall have the meanings ascribed thereto in the preamble and recitals of this Amendment.
Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 2:
“Released Claims” means any and all actions, causes of action, judgments, executions, suits, debts, claims, demands, controversies, liabilities, obligations, damages and expenses of any and every character (whether known or unknown, liquidated or unliquidated, absolute or contingent, acknowledged or disputed, direct or indirect), at law or in equity, of whatsoever kind or nature (including claims of usury), whether heretofore or hereafter accruing, for or because of any matter or things done, omitted or suffered to be done by any of the Released Persons prior to and including the date hereof that in any way directly or indirectly arise out of or in any way are connected to (a) any of the Loan Documents or any Default or Event of Default thereunder, (b) any negotiation, discussion, enforcement action, agreement or failure to agree related to any Loan Document or any Default or Event of Default thereunder, or (c) any action, event, occurrence, or omission otherwise related to the rights, duties, obligations and relationships among the Borrower and Lender.
“Released Persons” means Lender and its respective employees, agents, attorneys, officers, partners, shareholders, affiliates, accountants, consultants, and directors, and their respective successors and assigns.
Consent. Subject to the satisfaction (or waiver in writing by the Lender) of the conditions precedent set forth in Section 5 hereof, the Lender hereby consents to the De-Spac Transactions.
Amendment to Existing Credit Agreement. Subject to the satisfaction (or waiver in writing by the Lender) of the conditions precedent set forth in Section 5 hereof, effective as of the Merger Date, the Existing Credit Agreement shall be amended as follows:
The Existing Credit Agreement and Schedule 1.01A to the Existing Credit Agreement (excluding the Appendices, Schedules (except with respect to Schedule 1.01A) and Exhibits attached thereto) shall be amended to delete the stricken text (indicated textually in the same manner as the following example: ~~stricken text~~) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) set forth in the pages of the Credit Agreement attached as Exhibit A hereto.
- Conditions Precedent to Amendment. The satisfaction (or waiver in writing by the Lender) of each of the following shall constitute conditions precedent to the effectiveness of this Amendment:
(a) Lender shall have received this Amendment duly executed by the parties thereto;
(b) the effectiveness of a consent and amendment to the Senior Credit Agreement on substantially similar terms to this Amendment in form acceptable to Lender;
(c) after giving effect to the transactions contemplated by this Amendment, no event shall have occurred and be continuing that would constitute an Event of Default;
(d) all representations and warranties made by Borrower or any Affiliate thereof in any Loan Document shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of time of the effectiveness hereof as if such representations and warranties had been made as of the time of the effectiveness hereof (except to the extent that any such representation or warranty was made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such specific date); and
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(e) Borrower shall have paid, in connection with such Loan Documents, all reasonable and documented fees and reimbursements to be paid to Lender pursuant to any Loan Documents, or otherwise due Lender and including the reasonable and documented fees, expenses, and disbursements of Holland & Knight LLP.
- Representations and Warranties. The Borrower and the Parent represent and warrant to the Lender that:
(a) the representations and warranties of the Borrower, the Parent, each Subsidiary Guarantor, and each DST set forth in the Loan Documents (as modified by this Amendment) are true and correct in all material respects (or in all respects if the applicable representation and warranty is qualified by a Material Adverse Effect or any other materiality qualifier) on and as of the date hereof (after giving effect to this Amendment), except to the extent that such representations and warranties are by their terms made as of a specified date, in which case they are true and correct in all material respects (or in all respects if the applicable representation and warranty is qualified by a Material Adverse Effect or any other materiality qualifier) as of such specified date;
(b) immediately after giving effect to this Amendment, no Event of Default has occurred and is continuing;
(c) this Amendment has been duly executed and delivered by the Borrower and the Parent;
(d) this Amendment and the Credit Agreement (as modified by this Amendment), constitute legal, valid and binding obligations of the Borrower and the Parent, enforceable against such Person in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law; and
(e) the execution and delivery by the Borrower and the Parent of this Amendment and the performance by the Borrower and Parent of this Amendment and the Credit Agreement (as modified by this Amendment), have been duly authorized by all necessary corporate or other organizational action, and (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (ii) will not violate any material requirement of law applicable to the Borrower and Parent, (iii) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or the Parent or the assets of the Borrower or the Parent, or give rise to a right thereunder to require any payment to be made by the Borrower or the Parent, and (iv) will not result in the creation or imposition of any Lien on any asset of the Borrower, Parent or any Subsidiary, except Liens created pursuant to the Loan Documents and the Senior Documents.
GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL . THIS AMENDMENT SHALL BE SUBJECT TOTHE PROVISIONS REGARDING GOVERNING LAW; JURISDICTION; AND WAIVER OF JURY TRIAL SET FORTH IN SECTIONS 9.14 AND 9.15 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONSARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.
RELEASE OF CLAIMS . TO INDUCE THE LENDER TO ENTER INTO THISAMENDMENT, EACH OF THE BORROWER AND THE PARENT HEREBY (A) REPRESENTS AND WARRANTS THAT AS OF THE DATE OF THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOANDOCUMENTS, AND WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS,
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DEFENSES, OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF THIS AMENDMENT, (B) RELEASES AND FOREVER DISCHARGES THE RELEASED PERSONS FROM ANYAND ALL RELEASED CLAIMS, AND (C) COVENANTS NOT TO ASSERT (AND NOT TO ASSIST OR ENABLE ANY OTHER PERSON TO ASSERT) ANY RELEASED CLAIM AGAINST ANY RELEASED PERSON. THE BORROWER AND THE PARENT EACH ACKNOWLEDGES AND AGREES THATSUCH RELEASE IS A GENERAL RELEASE OF ANY AND ALL RELEASED CLAIMS THAT CONSTITUTES A FULL AND COMPLETE SATISFACTION FOR ALL OR ANY ALLEGED INJURIES OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE RELEASED CLAIMS, ALL OF WHICH ARE HEREINCOMPROMISED AND SETTLED.
Amendments. This Amendment cannot be altered, amended, changed or modified in any respect except in accordance with Section 9.01 of the Credit Agreement.
Counterpart Execution. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or other electronic transmission (i.e., a “pdf”) shall be effective as delivery of a manually executed counterpart hereof.
Continuing Effectiveness; Etc.
(a) Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the Existing Credit Agreement as modified hereby and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Existing Credit Agreement as modified hereby.
(b) Except as specifically amended hereby, and subject to the consent set forth herein, the Existing Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. The Borrower and the Parent each (i) agrees that, except as specifically provided herein, this Amendment and the transactions contemplated hereby shall not limit or diminish the obligations of the Borrower arising under or pursuant to the Credit Agreement or the other Loan Documents to which it is a party, (ii) reaffirms its obligations under the Credit Agreement and each and every other Loan Document to which it is a party and (iii) reaffirms (x) all Liens on the Collateral which have been granted by it in favor of the Lender pursuant to any of the Loan Documents and (y) all filings made with any Governmental Authority in connection with such Liens, as applicable. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AMENDMENT OR OTHERWISE, NOTHING IN THIS AMENDMENT EXTINGUISHES, NOVATES OR RELEASES ANY RIGHT, CLAIM, LIEN, SECURITY INTEREST OR ENTITLEMENT OF ANY OF THE LENDER CREATED BY OR CONTAINED IN THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS NOR IS THE BORROWER NOR PARENT NOR ANY OTHER PARTY RELEASED FROM ANY COVENANT, WARRANTY OR OBLIGATION CREATED BY OR CONTAINED HEREIN OR THEREIN.
(c) Except with respect to the subject matter hereof, including the consent and amendments specifically set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Lender nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.
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(d) This Amendment shall constitute a Loan Document under the Credit Agreement.
Integration. This Amendment, together with the other Loan Documents and the other documents contemplated hereby, contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.
Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Headings. Section headings in this Amendment are included herein for convenience or reference only and shall not constitute a part of this Amendment for any other purpose.
Representation. The parties hereto acknowledge that Lender has selected Holland & Knight LLP as its legal counsel in connection with the preparation and negotiation of this Amendment. Borrower and Parent acknowledge that Holland & Knight LLP has not represented it in connection with the preparation and negotiation of this Amendment, and Holland & Knight LLP shall owe no duties directly to Borrower or Parent. Each of Borrower and Parent confirms that it has been advised (and given adequate time) to consult with its own legal and tax advisors regarding this Amendment and the Loan Documents.
[Remainder of Page Intentionally Left Blank;
Signature Page(s) Follow(s).]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P., as Borrower | ||
|---|---|---|
| By: | /s/ David Rost | |
| Name: | David Rost | |
| Title: | General Counsel | |
| THE BENEFICIENT COMPANY GROUP, L.P.,<br><br><br>as Parent | ||
| By: | /s/ David Rost | |
| Name: | David Rost | |
| Title: | General Counsel |
Signature Page to
Consent and Amendment No. 6 to Second Amended and Restated Second Lien Credit Agreement
| HCLP NOMINEES, L.L.C., as the Lender, and as Senior Creditor and Subordinated Creditor under the Subordination Agreement | ||
|---|---|---|
| By: | CROSSMARK MASTER HOLDINGS, LLC, its Manager | |
| By: | /s/ David Wickline | |
| Name: | David Wickline | |
| Title: | Manager |
Signature Page to
Consent and Amendment No. 6 to Second Amended and Restated Second Lien Credit Agreement
EXHIBIT A
Amended Credit Agreement
[See attached]
EX-10.3
Exhibit 10.3
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the “Agreement”) is made as of June 6, 2023, by and among Beneficient Company Holding, L.P., a Delaware limited partnership (“BCH”), The Beneficient Company Group, L. P., a Delaware limited partnership and the general partner of BCH (“BCG”), and Bruce W. Schnitzer (the “Holder”). BCH, BCG and Holder are each referred to as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein have the meanings set forth in the Seventh Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (as amended, the “BCH LPA”).
RECITALS
WHEREAS, Holder owns Preferred Series A Subclass 1 Unit Accounts in BCH;
WHEREAS, BCG, Ben Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of BCG, Ben Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of BCG and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) have entered into that certain Business Combination Agreement dated September 21, 2022 (the “BCA”) which provides, among other thing, that prior to the closing of the transactions contemplated by the BCA, BCG will be recapitalized, including, among other things: (i) the Third Amended and Restated Limited Partnership Agreement of The Beneficient Company Group, L.P. (the “BCG LPA”) will be amended to create a new subclass of BCG common units referred to as Class B Common Units (the “BCG Class B Common Units”), and the existing common units of BCG will be renamed as Class A Common Units (the “BCG Class A Common Units”); (ii) Holder, together with certain other holders of the Preferred Series A Subclass 1 Unit Accounts of BCH will convert certain Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units of BCH; and (iii) such Class S Ordinary Units will be contributed to BCG in exchange for BCG Class A Common Units or BCG Class B Common Units, as applicable; and
WHEREAS, Holder desires to convert a portion of Holder’s Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units and to contribute such Class S Ordinary Units to BCG in exchange for BCG Class A Common Units and BCG Class B Common Units in accordance with the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the Parties hereby agree as follows:
| 1. | Conversion. |
|---|---|
| (a) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any<br>limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $734,053 of Holder’s Sub-Capital Account balance of Holder’s Preferred Series<br>A Subclass 1 Unit Accounts (the “Applicable Class A Conversion Amount”) into Class S Ordinary Units at the following conversion rate: (i) the Applicable Class A Conversion Amount divided by (ii)<br>$1.114355. |
| --- | --- |
| (b) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any<br>limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $987,605 of Holder’s Sub-Capital Account balance of Holder’s Preferred Series<br>A Subclass 1 Unit Accounts (the “Applicable Class B Conversion Amount” and, together with the Applicable Class A Conversion Amount, the “Applicable Conversion Amount”) into Class S<br>Ordinary Units at the following conversion rate: (i) the Applicable Class B Conversion Amount divided by (ii) $12.50. |
| --- | --- |
| (c) | In connection with such conversion, the Sub-Capital Account balance and<br>the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series A Subclass 1 Unit Accounts shall be reduced by the Applicable Conversion Amount and the Capital Account balance of the newly issued Class S<br>Ordinary Units issued to Holder shall be credited with the Applicable Conversion Amount. |
| --- | --- |
1
| (d) | The Parties acknowledge that such newly issued Class S Ordinary Units may be contemporaneously exchanged<br>into Common Units in accordance with Section 7.06 of the BCH LPA. |
|---|---|
| (e) | BCG, in its capacity as the General Partner of BCH, hereby (i) agrees to the conversion of such Preferred<br>Series A Subclass 1 Unit Accounts into the Class S Ordinary Units, and (ii) waives any limitation on such conversion, including, the provisions of Section 7.08 of the BCH LPA. |
| --- | --- |
| 2. | Contribution and Exchange. |
| --- | --- |
| (a) | Holder hereby agrees that immediately following the conversion of Holder’s Preferred Series A Subclass 1<br>Unit Account into Class S Ordinary Units as contemplated by Section 1 above, such newly issued Class S Ordinary Units shall automatically be contributed to BCG in exchange for BCG Class A Common Units and BCG Class B Common<br>Units, without any limitation on such contribution and exchange, with 658,724 Class S Ordinary Units being exchanged for 658,724 BCG Class A Common Units and 79,008 Class S Ordinary Units being exchanged for 79,008 BCG Class B<br>Common Units. |
| --- | --- |
| (b) | In connection with such contribution and exchange, each Class S Ordinary Unit shall be cancelled and its<br>Capital Account reduced to zero, and BCH shall issue a number of Class A Units to BCG equal to the number of contributed and exchanged Class S Ordinary Units and the Capital Account of such newly issued Class A Units shall be credited<br>with an amount equal to the amount by which the Capital Accounts of the contributed and exchanged Class S Ordinary Units were reduced. |
| --- | --- |
| (c) | Each of BCG and BCH hereby agrees to and approves the contribution and exchange contemplated by this<br>Section 2 effective as of the date of this Agreement. |
| --- | --- |
| (d) | In accordance with Section 7.06 of the BCH LPA, Holder’s exchange of such Class S Ordinary Units<br>into the BCG Class A Common Units and the BCG Class B Common Units has been approved by a majority in interest of the Class A Units of BCH. |
| --- | --- |
| 3. | Partnership Agreements. |
| --- | --- |
To the extent the provisions of this Agreement constitute a deviation from, waiver of, amendment to or other modification of the applicable provisions of the BCH LPA or the BCG LPA, each of the Parties hereby agrees to and approves of, for purposes of this Agreement and the transactions contemplated hereby, any and all such waivers, amendments or modifications.
| 4. | Informed Decision; Counsel. |
|---|
Holder hereby represents and warrants to each other Party, that (i) prior to execution of this Agreement, Holder was advised by BCH and BCG of Holder’s right to seek independent advice from legal counsel, accountants, tax and other advisors of its own selection regarding this Agreement, (ii) Holder acknowledges that it has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after consulting with counsel, (iii) in entering into this Agreement, Holder is not relying on any statements or representations made by any of the other Parties, their affiliates or, where applicable, any of their respective directors, officers, employees or agents, and is relying only upon its own judgment and any advice provided by its legal counsel, (iv) Holder is a sophisticated investor and has sufficient knowledge and experience in investing in securities to properly evaluate the merits of the transactions contemplated hereby, and (v) Holder has independently, and without reliance upon the other Parties or any of their affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement.
| 5. | Amendment and Waiver; Termination. |
|---|
Except as otherwise contemplated by this Section 5, this Agreement may be amended and the observance of any provision may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of each of the Parties.
| 6. | Governing Law. |
|---|
This Agreement shall be governed by and construed under the laws of the State of Delaware without regard to its rules of conflict of laws.
2
| 7. | Binding Agreement. |
|---|
This Agreement constitutes a valid and binding agreement of the Parties, enforceable against each Party in accordance with applicable law.
| 8. | Counterparts. |
|---|
This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts.
[Signature Page Follows]
3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P. | |
|---|---|
| By: The Beneficient Company Group, L.P., its general partner | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| THE BENEFICIENT COMPANY GROUP, L.P. | |
| By: | Beneficient Management, L.L.C., its general partner |
| By: | /s/ James G. Silk |
| Name: James G. Silk | |
| Title: | Authorized Signatory |
| /s/ Bruce W. Schnitzer | |
| Bruce W. Schnitzer |
[Signature Page to Conversion and Exchange Agreement]
EX-10.4
Exhibit 10.4
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the “Agreement”) is made as of June 6, 2023, by and among Beneficient Company Holding, L.P., a Delaware limited partnership (“BCH”), The Beneficient Company Group, L. P., a Delaware limited partnership and the general partner of BCH (“BCG”), and Richard W. Fisher (the “Holder”). BCH, BCG and Holder are each referred to as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein have the meanings set forth in the Seventh Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (as amended, the “BCH LPA”).
RECITALS
WHEREAS, Holder owns Preferred Series A Subclass 1 Unit Accounts in BCH;
WHEREAS, BCG, Ben Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of BCG, Ben Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of BCG and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) have entered into that certain Business Combination Agreement dated September 21, 2022 (the “BCA”) which provides, among other thing, that prior to the closing of the transactions contemplated by the BCA, BCG will be recapitalized, including, among other things: (i) the Third Amended and Restated Limited Partnership Agreement of The Beneficient Company Group, L.P. (the “BCG LPA”) will be amended to create a new subclass of BCG common units referred to as Class B Common Units (the “BCG Class B Common Units”), and the existing common units of BCG will be renamed as Class A Common Units (the “BCG Class A Common Units”); (ii) Holder, together with certain other holders of the Preferred Series A Subclass 1 Unit Accounts of BCH will convert certain Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units of BCH; and (iii) such Class S Ordinary Units will be contributed to BCG in exchange for BCG Class A Common Units or BCG Class B Common Units, as applicable; and
WHEREAS, Holder desires to convert a portion of Holder’s Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units and to contribute such Class S Ordinary Units to BCG in exchange for BCG Class A Common Units in accordance with the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the Parties hereby agree as follows:
| 1. | Conversion. |
|---|---|
| (a) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any<br>limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $1,721,658 of Holder’s Sub-Capital Account balance of Holder’s Preferred<br>Series A Subclass 1 Unit Accounts (the “Applicable Conversion Amount”) into Class S Ordinary Units at the following conversion rate: (i) the Applicable Conversion Amount divided by (ii) $2.3337154. |
| --- | --- |
| (b) | In connection with such conversion, the Sub-Capital Account balance and<br>the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series A Subclass 1 Unit Accounts shall be reduced by the Applicable Conversion Amount and the Capital Account balance of the newly issued Class S<br>Ordinary Units issued to Holder shall be credited with the Applicable Conversion Amount. |
| --- | --- |
| (c) | The Parties acknowledge that such newly issued Class S Ordinary Units may be contemporaneously exchanged<br>into Common Units in accordance with Section 7.06 of the BCH LPA. |
| --- | --- |
| (d) | BCG, in its capacity as the General Partner of BCH, hereby (i) agrees to the conversion of such Preferred<br>Series A Subclass 1 Unit Accounts into the Class S Ordinary Units, and (ii) waives any limitation on such conversion, including, the provisions of Section 7.08 of the BCH LPA. |
| --- | --- |
1
| 2. | Contribution and Exchange. |
|---|---|
| (a) | Holder hereby agrees that immediately following the conversion of Holder’s Preferred Series A Subclass 1<br>Unit Account into Class S Ordinary Units as contemplated by Section 1 above, such newly issued Class S Ordinary Units shall automatically be contributed to BCG in exchange for BCG Class A Common Units, without any limitation on<br>such contribution and exchange, with 737,733 Class S Ordinary Units being exchanged for 737,733 BCG Class A Common Units. |
| --- | --- |
| (b) | In connection with such contribution and exchange, each Class S Ordinary Unit shall be cancelled and its<br>Capital Account reduced to zero, and BCH shall issue a number of Class A Units to BCG equal to the number of contributed and exchanged Class S Ordinary Units and the Capital Account of such newly issued Class A Units shall be credited<br>with an amount equal to the amount by which the Capital Accounts of the contributed and exchanged Class S Ordinary Units were reduced. |
| --- | --- |
| (c) | Each of BCG and BCH hereby agrees to and approves the contribution and exchange contemplated by this<br>Section 2 effective as of the date of this Agreement. |
| --- | --- |
| (d) | In accordance with Section 7.06 of the BCH LPA, Holder’s exchange of such Class S Ordinary Units<br>into the BCG Class A Common Units has been approved by a majority in interest of the Class A Units of BCH. |
| --- | --- |
| 3. | Partnership Agreements. |
| --- | --- |
To the extent the provisions of this Agreement constitute a deviation from, waiver of, amendment to or other modification of the applicable provisions of the BCH LPA or the BCG LPA, each of the Parties hereby agrees to and approves of, for purposes of this Agreement and the transactions contemplated hereby, any and all such waivers, amendments or modifications.
| 4. | Informed Decision; Counsel. |
|---|
Holder hereby represents and warrants to each other Party, that (i) prior to execution of this Agreement, Holder was advised by BCH and BCG of Holder’s right to seek independent advice from legal counsel, accountants, tax and other advisors of its own selection regarding this Agreement, (ii) Holder acknowledges that it has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after consulting with counsel, (iii) in entering into this Agreement, Holder is not relying on any statements or representations made by any of the other Parties, their affiliates or, where applicable, any of their respective directors, officers, employees or agents, and is relying only upon its own judgment and any advice provided by its legal counsel, (iv) Holder is a sophisticated investor and has sufficient knowledge and experience in investing in securities to properly evaluate the merits of the transactions contemplated hereby, and (v) Holder has independently, and without reliance upon the other Parties or any of their affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement.
| 5. | Amendment and Waiver; Termination. |
|---|
Except as otherwise contemplated by this Section 5, this Agreement may be amended and the observance of any provision may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of each of the Parties.
| 6. | Governing Law. |
|---|
This Agreement shall be governed by and construed under the laws of the State of Delaware without regard to its rules of conflict of laws.
| 7. | Binding Agreement. |
|---|
This Agreement constitutes a valid and binding agreement of the Parties, enforceable against each Party in accordance with applicable law.
2
| 8. | Counterparts. |
|---|
This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts.
[Signature Page Follows]
3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P. | |
|---|---|
| By: The Beneficient Company Group, L.P., its general partner | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| THE BENEFICIENT COMPANY GROUP, L.P. | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: James G. Silk | |
| Title: | Authorized Signatory |
| /s/ Richard W. Fisher | |
| Richard W. Fisher |
4
EX-10.5
Exhibit 10.5
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the “Agreement”) is made as of June 6, 2023, by and among Beneficient Company Holding, L.P., a Delaware limited partnership (“BCH”), The Beneficient Company Group, L. P., a Delaware limited partnership and the general partner of BCH (“BCG”), and Beneficient Holdings, Inc. (the “Holder”). BCH, BCG and Holder are each referred to as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein have the meanings set forth in the Seventh Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (as amended, the “BCH LPA”).
RECITALS
WHEREAS, Holder owns Preferred Series A Subclass 1 Unit Accounts in BCH;
WHEREAS, BCG, Ben Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of BCG, Ben Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of BCG and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) have entered into that certain Business Combination Agreement dated September 21, 2022 (the “BCA”) which provides, among other thing, that prior to the closing of the transactions contemplated by the BCA, BCG will be recapitalized, including, among other things: (i) the Third Amended and Restated Limited Partnership Agreement of The Beneficient Company Group, L.P. (the “BCG LPA”) will be amended to create a new subclass of BCG common units referred to as Class B Common Units (the “BCG Class B Common Units”), and the existing common units of BCG will be renamed as Class A Common Units (the “BCG Class A Common Units”); (ii) Holder, together with certain other holders of the Preferred Series A Subclass 1 Unit Accounts of BCH will convert certain Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units of BCH; and (iii) such Class S Ordinary Units will be contributed to BCG in exchange for BCG Class A Common Units or BCG Class B Common Units, as applicable; and
WHEREAS, Holder desires to convert a portion of Holder’s Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units and to contribute such Class S Ordinary Units to BCG in exchange for BCG Class B Common Units in accordance with the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the Parties hereby agree as follows:
| 1. | Conversion. |
|---|---|
| (a) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any<br>limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $177,194,830 of Holder’s Sub-Capital Account balance of Holder’s Preferred<br>Series A Subclass 1 Unit Accounts (the “Applicable Conversion Amount”) into Class S Ordinary Units at the following conversion rate: (i) the Applicable Conversion Amount divided by (ii) $12.50. |
| --- | --- |
| (b) | In connection with such conversion, the Sub-Capital Account balance and<br>the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series A Subclass 1 Unit Accounts shall be reduced by the Applicable Conversion Amount and the Capital Account balance of the newly issued Class S<br>Ordinary Units issued to Holder shall be credited with the Applicable Conversion Amount. |
| --- | --- |
| (c) | The Parties acknowledge that such newly issued Class S Ordinary Units may be contemporaneously exchanged<br>into Common Units in accordance with Section 7.06 of the BCH LPA. |
| --- | --- |
| (d) | BCG, in its capacity as the General Partner of BCH, hereby (i) agrees to the conversion of such Preferred<br>Series A Subclass 1 Unit Accounts into the Class S Ordinary Units, and (ii) waives any limitation on such conversion, including, the provisions of Section 7.08 of the BCH LPA. |
| --- | --- |
| 2. | Contribution and Exchange. |
| --- | --- |
| (a) | Holder hereby agrees that immediately following the conversion of Holder’s Preferred Series A Subclass 1<br>Unit Account into Class S Ordinary Units as contemplated by Section 1 above, such newly issued Class S Ordinary Units shall automatically be contributed to BCG in exchange for BCG Class B Common Units, without any limitation on<br>such contribution and exchange, with 14,175,586 Class S Ordinary Units being exchanged for 14,175,586 BCG Class B Common Units. |
| --- | --- |
| (b) | In connection with such contribution and exchange, each Class S Ordinary Unit shall be cancelled and its<br>Capital Account reduced to zero, and BCH shall issue a number of Class A Units to BCG equal to the number of contributed and exchanged Class S Ordinary Units and the Capital Account of such newly issued Class A Units shall be credited<br>with an amount equal to the amount by which the Capital Accounts of the contributed and exchanged Class S Ordinary Units were reduced. |
| --- | --- |
| (c) | Each of BCG and BCH hereby agrees to and approves the contribution and exchange contemplated by this<br>Section 2 effective as of the date of this Agreement. |
| --- | --- |
| (d) | In accordance with Section 7.06 of the BCH LPA, Holder’s exchange of such Class S Ordinary Units<br>into the BCG Class B Common Units has been approved by a majority in interest of the Class A Units of BCH. |
| --- | --- |
| 3. | Partnership Agreements. |
| --- | --- |
To the extent the provisions of this Agreement constitute a deviation from, waiver of, amendment to or other modification of the applicable provisions of the BCH LPA or the BCG LPA, each of the Parties hereby agrees to and approves of, for purposes of this Agreement and the transactions contemplated hereby, any and all such waivers, amendments or modifications.
| 4. | Informed Decision; Counsel. |
|---|
Holder hereby represents and warrants to each other Party, that (i) prior to execution of this Agreement, Holder was advised by BCH and BCG of Holder’s right to seek independent advice from legal counsel, accountants, tax and other advisors of its own selection regarding this Agreement, (ii) Holder acknowledges that it has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after consulting with counsel, (iii) in entering into this Agreement, Holder is not relying on any statements or representations made by any of the other Parties, their affiliates or, where applicable, any of their respective directors, officers, employees or agents, and is relying only upon its own judgment and any advice provided by its legal counsel, (iv) Holder is a sophisticated investor and has sufficient knowledge and experience in investing in securities to properly evaluate the merits of the transactions contemplated hereby, and (v) Holder has independently, and without reliance upon the other Parties or any of their affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement.
| 5. | Amendment and Waiver; Termination. |
|---|
Except as otherwise contemplated by this Section 5, this Agreement may be amended and the observance of any provision may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of each of the Parties.
| 6. | Governing Law. |
|---|
This Agreement shall be governed by and construed under the laws of the State of Delaware without regard to its rules of conflict of laws.
| 7. | Binding Agreement. |
|---|
This Agreement constitutes a valid and binding agreement of the Parties, enforceable against each Party in accordance with applicable law.
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- Counterparts.
This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P. | |
|---|---|
| By: The Beneficient Company Group, L.P., its general partner | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| THE BENEFICIENT COMPANY GROUP, L.P. | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| BENEFICIENT HOLDINGS, INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
[Signature Page to Conversion and Exchange Agreement]
EX-10.6
Exhibit 10.6
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the “Agreement”) is made as of June 6, 2023, by and among Beneficient Company Holding, L.P., a Delaware limited partnership (“BCH”), The Beneficient Company Group, L. P., a Delaware limited partnership and the general partner of BCH (“BCG”), and Hicks Holdings Operating, LLC (the “Holder”). BCH, BCG and Holder are each referred to as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein have the meanings set forth in the Seventh Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (as amended, the “BCH LPA”).
RECITALS
WHEREAS, Holder owns Preferred Series A Subclass 1 Unit Accounts in BCH;
WHEREAS, BCG, Ben Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of BCG, Ben Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of BCG and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) have entered into that certain Business Combination Agreement dated September 21, 2022 (the “BCA”) which provides, among other thing, that prior to the closing of the transactions contemplated by the BCA, BCG will be recapitalized, including, among other things: (i) the Third Amended and Restated Limited Partnership Agreement of The Beneficient Company Group, L.P. (the “BCG LPA”) will be amended to create a new subclass of BCG common units referred to as Class B Common Units (the “BCG Class B Common Units”), and the existing common units of BCG will be renamed as Class A Common Units (the “BCG Class A Common Units”); (ii) Holder, together with certain other holders of the Preferred Series A Subclass 1 Unit Accounts of BCH will convert certain Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units of BCH; and (iii) such Class S Ordinary Units will be contributed to BCG in exchange for BCG Class A Common Units or BCG Class B Common Units, as applicable; and
WHEREAS, Holder desires to convert a portion of Holder’s Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units and to contribute such Class S Ordinary Units to BCG in exchange for BCG Class B Common Units in accordance with the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the Parties hereby agree as follows:
| 1. | Conversion. |
|---|---|
| (a) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any<br>limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $13,222,077 of Holder’s Sub-Capital Account balance of Holder’s Preferred<br>Series A Subclass 1 Unit Accounts (the “Applicable Conversion Amount”) into Class S Ordinary Units at the following conversion rate: (i) the Applicable Conversion Amount divided by (ii) $12.50. |
| --- | --- |
| (b) | In connection with such conversion, the Sub-Capital Account balance and<br>the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series A Subclass 1 Unit Accounts shall be reduced by the Applicable Conversion Amount and the Capital Account balance of the newly issued Class S<br>Ordinary Units issued to Holder shall be credited with the Applicable Conversion Amount. |
| --- | --- |
| (c) | The Parties acknowledge that such newly issued Class S Ordinary Units may be contemporaneously exchanged<br>into Common Units in accordance with Section 7.06 of the BCH LPA. |
| --- | --- |
| (d) | BCG, in its capacity as the General Partner of BCH, hereby (i) agrees to the conversion of such Preferred<br>Series A Subclass 1 Unit Accounts into the Class S Ordinary Units, and (ii) waives any limitation on such conversion, including, the provisions of Section 7.08 of the BCH LPA. |
| --- | --- |
| 2. | Contribution and Exchange. |
| --- | --- |
| (a) | Holder hereby agrees that immediately following the conversion of Holder’s Preferred Series A Subclass 1<br>Unit Account into Class S Ordinary Units as contemplated by Section 1 above, such newly issued Class S Ordinary Units shall automatically be contributed to BCG in exchange for BCG Class B Common Units, without any limitation on<br>such contribution and exchange, with 1,057,766 Class S Ordinary Units being exchanged for 1,057,766 BCG Class B Common Units. |
| --- | --- |
| (b) | In connection with such contribution and exchange, each Class S Ordinary Unit shall be cancelled and its<br>Capital Account reduced to zero, and BCH shall issue a number of Class A Units to BCG equal to the number of contributed and exchanged Class S Ordinary Units and the Capital Account of such newly issued Class A Units shall be credited<br>with an amount equal to the amount by which the Capital Accounts of the contributed and exchanged Class S Ordinary Units were reduced. |
| --- | --- |
| (c) | Each of BCG and BCH hereby agrees to and approves the contribution and exchange contemplated by this<br>Section 2 effective as of the date of this Agreement. |
| --- | --- |
| (d) | In accordance with Section 7.06 of the BCH LPA, Holder’s exchange of such Class S Ordinary Units<br>into the BCG Class B Common Units has been approved by a majority in interest of the Class A Units of BCH. |
| --- | --- |
| 3. | Partnership Agreements. |
| --- | --- |
To the extent the provisions of this Agreement constitute a deviation from, waiver of, amendment to or other modification of the applicable provisions of the BCH LPA or the BCG LPA, each of the Parties hereby agrees to and approves of, for purposes of this Agreement and the transactions contemplated hereby, any and all such waivers, amendments or modifications.
| 4. | Informed Decision; Counsel. |
|---|
Holder hereby represents and warrants to each other Party, that (i) prior to execution of this Agreement, Holder was advised by BCH and BCG of Holder’s right to seek independent advice from legal counsel, accountants, tax and other advisors of its own selection regarding this Agreement, (ii) Holder acknowledges that it has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after consulting with counsel, (iii) in entering into this Agreement, Holder is not relying on any statements or representations made by any of the other Parties, their affiliates or, where applicable, any of their respective directors, officers, employees or agents, and is relying only upon its own judgment and any advice provided by its legal counsel, (iv) Holder is a sophisticated investor and has sufficient knowledge and experience in investing in securities to properly evaluate the merits of the transactions contemplated hereby, and (v) Holder has independently, and without reliance upon the other Parties or any of their affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement.
| 5. | Amendment and Waiver; Termination. |
|---|
Except as otherwise contemplated by this Section 5, this Agreement may be amended and the observance of any provision may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of each of the Parties.
| 6. | Governing Law. |
|---|
This Agreement shall be governed by and construed under the laws of the State of Delaware without regard to its rules of conflict of laws.
| 7. | Binding Agreement. |
|---|
This Agreement constitutes a valid and binding agreement of the Parties, enforceable against each Party in accordance with applicable law.
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| 8. | Counterparts. |
|---|
This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
| BENEFICIENT COMPANY HOLDINGS, L.P. | |
|---|---|
| By: The Beneficient Company Group, L.P., its general partner | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: James G. Silk | |
| Title: Authorized Signatory | |
| THE BENEFICIENT COMPANY GROUP, L.P. | |
| By: Beneficient Management, L.L.C., its general partner | |
| By: | /s/ James G. Silk |
| Name: James G. Silk | |
| Title: Authorized Signatory | |
| HICKS HOLDINGS OPERATING, LLC | |
| By: | /s/ Thomas O. Hicks |
| Name: Thomas O. Hicks | |
| Title: Sole Member |
[Signature Page to Conversion and Exchange Agreement]
EX-10.7
Exhibit 10.7
BENEFICIENT
2023LONG-TERM INCENTIVE PLAN
The Beneficient 2023 Long-Term Incentive Plan (the “Plan”) was adopted by the Board of Directors of Beneficient, a Nevada corporation (the “Company”), effective as of June 7, 2023 (the “Effective Date”), subject to approval by the Company’s stockholders.
ARTICLE 1.
PURPOSE
The purpose of the Plan is to attract and retain the services of key Employees, key Contractors, and Outside Directors of the Company and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights, Other Awards, Performance Goals, and Tandem Awards whether granted singly, or in combination, or in tandem, that will:
(a) increase the interest of such persons in the Company’s welfare;
(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and
(c) provide a means through which the Company may attract able persons as Employees, Contractors, and Outside Directors.
With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio, to the extent permitted by law and deemed advisable by the Committee.
ARTICLE 2.
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:
2.1 “Applicable Law” means all legal requirements relating to the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, the rules of any foreign jurisdiction applicable to Incentives granted to residents therein, and any other applicable law, rule or restriction.
2.2 “Authorized Officer” is defined in Section 3.2(b) hereof.
2.3 “Award” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem (each individually referred to herein as an “Incentive”).
2.4 “Award Agreement” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.
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2.5 “Award Period” means the period set forth in the Award Agreement during which one or more Incentives granted under an Award may be exercised.
2.6 “Board” means the board of directors of the Company.
2.7 “Change in Control” means the occurrence of the event set forth in any one of the following paragraphs, except as otherwise provided herein:
(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below;
(b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3rds) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended;
(c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including the securities Beneficially Owned by such Person or any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
For purposes hereof:
“Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
“Beneficially Owned” with respect to any securities shall mean having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person (as hereinafter defined) shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act.
“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
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“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
Notwithstanding the foregoing provisions of this Section 2.7, (i) a Change in Control not be deemed to occur solely as a result of the conversion of the Company’s Class B shares of common stock into Common Stock, even if such conversion causes a change in the Board control or a change in shares Beneficially Owned by a Person; (ii) a Change in Control not be deemed to occur solely as a result the issuance of shares of Common Stock in exchange for equity of one or more of the Company’s Subsidiaries; and (iii) if an Award issued under the Plan is subject to Section 409A of the Code, then an event shall not constitute a Change in Control for purposes of such Award under the Plan unless such event also constitutes a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within the meaning of Section 409A of the Code.
2.8 “Claim” means any claim, liability or obligation of any nature, arising out of or relating to this Plan or an alleged breach of this Plan or an Award Agreement.
2.9 “Code” means the United States Internal Revenue Code of 1986, as amended.
2.10 “Committee” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.
2.11 “Common Stock” means the Class A common stock, $0.0001 par value per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.
2.12 “Company” means Beneficient, a Nevada corporation, and any successor entity.
2.13 “Contractor” means any natural person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, with compensation, pursuant to a written independent contractor agreement between such person and the Company or a Subsidiary, provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
2.14 “Corporation” means any entity that (a) is defined as a corporation under Section 7701 of the Code and (b) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (b) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.
2.15 “Date of Grant” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement; provided, however, that solely for purposes of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder, the Date of Grant of an Award shall be the date of stockholder approval of the Plan if such date is later than the effective date of such Award as set forth in the Award Agreement.
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2.16 “Dividend Equivalent Right” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made.
2.17 “Employee” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company; provided, however, in the case of individuals whose employment status, by virtue of their employer or residence, is not determined under Section 3401(c) of the Code, “Employee” shall mean an individual treated as an employee for local payroll tax or employment purposes by the applicable employer under Applicable Law for the relevant period.
2.18 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
2.19 “Exercise Date” is defined in Section 8.3(b) hereof.
2.20 “Exercise Notice” is defined in Section 8.3(b) hereof.
2.21 “Fair Market Value” means, as of a particular date, (a) if the shares of Common Stock are listed on any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date (as determined by the Committee, in its discretion), or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of Common Stock reported on the automated quotation system on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by OTCQX, OTCQB or OTC Pink (Pink Open Market); or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code.
2.22 “Immediate Family Members” is defined in Section 15.8 hereof.
2.23 “Incentive” is defined in Section 2.3 hereof.
2.24 “Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.25 “Independent Third Party” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.
2.26 “Nonqualified Stock Option” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive Stock Option.
2.27 “Option Price” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock.
2.28 “Other Award” means an Award issued pursuant to Section 6.9 hereof.
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2.29 “Outside Director” means a director of the Company who is not an Employee or a Contractor.
2.30 “Participant” means an Employee, Contractor or an Outside Director to whom an Award is granted under this Plan.
2.31 “Performance Award” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof.
2.32 “Performance Goal” means any of the Performance Criteria set forth in Section 6.10 hereof.
2.33 “Plan” means this Beneficient 2023 Long-Term Incentive Plan, as amended from time to time.
2.34 “Reporting Participant” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act.
2.35 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.
2.36 “Restricted Stock Units” means units awarded to Participants pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the Committee.
2.37 “Restriction Period” is defined in Section 6.4(b)(i) hereof.
2.38 “SAR” or “S tock Appreciation Right” means the right to receive an amount, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares.
2.39 “SAR Price” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR.
2.40 “Spread” is defined in Section 12.4(b) hereof.
2.41 “Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option.
2.42 “Subsidiary” means (a) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (b) any limited partnership, if the Company or any corporation described in item (a) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (c) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (a) above or any limited partnership listed in item (b) above. “Subsidiaries” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.
2.43 “Termination of Service” occurs when a Participant who is (a) an Employee of the Company or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (b) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (c) a Contractor of the Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or
5
state law, a “Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee becomes an Outside Director or Contractor or vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.43, in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of “separation from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
2.44 “Total and Permanent Disability” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that, with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.44, in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
ARTICLE 3.
ADMINISTRATION
3.1 General Administration; Establishment of Committee. Subject to the terms of this Article 3, the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “Committee”). The Committee shall consist of not fewer than two persons, unless there are not two members of the Board who meet the qualification requirements set forth herein to administer the Plan, in which case, the Committee may consist of one person. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board.
Membership on the Committee shall be limited to those members of the Board who are “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee.
3.2 Designation of Participants and Awards.
(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one
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Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board.
(b) Notwithstanding Section 3.2(a), to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an “Authorized Officer”) to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan, and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided, however, that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards, and (z) not authorize an officer to designate himself or herself as a recipient of any Award.
3.3 Authority of the Committee. The Committee, in its discretion, shall (a) interpret the Plan and Award Agreements, (b) prescribe, amend, and rescind any rules and regulations and sub-plans (including sub-plans for Awards made to Participants who are not resident in the United States), as necessary or appropriate for the administration of the Plan, (c) establish performance goals for an Award and certify the extent of their achievement, and (d) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary.
The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee.
With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, Section 422 of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.
ARTICLE 4.
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any such Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan.
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ARTICLE 5.
SHARES SUBJECT TO PLAN
5.1 Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is fifteen percent (15%) of the total number of shares of Common Stock outstanding or issuable upon the conversion or exchange of outstanding securities of the Company or its Subsidiaries, determined as of the Effective Date (the “Authorized Shares”), of which one hundred percent (100%) may be delivered pursuant to Incentive Stock Options (the “ISO Limit”). Notwithstanding the foregoing, on the first trading date of each calendar quarter (the “Adjustment Date”), the number of Authorized Shares for grant under the Plan shall be increased by the amount necessary so that the total number of shares of Common Stock that may be issued under the Plan shall equal the lesser of (i) 200,000,000 shares, and (ii) fifteen percent (15%) of the total number of shares of Common Stock outstanding or issuable upon the conversion or exchange of outstanding securities of the Company or its Subsidiaries, determined as of the Adjustment Date provided, however, that no such adjustment shall have any effect on, or otherwise change the ISO Limit, except for any adjustments permitted in Articles 11 and 12 below*.* Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan.
5.2 Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall expire or be canceled, in whole or in part, then the number of shares of Common Stock covered by the Award so forfeited, expired or canceled may again be awarded pursuant to the provisions of this Plan. In the event that previously acquired shares of Common Stock are delivered to the Company in full or partial payment of the exercise price for the exercise of a Stock Option granted under this Plan, the number of shares of Common Stock available for future Awards under this Plan shall be reduced only by the net number of shares of Common Stock issued upon exercise of the Stock Option. Awards that may be satisfied either by the issuance of shares of Common Stock or by cash or other consideration shall be counted against the maximum number of shares of Common Stock that may be issued under this Plan only during the period that the Award is outstanding or to the extent the Award is ultimately satisfied by the issuance of shares of Common Stock. Awards will not reduce the number of shares of Common Stock that may be issued pursuant to this Plan if the settlement of the Award will not require the issuance of shares of Common Stock, as, for example, a SAR that can be satisfied only by the payment of cash. Notwithstanding any provisions of the Plan to the contrary, only shares forfeited back to the Company, shares canceled on account of termination, expiration or lapse of an Award, shares surrendered in payment of the exercise price of a Stock Option or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an option shall again be available for grant of Incentive Stock Options under the Plan, but shall not increase the maximum number of shares described in Section 5.1 above as the maximum number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.
ARTICLE 6.
GRANT OFAWARDS
6.1 In General.
(a) The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s), the Option Price (if applicable), the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, and (ii) to the extent an Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and
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the regulations or other guidance issued thereunder. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the date of adoption of this Plan by the Board. The Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of stockholder approval. Any such Award granted prior to such stockholder approval shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan.
(b) If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.
(c) Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.
6.2 Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant.
6.3 Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company’s stock transfer records.
6.4 Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement, as applicable: (a) the number of shares of Common Stock awarded, (b) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (c) the time or times within which such Award may be subject to forfeiture, (d) specified Performance Goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (e) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan, to the extent applicable and, to the extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect to each Participant.
(a) Legend on Shares. The Company shall electronically register the Restricted Stock awarded to a Participant in the name of such Participant, which shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.10 of the Plan. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in Section 6.4(b)(i)) without forfeiture in respect of such shares of Common Stock, the Participant requests delivery of the certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting delivery of the certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request.
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(b) Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “Restriction Period”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations and the limitations set forth in Section 7.2 below, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action is appropriate.
(ii) Except as provided in sub-paragraph (a) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates, if any are issued pursuant to this Section 6.4, for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
(iii) The Restriction Period, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on length of continuous service or such Performance Goals, as may be determined by the Committee in its sole discretion.
(iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (1) the Company shall be obligated to, or (2) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.
6.5 SARs. The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are (a) not inconsistent with the Plan, and (b) to the extent a SAR issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The grant of the SAR may provide that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (a) the difference between the Fair Market Value of a
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share of Common Stock on the date of exercise over the SAR Price as set forth in such SAR (or other value specified in the Award Agreement granting the SAR), by (b) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted.
6.6 Restricted Stock Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee, provided, however, that such terms and conditions are (a) not inconsistent with the Plan, and (b) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction.
6.7 Performance Awards.
(a) The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided, however, if shares of Common Stock are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and conditions.
If the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.
(b) Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance Goals or other specific financial, production, sales or cost performance objectives that the Committee believes to be relevant to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee.
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6.8 Dividend Equivalent Rights. The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award.
6.9 Other Awards. The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant.
6.10 Performance Goals. Awards (whether relating to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or more business criteria which may consist of one or more or any combination of the following criteria: cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; total return to stockholders; or any other criteria determined by the Committee (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (a) events that are of an unusual nature or indicate infrequency of occurrence, (b) gains or losses on the disposition of a business, (c) changes in tax or accounting regulations or laws, (d) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (e) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an Award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report.
6.11 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “Tandem Award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a SAR are issued in a Tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock.
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6.12 No Repricing of Stock Options or SARs. The Committee may not “reprice” any Stock Option or SAR without stockholder approval. For purposes of this Section 6.12, “reprice” means any of the following or any other action that has the same effect: (a) amending a Stock Option or SAR to reduce its exercise price or base price, (b) canceling a Stock Option or SAR at a time when its exercise price or base price exceeds the Fair Market Value of a share of Common Stock in exchange for cash or a Stock Option, SAR, award of Restricted Stock or other equity award, or (c) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing in this Section 6.12 shall prevent the Committee from making adjustments pursuant to Article 11, from exchanging or cancelling Incentives pursuant to Article 12, or substituting Incentives in accordance with Article 14.
6.13 Recoupment for Restatements. Notwithstanding any other language in this Plan to the contrary, the Company may recoup all or any portion of any shares or cash paid to a Participant in connection with an Award, in the event of a restatement of the Company’s financial statements as set forth in the Company’s clawback policy, if any, approved by the Company’s Board from time to time.
ARTICLE 7.
AWARD PERIOD; VESTING
7.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive may not be exercised in whole or in part for any period or periods of time or beyond any date specified in the Award Agreement. Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No Incentive granted under the Plan may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.
7.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested.
ARTICLE 8.
EXERCISE ORCONVERSION OF INCENTIVE
8.1 In General. A vested Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions set forth in the Award Agreement.
8.2 Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished.
8.3 Exercise of Stock Option.
(a) In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.
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(b) Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Company (in accordance with the notice provisions in the Participant’s Award Agreement) setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised (the “Exercise Notice”) and the date of exercise thereof (the “Exercise Date”) with respect to any Stock Option shall be the date that the Participant has delivered both the Exercise Notice and consideration to the Company with a value equal to the total Option Price of the shares to be purchased (plus any employment tax withholding or other tax payment due with respect to such Award), payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (i) cash or check, bank draft, or money order payable to the order of the Company, (ii) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (iii) by delivery (including by FAX or electronic transmission) to the Company or its designated agent of an executed irrevocable option exercise form (or, to the extent permitted by the Company, exercise instructions, which may be communicated in writing, telephonically, or electronically) together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, (iv) by requesting the Company to withhold the number of shares otherwise deliverable upon exercise of the Stock Option by the number of shares of Common Stock having an aggregate Fair Market Value equal to the aggregate Option Price at the time of exercise (i.e., a cashless net exercise), and/or (v) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. If the Participant fails to deliver the consideration described in this Section 8.3(b) within three (3) business days of the date of the Exercise Notice, then the Exercise Notice shall be null and void and the Company will have no obligation to deliver any shares of Common Stock to the Participant in connection with such Exercise Notice.
(c) Issuance of Certificate. Except as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless the Participant or such other person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established by the Committee. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the forgoing, if the Participant has exercised an Incentive Stock Option, the Company may at its option place a transfer restriction on any electronically registered shares (or if a physical certificate is issued to the Participant, retain physical possession of the certificate evidencing the shares acquired upon exercise) until the expiration of the holding periods described in Section 422(a)(1) of the Code. Any obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.
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(d) Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant.
8.4 SARs. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the Exercise Date thereof which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and only if permissible under Section 409A of the Code and the regulations or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the regulations or other guidance issued thereunder), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and subject to the terms of the Award Agreement:
(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered;
(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or
(c) the Company may settle such obligation in part with shares of Common Stock and in part with cash.
The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award Agreement.
8.5 Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.
ARTICLE 9.
AMENDMENT ORDISCONTINUANCE
Subject to the limitations set forth in this Article 9, the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment for which stockholder approval is required either (a) by any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or (b) in order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding
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under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.
ARTICLE 10.
TERM
The Plan shall be effective as of the Effective Date, and, unless sooner terminated by action of the Board, the Plan will terminate on the tenth anniversary of the Effective Date, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions.
ARTICLE 11.
CAPITALADJUSTMENTS
In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the fair value of the Award immediately prior to the transaction or event (a) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (b) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (c) the Option Price of each outstanding Award, (d) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.4, and (e) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided, however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.
Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant.
ARTICLE 12.
RECAPITALIZATION, MERGER AND CONSOLIDATION
12.1 No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
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12.2 Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.
12.3 Exchange or Cancellation of Incentives Where CompanyDoes Not Survive. Except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms.
12.4 Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, all Incentives granted hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:
(a) giving notice to each holder thereof or such holder’s personal representative of its intention to cancel those Incentives for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares of Common Stock subject to such outstanding Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise be vested and exercisable; or
(b) in the case of Incentives that are either (i) settled only in shares of Common Stock, or (ii) at the election of the Participant, settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the price per share of such Incentive to be paid by the Participant (hereinafter the “Spread”), multiplied by the number of shares subject to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, such as deeming the Incentives to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Incentives as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.
An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable for purposes of Section 12.4(a) hereof.
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ARTICLE 13.
LIQUIDATION OR DISSOLUTION
Subject to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (a) sell all or substantially all of its property, or (b) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof.
ARTICLE 14.
INCENTIVESIN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees, independent contractors or directors of a corporation, partnership, or limited liability company who become or are about to become Employees, Contractors or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the incentives in substitution for which they are granted.
ARTICLE 15.
MISCELLANEOUS PROVISIONS
15.1 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution.
15.2 No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.
15.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation to the fullest extent provided by law. Except to the extent required by any unwaiveable requirement under Applicable Law, no member of the Board or the Committee (and no Subsidiary of the Company) shall have any duties or liabilities,
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including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award Agreement or any Claim arising hereunder and, to the fullest extent permitted under Applicable Law, each Participant (as consideration for receiving and accepting an Award Agreement) irrevocably waives and releases any right or opportunity such Participant might have to assert (or participate or cooperate in) any Claim against any member of the Board or the Committee and any Subsidiary of the Company arising out of this Plan.
15.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.
15.5 Compliance with Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
15.6 Foreign Participation. To assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Committee approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country.
15.7 Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this Section 15.7, the term “Company” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting or exercise of the Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable.
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15.8 Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.8 that is not required for compliance with Section 422 of the Code.
Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of an Award to be granted to a Participant on terms which permit transfer by such Participant to (a) the spouse (or former spouse), children or grandchildren of the Participant (“Immediate Family Members”), (b) a trust or trusts for the exclusive benefit of such Immediate Family Members, (c) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by the Participant and/or Immediate Family Members, (d) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (e) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Award is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Award shall be prohibited except those by will or the laws of descent and distribution.
Following any transfer, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “Participant” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which the Award shall be transferable, exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of an Award of any expiration, termination, lapse or acceleration of such Stock Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Award that has been transferred by a Participant under this Section 15.8.
15.9 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company.
15.10 Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On the reverse:
“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Beneficient 2023 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Dallas, Texas**.** No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”
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The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:
“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”
15.11 Governing Law. The Plan shall be governed by, construed, and enforced in accordance with the laws of the State of Nevada (excluding any conflict of laws, rule or principle of Nevada law that might refer the governance, construction, or interpretation of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, and no Participant shall have any claim or right of any nature against any Subsidiary of the Company or any stockholder or existing or former director, officer or Employee of the Company or any Subsidiary of the Company. The individuals and entities described above in this Section 15.11 (other than the Company) shall be third-party beneficiaries of this Plan for purposes of enforcing the terms of this Section 15.11.
A copy of this Plan shall be kept on file in the principal office of the Company in Dallas, Texas**.**
***************
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of the date first entered above pursuant to prior action taken by the Board.
| BENEFICIENT | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
[Signature Page to the
Beneficient 2023 Long-Term Incentive Plan]
22
EX-10.8
Exhibit 10.8
THIRD AMENDMENT TO THE
BENEFICIENT MANAGEMENT PARTNERS, L.P.
2019 EQUITY INCENTIVE PLAN
This Third Amendment to the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan (the “Amendment”) is made effective as of June 7, 2023, by Beneficient Management Partners, L.P., a Delaware limited partnership (the “Partnership”). Capitalized Terms not otherwise defined herein shall have the meaning as set forth in the Plan (as defined below).
WITNESSETH:
WHEREAS, on April 25, 2019, the General Partner of the Partnership approved the adoption of the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan (the “Plan”) and the Plan was subsequently amended on December 29, 2019 and further amended on January 1, 2021;
WHEREAS, Beneficient Company Group, L.P. (identified as an “Beneficient” in the Plan) has converted from a Delaware limited partnership to a Nevada corporation named “Beneficient” (the “Conversion”);
WHEREAS, the Administrator desires to amend certain provisions of the Plan as provided herein to reflect the Conversion and certain other changes as provided herein;
WHEREAS, this Amendment does not materially and adversely affect the rights of any Participant under an applicable Award, and the Administrator is authorized under Section 13 of the Plan to amend the Plan as set forth in this Amendment.
NOW, THEREFORE, the Plan is hereby amended as follows:
| 1. | The last sentence of Section 13 of the Plan is hereby amended and restated in its entirety as follows:<br> |
|---|
The Plan shall terminate on such date as determined by the Administrator; provided, however that the Administrator shall use commercially reasonable efforts to not terminate the Plan to the detriment of any Participant.
| 2. | Section 15 of the Plan is hereby amended and restated in its entirety as follows: |
|---|
Subject to the Minimum Retained Ownership Requirement and Section 4.05 of the LP Agreement, on a quarterly basis, the Participant may direct the Partnership, upon written notice, with respect to all or a portion of the Participant’s Vested Class A Units, (i)(A) to convert all or any
1
number of Allocation Partnership Preferred Units attributable to such Vested Class A Units to Allocation Partnership Ordinary Units and/or (B) exchange all or any number of Allocation Partnership Ordinary Units attributable to such Vested Class A Units for Issuer Common Units pursuant to the Exchange Agreement; and (ii) distribute such Issuer Common Units to the Participant. Notwithstanding the foregoing, fractional Allocation Partnership Ordinary Units may be settled in cash as allowed by the Administrator. The Partnership may immediately distribute to the Participant such Issuer Common Units. Subject to Section 16 or any waiver that may be granted in the sole discretion of the Administrator, at the time of any conversion of Allocation Partnership Preferred Units described in clause (i)(A) of this Section 15 or any exchange of Allocation Partnership Ordinary Units described in clause (i)(B) of this Section 15, the Participant shall be required to direct the Partnership to convert or exchange as applicable (or the Partnership is authorized to convert or exchange in the absence of such direction), to the extent available, such number of Allocation Partnership Preferred Units or Allocation Partnership Ordinary Units as necessary to reflect, as closely as practical, the Participant holding 1.2 Allocation Partnership Preferred Units for each Allocation Partnership Ordinary Unit held after such conversion or exchange. Notwithstanding the foregoing, this Section 15 shall not be effective and no conversion or exchange shall be permitted for any period during which (i) with respect to all Participants, the Partnership has any outstanding loan secured by the Participant’s Allocation Partnership Holdings, or the Partnership has any unsecured, outstanding loan otherwise attributable to such Participant’s Allocation Partnership Holdings, unless the General Partner of the Partnership otherwise consents, or (ii) with respect to any Participant, such Participant serves on the board of directors of Beneficient.
| 3. | Section 16(c)(i) of the Plan is hereby amended and restated in its entirety as follows:<br> |
|---|---|
| (i) | Without regard to the Minimum Retained Ownership Requirement, on a quarterly basis, the Partnership shall also<br>authorize and direct the Subsidiary to take any one or more of the following actions at the election of the Participant: (A) to convert any underlying Allocation Partnership Preferred Units to Allocation Partnership Ordinary Units, and/or<br>(B) to convert any underlying Allocation Partnership Ordinary Units to Issuer Common Units and distribute all or a portion of such Issuer Common Units to the Participant. Notwithstanding the foregoing, fractional Allocation Partnership Ordinary<br>Units may be settled in cash as allowed by the Administrator. |
| --- | --- |
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| 4. | The second Section 16(c)(iii) of the Plan is renumbered to Section 16(c)(iv) and hereby amended and<br>restated in its entirety as follows: |
|---|---|
| (iv) | The Issuer Common Units distributed by the Subsidiary to the Participant pursuant to Section 16(c) shall<br>be the only consideration for the redemption of the Class A Units and the Class B Units. |
| --- | --- |
| 5. | Exhibit A of the Plan is hereby amended by the addition of the following defined term, as such would be<br>included in the alphabetical order among the existing definitions. |
| --- | --- |
| “Issuer | Common Units” means Issuer Common Units as defined in the LP Agreement. |
| --- | --- |
| 6. | Exhibit A of the Plan is hereby amended by deleting the definitions set forth therein for each of the defined<br>terms set forth below and replacing them with the following definitions: |
| --- | --- |
“Affiliate” means Beneficient and all other Persons and entities directly or indirectly controlling, controlled by or under common control with the Partnership or Beneficient, where control may be either management authority or equity interest.
“Beneficient” means Beneficient, a corporation formed under the laws of the State of Nevada (or any successor thereto), as successor by way of statutory conversion of The Beneficient Company Group, L.P.
“Employment” means a Person’s employment or other service relationship with the Partnership and its Affiliates, including as a director of the General Partner and/or Beneficient, or a consultant. Unless the Administrator provides otherwise, an Employee will be deemed to cease Employment when the employee-employer or service-provider relationship with the Partnership and its Affiliates ceases and a Person who provides services to the Partnership or its Affiliates in a capacity other than as an Employee will be deemed to continue Employment so long as the Person is providing substantial services to the Partnership or its Affiliates. If a Person’s relationship is with an Affiliate and that entity ceases to be an Affiliate, the Person will be deemed to cease Employment when the entity ceases to be an Affiliate unless the Person transfers Employment to the Partnership or its remaining Affiliates.
| 7. | Except as otherwise specifically set forth herein, all other terms and conditions of the Plan shall remain in<br>full force and effect. |
|---|
[signature page follows]
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IN WITNESS WHEREOF, the Partnership has caused this Amendment to be executed on its behalf by its duly authorized officer on the date set forth above.
| BENEFICIENT MANAGEMENT PARTNERS, L.P. | |
|---|---|
| By: | Beneficient Management Group, L.L.C., its General Partner |
| By: | Highland Counselors, L.L.C., its manager |
| By: | Bradley K. Heppner |
| Name: Bradley K. Heppner | |
| Title: Manager |
Signature Page to Third Amendment to the
Beneficient Management Partners, L.P.
2019 Equity Incentive Plan
EX-10.9
Exhibit 10.9
FORM OF
BENEFICIENT LEGACY HOLDER LOCK-UP AGREEMENT
THIS BENEFICIENT LEGACY HOLDER LOCK-UP AGREEMENT (this “Agreement”) is made and entered into as of June 7, 2023, by and between (i) Beneficient (the “Company”) and (ii) the undersigned (“Holder”). Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Business Combination Agreement, as hereinafter defined.
WHEREAS, (i) Avalon Acquisition, Inc., a Delaware corporation (“Avalon”), (ii) The Beneficient Company Group, L.P. (“BCG”), (iii) Beneficient Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Merger Sub I”), and (iv) Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of the Company (“Merger Sub II”) have entered into that certain Business Combination Agreement (as amended from time to time in accordance with the terms thereof, the “Business Combination Agreement”), pursuant to which, subject to the terms and conditions thereof, among other matters, following the consummation of the Initial Recapitalization, Conversion and Contribution, (i) Merger Sub I shall, at the Avalon Merger Effective Time, be merged with and into Avalon, with Avalon continuing as the surviving entity in connection therewith, and as a result of which, (x) Avalon shall become a wholly-owned subsidiary of the Company and (y) each issued and outstanding share of Avalon Common Stock immediately prior to the Avalon Merger Effective Time shall no longer be outstanding and shall automatically be cancelled, in exchange for the right of the holder thereof to receive Company Class A Common Shares, all upon the terms and subject to the conditions set forth in the Business Combination Agreement and in accordance with the provisions of applicable law and (ii) following consummation of the Avalon Merger, the surviving company of the Avalon Merger will merge with and into Merger Sub II, with Merger Sub II surviving;
WHEREAS, as of the date hereof, Holder is a holder of certain BCG Partnership Units which, upon consummation of the Conversion, shall automatically be converted into Company Common Shares as more thoroughly described in the Plan of Conversion; and
WHEREAS, pursuant to the Business Combination Agreement, and in view of the valuable consideration or benefits to be received by Holder by virtue thereof or thereunder, the parties desire to enter into this Agreement, pursuant to which all of the Company Common Shares received by Holder in connection with the Conversion or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Company Common Shares now owned or hereafter acquired by the Holder (all such securities, together with any securities paid as dividends or distributions with respect to such securities or into which such securities are exchanged or converted, the “Restricted Securities”), shall become subject to limitations on disposition as set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, which are incorporated in this Agreement as if fully set forth below, and intending to be legally bound hereby, the parties hereby agree as follows:
- Lock-Up Provisions.
(a) Holder hereby agrees not to, during the period (the “Lock-UpPeriod”) commencing from the Closing and ending on the earlier of (x) six (6) months of the date of the Closing, (y) the date after the 150th day following the Closing on which the closing price of the Company Common Shares equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, share consolidations, subdivisions, share dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least 150 days after the Closing, and (z) the date after the Closing on which the Company consummates a liquidation, merger, share exchange, reorganization or other similar transaction with an unaffiliated third party that results in all of the Company’s shareholders having the right to exchange their equity
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holdings in Company for cash, securities or other property: (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, establish or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder, or otherwise transfer or dispose of, directly or indirectly, any Restricted Securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, whether any such transaction is to be settled by delivery of such Restricted Securities, in cash or otherwise, or (iii) publicly announce the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities owned by Holder (I) by gift, will or intestate succession upon the death of Holder, (II) to any Permitted Transferee (as defined below), (III) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union or pursuant to a domestic relations order, (IV) to the Company in accordance with the requirements of the Plan of Conversion, the Business Combination Agreement or the organizational documents of the Company, as amended, (V) required by virtue of the laws of the State of Nevada, (VI) of up to 250 Restricted Securities or (VII) to pay any taxes in respect of the settlement of equity awards; provided, however, that in any of the cases of clauses (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to the Company an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Agreement applicable to Holder, and there shall be no further transfer of such Restricted Securities except in accordance with this Agreement. As used in this Agreement, the term “Permitted Transferee” shall mean: (A) the members of Holder’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse, the siblings of such person and his or her spouse, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouses and siblings), (B) any trust or charitable organization for the direct or indirect benefit of Holder or the immediate family of Holder (which for avoidance of doubt, such Permitted Transferee that is a charitable organization shall not be required to execute any lock-up agreement), (C) if Holder is a trust, the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (D) if Holder is an entity, as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in Holder upon the liquidation and dissolution of Holder or, (E) to any affiliate of Holder. Holder further agrees to execute such agreements as may be reasonably requested by the Company that are consistent with the foregoing or that are necessary to give further effect thereto.
(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Agreement, such purported Prohibited Transfer shall be null and void ab initio, and the Company shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 1, the Company may impose stop-transfer instructions with respect to the Restricted Securities of Holder (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period.
(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A LOCK-UP AGREEMENT, DATED AS OF JUNE 7, 2023, BY AND AMONG THE ISSUER OF SUCH SECURITIES (THE “ISSUER”), A CERTAIN REPRESENTATIVE OF THE ISSUER NAMED THEREIN AND THE ISSUER’S SECURITY HOLDER NAMED THEREIN, AS AMENDED. A COPY OF SUCH LOCK-UP AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
(d) For the avoidance of any doubt, Holder shall retain all of its rights as a shareholder of the Company during the Lock-Up Period, including the right to vote any Restricted Securities, but subject to the obligations under the Business Combination Agreement.
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- Miscellaneous.
(a) Termination of Business Combination Agreement. This Agreement shall be binding upon Holder upon Holder’s execution and delivery of this Agreement, but this Agreement shall only become effective upon the Closing. Notwithstanding anything to the contrary contained herein, in the event that the Business Combination Agreement is terminated in accordance with its terms prior to the Closing, this Agreement shall automatically terminate and become null and void, and the parties shall not have any rights or obligations hereunder.
(b) Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and all obligations of Holder are personal to Holder and may not be transferred or delegated by Holder at any time, except as expressly permitted under Section 1 above. The Company may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity (whether by merger, consolidation, equity sale, asset sale or otherwise) or Affiliate without obtaining the consent or approval of Holder.
(c) Third Parties. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the parties hereto, any right or remedies under or by reason of this Agreement.
(d) Governing Law; Jurisdiction. This Agreement, and all claims or causes of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the Laws of the State of [Delaware], without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction. Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby may be brought in federal and state courts located in the State of Delaware, and each of the parties hereto irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any Party to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other Party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 2(d). Each party irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 2(g).
(e) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) Interpretation. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement, (iv) the terms “Article”, “Section”, “Schedule”, “Exhibit” and “Annex” refer to the specified Article, Section, Schedule, Exhibit or Annex of or to this Agreement unless otherwise specified, (v) the word “including” shall mean “including without limitation,” (vi) the word “or” shall be disjunctive but not exclusive, and (vii) the phrase “to the extent” means the degree to which a thing extends (rather than if). The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
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(g) Notices. All notices and other communications among the parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:
| If to the Company, to: | with a copy (which will not constitute notice) to: |
|---|---|
| Beneficient<br> <br><br><br><br>325 N Saint Paul St., Suite 4850<br> <br>Dallas, Texas 75201<br><br><br>Attn: General Counsel<br> <br>Email:<br>LegalNotices@beneficient.com | Haynes and Boone, LLP<br> <br>2323 Victory Ave., Suite<br>700<br> <br>Dallas, TX 75219<br> <br>Attn: Matthew L. Fry<br><br><br>Telephone No.: 214-651-5443<br><br><br>Email: matt.fry@haynesboone.com |
If to Holder, to: the address set forth below Holder’s name on the signature page to this Agreement.
(h) Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and Holder. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
(i) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The parties hereto further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the parties hereto.
(j) Specific Performance. Holder acknowledges that its obligations under this Agreement are unique, recognizes and affirms that in the event of a breach of this Agreement by Holder, money damages will be inadequate and the Company) will have no adequate remedy at law, and agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Holder in accordance with their specific terms or were otherwise breached. Accordingly, the Company shall be entitled to an injunction or restraining order to prevent breaches of this Agreement by Holder and to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.
(k) Entire Agreement. This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof and supersedes any other agreements, whether written or oral, that may have been made or entered into by or among any of the parties hereto relating to the transactions contemplated hereby; provided, that, for the avoidance of doubt, the foregoing shall not affect the rights and obligations of the parties under the Business Combination Agreement or any Transaction Agreement. Notwithstanding the foregoing, nothing in this Agreement shall limit any of the rights or remedies of the Company or any of the obligations of Holder under any other agreement between Holder and the Company or any certificate or instrument executed by Holder in favor of the Company, and nothing in any other agreement, certificate or instrument shall limit any of the rights or remedies of the Company or any of the obligations of Holder under this Agreement.
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(l) Further Assurances. From time to time, at another party’s request and without further consideration (but at the requesting party’s reasonable cost and expense), each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.
(m) Counterparts; Facsimile. This Agreement may also be executed and delivered by facsimile signature or by email in portable document format in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
{Remainder of Page Intentionally Left Blank; Signature Pages Follow}
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
| The Company: | |
|---|---|
| BENEFICIENT | |
| By: | |
| Name: | James G. Silk |
| Title: | Executive Vice President & Chief Legal Officer |
Signature Page
to Beneficient Legacy Holder Lock-Up Agreement
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Holder: |
|---|
| HOLDER NAME: |
| By: |
| Name: |
| Title: |
| Address for Notice: |
| --- |
| Address: |
| Facsimile No.: |
| Telephone No.: |
| Email: |
Signature Page
to Beneficient Legacy Holder Lock-Up Agreement
EX-10.13
Exhibit 10.13
SECOND AMENDED AND RESTATED SERVICES AGREEMENT
This Second Amended and Restated Services Agreement (this “Agreement”) is entered into by and between Bradley Capital Company, L.L.C., a Delaware limited liability company (“Provider”), Beneficient, a Nevada corporation (the “Company”), Beneficient Company Holdings, L.P., a Delaware limited partnership (“BCH”), and Beneficient Management Counselors, L.L.C., a Delaware limited liability company (“BMC”), and is effective as of June 7, 2023 (“Effective Date”). Provider, the Company, BCH and BMC are referred to collectively in this Agreement as the “Parties” and individually as a “Party.”
RECITALS
WHEREAS, effective as of June 1, 2017, The Beneficient Company Group, L.P., a Delaware limited partnership (“BCG”), Provider, BCH and BMC entered into that certain services agreement (the “Original ServicesAgreement”) that provided that Provider would provide to BCG and its direct and indirect Subsidiaries certain executive and other services described or identified in Schedule A attached to the Original Services Agreement;
WHEREAS, effective as of January 1, 2022, BCG, Provider, BCH and BMC entered into that certain First Amended and Restated Services Agreement, which amended and restated the Original Services Agreement (the “First Amended and Restated Services Agreement”); and
WHEREAS, as of the Effective Date, BCG has converted from a Delaware limited partnership into the Company, a Nevada corporation, and in connection therewith, the Parties desire to amend and restate the First Amended and Restated Services Agreement in its entirety as provided in this Agreement to set forth the terms and conditions under which the Provider will provide to the Company and its direct and indirect Subsidiaries (collectively, the “Group”) certain executive and other services (the “Services”) described or identified in Schedule A to this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties hereto agree as follows:
AGREEMENT
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. For the purpose of this Agreement, the following definitions shall be applicable:
“Active Employee Benefits Cost” is defined in Section 4.2(a).
“Advance Expenses Payment” is defined in Section 4.2(d).
“Agreement” is defined in the preamble.
“Aircraft” is defined in Section 6.3(a)(ii)(A).
“Applicable Extension Date” is defined in Section 3.1.
“BMC” is defined in the preamble.
“BCG” is defined in the Recitals.
“BCH” is defined in the preamble.
“Benefits Cost” is defined in Section 4.2(a).
“Benefits Cost Overpayment” is defined in Section 4.2(c)
“Benefits Cost Underpayment” is defined in Section 4.2(c).
“Board” means the Board of Directors of the Company.
“Cause” means (a) if a regulatory body must approve Executive Provider’s provision of the Executive Services, such regulatory body’s disapproval of Executive Provider; (b) Executive Provider’s knowing and material violation of any regulatory compliance policies of the Group, which such policies have been provided to Executive Provider in writing before such violation, and which such violation could reasonably be expected to be substantially injurious to the financial condition or business reputation of any member of the Group, provided that such violation has not been corrected or cured within thirty (30) days after receipt of written notice by the Company to Provider setting out the acts or omissions of Executive Provider claimed to violate such policies (it being understood that the good faith performance by Executive Provider of an act approved by or at the specific request of the Board or the Chief Executive Officer of the Company (if the Executive Provider is not also serving as the Company’s Chief Executive Officer) will not be considered a “knowing” violation); or (c) Executive Provider’s conviction of or entry of a plea agreement or civil consent decree with respect to (i) any felony, (ii) any other crime involving dishonesty or moral turpitude, or (iii) any material violation of federal or state securities laws which could reasonably be expected to be substantially injurious to the financial condition or business reputation of any member of the Group.
“Charity” means an entity organized and operated within the meaning of Section 501(c)(3) of the Code and classified by the Internal Revenue Service as a public charity within the meaning of Sections 509(a)(1) or 509(a)(2) of the Code or the corresponding provision or provisions of any subsequent United States Internal Revenue law or laws.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” is defined in the preamble.
“Date of Termination” is defined in Section 3.2(c).
“Effective Date” is defined in the preamble.
“Entity” means any Person other than an individual of which the Company is or is to become a direct or indirect shareholder, general, limited partner or other partner, member or other equity owner or manager, including serving as a direct or indirect shareholder, general or limited partner, member or other equity owner or manager of any such Person.
“Executive Committee” means the Executive Committee of the Board constituted in accordance with the Company’s governing documents as of the Effective Date or, in the event there is no such Executive Committee, then a committee of the Board composed of those members of the Board (or the duly appointed successors of those members) who served on the Executive Committee immediately before the Executive Committee ceased to exist.
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“Executive Provider” is the individual identified in Schedule A or the individual approved as a replacement pursuant to Section 2.2(b).
“Executive Services” means those Services described or identified in Schedule A.
“Expenses” means the Out-of-Pocket Expenses.
“Expenses Overpayment” is defined in Section 4.2(d).
“Expenses Underpayment” is defined in Section 4.2(d).
“Fee” is defined in Section 4.1.
“Group” is defined in the Recitals.
“Inability to Provide” means Executive Provider’s inability to provide the Executive Services by reason of a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
“Indemnitee” means (a) Provider, (b) BMC, (c) Executive Provider, (d) the Provider Employees, (e) any officer, director, employee, member, manager, partner, agent, representative, fiduciary or trustee of Provider or BMC (unless excluded from the definition of Indemnitee by (f)), (f) any Person serving at the written request of Provider or BMC (provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis or similar arm’s-length compensatory basis, agency, advisory, consulting, trustee, fiduciary or custodial services if not designated as an Indemnitee by Provider or BMC), (g) any Person that Provider or BMC in its sole discretion designates as an “Indemnitee” for purposes of this Agreement (which designation may be made at any time, including after any liability arises), and (h) any successors, assigns, heirs, executors or administrators of the foregoing.
“Other Services” means those Services described or identified in Schedule A.
“Out-of-Pocket Expenses” is defined in Section 4.2(a).
“Parties” and “Party” is defined in the preamble.
“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association (including any group, organization, co-tenancy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).
“Proceeding” means any threatened, pending, or completed action, suit or proceeding (including, without limitation, an action, suit or proceeding by or in the right of the Company), whether civil, criminal, administrative, or investigative.
“Provider” is defined in the preamble.
“Provider Employees” is defined in Section 2.1.
“Retirement/Disability Benefits Cost” is defined in Section 4.2(a).
“Services” is defined in the Recitals.
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“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person, at the date of determination, (i) is a general partner of such partnership, (ii) owns more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class), directly or indirectly, or (iii) otherwise controls such partnership, directly or indirectly, (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, (i) has at least a majority ownership interest, (ii) has the power to elect or direct the election of a majority of the directors or other governing body of such Person, or (iii) otherwise controls such Person or (d) any other Person the financial information of which is consolidated by such Person for financial reporting purposes under U.S. GAAP.
“Term” is defined in Section 3.1.
ARTICLE II.
SERVICES
Section 2.1 Services. Provider will provide the Services to the Group on the terms and conditions provided for in this Agreement. The Executive Services shall be provided by Executive Provider. The Other Services shall be provided through employees of Provider designated by Provider in its sole discretion (such other employees the “ProviderEmployees”). Executive Provider and the Provider Employees shall be subject to the standard regulatory compliance policies of the Group that relate to the performance of the Services, including those related to insider trading and the protection of confidential information, and that have been provided by the Group to Executive Provider and the Provider Employees.
Section 2.2 Removal and Replacement of Executive Provider.
(a) Removal. Executive Provider may be removed (i) by mutual written agreement of Provider and the Company; (ii) at the request of the Company for Cause upon thirty (30) days’ advance written notice to Provider and Executive Provider, which such notice shall identify the clause(s) of the definition of Cause relied upon and set out in reasonable detail the acts or omissions of Executive Provider alleged to constitute Cause under such clause(s); (iii) by reason of Executive Provider’s Inability to Provide the Executive Services upon thirty (30) days’ advance written notice by Provider or the Company to the other Party; or (iv) by Provider upon written notice to the Company for any reason, including by reason of Executive Provider no longer being employed by Provider. For the avoidance of doubt, the Executive Provider’s removal pursuant to this Agreement shall in no way affect the Executive Provider’s service as (A) a director of the Company if the Executive Provider is serving on the Board at the time of such removal or (B) the Company’s Chief Executive Officer if the Executive Provider is serving as the Company’s Chief Executive Officer at the time of such removal. During the period from the date of removal of Executive Provider through the date a replacement designated by Provider is approved by the Executive Committee pursuant to Section 2.2(b), the Executive Services shall be provided pursuant to this Agreement by a director (other than the removed Executive Provider) of the Company designated in writing by BMC.
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(b) Replacement Process. If Executive Provider is removed in accordance with Section 2.2(a) or Executive Provider dies, then the Company shall request in writing to Provider and BMC within sixty (60) days after such removal or death that BMC designate a replacement to provide the Executive Services through Provider. BMC shall so designate a replacement within sixty (60) days after receipt of such request. If the designated replacement is a director of the Company (other than the removed Executive Provider), then the Executive Services shall be provided by such designated director. If the designated replacement is not a director of the Company (other than the removed Executive Provider), the designated replacement is subject to the approval of a majority of the Executive Committee as follows, which approval shall not be unreasonably withheld. The Executive Committee shall notify Provider and BMC in writing within fifteen (15) days after such designation whether it approves the designated replacement and, if not, the specific grounds thereof. If the designated replacement is not approved, BMC shall have sixty (60) days after receipt of such notice to designate another replacement to provide the Executive Services through Provider. If the designated replacement is a director of the Company (other than the removed Executive Provider), then the Executive Services shall be provided by such designated director. If the designated replacement is not a director of the Company (other than the removed Executive Provider), the designated replacement is subject to the approval of a majority of the Executive Committee as follows, which approval shall not be unreasonably withheld. The Executive Committee shall notify Provider and BMC in writing within fifteen (15) days after such designation whether it approves the designated replacement and, if not, the specific grounds thereof. If the designated replacement is not approved, the Executive Services shall continue to be provided pursuant to this Agreement by a director (other than the removed Executive Provider) of the Company designated in writing by BMC.
(c) For the avoidance of doubt, this Agreement shall in no way affect or limit the Board’s authority to appoint and remove the officers of the Company, including the Company’s Chief Executive Officer, pursuant to the Company’s organizational documents.
Section 2.3 Compensation and Benefits. Provider will pay all wages and other compensation due to, reimburse business expenses incurred by, and provide employee benefits to, Executive Provider and the Provider Employees in connection with the performance of the Services, provided that Executive Provider and each Provider Employee shall be entitled to participate in equity incentive plans sponsored by the Group on the same basis as other service providers (including employees) who provide the same or similar services to the Group. For the avoidance of doubt, the Group shall be responsible for any and all costs and expenses incurred by the Group in connection with the participation of the Executive Provider and the Provider Employees in equity incentive plans sponsored by the Group, and such costs and expenses shall be paid by the Group in addition to the Fee.
Section 2.4 Compliance with Law. Provider will comply with all federal, state and local laws applicable to Provider as the employer of Executive Provider and the Provider Employees, including, without limitation, laws relating to employment and employment practices, terms and conditions of employment, labor relations, wages, hours of work and overtime, worker classification, employment-related immigration and authorization to work in the United States, occupational safety and health, and privacy of health information. Provider will be solely responsible for complying with all federal, state, and local tax laws applicable to Provider as the employer of Executive Provider and the Provider Employees including, without limitation, laws relating to the withholding and reporting of, and remitting or paying when due, all income and employment-related taxes, and the filing of all returns and reports required by applicable law.
Section 2.5 Acknowledgements Regarding Services. The Parties acknowledge and agree that Provider is not an employee leasing organization, personnel service, or contract labor firm, and Provider covenants not to hold itself out to the public as a professional employer, employee leasing, personnel service, contract labor, or similar organization. The Parties thus further acknowledge and agree that this Agreement and the Services provided hereunder are not, and are not intended to be, subject to laws concerning professional employer, employee leasing, personnel service, contract labor, or similar organizations.
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ARTICLE III.
TERM AND TERMINATION
Section 3.1 Term. The initial term of this Agreement shall be from the Effective Date through the earlier of (i) the Date of Termination or (ii) December 31, 2023, provided that the initial term shall be automatically extended by one calendar year on December 31, 2023 and on each December 31st thereafter (each such December 31st the “ApplicableExtension Date”). The initial term together with all extensions is the “Term.”
Section 3.2 Termination.
(a) This Agreement may be terminated:
(i) by mutual written agreement of Provider and the Company on such terms as they may agree upon in writing;
(ii) by the Company with a unanimous vote of the members of the Executive Committee (other than Executive Provider if Executive Provider is serving on the Executive Committee);
(iii) by the Company if Highland Business Holdings Trust, or its successors or assigns, directly or indirectly, hold capital or other ownership interests in the Group, or its successors or assigns, that in the aggregate have a fair market value of the lesser of (A) ten million ($10,000,000.00) or (B) 1% of the aggregate fair market value of the Group (or its successors or assigns) on both (x) December 31, 2023 or any Applicable Extension Date thereafter and (y) the Date of Termination; or
(iv) by Provider (A) for the Company’s material breach of this Agreement; or (B) upon thirty (30) days’ advance written notice to the Company.
(b) Before terminating the Agreement pursuant to Section 3.2(a)(iv)(A), Provider must provide written notice to the Company of its intention to terminate the Agreement on that basis. Such notice shall set out in reasonable detail the acts or omissions of the Company claimed to constitute a material breach of the Agreement; identify the specific provisions of the Agreement thereby breached; provide a reasonable period of time after the Company’s receipt of the notice, and not less than thirty (30) days after receipt, for the Company to correct the alleged acts or omissions or otherwise cure the alleged material breach; and state the Date of Termination if the alleged material breach is not corrected or cured within the period provided for in the notice.
(c) “Date of Termination” for purposes of this Agreement means:
(i) if terminated pursuant to Section 3.2(a)(i), the date so mutually agreed to;
(ii) if terminated pursuant to Section 3.2(a)(ii), the thirtieth (30th) day after Provider receives written notice by the Company of the unanimous vote terminating the Agreement pursuant to such Section;
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(iii) if terminated pursuant to Section 3.2(a)(iii), the last day of the calendar-year quarter which is at least thirty (30) days after the written notice is received by Provider, provided that Highland Business Holdings Trust, or its successors or assigns, directly or indirectly, hold capital or other ownership interests in the Group, or its successors or assigns, that in the aggregate have a fair market value of the lesser of (A) ten million ($10,000,000.00) or (B) 1% of the aggregate fair market value of the Group (or its successors or assigns) on the last day of such calendar-year quarter;
(iv) if terminated pursuant to Section 3.2(a)(iv)(A), the date specified in the written notice of intention to terminate, which date shall be no earlier than the period for correction or cure provided for in the notice; and
(v) if terminated pursuant to Section 3.2(a)(iv)(B), the thirtieth (30th) day after the written notice is received by the Company.
(d) Notwithstanding any provision of this Agreement to the contrary, if this Agreement is terminated pursuant to Section 3.2(a)(ii), the Company or a Subsidiary of the Company (including BCH) shall pay to Provider within thirty (30) days after the Date of Termination the sum of (i) five (5) times the Fee, determined as of the Date of Termination, on an annualized basis, (ii) plus five (5) times the Benefits Cost, determined as of the Date of Termination, (iii) less that portion of the Fee and Benefits Cost, if any, representing advance payment of the Fee and the Benefits Cost for the period from the Date of Termination through the end of the quarter, and (iv) less any outstanding Benefits Cost Overpayment and plus any outstanding Benefits Cost Underpayment, as applicable.
Section 3.3 Remedies; Survival of Certain Rights and Obligations Upon Termination.
(a) The Company and BCH acknowledge and agree that Provider would not have an adequate remedy at law and would be irreparably harmed in the event that the Company or BCH fail to perform any of their obligations under this Agreement in accordance with their specific terms. Accordingly, the Company and BCH agree that Provider shall be entitled to equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, in the event the Company or BCH breaches or threatens to breach any of their obligations under this Agreement, without the necessity of posting any bond or proving special damages or irreparable injury. Such remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of this Agreement by the Company or BCH but shall be in addition to Provider’s right to terminate this Agreement pursuant to Section 3.2(a)(iv)(A) and to recover all other remedies available to Provider at law or equity, including remedies for the Company’s or BCH’s material breach of this Agreement. In addition, in the event Provider brings an action (including a counter-claim) to restrain or otherwise remedy a breach or threatened breach of this Agreement (including seeking remedies for the Company’s material breach of this Agreement), the Company or BCH shall advance or pay to Provider all expenses (including attorneys’, experts’ and consultants’ fees and expenses as well as costs of investigation, sampling and defense) incurred by Provider in connection with such action within fifteen (15) days after receipt of a statement setting out such expenses, provided that Provider shall repay such expenses paid by the Company or BCH if a court of competent jurisdiction finds (and such finding is binding and no longer appealable) such action to be frivolous or filed in bad faith.
(b) The termination of this Agreement pursuant to Section 3.2 shall not impair the rights or obligations of any Party that have accrued prior to such termination or which by their nature or terms survive termination of this Agreement indefinitely, including, without limitation, the Parties’ continuing rights and obligations under Section 3.2(d), Article IV, Article VI, and Section 7.3.
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ARTICLE IV.
COMPENSATION FOR SERVICES
Section 4.1 Fee. As compensation for the Services, the Company shall pay or have one of its Subsidiaries (including BCH) pay Provider a quarterly fee (“Fee”) in advance and by no later than the first business day of the calendar-year quarter to which such Fee applies. The initial Fee, consisting of a base fee for the Executive Services and a supplemental fee for the Other Services, is set forth in Schedule A and shall be adjusted annually as set forth therein. Provider may increase the supplemental Fee up to twice (two times) the initial fee (which shall be adjusted on an annual basis by the percent equal to the percentage increase, if any, in the level of the CPI-U (or its most comparable successor, as published by the United States Department of Labor, Bureau of Labor Statistics) from December to December) in any calendar year in connection with an increase in the cost of providing the Services (including through the addition of one or more Provider Employees) and/or a change in the scope or performance of the Services as determined in the sole and absolute discretion of Provider subject, in the case of a change in the scope of the Services only, to the approval of a majority of the Executive Committee. Provider shall notify the Company in writing thirty (30) days in advance of the effectiveness of the proposed increase in the Fee. The Company shall notify Provider in writing within fifteen (15) days after receipt of the notice whether the proposed change in the scope of the Services is approved, and if not, the specific reasons thereof. Except for a termination pursuant to Section 3.2(a)(ii), within thirty (30) days after the Date of Termination, Provider shall refund to the Company that portion of the Fee, if any, representing advance payment of the Fee for the period from the Date of Termination through the end of the quarter.
Section 4.2 Benefits Cost; Expenses.
(a) In addition to the Fee, the Company or a Subsidiary of the Company (including BCH) shall pay Provider for (i) the cost of providing employee benefits (including, without limitation, retirement/disability and related benefits) for up to seven (7) active employees of Provider, which number may be increased due to the cost of providing the Services or a change in the scope of the Services (subject, in the case of a change in the scope of Services only, to the approval of a majority of the Executive Committee) (the “Active Employee BenefitsCost”), provided such active employee benefits shall be the same or substantially the same, in the aggregate, as those provided by Provider to its employees as of the Effective Date or provided by the Company or a Subsidiary to its or their employees from time to time; (ii) the cost of providing retirement/disability and related benefits to non-active or former employees of Provider (or their survivors, as applicable) as of the Effective Date and to such of the Provider Employees or Executive Provider (or their survivors, as applicable) as may become eligible for such benefits thereafter (the “Retirement/Disability Benefits Cost”), provided that the retirement and disability benefits paid by Provider to an individual shall not exceed an amount that would result in a reduction or elimination of benefits to which the individual is entitled to receive under a federally-sponsored retirement, disability, or survivorship program; (iii) any administrative costs incurred in connection with the provision of the foregoing benefits (the amounts in clauses (i)-(iii), collectively, the “Benefits Cost”); and (iv) all out-of-pocket expenses (“Out-of-Pocket Expenses”) reasonably incurred by or on behalf of Provider in connection with providing the Services and consistent with the Company’s travel and entertainment policy or other expense reimbursement policies. The initial Retirement/Disability Benefits Cost is set forth in Schedule A and shall or may be adjusted as set forth therein.
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(b) In the event that Provider, Executive Provider, Beneficient Holdings, Inc., Heppner Endowment for Research Organizations, L.L.C. or their affiliates, successors and assigns (collectively, the “Donors”), or their direct and indirect owners, are subject to an income or excise tax, or are required to reimburse a Charity for the imposition of an income or excise tax, arising in connection with or related to (i) any gift or assignment of interests in BCG and/or the Company or its affiliates to Charity and (ii) the Donor’s arranging for gifting by other parties to Charities or the Donor’s action of gifting to Charities of (A) cash distributions from or (B) beneficial interests in trusts which BCG and/or the Company or its affiliates may be lenders, beneficiaries, administrators, or trustees of such trusts, in the case of clause (i) or clause (ii), prior to the Effective Date (collectively, the “Donations”), the Company and/or BCH shall reimburse and pay the Donors an amount such that, after taking into account the taxation of any such payment, the Donors are in the same after-tax position that they would have been in if the Donors or their direct and indirect owners had not been required to reimburse or had not been subject to such income or excise tax (the “Tax Consequence”). The Company or BCH shall also reimburse and pay the Donors, without duplication, for any other related expenses and payments, including, but not limited to, the cost of gift processing fees, management fees, other fees, future liabilities, indemnification expenses, investments in put options, and carrying costs as each may be charged to the Donors by a Charity resulting from any action in (i) and (ii) of this Section 4.2(b) (the “Charity Costs”) and for all expenses (including attorneys’, accountants’, experts’ and consultants’ fees and expenses as well as costs of investigation, sampling, defense and court charges) incurred by Donors in connection with disputing the Donor’s liability for the Tax Consequence (the “Defense Costs”). In the event that no current tax benefit is available to the Donors or their direct and indirect owners for amounts of the Charity Costs and Defense Costs the Company and/or BCH shall reimburse and pay the Donors an amount such that, after taking into account the taxation of any such payment, the Donors are in the same after-tax position that they would have been in if the Donors or their direct and indirect owners had received a current tax benefit for the payment of the Charity Costs and Defense Costs (together with the Tax Consequence, the “Tax Related Payment”). The Company and BCH acknowledge and agree that the Donors and its advisors have not, and shall not, provide the Company and BCH with any advice regarding the Tax Related Payment. The Tax Related Payment shall be paid by the Company or BCH to the Donor within five (5) days after receipt from the Donor of an invoice, expense report, or other documentation showing in reasonable detail the Tax Related Payment calculations and supporting information.
(c) The Benefits Cost shall be paid by the Company or a Subsidiary of the Company (including BCH) to Provider in advance on a quarterly basis by no later than the first business day of the calendar year quarter to which such Benefits Cost apply based on a reasonable estimate of the Active Employee Benefits Cost and administrative costs to be incurred by Provider in such quarter plus one-fourth of the Retirement/Disability Benefits Cost. Provider shall provide the Company on at least an annual basis with a reconciliation of the Active Employee Benefits Cost paid by the Company against the Active Employee Benefits Cost actually incurred by Provider during the reconciliation period. The excess of the Active Employee Benefits Cost paid by the Company over the Active Employee Benefits Cost actually incurred by Provider during the reconciliation period (any such amount a “Benefits Cost Overpayment”) shall be applied, without interest, to reduce one or more subsequent quarterly Benefits Cost payments until repaid in full unless the Company requests in writing that Provider refund all or a portion of the Benefits Cost Overpayment. Any such refund of a Benefits Cost Overpayment shall be made within thirty (30) days after receipt by Provider of such written request. The excess of the Active Employee Benefits Cost actually incurred by Provider over the Active Employee Benefits Cost paid by the Company during the reconciliation period (any such amount a “Benefits Cost Underpayment”) at Provider’s option may be applied, without interest, to increase one or more subsequent quarterly Benefits Cost payments until paid in full unless Provider requests in writing that the Company pay
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all or a portion of the Benefits Cost Underpayment. Any such payment of a Benefits Cost Underpayment shall be made within thirty (30) days after receipt by the Company of such written request. Except for a termination pursuant to Section 3.2(a)(ii), within thirty (30) days after the Date of Termination, Provider shall refund to the Company that portion of Benefits Cost, if any, representing advance payment of the Benefits Cost for the period from the Date of Termination through the end of quarter, plus any outstanding Benefits Cost Overpayment and less any outstanding Benefits Cost Underpayment, as applicable.
(d) The Expenses shall be paid by the Company or a Subsidiary of the Company (including BCH) to Provider within thirty (30) days after receipt from Provider of an invoice, expense report, or other documentation showing in reasonable detail the Expenses so incurred. Notwithstanding the foregoing, Provider may require that an estimate of the Expenses be paid by the Company or a Subsidiary of the Company (including BCH) in advance on a quarterly or monthly basis at Provider’s option (the “Advance Expenses Payment”). In that event, Provider shall provide the Company on at least a quarterly basis with a reconciliation of the Advance Expenses Payments against the Expenses actually incurred by Provider during the reconciliation period. The excess of the Advance Expenses Payments over the Expenses actually incurred by Provider during the reconciliation period (any such amount an “Expenses Overpayment”) shall be applied, without interest, to reduce one or more subsequent Advance Expenses Payment or invoices until repaid in full unless the Company requests in writing that Provider refund all or a portion of the Expenses Overpayment. Any such refund of an Expenses Overpayment shall be made within thirty (30) days after receipt by Provider of such written request. The excess of the Expenses during the reconciliation period over the Advance Expenses Payments (any such amount an “Expenses Underpayment”) at Provider’s option may be applied, without interest, to increase one or more subsequent Advance Expenses Payments until repaid in full or invoiced by Provider to the Company. Any such invoice reflecting an Expenses Underpayment shall be paid by the Company or a Subsidiary of the Company (including BCH) within thirty (30) days after receipt. Within thirty (30) days after the Date of Termination, any outstanding Expenses Overpayment shall be paid by Provider to the Company and any outstanding Expenses Underpayment shall be paid by the Company or a Subsidiary of the Company (including BCH) to Provider.
ARTICLE V.
OTHER OBLIGATIONS OF THE PARTIES
Section 5.1 Office; Access to Systems. The Company shall provide Executive Provider and the Provider Employees, at no cost to Provider, with (a) suitable office space, furniture, and ancillary office equipment at the Company’s facilities and (b) access to the Group’s telephone, voicemail, e-mail, and other information systems, all as may be reasonably necessary to the performance of the Services and at the request of Provider. The Company shall provide such suitable office space for (i) Executive Provider in reasonable proximity to the office of a senior executive of the Company identified by Provider and (ii) each of the Provider Employees in reasonable proximity to the office of other service providers (including employees) identified by Provider who provide the same or similar services to the Group. Notwithstanding the foregoing, Executive Provider and the Provider Employees shall not be provided access to information and records relating to the Company’s assessment of Executive Provider’s performance, any claim against Executive Provider or any Provider Employee, or efforts to retain any replacement to Executive Provider or to perform such work within the Company, or any information or records as to which counsel advises there is a claim of legal privilege that may be waived by allowing Executive Provider or the Provider Employees access to that information or records.
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Section 5.2 Confidential Information. The Parties acknowledge that certain non-public information supplied by each to the other in connection with the performance of the Services may be proprietary or confidential. All such non-public information furnished by the Group to Provider and by Provider to the Group shall be received in confidence and be kept confidential and shall be used only in connection with the performance of the Services or as reasonably necessary to enforce this Agreement, provided that this Section 5.2 shall not prohibit the Group or Provider from disclosing such non-public information as required by law or valid legal process.
ARTICLE VI.
INDEMNIFICATION AND RELATED PROVISIONS
Section 6.1 Disclaimers.
(a) Except as otherwise expressly provided for in this Agreement, PROVIDER DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (i) RELATING TO THE SERVICES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (ii) RELATING TO THE RESULTS TO BE OBTAINED FROM THE SERVICES; AND (iii) THAT THE SERVICES ARE OR WILL BE ERROR-FREE OR NON-INTERRUPTIBLE.
(b) THE GROUP IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES NOT OTHERWISE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT.
Section 6.2 Liability Limitations.
(a) Provider shall not be liable (including any liability for the acts and omissions of any other Indemnitee) to the Group or any member of the Group for any of the Services or any actions taken by the Group or any member of the Group in respect of or in reliance on the Services, except with respect to Provider’s material breach of this Agreement.
(b) Provider shall not be liable (including any liability for the acts and omissions of any other Indemnitee) to the Group or any member of the Group for any operational decisions made by the Group in reliance on any of the Services or on the advice of Executive Provider or the Provider Employees, nor with respect to any action taken by Executive Provider or a Provider Employee under the direction or authority of the Group or any member of the Group.
(c) To the fullest extent permitted by law, Executive Provider shall not owe a fiduciary duty to the Company. To the fullest extent permitted by law, Executive Provider shall only be subject to any contractual standards imposed and existing under this Agreement. To the fullest extent permitted by Nevada Revised Statutes (“NRS”) 78.070(8), by approving this Agreement through action of the Board, the Company renounces any interest in the following classes of business opportunities which may be presented to the Executive Provider: any opportunity to enter into, directly or indirectly, business relationships whether in direct or indirect competition with the Company’s business, provided there has been advance disclosure of the same to the Company.
The Provider is not an officer or director of the Company. Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or in equity, whenever in this Agreement Provider is permitted to or required to make a decision (i) in its “discretion” or “sole discretion” or (ii) pursuant to any provision not subject to an express standard of “good faith”
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(regardless of whether there is a reference to “discretion,” “sole discretion” or any other standard), then Provider (or any Indemnitees causing it to do so), as applicable, in making such decision, shall not be subject to any fiduciary duty and shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Group, any member of the Group or any other person, and shall not be subject to any other or different standards imposed by this Agreement or otherwise existing at law, in equity or otherwise. Notwithstanding the immediately preceding sentence, if a decision or action under this Agreement is to be made or taken by Provider in “good faith,” Provider shall act under that express standard and shall not be subject to any other or different standard under this Agreement or otherwise existing at law, in equity or otherwise. For all purposes of this Agreement and notwithstanding any applicable provision of law or in equity, a determination or other action or failure to act by Provider conclusively will be deemed to be made, taken or omitted to be made or taken in “good faith”, and shall not constitute Cause or be a breach of this Agreement or any other agreement contemplated hereby or otherwise applicable provision of law or in equity, unless Provider subjectively believed such determination, action or failure to act was opposed to the best interests of the Group. In any proceeding in which such action, determination or failure to act is alleged to be made, taken or omitted to be made or taken not in good faith, notwithstanding any provision of law or equity to the contrary, the person or entity making such allegation shall have the burden of proving that such determination, action or failure to act was not in good faith. The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities relating thereto of Provider or any Indemnitee otherwise existing at law or in equity, are agreed by the Company to replace to that extent such other duties and liabilities of Provider or any Indemnitee.
(d) Notwithstanding anything to the contrary set forth in this Agreement or otherwise applicable provision of law or in equity, neither Provider, nor Executive Provider, nor any Indemnitee shall have any fiduciary duties, or to the fullest extent permitted by law, to the extent expressly provided in this Agreement, other duties, obligations or liabilities, to the Group (excepting therefrom the Company as set forth in Section 6.2(c) of this Agreement) in respect of the Services, and, to the fullest extent permitted by law Provider shall only be subject to any contractual standards imposed under this Agreement as to the Group (excepting therefrom the Company as set forth in Section 6.2(c) of this Agreement). Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or in equity, whenever in this Agreement Provider is permitted to or required to make a decision (i) in its “discretion” or “sole discretion” or (ii) pursuant to any provision not subject to an express standard of “good faith” (regardless of whether there is a reference to “discretion,” “sole discretion” or any other standard), then Provider (or any Indemnitees causing it to do so), as applicable, in making such decision, shall not be subject to any fiduciary duty and shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Group, any member of the Group or any other person, and shall not be subject to any other or different standards imposed by this Agreement or otherwise existing at law, in equity or otherwise. Notwithstanding the immediately preceding sentence, with respect to the Group (excepting therefrom the Company as set forth in Section 6.2(c) of this Agreement) if a decision or action under this Agreement is to be made or taken by Provider or Executive Provider in “good faith,” Provider or Executive Provider shall act under that express standard and shall not be subject to any other or different standard under this Agreement or otherwise existing at law, in equity or otherwise. For all purposes of this Agreement and notwithstanding any applicable provision of law or in equity, a determination or other action or failure to act by Provider or Executive Provider conclusively will be deemed to be made, taken or omitted to be made or taken in “good faith”, and shall not constitute Cause or be a breach of this Agreement or any other agreement contemplated hereby or otherwise applicable
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provision of law or in equity, unless Provider or Executive Provider subjectively believed such determination, action or failure to act was opposed to the best interests of the Group. In any proceeding in which such action, determination or failure to act is alleged to be made, taken or omitted to be made or taken not in good faith, notwithstanding any provision of law or equity to the contrary, the person or entity making such allegation shall have the burden of proving that such determination, action or failure to act was not in good faith. The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities relating thereto of Provider or Executive Provider or any Indemnitee otherwise existing at law or in equity, are agreed by the Group (excepting therefrom the Company as set forth in Section 6.2(c) of this Agreement) to replace to that extent such other duties and liabilities of Provider or any Indemnitee.
(e) Provider’s liability for all claims of loss, cost, liability, damage, penalty, fine, judgment, claim or expense (including reasonable attorneys’ fees) incurred by or asserted against Provider or any Indemnitee by the Group or any member of the Group in connection with or arising from (i) the Services; or (ii) any actions taken by Provider or any Indemnitee in connection with such Services or this Agreement, shall be limited to an amount equal to the total Fees paid by the Company to Provider with respect to such Services.
(f) THE LIMITATIONS ON LIABILITY AND THE INDEMNITIES IN THIS AGREEMENT (INCLUDING THIS SECTION 6.2 AND SECTION 6.3) ARE INTENDED TO BE, AND TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SHALL BE, ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.
Section 6.3 Indemnification; Advancement.
(a) Indemnification.
(i) Subject to the limitations set forth in this Section 6.3, each Indemnitee shall be indemnified to the fullest extent permitted by law by the Company against any losses, claims, damages, liabilities, and expenses (including reasonable attorneys’ fees, judgments, fines, penalties and amounts paid in settlement) incurred by or imposed upon it by reason or in connection with any action taken or omitted by such Indemnitee arising out of such Indemnitee’s status as such or its activities on behalf of the Company or any member of the Group, including in connection with any action, suit or proceeding before any judicial, administrative or legislative body or agency to which it may be made a party or otherwise involved or with which it shall be threatened by reason of being or having been an Indemnitee; provided that such Indemnitee either is not liable pursuant to NRS 78.138 or acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any Proceeding that is criminal in nature, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the Indemnitee is liable pursuant to NRS 78.138 or did not act in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal proceeding he or she had reasonable cause to believe that his or her conduct was unlawful. The Company shall not indemnify
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an Indemnitee for any claim, issue or matter as to which the Indemnitee has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for any amounts paid in settlement to the Company, unless and only to the extent that the court in which the Proceeding was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such amounts as the court deems proper. Except as so ordered by a court and for advancement of expenses pursuant to this Section 6.3, indemnification may not be made to or on behalf of an Indemnitee if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of law and was material to the cause of action. In the event that any Person whose capacity is included in the definition of Indemnitee ceases to have such capacity, he, she or it shall continue to be treated as an Indemnitee. The right to indemnification granted by this Section 6.3 shall be in addition to any rights to which each Indemnitee may otherwise be entitled and shall inure to the benefit of the successors or assigns of each Indemnitee.
(ii) BCH shall indemnify and hold harmless Provider from and against any and all losses, damages, liabilities, judgments, awards, penalties, interest, fines, costs and fees or any other expenses of whatever kind, including reasonable attorneys’ fees, incurred by Provider, as a result of any third-party claim, demand, suit, action, investigation, allegation or any other proceeding made in connection with, or otherwise related to, directly or indirectly, any (A) air travel expenses incurred by BCH prior to the Effective Date in connection with the operation of the Dassault Aviation model Falcon 2000 aircraft with manufacturer’s serial number 188 and United States Federal Aviation Administration nationality and registration markings N317M, including all attached or related engines, avionics, equipment, accessories, and records (collectively, the “Aircraft”), or (B) enforcement action, audit, or regulatory action by any governmental body relating to BCH’s use of the Aircraft prior to the Effective Date.
(b) Advancement. To the fullest extent permitted by law and subject to the limitations stated herein, the Company shall pay, or shall cause a member of the Group to pay, the expenses (including reasonable attorneys’ fees and expenses) incurred by each Indemnitee in defending and investigating a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by such Indemnitee to repay such payment if there shall be a final adjudication that it is not entitled to indemnification as provided herein. If a claim for indemnification (following the final disposition of such action, suit or proceeding) or advancement of expenses under this Section 6.3 is not paid in full within thirty (30) days after a written claim therefor by any Indemnitee has been received by the Company, such Indemnitee may file proceedings to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any suit brought by any Indemnitee (or other Person entitled to indemnification hereunder) to enforce a right to indemnification hereunder, it shall be a defense that the Indemnitee or other Person claiming a right to indemnification hereunder has not met the applicable standard of conduct set forth in this Section 6.3. In any suit in the name of the Company to recover expenses advanced pursuant to the terms of an undertaking, the Company shall be entitled to recover such expenses upon final adjudication that the Indemnitee or other Person claiming a right to indemnification hereunder has not met the applicable standard of conduct set forth in this Section 6.3. The Company shall not, and shall cause each member of the Group not to, impose any additional conditions, other than those expressly set forth in this Agreement, to indemnification or the advancement of expenses and shall not, and shall cause each member of the Group not to, seek or agree to any judicial or regulatory bar order that would prohibit any Indemnitee entitled to indemnification or the advancement of
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expenses hereunder from enforcing such Indemnitee’s rights to such indemnification or advancement of expenses. In any such suit brought to enforce a right to indemnification or to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee or other Person claiming a right to indemnification is not entitled to be indemnified or to an advancement of expenses hereunder shall be on the Company (or any Person acting derivatively or otherwise on behalf of the Company.
(c) Duplicative IndemnityObligations. Solely for purposes of clarification, and without expanding the scope of indemnification pursuant to this Section 6.3, the Parties intend that, to the maximum extent permitted by applicable law, as between the Company and its affiliates, this Section 6.3 shall be interpreted to reflect an ordering of liability for potentially overlapping or duplicative indemnification payments, with the Company having primary liability, and any member of the Group, as applicable, having only secondary liability. The possibility that an Indemnitee may, receive indemnification payments from an Entity or any Subsidiary of the Company shall not restrict the Company from making payments under this Section 6.3 to an Indemnitee that is otherwise eligible for such payments, but such payments by the Company are not intended to relieve an Entity or any Subsidiary of the Company from any liability that it would otherwise have to make indemnification payments to such Indemnitee and, if an Indemnitee that has received indemnification payments from the Company actually receives duplicative indemnification payments from an Entity or any Subsidiary of the Company, such Indemnitee shall repay the Company to the extent of such duplicative payments. If, notwithstanding the intention of this Section 6.3(c), an Entity’s or any Subsidiary of the Company’s obligation to make indemnification payments to an Indemnitee is relieved or reduced under applicable law as a result of payments made by the Company pursuant to this Section 6.3, the Company shall have, to the maximum extent permitted by law, a right of subrogation against (or contribution from) such Entity or any Subsidiary of the Company for amounts paid by the Company to an Indemnitee that relieved or reduced the obligation of such Entity or any Subsidiary of the Company to such Indemnitee. Each Indemnitee agrees to execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce any such rights in accordance with the terms of such relevant document. The Company shall pay or reimburse all expenses actually and reasonably incurred by the Indemnitee in connection with such subrogation subject to Section 6.3(b).
(d) Insurance. The Company shall not be liable under this Section 6.3 to make any payment of amounts otherwise indemnifiable hereunder (including judgments, fines and amounts paid in settlement, and excise taxes with respect to an employee benefit plan or penalties) if and to the extent that the applicable Indemnitee has otherwise actually received such payment under this Section 6.3 or any insurance policy, contract, agreement or otherwise. The Company shall include, or cause to be included, Provider as an additional insured under all liability insurance policies maintained by, or for the benefit of, the Company and waive, and require its insurers to waive, any right of subrogation or recovery against Provider. Such policies shall indemnify Provider and the Indemnitees against covered claims and expenses which may be incurred by Provider or any Indemnitee in connection with the activities of the Group in accordance with the terms of such policies.
(e) Applicability; Non-Exclusive Remedy. The provisions of this Section 6.3 shall be applicable to all actions, claims, suits or proceedings made or commenced on or after the Effective Date, whether arising from acts or omissions to act occurring on, before or after the Effective Date. The provisions of this Section 6.3 shall be deemed to be a contract between the Company and each Person entitled to indemnification under this Section 6.3 (or legal representative thereof) who serves in such capacity at any time while this Section 6.3 and the relevant provisions of applicable
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law, if any, are in effect. Any amendment, modification or repeal of this Section 6.3 or subsection hereof shall not affect any rights or obligations then existing with respect to any state of facts or any action, claim, suit or proceeding then or theretofore existing, or any action, suit, claim, demand or proceeding thereafter brought or threatened based in whole or in part on any such state of facts. The rights of indemnification provided in this Section 6.3 shall neither be exclusive of, nor be deemed in limitation of, any rights to which any Person may otherwise be or become entitled or permitted by contract, this Agreement, insurance or as a matter of law, both as to actions in such Person’s official capacity and actions in any other capacity, it being the policy of the Company that indemnification of any Person whom the Company is obligated to indemnify pursuant to Section 6.3(a)(i) shall be made to the fullest extent permitted by law.
(f) For purposes of this Section 6.3, references to “Persons” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a Person with respect to an employee benefit plan; and references to “serving at the written request of Provider or BMC” shall include any service as a director, manager, officer, employee or agent of Provider or BMC which imposes duties on, or involves services by, such director, manager, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Relationship of the Parties. The relationship between Provider and the Group is solely that of independent contractors. Nothing is this Agreement is intended to create, or creates, a partnership, agency, or join venture between Provider and the Group, or an employment relationship between the Group or any member thereof and Executive Provider or the Provider Employees.
Section 7.2 Assignment. No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties. Notwithstanding the preceding sentence, the Company may assign any of its rights or delegate any of its obligations with respect to the provision of the Services to any of the Company’s Subsidiaries, including delegation by the Company to BCH of the Company’s obligations to make the payments to Provider required by this Agreement, but for the avoidance of doubt, such assignment will not relieve the Company of all of its obligations hereunder.
Section 7.3 Governing Law; Jurisdiction; Jury Trial Waiver.
(a) Governing Law. This Agreement is governed by and shall be construed and enforced in accordance with the laws of the State of Nevada, without regard to principles of conflict of laws that would require the application of the law of any other state. The Parties hereby declare that it is their intention that this Agreement shall be regarded as made under the laws of the State of Nevada and that the laws of said State shall be applied in interpreting its provisions in all cases where legal interpretation shall be required.
(b) Submission to Jurisdiction. The Parties hereby (i) submit and consent to the exclusive jurisdiction, including removal jurisdiction, of the state and federal courts located in Clark County, Nevada for any action or proceeding relating to this Agreement or the provision of the Services; (ii) waive any objection to such venue; and (iii) agree that any judgment in any such action or proceeding may be enforced in other jurisdictions.
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(c) Appointment of Agent for Service of Process. The Parties hereby agree (i) to the extent such party is not otherwise subject to service of process in the State of Nevada, to appoint and maintain an agent in the State of Nevada as such Party’s agent for acceptance of legal process, and (ii) that, to the fullest extent permitted by applicable law, service of process may also be made on such Party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service, and that service made pursuant to this (c)(i) or (ii), to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such Party personally within the State of Nevada.
(d) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY AGREES THAT THE JUDGE PRESIDING IN ANY SUCH ACTION OR PROCEEDING, AND NOT A JURY, SHALL DECIDE ANY DISPUTES BETWEEN THEM AND THUS IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR RELATED TO THIS AGREEMENT, ANY PROVISION OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. IN CONNECTION WITH SUCH WAIVER, EACH OF THE PARTIES HEREBY AGREES NOT TO ASK FOR A JURY IN ANY SUCH ACTION OR PROCEEDING.
Section 7.4 Notices. All notices required hereunder shall be in writing and shall be given to such Party at such other Party’s principal executive office, to the attention of such Party’s chief executive officer (or in the case of notice to the Company if Executive Provider is the Company’s chief executive officer, to the Company’s chief financial officer), provided that, in the case of notice by Provider pursuant to Sections 2.2(a) and 3.2, such notice must be executed by or on behalf of the sole or majority interest holder in Provider. Notices shall be sent by (a) registered or certified mail, (b) overnight courier, or (c) hand delivery. To the fullest extent permitted by law, notice shall be deemed given and effective upon receipt (or refusal of receipt).
Section 7.5 Amendment; Waiver. Any amendment of any provision of this Agreement will be valid only if set forth in an instrument in writing signed by both Provider and the Company. No waiver of any provision of this Agreement shall be valid unless signed by the Party waiving compliance. A waiver by a Party of the performance of any covenant, agreement, obligation, condition, representation or warranty will not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any Party of the performance of any act will not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time. Notwithstanding the foregoing, any amendment or waiver of Sections 2.2(a), 3.2, or 7.4 with respect to notice by Provider will be valid only by the authorization of the sole or majority interest holder in Provider.
Section 7.6 Binding Agreement; Third Parties. The provisions of this Agreement are binding upon and are for the benefit of the named Parties and their respective Subsidiaries, affiliates, and successors and permitted assigns, and not for any other person (other than (a) the Indemnitees and (b) Executive Provider with respect to Section 6.3(b)).
Section 7.7 Guarantee by BCH. By its signature below, BCH (“Guarantor”) hereby represents and warrants that it will benefit from the Services and hereby irrevocably and unconditionally guarantees for the benefit of Provider the performance and payment (such guarantee, the “Guarantee”) of all obligations of the Company under this Agreement (collectively, the “Obligations”).
(a) Payment. Without limiting any other right Provider has at law or in equity, Guarantor hereby guarantees the payment in full of, and agrees to pay, the Obligations when and as such amounts become due, and Guarantor will upon demand pay to Provider an amount equal to the sum of all unpaid Obligations then due, including any amounts that would be due but for any proceeding or order listed under Section 7.7(b)(vii).
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(b) Absolute Liability. The Guarantee is a continuing guaranty and shall remain in effect until all of the Obligations have been paid in full to Provider. Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be subject to or affected by any circumstance which may provide or constitute a legal or equitable discharge of a guarantor or surety other than payment of the Obligations in full to Provider. Without limiting the foregoing, Guarantor hereby agrees as follows:
(i) the Guarantee is a guaranty of payment and performance when due and not of collectability;
(ii) the Guarantee is a primary obligation of Guarantor and not merely a contract of surety;
(iii) Provider may enforce the Guarantee upon the occurrence of any Default under this Agreement notwithstanding the existence of any dispute between Provider and the Company with respect to the existence of such Default;
(iv) payment by Guarantor of a portion of the Obligations shall not limit, affect, modify or abridge its liability for any unpaid portion of the Obligations;
(v) the obligations of Guarantor hereunder are independent of the obligations of the Company to Provider, and a separate action or actions may be brought and prosecuted by Provider against Guarantor whether or not any action is brought against the Company and whether or not the Company is joined in any such action or actions;
(vi) the Guarantee and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason other than payment in full of the Obligations, including the occurrence of any of the following, whether or not Guarantor shall have received notice or had knowledge of any of them: (A) any delay, failure or omission to assert or enforce, or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Obligations or any agreement or instrument relating thereto, or with respect to any other guarantee of or security for the payment of the Obligations, (B) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to any default) of this Agreement or any agreement or instrument executed pursuant thereto, or of any other guarantee or security for the Obligations, in each case whether or not in accordance with the terms hereof or of any document relating to such other guaranty or security, (C) the Obligations or any agreement or instrument relating thereto at any time being found to be illegal, invalid or unenforceable in any respect, (D) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Obligations, (E) any claim, counterclaim, deduction, set-off or any other defense or right whatsoever that the Company or any of its affiliates may have at any time against Provider or any of its affiliates, in respect of the Obligations or otherwise and (F) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk to or obligations of Guarantor in respect of the Guarantee; and
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(vii) the Guarantee and the obligations of Guarantor hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Company or by any defense which the Company may have by reason of any order (including any stay or injunction) resulting from any such proceeding.
(c) Waivers. Without limiting the foregoing, to the fullest extent permitted by applicable law, Guarantor hereby waives:
(i) any right to require, as a condition of payment or performance by Guarantor on the Guarantee, Provider to proceed against the Company or to pursue any other remedy whatsoever;
(ii) any defense based on, derived from or arising out of any lack of validity or unenforceability of the Obligations or any agreement or instrument relating thereto, or any cessation of the liability of the Company from any cause other than payment in full of the Obligations;
(iii) the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement hereof;
(iv) any principles or provisions of any statute or rule of law providing for any legal or equitable discharge of Guarantor’s obligations hereunder other than by payment in full of the Obligations;
(v) any rights to set-offs, recoupments and counterclaims against the Company in connection with any enforcement by Provider of the Guarantee;
(vi) any requirement that Provider take any action to protect, secure, perfect or insure any security interest or lien or any property subject thereto;
(vii) any notices, demands, presentments or protests relating to the Obligations or any agreement or instrument relating thereto, and any right to consent to any thereof; and
(viii) any surety defenses or other benefits that may be derived from or afforded by any law which limits the liability of or exonerates guarantors or sureties, or which may conflict with the terms hereof.
Section 7.8 Further Assurances. The Parties agree, upon the reasonable request of the other, to execute, acknowledge, and deliver any and all such further instruments, and to do and perform any and all such other acts as may be necessary or appropriate in order to carry out the intent and purposes of this Agreement.
Section 7.9 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and from and after the Effective Date supersedes all prior negotiations, agreements, and understandings with respect thereto; provided, that this Agreement shall not affect the rights of any Party that have accrued under the First Amended and Restated Services Agreement prior to the Effective Date.
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Section 7.10 Headings. The headings of Articles and Sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
Section 7.11 Counterparts; Electronic Signatures. This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed an original, and such counterparts together shall constitute one and the same instrument. Any of the Parties may execute this Agreement with an electronic signature. Facsimile or scanned and emailed transmission of any signed original document or retransmission of any signed facsimile or scanned and emailed transmission will be deemed the same as delivery of an original. At the request of any Party, the Parties will confirm facsimile or scanned and emailed transmission by signing a duplicate original document.
Section 7.12 Code Section 409A. The payments and benefits provided under this Agreement are intended to be exempt from Section 409A of the Code and this Agreement shall be interpreted and administered in a manner consistent with that intent.
[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement to be effective as of the Effective Date.
| PROVIDER: | COMPANY: | ||
|---|---|---|---|
| BRADLEY CAPITAL COMPANY, LLC | BENEFICIENT | ||
| By: | /s/ Jamie Crable | By: | /s/ James G. Silk |
| Name: | Jamie Crable | Name: | James G. Silk |
| Title: | Authorized Signatory | Title: | Executive Vice President & Chief Legal Officer |
| BMC: | BCH: | ||
| BENEFICIENT MANAGEMENT COUNSELORS, L.L.C | BENEFICIENT COMPANY HOLDINGS, L.P. | ||
| By: Beneficient Company Group, L.L.C., its general partner | |||
| By: | /s/ Jamie Crable | ||
| Name: | Jamie Crable | By: Beneficient, **** its managing member | |
| Title: | Authorized Signatory | ||
| By: | /s/ James G. Silk | ||
| Name: | James G. Silk | ||
| Title: | Executive Vice President & Chief Legal Officer |
Signature Page
Services Agreement
SCHEDULE A
Services
Executive Services: If the Executive Provider is serving as the Company’s Chief Executive Officer, the Executive Services shall mean such executive-level services customarily performed by the Company’s Chief Executive Officer consistent with the Company’s Bylaws. If the Executive Provider is not serving as the Company’s Chief Executive Officer, the Executive Services shall mean any such services as the Board reasonably requests. The Executive Services shall also include making recommendations to the Board or a designated committee thereof with respect to the charitable initiatives undertaken by the Group.
Other Services: Administrative and financial analysis services reasonably necessary to the performance of the Executive Services as determined by Provider it is sole discretion.
Executive Provider
Brad K. Heppner
Fee
Initial base Fee = $460,000.00 for each calendar-year quarter.
Initial supplemental Fee = $180,000.00 for each calendar-year quarter.
The Fee shall be adjusted on an annual basis by the percent equal to the percentage increase, if any, in the level of the CPI-U (or its most comparable successor, as published by the United States Department of Labor, Bureau of Labor Statistics) from December to December.
Retirement/Disability Benefits Cost
$150,000.00 annually. The Retirement/Disability Benefits Cost shall or may be adjusted as follows:
(i) The Retirement/Disability Benefits Cost shall be adjusted on a quarterly basis to reflect any increase or decrease in the actual cost of providing such benefits.
(ii) At Provider’s option, the cash retirement benefits paid by Provider may be adjusted on an annual basis by the percent equal to the percentage increase, if any, in the level of the CPI-U (or its most comparable successor, as published by the United States Department of Labor, Bureau of Labor Statistics) from December to December, provided that such benefits are either not subject to, or such adjustment would not result in, reduction or elimination of benefits to which the individual is entitled to receive under a federally-sponsored retirement or disability program.
Schedule A
Services Agreement
EX-10.14
Exhibit 10.14
TERMINATION OF DIRECTOR AGREEMENT
THIS TERMINATION OF DIRECTOR AGREEMENT (this “Termination Agreement”) is made and entered into as of June 6, 2023, by and among Beneficient Management, L.L.C. (“Ben Management”), The Beneficient Company Group, L.P. (“BCG”), Beneficient Management Counselors, L.L.C. (“Counselors”), Beneficient Holdings, Inc. (“BHI”) and James G. Silk (the “Director,” and together with Ben Management, BCG, Counselors and BHI, the “Parties” and each, a “Party”).
RECITAL
A. Director, Counselors and the other parties specified therein have entered into that certain letter agreement (the “Director Agreement”) dated December 31, 2019 setting forth the terms and conditions under which Director agreed to serve as (i) a director of Ben Management, which serves as the general partner of BCG and (ii) a trustee of The Beneficient Company Trust (the “Trust”), which is the sole member of Ben Management;
B. Effective September 21, 2022, (i) BCG, (ii) Avalon Acquisition, Inc., (iii) Beneficient Merger Sub I, Inc., a direct, wholly-owned subsidiary of BCG, and (iv) Beneficient Merger Sub II, LLC, a direct, wholly-owned subsidiary of BCG, entered into that certain Business Combination Agreement (as it may be amended from time to time, the “BCA”);
C. The BCA contemplates, among other things, that BCG will convert from a Delaware limited partnership to a Nevada corporation (the “Conversion”) to be named “Beneficient” (the “Corporation”) and that upon the consummation of the transactions contemplated by the BCA, it is anticipated that the Corporation will become a publicly-held company subject to the reporting obligations of Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with shares of the Corporation’s Class A common stock, $0.001 par value per share (the “Class A Common Stock”) being registered pursuant to Section 12(b) of the Exchange Act and listed for trading on The NASDAQ Stock Market; and
D. It is contemplated that Director will be appointed as a director of the Corporation, and in connection therewith, the Parties desire to enter into this Termination Agreement setting forth the terms under which the Director Agreement will be terminated effective as of the effectiveness of the Conversion of BCG into the Corporation.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledge, the Parties agree as follows:
Termination. Effective immediately upon the Conversion, and contingent upon the Conversion, the Director Agreement shall terminate; provided that (a) Director shall continue to serve as a trustee of the Trust until his successor is elected or appointed or qualified or until his earlier resignation or removal, and (b) Director’s employment by The Beneficient Company Group (USA), L.L.C. shall not be effected by the termination of Director’s position as a director of Ben Management.
Condition. The Parties acknowledge and agree that this Termination Agreement is subject to and conditioned upon the Conversion and shall not take effect until the consummation of the Conversion in accordance with the terms and conditions of the BCA.
Authority. Each Party executing this Termination Agreement hereby represents and warrants that (a) it has the full right, power, and authority to executive this Termination Agreement and perform its obligations hereunder; (b) the terms, covenants and obligations contained herein are binding upon it; and (c) the execution of this Termination Agreement by the individual whose signature is set forth on the signature pages hereto on behalf of such Party, and the delivery of this Termination Agreement by such Party, has been duly authorized by all necessary action on the part of such Party.
Entire Agreement. This Termination Agreement supersedes all prior agreements, whether written or oral, of the Parties hereto with respect to the subject matter contained herein among the Parties (including, without limitation, the Director Agreement); provided, that this Termination Agreement does not impair the rights or obligations under the Director Agreement that have accrued prior to the effectiveness of this Termination Agreement or which by their nature or terms survive the termination of the Director Agreement.
Governing Law. This Termination Agreement is made in, and shall be governed, enforced and construed under the laws of the State of Texas without regard to any conflict of law provisions of any jurisdiction.
Counterparts. This Termination Agreement may be executed in one or more counterparts, each of which, including those received via facsimile transmission or email (including in PDF format), shall be deemed an original, and all of which shall constitute one and the same Termination Agreement.
Successors and Assigns. This Termination Agreement shall be binding upon, and inure to the benefit of the Parties hereto and each of their respective permitted successors, assigns, heir, executors and administrators.
2
IN WITNESS WHEREOF, the Parties have executed this Termination Agreement as of the date first written above.
| BENEFICIENT MANAGEMENT, L.L.C. | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| THE BENFICIENT COMPANY GROUP, L.P. | |
| By: | BENEFICIENT MANAGEMENT, L.L.C., its sole general partner |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| BENEFICIENT MANAGEMENT COUNSELORS, L.L.C. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| BENEFICIENT HOLDINGS INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| JAMES G. SILK | |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
[ Signature Page to Termination of Director Agreement]
EX-10.15
Exhibit 10.15
TERMINATION OF DIRECTOR AGREEMENT
THIS TERMINATION OF DIRECTOR AGREEMENT (this “Termination Agreement”) is made and entered into as of June 6, 2023, 2023, by and among Beneficient Management, L.L.C. (“Ben Management”), The Beneficient Company Group, L.P. (“BCG”), Beneficient Management Counselors, L.L.C. (“Counselors”), Beneficient Holdings, Inc. (“BHI”) and Derek L. Fletcher (the “Director,” and together with Ben Management, BCG, Counselors and BHI, the “Parties” and each, a “Party”).
RECITAL
A. Director, Counselors and the other parties specified therein have entered into that certain letter agreement (the “Director Agreement”) dated July 21, 2020 setting forth the terms and conditions under which Director agreed to serve as (i) a director of Ben Management, which serves as the general partner of BCG and (ii) a trustee of The Beneficient Company Trust (the “Trust”), which is the sole member of Ben Management;
B. Effective September 21, 2022, (i) BCG, (ii) Avalon Acquisition, Inc., (iii) Beneficient Merger Sub I, Inc., a direct, wholly-owned subsidiary of BCG, and (iv) Beneficient Merger Sub II, LLC, a direct, wholly-owned subsidiary of BCG, entered into that certain Business Combination Agreement (as it may be amended from time to time, the “BCA”);
C. The BCA contemplates, among other things, that BCG will convert from a Delaware limited partnership to a Nevada corporation (the “Conversion”) to be named “Beneficient” (the “Corporation”) and that upon the consummation of the transactions contemplated by the BCA, it is anticipated that the Corporation will become a publicly-held company subject to the reporting obligations of Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with shares of the Corporation’s Class A common stock, $0.001 par value per share (the “Class A Common Stock”) being registered pursuant to Section 12(b) of the Exchange Act and listed for trading on The NASDAQ Stock Market; and
D. It is contemplated that Director will be appointed as a director of the Corporation, and in connection therewith, the Parties desire to enter into this Termination Agreement setting forth the terms under which the Director Agreement will be terminated effective as of the effectiveness of the Conversion of BCG into the Corporation.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledge, the Parties agree as follows:
Termination. Effective immediately upon the Conversion, and contingent upon the Conversion, the Director Agreement shall terminate; provided that (a) Director shall continue to serve as a trustee of the Trust until his successor is elected or appointed or qualified or until his earlier resignation or removal, and (b) Director’s employment by The Beneficient Company Group (USA), L.L.C. shall not be effected by the termination of Director’s position as a director of Ben Management.
Condition. The Parties acknowledge and agree that this Termination Agreement is subject to and conditioned upon the Conversion and shall not take effect until the consummation of the Conversion in accordance with the terms and conditions of the BCA.
Authority. Each Party executing this Termination Agreement hereby represents and warrants that (a) it has the full right, power, and authority to executive this Termination Agreement and perform its obligations hereunder; (b) the terms, covenants and obligations contained herein are binding upon it; and (c) the execution of this Termination Agreement by the individual whose signature is set forth on the signature pages hereto on behalf of such Party, and the delivery of this Termination Agreement by such Party, has been duly authorized by all necessary action on the part of such Party.
Entire Agreement. This Termination Agreement supersedes all prior agreements, whether written or oral, of the Parties hereto with respect to the subject matter contained herein among the Parties (including, without limitation, the Director Agreement); provided, that this Termination Agreement does not impair the rights or obligations under the Director Agreement that have accrued prior to the effectiveness of this Termination Agreement or which by their nature or terms survive the termination of the Director Agreement.
Governing Law. This Termination Agreement is made in, and shall be governed, enforced and construed under the laws of the State of Texas without regard to any conflict of law provisions of any jurisdiction.
Counterparts. This Termination Agreement may be executed in one or more counterparts, each of which, including those received via facsimile transmission or email (including in PDF format), shall be deemed an original, and all of which shall constitute one and the same Termination Agreement.
Successors and Assigns. This Termination Agreement shall be binding upon, and inure to the benefit of the Parties hereto and each of their respective permitted successors, assigns, heir, executors and administrators.
2
IN WITNESS WHEREOF, the Parties have executed this Termination Agreement as of the date first written above.
| BENEFICIENT MANAGEMENT, L.L.C. | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| THE BENFICIENT COMPANY GROUP, L.P. | |
| By: | BENEFICIENT MANAGEMENT, L.L.C., its sole general partner |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| BENEFICIENT MANAGEMENT COUNSELORS, L.L.C. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| BENEFICIENT HOLDINGS INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| DEREK L. FLETCHER | |
| By: | /s/ Derek L. Fletcher |
| Name: | Derek L. Fletcher |
[ Signature Page to Termination of Director Agreement]
EX-10.16
Exhibit 10.16
TERMINATION OF NON-EMPLOYEE DIRECTOR AGREEMENT
THIS TERMINATION OF NON-EMPLOYEE DIRECTOR AGREEMENT (this “Termination Agreement”) is made and entered into as of June 6, 2023, by and among Beneficient Management, L.L.C. (“Ben Management”), The Beneficient Company Group, L.P. (“BCG”) and Emily B. Hill (the “Director,” and together with Ben Management and BCG, the “Parties” and each, a “Party”).
RECITAL
A. Director, Ben Management and the other parties specified therein have entered into that certain letter agreement (the “Non-Employee Director Agreement”) dated March 31, 2022 setting forth the terms and conditions under which Director agreed to serve as (i) a director of Ben Management, which serves as the general partner of BCG, (ii) a trustee of The Beneficient Company Trust (the “Trust”), which is the sole member of Ben Management, (iii) a manager of Beneficient Fiduciary Financial, L.L.C. (“BFF”) and (iv) a manager of Beneficient Insurance Company, L.L.C. (“BIC”);
B. Effective September 21, 2022, (i) BCG, (ii) Avalon Acquisition, Inc., (iii) Beneficient Merger Sub I, Inc., a direct, wholly-owned subsidiary of BCG, and (iv) Beneficient Merger Sub II, LLC, a direct, wholly-owned subsidiary of BCG, entered into that certain Business Combination Agreement (as it may be amended from time to time, the “BCA”);
C. The BCA contemplates, among other things, that BCG will convert from a Delaware limited partnership to a Nevada corporation (the “Conversion”) to be named “Beneficient” (the “Corporation”) and that upon the consummation of the transactions contemplated by the BCA, it is anticipated that the Corporation will become a publicly-held company subject to the reporting obligations of Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with shares of the Corporation’s Class A common stock, $0.001 par value per share (the “Class A Common Stock”) being registered pursuant to Section 12(b) of the Exchange Act and listed for trading on The NASDAQ Stock Market; and
D. It is contemplated that (i) Director will be appointed as a director of the Corporation, and (ii) the Corporation will adopt a director compensation policy, and in connection therewith, the Parties desire to enter into this Termination Agreement setting forth the terms under which the Non-Employee Director Agreement will be terminated effective as of the effectiveness of the Conversion of BCG into the Corporation.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledge, the Parties agree as follows:
Termination. Effective immediately upon the Conversion, and contingent upon the Conversion, the Non-Employee Director Agreement shall terminate; provided that (a) Director shall continue to serve as a trustee of the Trust, a manager of BFF and a manager of BIC, in each case until her respective successors are elected or appointed or qualified or until her earlier resignation or removal, and (b) BCG, or the Corporation as its successor following the Conversion, will assume certain obligations under Section 4(b) of the Non-Employee Director Agreement such that if as of the date the common units of BCG, or the Class A Common Stock of the Corporation, as the successor of BCG, become listed and traded on The NASDAQ Stock Market (the “Listing Date”) the fair market value of the common units or Class A Common Stock subject to the REUs is less than $500,000.00, then BCG, or the Corporation as the successor of BCG, shall cause to be granted to the Director additional REUs (or restricted stock units) such that the total fair market value of the common units (or shares of Class A Common Stock), as of the Listing Date, subject to the REUs (and/or restricted stock units) equals $500,000.00. Any such additional REUs (or restricted stock units) will be settled at the same time as the original REUs.
Condition. The Parties acknowledge and agree that this Termination Agreement is subject to and conditioned upon the Conversion and shall not take effect until the consummation of the Conversion in accordance with the terms and conditions of the BCA.
Authority. Each Party executing this Termination Agreement hereby represents and warrants that (a) it has the full right, power, and authority to executive this Termination Agreement and perform its obligations hereunder; (b) the terms, covenants and obligations contained herein are binding upon it; and (c) the execution of this Termination Agreement by the individual whose signature is set forth on the signature pages hereto on behalf of such Party, and the delivery of this Termination Agreement by such Party, has been duly authorized by all necessary action on the part of such Party.
Entire Agreement. This Termination Agreement supersedes all prior agreements, whether written or oral, of the Parties hereto with respect to the subject matter contained herein among the Parties (including, without limitation, the Non-Employee Director Agreement); provided, that this Termination Agreement does not impair the rights or obligations under the Non-Employee Director Agreement that have accrued prior to the effectiveness of this Termination Agreement or which by their nature or terms survive the termination of the Non-Employee Director Agreement.
Governing Law. This Termination Agreement is made in, and shall be governed, enforced and construed under the laws of the State of Texas without regard to any conflict of law provisions of any jurisdiction.
Counterparts. This Termination Agreement may be executed in one or more counterparts, each of which, including those received via facsimile transmission or email (including in PDF format), shall be deemed an original, and all of which shall constitute one and the same Termination Agreement.
Successors and Assigns. This Termination Agreement shall be binding upon, and inure to the benefit of the Parties hereto and each of their respective permitted successors, assigns, heir, executors and administrators.
2
IN WITNESS WHEREOF, the Parties have executed this Termination Agreement as of the date first written above.
| BENEFICIENT MANAGEMENT, L.L.C. | |
|---|---|
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Executive Vice President and Chief Legal Officer |
| THE BENFICIENT COMPANY GROUP, L.P. | |
| By: | BENEFICIENT MANAGEMENT, L.L.C., its sole general partner |
| By: | /s/ James G. Silk |
| Name: | James G. Silk |
| Title: | Authorized Signatory |
| BENEFICIENT MANAGEMENT COUNSELORS, L.L.C. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| BENEFICIENT HOLDINGS INC. | |
| By: | /s/ Jamie Crable |
| Name: | Jamie Crable |
| Title: | Authorized Signatory |
| EMILY B. HILL | |
| By: | /s/ Emily B. Hill |
| Name: | Emily B. Hill |
[ Signature Page to Termination of Non-Employee Director Agreement]
EX-10.17
Exhibit 10.17
June 7, 2023
Bruce W. Schnitzer
89 South Street
PO Box 1107
Litchfield, CT 06759
| Re: | Consulting Agreement |
|---|
Dear Bruce:
This letter (the “Agreement”) sets forth the principal terms and conditions under which Bruce W. Schnitzer (“you” or “Consultant”) has agreed to serve as a consultant to Beneficient, a Nevada corporation (“Beneficient”) and its subsidiaries, including Beneficient Company Holdings, L.P. (“Holdings”). This Agreement is effective as of June 7, 2023 (the “Effective Date”) and replaces and supersedes, in accordance with the terms hereof, that certain letter agreement dated September 13, 2017 among Beneficient Management, LLC (“Ben Management”), Beneficient Management Group, LLC and Consultant (the “Prior Agreement”).
- Position; Duties and Responsibilities. Effective as of the Effective Date and during the Term (as defined below), you agree to serve as a consultant to Beneficient and its subsidiaries (collectively, “Ben”) and to be reasonably available to mentor, advise and support the efforts of Ben’s current Chief Executive Officer to grow Ben and its related entities into the leading provider of services, insurance, liquidity and financing for alternative assets held by medium and high net worth individuals and institutional investors. During the Term, you also may be appointed to, and agree to serve if appointed, in other roles including serving as a member on the Board of Directors of Beneficient and its committees for separate consideration established by Beneficient from time to time. As a consultant, you will not be an employee of Beneficient or any Ben-related entities (collectively the “Ben Entities”) and thus will not be eligible to participate in any employee benefits plans or programs except as may otherwise be permitted in your role as a director of Beneficient.
In your position as a consultant, you agree (i) to comply with the personnel, ethical, and operational policies and procedures of the Ben Entities that are made available to you, including codes of conduct, regulatory compliance policies, and policies and procedures addressing insider trading, conflicts of interest, the protection of confidential information, and expense reimbursement, (ii) to cooperate with any investigation or inquiry authorized by the Ben Entities or conducted by a governmental authority related to the business of the Ben Entities, and (iii) to present to the Board of Directors of Beneficient business opportunities or ventures known to you, independently or with others, that are within the purposes of any of the Ben Entities, including without limitation opportunities that may compete with any of the Ben Entities, provided that this subsection (iii) shall not apply to opportunities or ventures that are directly related to the Approved Activities (as defined below).
Mr. Bruce W. Schnitzer
June 7, 2023
Page 2
Term. The term of your consulting role under this Agreement shall begin on the Effective Date and shall continue in effect for one year following the Effective Date (the “Initial Term”), unless earlier terminated by either Beneficient or Consultant in accordance with paragraph 3. Upon the expiration of the Initial Term, the Agreement will automatically renew, subject to earlier termination as herein provided, for successive one-year periods (each, an “Additional Term”), unless either Consultant or Beneficient provides notice of non-renewal at least 90 days prior to the expiration of the Initial Term or the then Additional Term, whichever is applicable. The Initial Term and any Additional Term(s) shall be referred to collectively as the “Term.”
Termination of the Term Before Expiration. The Term will be terminated before it expires in the following circumstances:
(a) *You resign for any reason from any of your positions as a Consultant or director of Beneficient for any reason before the Term expires.*To resign as a consultant hereunder, you must submit a resignation letter to the Chief Executive Officer of Beneficient. The resignation letter must set forth the effective date of the resignation, which date must be not later than 30 days after the letter is delivered. The Chief Executive Officer may accept your resignation earlier but doing so will not change the nature or character of the resignation. To resign as a director of Beneficient, you will need to comply with the policies, if any, established by the Board of Directors of Beneficient. If you resign from one position, you will be considered to have resigned from all positions you then hold with any of the Ben Entities unless you and the governing body of the entity in which you hold another position otherwise agree in writing.
(b) You are not re-elected or re-appointed as a director of Beneficient for any reason during the Term. If this happens, you will be considered to have resigned from all positions you then hold with any of the Ben Entities.
(c) The Term also will be terminated immediately upon your death.
- Compensation; Equity.
(a) During the Term, for so long as you continue to serve as a Consultant, your exclusive compensation for serving as a consultant (other than reimbursement for expenses pursuant to established policy or the prior written approval of Beneficient’s Chief Executive Officer) shall be the amount of $150,000 per year (prorated for any partial period) (the “Consulting Fee”). The Consulting Fee will be paid in quarterly installments on the first business day of each calendar quarter; provided that the initial payment will be paid on the date you would have otherwise received a payment pursuant to the Prior Agreement, but for its termination hereunder. If the Term is terminated before it expires because you are not re-elected or re-appointed as a director of Beneficient other than for Cause (defined below), the Consulting
Mr. Bruce W. Schnitzer
June 7, 2023
Page 3
Fee will continue to be paid to you through the date the Term would have expired had your service as a director not been sooner ended. “Cause” for purposes of this Agreement has the definition given to that term in the Beneficient Management Partners, L.P. 2017 Equity Incentive Plan (as amended or replaced by the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan, the “BMP Plan”) and in addition includes the request of any federal, state or local court or governmental or regulatory agency or authority, including, without limitation, the Kansas Office of the State Bank Commissioner, having jurisdiction over any Ben Entity that you be removed or not re-elected or re-appointed as a director.
(i) Restricted Equity Units. Pursuant to the Prior Agreement, you were previously granted the number of restricted equity units (“REUs”) under The Beneficient Company Group, L.P. 2017 Equity Incentive Plan (as amended, the “Ben EIP”) representing common units in The Beneficient Company Group, L.P. (“BCG”) with a fair market value, as determined by the Board of Ben Management in its sole discretion as of the date of grant, equal to $1,000,000.00. If as of the date the common units of BCG (or the Class A common stock, $0.001 par value per share, of Beneficient (the “Class A Common Stock,”) as the successor of BCG) become listed and traded on the New York Stock Exchange or The NASDAQ Stock Market (the “Listing Date”) the fair market value of the common units of BCG, or the Class A Common Stock of Beneficient, as the successor of BCG, subject to the REUs is less than $1,000,000.00, then Beneficient agrees to cause to be granted to you additional REUs (or restricted stock units) such that the total fair market value of the common units (or shares of Class A Common Stock), as of the Listing Date, subject to the REUs (and restricted stock units) equals $1,000,000.00. Any such additional REUs (or restricted stock units) will be settled at the same time as the original REUs.
(ii) Participating Interest. Pursuant to the Prior Agreement, you were previously granted 13.5% of the Participating Interests available for grant under the BMP Plan. Pursuant to the Prior Agreement, it was agreed that (A) your percentage of Participating Interests would not be diluted during the term of the Prior Agreement without mutual agreement, (B) if the term of the Prior Agreement ends early because you are not re-elected or re-appointed as a director of Ben Management other than for Cause, your percentage of Participating Interests would not be diluted for the remainder of the original seven-year term of the Prior Agreement without your consent, and (C) at the end of the term of the Prior Agreement or upon such earlier end of your service for any reason other than for Cause, your Participating Interest would be redeemed by BMP pursuant to the terms and conditions of the BMP Plan. Upon the effectiveness of this Agreement, Beneficient agrees to comply with, or cause other Ben Entities to comply with, the terms of the Prior Agreement as it relates to the award of the Participating Interests under the BMP Plan.
Mr. Bruce W. Schnitzer
June 7, 2023
Page 4
- Confidential Information.
(a) During the term of the Prior Agreement, you have had access, and during the Term of this Agreement, you will continue to have access to Confidential Information (as defined below) that is unique, proprietary, and valuable to the Ben Entities (and former related entities) and the improper use or unauthorized disclosure of which could result in irreparable harm to the Ben Entities, their goodwill, and their competitive position in the marketplace. Accordingly, you agree that at all times during the Term and thereafter (i) all Confidential Information shall remain and be the sole and exclusive property of the Ben Entities; (ii) you will protect and safeguard all Confidential Information; (iii) except as compelled by law or valid legal process or as authorized by the Ben Entities, you will hold all Confidential Information in strictest confidence and not, directly or indirectly, (X) use any such Confidential Information for your own or a third-party’s advantage, benefit, or gain or (Y) disclose or divulge any Confidential Information to any person other than an officer, director, or employee of, or legal counsel for, the Ben Entities, or other person authorized to receive such information and under an obligation of confidentiality, and then only to the extent necessary for the proper performance of the your duties and responsibilities and consistent with the purposes for which it was provided to you; (iv) if you believe you are compelled by law or valid legal process to disclose or divulge any Confidential Information, you will notify the Chief Executive Officer and General Counsel of Beneficient in writing sufficiently in advance of any such disclosure to allow the Ben Entities the opportunity to defend, limit, or otherwise protect their interests against such disclosure; and (v) you will not ask, direct, or authorize another to take any action that would be prohibited by this paragraph 5 if undertaken by you.
(b) You further agree that (i) upon the expiration or termination of the Term for any reason or at the request of Beneficient at any time, you will immediately return to the Ben Entities (or, with the written consent of the Chief Executive Officer of Beneficient, destroy) all Confidential Information and all copies thereof, in whatever tangible form or medium, including electronic or digital, (ii) you will immediately notify Beneficient if you learn of or suspect any loss or unauthorized disclosure or destruction of any Confidential Information and provide Beneficient with an itemized list or description of the items that were or may have been lost, disclosed, or destroyed and a written statement of the facts surrounding such loss, disclosure, or destruction, and (iii) your obligations under this paragraph 5 are in addition to any applicable contractual, statutory, or common-law obligations and survive the termination of this Agreement.
(c) Notwithstanding the foregoing, nothing in this Agreement is intended to, or does, prohibit you from (i) reporting to, communicating with, responding to an inquiry from, cooperating with, providing truthful information to, or otherwise participating or assisting in or cooperating with an investigation being conducted by any governmental agency or regulatory body (such as the U.S. Department of Justice or the Securities and Exchange Commission) regarding a possible or alleged violation of law or regulation and without prior authorization of or notice to the Ben Entities, (ii) giving truthful testimony or making statements under oath in response to a subpoena or other valid legal process or in any legal proceeding; (iii) otherwise making truthful statements as required by law or valid legal process, (iv) otherwise engaging in activities protected by federal, state, or local law, or (v) pursuant to 18 U.S.C. § 183(b), disclosing a trade secret in confidence to a governmental official, directly or indirectly, or to an attorney, if the disclosure is made solely for the purpose of reporting or investigating a suspected violation of law, or if the disclosure is made in a document filed under seal in a lawsuit or other proceeding, and a party cannot be held criminally or civilly liable under any federal or state trade secret law for such a disclosure.
Mr. Bruce W. Schnitzer
June 7, 2023
Page 5
(d) For purposes of this Agreement, “Confidential Information” means (i) all material nonpublic information about any of the Ben Entities (which, for purposes of this definition, shall also include BCG and former subsidiaries of BCG); (ii) any “trade secret” as defined by federal and applicable state law; and (iii) all other confidential or proprietary information or trade secrets of or relating to the Ben Entities and their current, past, future, or prospective owners, investors, business partners, customers, vendors, and suppliers or otherwise provided to the Ben Entities under an obligation or expectation of confidential treatment. “Confidential Information” includes all documents or information (in whatever form or medium, and all copies thereof whether or not the original was deleted or destroyed) conceived, originated, discovered, or developed in whole or in part by you, otherwise disclosed to or obtained by you, or to which you have access in connection with the performance of services to the Ben Entities concerning or evidencing operations; processes; products; business practices; finances; strategies; modes of doing business; development, acquisition, or divestment plans; any proposed business transactions; officers, directors, shareholders; investors, business partners, customers, vendors, and suppliers; marketing methods; costs, prices, contractual relationships; legal or regulatory status; confidential or personal information about personnel (such as medical or banking records or information and including compensation, other terms of employment, or performance information other than as concerns solely you), but excluding any such documents or information (X) that is or becomes generally available to the public other than as a result of any breach of this Agreement, the Prior Agreement or other unauthorized disclosure by you or another with an obligation not to disclose such information or (Y) becomes available to you after the termination of this Agreement on a nonconfidential basis from a source who is not bound by a contractual or legal duty of confidentiality to the Ben Entities and who is authorized to make the disclosure to you.
6. Remedies and Reformation.
(a) You acknowledge and agree that the Ben Entities would not have an adequate remedy at law and would be irreparably harmed in the event that any of the provisions of paragraph 5 were not performed in accordance with their specific terms or were otherwise breached. Accordingly and notwithstanding paragraph 9, you agree that the Ben Entities shall be entitled to equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, in the event you breach or threaten to breach any of the provisions of such paragraph, without the necessity of posting any bond or proving special damages or irreparable injury. Such remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of such paragraph by you, but shall be in addition to all other
Mr. Bruce W. Schnitzer
June 7, 2023
Page 6
remedies available to the Ben Entities at law or equity. In addition, the Ben Entities shall be entitled to recover their reasonable attorneys’ fees and all costs and expenses associated with the enforcement of paragraph 5. You further acknowledge and agree that any of the Ben Entities (on behalf of themselves and any of the other Ben Entities) may seek to enforce any of the provisions of paragraph 5 and you will not assert that any such entity seeking to enforce such provisions is not a proper party or that any remedy may not be awarded to such entity.
(b) If any of the provisions of paragraph 5 are ever deemed by a court to be unenforceable as written under applicable law, such provisions shall be, and are, automatically reformed to the maximum limitations permitted by applicable law.
(c) You further agree that the existence of a claim or cause of action against any of the Ben Entities, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Ben Entities of your obligations under paragraph 5.
Termination of the Agreement and Effect Thereof. This Agreement, once effective, will terminate on the first to occur of the expiration of the Term or the termination of the Term before it expires. Termination of this Agreement does not impair the rights or obligations that have accrued prior to the termination or which by their nature or terms survive the termination.
Governing Law. This Agreement and any claim arising hereunder (whether based in contract or tort) shall be governed by and construed in accordance with the internal laws of the State of Texas, without giving effect to its conflicts of laws or principles.
Arbitration.
(a) Subject to paragraph 6, any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this paragraph 9) shall be finally settled by arbitration conducted by a single arbitrator in Dallas, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Except as required by law or as may be reasonably required in connection with ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm or challenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall not disclose any awards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party in the proceedings not otherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court having jurisdiction thereover.
Mr. Bruce W. Schnitzer
June 7, 2023
Page 7
(b) Notwithstanding subsection (a), the Ben Entities may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling arbitration, seeking temporary or preliminary relief in aid of an arbitration hereunder, enforcing an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6, and you expressly consent to the application of subsection (c) to any such action or proceeding.
(c) YOU AND EACH OF THE Ben ENTITIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRAIL AND SUBMIT TO THE EXCLUSIVE JURISDICTION, INCLUDING REMOVAL JURISDICTION, OF THE U.S. FEDERAL AND STATE COURTS LOCATED IN DALLAS, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 6 AND 9, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, to confirm or challenge an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6. You and the Ben Entities acknowledge that the forums designated by this subsection (c) have a reasonable relation to this Agreement and to the parties’ relationship with one another. You and the Ben Entities hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding referred to in paragraph 6 or 9 brought in any court referenced therein and agree not to plead or claim the same.
- Entire Agreement.
(a) This Agreement sets forth the entire agreement of you and any of the Ben Entities concerning its subject matter and supersedes all prior agreements and understandings, including the Prior Agreement; provided, that this Agreement does not impair the rights or obligations under the Prior Agreement that have accrued prior to the Effective Date or which by their nature or terms survive the termination of the Prior Agreement.
(b) The parties hereto acknowledge and agree that, subject to the provisions of paragraph 10(a) above, upon the full execution of this Agreement and as of the Effective Date, the Prior Agreement shall be terminated.
Mr. Bruce W. Schnitzer
June 7, 2023
Page 8
- Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the you and by a duly authorized officer of Beneficient, and such waiver is set out in writing and signed by the party to be charged; and (ii) no waiver by a party or failure to enforce or insist on its or his rights under this Agreement shall constitute a waiver or abandonment of any such rights or defense to enforcement of such rights, and a waiver on one occasion shall not be deemed to be a waiver of the same or any other type of breach on a future occasion.
If this letter accords with your understanding of our agreement, please sign below and return a signed and dated copied to my attention.
| Sincerely, |
|---|
| /s/ Brad K. Heppner |
| Brad K. Heppner, Chief Executive Officer of Beneficient |
| AGREED: |
| --- |
| /s/ Bruce W. Schnitzer |
| Bruce W. Schnitzer |
| June 7, 2023 |
| Date Signed |
EX-10.18
Exhibit 10.18
June 7, 2023
Richard W. Fisher
5343 Waneta Drive
Dallas, TX 75209
| Re: | Consulting Agreement |
|---|
Dear Richard:
This letter (the “Agreement”) sets forth the principal terms and conditions under which Richard W. Fisher (“you” or “Consultant”) has agreed to serve as a consultant to Beneficient, a Nevada corporation (“Beneficient”) and its subsidiaries, including Beneficient Company Holdings, L.P. (“Holdings”). This Agreement is effective as of June 7, 2023 (the “Effective Date”) and replaces and supersedes, in accordance with the terms hereof, that certain letter agreement dated September 13, 2017 among Beneficient Management, LLC (“Ben Management”), Beneficient Management Group, LLC and Consultant (the “Prior Agreement”).
- Position; Duties and Responsibilities. Effective as of the Effective Date and during the Term (as defined below), you agree to serve as a consultant to Beneficient and its subsidiaries (collectively, “Ben”) and to be reasonably available to mentor, advise and support the efforts of Ben’s current Chief Executive Officer to grow Ben and its related entities into the leading provider of services, insurance, liquidity and financing for alternative assets held by medium and high net worth individuals and institutional investors. During the Term, you also may be appointed to, and agree to serve if appointed, in other roles including serving as a member on the Board of Directors of Beneficient and its committees for separate consideration established by Beneficient from time to time. As a consultant, you will not be an employee of Beneficient or any Ben-related entities (collectively the “Ben Entities”) and thus will not be eligible to participate in any employee benefits plans or programs except as may otherwise be permitted in your role as a director of Beneficient.
In your position as a consultant, you agree (i) to comply with the personnel, ethical, and operational policies and procedures of the Ben Entities that are made available to you, including codes of conduct, regulatory compliance policies, and policies and procedures addressing insider trading, conflicts of interest, the protection of confidential information, and expense reimbursement, (ii) to cooperate with any investigation or inquiry authorized by the Ben Entities or conducted by a governmental authority related to the business of the Ben Entities, and (iii) to present to the Board of Directors of Beneficient business opportunities or ventures known to you, independently or with others, that are within the purposes of any of the Ben Entities, including without limitation opportunities that may compete with any of the Ben Entities, provided that this subsection (iii) shall not apply to opportunities or ventures that are directly related to the Approved Activities (as defined below).
Mr. Richard W. Fisher
June 7, 2023
Page 2
Term. The term of your consulting role under this Agreement shall begin on the Effective Date and shall continue in effect for one year following the Effective Date (the “Initial Term”), unless earlier terminated by either Beneficient or Consultant in accordance with paragraph 3. Upon the expiration of the Initial Term, the Agreement will automatically renew, subject to earlier termination as herein provided, for successive one-year periods (each, an “Additional Term”), unless either Consultant or Beneficient provides notice of non-renewal at least 90 days prior to the expiration of the Initial Term or the then Additional Term, whichever is applicable. The Initial Term and any Additional Term(s) shall be referred to collectively as the “Term.”
Termination of the Term Before Expiration. The Term will be terminated before it expires in the following circumstances:
(a) *You resign for any reason from any of your positions as a Consultant or director of Beneficient for any reason before the Term expires.*To resign as a consultant hereunder, you must submit a resignation letter to the Chief Executive Officer of Beneficient. The resignation letter must set forth the effective date of the resignation, which date must be not later than 30 days after the letter is delivered. The Chief Executive Officer may accept your resignation earlier but doing so will not change the nature or character of the resignation. To resign as a director of Beneficient, you will need to comply with the policies, if any, established by the Board of Directors of Beneficient. If you resign from one position, you will be considered to have resigned from all positions you then hold with any of the Ben Entities unless you and the governing body of the entity in which you hold another position otherwise agree in writing.
(b) You are not re-elected or re-appointed as a director of Beneficient for any reason during the Term. If this happens, you will be considered to have resigned from all positions you then hold with any of the Ben Entities.
(c) The Term also will be terminated immediately upon your death.
- Compensation; Equity.
(a) During the Term, for so long as you continue to serve as a Consultant, your exclusive compensation for serving as a consultant (other than reimbursement for expenses pursuant to established policy or the prior written approval of Beneficient’s Chief Executive Officer) shall be the amount of $150,000 per year (prorated for any partial period) (the “Consulting Fee”). The Consulting Fee will be paid in quarterly installments on the first business day of each calendar quarter; provided that the initial payment will be paid on the date you would have otherwise received a payment pursuant to the Prior Agreement, but for its termination hereunder. If the Term is terminated before it expires because you are not re-elected or re-appointed as a director of Beneficient other than for Cause (defined below), the Consulting
Mr. Richard W. Fisher
June 7, 2023
Page 3
Fee will continue to be paid to you through the date the Term would have expired had your service as a director not been sooner ended. “Cause” for purposes of this Agreement has the definition given to that term in the Beneficient Management Partners, L.P. 2017 Equity Incentive Plan (as amended or replaced by the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan, the “BMP Plan”) and in addition includes the request of any federal, state or local court or governmental or regulatory agency or authority, including, without limitation, the Kansas Office of the State Bank Commissioner, having jurisdiction over any Ben Entity that you be removed or not re-elected or re-appointed as a director.
(i) Restricted Equity Units. Pursuant to the Prior Agreement, you were previously granted the number of restricted equity units (“REUs”) under The Beneficient Company Group, L.P. 2017 Equity Incentive Plan (as amended, the “Ben EIP”) representing common units in The Beneficient Company Group, L.P. (“BCG”) with a fair market value, as determined by the Board of Ben Management in its sole discretion as of the date of grant, equal to $1,000,000.00. If as of the date the common units of BCG (or the Class A common stock, $0.001 par value per share, of Beneficient (the “Class A Common Stock,”) as the successor of BCG) become listed and traded on the New York Stock Exchange or The NASDAQ Stock Market (the “Listing Date”) the fair market value of the common units of BCG, or the Class A Common Stock of Beneficient, as the successor of BCG, subject to the REUs is less than $1,000,000.00, then Beneficient agrees to cause to be granted to you additional REUs (or restricted stock units) such that the total fair market value of the common units (or shares of Class A Common Stock), as of the Listing Date, subject to the REUs (and restricted stock units) equals $1,000,000.00. Any such additional REUs (or restricted stock units) will be settled at the same time as the original REUs.
(ii) Participating Interest. Pursuant to the Prior Agreement, you were previously granted 13.5% of the Participating Interests available for grant under the BMP Plan. Pursuant to the Prior Agreement, it was agreed that (A) your percentage of Participating Interests would not be diluted during the term of the Prior Agreement without mutual agreement, (B) if the term of the Prior Agreement ends early because you are not re-elected or re-appointed as a director of Ben Management other than for Cause, your percentage of Participating Interests would not be diluted for the remainder of the original seven-year term of the Prior Agreement without your consent, and (C) at the end of the term of the Prior Agreement or upon such earlier end of your service for any reason other than for Cause, your Participating Interest would be redeemed by BMP pursuant to the terms and conditions of the BMP Plan. Upon the effectiveness of this Agreement, Beneficient agrees to comply with, or cause other Ben Entities to comply with, the terms of the Prior Agreement as it relates to the award of the Participating Interests under the BMP Plan.
Mr. Richard W. Fisher
June 7, 2023
Page 4
- Confidential Information.
(a) During the term of the Prior Agreement, you have had access, and during the Term of this Agreement, you will continue to have access to Confidential Information (as defined below) that is unique, proprietary, and valuable to the Ben Entities (and former related entities) and the improper use or unauthorized disclosure of which could result in irreparable harm to the Ben Entities, their goodwill, and their competitive position in the marketplace. Accordingly, you agree that at all times during the Term and thereafter (i) all Confidential Information shall remain and be the sole and exclusive property of the Ben Entities; (ii) you will protect and safeguard all Confidential Information; (iii) except as compelled by law or valid legal process or as authorized by the Ben Entities, you will hold all Confidential Information in strictest confidence and not, directly or indirectly, (X) use any such Confidential Information for your own or a third-party’s advantage, benefit, or gain or (Y) disclose or divulge any Confidential Information to any person other than an officer, director, or employee of, or legal counsel for, the Ben Entities, or other person authorized to receive such information and under an obligation of confidentiality, and then only to the extent necessary for the proper performance of the your duties and responsibilities and consistent with the purposes for which it was provided to you; (iv) if you believe you are compelled by law or valid legal process to disclose or divulge any Confidential Information, you will notify the Chief Executive Officer and General Counsel of Beneficient in writing sufficiently in advance of any such disclosure to allow the Ben Entities the opportunity to defend, limit, or otherwise protect their interests against such disclosure; and (v) you will not ask, direct, or authorize another to take any action that would be prohibited by this paragraph 5 if undertaken by you.
(b) You further agree that (i) upon the expiration or termination of the Term for any reason or at the request of Beneficient at any time, you will immediately return to the Ben Entities (or, with the written consent of the Chief Executive Officer of Beneficient, destroy) all Confidential Information and all copies thereof, in whatever tangible form or medium, including electronic or digital, (ii) you will immediately notify Beneficient if you learn of or suspect any loss or unauthorized disclosure or destruction of any Confidential Information and provide Beneficient with an itemized list or description of the items that were or may have been lost, disclosed, or destroyed and a written statement of the facts surrounding such loss, disclosure, or destruction, and (iii) your obligations under this paragraph 5 are in addition to any applicable contractual, statutory, or common-law obligations and survive the termination of this Agreement.
(c) Notwithstanding the foregoing, nothing in this Agreement is intended to, or does, prohibit you from (i) reporting to, communicating with, responding to an inquiry from, cooperating with, providing truthful information to, or otherwise participating or assisting in or cooperating with an investigation being conducted by any governmental agency or regulatory body (such as the U.S. Department of Justice or the Securities and Exchange Commission) regarding a possible or alleged violation of law or regulation and without prior authorization of or notice to the Ben Entities, (ii) giving truthful testimony or making statements under oath in
Mr. Richard W. Fisher
June 7, 2023
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response to a subpoena or other valid legal process or in any legal proceeding; (iii) otherwise making truthful statements as required by law or valid legal process, (iv) otherwise engaging in activities protected by federal, state, or local law, or (v) pursuant to 18 U.S.C. § 183(b), disclosing a trade secret in confidence to a governmental official, directly or indirectly, or to an attorney, if the disclosure is made solely for the purpose of reporting or investigating a suspected violation of law, or if the disclosure is made in a document filed under seal in a lawsuit or other proceeding, and a party cannot be held criminally or civilly liable under any federal or state trade secret law for such a disclosure.
(d) For purposes of this Agreement, “Confidential Information” means (i) all material nonpublic information about any of the Ben Entities (which, for purposes of this definition, shall also include BCG and former subsidiaries of BCG); (ii) any “trade secret” as defined by federal and applicable state law; and (iii) all other confidential or proprietary information or trade secrets of or relating to the Ben Entities and their current, past, future, or prospective owners, investors, business partners, customers, vendors, and suppliers or otherwise provided to the Ben Entities under an obligation or expectation of confidential treatment. “Confidential Information” includes all documents or information (in whatever form or medium, and all copies thereof whether or not the original was deleted or destroyed) conceived, originated, discovered, or developed in whole or in part by you, otherwise disclosed to or obtained by you, or to which you have access in connection with the performance of services to the Ben Entities concerning or evidencing operations; processes; products; business practices; finances; strategies; modes of doing business; development, acquisition, or divestment plans; any proposed business transactions; officers, directors, shareholders; investors, business partners, customers, vendors, and suppliers; marketing methods; costs, prices, contractual relationships; legal or regulatory status; confidential or personal information about personnel (such as medical or banking records or information and including compensation, other terms of employment, or performance information other than as concerns solely you), but excluding any such documents or information (X) that is or becomes generally available to the public other than as a result of any breach of this Agreement, the Prior Agreement or other unauthorized disclosure by you or another with an obligation not to disclose such information or (Y) becomes available to you after the termination of this Agreement on a nonconfidential basis from a source who is not bound by a contractual or legal duty of confidentiality to the Ben Entities and who is authorized to make the disclosure to you.
- Remedies and Reformation.
(a) You acknowledge and agree that the Ben Entities would not have an adequate remedy at law and would be irreparably harmed in the event that any of the provisions of paragraph 5 were not performed in accordance with their specific terms or were otherwise breached. Accordingly and notwithstanding paragraph 9, you agree that the Ben Entities shall be entitled to equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, in the event you breach or threaten to breach any of the
Mr. Richard W. Fisher
June 7, 2023
Page 6
provisions of such paragraph, without the necessity of posting any bond or proving special damages or irreparable injury. Such remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of such paragraph by you, but shall be in addition to all other remedies available to the Ben Entities at law or equity. In addition, the Ben Entities shall be entitled to recover their reasonable attorneys’ fees and all costs and expenses associated with the enforcement of paragraph 5. You further acknowledge and agree that any of the Ben Entities (on behalf of themselves and any of the other Ben Entities) may seek to enforce any of the provisions of paragraph 5 and you will not assert that any such entity seeking to enforce such provisions is not a proper party or that any remedy may not be awarded to such entity.
(b) If any of the provisions of paragraph 5 are ever deemed by a court to be unenforceable as written under applicable law, such provisions shall be, and are, automatically reformed to the maximum limitations permitted by applicable law.
(c) You further agree that the existence of a claim or cause of action against any of the Ben Entities, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Ben Entities of your obligations under paragraph 5.
Termination of the Agreement and Effect Thereof. This Agreement, once effective, will terminate on the first to occur of the expiration of the Term or the termination of the Term before it expires. Termination of this Agreement does not impair the rights or obligations that have accrued prior to the termination or which by their nature or terms survive the termination.
Governing Law. This Agreement and any claim arising hereunder (whether based in contract or tort) shall be governed by and construed in accordance with the internal laws of the State of Texas, without giving effect to its conflicts of laws or principles.
Arbitration.
(a) Subject to paragraph 6, any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this paragraph 9) shall be finally settled by arbitration conducted by a single arbitrator in Dallas, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Except as required by law or as may be reasonably required in connection with ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm or challenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall not disclose any awards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party in the proceedings not otherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court having jurisdiction thereover.
Mr. Richard W. Fisher
June 7, 2023
Page 7
(b) Notwithstanding subsection (a), the Ben Entities may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling arbitration, seeking temporary or preliminary relief in aid of an arbitration hereunder, enforcing an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6, and you expressly consent to the application of subsection (c) to any such action or proceeding.
(c) YOU AND EACH OF THE Ben ENTITIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRAIL AND SUBMIT TO THE EXCLUSIVE JURISDICTION, INCLUDING REMOVAL JURISDICTION, OF THE U.S. FEDERAL AND STATE COURTS LOCATED IN DALLAS, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 6 AND 9, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, to confirm or challenge an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6. You and the Ben Entities acknowledge that the forums designated by this subsection (c) have a reasonable relation to this Agreement and to the parties’ relationship with one another. You and the Ben Entities hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding referred to in paragraph 6 or 9 brought in any court referenced therein and agree not to plead or claim the same.
- Entire Agreement.
(a) This Agreement sets forth the entire agreement of you and any of the Ben Entities concerning its subject matter and supersedes all prior agreements and understandings, including the Prior Agreement; provided, that this Agreement does not impair the rights or obligations under the Prior Agreement that have accrued prior to the Effective Date or which by their nature or terms survive the termination of the Prior Agreement.
(b) The parties hereto acknowledge and agree that, subject to the provisions of paragraph 10(a) above, upon the full execution of this Agreement and as of the Effective Date, the Prior Agreement shall be terminated.
Mr. Richard W. Fisher
June 7, 2023
Page 8
- Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the you and by a duly authorized officer of Beneficient, and such waiver is set out in writing and signed by the party to be charged; and (ii) no waiver by a party or failure to enforce or insist on its or his rights under this Agreement shall constitute a waiver or abandonment of any such rights or defense to enforcement of such rights, and a waiver on one occasion shall not be deemed to be a waiver of the same or any other type of breach on a future occasion.
If this letter accords with your understanding of our agreement, please sign below and return a signed and dated copied to my attention.
| Sincerely, |
|---|
| /s/ Brad K. Heppner |
| Brad K. Heppner, Chief Executive Officer of Beneficient |
AGREED:
| /s/ Richard W. Fisher |
|---|
| Richard W. Fisher |
| June 7, 2023 |
| Date Signed |
EX-10.19
Exhibit 10.19
June 7, 2023
Thomas O. Hicks
2200 Ross Avenue
Fiftieth Floor
Dallas, TX 75201
Re: Consulting Agreement
Dear Tom:
This letter (the “Agreement”) sets forth the principal terms and conditions under which Thomas O. Hicks (“you” or “Consultant”) has agreed to serve as a consultant to Beneficient, a Nevada corporation (“Beneficient”) and its subsidiaries, including Beneficient Company Holdings, L.P. (“Holdings”). This Agreement is effective as of June 7, 2023 (the “Effective Date”) and replaces and supersedes, in accordance with the terms hereof, that certain letter agreement dated September 13, 2017 among Beneficient Management, LLC (“Ben Management”), Beneficient Management Group, LLC and Consultant (the “Prior Agreement”).
- Position; Duties and Responsibilities. Effective as of the Effective Date and during the Term (as defined below), you agree to serve as a consultant to Beneficient and its subsidiaries (collectively, “Ben”) and to be reasonably available to mentor, advise and support the efforts of Ben’s current Chief Executive Officer to grow Ben and its related entities into the leading provider of services, insurance, liquidity and financing for alternative assets held by medium and high net worth individuals and institutional investors. During the Term, you also may be appointed to, and agree to serve if appointed, in other roles including serving as a member on the Board of Directors of Beneficient and its committees for separate consideration established by Beneficient from time to time. As a consultant, you will not be an employee of Beneficient or any Ben-related entities (collectively the “Ben Entities”) and thus will not be eligible to participate in any employee benefits plans or programs except as may otherwise be permitted in your role as a director of Beneficient.
In your position as a consultant, you agree (i) to comply with the personnel, ethical, and operational policies and procedures of the Ben Entities that are made available to you, including codes of conduct, regulatory compliance policies, and policies and procedures addressing insider trading, conflicts of interest, the protection of confidential information, and expense reimbursement, (ii) to cooperate with any investigation or inquiry authorized by the Ben Entities or conducted by a governmental authority related to the business of the Ben Entities, and (iii) to present to the Board of Directors of Beneficient business opportunities or ventures known to you, independently or with others, that are within the purposes of any of the Ben Entities, including without limitation opportunities that may compete with any of the Ben Entities, provided that this subsection (iii) shall not apply to opportunities or ventures that are directly related to the Approved Activities (as defined below).
2. Term. The term of your consulting role under this Agreement shall begin on the Effective Date and shall continue in effect for one year following the Effective Date (the “Initial Term”), unless earlier terminated by either Beneficient or Consultant in accordance with paragraph 3. Upon the expiration of the Initial Term, the Agreement will automatically renew, subject to earlier termination as herein provided, for successive one-year periods (each, an “Additional Term”), unless either Consultant or Beneficient provides notice of non-renewal at least 90 days prior to the expiration of the Initial Term or the then Additional Term, whichever is applicable. The Initial Term and any Additional Term(s) shall be referred to collectively as the “Term.”
- Termination of the Term Before Expiration. The Term will be terminated before it expires in the following circumstances:
(a) *You resign for any reason from any of your positions as a Consultant or director of Beneficient for any reason before the Term expires.*To resign as a consultant hereunder, you must submit a resignation letter to the Chief Executive Officer of Beneficient. The resignation letter must set forth the effective date of the resignation, which date must be not later than 30 days after the letter is delivered. The Chief Executive Officer may accept your resignation earlier but doing so will not change the nature or character of the resignation. To resign as a director of Beneficient, you will need to comply with the policies, if any, established by the Board of Directors of Beneficient. If you resign from one position, you will be considered to have resigned from all positions you then hold with any of the Ben Entities unless you and the governing body of the entity in which you hold another position otherwise agree in writing.
(b) You are not re-elected or re-appointed as a director of Beneficient for any reason during the Term. If this happens, you will be considered to have resigned from all positions you then hold with any of the Ben Entities.
(c) The Term also will be terminated immediately upon your death.
Mr. Thomas O. Hicks
June 7, 2023
Page 2
- Compensation; Equity.
(a) During the Term, for so long as you continue to serve as a Consultant, your exclusive compensation for serving as a consultant (other than reimbursement for expenses pursuant to established policy or the prior written approval of Beneficient’s Chief Executive Officer) shall be the amount of $150,000 per year (prorated for any partial period) (the “Consulting Fee”). The Consulting Fee will be paid in quarterly installments on the first business day of each calendar quarter; provided that the initial payment will be paid on the date you would have otherwise received a payment pursuant to the Prior Agreement, but for its termination hereunder. If the Term is terminated before it expires because you are not re-elected or re-appointed as a director of Beneficient other than for Cause (defined below), the Consulting Fee will continue to be paid to you through the date the Term would have expired had your service as a director not been sooner ended. “Cause” for purposes of this Agreement has the definition given to that term in the Beneficient Management Partners, L.P. 2017 Equity Incentive Plan (as amended or replaced by the Beneficient Management Partners, L.P. 2019 Equity Incentive Plan, the “BMP Plan”) and in addition includes the request of any federal, state or local court or governmental or regulatory agency or authority, including, without limitation, the Kansas Office of the State Bank Commissioner, having jurisdiction over any Ben Entity that you be removed or not re-elected or re-appointed as a director.
(i) Restricted Equity Units. Pursuant to the Prior Agreement, you were previously granted the number of restricted equity units (“REUs”) under The Beneficient Company Group, L.P. 2017 Equity Incentive Plan (as amended, the “Ben EIP”) representing common units in The Beneficient Company Group, L.P. (“BCG”) with a fair market value, as determined by the Board of Ben Management in its sole discretion as of the date of grant, equal to $1,000,000.00. If as of the date the common units of BCG (or the Class A common stock, $0.001 par value per share, of Beneficient (the “Class A Common Stock,”) as the successor of BCG) become listed and traded on the New York Stock Exchange or The NASDAQ Stock Market (the “Listing Date”) the fair market value of the common units of BCG, or the Class A Common Stock of Beneficient, as the successor of BCG, subject to the REUs is less than $1,000,000.00, then Beneficient agrees to cause to be granted to you additional REUs (or restricted stock units) such that the total fair market value of the common units (or shares of Class A Common Stock), as of the Listing Date, subject to the REUs (and restricted stock units) equals $1,000,000.00. Any such additional REUs (or restricted stock units) will be settled at the same time as the original REUs.
(ii) Participating Interest. Pursuant to the Prior Agreement, you were previously granted 13.5% of the Participating Interests available for grant under the BMP Plan. Pursuant to the Prior Agreement, it was agreed that (A) your percentage of Participating Interests would not be diluted during the term of the Prior Agreement without mutual agreement, (B) if the term of the Prior Agreement ends early because you are not re-elected or re-appointed as a director of Ben Management other than for Cause, your percentage of Participating Interests would not be diluted for the remainder of the original seven-year term of the Prior Agreement without your consent, and (C) at the end of the term of the Prior Agreement or upon such earlier end of your service for any reason other than for Cause, your Participating Interest would be redeemed by BMP pursuant to the terms and conditions of the BMP Plan. Upon the effectiveness of this Agreement, Beneficient agrees to comply with, or cause other Ben Entities to comply with, the terms of the Prior Agreement as it relates to the award of the Participating Interests under the BMP Plan.
- Confidential Information.
(a) During the term of the Prior Agreement, you have had access, and during the Term of this Agreement, you will continue to have access to Confidential Information (as defined below) that is unique, proprietary, and valuable to the Ben Entities (and former related entities) and the improper use or unauthorized disclosure of which could result in irreparable harm to the Ben Entities, their goodwill, and their competitive position in the marketplace. Accordingly, you agree that at all times during the Term and thereafter (i) all Confidential Information shall remain and be the sole and exclusive property of the Ben Entities; (ii) you will protect and safeguard all Confidential Information; (iii) except as compelled by law or valid legal process or as authorized by the Ben Entities, you will hold all Confidential Information in strictest confidence and not, directly or indirectly, (X) use any such Confidential Information for your own or a third-party’s advantage, benefit, or gain or (Y) disclose or divulge any Confidential Information to any person other than an officer, director, or employee of, or legal counsel for, the Ben Entities, or other person authorized to receive such information and under an obligation of confidentiality, and then only to the extent necessary for the proper performance of the your duties and responsibilities and consistent with the purposes for which it was provided to you; (iv) if you believe you are compelled by law or valid legal process to disclose or divulge any Confidential Information, you will notify the Chief Executive Officer and General Counsel of Beneficient in writing sufficiently in advance of any such disclosure to allow the Ben Entities the opportunity to defend, limit, or otherwise protect their interests against such disclosure; and (v) you will not ask, direct, or authorize another to take any action that would be prohibited by this paragraph 5 if undertaken by you.
Mr. Thomas O. Hicks
June 7, 2023
Page 3
(b) You further agree that (i) upon the expiration or termination of the Term for any reason or at the request of Beneficient at any time, you will immediately return to the Ben Entities (or, with the written consent of the Chief Executive Officer of Beneficient, destroy) all Confidential Information and all copies thereof, in whatever tangible form or medium, including electronic or digital, (ii) you will immediately notify Beneficient if you learn of or suspect any loss or unauthorized disclosure or destruction of any Confidential Information and provide Beneficient with an itemized list or description of the items that were or may have been lost, disclosed, or destroyed and a written statement of the facts surrounding such loss, disclosure, or destruction, and (iii) your obligations under this paragraph 5 are in addition to any applicable contractual, statutory, or common-law obligations and survive the termination of this Agreement.
(c) Notwithstanding the foregoing, nothing in this Agreement is intended to, or does, prohibit you from (i) reporting to, communicating with, responding to an inquiry from, cooperating with, providing truthful information to, or otherwise participating or assisting in or cooperating with an investigation being conducted by any governmental agency or regulatory body (such as the U.S. Department of Justice or the Securities and Exchange Commission) regarding a possible or alleged violation of law or regulation and without prior authorization of or notice to the Ben Entities, (ii) giving truthful testimony or making statements under oath in response to a subpoena or other valid legal process or in any legal proceeding; (iii) otherwise making truthful statements as required by law or valid legal process, (iv) otherwise engaging in activities protected by federal, state, or local law, or (v) pursuant to 18 U.S.C. § 183(b), disclosing a trade secret in confidence to a governmental official, directly or indirectly, or to an attorney, if the disclosure is made solely for the purpose of reporting or investigating a suspected violation of law, or if the disclosure is made in a document filed under seal in a lawsuit or other proceeding, and a party cannot be held criminally or civilly liable under any federal or state trade secret law for such a disclosure.
(d) For purposes of this Agreement, “Confidential Information” means (i) all material nonpublic information about any of the Ben Entities (which, for purposes of this definition, shall also include BCG and former subsidiaries of BCG); (ii) any “trade secret” as defined by federal and applicable state law; and (iii) all other confidential or proprietary information or trade secrets of or relating to the Ben Entities and their current, past, future, or prospective owners, investors, business partners, customers, vendors, and suppliers or otherwise provided to the Ben Entities under an obligation or expectation of confidential treatment. “Confidential Information” includes all documents or information (in whatever form or medium, and all copies thereof whether or not the original was deleted or destroyed) conceived, originated, discovered, or developed in whole or in part by you, otherwise disclosed to or obtained by you, or to which you have access in connection with the performance of services to the Ben Entities concerning or evidencing operations; processes; products; business practices; finances; strategies; modes of doing business; development, acquisition, or divestment plans; any proposed business transactions; officers, directors, shareholders; investors, business partners, customers, vendors, and suppliers; marketing methods; costs, prices, contractual relationships; legal or regulatory status; confidential or personal information about personnel (such as medical or banking records or information and including compensation, other terms of employment, or performance information other than as concerns solely you), but excluding any such documents or information (X) that is or becomes generally available to the public other than as a result of any breach of this Agreement, the Prior Agreement or other unauthorized disclosure by you or another with an obligation not to disclose such information or (Y) becomes available to you after the termination of this Agreement on a nonconfidential basis from a source who is not bound by a contractual or legal duty of confidentiality to the Ben Entities and who is authorized to make the disclosure to you.
6. Remedies and Reformation.
(a) You acknowledge and agree that the Ben Entities would not have an adequate remedy at law and would be irreparably harmed in the event that any of the provisions of paragraph 5 were not performed in accordance with their specific terms or were otherwise breached. Accordingly and notwithstanding paragraph 9, you agree that the Ben Entities shall be entitled to equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, in the event you breach or threaten to breach any of the provisions of such paragraph, without the necessity of posting any bond or proving special damages or irreparable injury. Such remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of such paragraph by you, but shall be in addition to all other remedies available to the Ben Entities at law or equity. In addition, the Ben Entities shall be entitled to recover their reasonable attorneys’ fees and all costs and expenses associated with the enforcement of paragraph 5. You further acknowledge and agree that any of the Ben Entities (on behalf of themselves and any of the other Ben Entities) may seek to enforce any of the provisions of paragraph 5 and you will not assert that any such entity seeking to enforce such provisions is not a proper party or that any remedy may not be awarded to such entity.
(b) If any of the provisions of paragraph 5 are ever deemed by a court to be unenforceable as written under applicable law, such provisions shall be, and are, automatically reformed to the maximum limitations permitted by applicable law.
Mr. Thomas O. Hicks
June 7, 2023
Page 4
(c) You further agree that the existence of a claim or cause of action against any of the Ben Entities, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Ben Entities of your obligations under paragraph 5.
Termination of the Agreement and Effect Thereof. This Agreement, once effective, will terminate on the first to occur of the expiration of the Term or the termination of the Term before it expires. Termination of this Agreement does not impair the rights or obligations that have accrued prior to the termination or which by their nature or terms survive the termination.
Governing Law. This Agreement and any claim arising hereunder (whether based in contract or tort) shall be governed by and construed in accordance with the internal laws of the State of Texas, without giving effect to its conflicts of laws or principles.
Arbitration.
(a) Subject to paragraph 6, any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this paragraph 9) shall be finally settled by arbitration conducted by a single arbitrator in Dallas, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Except as required by law or as may be reasonably required in connection with ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm or challenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall not disclose any awards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party in the proceedings not otherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court having jurisdiction thereover.
(b) Notwithstanding subsection (a), the Ben Entities may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling arbitration, seeking temporary or preliminary relief in aid of an arbitration hereunder, enforcing an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6, and you expressly consent to the application of subsection (c) to any such action or proceeding.
(c) YOU AND EACH OF THE Ben ENTITIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRAIL AND SUBMIT TO THE EXCLUSIVE JURISDICTION, INCLUDING REMOVAL JURISDICTION, OF THE U.S. FEDERAL AND STATE COURTS LOCATED IN DALLAS, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 6 AND 9, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, to confirm or challenge an arbitration award, or seeking equitable relief, including a temporary restraining order, preliminary and permanent injunctions, and specific performance, pursuant to paragraph 6. You and the Ben Entities acknowledge that the forums designated by this subsection (c) have a reasonable relation to this Agreement and to the parties’ relationship with one another. You and the Ben Entities hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding referred to in paragraph 6 or 9 brought in any court referenced therein and agree not to plead or claim the same.
- Entire Agreement.
(a) This Agreement sets forth the entire agreement of you and any of the Ben Entities concerning its subject matter and supersedes all prior agreements and understandings, including the Prior Agreement; provided, that this Agreement does not impair the rights or obligations under the Prior Agreement that have accrued prior to the Effective Date or which by their nature or terms survive the termination of the Prior Agreement.
(b) The parties hereto acknowledge and agree that, subject to the provisions of paragraph 10(a) above, upon the full execution of this Agreement and as of the Effective Date, the Prior Agreement shall be terminated.
Mr. Thomas O. Hicks
June 7, 2023
Page 5
- Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the you and by a duly authorized officer of Beneficient, and such waiver is set out in writing and signed by the party to be charged; and (ii) no waiver by a party or failure to enforce or insist on its or his rights under this Agreement shall constitute a waiver or abandonment of any such rights or defense to enforcement of such rights, and a waiver on one occasion shall not be deemed to be a waiver of the same or any other type of breach on a future occasion.
If this letter accords with your understanding of our agreement, please sign below and return a signed and dated copied to my attention.
| Sincerely, |
|---|
| /s/ Brad K. Heppner |
| Brad K. Heppner, Chief Executive Officer of Beneficient |
AGREED:
| /s/ Thomas O. Hicks |
|---|
| Thomas O. Hicks |
| June 7, 2023 |
| Date Signed |