Jefferies Financial Group Inc 8-K, filed Jan 17, 2023
Jefferies Financial Group Inc. (JEF)
About this 8-K
Jefferies Financial Group Inc filed this 8-K on January 17, 2023, reporting on events of January 13, 2023.
Items reported
- Item 1.01: Entered into a material agreement
- Item 5.02: Director or officer change, or executive pay
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
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 communications 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)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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. ☐
| Item 1.01 | Entry into a Material Definitive Agreement |
Completion of Spin-Off of Vitesse from Jefferies
On January 13, 2023 (the “Distribution Date”), Jefferies Financial Group Inc. (“Jefferies” or the “Company”) completed the previously announced legal and structural separation and distribution to its shareholders of all of the outstanding shares of Vitesse Energy, Inc. (“Vitesse”) held by Jefferies (the “Spin-Off”). The distribution was made in the amount of one share of Vitesse common stock for every 8.49668 Jefferies common shares (the “Distribution”) owned by the Company’s shareholders as of the close of business on December 27, 2022, the record date of the Distribution.
On January 13, 2023, in connection with the Spin-Off, the Company entered into several agreements with Vitesse and other related parties that set forth the principal actions taken or to be taken in connection with the Spin-Off and that govern the relationship of the parties following the Spin-Off, including a Separation and Distribution Agreement and a Tax Matters Agreement.
Summaries of the material terms and conditions of each of the foregoing agreements can be found in the section entitled “Certain Relationships and Related Party Transactions—Agreements Related to the Spin-Off” of Vitesse’s information statement, dated January 6, 2023 (the “Information Statement”), which was included as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 9, 2023 and which summaries are incorporated by reference herein. The summaries of the Separation and Distribution Agreement and Tax Matters Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such Separation and Distribution Agreement and Tax Matters Agreement, which are attached hereto as Exhibits 2.1 and 10.1, respectively, and are incorporated by reference herein.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Vitesse Energy, Inc. Transitional Equity Award Adjustment Plan
The Vitesse Energy, Inc. Transitional Equity Award Adjustment Plan (the “Transitional Plan”) became effective on the Distribution Date. The Transitional Plan will generally provide for the treatment of those Jefferies outstanding compensatory equity awards that are to be adjusted into equity incentive awards denominated both in shares of Vitesse common stock and in Jefferies common shares in connection with the Spin-Off. The Transitional Plan provides for the issuance of up to 2,182,299 shares of Vitesse common stock, subject to adjustments as provided by the Transitional Plan. A summary of the material terms of the Transitional Plan can be found in the Information Statement under the section entitled “Certain Relationships and Related Party Matters—Agreements Related to the Spin-Off—Transitional Equity Award Adjustment Plan,” which summary is incorporated by reference herein. The summary of the Transitional Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Transitional Plan, which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.
| Item 8.01 | Other Events |
On January 17, 2023, the Company and Vitesse issued a joint press release announcing the completion of the Spin-Off. A copy of the joint press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
| Item 9.01 | Financial Statements and Exhibits |
(d)
| Exhibit Number |
Description | |
| 2.1 | Separation and Distribution Agreement, dated as of January 13, 2023, by and among Jefferies Financial Group Inc., Vitesse Energy Finance LLC, Vitesse Energy, Inc., and the other signatories listed therein* | |
| 10.1 | Tax Matters Agreement, dated as of January 13, 2023, between Jefferies Financial Group Inc. and Vitesse Energy, Inc. | |
| 10.2 | Vitesse Energy, Inc. Transitional Equity Award Adjustment Plan*† | |
| 99.1 | Joint Press Release issued by Jefferies Financial Group Inc. and Vitesse Energy, Inc. on January 17, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
| * | Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC. |
| † | Compensatory plan or arrangement. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 17, 2023 | JEFFERIES FINANCIAL GROUP INC. | |||||
| /s/ Michael J. Sharp | ||||||
| Michael J. Sharp | ||||||
| Executive Vice President and General Counsel | ||||||
Exhibit 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
JEFFERIES FINANCIAL GROUP INC.,
VITESSE ENERGY FINANCE LLC,
AND
VITESSE ENERGY, INC.
AND, FOR THE PURPOSES OF ARTICLE I, SECTIONS 2.1-2.8, 4.1, 4.3(b) AND 4.3(d), ARTICLES VII AND VIII, AND SECTIONS 9.4-9.8, 10.1-10.2 AND 10.5-10.14 ONLY, THE PARTIES LISTED IN EXHIBIT A
DATED AS OF JANUARY 13, 2023
Table of Contents
| Page | ||||||
| ARTICLE I DEFINITIONS |
2 | |||||
| SECTION 1.1 |
Definitions | 2 | ||||
| SECTION 1.2 |
Interpretation | 7 | ||||
| ARTICLE II BUSINESS SEPARATION |
8 | |||||
| SECTION 2.1 |
Formation of SpinCo Entities | 8 | ||||
| SECTION 2.2 |
Pre-Distribution Transactions | 8 | ||||
| SECTION 2.3 |
Other Distribution Transactions | 8 | ||||
| SECTION 2.4 |
Transfer of Vitesse Business; Assumption of Vitesse Business Liabilities. | 8 | ||||
| SECTION 2.5 |
Financial Instruments | 9 | ||||
| SECTION 2.6 |
Ancillary Agreements | 9 | ||||
| SECTION 2.7 |
Termination of Agreements | 9 | ||||
| SECTION 2.8 |
Resignations | 10 | ||||
| ARTICLE III THE DISTRIBUTION |
10 | |||||
| SECTION 3.1 |
Distribution Agent | 10 | ||||
| SECTION 3.2 |
Delivery of SpinCo Shares | 10 | ||||
| SECTION 3.3 |
Distribution Ratio; Number of Shares to be Distributed | 11 | ||||
| SECTION 3.4 |
Treatment of Fractional Shares | 11 | ||||
| SECTION 3.5 |
Unclaimed Property | 11 | ||||
| SECTION 3.6 |
Record Holders | 11 | ||||
| SECTION 3.7 |
Jefferies Board Action | 12 | ||||
| ARTICLE IV CERTAIN COVENANTS |
12 | |||||
| SECTION 4.1 |
Further Assurances | 12 | ||||
| SECTION 4.2 |
Election of SpinCo Board of Directors | 12 | ||||
| SECTION 4.3 |
Registration and Listing | 13 | ||||
| SECTION 4.4 |
Delivery of Ancillary Agreements | 13 | ||||
| SECTION 4.5 |
Provision of Corporate Records | 13 | ||||
| SECTION 4.6 |
Solvency Opinions | 13 | ||||
| ARTICLE V CONDITIONS TO THE DISTRIBUTION |
14 | |||||
| SECTION 5.1 |
Approval by Jefferies Board of Directors | 14 | ||||
| SECTION 5.2 |
Receipt of IRS Private Letter Ruling and Tax Opinion | 14 | ||||
| SECTION 5.3 |
Solvency Opinions | 14 | ||||
| SECTION 5.4 |
Effectiveness of Form 10; No Stop Order | 14 | ||||
| SECTION 5.5 |
Dissemination of Information to Jefferies Stockholders | 14 | ||||
| SECTION 5.6 |
Approval of NYSE Listing Application | 14 | ||||
| SECTION 5.7 |
Ancillary Agreements | 15 | ||||
| SECTION 5.8 |
No Injunctions | 15 | ||||
| SECTION 5.9 |
Consummation of Pre-Distribution Transactions | 15 | ||||
| SECTION 5.10 |
No Other Events | 15 | ||||
| SECTION 5.11 |
Post-Distribution SpinCo Board | 15 | ||||
| SECTION 5.12 |
SpinCo Governing Documents | 15 | ||||
| SECTION 5.13 |
Resignations | 15 | ||||
| SECTION 5.14 |
Satisfaction of Conditions | 15 | ||||
| ARTICLE VI INSURANCE MATTERS |
15 | |||||
| SECTION 6.1 |
Insurance Matters | 15 | ||||
| ARTICLE VII INDEMNIFICATION |
17 | |||||
| SECTION 7.1 |
Release of Pre-Distribution Claims | 17 | ||||
| SECTION 7.2 |
Indemnification by SpinCo | 19 | ||||
| SECTION 7.3 |
Indemnification by Jefferies | 20 | ||||
| SECTION 7.4 |
Applicability of and Limitation on Indemnification | 20 | ||||
| SECTION 7.5 |
Adjustment of Indemnifiable Losses | 21 | ||||
| SECTION 7.6 |
Procedures for Indemnification of Third Party Claims | 21 | ||||
| SECTION 7.7 |
Procedures for Indemnification of Direct Claims | 23 | ||||
| SECTION 7.8 |
Contribution | 24 | ||||
| SECTION 7.9 |
Remedies Cumulative | 24 | ||||
| SECTION 7.10 |
Survival | 24 | ||||
| ARTICLE VIII DISPUTE RESOLUTION |
24 | |||||
| SECTION 8.1 |
Escalation and Mediation | 24 | ||||
| SECTION 8.2 |
Continuity of Service and Performance | 25 | ||||
| SECTION 8.3 |
Choice of Forum | 25 | ||||
| SECTION 8.4 |
Ability to Pursue Other Legal Remedies | 25 | ||||
| ARTICLE IX ACCESS TO INFORMATION AND SERVICES |
25 | |||||
| SECTION 9.1 |
Agreement for Exchange of Information | 25 | ||||
| SECTION 9.2 |
Ownership of Information | 26 | ||||
| SECTION 9.3 |
Compensation for Providing Information | 26 | ||||
| SECTION 9.4 |
Retention of Records | 26 | ||||
| SECTION 9.5 |
Limitation of Liability | 26 | ||||
| SECTION 9.6 |
Production of Witnesses | 26 | ||||
| SECTION 9.7 |
Confidentiality | 27 | ||||
| SECTION 9.8 |
Privileged Matters | 27 | ||||
| SECTION 9.9 |
Financial Information Certifications | 29 | ||||
| ARTICLE X MISCELLANEOUS |
29 | |||||
| SECTION 10.1 |
Entire Agreement | 29 | ||||
| SECTION 10.2 |
Choice of Law and Forum | 29 | ||||
| SECTION 10.3 |
Amendment | 29 | ||||
| SECTION 10.4 |
Waiver | 29 | ||||
| SECTION 10.5 |
Partial Invalidity | 30 | ||||
| SECTION 10.6 |
Execution in Counterparts | 30 | ||||
| SECTION 10.7 |
Successors and Assigns | 30 | ||||
| SECTION 10.8 |
Third Party Beneficiaries | 30 | ||||
| SECTION 10.9 |
Notices | 30 | ||||
| SECTION 10.10 |
Performance | 31 | ||||
| SECTION 10.11 |
Force Majeure | 31 | ||||
| SECTION 10.12 |
No Public Announcement | 31 | ||||
| SECTION 10.13 |
Expenses | 32 | ||||
| SECTION 10.14 |
Termination | 32 | ||||
| SECTION 10.15 |
Limitations of Liability | 32 | ||||
| SECTION 10.16 |
Conflicts | 32 |
Schedules
| Schedule 2.2 |
Pre-Distribution Transactions | |||||
|
|
Schedule 2.3 |
Other Distribution Transactions | ||||
| Schedule 2.7(b)(ii) |
|
Agreements not Terminated | ||||
| Schedule 2.7(c)(i) |
Pre-Effective Time Accounts Receivable and Accounts Payable | |||||
| Schedule 2.7(c)(ii) |
Post-Effective Time Accounts Receivable and Accounts Payable | |||||
| Schedule 4.2 |
Nominees to SpinCo Board of Directors | |||||
| Schedule 7.3(a) |
Supplied Information |
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT (the “Agreement”) is made as of January 13, 2023 by and between Jefferies Financial Group Inc., a New York corporation (“Jefferies”), Vitesse Energy Finance LLC, a Delaware limited liability company, formerly known as VE Holding LLC (“Vitesse Energy Finance”), Vitesse Energy, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Vitesse Energy Finance (“SpinCo”), and for the purposes of Article I, Section 2.1-2.8, 4.1, 4.3(b) and 4.3(d), Articles VII and VIII, and Sections 9.4-9.8, 10.1-10.2 and 10.5-10.14 only, the parties listed in Exhibit A.
WHEREAS, in 2017, Jefferies announced that its primary business initiative was to become a focused financial services company with clear drive and direction, concentrating on investment banking and capital markets and alternative asset management. To achieve those goals, Jefferies has been strategically and opportunistically monetizing a significant portion of its merchant banking portfolio and realigning its internal structure and intends to continue selling, distributing or transferring the business and investments comprising its merchant banking portfolio;
WHEREAS, the Board of Directors of Jefferies has determined that it would be advisable and in the best interests of Jefferies and its shareholders for all of the issued and outstanding equity interests of Vitesse Energy, LLC, a Delaware limited liability company (“VEL”), and Vitesse Oil, LLC, a Delaware limited liability company (“Vitesse Oil”), to be acquired by SpinCo in a series of transactions set forth in Schedule 2.2 (the “Pre-Distribution Transactions”) and for Jefferies to distribute on a pro rata basis to the holders of Jefferies’ common stock, par value $1.00 per share (“Jefferies Common Stock”), without any consideration being paid by the holders of such Jefferies Common Stock, all of the outstanding shares of SpinCo common stock, par value $0.01 per share (the “SpinCo Common Stock”), then owned by Jefferies (the “Distribution”);
WHEREAS, for federal income tax purposes, the Distribution (except for cash that Jefferies Common Stockholders may receive in lieu of fractional shares) together with certain related transactions is expected to qualify as a tax-free distribution to which Section 355(a), Section 355(c) and Section 361 of the Internal Revenue Code of 1986, as amended (the “Code”) apply
WHEREAS, on August 22, 2022, Jefferies submitted to the United States Internal Revenue Service (the “IRS”) a request for certain rulings under Sections 355 and 368 of the Code in connection with the Distribution and certain related transactions (together with subsequent submissions to the IRS with respect to such request, including the submissions made on October 25, 2022 and November 9, 2022, the “IRS Ruling Request”); and
WHEREAS, it is appropriate and desirable to set forth the principal transactions required to effect the Distribution and certain other agreements that will govern the relationship of Jefferies and SpinCo following the Distribution.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto hereby agree as follows:
1
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1.
“3B” means 3B Energy, LLC, a Delaware limited liability company, and the holder of a minority of the equity interests in VEL prior to the Pre-Distribution Transactions and an entity owned by Gerrity and Cree.
“Action” means any action, claim, demand, suit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative entity, agency or commission or any arbitration tribunal, domestic or foreign.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For the purpose of this definition, the term “control” means the power to direct the management of an entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the term “controlled” has the meaning correlative to the foregoing; provided, that, for any purpose hereunder, in each case both before and after the Effective Time, none of the Persons listed in clause (i), (ii), (iii), or (iv) shall be deemed to be Affiliates of any Person listed in any other such clause: (i) Jefferies, Phlcorp, Baldwin, and Vitesse Energy Finance, (ii) Gerrity, Cree, 3B, and Gerrity Bakken, LLC, (iii) SpinCo, SpinCo VEL-Sub, SpinCo VOL-Sub, Vitesse Oil, VEL, Vitesse Oil, Inc., and Vitesse Management Company LLC, and (iv) Jefferies Capital Partners LLC, JCP V LLC, Jefferies SBI Strategic Investments USA LLC, Jefferies Capital Partners V L.P., and Jefferies SBI USA Fund, L.P.
“Agreement” has the meaning set forth in the first paragraph hereof.
“Ancillary Agreements” means the Tax Matters Agreement, the Vitesse Energy, Inc. Transitional Equity Award Adjustment Plan and any other agreement entered into on or before the Distribution Date regarding the ongoing business and service relationships between the Jefferies Parties and SpinCo Parties.
“Assets” means, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.
“Baldwin” means Baldwin Enterprise, LLC, a Colorado limited liability company and direct, wholly owned Subsidiary of Phlcorp.
“Code” has the meaning set forth in the Recitals.
2
“Cree” means Brian J. Cree, the President of SpinCo.
“Distribution” has the meaning set forth in the Recitals.
“Distribution Agent” means American Stock Transfer & Trust Company, LLC, the distribution agent appointed by Jefferies to distribute shares of SpinCo Common Stock pursuant to the Distribution.
“Distribution Date” means the date determined by the Board of Directors of Jefferies as the date on which the Distribution is payable to holders of Jefferies Common Stock on the Record Date.
“Distribution Ratio” means 8.49668.
“Effective Time” means 11:59 p.m., New York City time, on the Distribution Date.
“Escalation Notice” has the meaning set forth in Section 8.1(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exhibit A Parties” means Vitesse Energy Finance and the entities and individuals listed in Exhibit A.
“Existing VEL Revolving Credit Facility” means the Amended and Restated Credit Agreement, dated as of April 29, 2022, as amended from time to time, among VEL, as borrower, Wells Fargo Bank, N.A., as administrative agent, and the lenders party thereto.
“Existing Vitesse Oil Revolving Credit Facility” means and the Credit Agreement, dated as of July 23, 2015, as amended from time to time, among Vitesse Oil, as borrower, Wells Fargo Bank, N.A., as administrative agent, and the lenders party thereto.
“Expenses” means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).
“Form 10” means the registration statement, including any amendment or supplement thereto, of SpinCo on Form 10 to register, under the Exchange Act, the SpinCo Common Stock to be distributed in the Distribution.
“Fund Entities” means the parties listed in clause (iv) of the definition of Affiliate, as well as any Subsidiaries of any such entity formed or acquired after the date hereof.
“Gerrity” means Robert W. Gerrity, the Chief Executive Officer of SpinCo and a member of SpinCo’s Board of Directors.
3
“Gerrity/Cree Parties” means the parties listed in clause (ii) of the definition of Affiliate, as well as any Subsidiaries of Gerrity and/or Cree formed or acquired after the date hereof.
“Governmental Authority” means any foreign, federal, state, local or other government, governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral body.
“Indemnified Party” has the meaning set forth in Section 7.5(a).
“Indemnifying Party” has the meaning set forth in Section 7.5(a).
“Indemnity Payment” has the meaning set forth in Section 7.5(a).
“Information” has the meaning set forth in Section 9.1.
“Information Statement” has the meaning set forth in Section 4.3(a).
“IRS” has the meaning set forth in the Recitals.
“IRS Ruling” has the meaning set forth in Section 5.2.
“IRS Ruling Request” has the meaning set forth in the Recitals.
“Jefferies” has the meaning set forth in the first paragraph of this Agreement.
“Jefferies Common Stock” has the meaning set forth in the Recitals.
“Jefferies Indemnified Parties” has the meaning set forth in Section 7.2.
“Jefferies Parties” means the parties listed in clause (i) of the definition of Affiliate, as well as any Subsidiaries of Jefferies formed or acquired after the date hereof.
“Jefferies Retained Assets” means all Assets held at the Effective Time by Jefferies.
“Jefferies Retained Business” means all businesses held at the Effective Time by Jefferies.
“Jefferies Retained Liabilities” means all Liabilities held at the Effective Time by Jefferies.
“Liability” means any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless otherwise specified in this Agreement), including all costs and expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking.
“Losses” means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, fees, expenses, deficiencies, claims or other charges, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued,
4
known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).
“New Revolving Credit Facility” means the secured revolving credit facility of SpinCo to be in effect following the completion of the Distribution.
“NYSE” means the New York Stock Exchange, Inc.
“Ordinary Course” means the operation of the Vitesse Business in the ordinary course of business consistent with past practice, other than such actions (including failures to act) and decisions relating solely to the Distribution which were taken (or not taken) or made with the consent of the other Party.
“Other Distribution Transactions” has the meaning set forth in Section 2.3.
“Party” means Jefferies or SpinCo.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Authority.
“Phlcorp” means Phlcorp Holding LLC, a Pennsylvania limited liability company and direct, wholly owned Subsidiary of Jefferies.
“Pre-Distribution Transactions” has the meaning set forth in the Recitals.
“Privilege” has the meaning set forth in Section 9.8.
“Privileged Information” has the meaning set forth in Section 9.8.
“Record Date” means the date determined by the Board of Directors of Jefferies as the record date for the Distribution.
“Record Holders” means the holders of record of shares of Jefferies Common Stock as of the close of business on the Record Date.
“SEC” means the United States Securities and Exchange Commission.
“Services Agreement” has the meaning set forth in Schedule 2.7(b)(ii).
“SpinCo” has the meaning set forth in the first paragraph of this Agreement.
“SpinCo Amended and Restated Bylaws” means the bylaws of SpinCo, substantially in the form filed as an exhibit to the Registration Statement, that will be in effect immediately prior to the Distribution Date.
5
“SpinCo Amended and Restated Certificate of Incorporation” means the certificate of incorporation of SpinCo, substantially in the form filed as an exhibit to the Registration Statement, that will be in effect immediately prior to the Distribution Date.
“SpinCo Common Stock” has the meaning set forth in the Recitals.
“SpinCo Employee RSU Awards” has the meaning set forth in Schedule 2.3.
“SpinCo Indemnified Parties” has the meaning set forth in Section 7.3.
“SpinCo Parties” means the parties listed in clause (iii) of the definition of Affiliate, as well as any Subsidiaries of SpinCo formed or acquired after the date hereof.
“SpinCo Share” means each share of SpinCo Common Stock.
“SpinCo VEL-Sub” means VE MergerSub LLC, a Delaware limited liability company and, as of the date hereof, a direct, wholly owned Subsidiary of SpinCo.
“SpinCo VOL-Sub” means VO MergerSub LLC, a Delaware limited liability company and, as of the date hereof, a direct, wholly owned Subsidiary of SpinCo.
“Subsidiary” means, when used with reference to any Person, any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that for purposes of this Agreement, both prior to and after the Effective Time, none of the Persons listed in clause (i), (ii), (iii), or (iv) shall be deemed to be a Subsidiary of any Person listed in any other such clause: (i) Jefferies, Phlcorp, Baldwin, and Vitesse Energy Finance, (ii) Gerrity, Cree, 3B, and Gerrity Bakken, LLC, (iii) SpinCo, SpinCo VEL-Sub, SpinCo VOL-Sub, Vitesse Oil, VEL, Vitesse Oil, Inc., and Vitesse Management Company LLC, and (iv) Jefferies Capital Partners LLC, JCP V LLC, Jefferies SBI Strategic Investments USA LLC, Jefferies Capital Partners V L.P., and Jefferies SBI USA Fund, L.P.
“Tax Opinion” has the meaning set forth in Section 5.2.
“Third Party Claim” has the meaning set forth in Section 7.6(a).
“Valuation Firm(s)” has the meaning set forth in Section 4.6.
“VEL” has the meaning set forth in the Recitals.
“VEL Merger” has the meaning set forth in Schedule 2.2.
“VEL MIUs” means the management incentive units with respect to VEL.
“Vitesse Business” means VEL and Vitesse Oil.
6
“Vitesse Energy Finance” has the meaning set forth in the first paragraph of this Agreement.
“Vitesse Oil” has the meaning set forth in the Recitals.
“Vitesse Oil MIUs” means the management incentive units with respect to Vitesse Oil.
“VO Merger” has the meaning set forth in Schedule 2.2.
SECTION 1.2 Interpretation. (a) In this Agreement, unless the context clearly indicates otherwise:
(i) words used in the singular include the plural and words used in the plural include the singular;
(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;
(iii) reference to any gender includes the other gender;
(iv) the word “including” means “including but not limited to”;
(v) reference to any Article, Section, Exhibit or Schedule means such Article or Section of, or such Exhibit or Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;
(vi) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;
(vii) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;
(viii) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;
(ix) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including”;
(x) if there is any conflict between the provisions of the body of this Agreement and the Exhibits or Schedules hereto, the provisions of the body of this
7
Agreement shall control unless explicitly stated otherwise in such Exhibit or Schedule;
(xi) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement;
(xii) any portion of this Agreement obligating a Party or an Exhibit A Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party or such Exhibit A Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be; and
(xiii) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.
(b) In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and the Exhibit A Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party or Exhibit A Party by virtue of the authorship of any provision herein.
ARTICLE II
BUSINESS SEPARATION
SECTION 2.1 Formation of SpinCo Entities. On August 5, 2022, Vitesse Energy Finance caused SpinCo to be formed as a direct, wholly owned Subsidiary of Vitesse Energy Finance. On January 4, 2023, SpinCo caused SpinCo VEL-Sub to be formed as a direct, wholly owned subsidiary of SpinCo. On January 4, 2023, SpinCo caused SpinCo VOL-Sub to be formed as a direct, wholly owned subsidiary of SpinCo. None of SpinCo, SpinCo VEL-Sub or SpinCo VOL-Sub has engaged in any actions except in preparation for the Distribution.
SECTION 2.2 Pre-Distribution Transactions. Prior to the Distribution, the Parties and the Exhibit A Parties shall effect each of the transactions set forth in Schedule 2.2, which Pre-Distribution Transactions shall be accomplished substantially in the order described therein, with such modifications, if any, as Jefferies shall determine are necessary or desirable for efficiency or similar purposes. For the avoidance of doubt, some or all of such Pre-Distribution Transactions may have already been implemented prior to the date hereof.
SECTION 2.3 Other Distribution Transactions. In connection with the Distribution, the Parties and the Exhibit A Parties shall effect each of the transactions set forth in Schedule 2.3 (the “Other Distribution Transactions”), which Other Distribution Transactions shall be accomplished prior to or following the Distribution, with such modifications, if any, as the Parties and the Exhibit A Parties shall determine are necessary or desirable for efficiency or similar purposes. For the avoidance of doubt, some or all of such Other Distribution Transactions may have already been implemented prior to the date hereof.
SECTION 2.4 Transfer of Vitesse Business; Assumption of Vitesse Business Liabilities.
8
(a) As more fully set forth in this Article II and subject to the terms and conditions of this Agreement (including Section 2.2) and the Ancillary Agreements, prior to the Distribution, Jefferies shall, and shall cause each of its Subsidiaries to, convey, assign, transfer, contribute and set over, or cause to be conveyed, assigned, transferred, contributed and set over, directly or indirectly, to SpinCo all of its rights, title and interest in and to all of the Vitesse Business and SpinCo agrees to accept or cause to be accepted, directly or indirectly, all such rights, title and interest. The Vitesse Business is being transferred on an “as is,” “where is” basis, without any warranty whatsoever on the part of Jefferies or its Subsidiaries.
(b) Upon completion of the transactions contemplated by this Agreement, SpinCo will own, directly or indirectly, the Vitesse Business and Jefferies will continue to own, directly or indirectly, the Jefferies Retained Business and the Jefferies Retained Assets and continue to be subject to the Jefferies Retained Liabilities.
(c) If, following the Effective Time, (i) any Asset forming part of the Vitesse Business has not been transferred to SpinCo, Jefferies undertakes to transfer, or procure the transfer of such Asset to SpinCo as soon as practicable, or (ii) any Asset forming part of the Jefferies Retained Business has been transferred to SpinCo, SpinCo undertakes to transfer or procure the transfer of such Asset to Jefferies as soon as practicable.
SECTION 2.5 Financial Instruments. Prior to the Distribution, SpinCo shall (i) enter into the New Revolving Credit Facility and related agreements, which shall amend and restate the Existing VEL Revolving Credit Facility, (ii) borrow under the New Revolving Credit Facility such amount, if any, as may be necessary in order to enable SpinCo to make (or cause to be made) the payment described in clause (iii) of this section, and (iii) pay (or cause to be paid) in full all amounts (including interest and fees) due under the Existing Vitesse Oil Revolving Credit Facility. Each of VEL and Vitesse Oil shall cooperate with SpinCo in connection with SpinCo’s entry into the New Revolving Credit Facility and shall take all actions and enter into (and cause its respective Subsidiaries to take all actions and enter into) such agreements and arrangements as shall be necessary to cause the termination of the Existing Vitesse Oil Revolving Credit Facility.
SECTION 2.6 Ancillary Agreements. At or prior to the Distribution, each of the Parties and the Exhibit A Parties will execute or adopt, as applicable, and deliver each Ancillary Agreement to which it is a party.
SECTION 2.7 Termination of Agreements
(a) Except as set forth in Section 2.7(b), in furtherance of the releases and other provisions of Section 7.1, effective as of the Effective Time, each SpinCo Party, each Gerrity/Cree Party, each Jefferies Party and each Fund Party hereby terminates any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among (i) any SpinCo Party, on the one hand, and any Gerrity/Cree Party, Jefferies Party and/or Fund Party, on the other hand, (ii) any Gerrity/Cree Party, on the one hand, and any SpinCo Party, Jefferies Party and/or Fund Party, on the other hand, (iii) any Jefferies Party, on the one hand, and any SpinCo Party, Fund Party and/or Gerrity/Cree Party, on the other hand, and (iv) any Fund Party, on the one hand, and any SpinCo Party,
9
Jefferies Party and/or Gerrity/Cree Party, on the other hand. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each SpinCo Party, each Gerrity/Cree Party, each Jefferies Party and each Fund Party shall take, or cause to be taken, such other actions as may be necessary to effect the foregoing.
(b) The provisions of Section 2.7(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement or the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or the Exhibit A Parties or to be continued from and after the Effective Time); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.7(b)(ii); (iii) any agreements, arrangements, commitments or understandings to which any Person other than the Parties or the Exhibit A Parties is a party thereto; (iv) any intercompany accounts payable or accounts receivable between any Jefferies Party, on the one hand, and any SpinCo Party, on the other hand, which shall be settled in the manner contemplated by Section 2.7(c); and (v) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of SpinCo or Jefferies, as the case may be, is a party.
(c) (i) All of the intercompany accounts receivable and accounts payable between any member of a SpinCo Party, on the one hand, and any Jefferies Party, on the other hand, outstanding as of the Effective Time, including as listed in Schedule 2.7(c)(i), shall, prior to or as promptly as practicable after the Effective Time, be repaid, settled or otherwise eliminated by means of cash payments, a dividend, capital contribution or combination of the foregoing, or otherwise as determined by Jefferies in its sole and absolute discretion, and (ii) all of the intercompany accounts receivable and accounts payable between any member of a SpinCo Party, on the one hand, and any Jefferies Party, on the other hand, that were not outstanding as of the Effective Time but are listed in Schedule 2.7(c)(ii), shall, as promptly as practicable after the accrual of such amounts, be repaid, settled or otherwise eliminated by means of cash payments.
SECTION 2.8 Resignations. The Jefferies Parties, the Fund Parties and the Gerrity/Cree Parties will cause all of their employees and directors to resign, effective not later than immediately prior to the Effective Time, from all boards of directors or managers or any similar governing bodies of any SpinCo Party on which they serve.
ARTICLE III
THE DISTRIBUTION
SECTION 3.1 Distribution Agent. Prior to the Effective Time and subject to the terms and conditions of this Agreement, Jefferies shall enter into an agreement with the Distribution Agent, providing for, among other things, the transactions described in this Article III.
SECTION 3.2 Delivery of SpinCo Shares. Subject to Article V, on or prior to the Effective Time, Jefferies will deliver to the Distribution Agent for the benefit of the Record Holders book-
10
entry transfer authorizations for such number of the outstanding SpinCo Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the Jefferies Common Stock to instruct the Distribution Agent to distribute at the Effective Time the appropriate number of SpinCo Shares to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form. SpinCo will not issue paper stock certificates in respect of the SpinCo Shares. The Distribution shall be effective at the Effective Time.
SECTION 3.3 Distribution Ratio; Number of Shares to be Distributed. Subject to Section 3.4 and Article V, each Record Holder will be entitled to receive in the Distribution a number of whole SpinCo Shares equal to the number of shares of Jefferies Common Stock held by such Record Holder on the Record Date multiplied by the Distribution Ratio, rounded down to the nearest whole number. For the avoidance of doubt, holders of Jefferies preferred stock shall not be entitled to receive any SpinCo Shares in the Distribution except to the extent that shares of such preferred stock are converted to shares of Jefferies Common Stock prior to the Record Date.
SECTION 3.4 Treatment of Fractional Shares. No fractional shares will be distributed or credited to book-entry accounts in connection with the Distribution. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this Section 3.4, would be entitled to receive a fractional share interest of a SpinCo Share pursuant to the Distribution, shall be paid cash, without any interest thereon, as hereinafter provided. As soon as practicable after the Effective Time, the Distribution Agent shall determine the number of whole and fractional SpinCo Shares allocable to each Record Holder, aggregate all such fractional shares and sell the whole shares obtained thereby in the open market on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests (with the Distribution Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and cause to be distributed to each such Record Holder, in lieu of any fractional share, such Record Holder’s ratable share of the proceeds of such sale, after deducting any taxes required to be withheld and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. None of Jefferies, SpinCo or the Distribution Agent will be required to guarantee any minimum sale price for the fractional SpinCo Shares sold in accordance with this Section 3.4. None of Jefferies, SpinCo or the Distribution Agent will be required to pay any interest on the proceeds from the sale of fractional shares. Neither the Distribution Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of Jefferies or SpinCo.
SECTION 3.5 Unclaimed Property. Any SpinCo Shares or cash in lieu of fractional shares with respect to SpinCo Shares that remain unclaimed by any Record Holder 180 days after the Distribution Date shall be delivered to SpinCo, and SpinCo shall hold such SpinCo Shares for the account of such Record Holder, and the Parties agree that all obligations to provide such SpinCo Shares and cash, if any, in lieu of fractional share interests shall be obligations of SpinCo, subject in each case to applicable escheat or other abandoned property laws, and Jefferies shall have no Liability with respect thereto.
SECTION 3.6 Record Holders. Until the SpinCo Shares are duly transferred in accordance with this Section 3.6 and applicable law, from and after the Effective Time, SpinCo will regard the Persons entitled to receive such SpinCo Shares as record holders of SpinCo Shares in accordance with the terms of the Distribution without requiring any action on the part of such
11
Persons. SpinCo agrees that, subject to any transfers of such shares, from and after the Effective Time (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the SpinCo Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the SpinCo Shares then held by such holder.
SECTION 3.7 Jefferies Board Action. The Jefferies Board of Directors shall, in its discretion, establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution. The consummation of the transactions provided for in this Article III shall only be effected after the Distribution has been declared by the Jefferies Board of Directors. Notwithstanding anything in this Agreement to the contrary, the Jefferies Board of Directors has the right, in its sole discretion and at any time prior to the Distribution Date, to decide to terminate or abandon the Distribution even if all conditions to the Distribution set forth in Article V have been satisfied, if the Jefferies Board of Directors determines that the Distribution is not in the best interest of Jefferies or its shareholders or otherwise is not advisable.
ARTICLE IV
CERTAIN COVENANTS
SECTION 4.1 Further Assurances. In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties and the Exhibit A Parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the Distribution and the other transaction, agreements and documents contemplated hereby, including (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings with Governmental Authorities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority, (ii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed and (iii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, each Party and Exhibit A Party shall cooperate with each other to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, contract or other instrument, and to take all such other actions as such Party or Exhibit A Party may reasonably be requested to take from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the other agreements and documents contemplated hereby.
SECTION 4.2 Election of SpinCo Board of Directors. Prior to the Distribution, Jefferies agrees to vote, or cause to be voted, all shares of SpinCo Common Stock held by Jefferies or its Subsidiaries in favor of the nominees to the Board of Directors of SpinCo, as set forth on Schedule 4.2.
12
SECTION 4.3 Registration and Listing.
Prior to the Distribution:
(a) Jefferies and SpinCo shall cooperate with respect to the preparation of the Form 10, to effect the registration of the SpinCo Common Stock under the Exchange Act. The Form 10 shall include an information statement to be made available on the Internet or mailed to the holders of Jefferies Common Stock in connection with the Distribution (the “Information Statement”). Jefferies and SpinCo shall use commercially reasonable efforts to cause the Form 10 to become and remain effective under the Exchange Act as soon as reasonably practicable. As soon as practicable, after the Form 10 becomes effective, Jefferies shall mail a notice of Internet availability of the Information Statement or the Information Statement to the holders of Jefferies Common Stock.
(b) The Parties shall take all such action as may be necessary or appropriate under state and foreign securities and “Blue Sky” laws in connection with the transactions contemplated by this Agreement.
(c) The Parties shall prepare, and SpinCo shall file and seek to make effective, an application for the listing of the SpinCo Common Stock on the NYSE, subject to official notice of issuance. Jefferies shall, to the extent commercially reasonable, give the NYSE notice of the Record Date in compliance with Rule 10b-17 of the Exchange Act.
(d) The Parties and the Exhibit A Parties shall cooperate in preparing, filing with the SEC and causing to become effective any registration statements or amendments thereto that are necessary or appropriate in order to effect the transactions contemplated hereby.
SECTION 4.4 Delivery of Ancillary Agreements. Prior to or as of the Distribution, the Parties shall execute or adopt, as applicable, and deliver, or shall cause to be executed and delivered, each of the Ancillary Agreements.
SECTION 4.5 Provision of Corporate Records. Prior to or as promptly as practicable after the Distribution, Jefferies shall deliver to SpinCo all corporate books and records of the SpinCo Parties and copies of all corporate books and records of the Jefferies Parties exclusively relating to the Vitesse Business.
SECTION 4.6 Solvency Opinions. Jefferies shall engage one or more nationally recognized valuation, appraisal or accounting firms or investment banks (the “Valuation Firm(s)”) and use commercially reasonable efforts to obtain from the Valuation Firm(s) (i) an opinion, dated the date the Jefferies Board of Directors declares and effects the Distribution, as to the solvency of Jefferies prior to the Distribution and (ii) an opinion as to the solvency and financial viability of Jefferies and SpinCo after the consummation of the Distribution, each in form and substance in the sole and absolute discretion of the Jefferies Board of Directors.
13
ARTICLE V
CONDITIONS TO THE DISTRIBUTION
The obligation of Jefferies to effect the Distribution is subject to Section 10.14, and the satisfaction or the waiver by Jefferies of each of the following conditions:
SECTION 5.1 Approval by Jefferies Board of Directors. This Agreement and the transactions contemplated hereby, including the Pre-Distribution Transactions and the Other Distribution Transactions, the Distribution and the declaration of the dividend of SpinCo Common Stock to Jefferies shareholders, shall have been duly approved, authorized and not rescinded by the Board of Directors of Jefferies in accordance with applicable law and its certificate of incorporation and bylaws as amended and as in effect on the date of this Agreement.
SECTION 5.2 Receipt of IRS Private Letter Ruling and Tax Opinion. Jefferies shall have received a ruling from the IRS which shall not have been rescinded, granting the rulings requested in the IRS Ruling Request, including, for the avoidance of doubt, that (i) the Distribution, together with certain related transactions, will be a reorganization and distribution pursuant to Sections 368(a)(1)(D) and 355 of the Code, and (ii) no gain or loss will be recognized by Jefferies, SpinCo, or holders of Jefferies Common Stock as a result of the Distribution and certain related transactions under Sections 361(a), 357(a), 355(a) and 1032(a) of the Code (the “IRS Ruling”). In addition, Jefferies shall have received the written opinion of Morgan, Lewis & Bockius LLP, which shall remain in full force and effect, subject to the limitations specified therein and the accuracy of and compliance with certain representations, warranties and covenants, substantially to the effect that the Distribution, together with certain related transactions, will be a reorganization and distribution pursuant to Sections 368(a)(1)(D) and 355 of the Code (the “Tax Opinion”).
SECTION 5.3 Solvency Opinions. The Valuation Firm(s) shall have delivered one or more opinions to the Jefferies Board of Directors confirming the solvency and financial viability of Jefferies before the consummation of the Distribution and each of Jefferies and SpinCo after the consummation of the Distribution, and such opinions shall be acceptable to Jefferies in form and substance in the sole and absolute discretion of the Jefferies Board of Directors, and such opinions shall not have been withdrawn, modified or rescinded.
SECTION 5.4 Effectiveness of Form 10; No Stop Order. The Form 10 shall have been declared effective by the SEC, and no stop order suspending the effectiveness of the Form 10 shall be in effect and no proceedings for that purpose shall have been initiated or, to the knowledge of either of the Parties, threatened by the SEC.
SECTION 5.5 Dissemination of Information to Jefferies Stockholders. Prior to the Distribution Date, notice of Internet availability of the Information Statement or the Information Statement shall be mailed to the holders of Jefferies Common Stock as of the Record Date.
SECTION 5.6 Approval of NYSE Listing Application. The SpinCo Common Stock to be distributed in the Distribution shall have been approved for listing on the NYSE (or another national securities exchange approved by Jefferies), subject to official notice of issuance.
14
SECTION 5.7 Ancillary Agreements. Each of the Ancillary Agreements shall have been executed by each party to such agreements or adopted by the requisite authority, as applicable, and delivered, and each of such agreements or plans shall be in full force and effect.
SECTION 5.8 No Injunctions. No order, injunction, judgment, ruling or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing or restricting the Distribution or any other transaction contemplated by this Agreement or the Ancillary Agreements shall be in effect. No other event outside the control of Jefferies shall have occurred or failed to occur that prevents or restricts the consummation of the Distribution or the other transactions contemplated by this Agreement or the Ancillary Agreements.
SECTION 5.9 Consummation of Pre-Distribution Transactions. The Pre-Distribution transactions contemplated by Article II of this Agreement shall have been consummated.
SECTION 5.10 No Other Events. No other events or developments shall have occurred prior to the Distribution Date that, in the judgment of the Jefferies Board of Directors, would result in the Distribution or the other transactions contemplated by this Agreement or the Ancillary Agreements having a material adverse effect on Jefferies or its shareholders.
SECTION 5.11 Post-Distribution SpinCo Board. Jefferies shall have duly elected, or caused to be elected, the persons listed in Schedule 4.2 who will become members of the SpinCo Board of Directors immediately after the Distribution; provided, that, to the extent required by any law or requirement of the NYSE or any other national securities exchange, as applicable, the existing SpinCo directors shall appoint one independent director prior to the date on which “when-issued” trading of SpinCo’s Common Stock begins, and this independent director shall begin his or her term prior to the Distribution and serve on SpinCo’s Audit, Nominating, Governance and Environmental and Social Responsibility and Compensation Committees.
SECTION 5.12 SpinCo Governing Documents. The SpinCo Amended and Restated Certificate of Incorporation and SpinCo Amended and Restated Bylaws shall be in effect.
SECTION 5.13 Resignations. The resignations contemplated by Section 2.8 shall have become effective.
SECTION 5.14 Satisfaction of Conditions. The satisfaction of the foregoing conditions are for the sole benefit of Jefferies and shall not give rise to or create any duty on the part of Jefferies or the Jefferies Board of Directors to waive or not waive any such condition, to effect the Distribution or in any way limit Jefferies’ power of termination set forth in Section 10.14.
ARTICLE VI
INSURANCE MATTERS
SECTION 6.1 Insurance Matters.
(a) From and after the Effective Time, other than as provided in this Article VI neither Jefferies nor SpinCo shall have any rights to or under the other Party’s or its Affiliates’ insurance policies. At the Effective Time, each of Jefferies and SpinCo shall have in effect all insurance programs required to comply with their respective contractual
15
obligations and such other insurance policies as reasonably necessary or customary for companies operating a similar business. Such insurance programs may include, but are not limited to, general liability, commercial auto liability, workers’ compensation, employer’s liability, product liability, professional services liability, property, employment practices liability, employee dishonesty/crime, directors’ and officers’ liability and fiduciary liability.
(b) From and after the Effective Time, with respect to any losses, damages and liability incurred by SpinCo or its Affiliates prior to the Effective Time, Jefferies will provide SpinCo with access to, and may, upon ten (10) days’ prior written notice to Jefferies, make claims under Jefferies’ third-party insurance policies in place at the Effective Time and Jefferies’ policies of insurance, but solely to the extent that such policies provided coverage prior to the Effective Time; provided that such access to, and the right to make claims under, such insurance policies, shall be subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles and other fees and expenses, and shall be subject to the following additional conditions:
(i) SpinCo shall report, as promptly as practicable, claims in accordance with Jefferies’ claim reporting procedures in effect immediately prior to the Effective Time (or in accordance with any modifications to such procedures after the Effective Time);
(ii) SpinCo and its Affiliates shall indemnify, hold harmless and reimburse Jefferies and its Affiliates for any deductibles, self-insured retention, fees and expenses incurred by Jefferies or its Affiliates to the extent resulting from any access to, any claims made by SpinCo or any of its Affiliates under, any insurance provided pursuant to this Section 6.1, including any indemnity payments, settlements, judgments, legal fees and allocated claims expenses and claim handling fees, whether such claims are made by SpinCo, its employees or third Persons; and
(iii) SpinCo shall exclusively bear (and neither Jefferies nor its Affiliates shall have any obligation to repay or reimburse SpinCo or its Affiliates for) and shall be liable for all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made on behalf of SpinCo or any of its Affiliates under the policies as provided for in this Section 6.1.
(c) If Jefferies incurs costs to enforce SpinCo’s rights herein, SpinCo agrees to indemnify Jefferies for such enforcement costs, including attorneys’ fees.
(d) Jefferies shall retain the exclusive right to control its insurance policies and programs, including the right to exhaust, settle, release, commute, buy-back or otherwise resolve disputes with respect to any of its insurance policies and programs and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any claims SpinCo has made or could make in the future, and neither SpinCo nor any of its Affiliates shall, without
16
the prior written consent of Jefferies, erode, exhaust, settle, release, commute, buyback or otherwise resolve disputes with Jefferies’ insurers with respect to any of Jefferies’ insurance policies and programs. Jefferies and SpinCo shall cooperate and share such information as is reasonably necessary in order to permit each other to manage and conduct their insurance matters as each deems appropriate.
(e) At the Effective Time, SpinCo shall have in effect all insurance programs required to comply with law or SpinCo’s contractual obligations and such other insurance policies as reasonably necessary or customary for companies operating in a business similar to the Vitesse Business.
(f) This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of Jefferies in respect of any insurance policy or any other contract or policy of insurance.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Release of Pre-Distribution Claims.
(a) Except as provided in Section 7.1(d), effective as of the Effective Time, each of Jefferies and SpinCo does hereby, on behalf of itself and its respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of either Jefferies or Jefferies’ Affiliates, on the one hand, or SpinCo or SpinCo’s Affiliates, on the other hand (in each case, in their respective capacities as such), remise, release and forever discharge the other Party, its/their respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of such Party (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions and all other activities to implement the Distribution.
(b) Except as provided in Section 7.1(d), effective as of the Effective Time, each of Jefferies and the Gerrity/Cree Parties do hereby, on behalf of itself and its respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of either Jefferies or Jefferies’ Affiliates, on the one hand, or the Gerrity/Cree Parties or the Gerrity/Cree Parties’ Affiliates, on the other hand (in each case, in their respective capacities as such), remise, release and forever discharge the other Party, its/their respective Subsidiaries and Affiliates, successors and
17
assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of such Party (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions and all other activities to implement the Distribution.
(c) Except as provided in Section 7.1(d), effective as of the Effective Time, each of Jefferies and the Fund Entities do hereby, on behalf of itself and its respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of either Jefferies or Jefferies’ Affiliates, on the one hand, or the Fund Entities or the Fund Parties’ Affiliates, on the other hand (in each case, in their respective capacities as such), remise, release and forever discharge the other Party, its/their respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Effective Time have been shareholders, members or other equity holders, directors, officers, agents or employees of such Party (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions and all other activities to implement the Distribution.
(d) Nothing contained in Section 7.1(a), Section 7.1(b) or Section 7.1(c) shall impair any right of any Person identified in Section 7.1(a) or Section 7.1(b) to enforce this Agreement or any Ancillary Agreement, in each case in accordance with its terms. Nothing contained in Section 7.1(a), Section 7.1(b) or Section 7.1(c) shall release any Person from:
(i) any Liability, contingent or otherwise, assumed, transferred, assigned, retained or allocated to a Party, its Subsidiaries or Affiliates in accordance with, or any other Liability of any Party, its Subsidiaries or Affiliates under this Agreement, any agreement governing the Pre-Distribution Transactions or any agreement governing the Other Distribution Transactions; or
(ii) any Liability that any Indemnified Party may have with respect to indemnification or contribution pursuant to this Agreement (including Section 7.2 and Section 7.3) for claims brought against the Parties or their respective Subsidiaries or Affiliates by third Persons, which Liability shall be governed by the provisions of this Article VII and, if applicable, the appropriate provisions of the Ancillary Agreements.
18
(e) Neither Party shall make, nor permit any of its Subsidiaries or Affiliates to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or indemnification, against the other Party, or any other Person released pursuant to Section 7.1(a), Section 7.1(b) or Section 7.1(c) with respect to any Liability released pursuant to Section 7.1(a), Section 7.1(b) or Section 7.1(c).
(f) It is the intent of each of the Parties by virtue of the provisions of this Section 7.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time, between the Parties (including any contractual agreements or arrangements existing or alleged to exist between the Parties on or before the Effective Time), except as expressly set forth in Section 7.1(d). At any time, at the reasonable request of either Party, the other Party shall execute and deliver releases reflecting the provisions hereof.
SECTION 7.2 Indemnification by SpinCo. Except as provided in Section 7.5, SpinCo shall, and shall cause each of the other SpinCo Parties to, indemnify, defend and hold harmless the Jefferies Parties and each of their Affiliates, directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Jefferies Indemnified Parties”), from and against any and all Expenses or Losses incurred or suffered by one or more of the Jefferies Indemnified Parties, in connection with, relating to, arising out of or due to, directly or indirectly, any of the following items:
(a) any claim that the information included in the Form 10 or the Information Statement that was supplied by SpinCo, is or was false or misleading with respect to any material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, regardless of whether the occurrence, action or other event giving rise to the applicable matter took place prior to or subsequent to the Effective Time; it being understood that apart from the information set forth on Schedule 7.3(a), all information included in the Form 10 or the Information Statement shall be deemed to be information supplied by SpinCo;
(b) the conduct of the SpinCo Parties (on and after the Effective Time);
(c) the Vitesse Business not being operated in the Ordinary Course prior to the Effective Time as a result of any action or failure to act by (i) any SpinCo Party, (ii) any person who served or is serving as a director, officer or employee of any SpinCo Party after the Effective Time, or (iii) any person whose employment and job responsibilities would have resulted in such person serving as a director, officer or employee of any SpinCo Party after the Effective Time had such person not retired or his employment been terminated voluntarily or involuntarily prior to the Effective Time; or
(d) the breach by any SpinCo Party of any covenant or agreement set forth in this Agreement or any agreement or instrument contemplated by this Agreement (other than the Tax Matters Agreement);
19
in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported.
SECTION 7.3 Indemnification by Jefferies. Except as provided in Section 7.5, Jefferies shall indemnify, defend and hold harmless the SpinCo Parties and each of their Affiliates, directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “SpinCo Indemnified Parties”), from and against any and all Expenses or Losses incurred or suffered by one or more of the SpinCo Indemnified Parties in connection with, relating to, arising out of or due to, directly or indirectly, any of the following items:
(a) any claim that the information included in the Form 10 or the Information Statement that was supplied by Jefferies, is or was false or misleading with respect to any material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, regardless of whether the occurrence, action or other event giving rise to the applicable matter took place prior to or subsequent to the Effective Time; it being understood that the information set forth on Schedule 7.3(a) shall be deemed to be the only information supplied by Jefferies included in the Form 10 or the Information Statement, and all other information included in the Form 10 or the Information Statement shall be deemed to be information supplied by SpinCo;
(b) the Jefferies Retained Business (whether before or after the Effective Time);
(c) the Jefferies Retained Assets;
(d) the Jefferies Retained Liabilities;
(e) the Vitesse Business not being operated in the Ordinary Course prior to the Effective Time as a result of any action or failure to act by any Jefferies Party or any person who served or is serving as a director, officer or employee of any Jefferies Party prior to, on or after the Effective Time, other than a person described in clauses (ii) or (iii) of Section 7.2(c); or
(f) the breach by any Jefferies Party of any covenant or agreement set forth in this Agreement or any agreement or instrument contemplated by this Agreement (other than the Tax Matters Agreement);
in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported.
SECTION 7.4 Applicability of and Limitation on Indemnification. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION UNDER THIS Article VII SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNIFIED PARTY AND SHALL APPLY WITHOUT REGARD TO WHETHER THE LOSS, LIABILITY, CLAIM, DAMAGE, COST OR EXPENSE FOR WHICH
20
INDEMNITY IS CLAIMED HEREUNDER IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY, ANY OTHER THEORY OF LIABILITY OR ARISES AS AN OBLIGATION FOR CONTRIBUTION.
SECTION 7.5 Adjustment of Indemnifiable Losses.
(a) The amount that any Party or any of its Affiliates (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification hereunder (an “Indemnified Party”) shall be reduced by any insurance proceeds and other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Expense or Loss. If an Indemnified Party receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Expense or Loss and subsequently actually receives Insurance Proceeds or other amounts in respect of such Expense or Loss, then such Indemnified Party shall pay to the Indemnifying Party a sum equal to the lesser of (1) the after-tax amount of such Insurance Proceeds or other amounts actually received and (2) the net amount of Indemnity Payments actually received previously. The Indemnified Party agrees that the Indemnifying Party shall be subrogated to such Indemnified Party under any insurance policy.
(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a “windfall” (i.e., a benefit it would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.
(c) Except as contemplated in this Agreement, Indemnity Payments (i) shall not be increased to take into account any tax costs incurred by the Indemnified Party arising from any Indemnity Payments from the Indemnifying Party and (ii) shall not be reduced to take into account any tax benefit received by the Indemnified Party arising from the incurrence or payment of any Indemnity Payment.
(d) For the avoidance of doubt, the indemnification provisions in Section 7.2 and Section 7.3 shall not apply to any Losses, including any taxes or tax related Losses, the responsibility for which is expressly covered by the Tax Matters Agreement.
SECTION 7.6 Procedures for Indemnification of Third Party Claims.
(a) If any third party shall make any claim or commence any arbitration proceeding or suit (collectively, a “Third Party Claim”) against any one or more of the Indemnified Parties with respect to which an Indemnified Party intends to make any claim for indemnification against any SpinCo Party under Section 7.2 or against Jefferies under Section 7.3, such Indemnified Party shall promptly give written notice to the Indemnifying Party describing such Third Party Claim in reasonable detail. Notwithstanding the foregoing, the failure of any Indemnified Party to provide notice in accordance with this Section 7.6(a) shall not relieve the relevant Indemnifying Party of its obligations under this
21
Article VII, except to the extent that such Indemnifying Party is actually prejudiced by such failure to provide notice.
(b) The Indemnifying Party shall have 30 days after receipt of the notice referred to in Section 7.6(a) to notify the Indemnified Party that it elects to conduct and control the defense of such Third Party Claim. If the Indemnifying Party does not give the foregoing notice, the Indemnified Party shall have the right to defend, contest, settle or compromise such Third Party Claim in the exercise of its exclusive discretion subject to the provisions of Section 7.6(c), and the Indemnifying Party shall, upon request from any of the Indemnified Parties, promptly pay to such Indemnified Parties in accordance with the other terms of this Section 7.6(b) the amount of any Expense or Loss resulting from their liability to the third party claimant. If the Indemnifying Party gives the foregoing notice, the Indemnifying Party shall have the right to undertake, conduct and control, through counsel reasonably acceptable to the Indemnified Party, and at the Indemnifying Party’s sole expense, the conduct and settlement of such Third Party Claim, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith, provided that (i) the Indemnifying Party shall not thereby permit any lien, encumbrance or other adverse charge to thereafter attach to any asset of any Indemnified Party; and (ii) the Indemnifying Party shall permit the Indemnified Party and counsel chosen by the Indemnified Party and reasonably acceptable to the Indemnifying Party to monitor such conduct or settlement and shall provide the Indemnified Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but the fees and expenses of such counsel chosen by the Indemnified Party (including allocated costs of in-house counsel and other personnel) shall be borne by the Indemnified Party. If the Indemnified Party has been advised by its counsel that there may be one or more legal defenses available to it that conflict with those available to the Indemnifying Party or that there may be actual or potential differing or conflicting interests between the Indemnifying Party and the Indemnified Party in the conduct of the defense of a Third Party Claim, the Indemnified Party will have the right, at the expense of the Indemnifying Party, to engage one separate counsel reasonably acceptable to the Indemnifying Party to handle and defend such Third Party Claim; provided, that, if such Third Party Claim can be reasonably separated between those portions for which separate legal defenses are and are not available, the Indemnified Party will instead have the right, at the expense of the Indemnifying Party, to engage one separate counsel reasonably acceptable to the Indemnifying Party to handle and defend the portion of the Third Party Claim for which separate legal defenses are available and the Indemnifying Party will have the right to control the defense or investigation of the remaining portion(s) of such Third Party Claim. In no event shall the Indemnifying Party, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment that does not include, in each such case, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such claim.
If the Indemnifying Party shall not have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnifying Party shall nevertheless be entitled through counsel chosen by the Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor the conduct or settlement of such claim by the Indemnified Party, and the
22
Indemnified Party shall provide the Indemnifying Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in connection with such monitoring shall be borne by the Indemnifying Party.
(c) So long as the Indemnifying Party is contesting any such Third Party Claim in its reasonable good faith judgment, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim, provided that in such event the Indemnified Party shall waive any right to indemnity therefor by the Indemnifying Party, and no amount in respect thereof shall be claimed as an Expense or a Loss under this Article VII.
If the Indemnified Party determines in its reasonable good faith judgment that the Indemnifying Party is not contesting such Third Party Claim in good faith, the Indemnified Party shall have the right to undertake control of the defense of such Third Party Claim upon five days written notice to the Indemnifying Party and thereafter to defend, contest, settle or compromise such Third Party Claim in the exercise of its exclusive discretion.
If the Indemnified Party shall have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnified Party, on not less than 45 days prior written notice to the Indemnifying Party, may make settlement (including payment in full) of such Third Party Claim, and such settlement shall be binding upon the Parties for the purposes hereof, unless within said 45-day period the Indemnifying Party shall have requested the Indemnified Party to contest such Third Party Claim at the expense of the Indemnifying Party. In such event, the Indemnified Party shall promptly comply with such request and the Indemnifying Party shall have the right to direct the defense of such claim or any litigation based thereon subject to all of the conditions of Section 7.6(b). Notwithstanding anything in this Section 7.6(c) to the contrary, if the Indemnified Party, in the good-faith belief that a claim may materially and adversely affect it other than as a result of money damages or other money payments, advises the Indemnifying Party that it has determined to settle a claim, the Indemnified Party shall have the right to do so at its own cost and expense, without any requirement to contest such claim at the request of the Indemnifying Party, but without any right under the provisions of this Article VII for indemnification by the Indemnifying Party.
(d) To the extent that, with respect to any claim governed by the Tax Matters Agreement, there is any inconsistency between the provisions thereof and of this Section 7.6, the provisions of the Tax Matters Agreement shall control with respect to such claim.
SECTION 7.7 Procedures for Indemnification of Direct Claims. Any claim for indemnification on account of an Expense or a Loss made directly by the Indemnified Party against the Indemnifying Party and that does not result from a Third Party Claim shall be asserted by written notice from the Indemnified Party to the Indemnifying Party specifically claiming indemnification hereunder. Such Indemnifying Party shall have a period of 45 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 45-day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim.
23
If such Indemnifying Party does respond within such 45-day period and rejects such claim in whole or in part, such Indemnified Party shall be free to pursue resolution as provided in Article VIII.
SECTION 7.8 Contribution. If the indemnification provided for in this Article VII is unavailable to an Indemnified Party in respect of any Expense or Loss arising out of or related to information contained in the Form 10 or the Information Statement, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Expense or Loss in such proportion as is appropriate to reflect the relative fault of the SpinCo Indemnified Parties, on the one hand, or the Jefferies Indemnified Parties, on the other hand, in connection with the statements or omissions that resulted in such Expense or Loss. The relative fault of any SpinCo Indemnified Party, on the one hand, and of any Jefferies Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to information supplied by the SpinCo Indemnified Party, on the one hand, or by a Jefferies Indemnified Party, on the other hand.
SECTION 7.9 Remedies Cumulative. The remedies provided in this Article VII shall be cumulative and, subject to the provisions of Article VIII, shall not preclude assertion by an Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
SECTION 7.10 Survival. All covenants and agreements of the Parties contained in this Agreement relating to indemnification shall survive the Effective Time indefinitely unless a specific survival or other applicable period is expressly set forth herein.
ARTICLE VIII
DISPUTE RESOLUTION
SECTION 8.1 Escalation and Mediation.
(a) The Parties and the Exhibit A Parties agree to use commercially reasonable efforts to resolve expeditiously any dispute, controversy or claim between them with respect to the matters covered hereby that may arise from time to time on a mutually acceptable negotiated basis. In furtherance of the foregoing, any Party or Exhibit A Party involved in a dispute, controversy or claim may deliver a notice (an “Escalation Notice”) demanding an in-person meeting involving senior representatives of the relevant Parties or Exhibit A Parties. A copy of any such Escalation Notice shall be given to the General Counsel, or like officer or official or Person listed in Section 10.9 of this Agreement, of or for each Party or Exhibit A Party involved in the dispute, controversy or claim (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedures for such discussions or negotiations between the relevant Parties or Exhibit A Parties may be established by the relevant Parties or Exhibit A Parties from time to time; provided, however, that the relevant Parties or Exhibit A Parties shall use commercially reasonable efforts to meet within 30 days of receipt of the Escalation Notice.
(b) The Parties or Exhibit A Parties involved in the dispute may agree to retain a mediator, acceptable to both Parties, to aid the relevant Parties or Exhibit A Parties in
24
their discussions and negotiations by informally providing advice. Any opinion expressed by the mediator shall be strictly advisory and shall not be binding on the relevant Parties or Exhibit A Parties, nor shall any opinion expressed by the mediator be admissible in any action or proceeding. The mediator shall be selected by the Party that did not deliver the applicable Escalation Notice from the list of individuals to be supplied to the Parties by JAMS/Endispute, the American Arbitration Association or such entity mutually agreeable to the Parties. Costs of the mediator shall be borne equally by the Parties or Exhibit A Parties involved in the matter, except that each Party or Exhibit A Party shall be responsible for its own expenses.
SECTION 8.2 Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties and the Exhibit A Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article VIII with respect to all matters not subject to such dispute, controversy or claim.
SECTION 8.3 Choice of Forum. Any mediation hereunder shall take place in New York, New York, unless otherwise agreed in writing by the Parties.
SECTION 8.4 Ability to Pursue Other Legal Remedies. For the avoidance of doubt, nothing in this Article VIII shall prevent any Party or Exhibit A Party from pursuing any and all remedies available to it in connection with a dispute relating to this Agreement or any of the Ancillary Agreements.
ARTICLE IX
ACCESS TO INFORMATION AND SERVICES
SECTION 9.1 Agreement for Exchange of Information. At all times from and after the Distribution Date for a period of seven years, as soon as reasonably practicable after written request: (i) Jefferies shall afford to SpinCo, its Subsidiaries and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours, at SpinCo’s expense and provide copies of, all records, books, contracts, instruments, data, documents and other information (collectively, “Information”) in the possession or under the control of Jefferies immediately following the Distribution Date that relates to SpinCo, the Vitesse Business or the employees of the Vitesse Business; and (ii) SpinCo shall afford to Jefferies, its Subsidiaries and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours to, or, at Jefferies’ expense, provide copies of, all Information in the possession or under the control of SpinCo immediately following the Distribution Date that relates to Jefferies, its business (other than the Vitesse Business) or the employees of Jefferies; provided, however, that in the event that either Party determines that any such provision of or access to Information could be commercially detrimental, violate any law or agreement or waive any attorney-client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.
(a) Either Party may request Information under Section 9.1 (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party
25
(including under applicable securities or tax laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, tax or other proceeding or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, tax or other similar requirements, (iii) for use in compensation, benefit or welfare plan administration or other bona fide business purposes or (iv) to comply with its obligations under this Agreement or any Ancillary Agreement.
SECTION 9.2 Ownership of Information. Any Information owned by one Party that is provided to a requesting Party pursuant to Section 9.1 shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed to grant or confer rights of license or otherwise in any such Information.
SECTION 9.3 Compensation for Providing Information. The Party requesting Information agrees to reimburse the providing Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting Party. Except as otherwise specifically provided in this Agreement, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures.
SECTION 9.4 Retention of Records. To facilitate the possible exchange of Information pursuant to this Article IX after the Distribution Date, the Parties and the Exhibit A Parties agree to use commercially reasonable efforts to retain all Information in their respective possession or control on the Distribution Date in accordance with the policies and procedures of Jefferies as in effect on the Distribution Date or such other procedures as may reasonably be adopted by the applicable Party or Exhibit A Party after the Distribution Date. No Party or Exhibit A Party will destroy, or permit any of its Subsidiaries or Affiliates to destroy, any Information that the other Party or Exhibit A Parties may have the right to obtain pursuant to this Agreement prior to the seventh anniversary of the date hereof, and thereafter without first using commercially reasonable efforts to notify the other Party or Exhibit A Parties of the proposed destruction and giving the other Party or Exhibit A Parties the opportunity to take possession of such Information prior to such destruction; provided, however, that in the case of any Information relating to Taxes, such period shall be extended to one year after the expiration of the applicable statute of limitations (giving effect to any extensions thereof).
SECTION 9.5 Limitation of Liability. No Party or Exhibit A Party shall have any liability to the other Party or Exhibit A Parties (i) if any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate, in the absence of gross negligence or willful misconduct by the Party or Exhibit A Party providing such Information, or (ii) if any Information is destroyed after commercially reasonable efforts to comply with the provisions of Section 9.4.
SECTION 9.6 Production of Witnesses. At all times from and after the Distribution Date, each Party or Exhibit A Party shall use commercially reasonable efforts to make available to the requesting Party or (without cost (other than reimbursement of actual out-of-pocket expenses) to, and upon prior written request of, the requesting Party), as applicable, its directors, officers, employees and agents as witnesses to the extent that the same may reasonably be required by the requesting Party in connection with any legal, administrative or other proceeding in which the
26
requesting Party may from time to time be involved with respect to the Vitesse Business, the Jefferies Retained Business or any transactions contemplated hereby.
SECTION 9.7 Confidentiality.
(a) From and after the Distribution Date, each of Jefferies and SpinCo and each Exhibit A Party shall hold, and shall cause their respective directors, officers, employees, agents, consultants, advisors and other representatives to hold, in strict confidence, with at least the same degree of care that applies to Jefferies’ confidential and proprietary information pursuant to policies in effect as of the Distribution Date or such other procedures as may reasonably be adopted by the applicable Party or Exhibit A Party after the Distribution Date, all non-public information concerning or belonging to the other Party or other Exhibit A Party or any of its/their Subsidiaries or Affiliates obtained by it prior to the Distribution Date, accessed by it pursuant to Section 9.1, or furnished to it by the other Party or other Exhibit A Party or any of its/their Subsidiaries or Affiliates pursuant to this Agreement or any agreement or document contemplated hereby, and shall not release or disclose such information to any other Person, except their representatives, who shall be bound by the provisions of this Section 9.7; provided, however, that Jefferies, SpinCo or an Exhibit A Party and their respective directors, officers, employees, agents, consultants, advisors and other representatives may disclose such information if, and only to the extent that, (i) a disclosure of such information is compelled by judicial or administrative process or, in the opinion of such Party or Exhibit A Party’s counsel, by other requirements of law (in which case the disclosing Party or disclosing Exhibit A Party will provide, to the extent practicable under the circumstances, advance written notice to the other Party or other Exhibit A Party of its intent to make such disclosure), or (ii) such Party or other Exhibit A Party can show that such information (A) is published or is or otherwise becomes available to the general public as part of the public domain without breach of this Agreement; (B) has been furnished or made known to the recipient without any obligation to keep it confidential by a third party under circumstances which are not known to the recipient to involve a breach of the third party’s obligations to a Party or Exhibit A Party hereto; (C) was developed independently of information furnished to the recipient under this Agreement; or (D) in the case of information furnished after the Distribution Date, was not known to the recipient at the time of the Distribution but became known to the recipient prior to the time of receipt thereof from the other Party or other Exhibit A Party.
(b) Each Party and each Exhibit A Party acknowledges that the other Parties or other Exhibit A Parties would not have an adequate remedy at law for the breach by the acknowledging Party or acknowledging Exhibit A Party of any one or more of the covenants contained in this Section 9.7 and agrees that, in the event of such breach, the other Parties or other Exhibit A Parties may, in addition to the other remedies that may be available to it, apply to a court for an injunction to prevent breaches of this Section 9.7 and to enforce specifically the terms and provisions of this Section 9.7. Notwithstanding any other Section hereof, the provisions of this Section 9.7 shall survive the Distribution Date until the seventh anniversary of the Distribution Date.
SECTION 9.8 Privileged Matters.
27
(a) Each of Jefferies and SpinCo and each Exhibit A Party agrees to maintain, preserve and assert all privileges, including, without limitation, privileges arising under or relating to the attorney-client relationship (which shall include without limitation the attorney-client and work product privileges), not heretofore waived, that relate to the Vitesse Business for any period prior to the Distribution Date (“Privilege” or “Privileges”). Each Party and each Exhibit A Party acknowledges and agrees that any costs associated with asserting any Privilege shall be borne by the Person requesting that such privilege be asserted. Each Party and Exhibit A Party agrees that it shall not waive any Privilege that could be asserted under applicable law without the prior written consent of the relevant other Party or Exhibit A Party. The rights and obligations created by this Section 9.8 shall apply to all information relating to the Vitesse Business as to which, but for the Distribution, either Party or any Exhibit A Party would have been entitled to assert or did assert the protection of a Privilege (“Privileged Information”), including without limitation, (i) any and all information generated prior to the Distribution Date but which, after the Distribution, is in the possession of either Party or any Exhibit A Party; and (ii) all information generated, received or arising after the Distribution Date that refers to or relates to Privileged Information generated, received or arising prior to the Distribution Date.
(b) Upon receipt by either Party or any Exhibit A Party of any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information or if either Party or Exhibit A Party obtains knowledge that any current or former employee of Jefferies or SpinCo has received any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information, such Party or Exhibit A Party shall notify promptly the relevant other Party or Exhibit A Party of the existence of the request and shall provide the relevant other Party or Exhibit A Party a reasonable opportunity to review the information and to assert any rights it may have under this Section 9.8 or otherwise to prevent the production or disclosure of Privileged Information. Each Party and each Exhibit A Party agrees that it will not produce or disclose any information that may be covered by a Privilege under this Section 9.8 unless (i) the other Party or relevant Exhibit A Party has provided its written consent to such production or disclosure (which consent shall not be unreasonably withheld), or (ii) a court of competent jurisdiction has entered a final, nonappealable order finding that the information is not entitled to protection under any applicable Privilege.
(c) Jefferies’ transfer of books and records and other information to SpinCo, and Jefferies’ agreement to permit SpinCo to possess Privileged Information existing or generated prior to the Distribution Date, are made in reliance on SpinCo’s agreement, as set forth in Section 9.7 and Section 9.8, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Section 9.1, the agreement to provide witnesses and individuals pursuant to Section 9.6 and the transfer of Privileged Information to SpinCo pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section 9.8 or otherwise. Nothing in this Agreement shall operate to reduce, minimize or condition the rights granted to Jefferies in, or the obligations imposed upon SpinCo by, this Section 9.8.
28
SECTION 9.9 Financial Information Certifications. To enable the principal executive officer or officers, principal financial officer or officers and controller or controllers of Jefferies to make the certifications required of them under Section 302 of the Sarbanes-Oxley Act of 2002, within 30 days following the end of any fiscal quarter during which SpinCo is a Subsidiary of Jefferies, SpinCo shall provide a certification statement with respect to such quarter or portion thereof to those certifying officers and employees of Jefferies, which certification shall be in substantially the same form as had been provided by officers or employees of SpinCo in certifications delivered prior to the Distribution Date (provided that such certification shall be made by SpinCo rather than individual officers or employees), or as otherwise agreed upon between the Parties. Such certification statements shall also reflect any changes in certification statements necessitated by the transactions contemplated by this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Entire Agreement. This Agreement and the Ancillary Agreements, including the Schedules and Exhibits referred to herein and therein and the documents delivered pursuant hereto and thereto, constitute the entire agreement between the Parties and the Exhibit A Parties with respect to the subject matter contained herein or therein, and supersede all prior agreements, negotiations, discussions, understandings, writings and commitments between the Parties with respect to such subject matter.
SECTION 10.2 Choice of Law and Forum. This Agreement shall be governed by and construed and enforced in accordance with the substantive laws of the State of Delaware and the federal laws of the United States of America applicable therein, as though all acts and omissions related hereto occurred in Delaware. The Parties and Exhibit A Parties hereby irrevocably submit to the non-exclusive jurisdiction of the state and federal courts located in the State of Delaware, and each Party and Exhibit A Party hereby irrevocably agrees that all disputes, controversies or claims may be heard and determined in the state and federal courts located in the State of Delaware. The Parties and Exhibit A Parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties and Exhibit A Parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 10.3 Amendment. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the Parties, but in no event shall any such amendment alter the terms of Article II or Schedule 2.2 or Schedule 2.3 in a manner that would have greater than a de minimus effect without the approval of each affected Exhibit A Party.
SECTION 10.4 Waiver. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any Party, it is in writing signed by an authorized representative of such Party. The failure of any Party to enforce at any time any provision of this Agreement shall not be construed to be a
29
waiver of such provision, or in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
SECTION 10.5 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such a manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision or provisions shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.
SECTION 10.6 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by and delivered to each of the Parties.
SECTION 10.7 Successors and Assigns. This Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties and Exhibit A hereto and thereto, respectively, and their successors and permitted assigns; provided, however, that the rights and obligations of either Party or any Exhibit A Party under this Agreement and each Ancillary Agreement shall not be assignable by such Party or Exhibit A Party without the prior written consent of the other Party (or without the prior written consent of both Parties in the case of an Exhibit A Party). The successors and permitted assigns hereunder shall include, without limitation, any permitted assignee as well as the successors in interest to such permitted assignee (whether by merger, liquidation (including successive mergers or liquidations) or otherwise).
SECTION 10.8 Third Party Beneficiaries. Except to the extent otherwise provided in Article X or in any Ancillary Agreement, the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and their respective Affiliates, successors and permitted assigns and shall not confer upon any third Person any remedy, claim, liability, reimbursement or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.
SECTION 10.9 Notices. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) if transmitted by email, when sent if sent during normal business hours of the recipient and on the next business day if sent after normal business hours of the recipient, (iii) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third business day after mailing or (iv) if sent by private courier when received; and shall be addressed as follows:
If to Jefferies, to:
Jefferies Financial Group Inc.
520 Madison Ave.
30
New York, New York 10022
Attention: General Counsel
Tel: 212-460-1900
Email: msharp@jefferies.com
If to SpinCo, to:
Vitesse Energy, Inc.
9200 E. Mineral Avenue, Suite 200
Centennial, Colorado 80112
Attention: General Counsel
Tel: 720-361-2500
Email: chrishumber@vitesseoil.com
If to Vitesse Energy Finance, to:
Vitesse Energy Finance LLC
c/o Jefferies Financial Group Inc.
520 Madison Ave.
New York, New York 10022
Attention: General Counsel
Tel: 212-460-1900
Email: msharp@jefferies.com
If to any other signatory to this Agreement, to the address set forth opposite such signatories name on Exhibit A, or, in the case of all signatories to such other address as such Exhibit A Party may indicate by a notice delivered to the Parties and other Exhibit A Parties.
SECTION 10.10 Performance. Each Party and Exhibit A Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party or Exhibit A Party.
SECTION 10.11 Force Majeure. No Party or Exhibit A Party shall be deemed in default of this Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement results from any cause beyond its reasonable control and without its fault or negligence, including, without limitation, acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.
SECTION 10.12 No Public Announcement. Neither Jefferies nor SpinCo shall, without the approval of the other, and no Exhibit A Party shall, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such Party or Exhibit A Party shall be so obligated by law or the rules of any stock exchange or quotation system, in which case the non-disclosing Party or Parties shall be advised and Jefferies and SpinCo, and, if relevant, the Exhibit A Party/Parties shall use
31
commercially reasonable efforts to cause a mutually agreeable release or announcement to be issued; provided, however, that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and SEC disclosure obligations or the rules of any stock exchange.
SECTION 10.13 Expenses. Except as expressly set forth in this Agreement or in any Ancillary Agreement, all fees, costs and expenses in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, and with the consummation of the transactions contemplated hereby and thereby will be borne by the Party incurring such fees, costs and expenses.
SECTION 10.14 Termination. Notwithstanding any provisions hereof, this Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Jefferies Board of Directors without the prior the approval of any Person. In the event of such termination, this Agreement shall forthwith become void and no Party shall have any liability to any Person by reason of this Agreement, except that Jefferies shall be liable for any costs and expenses, including reasonable attorneys’ fees, prior to or arising out of such termination.
SECTION 10.15 Limitations of Liability. Notwithstanding anything in this Agreement to the contrary, (i) no SpinCo Party shall be liable to any Gerrity/Cree Party, any Jefferies Party or any Fund Party, (ii) no Gerrity/Cree Party shall be liable to any SpinCo Party, any Jefferies Party or any Fund Party, (iii) no Jefferies Party shall be liable to any SpinCo Party, any Gerrity/Cree Party or any Fund Party, and (iv) no Fund Party shall be liable to any SpinCo Party, any Gerrity/Cree Party or any Jefferies Party under this Agreement for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages arising in connection with the transactions contemplated hereby, other than any such Liability paid or actually payable with respect to a Third-Party Claim.
SECTION 10.16 Conflicts. In the event of a conflict between any provision of the Tax Matters Agreement and this Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall govern.
[Signature Pages Follow]
32
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives as of the date first above written.
| JEFFERIES FINANCIAL GROUP INC. | ||
| By: | /s/ Michael J. Sharp | |
| Name: | Michael J. Sharp | |
| Title: | Executive Vice President and General Counsel | |
| VITESSE ENERGY FINANCE LLC | ||
| By: | /s/ Michael J. Sharp | |
| Name: | Michael J. Sharp | |
| Title: | Executive Vice President | |
| VITESSE ENERGY, INC. | ||
| By: | /s/ Brian J. Cree | |
| Name: | Brian J. Cree | |
| Title: | President | |
[Signature Page to Separation and Distribution Agreement]
EXHIBIT A
OTHER SIGNATORIES
| Entity or Individual |
Notice Information (Address, Tel.,
Email, |
IN WITNESS WHEREOF, for the purposes of
Signature |
Name and Title | |||
| 3B Energy, LLC | 3B Energy, LLC 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President and Chief Financial Officer Email: briancree@vitesseoil.com |
/s/ Brian J. Cree | Brian J. Cree, Managing Member | |||
| Baldwin Enterprise, LLC | Baldwin Enterprise, LLC 520 Madison Ave. New York, New York 10022 |
/s/ Michael J. Sharp | Michael J. Sharp, President | |||
| Robert W. Gerrity | Robert W. Gerrity 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Email: bobgerrity@vitesseoil.com |
/s/ Robert W. Gerrity | — | |||
| Brian J. Cree | Brian J. Cree 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Email: briancree@vitesseoil.com |
/s/ Brian J. Cree | — | |||
| Gerrity Bakken, LLC | Gerrity Bakken, LLC 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Email: bobgerrity@vitesseoil.com |
/s/ Robert W. Gerrity | Robert W. Gerrity, Member | |||
[Exhibit A of Separation and Distribution Agreement]
| Entity or Individual |
Notice Information (Address, Tel.,
Email, |
IN WITNESS WHEREOF, for the purposes of
Signature |
Name and Title | |||
| JCP V LLC | JCP V LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: juliana.wu@jefferies.com |
/s/ Brian Friedman | Brian Friedman, Managing Member of Managing Member | |||
| Jefferies Capital Partners LLC | Jefferies Capital Partners LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: juliana.wu@jefferies.com |
/s/ Brian Friedman | Brian Friedman, Managing Member | |||
| Jefferies Capital Partners V L.P. | Jefferies Capital Partners V L.P. c/o JCP V LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: juliana.wu@jefferies.com |
/s/ Brian Friedman | Brian Friedman, Managing Member of Manager | |||
| Jefferies-SBI Strategic Investments USA LLC | Jefferies-SBI Strategic Investments USA LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: juliana.wu@jefferies.com |
/s/ Brian Friedman | Brian Friedman, Managing Member of Managing Member | |||
| Jefferies SBI USA Fund L.P. | Jefferies SBI USA Fund L.P. c/o Jefferies-SBI Strategic Investments USA LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: juliana.wu@jefferies.com |
/s/ Brian Friedman | Brian Friedman, Managing Member of Manager | |||
[Exhibit A of Separation and Distribution Agreement]
| Entity or Individual |
Notice Information (Address, Tel.,
Email, |
IN WITNESS WHEREOF, for the purposes of
Signature |
Name and Title | |||
| Phlcorp Holding LLC | Phlcorp Holding LLC 520 Madison Avenue 11th Floor New York, New York 10022 Email: msharp@jefferies.com |
/s/ Michael J. Sharp | Michael J. Sharp, President | |||
| Vitesse Energy, LLC | Vitesse Energy, LLC 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President and
Chief Operating Officer |
/s/ Brian J. Cree | Brian J. Cree, President and Chief Operating Officer | |||
| Vitesse Management Company LLC | Vitesse Management Company LLC 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention:
President |
/s/ Brian J. Cree | Brian J. Cree, President | |||
| Vitesse Oil, Inc. | Vitesse Oil, Inc. 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President
|
/s/ Brian J. Cree | Brian J. Cree, President | |||
| Vitesse Oil, LLC | Vitesse Oil, LLC 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President and Chief
Operating Officer |
/s/ Brian J. Cree | Brian J. Cree, President and Chief Operating Officer | |||
[Exhibit A of Separation and Distribution Agreement]
| Entity or Individual |
Notice Information (Address, Tel.,
Email, |
IN WITNESS WHEREOF, for the purposes of
Signature |
Name and Title | |||
| VE MergerSub LLC | VE MergerSub LLC c/o Vitesse Energy, Inc. 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President |
/s/ Brian J. Cree | Brian J. Cree, President of Vitesse Energy, Inc., the Sole Member | |||
| VO MergerSub LLC | VO MergerSub LLC c/o Vitesse Energy, Inc. 9200 E. Mineral Ave., Suite 200 Centennial, Colorado 80112 Attention: President |
/s/ Brian J. Cree | Brian J. Cree, President of Vitesse Energy, Inc., the Sole Member | |||
[Exhibit A of Separation and Distribution Agreement]
Exhibit 10.1
TAX MATTERS AGREEMENT
between
JEFFERIES FINANCIAL GROUP INC.
and
VITESSE ENERGY, INC.
Dated as of January 13, 2023
TABLE OF CONTENTS
| Page | ||||||
| Section 1. |
Definitions | 1 | ||||
| Section 2. |
Sole Tax Sharing Agreement | 7 | ||||
| Section 3. |
Allocation of Taxes | 7 | ||||
| Section 4. |
Preparation and Filing of Tax Returns | 9 | ||||
| Section 5. |
Deductions and Reporting for Certain Awards | 11 | ||||
| Section 6. |
Certain Representations and Covenants | 11 | ||||
| Section 7. |
Protective Section 336(e) Elections | 15 | ||||
| Section 8. |
Indemnities | 15 | ||||
| Section 9. |
Payments | 16 | ||||
| Section 10. |
Guarantees | 17 | ||||
| Section 11. |
Communication and Cooperation | 17 | ||||
| Section 12. |
Audits and Contest | 18 | ||||
| Section 13. |
Costs and Expenses | 19 | ||||
| Section 14. |
Effectiveness; Termination and Survival | 19 | ||||
| Section 15. |
Dispute Resolution | 19 | ||||
| Section 16. |
Authorization, Etc. | 20 | ||||
| Section 17. |
Change in Tax Law | 20 | ||||
| Section 18. |
Principles | 20 | ||||
| Section 19. |
Interpretation; Incorporation of Terms by Reference | 20 | ||||
-i-
TAX MATTERS AGREEMENT
This TAX MATTERS AGREEMENT (the “Agreement”) is entered into as of January 13, 2023 between Jefferies Financial Group Inc. (“Jefferies”), a New York corporation, and Vitesse Energy, Inc. (“SpinCo”), a Delaware corporation.
WITNESSETH:
WHEREAS, Jefferies and SpinCo have entered into a Separation and Distribution Agreement, dated as of the date hereof, as amended, modified or supplemented from time to time (the “Separation and Distribution Agreement”), pursuant to which the Pre-Distribution Transactions (including the Contribution), the Distribution, and other related transactions will be consummated;
WHEREAS, the Pre-Distribution Transactions (including the Contribution), together with the Distribution, are intended to qualify for the Intended Tax-Free Treatment; and
WHEREAS, Jefferies and SpinCo desire to set forth their agreement on the rights and obligations of Jefferies, SpinCo and the other Jefferies Parties and SpinCo Parties respectively, with respect to (A) the administration and allocation of federal, state, local and foreign Taxes incurred in Taxable periods beginning prior to the Distribution Date, as defined below, (B) Taxes arising prior to, at the time of, and subsequent to the Distribution, or resulting from the Distribution and transactions effected in connection with the Distribution and (C) various other Tax matters.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:
Section 1. Definitions.
(a) For the purposes of this Agreement the following terms shall have the following meanings; provided that capitalized terms used but not otherwise defined in this Section 1 shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement:
“Active Trade or Business” means the business conducted by SpinCo, as described in the IRS Ruling.
“Affiliate” has the meaning set forth in the Separation and Distribution Agreement.
“Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the Code or any combined, consolidated, unitary or other similar group defined under a similar provision of applicable Law.
“Agreement” has the meaning set forth in the preamble.
“Applicable Law” (or “Applicable Tax Law,” as the case may be) means, with respect to any Person, any federal, state, county, municipal, local, multinational or foreign statute, treaty, law, common law, ordinance, rule, regulation, order, writ, injunction, judicial decision, decree, permit or other legally binding requirement of any Governmental Authority applicable to such Person or any of its respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person).
“Business Day” has the meaning set forth in the Separation and Distribution Agreement.
“Closing of the Books Method” means the apportionment of items between portions of a Taxable period based on a closing of the books and records on the close of the Distribution Date (in the event that the Distribution Date is not the last day of the Taxable period, as if the Distribution Date were the last day of the Taxable period), subject to adjustment for items accrued on the Distribution Date that are properly allocable to the Taxable period following the Distribution, as determined by Jefferies in accordance with Applicable Law; provided that Taxes not based upon or measured by net or gross income or specific events and imposed for a Tax period beginning before and ending after the Distribution Date shall be apportioned between the portion of such Tax period ending on the Distribution Date and the portion of such Tax period beginning after the Distribution Date on a pro rata basis in accordance with the number of days in each such portion of such Tax period.
“Code” means the Internal Revenue Code of 1986, as amended.
“Combined Group” means any group that filed or was required to file (or will file or be required to file) a Tax Return on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) that includes at least Jefferies Party and at least one SpinCo Party.
“Company” means Jefferies or SpinCo (or the appropriate Jefferies Party or SpinCo Party), as appropriate.
“Contribution” means the contribution of the capital interest in VEL into SpinCo as set forth in Step 5(i) on Schedule 2.2 of the Separation and Distribution Agreement.
“Distribution” has the meaning set forth in the Separation and Distribution Agreement.
“Distribution Date” has the meaning set forth in the Separation and Distribution Agreement.
“Distribution Effective Time” means the time established by Jefferies as the effective time of the Distribution, New York time, on the Distribution Date.
“Distribution Taxes” means any Taxes incurred solely as a result of the failure of the Intended Tax-Free Treatment of the Pre-Spin-Off Restructuring Transactions (including the Contribution) and the Distribution.
“Due Date” has the meaning set forth in Section 9(a).
2
“Equity Interests” means any stock or other securities treated as equity for Tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.
“Escheat Payment” means any payment required to be made to a Governmental Authority pursuant to an abandoned property, escheat or similar law.
“Final Determination” means (a) a decision, judgment, decree, or other order by any court of competent jurisdiction, which has become final, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement with the IRS or other Taxing Authority.
“Governmental Authority” has the meaning set forth in the Separation and Distribution Agreement.
“Group” means either the SpinCo Parties or the Jefferies Parties, as the context requires.
“Income Tax” means any U.S. federal, state, local or foreign Tax that is, in whole or in part, based on or measured by net income or gains.
“Income Tax Return” means any U.S. federal, state, local or foreign Tax Return with respect to Income Tax.
“Indemnifying Party” means the party from which another party is entitled to seek indemnification pursuant to the provisions of Section 8.
“Indemnitee” means the party which is entitled to seek indemnification from another party pursuant to the provisions of Section 8.
“Intended Tax-Free Treatment” means, after taking into account the Pre-Distribution Transactions, the qualification of the Contribution and the Distribution, taken together (a) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(c) and 361(c) of the Code, and (c) as a transaction in which Jefferies, the Company and the holders of Jefferies Common Stock recognize no income or gain for U.S. federal income tax purposes pursuant to Sections 355, 361 and 1032 of the Code.
“IRS” means the United States Internal Revenue Service.
“IRS Ruling” has the meaning set forth in the Separation and Distribution Agreement.
“Jefferies” has the meaning ascribed thereto in the preamble.
3
“Jefferies Retained Business” has the meaning set forth in the Separation and Distribution Agreement.
“Jefferies Compensatory Equity Interests” means any options, stock appreciation rights, restricted stock, stock units or other rights with respect to Jefferies stock that are granted on or prior to the Distribution Date by any of the Jefferies Parties in connection with employee, independent contractor or director compensation or other employee benefits (including, for the avoidance of doubt, options, stock appreciation rights, restricted stock, restricted stock units, performance share units or other rights issued in respect of any of the foregoing by reason of the Distribution or any subsequent transaction).
“Jefferies Intermediate Entity” means an entity treated as a partnership for applicable U.S. federal, state, local or foreign Tax purposes, in which any of the Jefferies Parties holds an interest as a partner for such Tax purposes, directly or through another Jefferies Intermediate Entity, and that holds an interest as a partnership for such Tax Purposes, directly or through another Jefferies Intermediate Entity, in a SpinCo Party that is a partnership for such Tax purposes.
“Jefferies Income Tax Return” means any Income Tax Return that is required to be filed by, or with respect to, a member of the Jefferies Parties.
“Jefferies Parties” has the meaning set forth in the Separation and Distribution Agreement.
“MLTN Basis” shall mean a more likely than not basis, taking into account the relevant provisions of the the Code, the Treasury Regulations promulgated thereunder and other relevant Tax Law.
“Non-Income Tax” means any Tax that is not an Income Tax.
“Partnership Tax Audit Provisions” means Sections 6221 through 6242 of the Code, and the Treasury Regulations and other guidance promulgated with respect thereto, and any similar applicable provision of U.S. state or local or foreign Tax Law.
“Past Practices” has the meaning set forth in Section 4(c)(i).
“Person” has the meaning set forth in Section 7701(a)(1) of the Code.
“Post-Distribution Period” means any Taxable period (or portion thereof) beginning after the Distribution Date.
“Post-Distribution Ruling” has the meaning set forth in Section 6(c).
“Pre-Distribution Period” means any Taxable period (or portion thereof) ending on or before the Distribution Date.
“Pre-Distribution Transactions” has the meaning set forth in the Separation and Distribution Agreement.
4
“Responsible Party” shall mean, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return pursuant to this Agreement.
“Section 336(e) Election” has the meaning set forth in Section 7.
“Separation and Distribution Agreement” has the meaning set forth in the recitals.
“SpinCo” has the meaning set forth in the preamble.
“SpinCo Compensatory Equity Interests” means any options, stock appreciation rights, restricted stock, stock units or other rights with respect to the capital stock of SpinCo or any of the SpinCo Parties that are granted on or prior to the Distribution Effective Time by any of the SpinCo Parties in connection with employee, independent contractor or director compensation or other employee benefits.
“SpinCo Disqualifying Action” means (a) any action (or the failure to take any action) by any of the SpinCo Parties after the Distribution Effective Time (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) after the Distribution Effective Time involving the capital stock of SpinCo or any assets of any of the SpinCo Parties or (c) any breach by any of the SpinCo Parties after the Distribution Effective Time of any representation, warranty or covenant made by them in this Agreement, in the Tax Materials or otherwise in connection with obtaining the IRS Ruling or the Tax Opinion, that, in each case, would affect the Intended Tax-Free Treatment; provided, however, that the term “SpinCo Disqualifying Action” shall not include any action (or the failure to take any action) entered into pursuant to any Transaction Document (other than this Agreement), that is described in the IRS Ruling or that is undertaken pursuant to the Contribution or the Distribution.
“SpinCo Parties” has the meaning set forth in the Separation and Distribution Agreement.
“SpinCo Partnership Tax Return” means any Income Tax Return that is required to be filed by any of the SpinCo Parties reflecting the treatment of such SpinCo Party as a partnership for applicable Income Tax purposes, including any Income Tax Return prepared and filed on IRS Form 1065 or a similar state, local or non-U.S. Income Tax Return.
“SpinCo Separate Income Tax Return” means any Income Tax Return that is required to be filed by, or with respect to, any of the SpinCo Parties that is not a SpinCo Partnership Tax Return.
“Tax” (and the correlative meaning, “Taxes,” “Taxing” and “Taxable”) means (i) any tax, including any net income, gross income, gross receipts, recapture, alternative or add-on minimum, sales, use, business and occupation, value-added, trade, goods and services, ad valorem, franchise, profits, net wealth, license, business royalty, withholding, payroll, employment, capital, excise, transfer, recording, severance, stamp, occupation, premium, property, asset, real estate acquisition, environmental, custom duty, impost, obligation, assessment, levy, tariff or other tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, any Escheat Payment), together with any interest
5
and any penalty, addition to tax or additional amount imposed by a Taxing Authority; (ii) liability for the payment of any amount of the type described in clause (i) above arising as a result of being (or having been) a member of any Affiliated Group or being (or having been) included or required to be included in any Tax Return related thereto; and (iii) liability for the payment of any amount of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person.
“Tax Advisor” means a tax counsel or accountant of recognized standing in the relevant jurisdiction.
“Tax Arbiter” has the meaning set forth in Section 15.
“Tax Attribute” means a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, unused general business credit, alternative minimum tax credit or any other Tax Item that could reduce a Tax liability for a past or future taxable period.
“Tax Counsel” means Morgan, Lewis & Bockius LLP.
“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item that can increase or decrease Taxes paid or payable.
“Tax Opinion” has the meaning set forth in the Separation and Distribution Agreement.
“Tax Proceeding” means any Tax audit, dispute, examination, contest, litigation, arbitration, action, suits, claim, cause of action, review, inquiry, assessment, hearing, complaint, demand, investigation or proceeding (whether administrative, judicial or contractual).
“Tax-Related Losses” means, with respect to any Taxes asserted or imposed pursuant to any Tax Proceeding, settlement, determination, judgment or otherwise (but excluding such Taxes), (i) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and accounting, legal and other professional fees and expenses, and court costs), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any such Taxes, including those incurred in the contest in good faith in appropriate proceedings relating to the imposition, assessment or assertion of any such Taxes, liability or damage, as well as any other reasonable out-of-pocket costs incurred in connection therewith, and (ii) if such matter is with respect to Distribution Taxes, any amount paid by any of the Jefferies Parties or any of the SpinCo Parties in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Taxing Authority (including any damages, costs, and expenses associated with shareholder litigation or controversies with respect thereto).
“Tax Representation Letters” means the representations provided by SpinCo and Jefferies to Tax Counsel in connection with the rendering by Tax Counsel of the Tax Opinion.
“Tax Return” means any Tax return, statement, report, form, election, bill, certificate, claim or surrender (including estimated Tax returns and reports, extension requests and forms,
6
and information returns and reports), or statement or other document or written information filed or required to be filed with any Taxing Authority, including any amendment thereof, appendix, schedule or attachment thereto.
“Taxing Authority” means any Governmental Authority (domestic or foreign), including, without limitation, any state, municipality, political subdivision or governmental agency, responsible for the imposition, assessment, administration, collection, enforcement or determination of any Tax.
“Transaction Documents” means the Separation and Distribution Agreement, together with the Ancillary Agreements, as defined in the Separation and Distribution Agreement.
“Transfer Taxes” means all U.S. federal, state, local or foreign sales, use, privilege, transfer, documentary, stamp, duties, real estate transfer, controlling interest transfer, recording and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any of the Jefferies Parties or of the SpinCo Parties in connection with the Pre-Distribution Transactions or the Distribution.
“Treasury Regulations” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant tax period.
“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, on which the Companies may rely to the effect that a transaction will not affect the Intended Tax-Free Treatment. Any such opinion must assume that the Contribution and Distributions would have qualified for Intended Tax-Free Treatment.
“Vitesse Business” has the meaning set forth in the Separation and Distribution Agreement.
(b) Any term used in this Agreement which is not defined in this Agreement or the Separation and Distribution Agreement shall, to the extent the context requires, have the meaning assigned to it in the Code or the applicable Treasury Regulations thereunder (as interpreted in administrative pronouncements and judicial decisions) or in comparable provisions of Applicable Tax Law.
Section 2. Sole Tax Sharing Agreement. Any and all existing Tax sharing agreements or arrangements, written or unwritten, between any of the Jefferies Parties, on the one hand, and any of the SpinCo Parties, on the other hand, if not previously terminated, shall be terminated as of the Distribution Date without any further action by the parties thereto. Following the Distribution Date, none of the SpinCo Parties or the Jefferies Parties shall have any further rights or liabilities thereunder, and this Agreement shall be the sole Tax sharing agreement between the SpinCo Parties on the one hand, and the Jefferies Parties, on the other hand.
Section 3. Allocation of Taxes.
(a) General Allocation Principles. Except as provided in Section 3(c), all Income Taxes shall be allocated as follows:
7
(i) Jefferies shall be allocated all Taxes attributable to (x) a Jefferies Party and reported, or required to be reported, on a Jefferies Income Tax Return, other than any such Taxes attributable to a SpinCo Partnership Tax Return, or (y) items of income, gain, loss, deduction and credit allocated to Jefferies or another Jefferies Party (directly or through an allocation of such items by a Jefferies Intermediate Entity) on an original SpinCo Partnership Tax Return that was filed prior to the Distribution Date or is filed after the Distribution Date, with respect to a Pre-Distribution Period, and that was prepared in accordance with Section 4, which, for the avoidance of doubt, shall not include Taxes attributable to any Tax Proceeding with respect to a SpinCo Partnership Tax Return or any amended SpinCo Partnership Tax Return, including by way of an administrative adjustment request or other procedure provided for under the Partnership Tax Audit Provisions, filed after the Distribution Date in connection with a Tax Proceeding.
(ii) SpinCo shall be allocated (w) all Taxes attributable to any SpinCo Party and reported, or required to be reported, on a SpinCo Separate Income Tax Return for any Post-Distribution Period and (x) all Taxes attributable to any SpinCo Partnership Tax Return that is subject to a Tax Proceeding, including under the Partnership Tax Audit Provisions, that concludes after the Distribution Date, including any “imputed underpayment” imposed pursuant to the Partnership Tax Audit Provisions. SpinCo shall not (y) amend or cause the amendment of any SpinCo Partnership Tax Return with respect to a Pre-Distribution Period, or require any Jefferies Party or any Jefferies Intermediate Entity to amend any Income Tax Return, or (z) make any “push-out” election, pursuant to the Partnership Tax Audit Provisions, with respect to a Tax Proceeding with respect to a Pre-Distribution Period.
(iii) Allocation of Non-Income Taxes. SpinCo shall be allocated all Non-Income Taxes attributable to the Vitesse Business, and Jefferies shall be allocated all Non-Income Taxes attributable to the Jefferies Retained Business.
(b) Allocation Conventions.
Any Tax Item of any of the SpinCo Parties arising from a transaction engaged in outside the ordinary course of business on the Distribution Date after the Distribution Effective Time shall be allocable to SpinCo and any such transaction by or with respect to any of the SpinCo Parties occurring after the Distribution Effective Time shall be treated for all Tax purposes (to the extent permitted by Applicable Tax Law) as occurring at the beginning of the day following the Distribution Date in accordance with the principles of Treasury Regulations Section 1.1502-76(b) (assuming no election is made under Treasury Regulations Section 1.1502-76(b)(2)(ii) (relating to a ratable allocation of a year’s Tax Items)); provided that the foregoing shall not include any action that is undertaken pursuant to the Contribution or the Distribution.
(c) Special Allocation Rules. Notwithstanding any other provision in this Section 3, the following Taxes shall be allocated as follows:
8
(i) Transfer Taxes. Transfer Taxes shall be allocated 100% to SpinCo.
(ii) Distribution Taxes and Tax-Related Losses. Any liability for Distribution Taxes and Tax-Related Losses resulting from a SpinCo Disqualifying Action shall be allocated in a manner consistent with Section 8(a) and Section 8(b).
Section 4. Preparation and Filing of Tax Returns.
(a) Responsibility for Preparing Returns.
(i) Jefferies Prepared Returns. Jefferies shall prepare, or cause to be prepared, all Jefferies Income Tax Returns. To the extent that any of the SpinCo Parties is included in any Jefferies Income Tax Return, as a member of a Combined Group for a Taxable period that includes the Distribution Date, Jefferies shall include in such Joint Tax Return the results of such SpinCo Party on the basis of the Closing of the Books Method to the extent permitted by Applicable Tax Law.
(ii) SpinCo Prepared Returns. SpinCo shall prepare, or cause to be prepared, any SpinCo Separate Income Tax Return and any SpinCo Partnership Tax Return.
(iii) Transfer Tax Returns. SpinCo shall prepare and file (or cause to be prepared and filed) all Transfer Tax Returns. If required by Applicable Law, Jefferies shall, and shall cause its Affiliates to, cooperate in preparing and filing, and join in the execution of, any such Tax Returns.
(b) Cooperation.
(i) Provision of Information; Timing. SpinCo shall maintain all necessary information for Jefferies (or any of its Affiliates) to file any Tax Return that Jefferies is required or permitted to file under this Section 4, and shall provide to Jefferies all such necessary information in accordance with the Jefferies Parties’s past practice.
(ii) Right to Review SpinCo Partnership Tax Return. SpinCo shall submit to Jefferies a draft of, and related workpapers for, any SpinCo Partnership Tax Return that includes a Pre-Distribution Period. SpinCo shall (x) make a draft of such Tax Return available for review as required under this paragraph at least 30 days in advance of the due date for filing of such Tax Return (taking into account extensions) and (y) reflect in good faith Jefferies’s comments with respect to such Tax Return, consistent with the special rules provided under Section 4(c).
(iii) Right to Review Other Tax Returns. To the extent that the positions taken on any Tax Return prepared by or at the direction of either Party pursuant to this Agreement (other than a SpinCo Partnership Tax Return) would reasonably be expected to materially adversely affect the Tax position of the Party other than the Party that is required to prepare and file any such Tax Return pursuant to Section 4 (the “Reviewing Party”), the Party required to prepare and file such Tax Return (the “Preparing Party”) shall prepare the portions of such Tax Return that relates to the business of the Reviewing Party, shall provide a draft of such portion of such Tax Return to the Reviewing Party for
9
its review and comment at least thirty (30) days prior to the Due Date for such Tax Return, and shall modify such portion of such Tax Return before filing to include the Reviewing Party’s reasonable comments
(c) Special Rules Relating to the Preparation of Tax Returns.
(i) General Rule. Except as provided in this Section 4(c)(i), each Responsible Party shall prepare (or cause to be prepared) any Tax Return for which it is responsible under this Section 4 in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used by the SpinCo Parties or the Jefferies Parties, as applicable, prior to the Distribution Date with respect to such Tax Return, (unless there is no MLTN Basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no MLTN Basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by such Responsible Party.
(ii) Consistency with Intended Tax-Free Treatment. All Tax Returns that include any of the Jefferies Parties or any of the SpinCo Parties shall be prepared in a manner that is consistent with the Intended Tax-Free Treatment.
(iii) SpinCo Separate Income Tax Returns. With respect to any SpinCo Separate Income Tax Return for which SpinCo is responsible pursuant to this Agreement, SpinCo and the other SpinCo Parties shall include such Tax Items in such SpinCo Separate Income Tax Return in a manner that is consistent with the inclusion of such Tax Items in any related Tax Return for which Jefferies is responsible to the extent such Tax Items are allocated in accordance with this Agreement, unless there is no MLTN Basis for such inclusion. In the event that a Party shall determine that there is no MLTN Basis for such inclusion, such Party shall notify the other Party no later than twenty (20) Business Days prior to filing the relevant Tax Return and the Parties shall attempt in good faith to agree on the manner in which the Tax Returns should be prepared to reflect such items or otherwise such dispute shall be resolved in accordance with Section 15.
(iv) Election to File Jefferies Income Tax Returns as a Combined Group. Jefferies shall have the sole discretion to file any Jefferies Income Tax Return as a Combined Group if the filing of such Tax Return is elective under Applicable Tax Law.
(v) Amended Returns. Any amended Tax Return or claim for a refund with respect to any of the SpinCo Parties may be made only by the party responsible for preparing the original Tax Return with respect to such member of the SpinCo Parties pursuant to this Section 4; provided that no amended SpinCo Partnership Tax Return, “administrative adjustment request” (within the meaning of the Partnership Tax Audit Provisions) or similar submission with respect to a Tax period or portion thereof ending on or before the Distribution Date may be made without prior written consent by Jefferies.
(d) Payment of Taxes. Jefferies shall pay (or cause to be paid) to the proper Taxing Authority the Tax shown as due on any Tax Return for which a Jefferies Party is responsible
10
under this Section 4, and SpinCo shall pay (or cause to be paid) to the proper Taxing Authority the Tax shown as due on any Tax Return for which a SpinCo Party is responsible under this Section 4. If any Responsible Party is required to make a payment to a Taxing Authority for Taxes allocated to the other Party under Section 3, such other Party shall pay the amount of such Taxes to the Responsible Party in accordance with Section 8 and Section 9.
Section 5. Deductions and Reporting for Certain Awards.
(a) Deductions. To the extent permitted by Applicable Tax Law, Income Tax deductions with respect to the issuance, exercise, vesting or settlement after the Distribution Date of any Jefferies Compensatory Equity Interests or SpinCo Compensatory Equity Interests shall be claimed (A) in the case of an active officer or employee, solely by the Group that employs such Person at the time of such issuance, exercise, vesting, or settlement, as applicable; (B) in the case of a former officer or employee, solely by the Group that was the last to employ such Person; and (C) in the case of a director or former director (who is not an officer or employee or former officer or employee of a member of either Group), (x) solely by the Jefferies Parties if such person was, at any time before or after the Distribution, a director of a Jefferies Party, and (y) in any other case, solely by the SpinCo Parties.
(b) Withholding and Reporting. All applicable withholding and reporting responsibilities (including all income, payroll or other Tax reporting related to income to any current or former employees) with respect to the issuance, exercise, vesting or settlement of any Jefferies Compensatory Equity Interests or SpinCo Compensatory Equity Interests shall be the responsibility of the Jefferies Parties and the SpinCo Parties, respectively. Jefferies and SpinCo acknowledge and agree that the parties shall cooperate with each other and with third-party providers to effectuate withholding and remittance of Taxes, as well as required Tax reporting, in a timely manner.
Section 6. Certain Representations and Covenants.
(a) Representations.
(i) Jefferies, hereby represents and warrants that (x) it has examined the IRS Ruling, the Tax Opinion, the IRS Ruling request and any other materials delivered or deliverable in connection with the issuance of the IRS Ruling and the Tax Opinion (collectively, the “Tax Materials”) and (y) the facts presented and representations that have been or will be made therein were or will be, at the time presented or represented and from such time until and including the Distribution Date, to the extent such facts and representations are with respect to any Jefferies Party (including as to the assets and operations of such Jefferies Party), true, correct, and complete in all material respects (including as to any matter material to qualification for the Intended Tax-Free Treatment).
(ii) SpinCo hereby represents and warrants:
(1) that (x) it has examined the Tax Materials and (y) the facts presented and representations that have been or will be made therein were or will be, at the time presented or represented and from such time until and including the
11
Distribution Date, to the extent such facts and representations are with respect to any SpinCo Party (including as to the assets and operations of such SpinCo Party), true, correct, and complete in all material respects (including as to any matter material to qualification for the Intended Tax-Free Treatment).
(2) that as of the Distribution Date, there is no plan or intention:
a. to liquidate SpinCo or to merge or consolidate any of the SpinCo Parties with any other Person subsequent to the Distribution;
b. to sell or otherwise dispose of any material asset of any of the SpinCo Parties, except in the ordinary course of business;
c. to take or fail to take any action in a manner that is inconsistent with the written information and representations furnished by SpinCo to the IRS in connection with the submission of the IRS Ruling or to Tax Counsel in connection with the Tax Representation Letters or Tax Opinion;
d. to repurchase stock of SpinCo other than in a manner that satisfies the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48) and consistent with any representations made to Tax Counsel in connection with the Tax Representation Letters;
e. to take or fail to take any action in a manner that management of SpinCo knows, or should know, is reasonably likely to contravene any agreement with a Taxing Authority entered into prior to the Distribution Date to which any of the SpinCo Parties is a party; or
f. to enter into any negotiations, agreements, or arrangements with respect to transactions or events (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the Distribution) that could reasonably be expected to cause the Distribution to be treated as part of a plan (within the meaning of Section 355(e) of the Code) pursuant to which one or more Persons acquire directly or indirectly SpinCo stock representing a 50% or greater interest within the meaning of Section 355(d)(4) of the Code.
(b) Covenants.
(i) Jefferies, on behalf of itself and all other Jefferies Parties, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to Jefferies or the other Jefferies Parties and shall not, and shall not permit any Jefferies Party to, take or fail to take any action that is inconsistent with the facts, information and representations in the Tax Materials with respect to any Jefferies Party (including as to the assets and operations of such Jefferies Party).
12
(ii) SpinCo, on behalf of itself and all other SpinCo Parties, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to SpinCo or the other SpinCo Parties and shall not, and shall not permit any of the SpinCo Parties to, take or fail to take any action (x) that is inconsistent with the fact, information and representations in the Tax Materials with respect to SpinCo or the other SpinCo Parties (including as to the assets and operations of SpinCo or such other SpinCo Parties).
(iii) SpinCo shall not, and shall not permit any other SpinCo Parties to, take or fail to take any action that constitutes a SpinCo Disqualifying Action.
(iv) SpinCo shall not, and shall not permit any other SpinCo Parties to, take or fail to take any action that is inconsistent with the information and representations furnished by SpinCo to the IRS in connection with the submission of the IRS Ruling or to Tax Counsel in connection with the Tax Representation Letters or Tax Opinion;
(v) SpinCo shall not, and shall not permit any other SpinCo Parties to, take or fail to take any action in a manner that management of SpinCo knows, or should know, is reasonably likely to contravene any agreement with a Taxing Authority entered into prior to the Distribution Date to which any of the SpinCo Parties or the Jefferies Parties is a party;
(vi) During the two-year period following the Distribution Date:
(1) SpinCo shall (v) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code as conducted immediately prior to the Distribution and in accordance with the IRS Ruling, (w) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code as conducted immediately prior to the Distribution and in accordance with the IRS Ruling, (x) cause each of the SpinCo Parties whose Active Trade or Business is relied upon for purposes of qualifying the Distribution for the Intended Tax-Free Treatment to maintain its status as a company engaged in such Active Trade or Business for purposes of Section 355(b)(2) of the Code as conducted immediately prior to the Distribution and in accordance with the IRS Ruling , (y) not engage in any transaction or permit any of the SpinCo Parties to engage in any transaction that would result in a SpinCo Party described in clause (x) hereof ceasing to be a company engaged in the relevant Active Trade or Business for purposes of Section 355(b)(2) of the Code as conducted immediately prior to the Distribution and in accordance with the IRS Ruling, taking into account Section 355(b)(3) of the Code for purposes of each of clauses (v) through (y) hereof, and (z) not dispose of or permit any SpinCo Party to dispose of, directly or indirectly, any interest in a SpinCo Party described in clause (x) hereof or permit any such SpinCo Party to make or revoke any election under Treasury Regulation Section 301.7701-3;
13
(2) SpinCo shall not repurchase stock of SpinCo in a manner contrary to the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48) or inconsistent with any representations made by SpinCo to Tax Counsel in connection with the Tax Representation Letters;
(3) SpinCo shall not, and shall not agree to, merge, consolidate or amalgamate with any other Person;
(4) SpinCo shall not, and shall not permit any other SpinCo Party to, issue Equity Interests in a manner that could reasonably be expected to have adverse consequences under Section 355(e) of the Code; provided, however, that SpinCo may issue Equity Interests to the extent such issuances satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d);
(5) SpinCo shall not, and shall not permit any other of the SpinCo Parties to (I) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Interests of SpinCo, (II) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Interests of SpinCo or (III) approve or otherwise permit any proposed business combination or any transaction which, in the cause of clauses (I) or (II), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Distribution, could result in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in SpinCo (or any successor thereto) (any such transaction, a “Proposed Acquisition Transaction”); provided further that any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in the restrictions in this clause (viii) and the interpretation thereof;
(6) SpinCo shall not, and shall not permit any other SpinCo Party to, amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of the Equity Interests of SpinCo (including, without limitation, through the conversion of one class of Equity Interests of SpinCo into another class of Equity Interests of SpinCo); and
(7) SpinCo shall not take or fail to take, or permit any other SpinCo Party to take or fail to take, any action which prevents or could reasonably be
14
expected to result in Tax treatment that is inconsistent with the Intended Tax-Free Treatment.
(c) SpinCo Covenants Exceptions. Notwithstanding the provisions of Section 6(b), SpinCo and the other SpinCo Parties may take any action that would reasonably be expected to be inconsistent with the covenants contained in Section 6(b), if prior to taking any such actions, SpinCo shall (1) have received a favorable private letter ruling from the IRS, or a ruling from another Tax Authority that confirms that such action or actions will not result in Distribution Taxes, taking into account such actions and any other relevant transactions in the aggregate (a “Post-Distribution Ruling”), in form and substance satisfactory to Jefferies in its discretion, which discretion shall be reasonably exercised in good faith to prevent the imposition on Jefferies, or responsibility for payment by Jefferies, of Distribution Taxes (which discretion shall include consideration of the reasonableness of any representations made in connection with such Post-Distribution Ruling) or (2) have received an Unqualified Tax Opinion, taking into account such actions and any other relevant transactions in the aggregate, in form and substance satisfactory to Jefferies (including any representations or assumptions that may be included in such Unqualified Tax Opinion), acting reasonably and in good faith solely to prevent the imposition on Jefferies, or responsibility for payment by Jefferies, of Distribution Taxes. SpinCo shall provide a copy of the Post-Distribution Ruling or the Unqualified Tax Opinion described in this paragraph to Jefferies as soon as practicable prior to taking or failing to take any action set forth in the foregoing clause (b). Jefferies’s evaluation of a Post-Distribution Ruling or Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with such Post-Distribution Ruling or Unqualified Tax Opinion. SpinCo shall bear all costs and expenses of securing any such Post-Distribution Ruling or Unqualified Tax Opinion and shall reimburse Jefferies for all reasonable out-of-pocket costs and expenses that Jefferies may incur in good faith in seeking to obtain or evaluate any such Post-Distribution Ruling or Unqualified Tax Opinion. SpinCo shall not be relieved of any liability under Section 8 of this Agreement by reason of having obtained such a Post-Distribution Ruling or Unqualified Tax Opinion.
Section 7. Protective Section 336(e) Elections. Pursuant to Treasury Regulations Sections 1.336-2(h)(1)(i) and 1.336-2(j), Jefferies and SpinCo agree that Jefferies may, within its sole discretion, make a timely protective election under Section 336(e) of the Code and the Treasury Regulations issued thereunder for each member of the SpinCo Parties that is a domestic corporation for U.S. federal income Tax purposes with respect to the Distribution (a “Section 336(e) Election”). If made, it is intended that a Section 336(e) Election will have no effect unless the Distribution is a “qualified stock disposition,” as defined in Treasury Regulations Section 1.336(e)-1(b)(6), by reason of the application of Treasury Regulations Section 1.336-1(b)(5)(i)(B) or Treasury Regulations Section 1.336-1(b)(5)(ii).
Section 8. Indemnities.
(a) SpinCo Indemnity to Jefferies. SpinCo shall indemnify Jefferies and the other Jefferies Parties against, and hold them harmless, without duplication, from:
(i) any Tax liability allocated to SpinCo pursuant to Section 3 and any Tax-Related Losses with respect thereto;
15
(ii) any Tax liability and Tax-Related Losses attributable to a breach, after the Distribution Effective Time, by SpinCo or any other member of the SpinCo Parties of any representation or covenant contained in this Agreement; and
(iii) any Distribution Taxes and Tax-Related Losses attributable to a SpinCo Disqualifying Action (including, for the avoidance of doubt, any Taxes and Tax-Related Losses resulting from any action for which the conditions set forth in Section 9(c) are satisfied).
(b) Jefferies Indemnity to SpinCo. Except in the case of any liabilities described in Section 11(a), Jefferies indemnify SpinCo and the other SpinCo Parties against, and hold them harmless, without duplication, from:
(i) any Tax liability allocated to Jefferies pursuant to Section 3 and any Tax-Related Losses with respect thereto; and
(ii) any Tax liability and Tax-Related Losses attributable to a breach by Jefferies or any other member of the Jefferies Parties of any representation or covenant contained in this Agreement.
(c) Discharge of Indemnity. SpinCo, Jefferies and the members of their respective Groups shall discharge their obligations under Section 8(a) or Section 8(b) hereof, respectively, by paying the relevant amount in accordance with Section 9, within 30 Business Days of written demand therefor provided that, to the extent such amount is required to be paid to a Taxing Authority, such discharge is can be made by paying such amount no later than 10 Business Days prior to the date by which the demanding party is required to pay the related Tax liability (the “Due Date”). Any such written demand shall include a statement showing the amount due under Section 8(a) or Section 8(b), as the case may be and the calculation of such amounts and explanation of the obligation in reasonably sufficient details. Notwithstanding the foregoing, if SpinCo or Jefferies disputes in good faith the fact or the amount of its obligation under Section 8(a) or Section 8(b), then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Section 15 hereof; provided, however, that any amount not paid within the time provided herein shall bear interest as provided in Section 9.
(d) Tax Benefits. Except as contemplated in this Agreement, any indemnification obligation of any Indemnifying Party under this Section 8 that arises (i) shall not be increased to take into account any tax costs incurred by the Indemnified Party arising from any payment of the indemnification obligation and (ii) shall not be reduced to take into account any tax benefit received by the Indemnitee arising from the incurrence or payment of any payment of the indemnification obligation.
Section 9. Payments.
(a) Timing. All payments to be made under this Agreement (excluding, for the avoidance of doubt, any payments to a Taxing Authority described herein) shall be made in immediately available funds. Except as otherwise provided, all such payments will made no later than the Due Date. Payments shall be deemed made when received. Any payment that is not made on or before the Due Date shall bear interest at the rate equal to the “prime” rate as
16
published on such Due Date in the Wall Street Journal, Eastern Edition, for the period from and including the date immediately following the Due Date through and including the date of payment. With respect to any payment required to be made under this Agreement, Jefferies has the right to designate, by written notice to SpinCo, which Jefferies Party will make or receive such payment.
(b) Treatment of Payments. To the extent permitted by Applicable Tax Law, any payment made by any Jefferies Party to any SpinCo Party, or by any SpinCo Party to any Jefferies Party, pursuant to this Agreement, the Separation and Distribution Agreement shall be treated by the parties hereto for all Tax purposes as a distribution by SpinCo to Jefferies, or a capital contribution from Jefferies to SpinCo, as the case may be, and such payment shall be treated as having been made immediately prior to the Distribution. In the event that a Taxing Authority asserts that a party’s treatment of a payment described in this Section 9(b) should be other than as required herein, such party shall use its reasonable best efforts to contest such assertion in a manner consistent with Section 12 of this Agreement.
(c) No Duplicative Payment. It is intended that the provisions of this Agreement shall not result in a duplicative payment of any amount required to be paid under the Separation and Distribution Agreement or any other Transaction Document, and this Agreement shall be construed accordingly.
Section 10. Guarantees. Jefferies or SpinCo, as the case may be, shall guarantee or otherwise perform the obligations of each other Jefferies Parties or SpinCo Parties, respectively, under this Agreement.
Section 11. Communication and Cooperation.
(a) Consult and Cooperate. Jefferies and SpinCo shall consult and cooperate (and shall cause each other member of their respective Groups to consult and cooperate) fully at such time and to the extent reasonably requested by the other party in connection with all matters subject to this Agreement. Such cooperation shall include, without limitation:
(i) the retention, and provision on reasonable request, of any and all information including all books, records, documentation or other information pertaining to Tax matters relating to the SpinCo Parties (or, in the case of any Tax Return of the Jefferies Parties, the portion of such return that relates to Taxes for which the SpinCo Parties may be liable pursuant to this Agreement), any necessary explanations of information, and access to personnel, until one year after the expiration of the applicable statute of limitation (giving effect to any extension, waiver or mitigation thereof);
(ii) the execution of any document that may be necessary (including to give effect to Section 12) or helpful in connection with any required Tax Return or in connection with any audit, proceeding, suit or action; and
(iii) the use of the parties’ commercially reasonable efforts to obtain any documentation from a Governmental Authority or a third party that may be necessary or helpful in connection with the foregoing.
17
(b) Provide Information. Except as set forth in Section 12, Jefferies and SpinCo shall keep each other reasonably informed with respect to any material development relating to the matters subject to this Agreement.
(c) Tax Matters. Jefferies and SpinCo shall promptly advise each other with respect to any proposed Tax adjustments that are the subject of an audit or investigation, or are the subject of any proceeding or litigation, and that may affect any Tax liability or any Tax Attribute (including, but not limited to, basis in an asset or the amount of earnings and profits) of any of the SpinCo Parties or any of the Jefferies Parties, respectively.
(d) Confidentiality and Privileged Information. Any information or documents provided under this Agreement shall be kept confidential by the party receiving the information or documents, except as may otherwise be necessary in connection with the filing of required Tax Returns or in connection with any audit, proceeding, suit or action. Without limiting the foregoing (and notwithstanding any other provision of this Agreement or any other agreement), (i) none of the Jefferies Parties or SpinCo Parties, respectively, shall be required to provide any of the SpinCo Parties or Jefferies Parties, respectively, or any other Person access to or copies of any information or procedures other than information or procedures that relate solely to SpinCo, the business or assets of any of the SpinCo Parties, or matters for which SpinCo or Jefferies Parties, respectively, has an obligation to indemnify under this Agreement, and (ii) in no event shall any of the Jefferies Parties or the SpinCo Parties, respectively, be required to provide any of the SpinCo Parties or Jefferies Parties, respectively, or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any privilege. Notwithstanding the foregoing, in the event that Jefferies or SpinCo, respectively, determines that the provision of any information to any of the SpinCo Parties or Jefferies Parties, respectively, could be commercially detrimental or violate any law or agreement to which Jefferies or SpinCo, respectively, is bound, Jefferies or SpinCo, respectively, shall not be required to comply with the foregoing terms of this Section 11(d) except to the extent that it is able, using commercially reasonable efforts, to do so while avoiding such harm or consequence (and shall promptly provide notice to Jefferies or SpinCo, to the extent such access to or copies of any information is provided to a Person other than a the Jefferies Parties or SpinCo Parties (as applicable)).
Section 12. Audits and Contest.
(a) Notice. Each of Jefferies or SpinCo shall promptly notify the other in writing upon the receipt of any notice of Tax Proceeding from the relevant Taxing Authority that may affect the liability of any of the SpinCo Parties or the Jefferies Parties, respectively, for Taxes under Applicable Law or this Agreement; provided, that a party’s right to indemnification under this Agreement shall not be limited in any way by a failure to so notify, except to the extent that the Indemnifying Party is prejudiced by such failure.
(b) Assumption of Control.
(i) SpinCo Separate Income Tax Returns. In the case of any Tax Proceeding with respect to any SpinCo Separate Income Tax Return (other than any SpinCo Partnership Tax Return), SpinCo shall have the sole responsibility and right to control the prosecution of such
18
Tax Proceedings, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Proceedings.
(ii) Jefferies Income Tax Returns. In the case of any Tax Proceeding with respect to any Jefferies Income Tax Returns (other than any Tax Proceeding with respect to Distribution Taxes), Jefferies shall have the sole responsibility and right to control the prosecution of such Tax Proceedings, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Proceedings.
(iv) Vitesse Partnership Tax Returns. SpinCo shall control any Tax Proceeding with respect to a Vitesse Partnership Tax Return, provided that (x) SpinCo shall not require any Jefferies Party, or any Jefferies Intermediate Entity to amend any Income Tax Return, and shall not make any “push-out” election, pursuant to the Partnership Tax Audit Provisions, with respect to such Tax Proceeding, and (y) SpinCo shall keep Jefferies fully informed of all material developments and shall permit Jefferies a reasonable opportunity to participate in the defense of such Tax Proceeding.
(v) Distribution Taxes. Jefferies shall have the right to control any Tax Proceeding relating to Distribution Taxes; provided, that Jefferies shall keep SpinCo fully informed of all material developments and shall permit SpinCo a reasonable opportunity to participate in the defense of such Tax Proceeding.
Section 13. Costs and Expenses. Except as expressly set forth in this Agreement, each party shall bear its own costs and expenses incurred pursuant to this Agreement. For purposes of this Agreement, costs and expenses shall include, but not be limited to, reasonable attorneys’ fees, accountants’ fees and other related professional fees and disbursements.
Section 14. Effectiveness; Termination and Survival. Except as expressly set forth in this Agreement, as between Jefferies and SpinCo, this Agreement shall become effective upon the consummation of the Distribution. All rights and obligations arising hereunder shall survive until they are fully effectuated or performed; provided that, notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for one year after the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) and, with respect to any claim hereunder initiated prior to the end of such period, until such claim has been satisfied or otherwise resolved. This agreement shall terminate without any further action at any time before the Distribution upon termination of the Separation and Distribution Agreement.
Section 15. Dispute Resolution. In the event of any dispute relating to this Agreement, the parties shall work together in good faith to resolve such dispute within 30 days. In the event that such dispute is not resolved, upon written notice by a party after such 30-day period, the matter shall be referred to a U.S. Tax counsel or other Tax advisor of recognized national standing (the “Tax Arbiter”) that will be jointly chosen by Jefferies and SpinCo; provided, however, that, if Jefferies and SpinCo do not agree on the selection of the Tax Arbiter after five (5) days of good faith negotiation, the Tax Arbiter shall consist of a panel of three U.S. Tax
19
counsel or other Tax advisor of recognized national standing with one member chosen by Jefferies, one member chosen by SpinCo, and a third member chosen by mutual agreement of the other members within the following ten (10)-day period. Each decision of a panel Tax Arbiter shall be made by majority vote of the members. The Tax Arbiter may, in its discretion, obtain the services of any third party necessary to assist it in resolving the dispute. The Tax Arbiter shall furnish written notice to the parties to the dispute of its resolution of the dispute as soon as practicable, but in any event no later than ninety (90) days after acceptance of the matter for resolution. Any such resolution by the Tax Arbiter shall be binding on the parties, and the parties shall take, or cause to be taken, any action necessary to implement such resolution. All fees and expenses of the Tax Arbiter shall be shared equally by the parties to the dispute. If the parties are unable to find a Tax Arbiter willing to adjudicate the dispute in question and whom the parties, acting in good faith, find acceptable, then the dispute shall be resolved in the manner set forth in Section 8.1 of the Separation and Distribution Agreement.
Section 16. Authorization, Etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party, and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision or law or of its charter or bylaws or any agreement, instrument or order binding on such party.
Section 17. Change in Tax Law. Any reference to a provision of the Code, Treasury Regulations or any other Applicable Tax Law shall include a reference to any applicable successor provision of the Code, Treasury Regulations or other Applicable Tax Law.
Section 18. Principles. This Agreement is intended to calculate and allocate certain Tax liabilities of the SpinCo Parties and the Jefferies Parties to SpinCo and Jefferies (and their respective Groups), and any situation or circumstance concerning such calculation and allocation that is not specifically contemplated by this Agreement shall be dealt with in a manner consistent with the underlying principles of calculation and allocation in this Agreement.
Section 19. Interpretation; Incorporation of Terms by Reference. This Agreement is an “Ancillary Agreement” as such term is defined in the Separation and Distribution Agreement and shall be interpreted in accordance with the terms of the Separation and Distribution Agreement in all respects; provided that in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation and Distribution Agreement in respect of the subject matter of this Agreement, the terms of this Agreement shall control in all respects. Article 10 of the Separation and Distribution Agreement shall be incorporated herein by reference, mutatis mutandis, unless there is any conflict or inconsistency between such provisions and the terms of this Agreement, in which case the terms of this Agreement shall control in all respects.
[SIGNATURE PAGE FOLLOWS]
20
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first written above.
| JEFFERIES FINANCIAL GROUP INC. | ||
| By: | /s/ Michael J. Sharp | |
| Name: | Michael J. Sharp | |
| Title: | Executive Vice President and General Counsel | |
| VITESSE ENERGY, INC. | ||
| By: | /s/ Brian J. Cree | |
| Name: | Brian J. Cree | |
| Title: | President |
[Signature Page to Tax Matters Agreement]
Exhibit 10.2
VITESSE ENERGY, INC.
TRANSITIONAL EQUITY AWARD ADJUSTMENT PLAN
1. Purpose of the Plan
The purpose of this Transitional Equity Award Adjustment Plan (the “Plan”) is to provide for the grant by Vitesse Energy, Inc., a Delaware corporation (“Vitesse”), of stock options and restricted stock units (“RSUs”), and the treatment of certain issued and outstanding shares of Vitesse common stock as restricted stock, as adjustments to certain compensatory equity awards granted by Jefferies Financial Group Inc. (“Jefferies”) that are outstanding under the Jefferies Equity Compensation Plan effective March 25, 2021 (the “ECP”), the Jefferies 2003 Incentive Compensation Plan as amended and restated as of March 25, 2021 (the “2003 Plan”) and the Jefferies 1999 Directors’ Stock Compensation Plan as amended and restated March 25, 2021 (the “1999 Plan” and, with the ECP and 2003 Plan, the “Jefferies Plans”) at the close of business on January 13, 2023 (the “Effective Time”). Such adjustments are made under the terms of the Jefferies Plans in connection with the separation of Vitesse from Jefferies, effected by Jefferies’ distribution of Vitesse common stock to its shareholders at the Effective Time (the “Spin-Off”). Vitesse is assuming the Jefferies Plans, to the extent specified and on the terms set forth in this Plan. The ECP is attached hereto as Attachment B, the 2003 Plan is attached hereto as Attachment C and the 1999 Plan is attached hereto as Attachment D.
2. Definitions
In addition to terms defined in Section 1, the following terms shall be defined as set forth below:
2.1 “Awards” means Options exercisable for Shares, RSUs settleable by issuance of Shares and Shares of Vitesse restricted stock granted or treated as granted under the Plan.
2.2 “Beneficiary” means any person or trust that has been designated by a Participant in his or her most recent written beneficiary designation filed with the Jefferies Committee to receive the benefits specified under the Plan upon such Participant’s death. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means any person or trust entitled by will or the laws of descent and distribution to receive such benefits.
2.3 “Code” means the Internal Revenue Code of 1986, as amended, including regulations thereunder and successor provisions and regulations thereto.
2.4 “Committees” means the Vitesse Committee and the Jefferies Committee, acting jointly under Section 3.3.
2.5 “Exchange Act” means the Securities Exchange Act of 1934, as amended, including regulations thereunder and successor provisions and regulations thereto.
2.6 “Fair Market Value,” means, with respect to a Share at a given date, the closing sales price of a Share in composite trading of New York Stock Exchange-listed securities for that date or, if no sale occurred on that date, on the latest preceding day on which a sale occurred, as
reported by a reliable reporting service; provided, however, that if Shares are no longer listed on the New York Stock Exchange at a determination date, Fair Market Value shall be determined by the Committees under Section 3.3 in manner that constitutes equitable treatment of the Participant.
2.7 “Jefferies Board” means the Board of Directors of Jefferies.
2.8 “Jefferies Committee” means the Compensation Committee of the Jefferies Board (or any successor to that Committee), the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Jefferies Board. The term “Jefferies Committee” shall refer to the full Jefferies Board in any case in which it is performing any function of the Jefferies Committee under the Plan.
2.9 “Participant” means an individual who has been granted an Award under the Plan, for so long as Vitesse has any obligation under the Plan or an applicable Award agreement with respect to such Award or such Award remains subject to any restriction or other provision under the Plan or the applicable Award agreement. In the event of death of a Participant, the term Participant will mean that Participant’s beneficiaries or estate, unless the context otherwise requires.
2.10 “Restricted Stock” means Shares received in the Spin-Off by the Participant in respect of a Jefferies restricted stock award, which under the applicable Jefferies Plan remain subject to restrictions, including a vesting requirement, subject to the terms of the Plan and the applicable Award agreement.
2.11 “RSU” means a restricted stock unit, which constitutes a right to receive delivery of a Share from Vitesse at a specified date, subject to the terms of the Plan and the applicable Award agreement
2.12“Shares” means shares of Vitesse Common Stock, par value $0.01 per share, and such other securities as may be substituted or resubstituted for Shares pursuant to Section 5.2.
2.13 “Vitesse Board” means the Board of Directors of Vitesse.
2.14“Vitesse Committee” means the Compensation Committee of the Vitesse Board (or any successor to that Committee), the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Vitesse Board. The term “Vitesse Committee” shall refer to the full Vitesse Board in any case in which it is performing any function of the Vitesse Committee under the Plan.
2.15 “Vitesse Option” means a non-qualified stock option to purchase Shares, subject to the terms of the Plan and the applicable Award agreement.
3. Administration
The Plan and Awards shall be administered by the Vitesse Committee and the Jefferies Committee subject to and consistent with the provisions of the Plan:
3.1 Authority of the Jefferies Committee. The Jefferies Committee shall have exclusive and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
2
(a) To make all determinations relating to the vesting and settlement of Awards, including the achievement of performance conditions, the satisfaction of service-based vesting conditions, the reaching of any settlement date, any discretionary acceleration of vesting and the application of any Jefferies recoupment or clawback right or policy.
(b) To make all determinations regarding other terms of the Award that constitute an obligation of the Participant to Jefferies or a benefit of the Award to Jefferies, including the waiver of any such obligation or benefit if such waiver is within the scope of the authority of the Jefferies Committee under the applicable Jefferies Plan and Award agreement; provided, however, that any modification to an Award that would impose an increased or additional obligation on Vitesse shall be subject approval in accordance with Section 3.3.
(c) To distribute Award agreements and related notices to Participants.
On behalf of the Jefferies Committee, Jefferies will advise Vitesse in a timely manner regarding any of such determinations as well as regarding the vesting and settlement dates of Awards and applicable tax events and tax withholding rates.
3.2 Authority of the Vitesse Committee. The Vitesse Committee shall have exclusive and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
(a) To determine that all legal and other obligations that are conditions to the issuance or delivery of Shares have been satisfied, in accordance with Section 7.3. This will include steps required for Vitesse to comply with requirements under the Securities Act of 1933, as amended.
(b) To make determinations as specified in the Plan, including the determination specified in Section 7.2 (relating to tax withholding).
(c) To establish any Vitesse policy on insider trading and determine its applicability to Participants.
(d) To oversee ministerial functions for the administration of the Plan, including the appointment of such agents as the Vitesse Committee may deem necessary or advisable to administer the Plan.
On behalf of the Vitesse Committee, Vitesse will issue Shares to Participants and take other actions in accordance with the Plan and Award agreements in accordance with the directions and advice provided by Jefferies pursuant to Section 3.1.
3.3 Authority of the Jefferies Committee and Vitesse Committee Acting Jointly. The Jefferies Committee and the Vitesse Committee shall have authority to take the following actions, upon the approval of both Committees, in each case subject to and consistent with the provisions of the Plan:
(a) To prescribe the form of each agreement evidencing an Award, which shall as nearly as possible preserve without enlarging the rights of the Participant under the Jefferies equity award for which the Award is an adjustment, except for modifications specified in the Plan and subject to the exercise of the Jefferies Committee’s authority under Section 3.1.
3
(b) To adopt, amend, suspend and rescind such rules and regulations as the Committees may deem necessary or advisable to administer the Plan.
(c) To make determinations as specified in the Plan, including Sections 2.6 (relating to Fair Market Value), 5.2 (relating to adjustments), 6.2(b) (relating to method of exercise of Options), 6.4(c) (relating to date of crediting of dividend equivalents, 7.2 (relating to tax withholding) and 8.1 (relating to amendments to the Plan and Award agreements).
(d) To correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award agreement or other instrument hereunder.
(e) To make all other decisions and determinations as may be required under the terms of the Plan or as the Committees may deem necessary or advisable for the administration of the Plan, except for determinations authorized under Section 3.1 and ministerial functions governed by Section 3.2(c).
3.4 Delegation. The Committees each may delegate to officers or managers of Vitesse or Jefferies (or any subsidiary) the authority, subject to such terms as that Committee shall determine, to perform functions designated by that Committee, to the extent that such delegation (i) will not result in the loss of an exemption under Rule 16b-3(d) for Awards held by Participants subject to Section 16 of the Exchange Act in respect of Vitesse, (ii) will not result in a related-person transaction with an executive officer required to be disclosed under Item 404(a) of Regulation S-K (in accordance with Instruction 5.a.ii thereunder) under the Exchange Act and (iii) is permitted under applicable provisions of the Delaware General Corporation Law and other applicable laws. Other provisions of the Plan notwithstanding, subject to Section 303A.05 of the Listed Company Manual of the New York Stock Exchange, the Vitesse Board may perform any function of the Vitesse Committee under the Plan in order to ensure that transactions under the Plan are exempt under Rule 16b-3 or for any other reason.
3.5 Limitation of Liability. Each member of the Committees shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of Jefferies or Vitesse or any subsidiary, the independent certified public accountants of Jefferies or Vitesse or any executive compensation consultant, legal counsel or other professional retained by Jefferies or Vitesse or any subsidiary to assist in the administration of the Plan. No member of the Committees or the Jefferies Board or Vitesse Board, nor any officer or employee of Jefferies, Vitesse or any subsidiary acting on behalf of the Jefferies Committee or the Vitesse Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan.
3.6 Award Agreements. Award agreements shall be provided to Participants in such manner (which may include through an electronic system maintained by Jefferies) as determined by the Jefferies Committee.
4. Eligibility and Awards
4.1. Eligibility. Awards under the Plan shall be granted or deemed to be granted only to current and former employees and non-employee directors of Jefferies holding specified Jefferies equity awards at the Effective Time, as an adjustment to such Jefferies equity awards, as set forth in the table attached hereto as Attachment A. Such awards to be adjusted are referred to
4
herein, in the case of Jefferies stock options, as “Pre-Spin Jefferies Options” and, in the case Jefferies restricted stock units (including variants that are vested share units or are subject to performance-based vesting conditions), as “Pre-Spin Jefferies RSUs.” No other Awards will be granted under the Plan, although outstanding Awards will be subject to adjustment as set forth in Section 5.2. Awards, or portions of awards, of options to purchase Jefferies Common Shares or of restricted stock units (and variants, such as deferred shares and performance-based restricted stock units) that are settleable by issuance of Jefferies Common Shares, if not specified on Attachment A, will not be adjusted by issuance of Awards under this Plan.
4.2 Adjustments to Jefferies Stock Options. Each Pre-Spin Jefferies Option that is outstanding immediately before the Effective Time shall be adjusted, immediately before the Effective Time, into both a continuing Jefferies Option (a “Post-Spin Jefferies Option”) and a Vitesse Option. Each such adjusted award shall be subject to the same material terms and conditions, including with respect to vesting and expiration, after the Effective Time as the terms and conditions applicable to such Pre-Spin Jefferies Option immediately before the adjustment, except for terms and conditions of Vitesse Options that are varied in accordance with this Plan. The adjustments to the Pre-Spin Jefferies Option will be as follows:
| (i) | The per-share exercise price of such Post-Spin Jefferies Option shall be equal to the product, rounded up to the nearest one-one-hundredth cent, obtained by multiplying (A) the Post-Spin Jefferies Stock Value by (B) the ratio (the “Option Exercise Price Ratio”) of the per-share exercise price of the corresponding Pre-Spin Jefferies Option divided by the Pre-Spin Jefferies Stock Value. For purposes of this Section 4.2: |
The “Post-Spin Jefferies Stock Value” means the closing per-share sales price of Jefferies Common Shares trading “ex distribution” in consolidated trading of New York Stock Exchange-listed securities at market close immediately before the Effective Time; and
The “Pre-Spin Jefferies Stock Value” means the closing per-share sales price of Jefferies Common Shares trading “regular way with due bills” in consolidated trading of New York Stock Exchange-listed securities at market close immediately before the Effective Time.
| (ii) | The per-share exercise price of such Vitesse Option shall be equal to the product, rounded up to the nearest one-one-hundredth cent, obtained by multiplying (A) the Vitesse Stock Value by (B) the Option Exercise Price Ratio. For purposes of this Section 4.2: |
“Vitesse Stock Value” means the closing per-share sales price of Vitesse Common Stock trading “as when issued” in consolidated trading on the principal securities exchange on which such stock is listed or quoted at market close immediately before the Effective Time.
| (iii)(a) | If the Pre-Spin Jefferies Stock Value is less than or equal to $34.96, the number of shares of Vitesse Common Stock subject to such Vitesse Option will be equal to the number of Jefferies shares subject to the Pre-Spin Jefferies Option divided by 8.49668, rounded down to the nearest whole share. |
5
| (b) If the Pre-Spin Jefferies Stock Value is greater than $34.96, the number of shares of Vitesse Common Stock subject to such Vitesse Option will be equal to (A) the number of Jefferies shares subject to the Pre-Spin Jefferies Option divided by 8.49668 times (B) the ratio of $11.21 divided by $34.96 divided by (C) (1 minus the Option Exercise Price Ratio), rounded down to the nearest whole share. |
| (iv) | The number of Jefferies Common Shares subject to such Post-Spin Jefferies Option shall equal (A) the Aggregate Pre-Spin Intrinsic Value minus the Aggregate Vitesse Option Intrinsic Value divided by (B) the Post-Spin Jefferies Intrinsic Value per Option (subject to rounding in a manner ensuring compliance with Internal Revenue Code Section 409A). For purposes of this Section 4.2: |
“Aggregate Pre-Spin Intrinsic Value” means the product of (A) the number of shares subject to the Pre-Spin Jefferies Option multiplied by (B) the Pre-Spin Jefferies Stock Value minus the per-share exercise price of the corresponding Pre-Spin Jefferies Option;
“Aggregate Vitesse Option Intrinsic Value” means product of (A) the number of shares subject to the Vitesse Option (determined under Section 4.2(iii) above) multiplied by (B) the Vitesse Stock Value minus the per-share exercise price of such Vitesse Option determined under Section 4.2(ii) above; and
“Post-Spin Jefferies Intrinsic Value per Option” means (A) the Post-Spin Jefferies Stock Value minus the per-share exercise price of the Post-Spin Jefferies Option determined under Section 4.2(i) above.
4.3 Adjustments to Jefferies Restricted Stock Units. Each Pre-Spin Jefferies RSU that is outstanding immediately before the Effective Time shall be adjusted, immediately before the Effective Time, by the grant of Vitesse RSUs in the same number as the number of Vitesse Shares that would have been granted to the Participant in the Spin-Off if the Pre-Spin Jefferies RSUs had been outstanding Jefferies Common Shares at the Effective Time. The Pre-Spin Jefferies RSUs will not be otherwise adjusted (i.e., the number of Jefferies Common Shares underlying the Pre-Spin Jefferies RSUs will not change) as a result of the Spin-Off.
4.4 Adjustments to Jefferies Restricted Stock. Shares of Jefferies restricted stock outstanding the Effective Time will receive Shares in the Spin- Off. Those Shares are treated as an award of Restricted Stock under the Plan. The shares of Jefferies restricted stock will not be otherwise adjusted as a result of the Spin-Off.
5. Shares Available for Awards; Adjustments
5.1 Aggregate Number of Shares Available for Awards. The maximum number of Shares that may be delivered under the Plan shall be 2,182,299, subject to adjustment as provided in Section 5.2. This number does not include the Shares distributed in the Spin-Off to Participants holding Jefferies restricted stock awards, but those Shares will be deemed to be subject to the Plan and the applicable Award agreement. If Shares are not delivered under an Award due to forfeiture or cancellation of the Award, such Shares will not become available for grants of other Awards or reallocation to other persons under the Plan, but will be retained by
6
Vitesse. Shares to be delivered in connection with Awards may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares acquired in the market for the account of or delivery to a Participant.
5.2 Adjustments. In the event of any transaction or event affecting the outstanding Shares while this Plan is in effect by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares, repurchase, liquidation, dissolution or other corporate exchange, any large, special and non-recurring dividend or distribution to stockholders or other similar corporate transaction, Vitesse shall make such substitution or adjustment as determined by the Committees under Section 3.3 to be equitable and in order to preserve, without enlarging, the rights of Participants, as to (i) the exercise price relating to any Option, and (ii) the number and kind of Shares subject to or deliverable in respect of outstanding Awards and reserved therefor under Section 5.1, and/or make provision for payment of cash, other Awards or other property in respect of any outstanding Award. In addition, the Jefferies Committee may adjust performance goals and conditions relating to any performance-based RSUs in any circumstance in which such adjustment is authorized by the Jefferies Plan under which the original equity award was granted. The foregoing notwithstanding, upon the occurrence of an event constituting an “equity restructuring” as defined under Financial Accounting Standards Board Accounting Standards Codification Topic 718 with respect to Shares, each Participant shall have a legal right to the equitable adjustment of his or her outstanding Awards, with the manner of such adjustment to be determined by the Committees as provided in this Section 3.3. If, in a transaction triggering an adjustment hereunder, public stockholders of Vitesse receive cash for their Shares, an adjustment providing for cancellation of an Award in exchange for a cash payment based solely on the then intrinsic value of the Award shall be deemed to meet the requirements of this Section 5.2. Adjustments determined in accordance with Section 3.3 and this Section 5.2 shall be final, binding and conclusive on Jefferies, Vitesse and Participants.
6. Specific Terms of Awards
6.1 General. Persons holding the Jefferies equity awards identified in Section 4 and Attachment A immediately prior to the Effective Time will be automatically granted a corresponding Award of the same type as set forth on Attachment A (or, in the case of Restricted Stock, the Award will be deemed to be granted under the Plan) relating to the number of Shares as set forth in Section 4. Such Awards will be evidenced by an Award agreement (or shall be deemed to be evidenced by an Award agreement, in each case, as determined by the Jefferies Committee in accordance with Section 3.6) that sets forth the same terms as the corresponding Jefferies award relating to vesting, forfeiture, exercisability, settlement, recoupment of gains and other rights and obligations of the Participant, except for modifications provided for under the terms of the Plan, immaterial modifications (including those to facilitate administration) and modifications approved by the Jefferies Committee under Section 3.1. In this regard, an Award granted as an adjustment to an award subject to a predecessor version of the 2003 Plan or 1999 Plan will be subject to the terms of such predecessor plan to the extent provided in the 2003 Plan, the 1999 Plan and the original award agreement, as applicable, except as otherwise provided in this Plan or the Award agreement.
6.2 Options. Options granted under the Plan shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per Share purchasable under an Option shall be set as provided in Section 4.2.
7
(b) Method of Exercise. An Option may be exercised in whole or in part (i) by payment of the exercise price in cash, (ii) through broker-assisted “cashless exercise” arrangements or (iii) by the surrender of Shares or the withholding of Option Shares having a Fair Market Value equal to the exercise price being paid through such surrender or withholding, provided that the Committees, acting under Section 3.3, may limit or eliminate alternatives (ii) or (iii) if they reasonably determine that use of such exercise methods would have a materially detrimental effect on Vitesse. Upon exercise of an Option, Vitesse will promptly deliver Shares by a commercially reasonable method.
6.3 Restricted Stock. Restricted Stock deemed to be granted under the Plan shall be subject to the following terms and conditions:
(a) Grant and Restrictions. Restricted Stock will be subject to the substantial risk of forfeiture and restrictions on transferability as set forth in the applicable Award agreement. Except to the extent restricted under the terms of the Plan and the applicable Award agreement, a Participant granted Restricted Stock shall have all of the rights of a stockholder including the right to vote Restricted Stock and the right to receive dividends as specified in Section 6.3(d) below.
(b) Forfeiture. Except as otherwise determined by the Jefferies Committee or in the applicable Award agreement, upon a Participant’s termination of employment or service to Jefferies during the applicable restriction period, Restricted Stock that is at that time subject to service-based vesting requirements shall be forfeited; provided, however, that the Jefferies Committee may provide, by rule or regulation or in any Award agreement or amendment thereto, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part in the event of terminations resulting from specified causes. Forfeited shares will be reacquired by Vitesse.
(c) Evidence of Share Ownership. Restricted Stock granted under the Plan shall be evidenced by direct registration in book-entry form in an account in the Participant’s name with the Vitesse transfer agent. Such account will be subject to stop-transfer and other conditions and restrictions applicable to such Restricted Stock.
(d) Dividends and Distributions. Participants deemed to be granted Restricted Stock will be entitled to dividends, if any, paid on the Shares, provided that dividends on Restricted Stock deemed to be an adjustment to the Jefferies restricted stock granted under the ECP will be forfeitable or subject to recoupment (clawback) to the same extent as dividends on Jefferies restricted stock under Section 7.6 of the ECP. Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or Share dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property have been distributed.
6.4 RSUs. RSUs granted under the Plan shall be subject to the following terms and conditions:
(a) Award and Restrictions. Vesting conditions of RSUs will lapse and Vitesse shall issue Shares in settlement of RSUs as provided in the applicable Award agreement (subject to any valid election as to time of settlement made by the Participant). RSUs will be granted and accounted for including any fractional RSU. No fractional Share will be issued in settlement, but instead cash in lieu of any fractional share that otherwise would have been issuable based on the
8
Fair Market Value of a Share at the distribution date (or a previous trading date as near to the distribution date as administratively practicable).
(b) Forfeiture. Except as otherwise determined by the Jefferies Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the applicable Award agreement), all RSUs that are at that time subject to such risk of forfeiture shall be forfeited; provided, however, that the Jefferies Committee may provide, by rule or regulation or in any Award agreement or amendment thereto, or may determine in any individual case, that restrictions or forfeiture conditions relating to RSUs will lapse in whole or in part in the event of terminations resulting from specified causes. Shares underlying forfeited RSUs will be retained by Vitesse.
(c) Dividend Equivalents. RSUs will be credited with cash amounts in the form of dividend equivalents equal to the regular quarterly dividends declared and paid on Shares, which amounts will be paid or distributed when accrued (i.e., at the dividend payment date) or accrued and carried as cash credits to be paid at the time of settlement of the RSUs. The timing of payment of accrued dividend equivalents will be the same as for dividend equivalents credited on the corresponding Jefferies restricted stock units. In the case of accrued cash amounts to be paid at the time of settlement of the RSUs, such amounts will not be credited with interest. Credited dividend equivalents will be subject to vesting requirements and other restrictions as specified in the applicable Award agreement, provided that dividend equivalents resulting from RSUs issued as an adjustment to Jefferies RSUs granted under the ECP will be forfeitable to the same extent as dividend equivalents on the corresponding Jefferies RSUs under Section 7.6 of the ECP and dividend equivalents resulting from RSUs issued as an adjustment to Jefferies performance-based RSUs granted under the 2003 Plan will be forfeitable to the same extent as dividend equivalents on the corresponding Jefferies performance-based RSUs under Section 7.6 of the 2003 Plan.
6.5 Change in Control. If any Jefferies equity award provides for acceleration of vesting upon a change in control of Jefferies or upon a termination of service at or following such a change in control, the agreement evidencing the Award granted or deemed granted hereunder as an adjustment to such Jefferies equity award will provide also for acceleration of vesting (regardless of employment status) upon a Change in Control, as defined in the Vitesse Long-Term Incentive Plan (as in effect immediately following the Effective Time) (a “Change in Control”). If any Jefferies equity award provides for acceleration of settlement upon a change in control of Jefferies or upon a termination of service at or following such a change in control, the agreement evidencing the Award granted or deemed granted hereunder as an adjustment to such Jefferies equity award will provide for acceleration of settlement upon a Change in Control or upon a termination of service at or following a Change in Control, in terms parallel to those of the Jefferies equity award, provided that, if the Award constitutes a deferral of compensation for purposes of Code Section 409A, a settlement triggered by the Change in Control (but not a settlement triggered by separation from service following a Change in Control) will occur only if the event qualifying as a Change in Control, or an event closely associated therewith, constitutes a change in the ownership of Vitesse, a change in effective control of Vitesse or a change in the ownership of a substantial portion of the assets of Vitesse as defined in Treasury Regulation § 1.409A-3(i)(5). Awards will also be subject to acceleration of vesting or settlement upon a change in control of Jefferies or upon a termination of service at or following such a change in control on terms parallel to those of the corresponding Jefferies equity award.
7. Certain Provisions Applicable to Awards
9
7.1 Acceleration. The vesting of any Award or settlement of RSUs may be accelerated, in the discretion of the Jefferies Committee or upon occurrence of one or more events specified by the Jefferies Committee, except that settlement of an Award shall not be accelerated if such action would result in a tax penalty under Code Section 409A.
7.2 Taxes. Awards shall be subject to, and each Participant shall pay, applicable withholding taxes under U.S. federal (including FICA), state and local law (and any applicable tax law of a foreign jurisdiction). Jefferies is obligated to withhold taxes relating to Awards and pay such withheld amounts to tax authorities. A Participant may elect, prior to an applicable withholding date, to pay to Jefferies the withholding amount in cash in an arrangement satisfactory to Jefferies. If a Participant has not made this election, the manner of withholding shall be determined by the Committees, which may include (i), in the case of RSUs or restricted stock vesting or being settled at a given date, Jefferies will withhold from the Jefferies Common Shares to be delivered upon vesting or settlement of the corresponding Jefferies award at that date sufficient Jefferies Common Shares to satisfy the withholding requirement applicable to the corresponding Vitesse award, or (ii) Vitesse will arrange to deliver Shares issuable upon exercise or settlement of an Award to a designated broker that maintains an account for the Participant, which broker will sell sufficient Shares in the market and remit the proceeds to Jefferies to satisfy tax withholding obligations, or (iii), if authorized by the Vitesse Committee under Section 3.2, Vitesse will withhold from any delivery of Shares in connection with an exercise or settlement of an Award or any other payment relating to an Award (including credited dividend equivalents) any required withholding amount and pay to Jefferies the Fair Market Value of the withheld Shares and any cash withheld, so that Jefferies may satisfy the applicable withholding obligation. Jefferies will advise Vitesse in advance of a tax withholding date regarding the tax withholding rates applicable to a Participant if necessary to implement tax withholding under this Section 7.2.
7.3 Compliance with Laws and Obligations. Vitesse may delay the issuance or delivery of Shares in connection with any Award or the taking of any other action under the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between Vitesse and any national securities exchange or automated quotation system, or any other law, regulation or contractual obligation of Vitesse, until Vitesse is satisfied that such laws, regulations and other Vitesse obligations have been complied with in full; provided, however, that Vitesse will use its best efforts to achieve such full compliance in a manner that enables Vitesse to fulfill its obligations under the Plan in a timely fashion. Shares issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations and other Vitesse obligations.
7.4 Certain Additional Provisions of the Jefferies Plans Applicable to Awards
(a) ECP Provisions: Awards granted or deemed to be granted as an adjustment to awards granted under the ECP shall be subject to the following provisions of the ECP to the same extent as the corresponding Jefferies award. For this purpose, references in the ECP provisions to the Committee refer to the Jefferies Committee and to the Company refer to Jefferies:
(i) ECP Section 7.4, providing for cancellation or rescission of awards in the event the Participant takes actions or has failed to take actions resulting in harm to the business interests of Jefferies.
(ii) ECP Section 7.7, providing for recoupment or clawback.
10
(iii) ECP Section 7.8, providing for a required Award holding period. The Jefferies Committee can waive this requirement. The retention requirement will apply to the aggregate of the original Jefferies award and the corresponding Award granted or deemed to be granted as an adjustment (so, for example, if sufficient Jefferies shares are retained with respect to the corresponding Jefferies award, no Shares would need to be retained with respect to the Award).
(iv) ECP Section 7.9, which shall be deemed to prohibit loans from Jefferies or Vitesse to a Participant.
(v) ECP Section 9.2, prohibiting transfers of Awards, subject to limited exceptions. Transfers that may be permitted under Section 9.2 will require approval of the Vitesse Committee under Section 3.2.
(vi) ECP Sections 9.3 (No Right to Continued Employment; Leaves of Absence); 9.6 (409A Awards and Deferrals); 9.7 (No Rights to Awards; No Shareholder Rights); 9.8 (International Participants); 9.9 (Unfunded Status of Awards; Creation of Trusts); 9.11 (Payments in the Event of Forfeitures; Fractional Shares).
(b) 2003 Plan Provisions: Awards granted or deemed to be granted as an adjustment to awards granted under the 2003 Plan shall be subject to the following provisions of the 2003 Plan to the same extent as the corresponding Jefferies award. For this purpose, references in the 2003 Plan provisions to the Committee refer to the Jefferies Committee and to the Company refer to Jefferies:
(i) 2003 Plan Section 7.4, providing for cancellation or rescission of awards in the event the Participant takes actions or has failed to take actions resulting in harm to the business interests of Jefferies.
(ii) 2003 Plan Section 7.7, providing for recoupment or clawback.
(iii) 2003 Plan Section 7.8, providing for a required Award holding period. The Jefferies Committee can waive this requirement. The retention requirement will apply to the aggregate of the original Jefferies award and the corresponding Award granted or deemed to be granted as an adjustment (so, for example, if sufficient Jefferies shares are retained with respect to the corresponding Jefferies award, no Shares would need to be retained with respect to the Award).
(iv) 2003 Plan Section 9.2, prohibiting transfers of Awards, subject to limited exceptions. Transfers that may be permitted under Section 9.2 will require approval of the Vitesse Committee under Section 3.2.
(v) 2003 Plan Sections 9.2 (Limitations on Transferability); 9.3 (No Right to Continued Employment; Leaves of Absence); 9.6 (409A Awards and Deferrals); 9.7 (No Rights to Awards; No Shareholder Rights); 9.8 (International Participants); 9.9 (Unfunded Status of Awards; Creation of Trusts); 9.10 (Nonexclusivity of the Plan); 9.11 (Payments in the Event of Forfeitures; Fractional Shares).
(c) 1999 Plan Provisions: Awards granted or deemed to be granted as an adjustment to awards granted under the 1999 Plan shall be subject to the provisions of the 2003
11
Plan to the same extent as the corresponding Jefferies award, including under Sections 7, 9 and 11 of the 1999 Plan.
8. Other Provisions
8.1 Changes to the Plan and Awards. The Committees, acting under Section 3.3, may amend, suspend, discontinue or terminate the Plan or amend an outstanding Award or Award agreement. Such action shall not require the consent of Jefferies shareholders, Vitesse stockholders or Participants, except that (i) any such action shall be subject to the approval of Vitesse stockholders at or before the next annual meeting of stockholders for which the record date is after the date of the Committees’ action if such stockholder approval is required by any applicable federal or state law or regulation or the rules of the New York Stock Exchange, and the Committees may otherwise, in their discretion, determine to submit other such amendments to Vitesse stockholders for approval, and (ii), without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any outstanding Award. Other provisions of the Plan notwithstanding, without the prior approval of Vitesse stockholders, Vitesse and the Committees will not amend or replace outstanding Options in a transaction that constitutes a “repricing,” as that term is defined in Section 303A.08 of the Listed Company Manual of the New York Stock Exchange or any other transaction resulting in a reduction in exercise price or base price or any cancellation of an Award or award at a time when its exercise price or base price exceeds the fair market value of the underlying Shares in exchange for another Option, any other Award or cash.
8.2 Successors and Assigns. The Plan shall be binding on all successors and assigns of Jefferies, Vitesse and a Participant, including any permitted transferee of a Participant, the Beneficiary or estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.
8.3 Governing Law. The validity, construction, and effect of the Plan, any rules and regulations under the Plan, and any Award agreement will be determined in accordance with the laws of the State of New York (including those governing contracts), without giving effect to principles of conflicts of laws, and applicable federal law.
8.4 Plan Termination. The Plan will terminate at such time as Jefferies, Vitesse and Participants have no further rights or obligations with respect to outstanding Awards or otherwise under the Plan.
12
Exhibit 99.1
Jefferies Completes Spin-Off of Vitesse
Launches new independent, publicly traded company focused on returning capital to stockholders through owning financial interests as a non-operator in oil and gas wells drilled by leading U.S. operators
NEW YORK & CENTENNIAL, Colo. – Jefferies Financial Group Inc. (“Jefferies”) (NYSE: JEF) and Vitesse Energy, Inc. (“Vitesse”) (NYSE: VTS) announced today the completion of the distribution (the “Distribution”) by Jefferies of all the outstanding shares of common stock of Vitesse (“Vitesse Common Stock”) held by Jefferies. As a result of the Distribution, Vitesse became an independent, publicly traded company. Prior to the Distribution, Vitesse acquired all of the issued and outstanding equity interests of Vitesse Energy, LLC and Vitesse Oil, LLC.
Common shares of Jefferies (“Jefferies Common Shares”) and Vitesse Common Stock will each begin trading “regular way” today, January 17, 2023, on the New York Stock Exchange under the symbols “JEF” and “VTS,” respectively.
Rich Handler, CEO of Jefferies, and Brian Friedman, President of Jefferies, remarked: “We congratulate Bob Gerrity, Brian Cree and their team for all the smart and hard work they have done to build Vitesse into the solid business it is and to help manage the process of becoming an independent, publicly traded company. As we have noted before, we each look forward to being stockholders of Vitesse and to seeing its success in the coming years.”
Bob Gerrity, CEO of Vitesse, stated: “We at Vitesse could not be more excited to have gone public. We are extremely grateful to Jefferies for having provided the insight and resources that allowed us to grow from the start-up we were in 2014 to where we are today. And we are especially grateful for their confidence in us as we move into the future as an independent, publicly traded company.”
In connection with the Distribution, on January 13, 2023, Jefferies shareholders received one share of Vitesse Common Stock for every 8.49668 Jefferies Common Shares held at the close of business on December 27, 2022. Fractional shares will be aggregated and sold into the public market and the proceeds distributed pro rata to Jefferies shareholders who otherwise would have received such fractional shares. The shares will be credited to “street name” shareholders through the Depository Trust Corporation. Approximately 26.6 million shares of Vitesse Common Stock were distributed to Jefferies shareholders, which equals approximately 94.37% of the total issued and outstanding shares of Vitesse Common Stock.
About Jefferies
Jefferies is a leading global, full-service investment banking and capital markets firm that provides advisory, sales and trading, research and wealth and asset management services. With more than 40 offices around the world, we offer insights and expertise to investors, companies and governments.
About Vitesse
Vitesse is an independent energy company engaged in the acquisition, development, and production of non-operated oil and natural gas properties in the United States that are generally operated by leading oil companies and are primarily in the Bakken and Three Forks formations in the Williston Basin of North Dakota and Montana. Vitesse also has properties in the Central Rockies, including the Denver-Julesburg Basin and the Powder River Basin. Since Vitesse’s inception in 2014, Vitesse has built a strong and diversified asset base through a combination of property acquisitions, development activities and the implementation of proprietary platforms and processes utilizing its extensive data resources.
Forward-Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and include statements about the future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” “would,” or similar expressions. Forward-looking statements may include, without limitation, statements relating to the spin-off of Vitesse, such as the anticipated timing and implementation of the distribution of Vitesse Common Stock to Jefferies shareholders. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Factors that could cause actual results to materially differ from those expressed in the forward-looking statements set forth in this press release include, without limitation, risks that either the distribution of proceeds from the sale of fractional shares or regular-way trading in Vitesse Common Stock or Jefferies Common Shares will not proceed as expected. The forward-looking statements in this press release also should be considered in light of the risks and uncertainties described in the reports Jefferies and Vitesse file with the U.S. Securities and Exchange Commission (the “SEC”) and in the information statement (the “Information Statement”) containing details regarding the Distribution, Vitesse’s business and management following the spin-off and other information regarding the spin-off that was made available to Jefferies shareholders prior to the distribution date. You should read and interpret any forward-looking statement together with the reports Jefferies and Vitesse file with the SEC and the Information Statement. Jefferies and Vitesse are providing the information in this press release as of this date and assume no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contacts
Jefferies Financial Group Inc.:
Jonathan Freedman (212) 778-8913
MediaContact@Jefferies.com
Vitesse Energy, Inc.:
Ben Messier (720) 532-8232
benmessier@vitesse-vts.com
2