Marblegate Capital Corp 10-K, filed Apr 7, 2025
Marblegate Capital Corp (MGTE)
About this 10-K
Marblegate Capital Corp filed this 10-K on April 7, 2025, covering the fiscal year ended December 31, 2024.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2024
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 333-283675
MARBLEGATE CAPITAL CORPORATION
(Exact name of Registrant as specified in its Charter)
| Delaware | 92-2142791 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 5 Greenwich Office Park, Suite 400 Greenwich, CT |
06831 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 203 (210) 6500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| 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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and, therefore, cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date.
As of April 7, 2025, there were 11,282,212 shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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EXPLANATORY NOTE
On April 7, 2025 (the “Closing Date”), subsequent to the fiscal year ended December 31, 2024, the fiscal year to which this Annual Report on Form 10-K relates, Marblegate Acquisition Corp., a Delaware corporation (“MAC”), Marblegate Asset Management, LLC, a Delaware limited liability company (“MAM”), Marblegate Capital Corporation, a Delaware corporation (“New MAC”), MAC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of New MAC (“Merger Sub”), DePalma Acquisition I LLC, a Delaware limited liability company (“DePalma I”), and DePalma Acquisition II LLC, a Delaware limited liability company (“DePalma II,” and each of DePalma I and DePalma II, a “DePalma Company” and together, the “DePalma Companies” or “DePalma”), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated February 14, 2023, by and among the foregoing parties (the “Business Combination Agreement”). In connection with the Closing of the Business Combination, among other things, (i) New MAC and the DePalma Companies effected a series of reorganization transactions, resulting in New MAC becoming the majority owner of the DePalma Companies, and (ii) Merger Sub merged with and into MAC (the “Merger”), with MAC surviving the Merger as a wholly-owned subsidiary of New MAC. New MAC intends for its shares of common stock, par value $0.0001 per share, and warrants, each representing the right to purchase a share of common stock of New MAC, to be quoted on the OTCQX® Best Market (the “OTC Markets”) under the symbols “GATE” and “GATEW”, respectively.
Unless context otherwise requires, references to the “Company,” “New MAC,” “our,” “us” or “we” in this Annual Report on Form 10-K refer to Marblegate Capital Corporation.
Further information regarding the Business Combination is set forth in the definitive proxy statement/prospectus included in the Registration Statement of the Company and DePalma Companies on Form S-4 (File No. 333-283675) filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 7, 2025.
Except as otherwise expressly provided herein, the information in this Annual Report on Form 10-K does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding the financial position, business strategy and the plans and objectives of management for our future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Annual Report on Form 10-K are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Annual Report on Form 10-K entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K. These forward-looking statements are subject to numerous risks, including, without limitation, the following:
| • | our ability to realize the benefits expected from the Business Combination; |
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| • | our ability to subsequently obtain the listing of our common stock and warrants on a national securities exchange (e.g., the New York Stock Exchange or The Nasdaq Stock Market); |
| • | the limited liquidity and trading of our securities; |
| • | our limited operating history, which may make it difficult to successfully execute our strategic initiatives and accurately evaluate future risks and challenges; |
| • | our failure to attract new borrowers or retain existing borrowers; |
| • | fluctuations in costs and economic activity, especially in New York City; |
| • | loss of confidential data from customers and employees, which may subject us to litigation, liability or reputational damage; |
| • | our failure to successfully compete; |
| • | our failure to properly manage growth and relationships with various business partners; |
| • | our failure to protect against software or hardware vulnerabilities; |
| • | our failure to raise additional capital to develop our business; |
| • | risks related to global economic and societal disruptions and uncertainties or future widespread public health epidemics, including supply chain disruptions; |
| • | the loss of one or more of our executive officers and other key employees; |
| • | our failure to hire and retain qualified employees; |
| • | our failure to comply with federal, state and local laws and regulations; |
| • | the costs related to being a public company; |
| • | the impact from changes in policies and regulations as a result of the new presidential administration; and |
| • | other factors detailed in this Annual Report on Form 10-K, including those in the section entitled “Risk Factors.” |
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
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SELECTED DEFINITIONS
Unless otherwise stated in this Annual Report on Form 10-K or the context otherwise requires, references to the following capitalized terms have the meanings set forth below:
“Anchor Founder Shares” means an aggregate of 2,473,864 Founder Shares purchased by the Anchor Investors from the Sponsor at their original purchase price of approximately $0.002 per share.
“Anchor Investors” means the qualified institutional buyers or institutional accredited investors which are not affiliated with MAC, the Sponsor, MAC’s directors or any member of MAC’s management and that purchased Anchor Founder Shares and certain units in the IPO.
“Business Combination” means the transactions contemplated by the Business Combination Agreement.
“Business Combination Agreement” means the Business Combination Agreement, dated as of February 14, 2023, by and among MAC, MAM, New MAC, Merger Sub, DePalma I and DePalma II.
“Cantor” means Cantor Fitzgerald & Co.
“Closing” means the consummation of the Business Combination.
“Closing Date” means the date on which the Closing occurs.
“DePalma” or the “DePalma Companies” means DePalma Acquisition I LLC, a Delaware limited liability company, and DePalma Acquisition II LLC, a Delaware limited liability company.
“DePalma Equityholders” means Marblegate Special Opportunities Master Fund, L.P., as the Master Fund, DePalma Dispatch Inc., a blocker entity 100% owned by the Master Fund, Marblegate Partners Master Fund I L.P., Marblegate Partners Master Fund II L.P., Marblegate Strategic Opportunities Master Fund I L.P., Marblegate Tactical Master Fund I L.P., Marblegate Tactical Master Fund II L.P., Marblegate Tactical III Master Fund I L.P., Marblegate Tactical III Master Fund II L.P., and Marblegate Cobblestone Master Fund I L.P. (and their respective feeder funds and affiliates).
“DGCL” means the Delaware General Corporation Law.
“Effective Time” means the time at which the Merger becomes effective.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Field Point” means Field Point Servicing, LLC.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“IPO” or “initial public offering” means MAC’s initial public offering of units, which was consummated on October 5, 2021.
“MAC” means Marblegate Acquisition Corp., a Delaware corporation, prior to the consummation of the Business Combination, unless the context provides otherwise.
“MAC Class A Common Stock” means MAC’s Class A Common Stock, par value $0.0001 per share.
“MAC Class B Common Stock” means shares of MAC Class B Common Stock, par value $0.0001 per share, which were automatically converted into shares of MAC Class A Common Stock at the time of the Business Combination.
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“MAC Common Stock” means, collectively, the MAC Class A Common Stock and the MAC Class B Common Stock.
“MAM” or “Manager” means Marblegate Asset Management, LLC.
“Master Fund” means Marblegate Special Opportunities Master Fund, L.P., the majority owner of the Sponsor.
“Merger” means the merger of Merger Sub with and into MAC with MAC being the surviving corporation and becoming a wholly-owned subsidiary of New MAC.
“Merger Sub” means MAC Merger Sub, Inc., a Delaware corporation, and wholly-owned subsidiary of New MAC.
“Nasdaq” or “The Nasdaq Capital Market” means The Nasdaq Capital Market LLC.
“New MAC” means Marblegate Capital Corporation, a Delaware corporation.
“Owned Medallions” means, collectively, all Registered Medallions and Unregistered Medallions.
“Private Placement” means the private placement of 910,000 Private Placement Units purchased by the Sponsor and Cantor, which occurred simultaneously with the completion of the IPO, at a purchase price of $10.00 per Private Placement Unit for an aggregate purchase price of $9,100,000.
“Private Placement Shares” means the shares of MAC Class A Common Stock included as part of the Private Placement Units sold in the Private Placement concurrent with the IPO.
“Private Placement Units” means the units of MAC, each comprised of one Private Placement Share and one half of one Private Placement Warrant, purchased by the Sponsor and Cantor in the Private Placement.
“Private Placement Warrants” means the warrants to purchase MAC Class A Common Stock included as part of the Private Placement Units sold in the Private Placement concurrent with the IPO.
“Registered Medallions” means, collectively, NYC taxi medallions that have completed the formal TLC transfer process and are owned by mini-LLCs that are wholly owned by DePalma II.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Sponsor” means Marblegate Acquisition LLC, a Delaware limited liability company.
“TLC” means the New York City Taxi and Limousine Commission.
“UCC” means the Uniform Commercial Code.
“Unregistered Medallions” means, collectively, NYC taxi medallions that have not yet completed the formal TLC transfer process, including medallions that DePalma II has acquired pursuant to a UCC disposition, and are directly owned by DePalma II.
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Our business is subject to numerous risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K. You should carefully consider these risks and uncertainties when investing in our securities. The principal risks and uncertainties affecting our business include the following:
| • | We have a limited operational history. |
| • | Our business is heavily concentrated in loans secured by taxicab medallions as well as Owned Medallions, which carry a high risk of loss and could be adversely affected by an economic downturn as well as the regulatory policies of the City of New York and the New York City Taxi and Limousine Commission. |
| • | DePalma I’s balance sheet consists substantially of loans secured by taxicab medallions, which historically have been associated with significant delinquency rates and risk of default. |
| • | The mobility industry is highly competitive, with many well-established, low-cost alternatives, including government-run/based mass transportation options, low switching costs, and well-capitalized competitors in nearly every major geographic region. |
| • | A significant portion of our medallion loans that are not participating in the MRP+ are in default and non-performing. |
| • | We may not be able to fully realize the benefits of our participation in the MRP+, which may adversely affect our financial performance. |
| • | The insolvency of American Transit Insurance Company, the largest insurer of for-hire vehicles in New York City, may result in rising prices for liability insurance and a lack of available coverage, which may negatively impact our business. |
| • | Changes in taxicab industry regulations that result in the issuance of additional medallions or increases in the expenses involved in operating a medallion could lead to a decrease in the value of our medallion loan collateral or our Owned Medallions. |
| • | As a result of our geographic concentration, our business may be adversely affected if the New York City taxicab industry experiences a sustained economic downturn. |
| • | The impact of economic conditions, including the resulting effect on discretionary passenger spending, may harm our business and operating results. |
| • | If autonomous vehicle technologies continue to improve and provide passengers with additional transportation alternatives, and the taxi industry fails to adapt to the use of autonomous vehicle technologies, our financial performance and prospects would be adversely impacted. |
| • | Decreases in the value of our medallion loan collateral, including the impact on loans in process of foreclosure, have had, and may continue to have, a material adverse effect on our business. |
| • | Uncertainty relating to the reporting of collateral values for our loans may adversely affect the value of our portfolio. |
| • | Decreases or increases in prevailing interest rates could adversely affect our business, our cost of capital and our net interest income. |
| • | We are reliant on third-party service providers in our taxi leasing operations. If our third-party service providers fail to perform as needed, our business may be adversely impacted. |
| • | Competition with other lenders could adversely affect us. |
| • | We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer. |
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| • | Our only material assets are our direct and indirect interests in DePalma, and we are accordingly dependent upon distributions from DePalma to pay dividends and taxes and other expenses. |
| • | Conflicts of interest could arise in connection with certain of our directors’ and executive officers’ discharge of fiduciary duties to our stockholders. |
| • | At the time the Merger closed, we were unable to meet Nasdaq’s round lot requirement for initial listing and, as a result, are planning to list our securities on the OTC Markets, which is volatile and could reduce the liquidity of our securities. |
| • | Trading on the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares. |
| • | We will incur significant increased expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition and results of operations. |
| • | Other risks and uncertainties described in this Annual Report on Form 10-K, including those under the section entitled “Risk Factors.” |
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PART I
Background
We are a Delaware corporation, formed by MAC on February 2, 2023 (inception). We were formed to be the surviving company in connection with the Business Combination among MAC, MAM, DePalma I, and DePalma II. We have no prior operating activities.
MAC was formed on December 10, 2020 as a blank check company formed under the laws of the State of Delaware for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. MAC completed an initial public offering (the “IPO”) on October 5, 2021, following which the management of MAC commenced an active search for businesses or assets to acquire for the purpose of consummating an initial business combination with a high-quality business that had recently undergone a restructuring.
The DePalma Companies were organized as two Delaware limited liability companies on February 23, 2018 and commenced operations on March 29, 2018. The DePalma Companies are the market leader in providing specialized financing solutions to the regulated mobility sector, with a geographic focus on the New York City (“NYC”) taxi market.
On February 14, 2023, we entered into the Business Combination Agreement with MAC, MAM, Merger Sub, and the DePalma Companies, pursuant to which, among other things, MAC was combined with the DePalma Companies in a series of transactions that is expected to result in New MAC’s Common Stock and warrants being quoted on the OTC Markets.
Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, among other things:
(i) We and the DePalma Companies effected a series of reorganization transactions immediately prior to the consummation of the transactions contemplated by the Business Combination Agreement, resulting in the DePalma Companies becoming wholly-owned subsidiaries of New MAC;
(ii) Merger Sub merged with and into MAC, with MAC surviving as a wholly-owned subsidiary of New MAC, in accordance with the terms and subject to the conditions of the Business Combination Agreement; and
(iii) Upon the effectiveness of the Merger (the “Effective Time”), (x) each share of Class A common stock of MAC issued and outstanding immediately prior to the Effective Time was cancelled and converted into the right to receive the per share consideration allocable to each share of our common stock (the “Company Per Share Consideration”); (y) each share of Class B common stock of MAC issued and outstanding immediately prior to the Effective Time was cancelled and converted into the right to receive the Company Per Share Consideration, and (z) each warrant of MAC outstanding immediately prior to the Effective Time was cancelled and converted into the right to receive one warrant of New MAC, with New MAC assuming MAC’s obligations under the existing warrant agreement.
The Business Combination closed on April 7, 2025 following the receipt of the requisite stockholder approval on March 25, 2025 and the fulfilment of other customary closing conditions.
Following the Business Combination, substantially all of our assets and operations are held and conducted by the DePalma Companies and their subsidiaries, and our only material assets are direct limited liability company interests in the DePalma Companies. Unless the context otherwise requires, the “Company,” “New MAC,” “our,” “us” or “we” refer to Marblegate Capital Corporation.
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Except as otherwise expressly provided herein, the information in this Annual Report on Form 10-K does not reflect the consummation of the Business Combination, which occurred subsequent to the periods covered by this Annual Report.
Overview
We are primarily engaged in the business of acquiring, restructuring, and owning NYC taxi medallion collateralized loans, which we refer to as “medallion loans,” as well as leasing NYC taxi medallions through our taxicab fleet. We expect to continue to sell medallions (potentially including seller financing). We believe we are the largest NYC taxi medallion lender with a medallion loan portfolio collateralized by approximately 1,760 NYC taxi medallions as of December 31, 2024. In addition to our business of owning medallion loans and leasing medallions, we believe we are also the largest owner of Registered and Unregistered NYC taxi medallions. As of December 31, 2024, we had approximately 2,061 Owned Medallions, which will generally be redeployed over time into the NYC taxi medallion lending market or leased by a fleet.
As of December 31, 2024, we leased 231 medallions through a fleet managed by Septuagint Solutions, LLC (“Septuagint”), an operating joint venture with Kirie Eleison Corp (“Kirie Eleison”), an unaffiliated strategic partner in which we hold a 50% interest and will have the right to exercise governance control once 85% of DePalma II’s Owned Medallions have been leased to Septuagint. The fleet operations provide an additional avenue to lease our Owned Medallions, and in the future we believe will provide us with an avenue to finance sales to NYC taxi operators and other potential medallion purchasers. DePalma II, through its wholly-owned mini-LLC subsidiaries, entered into Medallion Owner Lease Agreements with Septuagint (collectively, the “Lease Agreement”), whereby DePalma II grants Septuagint the exclusive right to operate or sublease medallions and related taxicab vehicles owned by the mini-LLCs in the amount of monthly rental payments of $1,500 per medallion. Septuagint is separately obligated to pay for the vehicles under various guaranty agreements, pursuant to which it guaranteed the promissory notes executed by the mini-LLCs, as borrower, in favor of DePalma II, as lender, in connection with the purchase of the vehicles by the mini-LLCs funded by DePalma II, which accrues interest at 6% per annum. Under the Lease Agreement, Septuagint was granted full and exclusive authority to sell (or lease) the vehicles on behalf of the mini-LLCs at such price as Septuagint shall determine in its sole discretion. As of October 17, 2024, Septuagint no longer has exclusive authority to sell or lease vehicles on behalf of the mini-LLCs. The mini-LLCs retain ownership interest in the medallions and taxicab vehicles throughout the contractual term, unless otherwise agreed upon.
Septuagint is governed by an Operating Services Agreement, dated October 15, 2019 (the “OSA”), by and between DePalma II, Septuagint, and Kirie Eleison. The OSA requires DePalma II to lease its Owned Medallions exclusively through Septuagint. On September 26, 2024, DePalma II provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie Eleison signed an amendment to the OSA that eliminated Septuagint’s exclusive right under the OSA to lease DePalma II’s medallions and provided for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down Septuagint. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. Accordingly, there have been no quantitative and qualitative changes to Septuagint’s ownership or Septuagint’s organizational or operating agreements during this transition period, as the parties are continuing to operate under the original OSA, as amended on October 17, 2024, which, as noted, only removed the exclusivity provisions. If DePalma II winds down Septuagint, DePalma II would no longer lease any of its Owned Medallions through Septuagint.
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DePalma II intends to continue to pursue its leasing strategy by leasing Owned Medallions either through Septuagint or through a newly formed, wholly owned subsidiary of DePalma II. DePalma II intends to enter into non-exclusive commercial agreements with third party fleets to assist the company in leasing medallions. The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025. As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
The medallion loans are secured by one or more taxi medallions and primarily take the following two forms:
| • | MRP+ Loans: MRP+ Loans are medallion loans participating in the Medallion Relief Program (“MRP”) and MRP+, each established by the City of New York and the TLC. MRP+ Loans are nonrecourse loans that are typically secured by one or more medallions and do not carry a personal guarantee, but rather have credit support from funds provided by the City of New York. See “— MRP and MRP+ — Reserve Fund”) below for more information. |
| • | Non-MRP+ Loans: Non-MRP+ Loans are not part of the MRP+ and, in addition to being secured by one or more medallions, are, in many cases, further secured by personal guarantees of the borrowers, shareholders or equity members and, in some cases, collateralized with additional collateral such as real estate of the borrowers. |
Since formation, substantially all our medallion loans were acquired via bulk purchases of loan portfolios from prior lenders, many of whom were the originators or lead participants of such loans. In almost all cases, the vast majority of the loans we acquired were non-performing at the time of acquisition.
When a borrower defaults on a loan, we have the ability to enforce our rights as a lender under the applicable medallion loan agreement. Historically, we have resolved defaulted medallion loans by (i) restructuring the loan, (ii) repossessing or otherwise obtaining possession of and/or foreclosing upon the taxi medallion that was collateral for the loan, (iii) enforcing the underlying obligation against the borrower and/or any guarantor of the loan including the personal guaranty or additional collateral, if any, in the case of Non-MRP+ Loans or (iv) some other negotiated settlement with the borrower, including restructuring, discounted payoff, paydown and surrender and foreclosure and loan enforcement litigation. For MRP+ Loans, enforcement is limited to foreclosing on the taxi medallion collateral and collecting any deficiency between the foreclosure sale price and the amounts due under the loan from funds provided by the City of New York for such purpose. Due to the original price of acquisition for each of these sets of loans, we have typically realized gains from each of the scenarios listed above.
Please see “— MRP and MRP+” below “— MRP and MRP+ — Reserve Fund” below for more information.
How Medallions Are Acquired
We acquired our taxi medallion loans and medallions through a series of bulk portfolio transactions comprised of (i) loans with medallions as collateral and (ii) unregistered foreclosed medallions. To date, we have not purchased any additional medallions since our last bulk purchase transaction in February 2020.
As part of the resolution process on defaulted loans where DePalma I is the lender, DePalma II ultimately acquires such collateralized medallions via assignment from DePalma I following DePalma I’s acquisition of such medallions from the defaulted borrower through a method of UCC disposition.
The three primary UCC disposition methods are (i) public auction, (ii) surrender and (iii) private sale. To date, we have only acquired loans with medallions as collateral by purchasing portfolios of taxi medallion loans from third-party secured lenders. A description of each of these UCC disposition methods is set forth below.
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Public Auction
Typically, a public auction is held in connection with foreclosure proceedings. A third-party bidder may seek to acquire the auctioned medallion via cash bid or the existing secured lender may elect to bid on the medallion via a credit bid to acquire the collateral. Credit bidding allows a secured lender to use the amount of its secured debt as all or part of its bid to acquire the secured asset. When a secured lender “credit bids”, the secured lender bids at auction for the medallion with all or a portion of the delinquent borrower’s debt obligation secured by the medallion. For example, if the delinquent borrower’s total debt obligation is $200,000, the secured lender can credit bid up to such amount. If the secured lender credit bids $175,000 and is the winning bidder at auction with such bid, the secured lender will obtain the legal right to ownership of the medallion and the difference between the winning credit bid ($175,000) and $200,000 becomes an unsecured “deficiency” obligation owed to the secured lender by the delinquent borrower. Conversely, in the event a bidder offers $205,000 at auction, which bid would be in excess of the secured lender’s credit bid of $200,000, in order for the secured lender to prevail at the auction and acquire the medallion, the secured lender would have to bid in excess of $205,000 (i.e., $206,000) and settle the difference between the $200,000 credit bid and the winning bid (of $206,000) with cash. To date, in instances where we acquired medallions via credit bid, we have not had to bid an amount in excess of our credit bid. As such, we have recorded no cash outflows due to our credit bidding activity.
A third party may also seek to acquire medallions via credit bid assignment whereby the third party purchases the right to a secured lender’s credit bid, which is then assigned to the third party purchaser, who, in turn, steps into the place of the prior secured lender with the legal right to credit bid, and, if such bid is the winning bid, completes the UCC disposition acquiring the previously collateralized medallion.
Additionally, holders of portfolios of medallions or loans collateralized by medallions may choose to sell their positions via an auction. In the past, we have purchased portfolios of medallions and loan portfolios containing both loans secured by medallions and Owned Medallions.
As of December 31, 2024, of our 2,061 Owned Medallions, 1,129, or approximately 55%, were acquired via public auction credit bid and 181, or approximately 9%, were acquired via public auction for cash.
Surrender
In lieu of a public auction, a secured lender could acquire a medallion via the UCC disposition method of surrender. A surrender is effectively a private transaction between delinquent borrower and secured lender whereby the delinquent borrower agrees to surrender the collateral secured by the loan (i.e., the medallion) plus, in some cases, additional cash, to the secured lender, in complete satisfaction of the borrower’s obligation.
Similar to a credit bid assignment, a third party may also purchase a loan from a secured lender by stepping into the place of the secured lender under the surrender agreement, and ultimately acquiring a medallion through the surrender agreement previously initiated, but not completed by the assigning secured lender with its borrower.
As of December 31, 2024, of our 2,061 Owned Medallions, 238, or approximately 12%, were acquired via surrender.
Private Sale
The owner of a medallion may also choose private sale as a method of UCC disposition. A private sale is a negotiated transaction between the owner of the medallion and a third-party buyer.
Since inception, we have acquired our current medallion portfolios in a series of private medallion and medallion collateralized loan portfolio purchases, whereby we directly acquired 361 Owned Medallions and loans collateralized by 4,189 medallions. The table below sets forth information regarding when we acquired New York City medallions directly or medallions serving as collateral for acquired loans, as applicable, and the price paid in those acquisitions. With respect to acquired loans, such loans are almost universally in default and
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following such acquisition, DePalma I may choose to acquire direct ownership of the medallion collateral through a UCC disposition method (i.e., public auction or surrender), which medallion would then be assigned to DePalma II.
| Private Sale Acquisitions of Medallions |
Avg. Price Paid($) | |||||||||||||||||||||||||
| Year |
Owned Medallions |
Medallions as Collateral |
Total | Owned Medallions |
Medallions as Collateral |
Total | ||||||||||||||||||||
| 2018 | 292 | 1,211 | 1,503 | $ | 182,737 | $ | 189,139 | $ | 187,908 | |||||||||||||||||
| 2020 | 69 | 2,978 | 3,047 | $ | 118,149 | $ | 118,149 | $ | 118,149 | |||||||||||||||||
Our Market
A NYC taxi medallion is the only permitted license to operate a taxi and accept street hails in the City of New York. There are a limited number of taxi medallions that have been issued to date and, as of December 31, 2024, the number of those licenses was capped by the TLC at 13,587. Selling price information publicly released by the TLC is a factor considered in valuing DePalma II’s New York City medallions along with other inputs, including the amount per medallion that was backstopped by the City of New York per the MRP+ program, and DePalma I’s historical loan realization activity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of DePalma—Critical Accounting Policies and Estimates—Fair Value Measurements.” The below table illustrates the average sale price of a NYC taxi medallion based on transfers of medallions:
| Transfers of Medallions |
||||||||||||||||||||||||
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||||||||
| Average |
149,502 | 123,789 | 87,918 | 130,269 | 129,598 | 104,423 | ||||||||||||||||||
| Maximum |
245,583 | 264,845 | 204,204 | 265,204 | 200,000 | 200,000 | ||||||||||||||||||
| Median |
137,500 | 125,000 | 80,987 | 140,000 | 125,000 | 95,000 | ||||||||||||||||||
| Minimum |
100,000 | 70,000 | 25,000 | 35,000 | 40,000 | 30,000 | ||||||||||||||||||
Source: TLC and management estimates
| (1) | Excludes estate sales and foreclosure data because the reported sales price associated with these types of transfers are less likely to reflect the market value of a medallion as opposed to an arm’s length auction sale, which involves competitive bidding and bidders who are in the business of monetizing medallions. Estate and foreclosure sales lack the attributes associated with an arm’s length auction sale transfer and would require significant assumptions. |
| (2) | Excludes partnership to LLC transfers and transfers marked as $0 in TLC transfer data set. |
| (3) | Each medallion transfer is treated as one transaction. |
We believe the increase in the 2022 average and maximum sale prices from 2020 and 2021 primarily reflected the improvement in the market driven by COVID’s diminishing impact, the MRP+ stabilizing the market and providing relief to borrowers, and the telegraphed rate increase that went into effect in December 2022 improving driver confidence in the market. The illiquidity and distressed nature of the taxi industry over the last several years has resulted in a wide range of reported medallion sale transaction values, including many of which we believe are not reflective of the intrinsic value of the collateral or the potential recoveries. We believe the lack of a financing market for NYC taxi medallions creates an environment where medallion values do not reflect their underlying intrinsic value.
To facilitate our specialty finance business of financing and owning of NYC taxi medallions, our lending business currently acquires, restructures and owns loans collateralized by taxi medallions, and Septuagint, an operating joint venture, manages a TLC-licensed taxi fleet that utilized 231 of our Owned Medallions as of December 31, 2024. For the years ended December 31, 2024 and December 31, 2023, Septuagint utilized 231 and 230 medallions, respectively. However, if we terminate the OSA or acquire a 100% ownership interest in
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Septuagint, then in the future we intend to lease medallions through either a newly formed, wholly owned subsidiary of DePalma II or through third-party fleets. We intend to transition our currently operating Owned Medallions at Septuagint to either DePalma II’s newly formed subsidiary or through third-party fleets. In the future, we expect to sell medallions, potentially including seller financing. Medallion owners are generally individual taxi owners/operators, taxi fleet operators or passive investors looking to monetize the medallion asset, which they typically do by leasing them to fleet operators who look to procure additional operating capacity.
Medallions are typically sold either through a negotiated transaction, often using TLC-licensed brokers, or at a foreclosure auction. The TLC does not have a role in the auction process, which is run by secured lenders. Upon a default, the UCC provides a secured lender with wide discretion to dispose of the medallion collateral via public auction, private sale, or otherwise. In the case of a public auction, the UCC requires a secured lender to advertise the auction to the public, notify certain other secured lenders and allow qualified bidders to participate. However, the UCC does not require that the auction be open to the general public or that the results of the auction be disclosed publicly.
To the extent that a medallion buyer registers its ownership with the TLC after a public auction, the buyer and seller self-report the purchase price in connection with the transfer application to the TLC. These prices are then reflected in the TLC’s monthly medallion transfer reports. The TLC’s medallion transfer reports, however, do not provide medallion numbers, sellers, buyers, or other identifiers that would allow a determination of the results of a specific auction. In addition, there is no publicly available data on how often public auctions of medallions have occurred in the past.
Historically, NYC has sold some new medallions via sealed bids, but has not done so since 2013 and we do not expect them to resume anytime soon. However, the TLC does not regulate the method or economic terms of a medallion transfer. The TLC’s involvement in a medallion transfer is limited to confirmation that the open market transferor and transferee submitted a complete medallion transfer package, settling any unpaid taxes or fines associated with the medallion and registration of the medallion in the name of the new owner. When a medallion is transferred, the new owner must register the medallion in its name with the TLC in order for a medallion to be deployed on a working taxi vehicle. In connection with such registration, the transferor and transferee also report to the TLC the sales price and manner of medallion acquisition. The TLC makes available on its website certain limited information with respect to medallion transfers, including the month and year of transfer and the method of transfer, which is self-reported and therefore imprecise. Because the TLC is not involved with the method or economic terms of a medallion transfer, medallion transferees are responsible for self-reporting the method of transfer to the TLC and any analysis of data available from the TLC requires significant assumptions, we are unable to reliably estimate the percentage or volume of medallions transferred through each transfer method during any given period.
Substantially all of our operations and assets are concentrated within the NYC taxi medallion market. We have minor lending exposure to other medallion markets in cities across the United States, including, among others, Chicago and Philadelphia, however, as of December 31, 2024, medallion markets outside of NYC accounted for a de minimis percentage of our total assets.
Since formation, DePalma I has resolved a significant portion of its non-performing loans via UCC public auction. DePalma I engaged outside counsel to complete each of its auctions (e.g., review the file, run searches, establish the terms and condition of auction, send auction notices, publish the auction, communicate with potential bidders, conduct the auction, and provide an affidavit detailing the results of each auction) and confirm that the auction process is compliant with the UCC and the respective loan documents.
For auctions in which DePalma I is the lender or has been assigned the right to credit bid, DePalma I has the right to credit bid and often exercises its right to credit bid to acquire the medallion collateral instead of selling the medallion collateral to a third-party. For a description of what it means to “credit bid”, see the section entitled “—How Medallions Are Acquired—Public Auction” above. For the non-MRP+ auctions, DePalma I has the right not to set a reserve price.
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The table below summarizes DePalma I’s auction and credit bid activity for each year since formation.
| Year |
Number of Auctions Held |
Number of Medallions Auctioned |
Number of Medallions Acquired by Credit- Bid |
Average Credit- Bid Amount |
Number of Medallions Sold to Third Parties With Seller Financing |
Average Purchase Price Sold to Third Parties With Seller Financing |
Number of Medallions Sold at Auction to Third Parties Without Seller Financing |
Average Purchase Price Sold at Auction to Third Parties Without Seller Financing |
||||||||||||||||||||||||
| 2019 |
6 | 120 | 120 | $ | 200,000 | — | $ | — | — | $ | — | |||||||||||||||||||||
| 2020 |
1 | 20 | 20 | $ | 200,000 | — | $ | — | — | $ | — | |||||||||||||||||||||
| 2021 |
9 | 106 | 106 | $ | 200,000 | — | $ | — | — | $ | — | |||||||||||||||||||||
| 2022 |
— | — | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||||||||
| 2023 |
26 | 683 | 680 | $ | 199,853 | 3 | $ | 175,333 | — | $ | — | |||||||||||||||||||||
| 2024 |
14 | 286 | 275 | $ | 193,357 | 11 | $ | 175,000 | — | $ | — | |||||||||||||||||||||
Medallion Lending
We believe we are the largest NYC taxi medallion lender with a medallion loan portfolio collateralized by approximately 1,760 medallions as of December 31, 2024. Substantially all of the medallion loan portfolio was purchased from prior lenders. Additionally, as of December 31, 2024, we held approximately 2,061 Owned Medallions, most of which have been acquired through numerous foreclosures conducted under the UCC or through consensual resolutions with borrowers. Certain of those medallions have been deployed and are currently operating in a joint venture affiliate fleet operating business, Septuagint.
As of December 31, 2024, our NYC taxi medallion loan portfolio consisted of the following:
| MRP+ Loans(1)(2) |
Non-MRP+ Loans(3) | |||||||||||
| Unpaid Principal Balance(4) |
Underlying Medallions | Unpaid Principal Balance(4) | Underlying Medallions | |||||||||
| $203,651,580 |
1,382 | $ | 142,921,930 | 378 | ||||||||
| (1) | The MRP+ became effective during the fourth quarter of 2022. |
| (2) | Reflects unpaid principal balance of current loans outstanding under the MRP+ and medallions underlying such loans as collateral, includes estimates of loans that would be restructured through the MRP+ program. |
| (3) | Reflects unpaid principal balance of current loans outstanding not subject to the MRP+ and medallions underlying such loans as collateral. Substantially all of these loans are currently in default. |
| (4) | Unpaid Principal Balance excludes loans no longer secured by medallions. |
A prospective NYC taxi medallion owner must qualify under the taxi medallion ownership standards established and enforced by the TLC to transfer the medallion. These standards, among others, prohibit individuals with criminal records from owning taxi medallions, require that the funds used to purchase taxi medallions be derived from legitimate sources, and mandate that taxi vehicles and meters meet TLC specifications. In addition, before the TLC can approve a taxi medallion transfer, the TLC requires a letter from the seller’s insurer stating that there are no outstanding claims for personal injuries in excess of insurance coverage. After the medallion transfer is approved, the medallion owner’s taxi is subject to quarterly TLC inspections.
Most NYC taxi medallion transfers are handled through our third-party servicer, Field Point Servicing LLC (“Field Point”), a servicer of NYC taxi medallion loans that we believe to be the largest in the NYC taxi market, and by taxi medallion brokers, who are current and former NYC taxi medallion owners, licensed by the TLC. In addition to brokering taxi medallions, we work with these brokers to arrange for TLC documentation insurance, vehicles, meters, and financing. We have relationships and interactions with many of the most active brokers, some of which are or have been borrowers of ours, and we intend to leverage these relationships with brokers to expand our sales channel to provide financing for medallion purchases.
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While medallion loans become delinquent or otherwise go into default, our medallion loans are secured by the underlying taxi medallions and, with respect to Non-MRP+ Loans, are further supported by personal guarantees of, or direct recourse to, the obligor owners, shareholders or equity members, as well as additional collateral, if applicable. To date, a substantial portion of our Non-MRP+ Loans portfolio is in default. When a borrower defaults on a Non-MRP+ Loan, we generally decide whether to restructure the underlying loan, initiate a process of foreclosure and/or pursue individual and entity borrowers, guarantors and other obligors through a judicial process. For the period ended December 31, 2024, our top 10 borrowers accounted for 74% of our NYC Non-MRP+ loan portfolio based on medallion count.
MRP and MRP+
The City of New York has established various programs to provide debt relief for eligible NYC taxi medallion owners, including the MRP and the MRP+, which enhances the MRP by providing NYC taxi medallion loan lenders like us with municipal credit support. We believe these initiatives are indicative of the City of New York’s backing of the taxi medallion industry as a key piece of NYC’s transportation infrastructure and provide meaningful support for medallion collateral values via the economic commitments made through these programs. As a result, as of December 31, 2024, we have been able to restructure and reperform MRP+ eligible loans backed by 1,536 NYC taxi medallions. This has the impact of increasing expected future collections of interest and principal as significant number of these loans were not performing or in default prior to entering the programs.
Medallion Relief Program (MRP)
On March 9, 2021, the City of New York announced the MRP to assist economically distressed individual taxicab medallion owners. The purpose of the MRP is to support the recovery of the taxicab industry in the City of New York and return taxicabs to service by providing relief to owners of taxi medallions who are currently unable to make debt service payments on loans incurred to purchase such medallions. The MRP helps eligible medallion owners restructure their outstanding debt to more sustainable levels on more favorable terms. The MRP allocated $65 million in federal grant money from the American Rescue Plan Act of 2021 to provide a $20,000 per medallion principal reduction payment and up to $9,000 in monthly debt relief payments in connection with the restructuring of taxicab medallion loans to reduce principal balances and lower monthly payments for taxicab medallion owners.
The MRP was intended to significantly lower the overall debt service obligations for eligible taxi medallion owners. Among other requirements, the MRP is only available to individual medallion owners who own five or fewer medallions. The MRP is available to all medallion loan lenders to participate upon agreement to provide reductions in outstanding medallion loan balances consistent with MRP parameters. Any medallion owner with a qualified loan under the MRP who defaults on a qualified loan will be prohibited from acquiring another medallion for a period of five years.
To be eligible for the MRP, a borrower must satisfy several criteria, including but not limited to:
| • | having an ownership interest in no more than six (6) NYC taxi medallions; and |
| • | the original loan (i) was used to purchase a medallion or (ii) to refinance a loan used to purchase a medallion and was outstanding as of March 9, 2021. |
The original MRP program (which is not subject to credit support by the City of New York) was announced in March 2021 and became effective in September 2021. The MRP+ program (which is subject to deficiency credit support by the City of New York) was announced in November 2021 and became effective during the fourth quarter of 2022. Loans under the original MRP program that were not restructured under the MRP+ program are not MRP+ Loans.
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Medallion Relief Program+ (MRP+)
On November 3, 2021, the City of New York further reached an agreement with the New York Taxi Workers Alliance (“TWA”), a labor union representing taxicab drivers, and MAM, to supplement the MRP with a NYC-funded deficiency credit support mechanism (the “Reserve Fund”) to achieve greater principal reduction and lower monthly payments for taxicab medallion loans that were restructured through the MRP, and to permit restructuring of additional medallion loans. On March 17, 2022, the TLC adopted rules establishing the eligibility criteria for applying for supplemental loan deficiency credit support through the MRP+.
As a result, the City of New York has appropriated a total of $115 million in funding to implement the MRP, including (i) $65 million to be utilized to provide upfront principal reduction payments in the form of a grant equal to $30,000 per medallion to lenders as part of each restructuring transaction and (ii) $50 million to fund the Reserve Fund (as described below under “— Reserve Fund”). The Reserve Fund also serves to both make loan payments for a period of time to participating lenders following the occurrence of a payment default by a participating borrower, as well as to satisfy any deficiency realized upon foreclosure of medallion collateral.
Under the MRP+, eligible medallion loans with a principal balance of $200,000 or more will be reduced to an initial principal balance of $200,000, and further reduced to $170,000 per medallion (after a $30,000 per medallion principal reduction payment in the form of a grant from the Reserve Fund). Existing medallion loans with a principal balance of $200,000 or less will have a principal balance equal to the existing principal balance reduced by (i) $30,000 per medallion and (ii) further reduced by 5% of the post-paydown principal balance per medallion resulting from (i) above. In no event will the principal balance of any eligible medallion loan exceed $170,000 per medallion.
Unlike Non-MRP+ Loans, where a significant portion are currently in default, medallion loans participating in the MRP+ are restructured and therefore not in default immediately following participation in the MRP+. Moreover, any personal guarantees and recourse to the borrowers, to the extent those existed prior to the MRP+ restructurings, are released once the loan is restructured. Because MRP+ participating borrowers may still default on their payment following such restructuring, we may ultimately decide to foreclose on medallions securing such loans pursuant to the terms of the MRP+. If there is any deficiency as a result of the foreclosure, funds from the Reserve Fund will be used to pay us the amount of any deficiency. In addition, following a payment default, funds from the Reserve Fund will be released to make regularly scheduled payments of interest and principal, pending foreclosure and satisfaction of the loan balance, either through the foreclosure process entirely, or through a combination of the proceeds realized upon foreclosure plus amounts released from the Reserve Fund to pay any deficiency.
As of December 31, 2024, approximately 32% of our MRP+ Loans, based on medallion count, were delinquent. All delinquent loans that were outside of their grace period had regular payments being made out of the Reserve Fund.
Because the window for a borrower to go through the MRP+ program ended June 30, 2023 and new applicants are only being accepted on a case-by-case basis, we do not expect substantially more borrowers to participate in the MRP+ program. Over time, we intend to gradually continue disposition proceedings with respect to MRP+ non-performing loans, which would decrease the percentage of our loan portfolio eligible for credit support. Non-MRP+ loans are not eligible for credit support from the Reserve Fund and, therefore, any new non-MRP+ loans added to our portfolio would be ineligible for such credit support. To the extent nonperforming non-MRP+ loans in our portfolio are replaced with performing loans, we would anticipate non-MRP+ loan delinquency to decrease and associated debt service payments to correspondingly increase. However, to the extent adverse macroeconomic factors arise in the future, delinquencies could increase, which could negatively impact debt service payments from non-MRP+ loans.
The deadline for eligible borrowers to apply to participate in the MRP+ was January 31, 2023 and the official deadline to close restructured loans under the MRP+ was June 30, 2023. Nonetheless, the TLC is
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continuing to close loans under the program for a handful of eligible borrowers who registered prior to the June 30, 2023 deadline but who have been otherwise unable to close due to extenuating circumstances. Additional exceptions are reviewed by the TLC on a case-by-case basis.
Standardized MRP+ Loan Terms
All of our medallion loans restructured under the MRP+ contain the following terms, among others:
| • | a maturity of 25 years from the date of restructuring; |
| • | annual interest rate of 7.3%; |
| • | fixed monthly payments calculated on a fully-amortizing basis; |
| • | an ability to prepay on the first of each month with 30 days’ notice and without penalty; |
| • | if the medallion is sold during the term of the loan, the principal balance of the loan is due upon sale; and |
| • | all loans will be made pursuant to a TLC-approved standard form of loan security agreement. |
As of December 31, 2024, we have restructured loans under the MRP+ representing approximately $229 million in post-restructured principal and 1,536 medallions. As a consequence of these restructurings, we forgave approximately $236 million in principal and received approximately $44 million in upfront principal reduction payments, all of which came from the City of New York.
Reserve Fund
The Reserve Fund was established in the City of New York in 2022 and is available to cover deficiencies and other items on all participating loans owned by participating lenders, subject to various mechanisms designed to limit risk on the availability of funds to support defaulted loans. Fund-level protections designed to preserve the balance of the Reserve Fund include, among others:
| • | the aggregate debt service of loans supported by the Reserve Fund is limited to the initial fund balance equal to 1.1x annual debt service (e.g., $49 million initial funding divided by 1.1x based on $44.5 million of debt service); |
| • | the Reserve Fund may be accessed to cover unpaid scheduled debt service on a regular basis or to cover deficiencies realized where foreclosure sale proceeds are insufficient to satisfy remaining amounts due; and |
| • | upon a disposition, where the sale proceeds received for selling a medallion are less than the outstanding balance of the medallion loan, the Reserve Fund will satisfy the deficiency claim so long as the debt service coverage ratio is at least 1.0x annual debt service of participating loans, otherwise the Reserve Fund will continue to make regularly scheduled payments of principal and interest. |
Replenishment and Release Mechanism
If the Reserve Fund balance is less than 1.0x the annual debt service of participating loans, then:
| • | the Mayor of the City of New York may request an appropriation for the upcoming fiscal year in an amount sufficient to replenish the Reserve Fund to 1.0x coverage of annual loan debt service with a payment to be made by the City of New York by September 30 of such year; |
| • | the Reserve Fund may only be accessed to cover scheduled unpaid loan debt service and may not be accessed to cover shortfalls where the foreclosure sale proceeds received for selling a medallion is less than the outstanding balance of the medallion loan; and |
| • | foreclosure auctions may continue to occur, and any sale proceeds received will be used as determined by the lender, and the Reserve Fund will continue to be accessed to cover the scheduled debt service on the amount of the loan not recovered in auction. |
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If the balance of the Reserve Fund is less than 0.5x the annual debt service of participating loans, then the City of New York, acting through the Mayor, is required to seek an appropriation for the next fiscal year to replenish the Reserve Fund to 1.0x coverage of annual loan debt service with payment to be made by the City of New York by September 30 of such year.
If the balance of the Reserve Fund falls below 0.25x the annual debt service of participating loans, then the MRP+ documents require immediate notification to the City of New York and/or the Mayor that it should request an additional appropriation in the current fiscal year to replenish the Reserve Fund to 0.25x coverage of annual loan debt service.
The Reserve Fund is not a guarantee of the City of New York to repay the MRP+ Loans, nor is it our asset nor pledged to us. Furthermore, the City of New York’s agreement to replenish the Reserve Fund is not a debt of the City of New York under or within the meaning of the New York State Constitution or the Local Finance Law of the State, nor are the MRP+ Loans deemed to be debts of the City of New York. As a result, the City of New York has no obligation to pay principal of or interest on any of the MRP+ Loans.
Loan Portfolio
Our NYC loan portfolio is comprised of two categories: (i) MRP+ Loans and (ii) Non-MRP+ Loans.
MRP+ Loans. As of December 31, 2024, we had approximately $204 million of unpaid principal balance represented by loans that have been or are expected to be restructured pursuant to the MRP+ and benefit from credit enhancement and support from the City of New York (the “MRP+ Loans”). In the aggregate, these MRP+ Loans are collateralized by 1,382 NYC taxi medallions. While each MRP+ Loan has a different unpaid principal balance, all other terms are substantially identical, including carrying a 7.3% interest rate, a 25-year maturity and a monthly payment calculated based on a 25-year amortization schedule. See “— Medallion Relief Program+ (MRP+)” for more information about the MRP+ and our portfolio of MRP+ Loans. For the year ended December 31, 2024, all MRP+ Loans were actual MRP+ Loans that participated in the MRP+ program and as such, there were no forecasted amounts of MRP+ Loans. Going forward, we do not expect to include anticipated MRP+ Loans in our MRP+ loan asset value.
Our MRP+ Loans represent a significant portion of our current regular monthly collections of principal and interest.
DePalma I’s MRP+ portfolio was approximately $204 million in aggregate principal amount as of December 31, 2024, which represents approximately 74% of the total MRP+ program by unpaid principal balance as of such date. The Reserve Fund balance is approximately $37 million as of December 31, 2024. As of December 31, 2024, the default rate of our MRP+ portfolio is 35% based on aggregate principal amount, and the default rate of the broader MRP+ program is approximately 35%.
Non-MRP+ Loans. As of December 31, 2024, we had approximately $143 million of unpaid principal balance represented by NYC loans whose borrowers (i) were not eligible to participate in the MRP+ or (ii) chose not to participate in the MRP+ (the “Non-MRP+ Loans”). A significant portion of these loans currently are in default and were at the time we acquired them. Many of these loans are to borrowers who own large numbers of medallions and maintain active taxi fleet operations. As of December 31, 2024, our Non-MRP+ Loans are collateralized by 378 NYC taxi medallions. Our Non-MRP+ Loans are expected to be resolved over the next few years in any one of the following ways.
| • | Restructuring. Loan restructurings take multiple forms, sometimes involving a reduction of the principal balance by us in return for an upfront cash payment from the borrower and reperformance of the loan with new, market-based terms. Since 2018, we have completed restructurings on Non-MRP+ Loans of $217 million of original unpaid principal balance and 477 NYC taxi medallions. |
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| • | Discounted Payoff. Discounted payoffs occur when a borrower makes a payment at a discount to the current unpaid principal balance and interest in full satisfaction of their obligations to us. Once payment is received, we will release our liens on all collateral. Since 2018, we have completed discounted payoffs on Non-MRP+ Loans of $198 million of original unpaid principal balance and 429 NYC taxi medallions, for aggregate cash collections of $93 million, some of which are no longer in the portfolio as the collateral was returned to the borrower and the loans were deemed satisfied. |
| • | Paydown and Surrender. Paydown and surrender occurs when a borrower makes an upfront payment and voluntarily surrenders ownership of the medallion to us. Since 2018, we have completed paydowns and surrenders on Non-MRP+ Loans of $129 million of original unpaid principal balance and 264 NYC taxi medallions. |
| • | Foreclosure and Loan Enforcement Litigation. Foreclosure and loan enforcement litigation are typically used when other more efficient means of resolutions are not available. In these circumstances, we typically utilize the non-judicial foreclosure procedures provided for under the UCC to conduct a public auction of medallions, retain collateral in satisfaction of the debt and/or other mechanisms provided for under the loan documents and applicable law. We also may commence enforcement litigation against guarantors and borrowers, where appropriate. |
Our Non-MRP+ Loans represent a nominal portion of our current monthly collections of principal and interest, as compared to our MRP+ Loans. Beginning in 2023, we and Field Point began active negotiations with all of our delinquent borrowers and, in some cases, have commenced enforcement actions for substantially all of the Non-MRP+ Loans that are more than one year past maturity. In some cases, we have agreed upon terms for the resolution or restructuring of those defaulted loans. As we resolve these loans, we expect monthly collections of principal and interest to increase or that we will collect meaningful cash payments in resolution of each borrower relationship. However, there can be no assurance that monthly collections of principal and interest will increase, or that we will collect such cash payments, if at all.
The table below sets forth our loan resolution activity during the financial statement periods presented.
| Prior to 2021 |
Year ending December 31, 2022 |
Year ending December 31, 2022 |
Year ending December 31, 2023 |
Year ending December 31, 2024 |
||||||||||||||||
| Restructurings(1) |
197 | 92 | 1,292 | 293 | 139 | |||||||||||||||
| Discounted Payoffs |
304 | 54 | 51 | 19 | 16 | |||||||||||||||
| Paydown & Surrenders |
90 | 97 | 41 | 18 | 1 | |||||||||||||||
| (1) | Restructurings include both MRP+ Loans and Non-MRP+ Loans as well as instances where borrowers restructured their loans multiple times. |
Since inception, we had 108 medallions loans participate in the original MRP program, of which 79 subsequently participated in the MRP+ program and the remaining 29 remained as non-MRP+ loans. We received total debt paydowns under the original MRP program of $1.6 million and $0.4 million in 2021 and 2022, respectively.
Additionally, we received $0.2 million and $0.1 million of debt service payments from the MRP program in 2021 and 2022, respectively. There will not be an impact on future financial results as the MRP program is closed. In addition, as of December 31, 2024, 14% of loans by medallions were non-performing (i.e., more than 30 days past due). Of the original MRP loans, 3% were foreclosed, 14% remained in default, 65% are current and 19% were paid off by December 31, 2024.
Our fair value calculation for New York City medallions includes a variety of factors including the amount backstopped by New York City in the MRP+ program. After significant negotiations between the City of New York, the Taxi Workers Alliance, and the DePalma Companies, the parties agreed to a $200,000 per
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medallion total price for MRP+ loans. New York City agreed to provide an upfront principal reduction grant payment equal to $30,000 per medallion to lenders who participated in the MRP+ program. New York City also agreed to provide a deficiency credit support mechanism (the previously described “Reserve Fund”) of the post-restructuring unpaid principal value up to $170,000 per medallion, plus interest and collection costs. Considering that the agreed-upon price at the time of the restructuring was $200,000 per medallion with a subsequent paydown equal to $30,000, the maximum unpaid principal balance per medallion for an MRP+ loan is $170,000 before taking into account interest and collections costs. In effect, this deficiency credit support mechanism supports the entire unpaid principal balance of the MRP+ loans. The Reserve Fund lasts for the entire 25-year term of the underlying loan. As of December 31, 2024, 1,214 loans, 1,382 medallions (which includes medallions underlying loans that went through the MRP+ program and were subsequently paid down), and $203.7 million in unpaid principal balance in DePalma I’s portfolio was backstopped by the Reserve Fund in addition to the medallion collateral.
We believe that even following the completion of the MRP+ program, the New York City backstopped value per medallion is a relevant input in the valuation of medallions. The negotiated value per medallion from the MRP+ program represents a three-party consensus view of medallion value agreed upon by the City of New York, the Taxi Workers Alliance, and the DePalma Companies, which are all parties that understand the underlying economics of medallions.
Owned Medallions — Fleet and Leasing
Our Owned Medallions consist of medallions we own directly as well as those where, subject to the TLC ownership transfer approval process, we have the legal right to ownership. As of December 31, 2024, we had approximately 2,061 Owned Medallions, a portion of which is, as of December 31, 2024, used in Septuagint’s operating fleet, acquired primarily as a result of enforcement actions involving defaulted medallion loans we owned. We believe our ownership makes us the largest single owner of medallions in the NYC taxi market, providing us with significant strategic advantages in executing our business strategy and allowing us to sell medallions, potentially including seller financing, without the need for incremental capital.
In 2019, we commenced activities to deploy our Owned Medallions through Septuagint, an operating joint venture with Kirie Eleison, an unaffiliated strategic joint-venture partner, in which we will have the right to exercise governance control once 85% of DePalma II’s Owned Medallions (as of November 1, 2019) have been leased to and are operated by Septuagint. As of December 31, 2024, approximately 62% of DePalma II’s Owned Medallions as of November 1, 2019 are being leased to and operated by Septuagint. As of December 31, 2024, Septuagint is governed by a board of four directors with Kirie Eleison and DePalma each having the ability to appoint two directors. Once 85% of DePalma II’s Owned Medallions as of November 1, 2019 have been leased to and are operated by Septuagint, the structure of the board will change such that if either we or Kirie Eleison provides over 60% of the medallions in use by Septuagint, then such party will be entitled to appoint an additional board member, resulting in an increase of the board size to five directors. Certain major decisions (corporate transactions, new lines of business, certain employment decisions) require the unanimous consent of the Septuagint board of directors. Additionally, the operations of Septuagint are governed by the OSA, which establishes the parameters of Septuagint’s day-to-day operations and establishes exclusivity between DePalma II and Kirie Eleison. Pursuant to the OSA, Septuagint has agreed to provide customary day-to-day taxicab services, such as the subleasing of medallions to drivers (both with respect to DePalma II’s Owned Medallions and for the medallions owned by Kirie Eleison and its affiliates), the subleasing of DePalma II’s taxicab vehicles to drivers and the maintenance, inspection and repair of the taxicabs. DePalma II has also agreed to provide assistance to Septuagint with the preparation of business plans, strategic planning, and operational modeling. Kirie Eleison agreed to transition employees and personal property to Septuagint and cause its affiliate to lease space to Septuagint for use as a taxicab business. The exclusivity provisions in the OSA provide that DePalma II and Kirie Eleison will work together on taxi-related services and activities during the term of the OSA and (i) so long as DePalma II leases Owned Medallions, all of such Owned Medallions will be leased to and operated by Septuagint, and (ii) so long as Kirie Eleison or its affiliates leases medallions, such medallions will be leased to and operated by Septuagint. The OSA had an initial term of 36 months, and such term automatically renews
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for 12-month periods, unless terminated by DePalma II or Kirie Eleison upon written notice at least 90 days prior to the expiration of any such renewal term or as otherwise agreed by the parties. Additionally, the OSA can be terminated with cause upon one day prior written notice to the other parties upon failure to cure a breach of the OSA within the 30-day cure period. In the event of a termination, the parties agreed to work in good faith to wind down Septuagint while maintaining taxicab services, producing financial and operational reporting, and executing an orderly separation. The exclusivity provisions do not have a material impact on DePalma II and its financial results given that the OSA is terminable, the services being provided thereunder can be replaced in the ordinary course upon termination, and, as reflected in DePalma II’s financial statements, Septuagint’s current operations are immaterial to DePalma II’s financial performance. On September 26, 2024, DePalma II provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie Eleison signed an amendment to the OSA that eliminated Septuagint’s exclusive right under the OSA to lease DePalma II’s medallions and provided for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down Septuagint. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. Accordingly, there have been no quantitative and qualitative changes to Septuagint’s ownership or Septuagint’s organizational or operating agreements during this transition period, as the parties are continuing to operate under the original OSA, as amended on October 17, 2024, which, as noted, only removed the exclusivity provisions. If DePalma II winds down Septuagint, DePalma II would no longer lease any of its Owned Medallions through Septuagint. DePalma II intends to continue to pursue its leasing strategy by leasing Owned Medallions either through Septuagint or through a newly formed, wholly owned subsidiary of DePalma II. DePalma II intends to enter into non-exclusive commercial agreements with third party fleets to assist the company in leasing medallions. The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025. As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
Septuagint is a medallion leasing agent and taxi fleet operating company based in Long Island City, Queens, New York, licensed by the TLC as an agent/broker for managing NYC taxi medallions. As of December 31, 2024, Septuagint utilized 231 of our Owned Medallions and managed a fleet of approximately 231 vehicles and 261 drivers via a TLC-licensed fleet.
DePalma II entered into agreements with Septuagint which granted Septuagint the exclusive right to operate or sublease medallions and related taxicab vehicles owned by the mini-LLCs. The monthly rental payments for the leases of the medallions are $1,500 per medallion. Septuagint is separately obligated to pay for the vehicles under various guaranty agreements. Septuagint is granted full and exclusive authority to sell (or lease) the vehicles on behalf of the mini-LLCs at prices that Septuagint shall determine in its sole discretion. The mini-LLCs retain ownership interests in the medallions and taxicab vehicles throughout the contractual term, unless otherwise agreed upon. As a result of COVID-19, Septuagint’s ability to make payments on the medallion and vehicle leases significantly deteriorated and DePalma II implemented a payment holiday beginning in March 2020 through April 30, 2022. Commencing in May 2022, Septuagint began making payments on the vehicle leases, which are currently recorded as a deposit liability in the Consolidated Balance Sheet of DePalma II, however, payments on the medallion leases have not yet resumed through December 31, 2024.
We continue to monitor Septuagint’s ability to pay its medallion lease payment obligations, as well as its working capital note and vehicle payment obligations. In light of Septuagint’s current cash constraints, Septuagint continues to delay payment on its medallion leases. Currently, DePalma II does not have an
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anticipated date for when Septuagint will resume its medallion lease payment obligations. DePalma II’s and Septuagint’s management each currently believe the continued delay of medallion lease payments is the best course of action because it allows Septuagint to retain such payments for working capital, which is primarily deployed to Septuagint’s workforce at this time. In order for Septuagint to grow its fleet consistent with its growth strategy, Septuagint will need to attract and retain additional drivers. Accordingly, Septuagint remains focused on the goal of achieving profitability by attracting and retaining additional drivers over time, at which point medallion lease payments could recommence. However, the market for drivers remains fluid and subject to general economic conditions. As a result, DePalma II is currently unable to determine when, if at all, Septuagint’s fleet will achieve profitability. In the event that our relationship with Septuagint is terminated, we do not expect to be repaid on the medallion lease payments or the working capital notes that mature in June 2026.
Further, certain entities owned by the principals of Kirie Eleison are borrowers of Non-MRP+ Loans and, as a result, owe approximately $38 million in principal (excluding accrued unpaid regular and default interest payment obligations) to DePalma I under such loans. Similar to substantially all of DePalma I’s Non-MRP+ Loan portfolio, these loans are in default. Although distinct contractually, given overlap of the parties, a resolution between Kirie Eleison and DePalma I regarding the Non-MRP+ Loans could adversely impact DePalma II’s current operating relationship with Septuagint. For example, we may resolve DePalma I’s lending relationship through negotiating a resolution with the owners of Kirie Eleison that (i) removes Kirie Eleison as an owner and joint-venture partner in Septuagint and/or (ii) results in Septuagint being wound-down.
We plan to continue to increase the number of taxis we deploy either (i) in Septuagint’s fleet or (ii) through either a newly formed, wholly owned subsidiary of DePalma II or through third-party fleets as we attract new drivers, acquire new vehicles and take ownership of more medallions through foreclosures on our existing medallion loans. In the future, we also plan to purchase additional vehicles and either (i) lease them to Septuagint or (ii) deploy them through either a newly formed, wholly owned subsidiary of DePalma II or through third-party fleets. We believe that this growth will allow us to continue to increase cash flows from our Owned Medallions while also developing a pipeline of taxi drivers for the future sale of medallions, which could include related seller financing. However, such expansion plans may be costly and there is no assurance that we will be able to expand a taxi fleet, if at all, or that this initiative will ultimately have the intended effects to operating results. The primary factors that have limited the number of taxis in Septuagint’s fleet are availability of cars, the availability of drivers at certain times of the year, a desire by Septuagint to grow the fleet in a methodical manner that would not require the need for a capital infusion, and Septuagint’s need to scale up its operations as the fleet grows. In addition, Septuagint needs access to medallions in order to grow its fleet. DePalma II has discretion to determine, in its business judgment, the pace at which it will deploy its medallions for lease to Septuagint. In the event we are unable to scale Septuagint as desired, we may have to reevaluate the relationship and pursue other ventures with third parties to establish and grow a taxi fleet, however, there can be no assurance that we will be able to identify a suitable alternative. Any changes to the current Septuagint relationship will likely cause short-term operational disruptions and may negatively impact results, including our ability to collect on our various obligations from Septuagint. See “Risk Factors—Risks Related to DePalma’s Business—Changes to Septuagint, our operating joint venture with Kirie Eleison, an unaffiliated strategic joint-venture partner, could have negative impacts on our business.”
On November 15, 2024, DePalma II entered into a non-exclusive servicing agreement with an unrelated taxi fleet to provide operational support and access to physical garage and office space for our medallion leasing business.
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The table below sets forth the amount of medallion lease payments deferred and vehicle guaranty payments deferred with Septuagint during each period presented.
| Year Ended December 31, 2022 |
Year Ended December 31, 2023 |
Year Ended December 31, 2024 |
||||||||||
| Payable Balance(1) |
$ | 5,468,512 | $ | 8,597,380 | $ | 12,755,380 | ||||||
| Medallions Lease Payments |
$ | 2,544,476 | $ | 3,128,868 | $ | 4,158,000 | ||||||
| Vehicle Guaranty Payments |
$ | 624,087 | $ | — | $ | — | ||||||
| Number of Medallions |
142 | 230 | 231 | |||||||||
| (1) | Payable Balance represents the total accrued medallion lease expense during each period presented. |
Competitive Strengths
We believe that we have significant competitive strengths within the NYC taxi medallion industry.
Multiple Ways to Deploy Medallions. Through our investment in Septuagint, we believe we are the only meaningful participant in the NYC taxicab industry with both a fleet to deploy medallions and a balance sheet to support seller financing of medallions as described below. We are able to provide solutions for both current and prospective drivers to buy or lease medallions within our driver ecosystem.
Significant Scale. We have an interest in approximately 30% of the outstanding NYC taxi medallions, either as collateral for our medallion loans or through ownership of Registered and Unregistered Medallions. As of December 31, 2024, we have medallion loans outstanding on approximately 1,760 NYC taxi medallions and we have approximately 2,061 Owned Medallions. We believe that this enables us to have what we believe to be the best available data on all aspects of the NYC taxi industry and to obtain favorable terms when we negotiate with counterparties.
Track Record and Demonstrated Success. Since our inception in 2018, we have restructured, resolved or reperformed over 2,000 medallion loans while maintaining a significant level of cash collections and recoupment of capital. In addition, since our inception, we have purchased several loan portfolios from existing lenders and have had direct and indirect ownership in loans and/or medallions representing approximately over 4,500 NYC taxi medallions.
Strong Collateral Support. A key component of the NYC mobility infrastructure, taxi medallions have meaningful and permanent collateral value to support asset values and recovery, and are an enduring part of the NYC transportation landscape that represent a valuable asset to a diverse group of small business owners.
Partnership and Support with Key Stakeholders. We maintain strong relationships with key industry participants, including demonstrated successful partnerships and collaborations with the City of New York, the TLC and major driver organizations including the TWA. Most notably, we worked closely with the City of New York, the TLC and the TWA to establish the MRP+. These relationships, together with our recognized scale, allow us to participate in planning for and investing in the continued growth and development of this market.
Capitalize on relationships with brokers. We are committed to establishing, building, and maintaining relationships with brokers. We believe that relationships with brokers provide us with significant benefits, including an additional layer of due diligence regarding borrowers, lessees and other fleet operators, as well as additional monitoring capabilities. We plan to leverage our relationships with brokers, many of whom are currently borrowers, to expand our sales channel.
Conservative Capital Structure. We are currently entirely equity-funded, which eliminates the need for us to make interest or principal payments on third party debt. It also provides us with flexibility in our loan servicing and fleet operations and may allow for flexibility to incur debt financing in the future. As a result, we believe we
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are well-positioned to take a long-term approach to our business and are relatively insulated from the cyclicality of the credit markets, where increased costs of borrowing can have an immediate and adverse impact on our borrowers and their ability to make interest payments on our loans.
Strategy
Our core philosophy is to work with key stakeholders in the NYC taxi industry, such as the City of New York, the TLC and major driver organizations including the TWA, to help facilitate an industry-wide restructuring of historical medallion lending practices and to standardize a key piece of the NYC mobility infrastructure. Our primary strategy has been to attract institutional capital to the NYC taxi market to increase our profitability while also positioning us to deploy and reinvest capital in the NYC taxi market where we have a competitive advantage. Our primary methods of value creation in the future will be the sale of medallions, which could include seller financing, increased deployment of new vehicles in the Septuagint fleet and increasing recoveries on defaulted loans. As a byproduct of institutional capital returning to the NYC taxi market, we expect to that both NYC taxi medallion prices and operating cash flows will increase.
In executing our strategy, we have focused on reperforming, restructuring, and resolving defaulted loans to more closely match current market conditions.
New Medallion Loans. One of our strategies is to begin originating medallion loans to facilitate new ownership of NYC taxi medallions. We intend to sell medallions to new and existing borrowers while providing seller financing, thereby converting our Owned Medallions into new, performing medallion loans.
Improving Driver Experience. In addition, we seek to modernize and improve the driver experience. Some of our key driver-centric operating initiatives include:
| • | a driver-first leasing model, where we view drivers as our customers; |
| • | a data-enabled services that provide for a more efficient driving experience, thereby improving driver earnings; and |
| • | investing in initiatives such as a driver clubhouse to provide drivers a place to rest and to improve their quality of life in the workplace. |
Regulation
We believe that we are in compliance with all rules and regulations relating to the operations of our business.
Exemption from the Investment Company Act
In order to maintain our status as not being an “investment company” for purposes of the Investment Company Act, we must operate so as to fall outside the definition of an investment company or to fall within an applicable exclusion from that status. We expect to continue to fall within the exclusion from the definition of an “investment company” provided under Section 3(c)(5) of the Investment Company Act as a company primarily engaged in the business of (i) purchasing and otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance and services, and/or (ii) making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services. We monitor our continued compliance with this exclusion and believe that we remain in compliance with this exclusion as of December 31, 2024.
New York City Taxi and Limousine Commission
The TLC, created in 1971, is the municipal agency responsible for licensing and regulating NYC’s medallion taxicab and for-hire vehicles, including app-based companies such as Uber and Lyft. The TLC Board
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consists of nine members, including the Chairperson, each of whom is appointed by the City of New York Mayor with the advice and consent of the City of New York Council. As the primary regulator of the taxi industry, the TLC establishes the broader public transportation policy that governs taxi and for-hire transportation services in the City of New York, as well as standards for business operations, vehicle conditions, accessibility, public safety and consumer rights, issuing and regulating medallion licenses, setting and enforcing the fare rate in taxis, limiting taxi lease rates and overseeing the purchase and sale of taxi medallions. Under TLC rules, only yellow taxis are licensed to pick up street-hailing passengers anywhere within the City of New York limits.
As part of its regulatory landscape, the TLC regulates the number of medallions that may be issued. As of December 31, 2024, the number of medallions is capped at 13,587; however, the TLC may issue additional medallion licenses up to a number allowed by state and local laws through a sealed-bid process with a minimum upset price set by the TLC Chairperson. The TLC also supervises the application process for medallion licenses and oversees the transfer of ownership process, where medallion owners may transfer their licenses to another party so long as the second party meets eligibility requirements set forth by the TLC.
Additionally, the TLC regulates the fares medallion taxi drivers may charge. Fares are based on an initial charge, elapsed time and distance, plus surcharges. Vehicles must also comply with condition and safety standards detailed under TLC regulations, which include annual inspections and technological upgrades.
Intellectual Property
We do not possess any intellectual property. We entered into a Management Service Agreement with MAM, which will provide for, among other things, licensing for use of the “Marblegate” trademark.
Management and Servicing
DePalma is a portfolio company of and externally managed by MAM, a firm that was founded in 2009 and invests in distressed credit opportunities in the U.S. middle market. MAM currently manages approximately $3.0 billion, is comprised of 30 team members and is led by a team of professionals with an average of 30 years of experience in restructuring distressed investments. MAM first invested in NYC taxi medallion loans in March 2018, following two years of industry diligence and research. MAM has been managing the DePalma Companies since their inception.
We rely on MAM and other service providers for certain key services relating to the operation of our business. See the sections entitled “—Human Capital Resources” and “Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationships and Transactions with Directors, Executive Officers and Significant Stockholders—Management Services Agreement” contained elsewhere in this Annual Report on Form 10-K for more information.
MAM provides various services to us and to Septuagint, a fleet operator, including, but not limited to:
| • | providing strategic oversight of our operations through MAM’s seasoned professionals and experienced team of operations experts; |
| • | negotiating and overseeing the origination, structuring, restructuring and workout of taxi-medallion loans and other loans held by us; |
| • | assisting the Septuagint board in making operational decisions; |
| • | evaluating, managing, performing due diligence on, negotiating and overseeing the acquisition and disposition of our assets and any subsidiaries’ assets, including taxi medallions, taxi-medallion loans and other assets or property; |
| • | managing our day-to-day business and operations, including assisting us in complying with any regulatory requirements applicable to us in respect of its business activities; |
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| • | evaluating our financial and operating performance, including monitoring our business and operations, and our financial performance and assets; |
| • | providing a management team to serve as our and/or our subsidiaries’ executive officers; |
| • | identifying, evaluating, managing, performing due diligence on, negotiating and overseeing the provision of any debt or equity financing by us; and |
| • | identifying, evaluating, performing due diligence on, negotiating and overseeing the acquisition of all or a portion of target businesses or assets by us. |
Our third-party servicer, Field Point, is a loan servicing provider formed in 2018 to provide a full suite of loan and collateral servicing capabilities to third-party owned loan portfolios. We believe Field Point is the largest servicer of taxi medallion loans in the NYC taxi market. Field Point has serviced all of DePalma I’s medallion loans since their initial acquisition by DePalma I. Most of our NYC taxi medallion loan servicing, including medallion transfers, is handled through Field Point and its affiliates, and Field Point is the first servicer to complete restructurings of MRP+ Loans. As of December 31, 2024, Field Point serviced more than $799 million of loans secured by NYC taxi medallions and restructured loans secured by approximately 2,706 NYC taxi medallions. In addition, as of December 31, 2024, Field Point completed the transfer process for approximately 870 NYC taxi medallions owned by DePalma II under the rules established by the TLC.
Additionally, we have servicing agreements with Field Point to manage, service and collect on all of our medallion loans. Since 2018, Field Point has serviced our loans from the time of acquisition and onboarding of each acquired loan portfolio. Under the terms of our servicing agreements, Field Point provides services to us and is responsible for:
| • | managing, servicing, administering and assisting in making collections on the medallion loans (including, if necessary, commencing foreclosure on a medallion, or taking any other loss-mitigation steps as directed by us); |
| • | billing and collections; |
| • | loan documentation and customer information; |
| • | collateral maintenance and TLC compliance; |
| • | credit reporting; and |
| • | loan restructurings and modifications. |
Human Capital Resources
Historically, we have relied on the employees and service providers of our affiliates as well as our third-party medallion-loan servicer, Field Point, because such entities and individuals have significant experience in servicing taxi medallion loans and related services and have provided us an organizational infrastructure on a more cost effective basis. Our key functions are performed by employees of our affiliates and service providers pursuant to various servicing agreements. As of December 31, 2024, Septuagint had 12 employees and 1 consultant.
Additionally, through our servicing agreements, we utilize approximately 30 and 28 individuals of MAM and Field Point, respectively. We continuously assess our management team’s capabilities, as well as those of MAM and Field Point, with a view towards the long-term objectives and value creation goals of our company. Accordingly, we are currently assessing whether it would be in our stockholders’ best interests to internalize certain of the operations currently being provided through our servicing agreements. If we elect to internalize some of these operations, we would expect to do so in a cost-effective manner by hiring certain employees of such affiliates or third parties with similar capabilities and experience, while continuing to utilize certain personnel and resources on a contract basis.
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Alternatively, as a result of such assessment, we may elect to maintain our external operational structure, but seek to modify one or more of such servicing agreements to optimize our related expenses. There are no assurances that any such actions could be achieved on terms reasonable acceptable to us or at all.
We currently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we intend to adopt some or all of such plans in the future. There are currently no personal benefits available to any of our affiliates’ employees or service providers.
Additional Information
Our principal corporate office is located at 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. The phone number of this office is (203) 210-6500. Our website is www.marblegatecapitalcorp.com. Under the investor relations page of the Company’s website, https://marblegatecapitalcorp.com/sec-filings/, we make available free of charge a variety of information for investors, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the SEC. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
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Our business involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K. The occurrence of any of the events described below could harm our business, operating results, financial condition, liquidity, or prospects. In any such event, the market price of our common stock and warrants could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business. See “Forward-Looking Statements.”
Risks Related to Our Business
We have a limited operational history.
We have a limited history upon which an evaluation of our prospects and future performance can be made. Our ongoing and future operations are subject to all business risks associated with new enterprises. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business operation, and the continued development of a business strategy and customer base. This is compounded by the fact that we operate in the mobility industry, which is a rapidly transforming sector. There is a possibility that we could sustain losses in the future, and there are no assurances that we will operate profitably in the future.
Additionally, given our limited operational history, our recent financial performance may not be indicative of our future performance including the future impact of being a public company.
Our business is heavily concentrated in loans secured by taxicab medallions as well as Owned Medallions, which carry a high risk of loss and could be adversely affected by an economic downturn as well as the regulatory policies of the City of New York and the New York City Taxi and Limousine Commission.
Our business is heavily concentrated in medallion collateralized lending and Owned Medallions, including leasing medallions to fleets or other drivers. As a result, we are more susceptible to fluctuations and risks particular to the New York City taxicab industry than a more diversified company, including as a result of the COVID-19 pandemic. For example, our business is particularly sensitive to macroeconomic conditions that affect the U.S. economy, travel and tourism as well as those that affect the City of New York. We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at the for-hire-vehicle, taxicab or automotive industry. Our business concentration could lead to developments that may have a material adverse effect on our results of operations.
By its nature, medallion collateralized lending to sole proprietors that own cars, fleet operators who own and operate cars, and leasing medallions to fleets or other drivers involves high risk of loss. Although the net interest margins are intended to be higher to compensate us for this increased risk, an economic downturn could result in higher loss rates and lower returns than expected, and could affect the profitability of our medallion loan portfolios. During periods of economic slowdown, delinquencies, defaults, repossessions, and losses generally increase, and may reduce discretionary spending in areas such as recreation and tourism, which would have a detrimental effect on the taxicab industry, which would in turn impact the value of taxicab medallions. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our net interest income.
Furthermore, our business is significantly affected by monetary and regulatory policies of the U.S. Federal Government and its agencies, the monetary and regulatory policies of the State of New York and its agencies as well as the regulatory policies of the City of New York, particularly regulations promulgated by the TLC. For example, since 2017, New York State, New York City Council and the TLC have made several changes to the medallion classes and regulations forcing greater transparency and equal regulation among transportation companies, including eliminating the distinction between individual and corporate medallions, temporarily
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capping the number of ride-sharing licenses, minimum-wage regulations for for-hire vehicle (“FHV”) companies, and congestion pricing. The long-term impact of these changes is still uncertain. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on us through interest rate changes, costs of compliance with increased regulation, and other factors. All medallion owners must be approved by TLC, and if we fail to follow TLC regulations and registration requirements, we may lose our license as a medallion leasing agent and taxi fleet operator or receive fines or face other costly penalties, which may have a material adverse effect on our business.
The TLC also governs the transfer of medallions. In the event of a TLC transfer as a result of a UCC disposition, the TLC does not require anything from the original owner of the medallion so long as the secured party has properly obtained the legal right to the medallion.
Risks associated with the TLC transfer process include properly obtaining the legal right to the medallion (e.g., issues with the auction or surrender of the medallion), properly documenting the right to the medallion (e.g., affidavits detailing the auction), and the risk of outstanding prior liens, taxes, fines, summons, or other “open items” that need to be resolved in order to proceed with the TLC closing. There are also general regulatory risks associated with medallion ownership and potential changes to the regulatory framework and TLC practices, including, but not limited to, the TLC slowing or stopping the processing of transfer application packages and the TLC changing the rules or practices associated with medallion ownership and the transfer of ownership, including determining that a certain party is “unfit” to own medallions.
The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their loans. Historically, we have not used the current expected credit losses model or preceding authoritative GAAP for loss reserving, which is used by other specialty financing companies and requires us to have to book all losses for all loan loss reserves because we may not recover on the full amount of a loan. However, in many instances with loans in our portfolio, we do not expect to recover on the full amount of such a loan because we acquired the loans at a meaningful discount to its unpaid principal balance through our historical portfolio acquisitions. We have historically and per audits have used fair value accounting to value our medallion loan portfolios and medallions. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets.
DePalma I’s balance sheet consists substantially of loans secured by taxicab medallions, which historically have been associated with significant delinquency rates and risk of default. If we are unable to recover meaningful amounts relative to our acquisition prices on loans in default, our results of operations could be adversely impacted.
DePalma I’s balance sheet consists substantially of loans secured by taxicab medallions, which historically have been associated with higher-than-average delinquency rates and defaults as substantially all of the loans were acquired after they had defaulted. As of December 31, 2024, we held approximately $346.6 million in aggregate of NYC taxicab medallion loans including MRP+ Loans and Non-MRP+ Loans, of which approximately 46% of Non-MRP+ Loans by medallion count were in default. Defaulted loans may result in foreclosure or sale at auction of the medallions securing such loans, which may result in us collecting less interest income over the original stated life of the loan. For many loans in default we may attempt to restructure the debt to bring it out of default or attempt to recover meaningful amounts in other ways, however these methods may not be successful. If we fail to realize enough value on loans in default to cover the price we paid to acquire the loans in the secondary market and service these loans then our results of operations could be adversely impacted. The actual rates of delinquencies, defaults, repossessions, and losses on these loans could be more dramatically affected by a general economic downturn. As described in more detail in “Item 1. Business”, a significant portion of our loans are backed by a Supplemental Loan Deficiency Guaranty, which is a program that was established to benefit participating NYC taxi medallion loan lenders like us by providing municipal credit
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support in the event of defaults by eligible and participating taxi medallion owners. Although the MRP+ is designed to lower the risk of incurring losses from borrowers in default, the MRP+ may not be successful, or as successful as we anticipate. While the original deadline to sign up to participate in the MRP+ ended on January 31, 2023 and the official deadline to close MRP+ loans was June 30, 2023, as of December 31, 2024, the TLC has continued to close loans under the program for eligible borrowers who registered prior to the June 30, 2023 deadline but were unable to close due to extenuating circumstances, although no assurance can be made that such exceptions will continue. If additional borrowers cannot participate in the MRP+, our operations will be adversely affected. Additionally, we may in the future have loan portfolios that do not consist of loans acquired in the secondary market at discount prices.
We also have Non-MRP+ Loans. We may not be able to efficiently resolve an adequate number of Non-MRP+ Loans. If a borrower defaults on their loan, the medallion could be foreclosed on or sold at auction, which could result in us receiving less income than expected. Our ability to efficiently resolve the amount of any medallion loans on beneficial terms may impact our business and results of operations by not producing cash in the short term.
The mobility industry is highly competitive, with many well-established, low-cost alternatives, including government-run/based mass transportation options, low switching costs, and well-capitalized competitors in nearly every major geographic region. If taxis are unable to compete effectively for drivers and passengers in this industry, our business and financial prospects would be adversely impacted.
Our business, which currently consists of acquiring, restructuring and owning loans secured by taxicab medallions or the medallions themselves is entirely based in the mobility industry. Additionally, in the future the Company will sell medallions, potentially including seller financing. Taxis face significant competition in the mobility industry from existing, well-established, and low-cost alternatives, and in the future we expect taxis to face competition from new market entrants. In addition, within the mobility market, the cost for consumers to switch between modes of transportation is low. Passengers have a propensity to shift to the lowest-cost or highest-quality provider and drivers have a propensity to shift to the platform with the highest earnings potential. Drivers who have medallion loans are often more reluctant to shift platforms as a consequence of their loans, although this does not necessarily mean that they won’t default on their loans.
For example, ridesharing applications, or ridesharing apps, including Uber and Lyft, utilized by for-hire vehicles were introduced in the City of New York in 2011 and continue to expand domestically and globally. Many of these ridesharing companies operate outside of the regulatory regime which we and our borrowers operate. As a result, there is an increased risk of competition because such companies are able to pass the cost savings of not having to comply with certain regulations to its passengers. As competitors introduce new products and offerings, and as existing products evolve, taxis expect to become subject to additional competition. In addition, taxi competitors may adopt certain product features, or may adopt innovations that drivers and passengers value more highly than that offered by taxis, which would render taxis less attractive.
With regard to passengers, taxis compete with personal vehicle ownership and usage and ridesharing companies, including Uber and Lyft. In addition, public transportation can be a superior substitute to taxis for passengers and in many cases, offers a faster and lower-cost travel option in many cities, including the City of New York where the majority of our taxi medallions are based. The City of New York and other major metropolitan areas may also encourage persons to utilize non-automotive transportation, such as walking and biking, by improving bicycle lanes and pedestrian walkways. The City of New York and other major metropolitan areas have launched pilot programs to provide free or subsidized bike and scooter rentals. Taxis also compete with other traditional transportation services and for hire vehicles, such as livery and other car services.
In the case of drivers, the primary competition for fleet operators is the ride-sharing companies such as Uber and Lyft, along with Street-hail Liveries, known colloquially in the City of New York as “Green Taxis,” although
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Green Taxis are not available in the Borough of Manhattan. Many of the taxi industry’s competitors are well-capitalized and offer discounted services, driver incentives, passenger discounts and promotions, innovative products and offerings, and alternative pricing models, which may be more attractive to passengers than those offered by taxis. In addition, we currently benefit from certain regulations and proposals in the City of New York that are favorable to taxicabs and unfavorable to ride-share companies, see “—Current regulations or proposed regulations in the City of New York that are favorable to taxicabs may change or cease to be in effect, which could negatively impact our business.” We cannot guarantee these regulations will remain unchanged and in force, and if they were to change it may be in a way that increases the competition for taxicabs.
For all of these reasons, changing consumer and driver preferences about modes of transportation and/or other alternatives for drivers (such as ride-share) could have an impact on borrowers’ ability to service debt on a medallion which could impact the value of our Owned Medallions and the medallions underlying the loans and the ability of borrowers to pay off medallion loans, both of which would adversely affect our results of operations.
A significant portion of our medallion loans that are not participating in the MRP+ are in default and non-performing.
As of December 31, 2024, 46% of our NYC Non-MRP+ medallion loan portfolio was in default based on the number of medallions that are collateral for the loans. While historically we have been successful in restructuring, reperforming or resolving defaulted loans, either by restructuring eligible loans into the MRP+ or via other forms of resolution, our ability to continue such programs is uncertain and subject to many risks, including litigation, foreclosure and ultimate collateral values. For example, foreclosure processes are often lengthy and expensive, and the results of foreclosure processes may be uncertain, as claims may be asserted by the relevant borrower or by other creditors or investors in such borrower that interfere with enforcement of our rights, such as claims that challenge the validity or enforceability of our medallion loan or the priority or perfection of our security interests. Although it has not been our experience to date, our borrowers may attempt to file suit to stop or delay foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no merit, in an effort to prolong the foreclosure action and seek to force us into a modification or buy-out of our loan for less than we are owed. Additionally, the transfer of certain collateral to us may be limited or prohibited by applicable laws and regulations. Even if we are successful in foreclosing on collateral property securing our medallion loans, the liquidation proceeds upon sale of the underlying medallions or other collateral may not be sufficient to recover our loan. Any costs or delays involved in the foreclosure on the collateral asset will reduce the net proceeds realized and, thus, increase the potential for loss.
We may not be able to fully realize the benefits of our participation in the MRP+, which may adversely affect our financial performance.
As of December 31, 2024, 79% of our current New York City medallion loans based on the number of NYC taxi medallions that are either collateral to medallion loans or that we own are MRP+ loans, which is a Supplemental Loan Deficiency Guaranty program that was established to benefit participating NYC taxi medallion loan lenders by providing municipal credit support in the event of defaults by eligible and participating taxi medallion owners. As part of this initiative, the Reserve Fund was established in 2022. Initially funded with $49 million, the City of New York’s obligations to replenish the Reserve Fund shall be subject to and dependent upon appropriations being made from time to time by the New York City Council for such purpose. The City of New York is not legally required to appropriate such funds, and the ability of the City of New York to replenish the Reserve Fund may depend on various factors, including the financial condition of the City of New York at the time. As discussed under the heading “Item 1. Business—Our Market,” the City of New York agreed to provide an upfront principal reduction payment in the form of a grant equal to $30,000 per medallion to lenders who participated in the MRP+ program. The City of New York also agreed to provide a deficiency credit support mechanism via the Reserve Fund covering payment deficiencies on the remaining unpaid principal balance of up
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to $170,000 per medallion, plus interest and collection costs. As of December 31, 2024, no additional funding in excess of the initial funding has been committed. The initial funding amount may fall short, and until the program is closed and all participants and statistics are quantified we are unable to estimate how long the initial $49 million grant will last As a result, the amount held in the Reserve Fund may not be sufficient to support all of the loans participating in the MRP+ in need of debt relief.
The Reserve Fund is not a guarantee of the City of New York to repay the MRP+ Loans, nor is it an asset of the Company nor pledged to the Company. Furthermore, the City of New York’s agreement to replenish the Reserve Fund is not a debt of the City of New York under or within the meaning of the New York State Constitution or the Local Finance Law of the State, nor are the MRP+ Loans deemed to be debts of the City of New York. As a result, the City of New York has no obligation to pay principal of or interest on any of the MRP+ Loans. See “Item 1. Business—Our Market—MRP and MRP+—Reserve Fund” for more information.
Under the MRP+, a “loan enhancement administrator” is required to release funds from the Reserve Fund to pay contractual monthly payments to pay any deficiencies on outstanding amounts owed to the lender upon completion of a disposition of the collateral. If the loan enhancement administrator defaults on its obligation to release those funds, or if the Reserve Fund is depleted without the City of New York making further appropriations to restore it, our operations and loan portfolio may be impacted.
To the extent the MRP+’s loan enhancement administrator defaults on its obligations on administering the program, such default could result in litigation or subject us to delays in collecting payments due to us as a result of our participation in MRP+. If the Reserve Fund is depleted without further appropriations, it would directly tie the collectability of regular payments of MRP+ Loans to the willingness of the borrower to make payments. As of December 31, 2024, 32% of our MRP+ Loans (based on medallion count), representing approximately $72.0 million of unpaid principal balance were delinquent. All delinquent loans that were outside of their grace period had regular payments being made out of the Reserve Fund. Additionally, upon either disposition or resolution of medallion collateral for an MRP+ Loan, if the sale prices attainable in the market are insufficient to cover the outstanding amounts on the loan, it is unlikely we would be able to collect any deficiencies as recover under the loan documents are limited to the medallion collateral with no personal guarantees.
The lack of liquidity in our medallion loan portfolio and Owned Medallions as well as rising interest rates may adversely affect our business.
The illiquidity of our loan portfolio and Owned Medallions may adversely affect our ability to dispose of these assets at times when it may be advantageous for us to monetize their value, or at any time. In addition, if we were required to liquidate some or all of the medallion loans or Owned Medallions, the proceeds of such liquidation may be significantly less than the current value of such assets. Because we may borrow money to make or acquire medallion loans and other assets, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds.
Increase in interest rates has not had an identifiable impact on our interest income, gross income spread, or our ability to pass on interest costs to the borrower. The majority of our loan portfolio historically has been non-performing and has not made regular interest payments. As such, the increase in interest rates has not had an identifiable impact on interest income. The majority of our current interest income is from the MRP+ loans, which have a fixed interest rate of 7.3%. Additionally, DePalma I and DePalma II currently have no external borrowings, so the increase in interest rates have not impacted gross income spread or interest expense. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of DePalma—Overview—Key Factors Affecting Operating Results—Changes in Interest Rates” for more information.
As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net operating income before net realized and unrealized gains and materially affect our results of operations.
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The insolvency of American Transit Insurance Company, the largest insurer of for-hire vehicles in New York City, may result in rising prices for liability insurance and a lack of available coverage, which may negatively impact our business.
American Transit Insurance Company (“American Transit”), the largest liability insurer of for-hire vehicles in New York City has been declared insolvent. We anticipate that the taxi industry will be negatively impacted by the insolvency of American Transit, as fleets and owners/operators of taxis may struggle to find alternative insurance providers. The lack of insurance providers could expose us and our borrowers to significant cost increases. The loss of American Transit may lead to an increase in the price of our own insurance policies, thereby adversely affecting our financial condition and results of operations.
Changes in taxicab industry regulations that result in the issuance of additional medallions or increases in the expenses involved in operating a medallion could lead to a decrease in the value of our medallion loan collateral or our Owned Medallions.
Every city in which we own medallion loans and medallions, including and primarily the City of New York, and most other major cities in the United States, limits the supply of taxicab medallions. This regulation results in supply restrictions that support the value of medallions. Actions that loosen these restrictions and result in the issuance of additional medallions into a market could decrease the value of medallions in that market. If this were to occur, the value of the collateral securing our then-outstanding medallion loans and Owned Medallions in that market could be adversely affected. While we do not believe there are plans to issue new medallions in the future, we are unable to forecast with any degree of certainty whether any other potential increases in the supply of medallions will occur.
In the City of New York and in other markets where we own medallion loans and medallions, taxicab fares are generally set by government agencies. Expenses associated with operating taxicabs are largely unregulated. As a result, the ability of taxicab operators to recoup increases in expenses is limited in the short term. Escalating expenses, such as rising gas prices, can render taxicab operations less profitable, could cause borrowers to default on loans from us, and could potentially adversely affect the value of our collateral and our Owned Medallions. On December 19, 2022, the TLC implemented a fare increase for passengers of NYC taxicabs. Per the TLC, they expect the impact of such increase to result in passenger fares to increase by 22.9%. From November 2022 to December 2024, farebox per day increased 39%.
Current regulations or proposed regulations in the State and City of New York that are favorable to taxicabs may change or cease to be in effect, which could negatively impact our business.
In December 2018, the TLC implemented a per-mile and per-minute minimum trip payment formula, designed to establish a minimum pay standard, for drivers providing for-hire services the City of New York, such as those provided by drivers on ride-sharing platforms. These minimum rates took effect in February 2019. Since implementation, these regulations have had an adverse impact on the performance of ride-share providers in the City of New York and may continue to do so in the future. In August 2018, the New York City Council voted to approve various measures to further regulate ride-share providers, including driver earning rules and licensing requirements.
Additionally, in October 2021, the City of New York proposed certain legislation requiring any autonomous cars operated by ridesharing companies to still require a valid medallion. There can be no guarantee that such legislation will be passed and go into effect.
Currently, the aggregate number of medallions in NYC is capped at the current status quo, and thus our share of the medallion market remains stable and somewhat insulated from competition from other collateralized medallion lenders. However, if TLC created more medallions, there could be increased risk of competition from other collateralized medallion lenders or the value of existing medallions could decline as a result of increased medallion supply. See “Item 1. Business” for more information.
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We cannot predict the status of these and other similar regulations in the future, and if the resulting regulations are not favorable to taxicabs it may negatively impact our business operations by causing borrowers to default on loans from us and adversely affecting the value of our collateral and our Owned Medallions.
As a result of our geographic concentration, our business may be adversely affected if the New York City taxicab industry experiences a sustained economic downturn.
Substantially all of our revenue and asset value is derived from NYC taxi medallion loans collateralized by NYC taxicab medallions and owned NYC taxi medallions. An economic downturn in the NYC taxicab industry could lead to an increase in defaults by our loan borrowers on our medallion loans and lower cash flows on all of our medallion assets. We cannot assure you that we will be able to sufficiently diversify our operations outside of the NYC taxicab market.
Changes to Septuagint, our operating joint venture with Kirie Eleison (“Kirie Eleison”), an unaffiliated strategic joint venture partner, could have negative impacts on our business.
In 2019, we commenced activities to deploy DePalma II’s Owned Medallions through Septuagint, an operating joint venture with Kirie Eleison, an unaffiliated joint venture partner. Septuagint is a medallion leasing agent and taxi fleet operating company based in Long Island City, Queens, New York, licensed by the TLC as an agent/broker for managing NYC taxi medallions. As of December 31, 2024, Septuagint utilized 231 of our Owned Medallions and managed a fleet of approximately 231 vehicles and 261 drivers via a TLC-licensed fleet. We will have the right to exercise governance control once 85% of DePalma II’s Owned Medallions (as of November 1, 2019) have been leased to and are operated by Septuagint. As of December 31, 2024, approximately 62% of DePalma II’s Owned Medallions as of November 1, 2019 are being leased to and operated by Septuagint.
On September 26, 2024, DePalma II provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie Eleison signed an amendment to the OSA that eliminated Septuagint’s exclusive right under the OSA to lease DePalma II’s medallions and provided for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down Septuagint. The amendment allows DePalma II to either wind down Septuagint or have Kirie Eleison transfer its ownership interest in Septuagint to DePalma II or a designee. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. Accordingly, there have been no quantitative and qualitative changes to Septuagint’s ownership or Septuagint’s organizational or operating agreements during this transition period, as the parties are continuing to operate under the original OSA, as amended on October 17, 2024, which, as noted, only removed the exclusivity provisions. If DePalma II winds down Septuagint, DePalma II would no longer lease any of its Owned Medallions through Septuagint. DePalma II intends to continue to pursue its leasing strategy by leasing Owned Medallions either through Septuagint or through a newly formed, wholly owned subsidiary of DePalma II. DePalma II intends to enter into non-exclusive commercial agreements with third party fleets to assist the company in leasing medallions.
The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025.
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As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
DePalma II entered into agreements with Septuagint which grant Septuagint the exclusive right to operate or sublease medallions and related taxicab vehicles owned by the mini-LLCs. Following the termination of the OSA, Septuagint will no longer have the exclusive right to operate or sublease DePalma II’s medallions. The monthly rental payments for the leases of the medallions are $1,500 per medallion. Septuagint is separately obligated to pay for the vehicles under various guaranty agreements. As a result of COVID-19, Septuagint’s ability to make payments on the medallion and vehicle leases significantly deteriorated and DePalma II implemented a payment holiday beginning in March 2020 through April 30, 2022. Commencing in May 2022, Septuagint began making payments on the vehicle leases, which are currently recorded as a deposit liability in the Consolidated Balance Sheets of DePalma II, however, payments on the medallion leases have not yet resumed through December 31, 2024.
DePalma II continues to monitor Septuagint’s ability to pay its medallion lease payment obligations, as well as its working capital note and vehicle payment obligations. In light of Septuagint’s current cash constraints, Septuagint continues to delay payment on its medallion leases. Currently, DePalma II does not have an anticipated date for when Septuagint will resume its medallion lease payment obligations. DePalma II’s and Septuagint’s management each currently believe the continued delay of medallion lease payments is the best course of action because it allows Septuagint to retain such payments for working capital, which is primarily deployed to Septuagint’s workforce at this time. In order for Septuagint to grow its fleet consistent with its growth strategy, Septuagint will need to attract and retain additional drivers. Accordingly, Septuagint remains focused on the goal of achieving profitability by attracting and retaining additional drivers over time, at which point medallion lease payments could recommence. However, the market for drivers remains fluid and subject to general economic conditions. As a result, DePalma II is currently unable to determine when, if at all, Septuagint’s fleet will achieve profitability. In the event that Septuagint is wound down, we do not expect to be repaid on the medallion lease payments or the working capital notes that mature in June 2026.
Further, certain entities owned by the principals of Kirie Eleison are borrowers of Non-MRP+ Loans and, as a result, owe approximately $38 million in principal (excluding accrued unpaid regular and default interest payment obligations) to DePalma I under such loans. Similar to substantially all of DePalma I’s Non-MRP+ Loan portfolio, these loans are in default. Although distinct contractually, given overlap of the parties, a resolution between Kirie Eleison and DePalma I regarding the Non-MRP+ Loans could adversely impact DePalma II’s current operating relationship with Septuagint and the potential termination of the OSA and wind down of Septuagint. The DePalma Companies may resolve DePalma I’s lending relationship through negotiating a resolution with the owners of Kirie Eleison that (i) removes Kirie Eleison as an owner and joint-venture partner in Septuagint and/or (ii) results in Septuagint being wound-down. The agreement between the DePalma Companies and the principals of Kirie Eleison signed on October 17, 2024, would provide debt forgiveness to the principals of Kirie Eleison in exchange for assisting in transitioning or transferring our medallions and vehicles to a new garage as we see fit and surrendering to DePalma or its designee the medallions that serve as collateral on their loans.
Any changes to the current Septuagint relationship will likely cause short-term operational disruptions and may negatively impact results, including our ability to collect on the DePalma Companies’ various obligations from Septuagint. See “Item 1. Business—Our Market—Owned Medallions—Fleet and Leasing” for more information.
Increases in fuel, food, labor, energy, and other costs due to inflation and other factors could adversely affect our operating results. In addition, supply chain disruptions may make expansion and maintenance of our existing taxi fleet challenging or prohibitively expensive.
Factors such as inflation, increased fuel prices, and increased vehicle purchase, rental, or maintenance costs, including increased prices of new and used vehicle parts as a result of recent global supply chain challenges, may
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increase the costs incurred by taxi drivers. Similarly, factors such as inflation, increased food costs, increased labor costs, increased rental costs, and increased energy costs may increase driver operating costs. In many cases, these increased costs may cause taxis to spend less time providing service. Likewise, these increased costs may cause fleet operators to pass costs on to drivers by increasing prices, which would likely cause fleet utilization to decline. A decreased supply of taxi drivers could lead to an increase in defaults by our loan borrowers on our medallion loans and lower cash flows on all of our medallion assets.
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations, or our prospects.
The funds in our operating account and our trust account are held in banks or other financial institutions. Such funds exceeding $250,000 are not insured against loss by the Federal Deposit Insurance Corporation (“FDIC”). Should events, including limited liquidity, defaults, non- performance or other adverse developments occur with respect to the banks or other financial institutions that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, our liquidity may be adversely affected. For example, on March 10, 2023, the FDIC announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation. Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us in connection with a potential business combination, or at all, and could have material adverse impacts on our liquidity, our business, financial condition or results of operations, and our prospects.
The impact of economic conditions, including the resulting effect on discretionary passenger spending, may harm our business and operating results.
Our performance is subject to economic conditions and their impact on levels of discretionary passenger spending. Some of the factors that have an impact on discretionary passenger spending include general economic conditions, slower growth or recession, inflation, unemployment, passenger debt, reductions in net worth, residential real estate and mortgage markets, taxation, energy prices, interest rates, passenger confidence, and other macroeconomic factors. Passenger preferences tend to shift to lower-cost alternatives during recessionary periods and other periods in which disposable income is adversely affected. In such circumstances, passengers may choose to forgo taxis for lower-cost personal vehicle or public transportation alternatives, or may reduce total miles traveled as economic activity decreases. Such a shift in passenger behavior may harm our business, financial condition, and operating results. Likewise, small businesses and individuals that do not have substantial resources, including many of the taxi drivers we do business with, tend to be more adversely affected by poor economic conditions than large businesses.
In addition, economic instability or uncertainty, and other events beyond our control, such as the COVID-19 pandemic, have, and may continue to, put pressure on economic conditions, which has led and could lead to reduced demand for services on our platform or greater operating expenses. We regularly maintain cash balances at third-party financial institutions in excess of the FDIC insurance limit and are therefore reliant on banks and other financial institutions to safeguard and allow ready access to these assets. If banks or financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. If general economic conditions deteriorate in the United States, and in particular in the City of
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New York, discretionary spending may decline and demand for taxi service may be reduced, adversely affecting the value of our collateral and our Owned Medallions. A recessionary period may have a further adverse effect on our revenue.
If autonomous vehicle technologies continue to improve and provide passengers with additional transportation alternatives, and the taxi industry fails to adapt to the use of autonomous vehicle technologies, our financial performance and prospects would be adversely impacted.
Autonomous vehicle technologies may have the ability to meaningfully impact the taxi and ride share industry. Several companies are developing autonomous ride share technology, including Aurora, Waymo, Cruise Automation, Tesla, Apple, Zoox (which Amazon has acquired), Aptiv, and Nuro, either alone or through collaborations with car manufacturers, and we expect that they will use such technology to further compete in the mobility and logistics industries. Waymo has already introduced a commercialized ridehailing fleet of autonomous vehicles, and it is possible that additional companies could introduce autonomous vehicle offerings. In the event that our competitors bring autonomous vehicles to market before the taxi industry is able to adjust, they may be able to leverage such technology to compete more effectively with taxis, which would adversely impact our financial performance and our prospects. For example, the use of autonomous vehicles could substantially reduce the cost of providing mobility or logistics services, which could allow ride sharing companies to offer such services at a substantially lower price as compared to the price available to passengers using taxis. If a significant number of passengers choose to use these offerings instead of taxis, thereby causing the value of taxicab medallions to decrease, our financial performance and prospects would be adversely impacted. However, in October 2021, the City of New York proposed certain legislation requiring any autonomous cars operated by ridesharing companies to still require a valid medallion. There can be no guarantee that such legislation will be passed and go into effect. If it were to be passed, it could mitigate some of the risks of autonomous vehicle technology.
We are subject to climate change risks, including physical and transitional risks, and if we are unable to manage such risks, our business may be adversely impacted.
We face climate change-related physical and transition risks, which include the risk of market shifts toward electric vehicles (“EVs”) and lower carbon business models and risks related to extreme weather events or natural disasters. Climate-related events, including the increasing frequency, severity and duration of extreme weather events and their impact on critical infrastructure in the United States and elsewhere, have the potential to disrupt our business.
Congress and other governmental authorities have either considered or implemented various laws and regulations in response to climate change and the reduction of greenhouse gases. Existing environmental regulations could be revised or reinterpreted, new laws and regulations could be adopted, and future changes in environmental laws and regulations could occur, which could impose additional costs on the operation of our borrowers and other partners. Regulations to cut gasoline use and control greenhouse gas emissions from new cars could adversely affect taxicab driver customers. The taxicab industry may have to make significant capital and other expenditures to comply with these laws and regulations. Changes in, or new, environmental restrictions may force taxicab drivers and fleet operators to incur significant expenses or expenses that may exceed their estimates. There can be no assurance that we or our borrowers would be able to recover all or any increased environmental costs or that our borrowers’ businesses, financial condition or results of operations would not be materially and adversely affected by such expenditures or any changes in environmental laws and regulations, in which case the value of medallion loans and Owned Medallions could be adversely affected.
The Central Business District Tolling Program could result in significantly increased costs to operate taxis.
On January 5, 2025, the Metropolitan Transportation Authority enacted a Central Business District (“CBD”) Tolling Program (the “Tolling Program”) that imposes tolls on vehicles that enter or remain in the CBD, defined as the area of Manhattan south of 60th Street, in an effort to reduce congestion and improve air quality. Under the
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Tolling Program, app-based ride share companies such as Uber and Lyft will be charged $1.50 per trip and NYC taxis will be charged $0.75 per trip, which could result in a relative benefit for taxis. Nevertheless, the Tolling Program could result in significantly increased costs to operate taxis within the CBD, which has historically been one of the areas of NYC most heavily served by taxis. Such increased costs could adversely affect the attractiveness of operating a taxi as a business and, as a result, the value of a taxi medallion, which could have a material adverse effect on the value of our Owned Medallions, loan collateral and general business operations.
On February 19, 2025, the Trump administration moved to revoke federal approval of New York City’s nascent CBD Tolling Program effective March 21, 2025, prompting New York’s Metropolitan Transportation Authority to file a lawsuit challenging the move, arguing that the Trump administration’s move to unilaterally end congestion pricing is unlawful. On March 4, 2025, Riders Alliance and Sierra Club, represented by Earthjustice, also filed to join such lawsuit as interveners, raising additional claims. The deadline set by the Trump administration was extended by 30 days as of the date of the Annual Report on Form 10-K. Uncertainty around the CBD Tolling Program makes it difficult for us to predict the effect of such program on our financial condition and results of operations.
Decreases in the value of our medallion loan collateral, including the impact on loans in process of foreclosure, have had, and may continue to have, a material adverse effect on our business.
In recent years, increased competition has reduced the overall market for taxi services, income generated from operating medallions, and the value of taxi medallions. If these trends continue, there will be further negative impacts to our medallion loans and related assets.
Government entities may take other actions in the future, which could have adverse effects on the market for taxi medallions and which could affect our financial condition and results of operations. The City of New York, like most other major cities in the United States, limits the supply of taxi medallions. This regulation results in supply restrictions that support the value of medallions. Actions that loosen these restrictions and result in the issuance of additional medallions into a market could decrease the value of medallions in that market. Loosening restrictions that result in the issuance of additional taxi medallions could decrease the value of taxi medallions in the NYC metropolitan area and in turn, adversely affect the value of the collateral securing our then-outstanding medallion loans in that market.
If taxi medallion values decline in the future, there is likely to be an increase in medallion loan delinquencies, foreclosures and borrower bankruptcies. See “—DePalma I’s balance sheet consists substantially of loans secured by taxicab medallions, which historically have been associated with significant delinquency rates and risk of default. If we are unable to recover meaningful amounts relative to our acquisition prices on loans in default, our results of operations could be adversely impacted.” Our ability to recover on defaulted medallion loans by foreclosing on and selling the taxi medallion collateral would be diminished, which would result in future losses on defaulted medallion loans that could have an effect on our business. If we are required to liquidate all or a portion of our medallion loans quickly, we could realize less than the value at which we had previously recorded such medallions.
Uncertainty relating to the reporting of collateral values for our loans may adversely affect the value of our portfolio.
Medallion loans are primarily collateral-based lending. Collateral values for medallion loans reflect a combination of recent sales prices obtained from the regulatory agency in a particular local market and intrinsic value analyses based on management estimates and other factors. The illiquidity and distressed nature of the taxi industry over the last several years has resulted in a wide range of reported medallion sale transaction values, including many which we believe are not reflective of the intrinsic value of the collateral or the potential recoveries on our loans as all of our Non-MRP+ Loans also benefit from the personal guarantees of the borrowers or their affiliates.
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Decreases or increases in prevailing interest rates could adversely affect our business, our cost of capital and our net interest income.
Under the MRP+, borrowers have explicit prepayment rights with respect to their medallion loans whereby they can make prepayment at par once a month with no penalty. Borrowers of Non-MRP+ Loans can generally make prepayments as well, which creates a risk for reperformed loans. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. Any future collateralized medallion lending may be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if a substantial number of borrowers elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.
Our profitability may be directly affected by interest rate levels and fluctuations in interest rates. Although all of our current loans have fixed interest rates, and therefore are not impacted by changing interest rates, for any new lending and future restructurings of existing defaulted loans (which comprises 100% of non-MRP loans), we would intend to set interest rates based on current market conditions at the time. If interest rates were to increase, it may make it more difficult for borrowers to accept the terms of new or restructured loans. As interest rates change, our gross interest rate spread on loans either increases or decreases because the rates potentially charged on future seller financings provided in medallion sales are limited by market and competitive conditions, restricting our ability to pass on increased interest costs to the borrower. While we monitor the interest rate environment and seek to mitigate the impact of increased interest rates, we cannot provide assurance that the impact of changes in interest rates can be successfully mitigated.
As we may borrow in the future to fund our loans and investments, and a portion of our income could be dependent upon the interest rate at which we borrow funds as compared to the fixed interest rate on all of our MRP+ Loan portfolio.
We are reliant on third-party service providers in our taxi leasing operations. If our third-party service providers fail to perform as needed, our business may be adversely impacted.
We are reliant on third-party service providers in our taxi leasing operations to assist us in managing a garage for our fleet and repairing our vehicles, among other services. While these arrangements would allow us to focus on our business, they reduce our direct control over the services necessary for our fleet to function. If our third-party logistics service providers fail to comply with applicable NYC rules and regulations or provide the critical services, our business may be materially and adversely affected. If any of our third-party service providers’ operations or services are disrupted or terminated, we may not be able to find alternative third-party service providers in a timely manner.
We signed a non-exclusive operating agreement with a third-party taxi fleet who will provide us with services in exchange for a fee. Such services will include, but not be limited to, access to their garage facilities, taxicab repairs and operational support. If these third-party service providers fail to satisfy their obligations, it will negatively impact our operating results.
Our third-party service providers are increasingly dependent on information technology and our ability to process data in order to operate, and if we (or our third-party service providers) are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, our operations could be disrupted, our ability to provide our services could be interrupted, our reputation may be harmed and we may be exposed to liability and loss of customers and business.
Our third-party service providers rely on information technology networks and systems and data processing to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share (“Process” or “Processing”) personal information, confidential or proprietary information, financial
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information and other information, to manage a variety of business processes and activities, for financial reporting purposes, to operate our business and to comply with regulatory, legal and tax requirements (“Business Functions”). These information technology networks and systems, and the Processing they perform, may be vulnerable to data security and privacy threats, cyber and otherwise. Moreover, the risk of unauthorized circumvention of our security measures or those of our third parties on whom we rely has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including, without limitation, “phishing” or social engineering incidents, ransomware, extortion, account takeover attacks, denial or degradation of service attacks and malware. Further, breaches experienced by other companies may also be leveraged against us. For example, credential stuffing attacks are becoming increasingly common and sophisticated actors can mask their attacks, making them increasingly difficult to identify and prevent. If our or our third-party providers’ information technology networks and systems or data processing suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, they could cause a material adverse impact to our Business Functions and our business, reputation and financial condition.
Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, which may remain undetected until after they occur. Despite our and our third-party service providers’ efforts to protect our information technology networks and systems, Processing, and information, we may not be able to anticipate or to implement effective preventive and remedial measures against all data security and privacy threats. Our and our third-party service providers’ security measures may not be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences. No security solution, strategy, or measures can address all possible security threats. Our and our third-party service providers’ applications, systems, networks, software, and physical facilities could have material vulnerabilities or be breached, or personal or confidential information could be otherwise compromised due to error or malfeasance, if, for example, third parties attempt to fraudulently induce our personnel or our customers to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. We cannot be certain that we or our and our third-party service providers’ will be able to address any such vulnerabilities, in whole or part, and there may be delays in developing and deploying patches and other remedial measures to adequately address vulnerabilities, and taking such remedial steps could adversely impact or disrupt our operations.
An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and Processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees, and expenses.
The costs to respond to a security breach or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful. These costs include, but are not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; and costs related to maintaining redundant networks, data backups, and other damage-mitigation measures. We could be required to fundamentally change our business activities and practices in response to a security breach of our third-party service providers or related regulatory actions or litigation, which could have an adverse effect on our business. Additionally, most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our third-party service providers’ security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach.
Our board of directors will manage and oversee cybersecurity risks, including oversight of Field Point and any other third-party service providers with access to confidential or private information relating to our business.
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The audit committee will oversee the establishment of an enterprise risk framework that will cover a spectrum of business risks which the combined company will actively manage, including cybersecurity risks. Our board of directors will assess the adequacy of our protection of technology, including physical security, proprietary information and information security, as well as implement an appropriate cybersecurity risk management policy designed to protect against threats and vulnerabilities, containing such preventive and detective controls as deemed appropriate, including, but not limited to, firewalls, penetration testing, anti-virus software, and encryption. Our board directors, the audit committee and management team will be regularly briefed on our cybersecurity policies and practices, including effective monitoring of third-party service providers, and ongoing efforts to improve security, as well as periodic updates on cybersecurity events. Our board of directors and the audit committee will consider such additional protective measures as may be required to comply with rapidly evolving data privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. These measures may cause us to incur substantial expenses. Failure to timely upgrade or maintain computer systems, software and networks as necessary could also make our third-party service providers susceptible to breaches and unauthorized access and misuse. We may be required to expend significant additional resources to modify, investigate or remediate vulnerabilities or other exposures arising from data and cybersecurity risks.
We and our third-party service providers may not have adequate insurance coverage for handling security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees, and other impacts that arise out of incidents or breaches. If the impacts of a security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or the insurance coverage of our third-party service providers, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could harm our business. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss. Moreover, our privacy risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of personal and/or sensitive data.
Any such access, disclosure, destruction or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and regulatory penalties, disrupt our operations and damage our reputation, which could adversely affect our business. In addition, we may also be required to incur significant costs in connection with any regulatory investigation or civil litigation resulting from a security breach or other information technology disruption that affects us.
To date, cyber-attacks have not had a material impact on our financial condition, results or business; however, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, the current work-from-home environment, the outsourcing of the majority of our business operations, the ongoing shortage of qualified cybersecurity professionals, and the interconnectivity and interdependence of third parties to our systems.
Lending to individual taxi owners/operators, taxi fleet operators or passive investors involves a high degree of risk and is highly speculative.
Lending to individual taxi owners/operators, taxi fleet operators or passive investors involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative.
Historically, our borrower base consists primarily of individual taxi owners/operators, taxi fleet operators or passive investors that may have limited resources and that are generally unable to obtain financing from traditional sources. There is generally no publicly available information about these borrowers, and we must rely
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on the diligence conducted by the employees of our affiliates, our Manager, Field Point and other third-party service providers to obtain information in connection with our credit decisions. In addition, these borrowers often do not have audited financial statements.
Changes in the regulations and interpretations of existing regulations applicable to small business lending could negatively impact our business.
Our loans secured by taxicab medallions are often made to small businesses and sole proprietors. A growing number of states have adopted laws that require certain commercial lenders to (i) deliver disclosures summarizing loan terms to commercial borrowers and (ii) register with state regulatory authorities in some instances, which could require alterations to our lending procedures and increase our legal and compliance costs. In addition, these loans are not consumer loans, and therefore are not subject to the collection rules and regulations contained in the Fair Debt Collection Practices Act or within the scope of the Consumer Financial Protection Bureau’s (“CFPB”) authority, though the general restrictions against abusive, unfair, or deceptive collections practices contained in the Unfair, Deceptive, or Abusive Acts or Practices provisions of the Dodd-Frank Act may apply to our collections practices. In addition, the CFPB has recently signaled a desire to be more aggressive regarding debt collection in general as well as a strong interest in protection of small business credit programs, even though such commercial programs are generally outside its purview. Should the authority of the CFPB be expanded to expressly include regulation of small business lending, we could be required to alter our lending and collections practices, which could materially increase the cost of enforcing our remedies with respect to defaulted taxi medallion loans and negatively impact recoveries.
Our loan portfolio is, and we expect it to continue to be, concentrated in the NYC taxicab medallion industry and sector, which will subject us to a risk of significant loss by a downturn in the particular industry or sector.
Our loan portfolio is, and we expect it to continue to be, concentrated within the NYC taxicab medallion industry and sector. Taxi companies that constitute separate issuers may have related management or guarantors and constitute larger business relationships to us. As a result, the aggregate returns we realize may be adversely affected if a small number of loans perform poorly or if we need to write down the value of any one loan. Additionally, a downturn in any particular industry or sector in which we are invested could also negatively impact the aggregate returns we realize.
We depend on the accuracy and completeness of information about borrowers.
In deciding whether to extend credit or enter into other transactions, and in evaluating and monitoring our medallion loan portfolio on an ongoing basis, we may rely on information furnished by or on behalf of borrowers, including financial statements, credit reports and other financial information. We may also rely on representations of those borrowers or of other third parties, such as independent auditors, as to the accuracy and completeness of that information. The failure to receive financial statements, credit reports or other financial or business information related to our borrowers on a timely basis, or the inadvertent reliance by us on inaccurate, incomplete, fraudulent or misleading forms of any of the foregoing information, could result in loan losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition or results of operations.
Insurance providers may not be able to service our claims. We rely on a limited number of third-party insurance service providers for our insurance claims, and if such providers fail to service insurance claims to our expectations or we do not maintain business relationships with them, our business, financial condition and results of operations could be adversely affected.
We rely on a limited number of insurance service providers to service our claims. If any of our insurance service providers fails to service claims to our expectations, discontinues or increases the cost of coverage or changes the terms of such coverage in a manner not favorable to drivers or to us, we cannot guarantee that we
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would be able to secure replacement coverage or services on reasonable terms in an acceptable time frame or at all. If we cannot find alternate insurance service providers on terms acceptable to us, we may incur additional expenses related to servicing claims using internal resources.
Risks Related to Growth and Operations
Competition with other lenders could adversely affect us.
The NYC taxi medallion lending market historically has been served by a variety of entities, including banks, savings and loan associations, credit unions, independent finance companies, and financial technology companies. This level of competition may increase in more stable or favorable economic conditions. Increasing competition could also require us to lower the rates we charge on loans in order to maintain our active loan portfolio, which could also have a material adverse effect on our business, financial condition and results of operations.
The United States District Court for the Southern District of New York issued to a ruling requiring all new NYC taxi cabs to be wheelchair accessible vehicles (“WAV”). This ruling may adversely affect our business.
On September 3, 2024, the United States District Court for the Southern District of New York issued a ruling that requires all new yellow taxicabs joining NYC’s active taxicab fleet to be WAV until 50% of NYC’s authorized medallions are on WAV. Because certain drivers may prefer to drive non-WAV, this new ruling may materially adversely affect DePalma’s business and may decrease revenue if we struggle to lease out WAV.
Terrorist attacks, other acts of violence or war, public health crises, political crises, natural disasters and other unexpected events may affect any market for our securities, impact the businesses in which we invest, and harm our operations and profitability.
Any unexpected events, including terrorist attacks, natural disasters and other disruptions may harm our results of operations and your investment.
A significant natural disaster, such as an earthquake, fire, hurricane, tornado, flood or significant power outage, could disrupt our operations or the operations of our third-party technology providers. The impact of climate change may increase these risks. In addition, any public health crises, such as the COVID-19 pandemic, other epidemics, political crises, such as terrorist attacks, war and other political or social instability and other geopolitical developments, or other catastrophic events could adversely affect our operations or the economy as a whole. In particular, our business is focused in the NYC metropolitan area, which suffered a terrorist attack in 2001 and has faced continued threats. Another terrorist attack in the City of New York or elsewhere could severely impact our results of operations. The impact of any natural disaster, act of terrorism or other disruption to us or our third-party providers’ abilities could adversely affect our business, financial condition and results of operations. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate. Losses resulting from terrorist attacks are generally uninsurable.
Global health crises or catastrophes, such as the COVID-19, pandemic, and related significant negative impacts on the global economy and financial markets, have had and could a material adverse impact on our business, operating results, and financial condition, particularly given our concentration in the lending business.
Our business could be adversely affected by global health crises or catastrophes. For example, the spread of COVID-19 created a global public-health crisis that resulted in widespread volatility and deteriorations in employment levels, as well as business, economic, and market conditions that materially and adversely affected our business, operating results and financial condition. The full extent of the adverse impact of the COVID-19 pandemic on our business, results of operations, financial position (including capital and liquidity) and prospects depends on several evolving factors, including:
| • | The duration, extent, and severity of the pandemic. |
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| • | The response of governmental and non-governmental authorities. |
| • | The effect on our borrowers, counterparties, employees of our affiliates, and third-party service providers. |
| • | The effect on economies and markets. |
Any future pandemic or global health catastrophe would likely materially impact the taxi industry. For example, during the COVID-19 pandemic recurring payments of principal and interest on our medallion loan portfolio decreased significantly compared to payments in prior periods and we were forced to engage with non-performing borrowers about modifying their loan agreements.
As a result of these foregoing factors or other risks and consequences, a future pandemic or global health catastrophe could materially and adversely affect our business, results of operations and financial condition and heighten the other risk described in these Risk Factors. The full extent to which a future pandemic or global health catastrophe would impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the continued outbreak and the actions taken to contain or mitigate the pandemic.
Our business is heavily reliant on the services provided by our Manager and Field Point, and any disruption to them or to our relationship with either of them could adversely affect our business.
As we currently have no employees, we rely heavily on our Manager and our third-party service provider, Field Point, for most of the day-to-day services we require. Since inception, our Manager and Field Point have provided various services to us on a day-to-day basis, including, but not limited to, providing management oversight of the DePalma Companies, evaluating, managing, negotiating and overseeing the acquisition and disposition of our assets, including NYC taxi medallions, NYC taxi medallion loans and other assets or property, and evaluating, managing, negotiating and overseeing the sale, structuring, restructuring and workout of NYC taxi medallion loans held by us and evaluating our financial and operational performance. In addition, the Manager and Field Point may provide services related to the future selling of medallions, potentially with seller financing. As a result, we are heavily reliant on our Manager, which has significant discretion as to the implementation and execution of our business strategies and risk management practices. We are subject to the risk of discontinuation of our Manager’s operations or termination of the Management Service Agreement that we entered into upon consummation of the Business Combination and the risk that, upon such event, no suitable replacement will be found. We believe that our success depends to a significant extent upon the expertise and services of the executive officers and other key personnel provided to us through our Manager and that discontinuation of its operations or the loss of its key management personnel could have a material adverse effect on our ability to achieve our investment objectives. See “Risks Relating to the Externalization and Our Manager.”
Since our inception, Field Point has serviced our medallion loans starting from the initial acquisition and onboarding of each acquired loan portfolio. Under the terms of the servicing agreements, Field Point provides services to us and is responsible for managing and assisting in making collections on the medallion loans, assisting with loan documentation, credit reporting, foreclosures, loan restructuring, and other crucial operations. We believe Field Point is the largest servicer of taxi medallion loans in the NYC taxi market.
While outsourcing arrangements may lower our cost of operations, they also reduce our direct control over the services rendered. It is uncertain what effect such diminished control will have on the quality of services rendered, on our ability to quickly respond to changing market conditions, or on our ability to ensure compliance with all applicable federal and local laws and regulations. If we do not effectively develop and manage our outsourcing strategies, if our third-party service providers pass on the cost of inflation to us or do not perform as anticipated, or do not adequately protect our data from cyber-related security breaches, or if there are delays or difficulties in enhancing business operational difficulties, increased costs, and loss of sensitive data, quality and compliance issues, any of which could materially and adversely affect our business, financial condition and results of operations.
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Certain other companies managed by our Manager or its affiliates, Field Point and other third-party service providers, which have investment objectives or business operations similar to ours, also rely on many of these same officers and professionals. Our Manager or its affiliates, Field Point and other third-party service operators may face conflicts of interest if we enter into transactions with an affiliate. In addition, our Manager and certain of its affiliates, Field Point and certain other third-party service providers are presently, and plan in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, our Manager, its employees and certain of its affiliates, as well as Field Point and its employees and other third-party service providers will have conflicts of interest in allocating their time between us and the other activities in which they are or may become involved. See “Risks Relating to the Externalization and Our Manager.”
If we are unable to effectively manage our relationship and the agreement under which Field Point operates or we may have with any other third-party service providers where we outsource our operation, our results of operations and cash flows could be adversely impacted. Further, failure of Field Point or other third-party service providers to meet its obligations to us or substantial disruptions in the relationships between such service providers and us could adversely impact our operations and financial results.
Misconduct by current or former affiliates’ employees and service providers could expose us to significant legal liability and reputational harm.
Current and former employees of our affiliates and our service providers could engage or could have engaged in misconduct that adversely affects our business. For example, if such a person were to engage, or previously engaged, in fraudulent, illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities), financial position, third-party relationships and ability to forge new relationships with third-party dealers or contractors. Our business often requires that we deal with confidential information. If our current and former affiliates’ employees and service providers were to improperly use or disclose this information or previously improperly used or disclosed this information, even if inadvertently, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by our affiliates’ employees and service providers, or former employees of our affiliates or former service providers, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our business, financial condition or results of operations.
We may in the future pursue new strategies and lines of business that are not taxicab-related, and we may face enhanced risks as a result of these changes in strategy, including from transacting with a broader array of counterparties and exposure to new assets, activities and markets.
We may change our strategy and enter new lines of business, including through acquisitions of new types of loan portfolios or other asset classes, or otherwise, in the future. We may grow the operating business through acquisitions which could be either straightforward acquisition transactions or in satisfaction of amounts owned. Any new business initiatives may expose us to new and enhanced risks, including new credit-related, compliance, fraud, market and operational risks, increased compliance and operating costs, different and potentially greater regulatory scrutiny of such new activities and assets and expose us to new types of counterparties as well as asset classes, activities and markets.
Any new business initiatives and strategies we may pursue in the future may be less successful than anticipated and may not advance our intended business strategy. We may not realize a satisfactory return on investments or acquisitions, we may experience difficulty in managing new portfolios or integrating operations, and management’s attention from our other businesses could be diverted. Any of these results could ultimately have an adverse effect on our business, financial condition or results of operations.
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Risks Related to Regulation and Litigation
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
Changes in the laws or regulations applicable to us may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that we hold, or otherwise affect our funding profile or expose us to additional costs (including increased compliance costs). Any such changes may also require us to invest significant management attention and resources to make any necessary changes and may adversely affect our ability to conduct our business as previously conducted or our results of operations or financial condition.
We are also subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.
Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
From time to time, we may be party to various claims and lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings in the ordinary course of business, some of which we may institute ourselves, and some of which we may be defending against. For example, we are party to hundreds of court actions involving the enforcement of, and collection and/or foreclosure on, our taxi medallions loans, which matters include, among other things, claims for breach of contract and replevin. In addition, a number of our borrowers have also filed for bankruptcy, and we are involved in certain adversary proceedings against the debtors in these bankruptcy cases, some of whom might assert counterclaims. In all cases, we evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the nature and amount of potential recoveries or losses. Based on these assessments and estimates, we may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes, gains or losses may differ materially from our assessments and estimates. We may also, from time to time, take certain positions in respect of contractual or other relationships with third parties which may result a dispute, and, ultimately, litigation. We are not currently party to any material litigation.
Even when not merited, the commencement or defense of these lawsuits may divert management’s attention, and we may incur significant expenses in pursuing or defending these lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could negatively impact our financial position, cash flows or results of operations. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future. Furthermore, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of our business, commercial, and government partners and current and former directors and officers.
Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
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There is a risk of litigation between the principals of Kirie Eleison and us, which may adversely affect our business.
We are in active discussions with the principals of Kirie Eleison to resolve their loan defaults along with their defaults under the OSA. As of December 31, 2024, certain entities owned by the principals of Kirie Eleison are borrowers of Non-MRP+ Loans and, as a result, owe approximately $38 million in principal (excluding accrued unpaid regular and default interest payment obligations) to DePalma I under such loans. These loans are currently in default.
On September 26, 2024, DePalma II provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie Eleison signed an amendment to the OSA that eliminated Septuagint’s exclusive right under the OSA to lease DePalma II’s medallions and provided for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down Septuagint. The amendment allows DePalma II to either wind down Septuagint or have Kirie Eleison to transfer its ownership interest in Septuagint to DePalma II or a designee. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025. As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
There is a risk that discussions with these parties will result in litigation, which would lead to increased legal fees, costs and other expenses, which may adversely affect our business.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
We are subject to various privacy, information security, and data protection laws, including requirements concerning security breach notification, and we could be negatively affected by these laws. For example, our business may be subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to borrowers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing safeguards appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various state and federal regulators have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Moreover, legislators and regulators are increasingly adopting or revising privacy, information security, and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection, and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission, as well as at the state level.
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Compliance with current or future privacy, data protection, and information security laws (including those regarding security breach notification) could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to comply with privacy, data protection, and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, and damage to our reputation, which could have a material adverse effect on our business, financial condition, or results of operations.
Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results.
We are subject to numerous statutory, regulatory, and legal requirements. Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible government penalties and litigation in the event of deemed noncompliance. Changes in the regulatory environment in the area of privacy and information security, wage, and hour laws, among others, could potentially impact our operations and financial results.
Generally accepted accounting principles in the United States (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
Moreover, while we believe that we maintain insurance customary for businesses of our size and type, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could harm our business.
DePalma I and DePalma II have identified a material weakness in their internal control over financial reporting. If we are unable to remediate the material weakness, or if other control deficiencies are identified, we may not be able to report our financial results accurately or file periodic reports as a public company in a timely manner.
In the normal course of business, DePalma I and DePalma II have not been subject to SEC reporting, PCAOB auditing standards or the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). Historically, DePalma I and DePalma II were subject to AICPA audits. Financial statements audited under PCAOB standards for the years ended December 31, 2023 and 2022 were produced for the first time in connection with the Business Combination and the associated requirements of MAC to file a registration statement on Form S-4.
In the course of auditing its financial statements for the year ended December 31, 2023, which was undertaken by DePalma I and DePalma II in connection with the requirements of the Business Combination and filing of a registration statement on Form S-4, DePalma I and DePalma II and their independent registered public accounting firm identified a material weakness in the design of internal controls over the financial statement closing process due to the lack of appropriate resources to comply with GAAP and SEC reporting requirements, including application of accounting principles and disclosures. This material weakness resulted in misstatements in the financial statements and disclosures, which included material misstatements in DePalma I and DePalma II’s financial statements relating to the misapplication of reporting as an investment company in accordance with Accounting Standards Codification (“ASC”), Financial Services – Investment Companies (“ASC 946”), and it was determined DePalma I and DePalma II had incorrectly presented its 2022 financial statements in accordance with ASC 946. The financial statements of DePalma I and DePalma II for 2022 were restated and material adjustments were recorded for the 2023 financial statements prior to issuance.
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The application of ASC 946 resulted in misstatements in its accounting for taxi medallions and loans collateralized by taxi medallions. In addition, under the requirements of ASC 946, DePalma I and DePalma II had previously presented a schedule of investments and financial highlights that are no longer required to be presented and have been removed from the respective consolidated financial statements. The misstatements identified also resulted in additional footnote disclosures that were not included in the previously issued consolidated financial statements including intangible assets, loans held for investment at fair value, earnings (loss) per unit, and segment information. We believe this material weakness is reflective of the fact that, prior to the Business Combination, DePalma I and DePalma II were not required to produce standalone financial statements under PCAOB auditing standards or otherwise comply with SEC reporting requirements or the provisions of the Sarbanes-Oxley Act.
We are responsible for the internal control environment of DePalma I and DePalma II’s operations and compliance with all the applicable regulatory requirements.
In connection with the Business Combination, we have implemented a number of measures to address the material weakness, including but not limited to, (i) hiring accounting and financial personnel or professionals with relevant internal and/or external SEC reporting, PCAOB and SOX compliance experience, and (ii) expanding the capabilities of existing accounting and financial reporting personnel through continuous training and education in the accounting and reporting requirements including SEC rules and regulations. We have remedied the identified material weakness during the reporting period.
However, failure to discover and address any other material weaknesses or deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis.
As a public company, we are required pursuant to Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting for each annual report on Form 10-K to be filed with the SEC. We are required to disclose material changes made in our internal control over financial reporting on a quarterly basis. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC, the stock exchange on which our securities are listed or other regulatory authorities, which would require additional financial and management resources.
While documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal controls over financial reporting. If we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.
Generally, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could have a material adverse effect on our businesses, financial condition, results of operations and prospects, as well as the trading price of our common stock and warrants.
Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results and adversely affect our financial condition.
We are subject to taxes by the U.S. federal, state, and local tax authorities, and our tax liabilities are affected by the allocation of expenses to differing jurisdictions. We record tax expense based on our estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by
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various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We expect that there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
| • | changes in the valuation of our deferred tax assets and liabilities; |
| • | expected timing and amount of the release of any tax valuation allowance; |
| • | changes in tax laws, regulations or interpretations thereof; or |
| • | future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates. |
In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance, or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact our current or future tax structure and effective tax rates. We may be subject to audits of our income, sales, and other transaction taxes by U.S. federal, state, and local taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financial condition.
Present and potential conflicts of interest could arise in the future between us, on the one hand, and Andrew Milgram and Paul Arrouet and entities owned by or affiliated with them, on the other hand, concerning, among other things, business transactions, potential competitive business activities or business opportunities.
Present and potential conflicts of interest could arise in the future between us, on the one hand, and Andrew Milgram and Paul Arrouet and entities owned by or affiliated with them, including DePalma, on the other hand, concerning, among other things, business transactions, potential competitive business activities or business opportunities. As Manager of New MAC, MAM will receive fees and other compensation that Mr. Milgram will have an interest in. Upon consummation of the Business Combination, MAM entered into a Management Services Agreement (“MSA”) with New MAC, pursuant to which MAM will provide various services relating to the day-to-day operations of New MAC and receive fees and other compensation. See “Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationships and Transactions with Directors, Executive Officers and Significant Stockholders—Management Services Agreement” for more information. Furthermore, Andrew Milgram, Paul Arrouet and other businesses owned by or affiliated with them may now, or in the future, directly or indirectly, compete with us for investment or business opportunities.
Andrew Milgram, Paul Arrouet and their affiliates are not restricted from owning assets or engaging in businesses that compete directly or indirectly with us and do not have any duty to refrain from engaging, directly or indirectly, in the same or similar business activities or lines of business, including those business activities or lines of business deemed to be competing with us, or doing business with any of our customers. Andrew Milgram, Paul Arrouet or their affiliates may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunities.
In any of these matters, the interests of Andrew Milgram, Paul Arrouet and their affiliates and other businesses owned by or affiliated with them may differ or conflict with the interests of our other stockholders. Any actual or perceived conflicts of interest with respect to the foregoing could have an adverse impact on the trading price of our common stock and warrants.
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Risks Related to Our Corporate Structure
Our only material assets are our direct and indirect interests in DePalma, and we are accordingly dependent upon distributions from DePalma to pay dividends and taxes and other expenses.
We are a holding company and have no material assets other than our direct limited liability company interests in the DePalma Companies. We have no independent means of generating revenue. We intend to cause our subsidiaries (including the DePalma Companies) to make distributions in an amount sufficient to cover all applicable taxes and other expenses payable and dividends, if any, declared by us. The terms of any credit agreements or other borrowing arrangements we or our subsidiaries enter into in the future may impose restrictions on the ability to pay dividends to us. To the extent that we need funds, and any of our direct or indirect subsidiaries is restricted from making such distributions under these debt agreements or applicable law or regulation, or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.
We may become subject to the Investment Company Act.
We do not believe that we are subject to regulation under the Investment Company Act. We primarily acquire interests in NYC taxicab medallion loans and are engaged in actively managing and operating those interests, which we are committed to supporting for the long-term. Our officers, the Manager and any employees who provide services to us pursuant to the terms of our corporate services agreement devote their activities to these businesses. We believe that we are not an investment company under the Investment Company Act, including under Section 3(b)(1) of the Investment Company Act, and we intend to continue to conduct our operations so that we will not be deemed an investment company. In addition, we expect to continue to fall within the exclusion from the definition of an “investment company” provided under Section 3(c)(5) of the Investment Company Act as a company primarily engaged in the business of (i) purchasing and otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance and services, and/or (ii) making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services. If, at any time, we become or are determined to be primarily engaged in the business of investing, reinvesting or trading in securities, we could become subject to regulation under the Investment Company Act. In these circumstances, after giving effect to any applicable grace periods, we may be required to register as an investment company, which could result in significant registration and compliance costs, could require changes to our corporate governance structure and financial reporting, and could restrict our activities going forward. In addition, if we were to become subject to the Investment Company Act, any violation of the Investment Company Act could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of our contracts would be deemed unenforceable.
Delaware law, our amended and restated certificate of incorporation (“certificate of incorporation”) and amended and restated bylaws (“bylaws”) contain certain provisions, including antitakeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our certificate of incorporation and bylaws and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our common stock and warrants. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the board of directors or taking other corporate actions, including effecting changes in management. Among other things, our certificate of incorporation and bylaws include provisions regarding:
| • | the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
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| • | the limitation of the liability of, and the indemnification of, our directors and officers; |
| • | the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
| • | the requirement that directors may only be removed from our board of directors for cause, upon the affirmative vote of the holders of at least 66-2/3% of the voting power of all of then outstanding shares of the voting stock, voting together as a single class; |
| • | the requirement that a special meeting of stockholders may be called only by our board of directors, the chair of our board of directors or chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; |
| • | controlling the procedures for the conduct and scheduling of board and stockholder meetings; |
| • | the requirement for the affirmative vote of holders of (i) (a) at least 66-2/3%, in case of certain provisions or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our certificate of incorporation; and (ii) (a) at least 66-2/3%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; |
| • | the ability of our board of directors to amend our bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws to facilitate an unsolicited takeover attempt; and |
| • | advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our board of directors or management.
In addition, we are generally subject to provisions of Delaware law, including the DGCL. Although we elect not to be governed by Section 203 of the DGCL, certain provisions of our certificate of incorporation, in a manner substantially similar to Section 203 of the DGCL, prohibit certain stockholders who hold 15% or more of our outstanding capital stock from engaging in certain business combination transactions with us for a specified period of time unless certain conditions are met.
Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim
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of breach of a fiduciary duty owed by any current or former director, officer, other employee, agent or stockholder to our company or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against our company or any current or former director, officer, other employee, agent or stockholder (a) arising pursuant to any provision of the DGCL, our certificate of incorporation (as it may be amended or restated) or our bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against our company or any current or former director, officer, other employee, agent or stockholder governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum. Notwithstanding the foregoing, the provisions of our certificate of incorporation do not apply to suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum. While Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in our certificate of incorporation. If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder.
This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company or our directors, officers, stockholders, agents or other employees, or could result in increased costs for a stockholder to bring a claim, particularly if they do not reside in or near Delaware, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce this provision, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. Further, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find this provision of our certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
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Risks Relating to the Externalization and Our Manager
The Management Service Agreement entered into upon consummation of the Business Combination was negotiated between related parties and the terms, including fees payable, may not be as favorable to us as if it were negotiated with an unaffiliated third party.
Because our Manager is owned by certain of our directors and executive officers, the MSA was developed by related parties, although our independent directors reviewed and approved the Management Services Agreement. The terms of the MSA, including fees payable, may not reflect the terms we may have received if it was negotiated with an unrelated third party. In addition, particularly as a result of our relationship with the principal owners of the Manager, who are certain directors and members of our management team, our independent directors may determine that it is in the best interests of our stockholders not to enforce, or to enforce less vigorously, our rights under the MSA because of our desire to maintain our ongoing relationship with our Manager.
Our executive officers, directors, Manager and other members of our management team may allocate some of their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to our affairs, which may materially adversely affect our results of operations.
While the members of our management team anticipate devoting a substantial amount of their time to the affairs of the Company, our executive officers, directors, Manager and other members of our management team may engage in other business activities. This may result in a conflict of interest in allocating their time between our operations and our management and the operations of other businesses. Their other business endeavors may involve related or unrelated parties. Conflicts of interest that arise over the allocation of time may not always be resolved in our favor and may materially adversely affect our results of operations.
Conflicts of interest could arise in connection with certain of our directors’ and executive officers’ discharge of fiduciary duties to our stockholders.
Certain of our directors and executive officers are and are expected to continue to be members of the Manager. Such persons, by virtue of their positions with us, have fiduciary duties to us and our stockholders. The duties of such persons as directors or executive officers to us and our stockholders may conflict with the interests of such persons in their capacities as members or employees of the Manager.
Our Manager and members of our management team may engage in activities that compete with us or our businesses.
While the members of our management team intend to devote a substantial majority of their time to the affairs of the Company, and while our Manager currently does not manage any other businesses that are in lines of business similar to our businesses, neither our management team nor our Manager is expressly prohibited from investing in or managing other entities, including those that are in the same or similar line of business as our businesses, or required to present any particular acquisition or business opportunity to us. In this regard, the MSA and the obligation thereunder to provide management services to us will not create a mutually exclusive relationship between our Manager, on the one hand, and our company, on the other.
We cannot remove our Manager solely for poor performance, which could limit our ability to improve our performance and could adversely affect the market price of our shares.
Under the terms of the MSA, our Manager may not be removed as a result of underperformance. Instead, we may only remove our Manager in certain limited circumstances. This limitation could adversely affect the market price of our shares. See “Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationships and Transactions with Directors, Executive Officers and Significant Stockholders—Management Services Agreement” for more information.
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Our Manager can resign on 180 days’ notice and we may not be able to find a suitable replacement, resulting in a disruption in our operations that could materially adversely affect our financial condition, business and results of operations as well as the market price of our shares.
Our Manager has the right, under the MSA, to resign at any time on 180 days’ written notice, whether we have found a replacement or not. If our Manager resigns, we may not be able to contract with a new manager or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 180 days (subject to possible extension), or at all, in which case our operations are likely to experience a disruption; our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected; and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our businesses may result in additional costs and time delays that could materially adversely affect our financial condition, business and results of operations.
Our reliance on our service providers to conduct our operations will be a significant expense and could limit the amount of our free cash flow.
Historically, we have relied on the employees and service providers of our affiliates, including the Manager, as well as our third-party medallion-loan servicer, Field Point, because such entities and individuals have significant experience in servicing taxi medallion loans and related services and have provided us an organizational infrastructure on a more cost-effective basis. We continue to rely on the Manager and Field Point for these services pursuant to agreements in which we are obligated to pay fees and, subject to certain exceptions, reimburse the costs and out-of-pocket expenses of our service providers incurred on behalf of us. See “Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationships and Transactions with Directors, Executive Officers and Significant Stockholders—Management Services Agreement” for more information. While we intend to continually reassess our reliance on service providers, it is difficult to quantify with any certainty the actual amount of any such payments in the future, which could be substantial and could limit our free cash flow and operational flexibility.
Risks Related to an Investment in Our Securities
At the time the Merger closed, we were unable to meet Nasdaq’s round lot requirement for initial listing and, as a result, are planning to list its securities on the OTC Markets, which is volatile and could reduce the liquidity of our securities.
At the time the Merger closed, we were unable to meet Nasdaq’s round lot requirement for initial listing and, accordingly, intend to trade on the OTC Markets, which has its own risks described in the following risk factor. We intend to subsequently attempt to uplist our securities on a national securities exchange (e.g., NYSE or Nasdaq) but may not be able to do so in a timely manner or ever.
Trading on the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
We have applied for our common stock and warrants to be quoted on the OTC Markets. Trading in stock quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock and warrants for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a stock exchange like the NYSE or Nasdaq. Accordingly, stockholders may have difficulty reselling any of their shares or warrants, and the lack of liquidity may negatively impact our ability to pursue strategic alternatives.
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We will incur significant increased expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition and results of operations.
We face increased legal, accounting, administrative and other costs and expenses as a public company that DePalma did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities DePalma has not done previously. For example, we created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, additional expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if management identifies a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of us. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs may require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
We are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected
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not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
The Manager has limited experience in assisting in the operation of a public company.
The Manager has a substantial role in the management of our company and has limited experience in the management of a publicly traded company. The Manager may not successfully or effectively manage our transition to a public company following the Business Combination that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of our company. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.
The Manager has significant influence over us.
The Manager controlled and may be deemed to beneficially own up to 92% of our common stock immediately following the Business Combination. As long as the Manager beneficially owns or controls a significant percentage of our outstanding voting power, it will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. The Manager’s influence over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our securities to decline or prevent security holders from realizing a premium over the market price for such securities.
The Manager’s interests may not align with the interests of our other security holders. See “—Risks Relating to the Externalization and Our Manager” for more detail.
Resales of the shares of our securities pursuant to the registration rights agreement could depress the market price of our securities.
The Manager controlled, and may be deemed to beneficially own, approximately 92% of our common stock immediately following the Business Combination. All such shares of our common stock held by the Manager may be registered for resale under the Securities Act pursuant to a registration rights agreement entered into at Closing of the Business Combination. As a result, there may be a large number of our securities sold in the market in the near future. These sales, or the perception in the market that the holders of a large number of securities intend to sell securities, could reduce the market price of our securities. Such sales of our securities or the perception of such sales may depress the market price of our securities. See “Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationships and Transactions with Directors, Executive Officers and Significant Stockholders—Registration Rights Agreement” for more information.
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Subsequent to the consummation of the Business Combination, we may be required to take writedowns or writeoffs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Although we have conducted due diligence on DePalma, we cannot assure you that this diligence revealed all material issues that may be present in DePalma’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of our control will not later arise. As a result, we may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the post-combination company or its securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
Risk Management & Strategy
We have processes for assessing, identifying, managing, mitigating, and responding to cybersecurity risks, which are built into our information technology (“IT”) function and included in our overall risk management system and processes and are designed to help protect our information assets and operations from internal and external cyber threats, protect employee and customer information from unauthorized access or attack, as well as secure our networks and systems. The underlying processes and controls of our cyber risk management program incorporate best practices and standards for cybersecurity and IT. These standards leverage a thorough set of guidelines and best practices to help establish a strong cybersecurity posture, which include physical, procedural and technical safeguards, response plans, and routine review of our policies and procedures to identify risks and refine our practices.
We have an annual assessment performed by a third-party specialist of the cyber risk management program, who has relevant expertise to manage cybersecurity risks. The annual risk assessment identifies, quantifies, and categorizes material cyber risks. In addition, we, in conjunction with third-party cyber risk management specialists, develop a Risk Mitigation Plan to mitigate such risks, and where necessary, remediate potential vulnerabilities identified through the assessment process.
Cybersecurity partners, including assessors, consultants, advisors, auditors, and other third-party service providers, are a key part of our cybersecurity risk management strategy and infrastructure. We partner with industry recognized cybersecurity providers leveraging third-party technology and expertise and engage with these partners to monitor and maintain the performance and effectiveness of IT assets, data and services. The cybersecurity partners provide services including, but not limited to configuration management, penetration testing, network protection and monitoring, remote monitoring and management, user activity monitoring, data backups management, infrastructure maintenance, cybersecurity strategy, and cyber risk advisory, assessment, and remediation.
Our cybersecurity program includes an incident response plan that includes relevant and critical members of management and third-party service providers alike. The team is responsible for assessing and managing cybersecurity incident response processes, response times, and communication plans in the event corrective actions and mitigation procedures are required to isolate and eradicate an incident.
We engage certain external parties, including a full-service managed IT service provider, to enhance our cybersecurity oversight.
In an effort to deter and detect cyber threats, we annually provide all employees with cybersecurity and prevention training, which covers timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, and mobile security, and educates employees on the importance of reporting all incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs.
Governance & Oversight
Our Audit Committee of the Board of Directors (the “Audit Committee”) is responsible for overseeing cybersecurity risk and periodically updates our board of directors on such matters. The Audit Committee receives periodic updates from management regarding cybersecurity matters and is notified between such updates regarding any significant new cybersecurity threats or incidents. We do not believe that there are currently any
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known risks from cybersecurity threats that are reasonably likely to materially affect us or our business strategy, results of operations or financial condition.
Management is responsible for the operational oversight of company-wide cybersecurity strategy, policy, and standards across relevant departments to assess and help prepare us to address cybersecurity risks.
Our Audit Committee oversees our cybersecurity risk exposures and the steps taken by management to monitor and mitigate cybersecurity risks, including oversight of third-party service providers with access to confidential or private information relating to our business. The cybersecurity stakeholders, including member(s) of management assigned with cybersecurity oversight responsibility and/or third-party consultants providing cyber risk services brief the Audit Committee on cyber threats and vulnerabilities identified through the risk management process, the effectiveness of our cyber risk management program, and the emerging threat landscape and new cyber risks. This includes necessary updates on our processes to prevent, detect, and mitigate cybersecurity incidents.
We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation. We acknowledge that the risk of a cyber incident is prevalent in the current threat landscape and that a future cyber incident may occur in the normal course of our business. However, prior cybersecurity incidents have not had a material adverse effect on our business, financial condition, results of operations, or cash flows. We proactively seek to detect and investigate unauthorized attempts and attacks against our IT assets, data, and services, and to prevent their occurrence and recurrence where practical through changes or updates to our internal processes and tools and changes or updates to our service delivery; however, potential vulnerabilities to known or unknown threats will remain. Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, investors, and additional stakeholders, which could subject us to additional liability and reputational harm. In response to such risks, we have implemented initiatives such as the cybersecurity risk assessment process and maintain an incident response plan. See Item 1A. “Risk Factors” for more information on our cybersecurity risks.
Our principal corporate office is located at 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831 where we lease offices. The phone number of this office is (203) 210-6500. We believe that our leased property is in good operating condition and is suitable for our current business operations.
We are currently involved in various legal proceedings incident to the ordinary course of our business, including collection matters with respect to certain loans. To the extent relevant, we intend to vigorously defend any outstanding claims and pursue our legal rights. Although the results of proceedings in which we are involved cannot be predicted with certainty, in the opinion of our management and based upon the advice of legal counsel there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision could result in a material adverse effect on our results of operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
We have applied for our common stock and warrants to be quoted on the OTC Markets and expect such securities to do so under the symbols “GATE” and “GATEW”, respectively. Prior to the consummation of the Business Combination and from August 8, 2023 to April 4, 2025, the Class A common stock, warrants and units of MAC, the public blank check company, were listed on The Nasdaq Capital Market under the symbols “GATE,” “GATEW,” and “GATEU,” respectively.
Holders
As of April 7, 2025, there were 209 holders of record of our common stock. The actual number of stockholders of our common stock is greater than the number of record holders and includes stockholders whose shares of common stock are held in street name by brokers and other nominees.
Dividend Policy
We have not paid any cash dividends on shares of our common stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of our board of directors.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities By the Issuer and Affiliated Purchasers.
None.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NEW MAC
Unless context otherwise requires, all references in this section to “we,” “us,”, “our”, or “New MAC” refer to Marblegate Capital Corporation Inc., a Delaware corporation and its wholly owned subsidiary MAC Merger Sub, Inc. (“Merger Sub”). References to our “management” or our “management team” refer to our officers and directors. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Annual Report on Form 10-K.
Overview
New MAC is a Delaware corporation, formed by MAC on February 2, 2023 (inception), to consummate the Business Combination. New MAC has adopted a fiscal year-end of December 31. New MAC was formed to be the surviving company in connection with the proposed Business Combination between MAC, MAM, DePalma I, and DePalma II. New MAC has no prior operating activities.
Proposed Business Combination and Recent Developments
On February 14, 2023, New MAC entered into the Business Combination Agreement with MAC, MAM, Merger Sub, DePalma I and DePalma II, pursuant to which MAC agreed to combine with the DePalma Companies in a series of transactions that will result in New MAC becoming a public company. Under the Business Combination Agreement, the aggregate consideration payable to the DePalma Companies at the closing of the Business Combination is based on a valuation of the DePalma Companies of approximately $750 million plus minimum cash anticipated to be required at closing for working capital purposes. The closing of the Business Combination is subject to the satisfaction or waiver of certain conditions defined in the Business Combination Agreement, including, among others, approval by MAC stockholders and the Nasdaq Stock Market’s approval for listing the common stock of New MAC issued in connection with the Business Combination. On April 5, 2025, New MAC, MAC, MAM, Merger Sub, DePalma I and DePalma II entered into a Waiver to the Business Combination to waive the approval by the Nasdaq Stock Market of New MAC’s initial listing application. Immediately upon Closing, which is expected to occur on April 7, 2025, MAC will delist from Nasdaq and merge with Merger Sub and New MAC, whereupon New MAC intends for its common stock and warrants to be quoted, as soon as possible following the consummation of the Business Combination, on the OTCQX ® Best Market operated on The OTC Market systems under the symbols “GATE” and “GATEW”, respectively. There is no guarantee, however, that a broker will make a market in New MAC’s securities or that trading thereof will continue on the OTC Market or otherwise. The Business Combination received the requisite stockholder approval on March 25, 2025, and closed April 7, 2025, following the fulfillment or waiver of other customary closing conditions.
Results of Operations
We incurred expenses for the fiscal years ended December 31, 2024 and 2023 for organization activities. We do not expect to generate any operating revenues until after the completion of the Business Combination.
For the year ended December 31, 2024, we incurred a net loss of $0.04 million related to accounting and other organization activities. For the period from inception to December 31, 2023, we incurred a net loss of $0.02 million related to legal expenses and other organization activities.
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Liquidity and Capital Resources
In connection with New MAC’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” the liquidity of New MAC raises a substantial doubt about its ability to continue as a going concern through the twelve months following the issuance of the financial statements. If New MAC is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, mandatory liquidation and subsequent dissolution. New MAC cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Contractual Obligations and Commitments
As of December 31, 2024 and 2023, we have no contractual obligations and commitments outside of the agreements to which we are party in connection with the Business Combination.
Off-Balance Sheet Arrangements
As of December 31, 2024 and 2023 we had no obligations, assets or liabilities which would be considered off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of expenses during the reporting period. Actual results could materially differ from those estimates.
Management has determined New MAC does not have any critical accounting policies or significant estimates.
Recent Accounting Pronouncements
See Note 2 in the sections entitled “Summary of Significant Accounting Policies—Recent Accounting Standards Not Yet Adopted” and “Summary of Significant Accounting Policies—Accounting Standards Recently Adopted” as referred to in the consolidated financial statements of New MAC included elsewhere in this Annual Report on Form 10-K for a discussion about accounting pronouncements recently adopted and recently issued not yet adopted.
Quantitative and Qualitative Disclosures about Market Risk
As of December 31, 2024 and 2023, we have no material exposure to market risk.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DEPALMA
Unless context otherwise requires, (i) all references in this section to “DePalma I” refer to DePalma Acquisition I LLC and its consolidated subsidiaries, (ii) all references in this section to “DePalma II” refer to DePalma Acquisition II LLC and its consolidated subsidiaries, and (iii) all references in this section to “DePalma,” “DePalma Companies,” “we,” “us” or “our” refer to DePalma I and DePalma II. The following discussion and analysis is intended to help the reader understand results of operations and financial condition of the DePalma Companies. This discussion and analysis is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and notes thereto of DePalma I, and consolidated financial statements and notes thereto of DePalma II, in each case included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to DePalma’s plans and strategy for DePalma’s business, includes forward-looking statements that involve risks and uncertainties. DePalma’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” The objective of this section is to provide investors an understanding of the financial drivers and levers in DePalma’s business and describe the financial performance of the business.
Overview
We are comprised of two companies primarily engaged in the NYC taxi medallion business, namely DePalma I and DePalma II. The DePalma Companies were formed as two Delaware limited liability companies on February 23, 2018 and commenced operations on March 29, 2018. Our core philosophy has been to work with key stakeholders in the NYC taxi industry to help facilitate an industry-wide restructuring of historical medallion lending practices and to standardize a key piece of the NYC mobility infrastructure. The DePalma Companies’ goal is to achieve superior risk adjusted returns for its shareholders by maintaining a focus on capital preservation, current revenues and capital appreciation. The DePalma Companies will continue to act in a manner consistent with maximizing the underlying value of a medallion and improving the health of the taxicab industry.
DePalma I is focused on acquiring, restructuring and owning medallion loans collateralized by NYC taxi medallions, whereas DePalma II is engaged in the business of owning and investing in taxi medallions as well as redeploying such medallions over time into the NYC taxi medallion lending and fleet operations market. Further, during the year ended December 31, 2024, DePalma II began selling medallions with seller financing attached. In February 2019, DePalma II entered into a non-controlling joint venture with Kirie Eleison Corp (“Kirie Eleison”), an unaffiliated strategic partner, and formed Septuagint Solutions LLC (“Septuagint”), in which DePalma II holds a 50% interest and will have the right to exercise governance control once 85% of DePalma II’s Owned Medallions as of November 1, 2019 have been leased to Septuagint. Septuagint is a fully functioning medallion-leasing agent and taxi fleet operating company based in Long Island City, Queens, New York, licensed by the TLC as an agent/broker for managing NYC taxi medallions, formed for the purpose of operating and servicing taxicab medallions. The formation of Septuagint also allowed DePalma II to lease the medallions for its fleet operation business. Given the non-controlling nature of the relationship between DePalma II and Septuagint, Septuagint’s financial statements have not been consolidated with DePalma II. Summarized financial information of Septuagint is presented below within this discussion and analysis.
Septuagint is governed by an Operating Services Agreement, dated October 15, 2019 (the “OSA”). On September 26, 2024, we provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie
Eleison signed an amendment to the OSA that eliminated Septuagint’s exclusive right under the OSA to lease DePalma II’s medallions and provided for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down
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Septuagint. The amendment allows DePalma II to either wind down Septuagint or have Kirie Eleison transfer its ownership interest in Septuagint to DePalma II or a designee. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. Accordingly, there have been no quantitative and qualitative changes to Septuagint’s ownership or Septuagint’s organizational or operating agreements during this transition period, as the parties are continuing to operate under the original OSA, as amended on October 17, 2024, which, as noted, only removed the exclusivity provisions. If DePalma II winds down Septuagint, DePalma II would no longer lease any of its Owned Medallions through Septuagint. DePalma II intends to continue to pursue its leasing strategy by leasing Owned Medallions either through Septuagint or through a newly formed, wholly owned subsidiary of DePalma II. DePalma II intends to enter into non-exclusive commercial agreements with third party fleets to assist the company in leasing medallions. The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025. As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
On November 15, 2024, DePalma II entered into a non-exclusive servicing agreement (the “Consulting Agreement”) with an unrelated taxi fleet (the “Consultant”) to provide operational support and access to physical garage and office space for our medallion leasing business. DePalma II and the Consultant entered into the Consulting Agreement primarily to assist in establishing and growing DePalma II’s taxi fleet operations. In connection with the Consulting Agreement, DePalma II, as lessee, entered into a lease agreement for taxicab business and garage space to run its taxicab operations. The Consulting Agreement and garage lease each have an initial term of five years, with the garage lease having an additional renewal option available to DePalma II.
We believe we are the largest NYC taxi medallion lender with a medallion loan portfolio collateralized by approximately 1,760 NYC taxi medallions as of December 31, 2024. In addition to our ownership of medallion loans, we believe we are also the largest owner of NYC taxi medallions, with 2,061 Owned Medallions as of December 31, 2024. As of December 31, 2024, Septuagint utilized 231 of our Owned Medallions and managed a fleet of approximately 231 vehicles and 261 drivers via a TLC-licensed fleet.
Prior to the Business Combination, the DePalma Companies are managed and directly owned by their respective members, which in turn are the DePalma Equityholders managed by the Manager, a firm founded in 2009 to make secondary investments in event-driven, distressed credit, primarily in the U.S. middle market. Our Manager is also the managing member of the Sponsor. DePalma I holds its assets, mainly its medallion loans, either directly or indirectly through certain trusts it has established, whereas DePalma II holds its assets, primarily taxi medallions, indirectly through various holding entities that have been formed for the sole purpose of owning taxi medallions. Due to some member sensitivities around effectively connected income, upon foreclosure of a loan or surrender agreement, the underlying medallion collateral for the loan will be distributed out (in-kind) by DePalma I to the respective members and their respective feeders who then recontribute the medallion collateral (in-kind) into DePalma II, which is less sensitive to effectively connected income.
Over time, we plan to transition our portfolio of non-performing loans and Owned Medallions by selling medallions, primarily with seller financing attached, which will have the impact of increasing interest income from loans. Consistent with the DePalma Companies’ strategy over the last several years, and in response to industry dynamics, we may choose to lease Owned Medallions until sufficient market demand exists to execute a subsequent sale either for cash or with seller financing. The DePalma Companies intend to conduct these activities with the primary purposes of protecting the value of the original investment while enabling the DePalma Companies to achieve their objectives of capital appreciation and interest income from loans.
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DePalma II continues to monitor Septuagint’s ability to pay its obligations when due which was notably impacted by the COVID-19 pandemic. As of December 31, 2024, DePalma II has approximately, $15.3 million due and payable from Septuagint, inclusive of $3.4 million in working capital notes inclusive of PIK interest, $11.7 million in medallion lease payments and $0.2 million in other reimbursable expenses. In light of Septuagint’s current cash constraints, Septuagint continues to delay payment on its medallion leases. In addition, DePalma II enters into vehicle lease agreements with Septuagint as lessee. During the COVID-19 pandemic, many drivers became unable to repay the amount due to Septuagint under separate driver lease contracts. As a result, Septuagint became unable to make payments to DePalma II for its vehicle leases. To address this, DePalma II implemented a payment holiday for Septuagint from February 2020 to April 30, 2022, reducing collections during this period. For the fiscal year ended December 31, 2022, DePalma II received payments only in the last three quarters following the end of the payment holiday. DePalma II has continued to receive payments through December 31, 2024, totaling $7.1 million. If the OSA is terminated, no further collections are anticipated. Currently, DePalma II does not have an anticipated date for when Septuagint will resume its medallion lease payment obligations. DePalma II’s and Septuagint’s management each currently believe that the continued delay of medallion lease payments is the best course of action because it allows Septuagint to retain such payments for working capital, which is primarily deployed to Septuagint’s workforce at this time. In order for Septuagint to grow its fleet consistent with its growth strategy, Septuagint will need to attract and retain additional drivers. Accordingly, Septuagint remains focused on the goal of achieving profitability by attracting and retaining additional drivers over time, at which point medallion lease payments could recommence. However, the market for drivers remains fluid and subject to general economic conditions. As a result, DePalma II is currently unable to determine when, if at all, Septuagint’s fleet will achieve profitability. In the event that our relationship with Septuagint is terminated, we do not expect to be repaid on the medallion lease payments or the working capital notes that mature in June 2026.
Financial Overview
For the fiscal years ended December 31, 2024 and 2023, DePalma I generated total revenues of $20.5 million and $20.2 million, income from operations of $11.2 million and $9.3 million, other income of $3.2 million and $36.4 million, and net income of $14.4 million and $45.7 million, respectively. Other revenue includes payments made from the Reserve Fund. Through December 31, 2024, we have received approximately $34 million of revenue from MRP+ loans, of which 28% of such payments were made from the Reserve Fund. As of December 31, 2024, DePalma I had loans held for investment, at fair value of $278.6 million. For the fiscal years ended December 31, 2024 and 2023, DePalma I had gross collections of $36 million and $75.7 million, respectively, where 40% and 74% of such collections were related to payments made on account of restructurings or resolutions of medallion loans. The decrease in gross collections was due to significantly less borrowers entering the MRP+ program during the fiscal year ended December 31, 2024, as compared to the fiscal year ended December 31, 2023. The fiscal year ended December 31, 2023 included upfront payments from a substantial number of borrowers entering the MRP+ program. For the fiscal year ended December 31, 2024, DePalma I realized a year-over-year decrease of $0.9 million in regular monthly payments (which includes interest income and amortization) from borrowers who restructured in connection with the MRP+ program, a $25.9 million year-over-year decrease in upfront principal reduction payments received in connection with MRP+ closings, and a $1.6 million year-over-year increase in payments received from the Reserve Fund in connection with delinquent MRP+ loans. Additionally, during the fiscal year ended December 31, 2024, DePalma I realized a $8.9 million year-over-year increase in non-MRP+ restructuring activity from an escalation of enforcement and collection activities against defaulted loans that did not participate in the MRP+ program. The 52% decrease in gross collections during the fiscal year ended December 31, 2024 as compared to the same period in the prior year was primarily attributable to significantly less borrowers entering the MRP+ program during the fiscal year ended December 31, 2024, as compared to the fiscal year ended December 31, 2023.
With respect to delinquencies, as of December 31, 2024 and 2023, the percentage of NYC loans by medallion count in default were 35% and 45%, respectively. The decrease in delinquencies at December 31, 2024 was largely due to the foreclosure of a significant portion of non-performing loans during the year ended December 31, 2024.
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For the fiscal years ended December 31, 2024 and 2023, the DePalma Companies completed restructurings of loans collateralized by 139 and 268 NYC medallions, respectively. The substantial decrease in restructurings in 2024 was due to MRP+ restructurings occurring in 2023.
For the fiscal years ended December 31, 2024 and 2023, the DePalma Companies foreclosed on 254 and 739 medallions, respectively. The decrease in the pace of foreclosures is due to the reduced size of the non-performing loan pool as the Company has foreclosed on a significant portion of its non-performing loans.
Business Combination and Public Company Costs
On February 14, 2023, MAC entered into the Business Combination Agreement, with the Manager, New MAC, Merger Sub, DePalma I and DePalma II. Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, the Business Combination was effected as follows: (i) immediately prior to the consummation of the transactions contemplated by the Business Combination Agreement, New MAC and the DePalma Companies effected the Pre-Closing Transactions, resulting in New MAC becoming the owner of approximately 83.7% of the DePalma Companies, with the remaining 16.3% continuing to be owned by certain current limited partners of the DePalma Companies; and (ii) Merger Sub merged with and into MAC in the Merger, with MAC surviving as a wholly owned subsidiary of New MAC. As a result of the Business Combination, New MAC became a new publicly-traded company.
The Business Combination closed on April 7, 2025, following the receipt of the requisite stockholder approval on March 25, 2025. At the closing of the Business Combination, the aggregate merger consideration paid to the holders of capital stock of the DePalma Companies was $638.9 million, which consisted of 63,892,449 newly issued shares of New MAC Common Stock.
As a consequence of the Business Combination, New MAC became the owner of approximately 83.7% of the DePalma Companies, with the remaining 16.3% continuing to be owned by certain current limited partners of the DePalma Companies, and New MAC became an SEC-registered and publicly-listed company. As a result, New MAC may be required to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. New MAC expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Key Factors Affecting Operating Results
The DePalma Companies’ performance and future success depends on several factors that present significant opportunities, but also pose risks and challenges, including those discussed below and in the section entitled “Risk Factors.”
DePalma I’s balance sheet consists substantially of loans secured by taxicab medallions, which historically have been associated with higher than average delinquency rates and defaults as substantially all of the loans were acquired after they had defaulted. As of December 31, 2024, we held $347 million in aggregate principal of NYC taxicab medallion loans, of which approximately 65% of Non-MRP+ Loans by medallion count were in default. Defaulted loans may result in foreclosure or sale at auction of the medallions securing such loans, which may result in us collecting less interest income over the original stated life of the loan. For many loans in default we may attempt to restructure the debt to bring it out of default or attempt to recover meaningful amounts in other ways, however these methods may not be successful. If we fail to realize enough value on loans in default to cover the price we paid to acquire the loans in the secondary market, then our results of operations could be adversely impacted. The actual rates of delinquencies, defaults, repossessions, and losses on these loans could be more dramatically affected by a general economic downturn. DePalma II’s balance sheet consists substantially of taxicab medallions which are reported at cost and evaluated for impairment. As of December 31, 2024, DePalma
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II held an aggregate of 2,210 taxicab medallions with a carrying value of $345.4 million. The value of our taxicab medallion and loan portfolio, and the taxi industry in general, is susceptible to risk of loss resulting from, including but not limited to, changes in taxicab industry regulations that result in the issuance of additional medallions or increases in the expenses involved in operating a medallion. Our business is heavily concentrated in medallion collateralized lending and owned medallions, including leasing medallions to fleets or other drivers. As a result, we are more susceptible to fluctuations and risks particular to the New York City taxicab industry than a more diversified company. For example, our business is particularly sensitive to macroeconomic conditions that affect the U.S. economy, travel and tourism, as well as those that affect the City of New York. During periods of economic slowdown, delinquencies, defaults, repossessions, and losses generally increase, and may reduce discretionary spending in areas such as recreation and tourism, which would have a detrimental effect on the taxicab industry, which would in turn impact the value of taxicab medallions. In addition, changing consumer and driver preferences about modes of transportation and/or other alternatives for drivers (such as ride-share) could have an impact on borrowers’ ability to service debt on a medallion collateralized loan which could impact the value of our owned medallions and the medallions underlying the loans and the ability of borrowers to pay off medallion loans, both of which would adversely affect our results of operations.
MRP+
As of December 31, 2024, 36% of our current medallion loans based on the number of NYC taxi medallions that are either collateral to medallion loans or that we own, have participated in the MRP+, which is a Supplemental Loan Deficiency Guaranty program that was established to benefit participating NYC taxi medallion loan lenders by providing municipal credit support in the event of defaults by eligible and participating taxi medallion owners. As part of this initiative, the Reserve Fund was established in 2022. Initially funded with $49 million, the City of New York’s obligations to replenish the Reserve Fund is subject to and dependent upon appropriations being made from time to time by the New York City Council for such purpose. Any funding in excess of the initial $49 million is not legally required and is not committed by the City of New York and is subject to future appropriations by the New York City Council. The initial funding amount may fall short and, until the program is closed and all participants and statistics are quantified, we are unable to estimate how long the initial $49 million grant will last. The Reserve Fund balance is approximately $37 million as of December 31, 2024.
Under the MRP+, eligible medallion loans with a principal balance of $200,000 or more will be reduced to an initial principal balance of $200,000, and further reduced to $170,000 per medallion (after a $30,000 per medallion principal reduction payment in the form of a grant from the Reserve Fund). Existing medallion loans with a principal balance of $200,000 or less will have a principal balance equal to the existing principal balance reduced by (i) $30,000 per medallion and (ii) further reduced by 5% of the post-paydown principal balance per medallion resulting from (i) above. In no event will the principal balance of any eligible medallion loan exceed$170,000 per medallion. A reduction in the outstanding principal balance to the restructured principal balance is recorded as a writedown of principal in which no cash is received, at which time a loss is recorded based on the reduction in principal balance. The fair value of loans before and after entering the MRP+ program have seen minimal immediate change in fair value due to DePalma I’s fair value accounting policies for MRP+ and Non-MRP+ loans and the historical valuations of underlying NYC medallion collateral for the period of time in which the MRP+ program has existed.
Changes in Interest Rates
Our exposure to changes in interest rates primarily relates to the interest income generated by our medallion loans. In addition, the value of our MRP+ loans is determined by applying a discount to the anticipated future cash flows of the underlying loans. The two factors determining the discount are the movement in interest rates and a risk premium for likelihood of transaction close. A change in interest rates may impact the valuation of MRP+ loans.
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Our profitability may be directly affected by interest rate levels and fluctuations in interest rates. As interest rates change, our gross interest rate spread on loans will either increase or decrease because the rates potentially charged on future seller financings provided in medallion sales are limited by market and competitive conditions, restricting our ability to pass on increased interest costs to the borrower.
Changes in interest rates historically have not had an identifiable impact on our interest income, gross income spread, or our ability to pass on interest costs to the borrower. The majority of our loan portfolio historically has been non-performing and has not made regular interest payments. The majority of our current interest income is from the MRP+ loans, which have a fixed interest rate of 7.3%. Additionally, DePalma I and DePalma II currently have no external borrowings, so fluctuations in interest rates have not historically impacted gross income spread or interest expense.
As the impact of interest rates has generally not been material to our historical operating results, we have not entered into any interest rate swaps or other hedging transactions to mitigate such risks. However, we may do so in the future if interest rates increase and our exposure to interest rates becomes more significant. Furthermore, with respect to our assets that are not MRP+ Loans, which consist of NYC Non-MRP+ Loans (approximately 65% of which are in default) and Owned Medallions, we believe that we are able to mitigate the impact from any rising interest rates as we are generally able to pass on such increased interest rate costs to the borrowers. For example, with respect to such assets, we generally expect to either refinance the defaulted loans into new medallion loans or restructure the existing loans with new loan terms, in each case at a rate that would reflect the then current market interest rate. As a result, we believe that we have the flexibility to adjust our interest rate exposure with respect to some of our asset portfolio.
While we continue to monitor the interest rate environment and seek to mitigate the impact of interest rates, including potentially implementing any market based hedging strategies, we cannot provide assurance that the impact of changes in interest rates can be successfully mitigated.
Key Components of Results of Operations
Each of the DePalma Companies has historically operated and managed its business in one reportable segment. The following discussion of results of operations are based on each of the DePalma Companies’ reportable segment for the periods presented.
Revenue
DePalma I’s revenue has historically been primarily comprised of interest income from the taxicab medallion loans and any interest earned from cash on hand. All of the medallion loans are collateralized by one or more taxicab medallions, with a significant portion of the loans participating in the MRP+ program established by the City of New York and the New York City Taxi and Limousine Commission (“TLC”). These loans are nonrecourse loans that do not carry a personal guarantee, but rather have credit support from funds provided by the City of New York. Medallion loans that do not participate in the MRP+ program (or its predecessor, MRP) are often further secured by personal guarantees of the borrowers, shareholders or equity members and, in some cases, collateralized with additional collateral such as real estate of the borrowers. In addition, DePalma I’s other revenue has historically been comprised of restructuring fees borrowers are requested to pay as part of the MRP+ program, payments received from the Reserve Fund as they are not contractual payments made by the borrowers, fees received in connection with non-MRP+ restructurings and settlements, and the resolution of certain litigation and bankruptcy proceedings, as discussed further below.
DePalma II’s revenue has historically been nominal due to the fact that the majority of the Unregistered Medallions have not yet been placed in operation through Septuagint or otherwise, however more recently, and during the fiscal year ended December 31, 2024, has recognized interest income from originating medallion loan financings and from cash on hand.
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Operating Expenses
DePalma I’s operating expenses have historically been comprised of (1) service fee expenses, consisting of fees paid to its third-party servicer, Field Point, for servicing its medallion loans, (2) professional fees, consisting of fees for third-party professional services, including consulting, legal, accounting and lobbying, as well as (3) general and administrative fees, consisting of certain fees for third-party professional services and general and administrative expenses.
DePalma II’s operating expenses have historically been comprised of (1) depreciation expense on taxicab vehicles (2) professional fees, consisting of fees for third-party professional services, including consulting, legal, accounting and lobbying, (3) general and administrative fees, consisting of fees for third-party professional services, medallion administration costs, and general and administrative expenses, as well as (4) fleet servicing fees, consisting of net expenses incurred as a result of the Consulting Agreement.
The DePalma Companies expect their expenses, in particular professional fees and general and administrative fees, to increase for the foreseeable future as a result of their parent entity, New MAC, operating as a public company after the completed Business Combination, thereby requiring compliance with the rules and regulations of the SEC. As a result, the DePalma Companies expect an increase in legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services.
Other Income
DePalma I treats the loans purchased as a pool of loans in its books and records. DePalma I’s purchases of taxicab medallion loans have been transacted at significant discounts to par value and DePalma I has been working to resolve those loans. Resolution of the loans to date have resulted from (i) loan principal payments (at agreed upon amounts, either at or below par) and/or (ii) foreclosure and possession of collateral (taxi medallions). In either case, DePalma I recognizes a gain or loss which is the difference between the sale proceeds of a loan, or collateral value less foreclosure costs in a foreclosure, and the carrying value. Gains on loans held for investment may derive from principal payments in cash or collateral that exceed the carrying value of the principal amount that was relieved. Losses on loans held for investment may occur upon a reduction in principal balance in a restructuring, including when loans enter the MRP+ program. For foreclosed loans, the difference between fair value of the collateral less foreclosure costs compared to the loan carrying value is recorded as a gain or loss. DePalma I and DePalma II record changes in fair value on loans held for investment as a result of changes in the fair value of loans collateralized by taxi medallions, as applicable, which are primarily generated through changes in medallion pricing and changes in unpaid principal balances on outstanding loans. Prior period changes in fair value have been included in the carrying value of such loans up until foreclosure. DePalma II recognizes an in-kind gain or loss upon the reinstatement of certain taxi medallion loans and transfer of medallion collateral to DePalma I, and also recognizes a gain or loss from medallion sales to third-parties.
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Results of Operations of DePalma I
Comparison of the Fiscal Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations of DePalma I for the fiscal years ended December 31, 2024 and 2023:
| For the Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue: |
||||||||||||||||
| Interest income |
$ | 14,672 | $ | 15,186 | $ | (514 | ) | (3 | )% | |||||||
| Other revenue |
5,788 | 5,012 | 776 | 15 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
20,460 | 20,198 | 262 | 1 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Service fee expense |
4,450 | 4,540 | (90 | ) | (2 | )% | ||||||||||
| Professional fees |
4,582 | 6,124 | (1,542 | ) | (25 | )% | ||||||||||
| General and administrative |
202 | 255 | (53 | ) | (21 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
9,234 | 10,919 | (1,685 | ) | (15 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from operations |
$ | 11,226 | $ | 9,279 | $ | 1,947 | 21 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income: |
||||||||||||||||
| Gains on loans held for investment, net |
3,168 | 36,398 | (33,230 | ) | (91 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income |
3,168 | 36,398 | (33,230 | ) | (91 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 14,394 | $ | 45,677 | $ | (31,283 | ) | (68 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | Percentage not meaningful |
Revenue
Interest income. Interest income of DePalma I of $14.7 million decreased by $0.5 million, or 3%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was due to a $2.9 million decrease in interest income from MRP+ program driven by a $1.3 million decrease from borrower defaults, a $0.2 million decrease from borrower payoffs, and a $1.4 million decrease due to the initial booking of MRP+ loans and borrowers entering the program during the fiscal year ended December 31, 2023. The decrease in interest income from the MRP+ program was partially offset by a $0.5 million increase in interest in money market funds, as well as a $1.9 million increase in payments received on Non-MRP+ loans driven by more borrowers performing on their restructured obligations.
Other revenue. Other revenue of DePalma I of $5.8 million increased by $0.8 million, or 15%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. $1.0 million of such increase was due to an increase in payments from the Reserve Fund due to a larger number of MRP+ borrowers becoming delinquent, which was partially offset by a $0.2 million decrease due to a decrease in restructuring related fees from Non-MRP+ borrowers.
Operating Expenses
Service fees. Service fees of DePalma I of $4.5 million decreased by $0.1 million, or 2%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was primarily due to a decrease in charges related to third party servicing activities from Field Point.
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Professional fees. Professional fees of DePalma I of $4.6 million decreased by $1.5 million, or 25%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was due to a $0.8 million decrease in legal fees and a $0.7 million decrease in other professional fees.
General and administrative fees. General and administrative fees of DePalma I of $0.2 million decreased by $0.05 million, or 21%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was due to reductions in DePalma I’s share of third party administration costs resulting from DePalma I’s decrease in net asset value.
Other Income
For the fiscal year ended December 31, 2024, principal payments were received on 1,155 loans secured by 1,494 medallions and DePalma I foreclosed on 254 medallions. For the fiscal year ended December 31, 2023, principal payments were received on 1,566 loans secured by 1,999 medallions and DePalma I foreclosed on 734 medallions.
Gains on loans held for investment, net. Gains on loans held for investment, net of DePalma I of $3.2 million decreased by $33.2 million, or 91%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. $27.7 million of such decrease was due to a $13.2 million decrease in gains from cash paydowns and a $14.5 million decrease from medallion foreclosures. Further, $5.5 million of such decrease was due to a net decrease in changes in fair value on loans held for investment, of which $3.8 million and $1.7 million was from MRP+ loans and Non-MRP loans, respectively. The decrease in changes in fair value on MRP+ loans was driven by a decrease in fair value of MRP+ loans during 2024 of $0.5 million due to a decrease in value of $1.0 million from DePalma I extending the maturity date used to value MRP+ loans offset by a $0.5 million increase in value due to a decrease in the discount rate applied to loan cash flows in accordance with decreases in market discount rates. For the fiscal year ended December 31, 2023, there was an increase in the value of MRP+ loans of $3.3 million driven by a reduction in execution risk of loans moving into the MRP+ program and successful implementation of the program. The decrease in changes in fair value on Non-MRP+ loans was due to a revaluation of loans in non-NYC jurisdictions due to a decrease in the value of the underlying medallion collateral of Chicago medallion loans based on market observations during the fiscal year ended December 31, 2024.
Results of Operations of DePalma II
Comparison of the Fiscal Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations of DePalma II for the fiscal years ended December 31, 2024 and 2023:
| For the Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue: |
||||||||||||||||
| Interest income |
$ | 544 | $ | 1 | $ | 543 | * | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
544 | 1 | 543 | * | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Depreciation expense |
1,884 | 1,338 | 546 | 41 | % | |||||||||||
| Professional fees |
2,918 | 1,600 | 1,318 | 82 | % | |||||||||||
| General and administrative |
341 | 151 | 190 | 126 | % | |||||||||||
| Fleet servicing fees, net |
542 | — | 542 | * | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
5,685 | 3,089 | 2,596 | 84 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
$ | (5,141 | ) | $ | (3,088 | ) | $ | (2,053 | ) | * | ||||||
|
|
|
|
|
|
|
|
|
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| For the Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Other income: |
||||||||||||||||
| Gains from sale of medallions |
83 | — | 83 | * | ||||||||||||
| Gains from in-kind medallion transfers, net — related parties |
19 | 34 | (15 | ) | (44 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income |
102 | 34 | 68 | * | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (5,039 | ) | $ | (3,054 | ) | $ | (1,985 | ) | 65 | % | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | Percentage not meaningful |
Revenue
Interest income. Interest income was $0.5 million for the fiscal year ended December 31, 2024. The increase in interest income was due to a $0.4 million increase in interest from cash on hand, and a $0.1 million increase from DePalma II beginning to originate medallion loan financings.
Operating Expenses
Depreciation expense. Depreciation expense of DePalma II of $1.9 million increased by $0.5 million, or 41%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such increase was due to the purchase and placement of additional taxicab vehicles in service.
Professional fees. Professional fees of DePalma II of $2.9 million increased by $1.3 million, or 82%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such increase was due to an increase in legal expenses related to the increase of Owned Medallions that went through the TLC transfer process.
General and administrative fees. General and administrative fees of DePalma II of $0.3 million increased by $0.2 million, or 126%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such increase was a result of an increase in DePalma II’s share of third party administration costs due to DePalma II’s increase in net asset value.
Fleet servicing fees, net. Fleet servicing fees, net was $0.5 million for the fiscal year ended December 31, 2024. Such increase was due to DePalma II entering into the fleet servicing Consulting Agreement commencing November 15, 2024.
Other Income
Gains from sale of medallions. Gains from sale of medallions was $0.1 million for the fiscal year ended December 31, 2024. This was due to DePalma II beginning to initiate medallion sales to third parties during the period.
Gains from in-kind medallion transfers, net — related parties. Gains from in-kind medallion transfers, net — related parties of $0.02 million decreased by $0.02 million, or 44%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. This decrease was due to medallions contributed in-kind to DePalma I as a result of taxi medallions being converted back and reinstated to promissory notes having higher carrying values within DePalma II before contributing in-kind to DePalma I comparatively to the preceding period as the medallions are contributed to DePalma I at fair value.
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Summarized Financial Information of Septuagint
DePalma II’s investment in Septuagint is accounted for under the equity method to which DePalma II has elected the fair value option. As of December 31, 2024 and 2023, the fair value of DePalma II’s equity investment in Septuagint was $0.
DePalma II and Septuagint have historically, and continue to, conduct related party transactions with each other. The most notable transactions include, but are not limited to, various working capital promissory notes issued from DePalma II to Septuagint in an aggregate amount of $3.4 million inclusive of PIK interest through December 31, 2024. These working capital notes were amended in June 2023 to extend the maturity date of principal and accrued interest to June 2026. As of December 31, 2024 and 2023, the fair value of the working capital notes are determined to be $0 based on DePalma II’s assessment of its historical collections and expected future collections. Furthermore, DePalma II does not expect to receive future payment related to the working capital notes upon termination of the OSA. In addition, DePalma II leases medallions and taxicab vehicles to Septuagint that Septuagint may use in its taxicab fleet operations. The monthly rental payment for each medallion is $1,500 per month, and the monthly rental payment for taxicab vehicles varies by lease. Please refer to the financial statements of DePalma II included within this Annual Report on Form 10-K for additional information on DePalma II’s transactions with Septuagint and resulting impact to DePalma II’s financials statements, financial condition, and results of operations.
The primary factors that have limited the number of taxis in Septuagint’s fleet are availability of cars, the availability of drivers at certain times of the year, a desire by Septuagint to grow the fleet in a methodical manner that would not require the need for a capital infusion, and Septuagint’s need to scale up its operations as the fleet grows. In addition, Septuagint needs access to medallions in order to grow its fleet. DePalma II has discretion to determine, in its business judgment, the pace at which it will deploy its medallions for lease to Septuagint.
The following tables provide unaudited summarized financial information of the assets, liabilities, and results of operations of Septuagint for the periods presented:
| Summary Financial Data (unaudited): | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Current assets |
$ | 2,232 | $ | 2,007 | ||||
| Noncurrent assets |
4,744 | 4,430 | ||||||
| Current liabilities |
13,539 | 7,659 | ||||||
| Noncurrent liabilities |
7,553 | 7,265 | ||||||
| For the Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Revenues |
$ | 12,157 | $ | 8,608 | ||||
| Gross profit |
7,428 | 5,161 | ||||||
| Net loss |
(3,390 | ) | (3,627 | ) | ||||
Financial Condition
The Manager and the members of the DePalma Companies evaluate the financial condition and capital requirements of the DePalma Companies at the DePalma I and DePalma II levels, as well as on a combined basis. Historically, dependent upon the working capital needs of each of the DePalma Companies, DePalma I will, at times, advance working capital on behalf of DePalma II, and DePalma II will reimburse DePalma I in a timely manner. In addition, DePalma I may, via its Members, distribute capital to DePalma II that is not reimbursable to DePalma I. In addition, upon foreclosure of a loan or surrender agreement, the underlying medallion collateral
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for the loan will be distributed out (in-kind) by DePalma I to the respective members and their respective feeders who then recontribute the medallion collateral (in-kind) into DePalma II, consistent with the objective of each of the DePalma Companies. These in-kind transfers are largely dependent upon the activities of DePalma I, most notably including the frequency at which it obtains medallions secured as loan collateral. These in-kind transfers can have a significant impact on the reported amount of assets on each of the DePalma Companies’ balance sheets, as well as the resulting assessments of financial condition by the Manager and the members on each of the DePalma Companies. During the fiscal years ended December 31, 2024 and 2023, DePalma I, through its members, made distributions of underlying medallion collateral in-kind to DePalma II of approximately $49.1 million and $130.4 million, respectively.
On a combined basis, the DePalma Companies’ most notable changes in financial condition from December 31, 2023 to December 31, 2024 include an increase in intangible assets of approximately $44.8 million, a decrease in loans held for investment, at fair value of approximately $53.8 million, and a decrease in cash and cash equivalents of approximately $1.1 million. The increase in intangible assets was driven by contributions received on the medallion collateral (in-kind) into DePalma II resulting from medallion foreclosures. The decrease in loans held for investment, at fair value was driven by cash paydowns received and medallion foreclosures. The decrease in cash and cash equivalents was driven by purchases of Non-MRP+ loans by DePalma I of $2.8 million, payments for capital redemptions of approximately $22.5 million to the members of DePalma I, vehicle purchases by DePalma II of $1.1 million, and Non-MRP+ loan originations of DePalma II of $1.6 million, and was partially offset by cash flows from operations of DePalma I of $10.4 million, and payments received by DePalma I on its loans held for investment, at fair value of approximately $16.7 million.
Liquidity and Capital Resources
Cash Flows of DePalma I
DePalma I uses traditional measures of cash flow, including net cash provided by its operating activities, net cash provided by its investing activities, and net cash used in financing activities, as well as cash available for distribution to evaluate its periodic cash flow results. As of December 31, 2024 and 2023, DePalma I had available cash and cash equivalents of $2.4 million and $35.7 million, respectively, which are available to fund its operations. Based on its current expectations, DePalma I believes that its existing cash and cash equivalents, together with cash provided by operating and investing activities, will be sufficient to fund its working capital requirements for at least the next twelve months.
Comparison of the Fiscal Years Ended December 31, 2024 and 2023
The following table reflects the changes in cash flows of DePalma I for the fiscal years ended December 31, 2024 and 2023:
| For the Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net cash provided by operating activities |
$ | 10,444 | $ | 7,776 | $ | 2,668 | 34 | % | ||||||||
| Net cash provided by investing activities |
13,835 | 58,144 | (44,309 | ) | (76 | )% | ||||||||||
| Net cash used in financing activities |
(57,650 | ) | (44,450 | ) | (13,200 | ) | 30 | % | ||||||||
| Net (decrease) increase in cash and cash equivalents |
(33,371 | ) | 21,470 | (54,841 | ) | (255 | )% | |||||||||
| Cash and cash equivalents, at beginning of period |
35,735 | 14,265 | 21,470 | 151 | % | |||||||||||
| Cash and cash equivalents, at end of period |
2,364 | 35,735 | (33,371 | ) | (93 | )% | ||||||||||
| * | Percentage not meaningful |
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Operating Activities
The increase to net cash provided by operating activities was $2.7 million, or 34% for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such increase was driven by a decrease in professional fees of $1.5 million and loan payments received in advance of $1.4 million.
Investing Activities
The decrease to net cash provided by investing activities was $44.3 million, or 76%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was due to a reduction in loans entering the MRP+ program in the preceding period.
Financing Activities
The increase to net cash used in financing activities was $13.2 million, or 30%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. This increase was driven by distributions made to DePalma II of $35.2 million through its Members, partially offset by a decrease in distributions to its Members’ at the discretion of the Investment Manager of $22.0 million.
Cash Flows of DePalma II
DePalma II uses traditional measures of cash flow, including net cash provided by operating activities, net cash used in investing activities, and net cash provided by financing activities, as well as cash available for distribution to evaluate its periodic cash flow results. As of December 31, 2024 and 2023, DePalma II had available cash and cash equivalents of $32.8 million and $0.5 million, respectively, which are available to fund its operations. Based on its current expectations, DePalma II believes that its existing cash and cash equivalents, together with cash provided by operating and financing activities, will be sufficient to fund its working capital requirements for at least the next twelve months.
The table below sets forth the cash flows due and received by Septuagint for the periods presented. The taxi industry is competitive and there are uncertainties around our cash flows. There is no guarantee that Septuagint will be able to continue making cash vehicle payments or be able to make payments on either medallion leases or working capital notes in the future. The business of operating a taxi fleet is competitive. Septuagint competes with other established fleets, technology enabled ride sharing apps, and public transit among other competitors. On September 26, 2024, we provided notice to Kirie Eleison of its default under certain provisions of the OSA, including a provision requiring Kirie Eleison to lease all of the medallions owned by Kirie Eleison and its affiliates and transfer their medallion leases to Septuagint. Pursuant to the OSA, Kirie Eleison had 30 days from the date of the notice to cure its default. However, on October 17, 2024, the DePalma Companies and Kirie Eleison signed an agreement that eliminated Septuagint’s exclusive right to lease DePalma II’s medallions and provides for a transition period until December 15, 2024 for DePalma II to decide whether to (i) have Kirie Eleison transfer its 50% interest in Septuagint to DePalma II or (ii) wind down Septuagint. The agreement gives DePalma II the right to either wind down Septuagint or require Kirie Eleison to transfer its ownership interest in Septuagint to DePalma II or a designee. While the transition period originally expired on December 15, 2024, pursuant to the October 17, 2024 amendment, DePalma II and Kirie Eleison subsequently agreed to further extend the transition period through March 31, 2025 in order to allow DePalma II and Kirie Eleison additional time to, among other things, evaluate their options and consider whether to continue Septuagint’s operations, or wind Septuagint down and have DePalma II continue to pursue other alternative fleet servicing arrangements with third parties and/or to establish its own fleet servicing entity. Accordingly, there have been no quantitative and qualitative changes to Septuagint’s ownership or Septuagint’s organizational or operating agreements during this transition period, as the parties are continuing to operate under the original OSA, as amended on October 17, 2024, which, as noted, only removed the exclusivity provisions. If DePalma II winds down Septuagint, DePalma II would no longer lease any of its Owned Medallions through Septuagint. DePalma II intends to continue to
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pursue its leasing strategy by leasing Owned Medallions either through Septuagint or through a newly formed, wholly owned subsidiary of DePalma II. DePalma II intends to enter into non-exclusive commercial agreements with third party fleets to assist the company in leasing medallions. The DePalma Companies are in ongoing discussions with Kirie Eleison regarding the restructuring of its affiliates’ debt. On March 31, 2025, DePalma II and Kirie Eleison agreed to further extend the transition period by which DePalma II may elect to require Kirie Eleison to transfer its membership interest in Septuagint to April 30, 2025. As of the date of this Annual Report on Form 10-K, the transfer of ownership has not yet occurred.
| For the Years Ended December 31, |
||||||||||
| 2024 | 2023 | |||||||||
| (in thousands) | ||||||||||
| Amounts Owed |
Medallion Lease Payments |
$ | 4,158 | $ | 1,807 | |||||
| Vehicle Payments |
$ | 3,468 | $ | 2,399 | ||||||
| Amounts Paid |
Medallion Lease Payments |
$ | — | $ | — | |||||
| Vehicle Payments | $ | 3,511 | $ | 2,327 | ||||||
Comparison of the Fiscal Years Ended December 31, 2024 and 2023
The following table reflects the changes in cash flows of DePalma II for the fiscal years ended December 31, 2024 and 2023:
| For the Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net cash (used in) provided by operating activities |
$ | (177 | ) | $ | 1,227 | $ | (1,404 | ) | (114 | )% | ||||||
| Net cash used in investing activities |
(2,657 | ) | (4,703 | ) | 2,046 | (44 | )% | |||||||||
| Net cash provided by financing activities |
35,150 | 3,000 | 32,150 | * | ||||||||||||
| Net increase (decrease) in cash and cash equivalents |
32,316 | (476 | ) | 32,792 | * | |||||||||||
| Cash and cash equivalents, at beginning of period |
493 | 969 | (476 | ) | (49 | )% | ||||||||||
| Cash and cash equivalents, at end of period |
32,809 | 493 | 32,316 | * | ||||||||||||
| * | Percentage not meaningful |
Operating Activities
The increase to net cash used in operating activities was $1.4 million, or 114% for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such increase was primarily due to an increase in cash outflows associated with operating expenses including $1.9 million from professional fees and $0.4 million from fleet servicing fees, net, partially offset by an increase in payments received on vehicle leases from Septuagint of $1.2 million.
Investing Activities
The decrease to net cash used in investing activities was $2.0 million, or 44%, for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. Such decrease was driven by a $3.1 million decrease in vehicles purchased during the period, partially offset by an increase in originations of Non-MRP+ loans of $1.1 million.
Financing Activities
The increase to net cash provided by financing activities was $32.2 million for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023. The increase was driven by capital contributions received from DePalma I through its Members.
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Future sources and uses of liquidity
Our future capital requirements will depend on many factors, including our degree of success in collecting contractual payments on MRP+ Loans, reperforming, restructuring or resolving Non-MRP+ Loans, sales of medallions (which may include seller financing), growth in volume and collections of medallion and vehicle leases, general economic conditions, future market growth and competition in the mobility market.
In the future, we may be required or choose to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. In addition, we cannot assure you that such measures and our cash flows from operations and cash and cash equivalents will be sufficient to meet our working capital requirements and to meet our commitments in the future.
During the year ended December 31, 2024, DePalma II entered into an operating lease for taxicab garage and office space. DePalma II’s contractual obligations under this operating lease, excluding periods covered by renewal options, include minimum lease payments of $0.7 million for each of the fiscal years ending December 31, 2025 through 2029. The DePalma companies have no other long-term contractual commitments as of December 31, 2024.
Off-Balance Sheet Arrangements
DePalma I and DePalma II do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
The DePalma Companies’ consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with U.S. GAAP. The preparation of the DePalma Companies’ consolidated financial statements requires each management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of revenue, costs and expenses, and related disclosures. Each of the DePalma Companies’ management bases their estimates on historical experience and on various other assumptions that they believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by each management. To the extent that there are differences between their estimates and actual results, future financial statement presentation, financial condition, results of operations, and cash flows of the DePalma Companies will be affected.
An accounting policy or estimate is considered to be critical or significant if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
Management of each of the DePalma Companies believes the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of its consolidated financial statements. For a description of DePalma I’s significant accounting policies, see Note 2 “Summary of Significant Accounting Policies,” of the notes to DePalma I’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For a description of DePalma II’s significant accounting policies, see Note 2 “Summary of Significant Accounting Policies,” of the notes to DePalma II’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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Fair Value Measurements
Each of the DePalma Companies applies the provisions of ASC 820, Fair Value Measurement (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Under U.S. GAAP, a fair value hierarchy is implemented for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the DePalma Companies. Unobservable inputs reflect respective members’ own assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The fair value hierarchy is categorized into three levels based on the inputs as follows:
| • | Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities and in which transaction for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly. |
| • | Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The types of investments which would generally be included in this category are private equity and/or debt securities issued by private entities, and thinly traded securities. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities.
With respect to instruments valued by management, the valuation techniques that may be considered are the evaluation of arm’s-length transactions with third parties, an income approach reflecting a discounted cash flow analysis, and a market approach that includes a comparative analysis of acquisition multiples and pricing multiples generated by market participants.
DePalma I
As of December 31, 2024 and 2023, DePalma I had loans held for investment, at fair value of $278.6 million and $334.4 million, respectively. The following table presents information about DePalma I’s loans held for investment, at fair value by levels within the valuation hierarchy as of December 31, 2024 and 2023.
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| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Level 3 | ||||||||
| (in thousands) | ||||||||
| Loans held for investment, at fair value |
||||||||
| Private Loans: |
||||||||
| MRP+ Loans |
$ | 201,106 | $ | 211,294 | ||||
| Non-MRP+ Loans |
77,465 | 123,059 | ||||||
|
|
|
|
|
|||||
| Total loans held for investment, at fair value |
$ | 278,571 | $ | 334,353 | ||||
|
|
|
|
|
|||||
The following tables summarize the valuation techniques and significant unobservable inputs used for DePalma I’s investments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2024 and 2023:
| December 31, 2024 |
||||||||||||||||||||||||
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Input |
Low Range | High Range | Weighted Average5 |
||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| MRP+ Loans |
$ | 201,106 | |
Income Approach1 |
|
|
Discount Rate2 |
|
8.25 | % | 8.25 | % | 8.25 | % | ||||||||||
| Non-MRP+ Loans — NYC |
60,996 | |
Market Approach3 |
|
|
Discounted Medallion Price4 |
|
$ | 166 | $ | 166 | $ | 166 | |||||||||||
| Non-MRP+ Loans — Other |
16,469 | |
Market Approach |
|
|
Market Medallion Price |
|
$ | 10 | $ | 12 | $ | 11 | |||||||||||
|
|
|
|||||||||||||||||||||||
| Total |
$ | 278,571 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| 1 | Used to value MRP+ loan cash flows. |
| 2 | The discount rate is utilized to present value cash flows from loans restructured by the City of New York under the MRP+ program (at a price of $170,000). To determine the discount rate, DePalma considers the internal rate of return on the investment, changes in the US Treasury rates to maturity of the loans and a risk premium for the likelihood of whether a loan will be successfully restructured under the MRP+ program. |
| 3 | The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $210,000), the amount backstopped under the MRP+ ($170,000), and certain market prices reported by the TLC (ranging from $30,000 to $200,000). In addition, loans are valued at the lesser of unpaid principal balance and the medallion or other collateral value (such as commercial and residential real estate which generally does not exceed 5% of the total loans held for investment, at fair value), less a discount applied to the collateral value. In instances where loans are overcollateralized with an unpaid principal balance less than or equal to $165,000 as of December 31, 2024, these loans are determined to have a fair value equal to par. Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 4 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which the low value was $165,000 and the high value was $185,000. A 5% discount is applied to the Market Medallion Price for New York City medallions to estimate costs associated with taking ownership of a medallion as the medallions are not directly held by DePalma. |
| 5 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
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| December 31, 2023 |
||||||||||||||||||||||||
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Input |
Low Range | High Range | Weighted Average5 |
||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| MRP+ Loans |
$ | 211,294 | |
Income Approach1 |
|
|
Discount Rate2 |
|
8.75 | % | 8.75 | % | 8.75 | % | ||||||||||
| Non-MRP+ Loans — NYC |
101,548 | |
Market Approach3 |
|
|
Discounted Medallion Price4 |
|
$ | 166 | $ | 166 | $ | 166 | |||||||||||
| Non-MRP+ Loans — Other |
21,511 | |
Market Approach |
|
|
Market Medallion Price |
|
$ | 12 | $ | 13 | $ | 12 | |||||||||||
|
|
|
|||||||||||||||||||||||
| Total |
$ | 334,353 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| 1 | Used to value MRP+ loan cash flows. |
| 2 | The discount rate is applied to the unpaid principal balance as restructured by the City of New York under the MRP+ program (at a price of $170,000). To determine the discount rate, DePalma considers the internal rate of return on the investment, changes in the US Treasury rates to maturity of the loans and a risk premium for the likelihood of whether a loan will be successfully restructured under the MRP+ program. |
| 3 | The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $176,000), the amount backstopped under the MRP+ ($170,000), and certain market prices reported by the TLC (ranging from $40,000 to $200,000). In addition, loans are valued at the lesser of unpaid principal balance and the medallion or other collateral value (such as commercial and residential real estate which generally does not exceed 5% of the total loans held for investment, at fair value), less a discount applied to the collateral value. In instances where loans are overcollateralized with an unpaid principal balance less than or equal to $165,000 as of December 31, 2023, these loans are determined to have a fair value equal to par. Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 4 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which the low value was $165,000 and the high value was $185,000. A 5% discount is applied to the Market Medallion Price for New York City medallions to estimate costs associated with taking ownership of a medallion as the medallions are not directly held by DePalma. |
| 5 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
DePalma II
As of December 31, 2024 and 2023, DePalma II had investments at fair value of $2.4 million and $0.5 million, respectively. The following table presents information about DePalma II’s investments by levels within the valuation hierarchy as of December 31, 2024 and 2023.
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Level 3 | ||||||||
| (in thousands) | ||||||||
| Working Capital Note |
$ | — | $ | — | ||||
| Loans held for investment, at fair value |
||||||||
| Private loans: |
||||||||
| Non-MRP+ Loans — NYC |
2,427 | 473 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 2,427 | $ | 473 | ||||
|
|
|
|
|
|||||
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The following tables summarize the valuation techniques and significant unobservable inputs used for DePalma II’s investments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2024 and 2023:
| December 31, 2024 |
||||||||||||||||||||
| Loans held for investment, at fair value |
Fair Value |
Approach |
Unobservable Inputs |
Low Range |
High Range |
Weighted |
||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Non-MRP+ Loans — NYC |
$ | 2,427 | Market Approach1, 2 | Discounted Medallion Price2 | $ | 166 | $ | 166 | $ | 166 | ||||||||||
|
|
|
|||||||||||||||||||
| $2,427 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| 1 | Increased significance is placed on data that DePalma II assesses to indicate market transactions. The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $210,000), the amount restructured by the City of New York under a certain taxi medallion relief program (“MRP+”) ($170,000), and certain market prices reported by the TLC (ranging from $30,000 to $200,000). Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 2 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which low value was $165,000 and the high value was $185,000. |
| 3 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
| December 31, 2023 |
||||||||||||||||||||
| Loans held for investment, at fair value |
Fair Value |
Approach |
Unobservable Inputs |
Low Range |
High Range |
Weighted |
||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Non-MRP+ Loans — NYC |
$ | 473 | Market Approach1, 2 | Discounted Medallion Price2 | $ | 158 | $ | 158 | $ | 158 | ||||||||||
|
|
|
|||||||||||||||||||
| $473 | ||||||||||||||||||||
|
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| 1 | Increased significance is placed on data that DePalma II assesses to indicate market transactions. The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $176,000), the amount restructured by the City of New York under a certain taxi medallion relief program (“MRP+”) ($170,000), and certain market prices reported by the TLC (ranging from $40,000 to $200,000). Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 2 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which low value was $165,000 and the high value was $185,000. |
| 3 | Calculated based on the total fair value of medallions or underlying medallion collateral, using the applicable unobservable input. |
Intangible Assets
DePalma II’s taxi medallions are indefinite-lived intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other. Costs incurred for renewal of taxi medallions are included within general and administrative expenses.
Indefinite-lived intangible assets are not amortized but instead tested for impairment. DePalma II evaluates indefinite-lived intangible assets for impairment annually on October 1st of each year or more frequently whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired.
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DePalma II evaluates its taxi medallions as a single unit of accounting for purposes of testing for impairment, as taxi medallions are homogeneous assets, which are interchangeable and have identical characteristics. In DePalma II’s evaluation of indefinite-lived intangible assets for impairment, a qualitative assessment is typically performed prior to performing the quantitative analysis. If, after assessing the qualitative factors, DePalma II determines that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, a quantitative assessment is performed. The fair value of the indefinite-lived intangible asset is compared to its carrying amount and if the carrying value exceeds its fair value, an impairment loss will be recognized. Performing the qualitative and quantitative assessments, including determining the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions, notably including the determination of anticipated impacts of changes in regulatory and macroeconomic factors impacting our industry, as well as the use of limited readily available market information of third party medallion transfers, including those reported by the TLC. DePalma II performed its annual impairment analysis and concluded the fair value of its taxi medallions exceeded the carrying value. Therefore, no impairment losses were recognized for the years ended December 31, 2024 and 2023.
Recent Accounting Pronouncements
See Note 2 in the section entitled “Summary of Significant Accounting Policies — Recent Accounting Pronouncements” as referred to in the notes to consolidated financial statements of DePalma I, and Note 2 in the section entitled “Summary of Significant Accounting Policies — Recent Accounting Pronouncements” as referred to in the notes to consolidated financial statements of DePalma II, in each case included elsewhere in this Annual Report on Form 10-K for a discussion about accounting pronouncements recently adopted and recently issued not yet adopted.
Quantitative and Qualitative Disclosures about Market Risk
The DePalma Companies are exposed to market risks in the ordinary course of their business. We consider the principal types of risk to be risk of potential adverse changes to the value of financial instruments because of changes in market conditions, such as interest and currency rate movements and volatility in commodity or security prices, liquidity risk arising in the general funding of our trading activities, as well as inflation risk on asset values and increased costs. We are also impacted by general macroeconomic conditions and state of the taxi industry, governmental initiatives and medallion transfers. Accordingly, our risk management systems and procedures are designed to identify and analyze our risks, to set appropriate policies and limits, and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.
In addition, the illiquidity of portions of our medallion loans, medallions and related assets may adversely affect our ability to dispose of them at times when it may be advantageous for us to liquidate such assets. In addition, if we were required to liquidate some or all of our assets, the proceeds of such liquidation may be significantly less than the current fair value of such assets.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. However, in periods of sharply rising interest rates, our cost of funds would increase if we were to conduct any external borrowings in the future, which would reduce our net interest income. As such, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. See “—Overview—Key Factors Affecting Operating Results—Changes in Interest Rates.”
Emerging Growth Company Status
As a result of the consummation of the Business Combination, New MAC is an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and New MAC may take advantage of certain exemptions from various reporting requirements that are applicable to other public
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companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, New MAC’s stockholders may not have access to certain information they may deem important. New MAC could be an emerging growth company for up to five years, although circumstances could cause New MAC to lose that status earlier, including if the market value of the New MAC Common Stock held by non-affiliates exceeds $700 million as of any December 31 before that time, in which case New MAC would no longer be an emerging growth company as of the following December 31. New MAC cannot predict whether investors will find our securities less attractive because New MAC will rely on these exemptions. If some investors find New MAC’s securities less attractive as a result of New MAC’s reliance on these exemptions, the trading prices of New MAC’s securities may be lower than they otherwise would be, there may be a less active trading market for New MAC’s securities and the trading prices of New MAC’s securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. New MAC has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, New MAC, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of New MAC’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
New MAC will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of New MAC’s initial public offering, (b) in which New MAC has total annual gross revenue of at least $1.235 billion or (c) in which New MAC is deemed to be a “large accelerated filer” under the rules of the SEC which, in addition to certain other criteria, means the market value of New MAC’s common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which New MAC has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risks in the ordinary course of our business. We consider the principal types of risk to be risk of potential adverse changes to the value of financial instruments because of changes in market conditions, such as interest and currency rate movements and volatility in commodity or security prices, liquidity risk arising in the general funding of our trading activities, as well as inflation risk on asset values and increased costs. We are also impacted by general macroeconomic conditions and state of the taxi industry, governmental initiatives and medallion transfers. Accordingly, our risk management systems and procedures are designed to identify and analyze our risks, to set appropriate policies and limits, and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.
In addition, the illiquidity of portions of our medallion loans, medallions and related assets may adversely affect our ability to dispose of them at times when it may be advantageous for us to liquidate such assets. In addition, if we were required to liquidate some or all of our assets, the proceeds of such liquidation may be significantly less than the current value of such assets.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. However, in periods of sharply rising interest rates, our cost of funds would increase if we were to conduct any external borrowings in the future, which would reduce our net interest income. As such, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Limitations on effectiveness of controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
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Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table provides information regarding our executive officers and members of our board of directors (ages as of the date of this Annual Report on Form 10-K):
| Name | Age |
Position(s) Held | ||
| Andrew Milgram |
51 | Chief Executive Officer and Director | ||
| Paul Arrouet |
54 | President | ||
| Jeffrey Kravetz |
46 | Chief Financial Officer | ||
| Sarah E. Feinberg |
47 | Director | ||
| Harvey Golub |
85 | Independent Director | ||
| Frederick C. Herbst |
67 | Independent Director |
Andrew Milgram has served as Chief Executive Officer and an executive director of MAC since January 2021 and has served as Chief Executive Officer and director of the Company since the consummation of the Business Combination. Since August 2008, he has served as the managing partner of Marblegate, which he co-founded. Prior to forming Marblegate, Mr. Milgram was a Principal at Epic Asset Management, where he was responsible for generating, evaluating, executing and managing investments in a portfolio of distressed and special situation assets across a variety of industry sectors. In addition, he coordinated the firm’s overall research process and directed its team of investment analysts. Mr. Milgram has sat on a variety of official and ad-hoc creditor committees, and has been deeply involved in a number of corporate restructurings in both the United States and abroad. Prior to joining Epic, Mr. Milgram was a part of the capital market businesses at Deutsche Bank Alex. Brown and Bank of Tokyo-Mitsubishi. Mr. Milgram began his career at Swiss Bank Corp (now UBS), where he was part of the global emerging market team responsible for the bank’s proprietary investments in Russia, Africa and the Middle East. Mr. Milgram holds the Chartered Financial Analyst designation. Mr. Milgram is the Chairman of the Board of Millennium Health, a member of the Board of Managers of PSS Holdings LLC, and a member of the board of directors of Septuagint Solutions LLC, STVT-AAI Education Inc. (d/b/a Ancora Education), Britax Group Limited and Rhinoco Inc. He sits on the Board of Directors of the Greenwich Council of the Boy Scouts of America. Mr. Milgram is a member of the Economic Club of New York and the Metro NY Chapter of YPO. Mr. Milgram’s qualifications to serve on our board of directors include his extensive leadership, management and board experience, his track record as a founder and Chief Investment Officer of Marblegate and its affiliated funds, his current board experience, including as Chairman of the Board of Millennium Health, and his network of contacts in the distressed credit and restructuring arena.
Paul Arrouet has served as President and an executive director of MAC since January 2021. Since 2008, he has also served as Managing Partner of Marblegate. Prior to forming Marblegate, Mr. Arrouet was a six-year Senior Managing Director as well as a twelve-year distressed specialist in the Distressed/High Yield Trading & Sales Department at Bear Stearns & Co. At Bear Stearns, he managed the trading book focused on stressed/distressed capital structures as well as actively making markets to generate customer flow. Mr. Arrouet spent the first part of his career at Bear Stearns in sales, specializing in distressed debt, high yield and restructuring opportunities. Prior to joining Bear Stearns, he was a salesman and Vice President at Alex. Brown, responsible for helping launch a distressed sales and trading platform as an extension of a successful High Yield Group. He began his career as a junior distressed trader at Oppenheimer & Co. Mr. Arrouet earned a Bachelor of Arts degree from the University of Pennsylvania. Mr. Arrouet’s qualifications to serve on our board of directors include his extensive leadership and management experience, his track record as Managing Partner and principal trader at Marblegate and its affiliated funds, and his wide network of contacts in the distressed investing field.
Jeffrey Kravetz has served as Chief Financial Officer of MAC since March 13, 2023. Since March 2023, he has also served as the Chief Financial Officer of Marblegate Asset Management, LLC where he is responsible for the accounting, operational and financial activities of the firm. From March 2015 to March 2023, Mr. Kravetz served as the Chief Financial Officer of Contrarian Capital Management, L.L.C., an investment management
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firm, where he was responsible for the accounting, operational and financial activities of the firm’s investment and management entities. From 2015 to 2023, Mr. Kravetz served as director of various non-public investment vehicles affiliated with Contrarian Capital Management, L.L.C. Prior to joining Contrarian, Mr. Kravetz served in a variety of roles, including as a Director and Fund Controller at MSD Capital from September 2003 to February 2015. Prior to that, he was an Auditor at both Deloitte & Touche LLP (June 2002 to September 2003) and Arthur Andersen, LLP (September 2000 to June 2002). Mr. Kravetz holds a B.S. in Accounting from Binghamton University School of Management and is a Certified Public Accountant. He is a member of the New York State Society of Certified Public Accountants.
Sarah E. Feinberg has served as a director of the Company since the consummation of the Business Combination. Ms. Feinberg has over 20 years of experience managing large and highly regulated transportation and logistics operations, leading federal regulatory agencies and serving in various senior roles in federal and state governments. Ms. Feinberg currently serves on the board of directors of Southwest Airlines (NYSE: LUV). She previously served on the board of directors of the Metropolitan Transportation Authority, from 2019 to 2020, and on the board of directors of Amtrak, from 2015 to 2017. Ms. Feinberg is the founder of Feinberg Strategies LLC, a strategic operations, communications, CEO advisory and public policy consulting firm founded in 2017. Ms. Feinberg served as Interim President of New York City Transit, the largest transit system in North America, from 2020 to 2021, and led the organization through the COVID pandemic and the resulting ridership and financial crises. Ms. Feinberg also served as the Administrator of the Federal Railroad Administration, from 2015 to 2017, and as Chief of Staff at the U.S. Department of Transportation, from 2013 to 2015. Ms. Feinberg holds a B.A. in Politics from Washington and Lee University. We believe Ms. Feinberg is qualified to serve as a member of our board of directors due to her extensive experience in leadership roles within the tech and transportation sectors.
Harvey Golub has served as Chairman of the Board of MAC since October 2021 and has served as a director of the Company since the consummation of the Business Combination. In early 2001, Mr. Golub retired as CEO and chairman of American Express. Currently, Mr. Golub is the non-executive chairman of the board of Dynasty Financial Partners. He also serves on the board of Pagaya Technologies, Ltd. (NASDAQ: PGY), and is a member of its audit, risk and nominating and corporate governance committees. He served as chairman of Miller Buckfire & Company (a Stifel Company) from July 2011 to December 2018. He has also served as a member of the advisory board of Marblegate Asset Management, LLC since 2009. Mr. Golub also serves on the boards of the American Enterprise Institute (AEI) and the Manhattan Institute for Policy Research, serves on Jupiter Medical Center’s board of trustees and is the chairman of its finance and planning committees. Mr. Golub is also chairman of the Maltz Jupiter Theatre endowment board, and is a director emeritus of New York-Presbyterian Hospital and the Lincoln Center for the Performing Arts and a member of its investment committee. Previously, Mr. Golub served as non-executive chairman on the boards of American International Group (AIG), Campbell Soup Company, and The Reader’s Digest Association. He has also served as a member of the board of Dow Jones & Company, Hess Corporation, RHJ International and several private companies. Mr. Golub received a B.S. degree from the New York University in 1961. Mr. Golub is well qualified to serve as a member of our board of directors due to his extensive experience in leadership and advisor roles and his network of business contacts.
Frederick C. Herbst has served as a director of the Company since the consummation of the Business Combination. Mr. Herbst has over 40 years of experience in the financial services sector. Mr. Herbst has served as a member of the board of directors and as chairperson of the audit committee of Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI), an externally-managed commercial mortgage REIT, since 2021. He also served as a member of the board of directors of Chicago Atlantic BDC, Inc. (NASDAQ: LIEN) from September 2024 to March 2025. He previously served on the board of directors of Indemnis Inc., a privately owned provided of drone parachute safety systems, from January 2021 to June 2022. Mr. Herbst served as Chief Financial Officer of Ready Capital Corporation (NYSE: RC), a commercial mortgage REIT, and Managing Director of Waterfall Asset Management, LLC, an SEC-registered institutional asset manager, from 2009 until his retirement in June 2019. From 2005 to 2009, Mr. Herbst was Chief Financial Officer of Clayton Holdings, Inc. (NASDAQ: CLAY),
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a provider of analytics and due diligence services to participants in the mortgage industry. Prior to Clayton Holdings, Mr. Herbst was Chief Financial Officer of Arbor Realty Trust, Inc. (NYSE: ABR), a commercial mortgage REIT, from 2003 until 2005, and of Arbor Commercial Mortgage, LLC, from 1999 until 2005. Prior to joining Arbor Realty Trust, Mr. Herbst was Chief Financial Officer of The Hurst Companies, Inc., Controller with The Long Island Savings Bank, FSB, Vice President Finance with Eastern States Bankcard Association and a Senior Manager with Ernst & Young. Mr. Herbst holds a B.A. in Accounting from Wittenberg University and became a licensed Certified Public Accountant in 1983. We believe Mr. Herbst is qualified to serve as a member of our board of directors because of his extensive finance background, including his service as a Chief Financial Officer of multiple public companies, his experience as a director of public companies, and his extensive knowledge of our industry.
Controlled Company Exception
The Manager currently controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” under the Nasdaq corporate governance standards. As a controlled company, exemptions under the standards will free us from the obligation to comply with certain corporate governance requirements, including the requirements:
| • | that a majority of our board of directors consists of “independent directors” as defined under the Nasdaq rules; |
| • | that we have, to the extent applicable, a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; |
| • | that any corporate governance and nominating committee or compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and |
| • | for an annual performance evaluation of the nominating and governance committees and compensation committee. |
We may choose to rely upon these exemptions. These exemptions, however, do not modify the independence requirements for our audit committee and we intend to comply with the requirements of Rule 10A-3 of the Exchange Act and the Nasdaq rules within the applicable time frame.
Board Composition
Our business affairs will be managed under the direction of our board of directors. Our board of directors initially consists of four members, including the following individuals: Harvey Golub, serving as Chairperson, Sarah E. Feinberg, Frederick C. Herbst and Andrew Milgram.
Director Independence
Under the Nasdaq rules, independent directors must comprise a majority of a listed company’s board of directors. In addition, the Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and the Nasdaq rules. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the Nasdaq rules.
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In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act and under the Nasdaq rules, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or (2) be an affiliated person of the listed company or any of its subsidiaries.
To be considered independent for purposes of Rule 10C-1 under the Exchange Act and under the Nasdaq rules, the board of directors must affirmatively determine that the member of the compensation committee is independent, including a consideration of all factors specifically relevant to determining whether the director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the company to such director and (ii) whether such director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.
Certain exemptions are available to us under Nasdaq rules and under Rule 10A-3 of the Exchange Act that allow companies a phase-in period for complying with committee independence requirements after an initial public offering. Under these phase-in rules, companies are permitted to phase in compliance with these rules and regulations as follows: (1) one member must satisfy the requirements at the time of listing; (2) a majority of members must satisfy the requirements within 90 days of listing; and (3) all members must satisfy the requirements within one year of listing. Furthermore, newly listed companies have twelve months from the date of listing to comply with the majority independent board requirement. We intend to utilize these exemptions. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq or the Exchange Act.
Our board of directors has undertaken a review of the independence of each director and considered whether each director of the Company has a material relationship with the Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, we determine that Harvey Golub and Frederick C. Herbst each be considered “independent directors” as defined under the listing requirements and the Nasdaq rules and the applicable rules of the Exchange Act.
Board Committees
We have established an audit committee, compensation committee and nominating and corporate governance committee. The responsibilities of each committee are described below. The composition of each committee is made in accordance with the Nasdaq listing standards and the independence standards of Rule 10A-3 of the Exchange Act, as applicable. Our board of directors may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Audit Committee
Our audit committee consists of Harvey Golub and Frederick C. Herbst, with Mr. Herbst serving as chair. Each of these individuals qualify as independent directors under the Nasdaq listing standards and the independence standards of Rule 10A-3 of the Exchange Act. Each member of the audit committee is financially literate, and our board of directors has determined that Mr. Herbst qualifies as an “audit committee financial expert” as defined in applicable SEC rules. We intend to identify one additional independent director to serve on the audit committee within the applicable time periods set forth in Nasdaq’s phase-in rules for newly listed companies.
Our audit committee is responsible for, among other things:
| • | selecting and hiring our independent auditors and evaluating and approving, in advance, the audit and non-audit services to be performed by our independent auditors; |
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| • | assisting the board of directors in evaluating the qualifications, performance and independence of our independent auditors; |
| • | reviewing and discussing the adequacy and effectiveness of our financial reporting processes, internal control over financial reporting and disclosure controls and procedures and the audits of our financial statements; |
| • | assisting the board of directors in monitoring the quality and integrity of our financial statements and our accounting and financial reporting; |
| • | assisting the board of directors in monitoring our compliance with legal and regulatory requirements; |
| • | reviewing the adequacy and effectiveness of our internal control over financial reporting processes; |
| • | assisting the board of directors in monitoring the performance of our internal audit function; |
| • | monitoring the performance of our internal audit function; |
| • | reviewing with management and our independent auditors our annual and quarterly financial statements; |
| • | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and |
| • | preparing the audit committee report that the rules and regulations of the SEC require to be included in our annual proxy statement. |
Compensation Committee
Our compensation committee consists of Harvey Golub, Frederick C. Herbst and Sarah E. Feinberg, with Mr. Golub serving as chair. Mr. Golub and Mr. Herbst qualify as independent directors under the Nasdaq listing standards.
The compensation committee is responsible for, among other things:
| • | reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating our CEO’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors (as directed by the board of directors), determining and approving our CEO’s compensation level based on such evaluation; |
| • | reviewing and approving, or making recommendations to the board of directors with respect to, the compensation of our other executive officers, including annual base salary, bonus and equity-based incentives and other benefits; |
| • | reviewing and recommending the compensation of our directors; |
| • | reviewing and discussing annually with management our “Compensation Discussion and Analysis” disclosure required by SEC rules; |
| • | preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and |
| • | reviewing and making recommendations with respect to our equity compensation plans. |
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Harvey Golub, Frederick C. Herbst and Sarah E. Feinberg, with Mr. Golub serving as chair. Mr. Golub and Mr. Herbst qualify as independent directors under the Nasdaq listing standards.
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The nominating and corporate governance committee is responsible for, among other things:
| • | assisting the board of directors in identifying prospective director nominees and recommending nominees to the board of directors; |
| • | overseeing the evaluation of the board of directors and management; |
| • | reviewing developments in corporate governance practices and developing and recommending a set of corporate governance guidelines; and |
| • | recommending members for each committee of our board of directors. |
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, or has served during the last completed fiscal year, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee.
Related Person Policy of the Company
We have adopted a formal written policy providing that our officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our voting securities, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest are not permitted to enter into a related party transaction with the Company without the approval of our nominating and corporate governance committee, subject to the exceptions described below.
A related person transaction is generally a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to the Company as an employee or director are not covered by this policy.
Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under the Code of Conduct, employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, the audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is or is not inconsistent with, our best interests and those of our stockholders, as the audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.
The audit committee has determined that certain transactions will not require the approval of the audit committee including certain employment arrangements of officers, director compensation, transactions with another company at which a related party’s only relationship is as a director, nonexecutive employee or beneficial owner of less than 10% of our outstanding capital stock, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis and transactions available to all employees generally.
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Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. The full text of our Code of Conduct and Ethics is posted on our website at marblegateacquisition.com/governance/ and is filed hereto as Exhibit 14.1. We intend to disclose future amendments to, or waivers of, our Code of Conduct and Ethics, as and to the extent required by SEC regulations, at the same location on our website identified above or in public filings. Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information contained on our website to be part of this Annual Report on Form 10-K.
Insider Trading Policy
We have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees or the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the Company. A copy of such policies and procedures is filed hereto as Exhibit 19.1.
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ITEM 11. EXECUTIVE COMPENSATION.
As an emerging growth company, we comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for our principal executive officer and our two most highly compensated executive officers other than our principal executive officer. These three officers are referred to as our named executive officers. For the fiscal year ended December 31, 2024 (and since our inception), we had no employees and did not pay any compensation or make any equity awards to any executive officers. Accordingly, we had no named executive officers for fiscal year 2024. For this reason, we have omitted the 2024 Summary Compensation Table, the 2024 Outstanding Equity Awards at Fiscal Year-End Table and the corresponding narrative disclosures.
Andrew Milgram (Managing Partner and Chief Executive Officer of DePalma), Paul Arrouet (Managing Partner and Secretary of DePalma) and Jeff Kravetz (Chief Financial Officer of DePalma) (collectively, our “Officers”) are employees of, or other service providers to, our Manager. Prior to the Business Combination, our Manager compensated the Officers for the performance of their duties for our Manager and did not allocate this compensation between services to us and services to our Manager.
Our business and affairs, including officer and board compensation, were managed by members of DePalma prior to the Business Combination, which consist of various affiliates of our Manager. Upon the consummation of the Business Combination, our business and affairs are managed by or under the direction of our board of directors.
Director Compensation
For the fiscal year ended December 31, 2024, we did not pay any compensation or make any equity awards to any directors. For this reason, we have omitted the 2024 Director Compensation Table and the corresponding narrative disclosures. Our business and affairs, including director compensation, were managed by members of DePalma, which consist of various affiliates of our Manager. Upon the consummation of the Business Combination, our director compensation policies and arrangements are managed by or under the direction of our board of directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of shares of our common stock as of April 7, 2025, based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:
| • | each of our executive officers and directors, and all of our executive officers and directors as a group; and |
| • | each person who is known to be the beneficial owner of more than 5% of our commons stock. |
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Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them.
| Name and Address of Beneficial Owner(1) |
# Shares of Common Stock Beneficially Owned |
% of Total Voting Power |
||||||
| Directors and Executive Officers |
||||||||
| Andrew Milgram(2)(3) |
5,289,522 | 7.2 | % | |||||
| Paul Arrouet(2)(3) |
5,289,522 | 7.2 | % | |||||
| Sarah E. Feinberg |
— | — | ||||||
| Harvey Golub(3)(4) |
450 | * | ||||||
| Frederick C. Herbst |
— | — | ||||||
| Jeffrey Kravetz |
400 | * | ||||||
| All Directors and Executive Officers as a Group (6 Individuals) |
5,290,822 | 7.2 | % | |||||
| Five Percent Holders |
||||||||
| Marblegate Special Opportunities Master Fund, L.P.(5) |
9,678,578 | 13.1 | % | |||||
| Marblegate Strategic Opportunities Master Fund I, L.P.(6) |
13,793,655 | 18.7 | % | |||||
| Marblegate Tactical III Master Fund I, L.P.(7) |
8,660,253 | 11.7 | % | |||||
| Marblegate Cobblestone Master Fund I, L.P.(8) |
9,580,621 | 13.0 | % | |||||
| Marblegate Tactical III Master Fund II, L.P.(9) |
17,293,702 | 23.4 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o Marblegate Acquisition LLC, 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut 06831. |
| (2) | Includes 1,459,603 and 3,829,469 shares of Class A common stock of MAC and Class B common stock of MAC, respectively, that were converted into shares of our common stock in connection with the Business Combination. The Sponsor is the record holder of such shares. MAM is the managing member of the Sponsor and has voting and investment discretion with respect to the securities held by the Sponsor and may be deemed to beneficially own such shares. Andrew Milgram and Paul Arrouet, as Managing Partners of MAM, may be deemed to exercise voting and investment power over the securities held by the Sponsor and therefore may be deemed to beneficially own such securities. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. Also includes (i) 450 shares of Class A common stock of MAC that were converted into our shares of common stock in connection with the Business Combination held directly by Andrew Milgram and, as such, Mr. Milgram may be deemed to exercise voting and investment power over such securities, and (ii) 450 shares of Class A common stock of MAC that were converted into our shares of common stock in connection with the Business Combination held directly by Paul Arrouet and, as such, Mr. Arrouet may be deemed to exercise voting and investment power over such securities. |
| (3) | Each such person is a direct or indirect member of the Sponsor and disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. |
| (4) | Represents shares of Class A common stock of MAC transferred by the Sponsor before the closing of the Business Combination that were converted into our common stock in connection with the closing of the Business Combination. Golub Investments LP is the record holder of such shares. Mr. Golub has an indirect pecuniary interest in such shares through his direct membership interests in Golub Investments LP, over which he does not have voting or dispositive control. |
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| (5) | Represents shares of common stock issued in connection with the Business Combination. Marblegate Special Opportunities Master Fund, L.P. (“MSOMF”) is the record holder of such shares. Marblegate Special Opportunities GP, LLC (“Marblegate GP”) is the General Partner of MSOMF. Marblegate Holdings, LLC (“Marblegate Holdings”) is the Managing Member of Marblegate GP. Andrew Milgram and Paul Arrouet, as Managing Partners of Marblegate Holdings and Marblegate Asset Management, LLC, the investment advisor to Marblegate Special Opportunities Master Fund, L.P., may be deemed to exercise voting and investment power over such securities and therefore may be deemed to beneficially own such securities. Each of Mr. Milgram and Mr. Arrouet disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest each may have therein, directly or indirectly. The address of Marblegate Special Opportunities Master Fund, L.P. is 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. |
| (6) | Represents shares of common stock issued in connection with the Business Combination. Marblegate Strategic Opportunities Master Fund I, L.P is the record holder of such shares. Marblegate GP is the General Partner of Marblegate Strategic Opportunities Master Fund I, L.P. Marblegate Holdings is the Managing Member of Marblegate GP. Andrew Milgram and Paul Arrouet, as Managing Partners of Marblegate Holdings and Marblegate Asset Management, LLC, the investment advisor to Strategic Opportunities Master Fund I, L.P., may be deemed to exercise voting and investment power over such securities and therefore may be deemed to beneficially own such securities. Each of Mr. Milgram and Mr. Arrouet disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest each may have therein, directly or indirectly. The address of Marblegate Strategic Opportunities Master Fund I, L.P. is 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. |
| (7) | Represents shares of common stock issued in connection with the Business Combination. Marblegate Tactical III Master Fund I, L.P. is the record holder of such shares. Marblegate Tactical III GP, LLC (“Tactical III GP”) is the General Partner of Marblegate Tactical III Master Fund I, L.P. Marblegate Holdings is the Managing Member of Tactical III GP. Andrew Milgram and Paul Arrouet, as Managing Partners of Marblegate Holdings and Marblegate Asset Management, LLC, the investment advisor to Marblegate Tactical III Master Fund I, L.P., may be deemed to exercise voting and investment power over such securities and therefore may be deemed to beneficially own such securities. Each of Mr. Milgram and Mr. Arrouet disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest each may have therein, directly or indirectly. The address of Marblegate Tactical III Master Fund I, L.P. is 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. |
| (8) | Represents shares of common stock issued in connection with the Business Combination. Marblegate Cobblestone Master Fund I, L.P. is the record holder of such shares. Marblegate GP is the General Partner of Marblegate Cobblestone Master Fund I, L.P. Marblegate Holdings is the Managing Member of Marblegate GP. Andrew Milgram and Paul Arrouet , as Managing Partners of Marblegate Holdings and Marblegate Asset Management, LLC, the investment advisor to Marblegate Cobblestone Master Fund I, L.P., may be deemed to exercise voting and investment power over such securities and therefore may be deemed to beneficially own such securities. Each of Mr. Milgram and Mr. Arrouet disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest each may have therein, directly or indirectly. The address of Marblegate Cobblestone Master Fund I, L.P. is 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. |
| (9) | Represents shares of common stock issued in connection with the Business Combination. Marblegate Tactical III Master Fund II, L.P. is the record holder of such shares. Marblegate GP is the General Partner of Marblegate Tactical III Master Fund II, L.P. Marblegate Holdings is the Managing Member of Marblegate GP. Andrew Milgram and Paul Arrouet, as Managing Partners of Marblegate Holdings and Marblegate Asset Management, LLC, the investment advisor to Marblegate Tactical III Master Fund II, L.P., may be deemed to exercise voting and investment power over such securities and therefore may be deemed to beneficially own such securities. Each of Mr. Milgram and Mr. Arrouet disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest each may have therein, directly or indirectly. The address of Marblegate Tactical III Master Fund II, L.P. is 5 Greenwich Office Park, Suite 400, Greenwich, Connecticut, 06831. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Policies and Procedures for Approval of Related Person Transactions
We adopted a formal written policy providing that our officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our voting securities, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is an employee, acts as a director or executive officer (or other comparable position) or maintains, directly or indirectly, a 5% or greater ownership interest and all persons or entities that directly, or indirectly though one or more intermediaries, control, or are controlled by, or are under common control with, any such entity, are not permitted to enter into a related party transaction with the Company without the approval of our audit committee, subject to the exceptions described below.
A related person transaction is generally a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to the Company as an employee or director are not covered by this policy.
Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under the Code of Conduct, employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, the audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is or is not inconsistent with, our best interests and those of our stockholders, as the audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.
The audit committee has determined that certain transactions will not require the approval of the audit committee, including, among others, certain employment arrangements of officers, director compensation, transactions with another company at which a related party’s only relationship is as a director, nonexecutive employee or beneficial owner of less than 10% of that company’s outstanding capital stock, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis and transactions available to all employees generally.
Relationships and Transactions with Directors, Executive Officers and Significant Stockholders
Founder Shares
On January 15, 2021, in consideration for the payment of certain of MAC’s offering costs, MAC applied $25,000 of outstanding advances from the Sponsor towards the issuance of 8,625,000 shares of MAC Class B Common Stock. In September 2021, MAC effected a stock dividend of 0.3694 shares for each share of MAC Class B Common Stock outstanding, resulting in the Sponsor holding 11,810,833 founder shares (“Founder Shares”). The Founder Shares included an aggregate of up to 1,507,500 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the holders of the Founder Shares would collectively own, on an as-converted basis, 25% of the Company’s issued and outstanding shares after the IPO (including the Private Placement Shares). As a result of the underwriter’s option not to exercise its over-allotment option, a total of 1,507,500 Founder Shares were forfeited. On June 28, 2023, the Sponsor converted 4,000,000 shares of MAC Class B Common Stock into 4,000,000 shares of non-redeemable MAC Class A Common Stock, which represents 40% of the outstanding shares of MAC Class A Common Stock.
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The Sponsor and Cantor purchased an aggregate of 910,000 Private Placement Units (610,000 Private Placement Units purchased by our Sponsor and 300,000 Private Placement Units purchased by Cantor, the latter of which were forfeited by Cantor upon consummation of the Business Combination) for a purchase price of $10.00 per Unit in the Private Placement that occurred simultaneously with the closing of the IPO. Each Private Placement Unit contains one share of MAC Class A Common Stock and one-half of one whole Private Placement Warrant. Each whole warrant contained in a Private Placement Unit entitles the holder to purchase one whole share of MAC Class A Common Stock at $11.50 per share. The Private Placement Warrants included in the Private Placement Units (including the MAC Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of the Business Combination. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the Sponsor, Cantor or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, Cantor or their permitted transferees, the Private Placement Warrants are redeemable by MAC and exercisable by such holders on the same basis as the Public Warrants.
In connection with the closing of the IPO, the Sponsor sold 2,473,864 Founder Shares to the Anchor Investors, who are unaffiliated with the Sponsor, at their original purchase price. We estimated the aggregate fair value of the Founder Shares attributable to the Anchor Investors to be $20,656,764, or $8.35 per share.
On October 5, 2021, upon the closing of the IPO, the Sponsor sold membership interests to each of four directors of MAC. The membership interests entitle each director to 25,000 shares of Founder Shares, for an aggregate of 100,000 shares, that were transferred to the directors when the Business Combination was consummated.
The total consideration paid for these membership interests was $200. Three of the directors were also part of the Sponsor investor group and invested $409,929 for their pro-rata share of the Sponsor contribution for Founder Shares and Private Placement Units. Each Founder Share automatically converted to one share of MAC Class A Common Stock upon consummation of the Business Combination. The Sponsor retained all voting and dispositive power over all Founder Shares until the consummation of the Business Combination, after which the Sponsor distributed to each holder of the membership interests its share of the Founder Shares, subject to applicable lock-up or escrow restrictions.
Promissory Notes
On January 15, 2021, MAC issued an unsecured promissory note (the “January 2021 Note”) to the Sponsor, pursuant to which MAC may borrow up to an aggregate principal amount of $300,000. The January 2021 Note was non-interest bearing and payable on the earlier of September 30, 2021, or the completion of the IPO. The outstanding loan of $186,819 was repaid at the time of the IPO.
On June 30, 2022, MAC issued a promissory note in the principal amount of up to $600,000 (the “June 2022 Note”) to the Master Fund, a member of MAC’s Sponsor. The June 2022 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The June 2022 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of the Master Fund, all or a portion of the unpaid principal amount of the June 2022 Note may be converted into shares of MAC Class A Common Stock (the “Conversion Shares”), equal to: (x) the portion of the principal amount of the June 2022 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the June 2022 Note. As of December 31, 2024, MAC borrowed $600,000 under the June 2022 Note for the working capital loan.
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On February 13, 2023, MAC issued a promissory note in the principal amount of up to $1,100,000 (the “February 2023 Note”) to the Master Fund, a member of MAC’s Sponsor. The February 2023 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The February 2023 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of the Master Fund, all or a portion of the unpaid principal amount of the February 2023 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the February 2023 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the February 2023 Note. As of December 31, 2024, MAC borrowed $1,100,000 under the February 2023 Note for the working capital loan.
On July 20, 2023, MAC issued a promissory note in the principal amount of up to $500,000 (the “July 2023 Note”) to the Master Fund, a member of MAC’s Sponsor. The July 2023 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The July 2023 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of Master Fund, at any time prior to payment in full of the principal balance of the note, all or a portion of the unpaid principal amount of the July 2023 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the July 2023 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the July 2023 Note. As of December 31, 2024, MAC borrowed $500,000 under the July 2023 Note for the working capital loan.
On December 21, 2023, MAC issued a promissory note in the principal amount of up to $450,000 (the “December 2023 Note”) to the Master Fund, a member of MAC’s Sponsor. The December 2023 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The December 2023 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of Master Fund, at any time prior to payment in full of the principal balance of the note, all or a portion of the unpaid principal amount of the December 2023 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the December 2023 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the December 2023 Note. As of December 31, 2024, MAC borrowed $450,000 under the December 2023 Note for the working capital loan.
On April 11, 2024, MAC issued a promissory note in the principal amount of up to $240,000 (the “April 2024 Note”) to the Master Fund, a member of MAC’s Sponsor. The April 2024 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The April 2024 bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of Master Fund, at any time prior to payment in full of the principal balance of the note, all or a portion of the unpaid principal amount of the April 2024 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the April 2024 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the April 2024 Note. As of December 31, 2024, MAC borrowed $240,000 under the April 2024 Note for the working capital loan.
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On July 18, 2024, MAC issued a promissory note in the principal amount of up to $255,000 (the “July 2024 Note”) to the Master Fund, a member of MAC’s Sponsor. The July 2024 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The July 2024 bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of Master Fund, at any time prior to payment in full of the principal balance of the note, all or a portion of the unpaid principal amount of the July 2024 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the July 2024 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the July 2024 Note. As of December 31, 2024, MAC borrowed $255,000 under the April 2024 Note for the working capital loan.
On October 22, 2024, MAC issued a promissory note in the principal amount of up to $250,000 (the “October 2024 Note”) to the Master Fund, a member of MAC’s Sponsor. The October 2024 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The October 2024 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of Master Fund, at any time prior to payment in full of the principal balance of the note, all or a portion of the unpaid principal amount of the October 2024 Note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the October 2024 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the October 2024 Note. As of December 31, 2024, MAC borrowed $240,000 under the October 2024 Note for the working capital loan.
On January 17, 2025, MAC issued a promissory note in the principal amount of up to $485,000 (the “January 2025 Note”) to the Master Fund. The January 2025 Note was issued in connection with advances the Master Fund has made, and may make in the future, to MAC for working capital expenses. The January 2025 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which MAC consummates its initial business combination and (ii) the date that the winding up of MAC is effective. At the election of the Master Fund, at any time prior to payment in full of the principal balance of the note, up to $250,000 of the unpaid principal amount of the note may be converted into Conversion Shares, equal to: (x) the portion of the principal amount of the January 2025 Note being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares will be identical to the Private Placement Shares issued by MAC to its Sponsor and Cantor, the representative of the underwriters, in a private placement in connection with MAC’s IPO. The Conversion Shares are entitled to the registration rights set forth in the January 2025 Note. As of December 31, 2024, MAC borrowed $0 under the January 2025 Note for the working capital loan.
Post-Business Combination Arrangements
In connection with the Business Combination, certain agreements were entered into pursuant to the Business Combination Agreement. The agreements described in this section are filed as exhibits to the Annual Report on Form 10-K, and the following descriptions are qualified by reference thereto.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, the Sponsor and certain directors and executive officers of MAC (“Supporting Shareholders”) entered into the Sponsor Support Agreement pursuant to which the Sponsor and the Supporting Shareholders have agreed, among other things, to vote all shares of MAC Common Stock held by them in favor of the Business Combination Agreement and the
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transactions contemplated thereby (including the Merger) and to not redeem any of their shares of MAC Common Stock.
Registration Rights Agreement
In connection with the Closing of the Business Combination, the Company, the Sponsor, the Supporting Shareholders and certain other parties entered into a registration rights agreement (which such agreement contains terms and conditions similar to those contained in that certain registration rights agreement, dated as of September 30, 2021, among MAC, the Sponsor, and the other parties thereto, pursuant to which, the Sponsor, the Supporting Shareholders and certain other parties thereto are granted certain registration rights with respect to their shares of our common stock.
Management Services Agreement
At the Closing of the Business Combination, the Manager and the Company entered into a MSA pursuant to which the Manager provides certain management services to us including (i) evaluating, managing, performing due diligence on, negotiating and overseeing the acquisition and disposition of our and our subsidiaries’ assets, including taxi medallions, taxi-medallion loans and other assets or property, (ii) evaluating, managing, negotiating and overseeing the origination, structuring, restructuring and workout of taxi-medallion loans and other loans held by us (other than typical daily loan servicing activities), (iii) managing our and our subsidiaries’ day-to-day business and operations in complying with any regulatory requirements applicable to us in respect of our business activities, (iv) evaluating the financial and operational performance of any of our subsidiaries, including monitoring the business and operations thereof, and the financial performance of any of their other assets, (v) providing a management team to serve as executive officers of us and/or our subsidiaries or as members of our board of directors, (vi) identifying, evaluating, managing, performing due diligence on, negotiating and overseeing the provision of debt or equity financing by us, (vii) identifying, evaluating, managing, performing due diligence on, negotiating and overseeing the acquisition of all or a portion of target businesses or assets by us, and (viii) subject to the provisions of the MSA, performing any other services for and on behalf of our company and our subsidiaries to the extent that such services are consistent with those that are customarily performed by the executive officers and employees of a publicly listed company.
The services also include (1) establishing and maintaining books and records of our company and our subsidiaries in accordance with customary practice and GAAP; (2) recommending to our board of directors changes or other modifications in the capital structure of our company and/or our subsidiaries; (3) recommending to our board of directors the engagement of or, if approval is not otherwise required, engaging agents, consultants or other third party service providers on behalf of us and our subsidiaries, including accountants, lawyers or experts; (4) managing or overseeing litigation, administrative or regulatory proceedings, investigations or any other reviews of our and/or our subsidiaries business, subject to the approval of our board of directors to the extent necessary in connection with the settlement, compromise, consent to the entry of an order or judgment or other agreement resolving any of the foregoing; (5) recommending to our board of directors the payment of dividends or other distributions on the equity interests of us; (6) attending to the timely calculation and payment of taxes payable, and the filing of all taxes return due, by us and our subsidiaries; and (7) making loans to, or arranging loans on behalf of, entities in which we or any of our subsidiaries have an equity or debt investment.
We will compensate the Manager for its services provided pursuant to the MSA on a quarterly basis with a management fee calculated as follows: the product of (i) 0.375%, multiplied by (ii) our Adjusted Net Assets (as defined in the MSA). The Manager may also earn an incentive fee based on our financial performance pursuant to a separate agreement to be entered into by our company and the Manager that is approved by our board of directors and separately approved by a majority of the independent directors of our board. The Manager and our company and our board of directors agree to use their respective best efforts to enter into an agreement within 180 days after the Closing of the Business Combination to provide for the payment of a mutually agreeable incentive fee. We shall pay all of our own expenses and reimburse the Manager for certain documented
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expenses incurred by the Manager on our and our subsidiaries’ behalf during the term of the MSA. We must indemnify the Manager from all losses incurred arising out of any breach of the agreement or services provided thereunder, subject to certain exceptions.
During the term of the MSA, the Manager is permitted to provide services, including services similar to the services described above, to other Persons (as defined in the MSA). The Manager is not prohibited from investing in or assisting a business competitive with our company. Additionally, the Manager need not present business opportunities to our company.
The MSA further requires us to maintain a board consisting of a majority of independent directors.
The MSA became effective upon consummation of the Business Combination and continues in operation, unless terminated in accordance with the terms of the MSA, until the fifth (5th) anniversary of the Closing of the Business Combination (the “Initial Term”). After the Initial Term, the MSA shall be deemed renewed automatically for additional successive five-year periods (each, an “Automatic Renewal Term”) unless otherwise terminated.
The MSA provides that the Manager may resign and terminate the MSA at any time with at least 180 days’ prior written notice to us of the Manager’s intention to terminate the MSA, which right shall not be contingent upon the finding of a replacement manager. However, if the Manager resigns, the Manager shall, upon request of our board of directors, use reasonable efforts to assist our board of directors to find a replacement manager at no cost or expense to us.
Additionally, the MSA is subject to termination by (i) our board of directors at any time, if it is found that the Manager materially breached the terms of the MSA and such breach continued unremedied for sixty (60) days after the Manager received written notice from us setting forth the terms of such breach, (ii) at any time if (A) there if a finding that the manager (x) acted with gross negligence, willful misconduct, bad faith or reckless disregard in performing its duties and obligations under the MSA or (y) engaged in fraudulent or dishonest acts in connection with the business operations of us, and (B) at least seventy-five percent (75%) of our board of directors votes to terminate the MSA, (iii) at the expiration of the Initial Term or any Automatic Renewal Term with written notice to the Manager at least 180 days before the applicable expiration as approved in advance by a majority of the independent directors of our board voting in favor of providing that notice and terminating the MSA; or (iv) at any time if (A) at least seventy-five percent (75%) of our board votes to terminate the MSA and (B) the holders of at least seventy-five percent of the then outstanding shares of our common stock vote in favor of terminating the MSA.
Indemnification of Directors and Officers
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL.
There is no pending litigation or proceeding naming any of MAC’s or DePalma’s respective directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Director Independence
Our board of directors has undertaken a review of the independence of each director and considered whether each director of the Company has a material relationship with the Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, we determine that Harvey Golub and Frederick C. Herbst each be considered “independent directors” as defined under the listing requirements and the Nasdaq rules and the applicable rules of the Exchange Act.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table summarizes the fees of CBIZ CPAs, P.C., our independent registered public accounting firm, billed to us for each of the last two fiscal years for audit services and billed to us for the years ended December 31, 2024 and 2023 (dollars in thousands):
| Year Ended December 31, | ||||||||
| Fee Category | 2024 | 2023 | ||||||
| Audit Fees(1) |
$ | 18 | $ | 18 | ||||
| Audit-Related Fees |
— | — | ||||||
| Tax Fees |
— | — | ||||||
| All Other Fees |
— | — | ||||||
|
|
|
|
|
|||||
| Total Fees |
$ | 18 | $ | 18 | ||||
|
|
|
|
|
|||||
| (1) | Audit fees for the fiscal years ended December 31, 2024 and 2023 for professional services provided for the audit of New MAC’s consolidated financial statements. |
Audit Committee Pre-Approval Policy and Procedures
The audit committee has adopted a policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by the independent auditor may be pre-approved. The Pre-Approval Policy generally provides that we will not engage the independent auditor to render any audit, audit-related, tax or permissible non-audit service unless the service is either (i) explicitly approved by the audit committee (“specific pre-approval”) or (ii) entered into pursuant to the pre-approval policies and procedures described in the Pre-Approval Policy (“general pre-approval”). Unless a type of service to be provided by the independent auditor has received general pre-approval under the Pre-Approval Policy, it requires specific pre-approval by the audit committee or by a designated member of the audit committee to whom the committee has delegated the authority to grant pre-approvals. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval. For both types of pre-approval, the audit committee will consider whether such services are consistent with the SEC’s rules on auditor independence. The audit committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Company’s business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Company’s ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. On a periodic basis, the audit committee may review and generally pre-approve the services (and related fee levels or budgeted amounts) that may be provided by the independent auditor without first obtaining specific pre-approval from the audit committee. The audit committee may revise the list of general pre-approved services from time to time, based on subsequent determinations.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements.
The following documents are included on pages F-1 through F-63 attached hereto and are filed as part of this Annual Report on Form 10-K.
Index to Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
All financial statement schedules have been omitted because they are not applicable, not required or the information is shown in the financial statements or the notes thereto.
(a)(3) Exhibits.
The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
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98
Table of Contents
99
Table of Contents
| Exhibit |
Description | |
| 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | |
| 97.1* | Policy Relating to Recovery of Erroneously Awarded Compensation. | |
| # | Certain exhibits to this Exhibit Index have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the SEC upon request. |
| † | Certain of the exhibits and schedules to this Exhibit Index have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
| ‡ | Certain confidential information contained in this Exhibit has been omitted because it is both (i) information that the registrant customarily and actually treats as private or confidential and (ii) not material |
| + | Indicates a management contract of compensatory plan. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Marblegate Capital Corporation | ||||||
| Date: April 7, 2025 | By: | /s/ Andrew Milgram | ||||
| Andrew Milgram | ||||||
| Chief Executive Officer | ||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Andrew Milgram Andrew Milgram |
Chief Executive Officer and Director (principal executive officer) | April 7, 2025 | ||
| /s/ Jeffrey Kravetz Jeffrey Kravetz |
Chief Financial Officer (principal financial officer and principal accounting officer) |
April 7, 2025 | ||
| /s/ Sarah E. Feinberg Sarah E. Feinberg |
Director | April 7, 2025 | ||
| /s/ Harvey Golub Harvey Golub |
Director | April 7, 2025 | ||
| /s/ Frederick C. Herbst Frederick C. Herbst |
Director | April 7, 2025 | ||
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Marblegate Capital Corporation
As of and For the Year Ended December 31, 2024 and For the Period From
February 2, 2023 (Inception) to December 31, 2023
| F-2 | ||||
| Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023 |
F-3 | |||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Marblegate Capital Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Marblegate Capital Corporation (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2024 and for the period from February 2, 2023 (inception) through December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the year ended December 31, 2024 and for the period from February 2, 2023 (inception) through December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company’s business plan is dependent on the completion of the business combination and the Company’s cash and working capital as of December 31, 2024 are not sufficient to complete its planned activities for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The business combination has a termination date of April 7, 2025. There is no assurance that the Company will be able to close the business combination by April 7, 2025. If the Company does not complete a business combination by April 7, 2025, it will be required to liquidate. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2024.
Los Angeles, CA
April 4, 2025
F-2
Table of Contents
Marblegate Capital Corporation
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Total assets |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
| Liabilities and Stockholders’ Deficit |
||||||||
| Liabilities: |
||||||||
| Accrued expenses |
$ | 45,522 | $ | 17,197 | ||||
| Due to related party |
16,000 | — | ||||||
|
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|
|
|
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| Total liabilities |
61,522 | 17,197 | ||||||
|
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| Commitments and Contingencies (Note 5) |
||||||||
| Stockholders’ Deficit |
||||||||
| 1,000 shares of Common Stock authorized, $0.001 par value; no shares issued and outstanding as of December 31, 2024 and 2023, respectively |
— | — | ||||||
| Accumulated deficit |
(61,522 | ) | (17,197 | ) | ||||
|
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|
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|
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| Total stockholders’ deficit |
(61,522 | ) | (17,197 | ) | ||||
|
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|
|
|
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| Total liabilities and stockholders’ deficit |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
Marblegate Capital Corporation
Consolidated Statements of Operations
| For the Year Ended December 31, 2024 |
For the Period February 2, 2023 (Inception) to December 31, 2023 |
|||||||
| General and administrative expenses |
$ | 44,325 | $ | 17,197 | ||||
|
|
|
|
|
|||||
| Loss from operations |
(44,325 | ) | (17,197 | ) | ||||
|
|
|
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|
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| Net loss |
$ | (44,325 | ) | $ | (17,197 | ) | ||
|
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| Net loss per common stock, basic and diluted |
$ | — | $ | — | ||||
|
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|
|||||
| Weighted — Average shares outstanding, basic and diluted |
— | — | ||||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
Marblegate Capital Corporation
Consolidated Statements of Change in Stockholders’ Deficit
| Common Stock | ||||||||||||||||
| Shares | Amount | Accumulated Deficit |
Stockholders’ Deficit |
|||||||||||||
| Balance — February 2, 2023 (Inception) |
— | $ | — | $ | — | $ | — | |||||||||
| Net loss |
— | — | (17,197 | ) | (17,197 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance — December 31, 2023 |
— | — | (17,197 | ) | (17,197 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
— | — | (44,325 | ) | (44,325 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance — December 31, 2024 |
— | $ | — | $ | (61,522 | ) | $ | (61,522 | ) | |||||||
|
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|
|
|
|
|
|||||||||
See accompanying notes to consolidated financial statements.
F-5
Table of Contents
Marblegate Capital Corporation
Consolidated Statements of Cash Flows
| For the Year Ended December 31, 2024 |
For the period February 2, 2023 (Inception) to December 31, 2023 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (44,325 | ) | $ | (17,197 | ) | ||
| Changes in operating assets and liabilities: |
||||||||
| Due to related party |
16,000 | — | ||||||
| Accrued expenses |
28,325 | 17,197 | ||||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
— | — | ||||||
|
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|
|
|
|||||
| Net change in cash |
— | — | ||||||
| Cash — beginning of the period |
— | — | ||||||
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|
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| Cash — end of the period |
$ | — | $ | — | ||||
|
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| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid for interest, net amounts capitalized |
$ | — | $ | — | ||||
|
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|
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| Cash paid for income taxes |
$ | — | $ | — | ||||
|
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|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
1. Description of Organization and Business Operations
Marblegate Capital Corporation (the “Company” or “New MAC”) is a Delaware corporation, formed by Marblegate Acquisition Corporation (“MAC” or “Parent”) on February 2, 2023 (inception) to be the surviving company in connection with a contemplated business combination (as defined below). The Company has no prior operating activities.
MAC Merger Sub, Inc. (“Merger Sub”) is a newly-formed Delaware corporation formed on February 6, 2023, and a wholly owned subsidiary of New MAC. The Merger Sub was formed solely for the purpose of effectuating a contemplated business combination (as defined below) and it does not own any material assets or conduct any business activities other than activities incidental to effectuating the business combination.
Business Combination Agreement
On February 14, 2023, New MAC and Merger Sub entered into a business combination agreement (the “BCA”) with MAC, Marblegate Asset Management, LLC, DePalma Acquisition I LLC (“DePalma I”), and DePalma Acquisition II LLC (“DePalma II” and together, with DePalma I, the “DePalma Companies”), pursuant to which MAC agreed to combine with the DePalma Companies in a series of transactions that will result in New MAC becoming a public company (the “Business Combination”). Under the BCA, the aggregate consideration payable to the DePalma Companies at the closing of the Business Combination is based on a valuation of the DePalma Companies of approximately $750 million plus minimum cash anticipated to be required at closing for working capital purposes. The closing of the Business Combination is subject to the satisfaction or waiver of certain conditions defined in the BCA, including, among others, approval by MAC shareholders and the Nasdaq Stock Market’s approval for listing the New MAC Common Stock to be issued in connection with the Business Combination. As of December 31, 2024, the Business Combination has not been closed. See Note 5 and Note 7 for additional information.
Going Concern
As of December 31, 2024, the Company had no cash. The Company has incurred losses and negative cash flows from operations for the year ended December 31, 2024 and has an accumulated deficit of $61,522 at December 31, 2024. New MAC is a non-revenue generating holding company which was solely created to be the surviving company in connection with the BCA. The Parent has until April 7, 2025, as amended, to consummate a business combination. If the Parent is unable to complete the initial business combination by April 7, 2025, the Parent will be forced to cease operations and liquidate.
The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. If the Parent is unable to raise additional funds to alleviate liquidity needs as well as complete a business combination by April 7, 2025 to consummate a business combination, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company intends to complete a business combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate any business combination by April 7, 2025.
F-7
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements include the accounts of Marblegate Capital Corporation and its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated in the consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
Consolidated financial statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Management evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
F-8
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
Fair Value Measurement
The Company applies Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Under U.S. GAAP, a fair value hierarchy is implemented for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The carrying amounts of the Company’s assets and liabilities reflected in the Consolidated Balance Sheets approximate fair value due to their short-term nature.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities and in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC 740, Income Taxes (“ASC 740”) which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2024 and 2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties for the year ended December 31, 2024 and for the period from February 2, 2023 (inception) to December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The tax provision was deemed to be de
F-9
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
minimis for the year ended December 31, 2024 and for the period from February 2, 2023 (inception) to December 31, 2023.
Net Loss Per Common Stock
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. For the year ended December 31, 2024 and for the period from February 2, 2023 (inception) to December 31, 2023, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per common stock is the same as basic loss per common stock for the periods presented.
Accounting Standards Recently Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company has adopted this new guidance and has determined this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Recent Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the effect of this new guidance and does not expect this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the effect of this new guidance and does not expect this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.
3. Stockholders’ Deficit
The Company is authorized to issue 1,000 shares of common stock, with a par value of $0.001 per share (the “Common Stock”). As of December 31, 2024 and 2023, there were no shares of Common Stock issued and outstanding.
F-10
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
4. Related Party Transactions
The DePalma Companies provide advances for the Company’s operating and registration costs that are later reimbursed to the DePalma Companies. As of December 31, 2024 and 2023, the Company had a balance of $16,000 and $0, respectively, due to the DePalma Companies which is included in due to related party on the consolidated balance sheets.
5. Commitments and Contingencies
Business Combination Agreement
On February 14, 2023, New MAC, entered into a business combination agreement with MAC, Marblegate Asset Management, and the DePalma Companies, pursuant to which MAC agreed to combine with the DePalma Companies in a series of transactions that will result in New MAC becoming a public company.
Pursuant to the BCA, among other things:
| i. | Immediately prior to the consummation of the transactions contemplated by the BCA, New MAC and the DePalma Companies will effect a series of reorganization transactions, resulting in New MAC becoming the majority owner of the DePalma Companies (the “Pre-Closing Transactions”); and |
| ii. | Merger Sub will merge with and into MAC (the “Merger”), with MAC surviving the Merger as a wholly-owned subsidiary of New MAC, in accordance with the terms and subject to the conditions of the BCA; and |
| iii. | Upon the effectiveness of the DePalma Merger (the “Effective Time”), (x) each share of Class A common stock issued and outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive the Company Per Share Consideration (as defined below); (y) each share of Class B common stock issued and outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive the Company Per Share Consideration, and (z) each warrant of the Company outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive one warrant of New MAC, with New MAC assuming MAC’s obligations under the existing warrant agreement. |
The aggregate consideration payable to DePalma at the closing of the DePalma Business Combination (the “Closing”) will be based on a valuation of DePalma of approximately $750,000,000 plus the Minimum Cash Amount. The per share consideration allocable to each share of MAC common stock (the “Company Per Share Consideration”) is the number of shares of New MAC Common Stock, rounded up to the nearest whole share, equal to the quotient obtained by dividing (i) the product obtained by multiplying (A) the Company Exchange Ratio by (B) the Aggregate New MAC Capitalization, by (ii) the total number of shares of MAC common stock outstanding immediately prior to the Effective Time and after giving effect to any redemptions of shares of MAC common stock.
6. Segment Information
Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and to assess performance. The Company’s Chief Executive Officer is the Company’s CODM.
F-11
Table of Contents
Marblegate Capital Corporation
Notes to Consolidated Financial Statements
For the year ended December 31, 2024 and for the period from February 2, 2023 (Inception) to December 31, 2023
The Company is non-revenue generating formed solely for the purpose of effectuating a contemplated business combination. The CODM views the Company’s operations and manages expenses incurred on a consolidated basis. Accordingly, the Company has a single reporting segment. The CODM assesses performance of the reportable segment and decides how to allocate resources based on net loss that also is reported on the consolidated statements of operations as consolidated net loss. The Company does not have intra-entity transfers.
7. Subsequent Events
The Company has evaluated subsequent events through April 4, 2025, the date these consolidated financial statements were issued. Except as noted below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the accompanying consolidated financial statements.
The Business Combination received the requisite stockholder approval on March 25, 2025, and is expected to close on or about April 7, 2025, following the fulfillment or waiver of other customary closing conditions.
F-12
Table of Contents
Years Ended December 31, 2024 and 2023
Table of Contents
| F-14 – F-15 | ||||
| Consolidated Financial Statements |
||||
| Consolidated Balance Sheets as of December 31, 2024 and 2023 |
F-16 | |||
| Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 |
F-17 | |||
| F-18 | ||||
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 |
F-19 | |||
| F-20 | ||||
F-13
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of DePalma Acquisition I LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DePalma Acquisition I LLC (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in members’ capital, and cash flows, for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to those charged with governance and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-14
Table of Contents
Loans held for investment, at fair value—Refer to Notes 2, 3 and 4 to the financial statements
Critical Audit Matter Description
The Company holds loans collateralized by taxi medallions classified as Loans held for investment, at fair value. The determination of fair value by the Company included income and market approaches which use significant unobservable inputs, developed with the assistance of a third-party valuation specialist.
We identified Loans held for investment, at fair value, as a critical audit matter because of the significant unobservable inputs that management used to estimate the fair value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, to audit and evaluate these inputs.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to Loans held for investment, at fair value, included the following, among others:
| • | We obtained an understanding of the Company’s process for determining the fair value for Loans held for investment, at fair value, including the Company’s use of a third-party valuation specialist to develop the fair value measurement and evaluated whether the unobservable inputs used were appropriate in the context of accounting principles generally accepted in the United States of America. |
| • | We evaluated the design and implementation of relevant controls over management’s valuation of Loans held for investment, including those related to valuation techniques and significant unobservable inputs. |
| • | With the assistance of our fair value specialists, we evaluated the reasonableness of the fair value estimates by evaluating whether the methods, data, and assumptions used, and the judgments applied were representative of industry conditions by comparison to market data. |
| • | We developed independent valuation estimates, using externally sourced inputs, and compared such estimates to the Company’s recorded value. |
/s/ Deloitte & Touche LLP
New York, New York
March 27, 2025
We have served as the Company’s auditor since 2023.
F-15
Table of Contents
DePalma Acquisition I LLC
(Stated in United States Dollars)
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets: |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 2,364,279 | $ | 35,735,250 | ||||
| Interest receivable |
1,183,075 | 1,047,144 | ||||||
| Due from related party |
16,000 | — | ||||||
|
|
|
|
|
|||||
| Total current assets |
3,563,354 | 36,782,394 | ||||||
| Loans held for investment, at fair value |
278,571,140 | 334,353,100 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 282,134,494 | $ | 371,135,494 | ||||
|
|
|
|
|
|||||
| Liabilities: |
||||||||
| Current liabilities: |
||||||||
| Service fee payable |
$ | 1,181,227 | $ | 1,500,000 | ||||
| Loan payments received in advance |
72,849 | 301,042 | ||||||
| Accrued professional fees |
608,421 | 659,424 | ||||||
| Accrued expenses and other current liabilities |
124,730 | 156,945 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
1,987,227 | 2,617,411 | ||||||
| Commitments and contingencies (See Note 2) |
||||||||
| Total members’ capital (537,003,295 Units outstanding) |
280,147,267 | 368,518,083 | ||||||
|
|
|
|
|
|||||
| Total liabilities and members’ capital |
$ | 282,134,494 | $ | 371,135,494 | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-16
Table of Contents
DePalma Acquisition I LLC
Consolidated Statements of Operations
(Stated in United States Dollars)
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: |
||||||||
| Interest income |
$ | 14,672,363 | $ | 15,185,722 | ||||
| Other revenue |
5,788,139 | 5,011,847 | ||||||
|
|
|
|
|
|||||
| Total revenue |
20,460,502 | 20,197,569 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Service fee expense |
4,450,000 | 4,539,920 | ||||||
| Professional fees |
4,581,954 | 6,123,739 | ||||||
| General and administrative |
201,968 | 255,552 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
9,233,922 | 10,919,211 | ||||||
|
|
|
|
|
|||||
| Income from operations |
11,226,580 | 9,278,358 | ||||||
|
|
|
|
|
|||||
| Other income: |
||||||||
| Gains on loans held for investment, net |
3,167,604 | 36,398,198 | ||||||
|
|
|
|
|
|||||
| Total other income |
3,167,604 | 36,398,198 | ||||||
|
|
|
|
|
|||||
| Net income |
$ | 14,394,184 | $ | 45,676,556 | ||||
|
|
|
|
|
|||||
| Earnings per unit — basic and diluted |
$ | 0.03 | $ | 0.09 | ||||
|
|
|
|
|
|||||
| Weighted average units outstanding — basic and diluted |
537,003,295 | 537,003,295 | ||||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-17
Table of Contents
DePalma Acquisition I LLC
Consolidated Statements of Changes in Members’ Capital
(Stated in United States Dollars)
| Total Members’ Capital | ||||||||
| Units | Amount | |||||||
| Balance, January 1, 2023 |
537,003,295 | $ | 495,921,677 | |||||
| Net income |
— | 45,676,556 | ||||||
| Capital contributions — related parties (See Note 7) |
— | 1,750,000 | ||||||
| Capital distributions — related parties (See Note 7) |
— | (174,830,150 | ) | |||||
|
|
|
|
|
|||||
| Balance, December 31, 2023 |
537,003,295 | $ | 368,518,083 | |||||
| Net income |
— | 14,394,184 | ||||||
| Capital contributions — related parties (See Note 7) |
— | 4,025,000 | ||||||
| Capital distributions — related parties (See Note 7) |
— | (106,790,000 | ) | |||||
|
|
|
|
|
|||||
| Balance, December 31, 2024 |
537,003,295 | $ | 280,147,267 | |||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-18
Table of Contents
DePalma Acquisition I LLC
Consolidated Statements of Cash Flows
(Stated in United States Dollars)
| For the Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 14,394,184 | $ | 45,676,556 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Gains on loans held for investment, net |
(3,167,604 | ) | (36,398,198 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Interest receivable |
(135,931 | ) | (555,840 | ) | ||||
| Due from related party (See Note 7) |
(16,000 | ) | — | |||||
| Service fee payable |
(318,773 | ) | 208,383 | |||||
| Loan payments received in advance |
(228,193 | ) | (1,651,991 | ) | ||||
| Accrued professional fees |
(51,003 | ) | 381,793 | |||||
| Accrued expenses and other liabilities |
(32,215 | ) | 115,800 | |||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
10,444,465 | 7,776,503 | ||||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Loan repayments |
16,659,564 | 58,143,744 | ||||||
| Purchases of Non-MRP+ loans |
(2,825,000 | ) | — | |||||
|
|
|
|
|
|||||
| Net cash provided by investing activities |
13,834,564 | 58,143,744 | ||||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Capital distributions to Members-related parties (See Note 7) |
(57,650,000 | ) | (44,450,000 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in financing activities |
(57,650,000 | ) | (44,450,000 | ) | ||||
|
|
|
|
|
|||||
| Net (decrease) increase in cash and cash equivalents |
(33,370,971 | ) | 21,470,247 | |||||
| Cash and cash equivalents, at beginning of year |
35,735,250 | 14,265,003 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, at end of year |
$ | 2,364,279 | $ | 35,735,250 | ||||
|
|
|
|
|
|||||
| Supplemental disclosure of non-cash financing activities: |
||||||||
| In-kind distribution and sale to related parties (See Note 7) |
$ | 49,140,000 | $ | 130,380,150 | ||||
|
|
|
|
|
|||||
| In-kind contribution and purchase from related parties (See Note 7) |
$ | 4,025,000 | $ | 1,750,000 | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-19
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
1. Organization
DePalma Acquisition I LLC (“DePalma”) is a Delaware limited liability company which was formed on February 23, 2018 and commenced operations on March 29, 2018. DePalma has investments in DePalma Acquisition I Grantor Trust and DePalma Acquisition I Grantor Trust II (together, the “Trusts”), which are wholly owned, and established to issue certificates to their holders, to acquire certain assets, primarily loans secured by taxi medallions, to enter into certain contracts in connection therewith, and to engage in those activities that are necessary, suitable or convenient to accomplish the foregoing. The financial position and results of operations of the Trusts have been consolidated with those of DePalma. The objective of DePalma is to achieve superior risk-adjusted returns through investing all of its assets in opportunistic investments in the taxi industry, including but not limited to, loans secured by taxi medallions.
The performance of the portfolio taxi medallion loans may be impacted by external factors including, but not limited to, general macroeconomic conditions, the state of the taxi industry, governmental initiatives and so forth.
On March 9, 2021, the City of New York announced the Medallion Relief Program (“MRP”) to assist economically distressed individual taxi medallion owners. The purpose of the MRP is to support the recovery of the taxi industry in the City of New York and return taxis to service by providing relief to owners of taxi medallions who are currently unable to make debt service payments on loans issued by participating lenders, and incurred to purchase such medallions. The MRP helps eligible medallion owners restructure their outstanding debt to more sustainable levels on more favorable terms. The MRP allocated $65 million in federal grant money from the American Rescue Plan Act of 2021 to provide a $20,000 per medallion principal reduction payment and up to $9,000 in monthly debt relief payments in connection with the restructuring of taxi medallion loans to reduce principal balances and lower monthly payments for taxi medallion owners.
On November 3, 2021, the City of New York further reached an agreement with the New York Taxi Workers Alliance (“TWA”), a labor union representing taxi drivers, and Marblegate Asset Management, LLC, to supplement the MRP with a NYC-funded deficiency credit support mechanism (the “Reserve Fund”) to achieve greater principal reduction and lower monthly payments for taxi medallion loans that were restructured through the MRP, and to permit restructuring of additional medallion loans. On March 17, 2022, the New York City Taxi and Limousine Commission (the “TLC”) adopted rules establishing the eligibility criteria for applying for supplemental loan deficiency credit support through the Medallion Relief Program+ (“MRP+”).
As a result of the MRP+, the City of New York has appropriated a total of $115 million in funding to implement the MRP, including (i) $65 million to be utilized to provide upfront principal reduction payments equal to $30,000 per medallion to lenders as part of each restructuring transaction and (ii) $50 million to fund the Reserve Fund. The Reserve Fund also serves to both make loan payments for a period of time to participating lenders following the occurrence of a payment default by a participating borrower, as well as to satisfy any deficiency realized upon foreclosure of medallion collateral.
DePalma became a participating lender in the MRP+ program in 2021 and correspondingly, restructured medallion loans for eligible borrowers. Under the MRP+, eligible medallion loans with a principal balance of $200,000 or more will be reduced to an initial principal balance of $200,000, and further reduced to $170,000 per medallion (after a $30,000 per medallion principal reduction payment from the Reserve Fund). Existing medallion loans with a principal balance of $200,000 or less will have a principal balance equal to the existing principal balance reduced by (i) $30,000 per medallion and (ii) further reduced by 5% of the post-paydown principal balance per medallion resulting from (i) above. In no event will the principal balance of any eligible
F-20
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
medallion loan exceed $170,000 per medallion. Further, MRP+ loans have a maturity date of 25 years from the date of restructuring, accrue interest at an annual rate of 7.3%, and require fixed monthly payments.
Pursuant to the Third Amended and Restated Limited Liability Company Agreement dated July 1, 2020 (the “LLC Agreement”), DePalma issued one class of equity units to its members in consideration for their cash contributions. DePalma’s members consist of Marblegate Tactical Master Fund I, L.P., a Delaware limited partnership, Marblegate Special Opportunities Master Fund, L.P., a Cayman Islands exempted limited partnership, Marblegate Strategic Opportunities Master Fund I, LP, a Delaware limited partnership, Marblegate Partners Master Fund I, L.P., a Cayman Islands exempted limited partnership, Marblegate Tactical III Master Fund I, LP, a Cayman Islands exempted limited partnership and Marblegate Cobblestone Master Fund I, LP, a Delaware limited partnership (collectively, the “Members”). DePalma is managed by its Members, each of which is managed by Marblegate Asset Management, LLC, a Delaware limited liability company (the “Investment Manager”).
The Members, by the affirmative vote of 100% of the Member Units, have full and complete authority, power, and discretion to manage and control the business, affairs and properties of DePalma, make all decisions regarding those matters and perform any and all other acts or activities customary to the management of DePalma’s business. The Members have limited liability and are managed and controlled by the Investment Manager and affiliates thereof, and none of the limited partners of the Members participate in the management of their respective partnerships.
As of December 31, 2024 and 2023, Marblegate Special Opportunities Master Fund, L.P., Marblegate Strategic Opportunities Master Fund, LP, Marblegate Partners Master Fund I, L.P., Marblegate Tactical Master Fund I, L.P., Marblegate Cobblestone Master Fund I, LP, and Marblegate Tactical III Master Fund I, L.P. owned 12.87%, 18.35%, 5.25%, 16.28%, 12.74%, and 34.51%, respectively, of DePalma.
Pursuant to the LLC Agreement, all capital distributions made to the Members are made in proportion to the Members’ respective Units.
Field Point Servicing, LLC (the “Loan Servicer” or “Field Point”) is a third-party loan servicer for all of the loans held by DePalma and the Trusts.
SS&C Financial Services LLC is a third-party administrator to DePalma that performs certain middle-office and/or back-office support activities.
Business Combination Agreement
On February 14, 2023, DePalma and DePalma Acquisition II LLC (“DePalma II” and together, with DePalma, the “DePalma Companies”), entered into a business combination agreement (the “BCA”) with Marblegate Acquisition Corp. (“MAC”), a Delaware corporation, Marblegate Asset Management, LLC, Marblegate Capital Corporation (“New MAC”), a Delaware corporation, and MAC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of New MAC, pursuant to which MAC agreed to combine with the DePalma Companies in a series of transactions that will result in New MAC becoming a publicly-traded company whose shares are expected to trade on the Nasdaq Global Market (the “Business Combination”). Under the BCA, the aggregate consideration payable to the DePalma Companies at the closing of the Business Combination is based on a valuation of the DePalma Companies of approximately $750 million plus minimum cash anticipated to be
F-21
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
required at closing for working capital purposes. The closing of the Business Combination is subject to the satisfaction or waiver of certain conditions defined in the BCA, including, among others, approval by MAC shareholders and the Nasdaq Stock Market’s approval for listing the New MAC Common Stock to be issued in connection with the Business Combination. As of December 31, 2024, the BCA has not been closed.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are stated in United States Dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of DePalma and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.
The following is a summary of the significant accounting policies followed by DePalma in the preparation of its consolidated financial statements.
Use of Estimates
Financial statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Management evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. DePalma’s significant estimates and assumptions include estimation of the fair value of loans held for investment. Actual results could differ from these estimates.
Reclassifications
Certain amounts have been reclassified to conform with current presentation. Both the prior and current presentation of these amounts are in accordance with U.S. GAAP. These reclassifications include reflecting the line item gains on loans held for investment, net in lieu of separate line items for realized gains (losses) on loans held for investment, net and change in fair value of loans to conform with the current period presentation on the Consolidated Statements of Operations, Consolidated Statements of Cash Flows, and the notes to these consolidated financial statements. These reclassifications had no impact on DePalma’s financial condition, results of operations, or cash flows.
Cash and Cash Equivalents
DePalma considers money market accounts and highly liquid investments with an original maturity of three months or less to be cash equivalents. DePalma’s cash and cash equivalents are held by major financial institutions, for which accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per legal entity. At times, cash and cash equivalents balances may exceed federally insured limits, and this potentially subjects DePalma to concentration of credit risk. DePalma has not experienced any losses in such accounts. Furthermore, DePalma reduces risk by maintaining accounts with high quality financial institutions that management believes are creditworthy, and by monitoring this credit risk and adjusting when necessary.
F-22
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Loan Payments Received in Advance
Under the MRP+, eligible borrowers reduced their loan balances as described in Note 1. Payments received for loans that were not restructured as of December 31, 2024 were considered to be received in advance as payment was not yet due on the restructured loan contract. These are shown in loan payments received in advance on the Consolidated Balance Sheets.
Loans Held for Investment, at Fair Value
DePalma holds loans for investment that are generally collateralized by taxi medallions in various jurisdictions, primarily New York City. In certain instances, DePalma may take other forms of collateral in addition to taxi medallions, such as commercial and residential real estate. DePalma has elected the fair value option and measures these collateralized loans at fair value with changes in fair value recorded in the Consolidated Statements of Operations in the period of the change. DePalma made this accounting election upon adopting Accounting Standards Codification (“ASC”) 825 to better align reported results with the underlying economic changes in the value of the loans on the Consolidated Balance Sheets. After the initial adoption, the election is made at the acquisition of an eligible financial asset or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made.
DePalma recognizes gains and losses upon sale, or foreclosure, of loans held for investment, at fair value. Gains and losses on loans held for investment, at fair value are recorded within gains on loans held for investment, net in the Consolidated Statements of Operations and reported as both the difference between the sale proceeds and the carrying value of a loan, and a loan entering the MRP+ program as a result of the restructuring of the loan’s principal. For foreclosed loans, the difference between fair value of the collateral less foreclosure costs compared to the loan carrying value is recorded as a gain or loss. Prior period changes in fair value have been included in the carrying value of such loans up until foreclosure. Changes in fair value of loans are reported within gains on loans held for investment, net on the Consolidated Statements of Operations.
Interest income is generally recorded on the accrual basis. Interest income on non-accrual loans is recognized within interest income when cash is received. Interest income previously accrued but not paid on loans that have been placed on non-accrual status is reversed.
Taxi medallion loans are placed on non-accrual status when there is doubt as to the collectibility of interest or principal, unless management has determined that they are both well-secured and in the process of collection. Generally, loans are placed on non-accrual status when they are greater than 30 days past due.
A loan is considered to be non-performing, when based on current information and events, it is likely that DePalma will be unable to collect all amounts due according to the contractual terms of the original loan agreement. If the medallion collateral is foreclosed on, DePalma recognizes the collateral at its fair value less foreclosures related costs, and the collateral is distributed out to the Members.
Other revenue in the Consolidated Statements of Operations is primarily comprised of the restructuring fee paid by borrowers as part of the MRP+ program in accordance with the promissory note, loan and security agreement executed between DePalma and the borrower when a loan enters the MRP+ program. Also included in other revenue are payments received from the Reserve Fund on behalf of borrowers, fees received in connection with non-MRP+ restructurings and settlements, and the resolution of certain litigation and bankruptcy proceedings. Other revenue is recognized when cash is received based on the non-performing nature of loans being restructured.
F-23
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Under the MRP+ program, an eligible medallion loan with a principal balance of more than $200,000 will be restructured to reduce the outstanding principal balance to $200,000, and further reduced to $170,000 per medallion (after a $30,000 per medallion principal reduction payment from the Reserve Fund). The reduction in the outstanding principal balance to the restructured principal balance is recorded as a writedown of principal in which no cash is received, at which time a loss is recorded based on the reduction in principal balance.
Loan Servicing Fees
DePalma pays a servicing fee to Field Point, under a loan servicing agreement. Fees paid during the years ended December 31, 2024 and 2023 amounted to $4,450,000 and $4,539,920, respectively, and are included in the Consolidated Statements of Operations as service fee expense.
Earnings per Unit
Basic earnings per unit is computed by dividing net income by the weighted average number of units outstanding. There were no dilutive securities for the years ended December 31, 2024 and 2023.
The following table sets forth the computation of basic and diluted earnings per unit:
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income |
$ | 14,394,184 | $ | 45,676,556 | ||||
|
|
|
|
|
|||||
| Weighted average units outstanding — basic and diluted |
537,003,295 | 537,003,295 | ||||||
|
|
|
|
|
|||||
| Earnings per unit — basic and diluted |
$ | 0.03 | $ | 0.09 | ||||
|
|
|
|
|
|||||
Income Taxes
DePalma is treated as a partnership for U.S. tax purposes and therefore is not subject to federal, state, or local income taxes. Such taxes are the liabilities of the individual partners and the amounts thereof will vary depending on the individual situation of each partner. Accordingly, there is no provision for income taxes in the accompanying consolidated financial statements. DePalma applies the provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for and reporting of income tax uncertainties, and requires additional disclosures related to uncertain income tax positions. ASC 740 requires that DePalma determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, DePalma presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. DePalma classifies interest and penalties associated with uncertain tax positions, if any, within income tax expense. DePalma is subject to other state and local tax in New York. As of December 31, 2024, the earliest year DePalma remains subject to examination by the Internal Revenue Service is for tax year December 31, 2021.
In accordance with provisions set forth in ASC 740, DePalma has evaluated its tax positions, including interest and penalties, for all open tax years and concluded that the application of ASC 740 had no effect on its financial position, results of operations or cash flows. Based on DePalma’s analysis, no provision for income taxes is required as of December 31, 2024 and 2023.
F-24
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Commitments and Contingencies
As of December 31, 2024 and 2023, DePalma had no unfunded loan commitments. In the normal course of business, DePalma enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. DePalma’s maximum exposure under these arrangements cannot be estimated, as this would involve future claims that may be made against DePalma that have not yet occurred. However, based on experience, DePalma expects the risk of loss to be remote.
Accounting Standards Recently Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. DePalma adopted ASU 2023-07 during the year ended December 31, 2024. The adoption of ASU 2023-07 did not have a material impact on the financial statement disclosures. See Note 5 for additional information.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 31, 2027, with early adoption permitted. DePalma is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements and related disclosures.
3. Fair Value Measurements
DePalma applies the provisions of ASC Topic 820, Fair Value Measurement (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Under U.S. GAAP, a fair value hierarchy is implemented for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of DePalma. Unobservable inputs reflect the Members’ own assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy gives the highest priority to unadjusted quoted prices in
F-25
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities and in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. In addition to using the above inputs in asset or liability valuations, DePalma continues to employ the valuation policy that is consistent with ASC 820.
The following table presents information about DePalma’s assets by levels within the valuation hierarchy. Refer to Note 4 for further detail on the industry and geographic concentration.
| December 31, 2024 | Level 1 | Level 2 | Level 3 | Amount at Fair Value |
||||||||||||
| Loans held for investment, at fair value |
||||||||||||||||
| Private Loans: |
||||||||||||||||
| MRP+ Loans |
$ | — | $ | — | $ | 201,105,936 | $ | 201,105,936 | ||||||||
| Non-MRP+ Loans |
— | — | 77,465,204 | 77,465,204 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total loans held for investment, at fair value |
$ | — | $ | — | $ | 278,571,140 | $ | 278,571,140 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2023 | Level 1 | Level 2 | Level 3 | Amount at Fair Value |
||||||||||||
| Loans held for investment, at fair value |
||||||||||||||||
| Private Loans: |
||||||||||||||||
| MRP+ Loans |
$ | — | $ | — | $ | 211,294,011 | $ | 211,294,011 | ||||||||
| Non-MRP+ Loans |
— | — | 123,059,089 | 123,059,089 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total loans held for investment, at fair value |
$ | — | $ | — | $ | 334,353,100 | $ | 334,353,100 | ||||||||
|
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|
|
|
|
|
|
|||||||||
F-26
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
The following table provides a reconciliation of the beginning and ending balances for loans held for investment, at fair value that use Level 3 inputs:
| MRP+ Loans | Non-MRP+ Loans | |||||||
| Balance as of January 1, 2023 |
$ | 221,563,000 | $ | 263,165,796 | ||||
| Transfers into MRP+ Program |
22,683,568 | (22,683,568 | ) | |||||
| Gains on loans held for investment, net |
4,673,253 | 31,724,945 | ||||||
| Loan repayments |
(38,850,810 | ) | (19,292,934 | ) | ||||
| In-kind contribution and purchase from related parties |
1,750,000 | — | ||||||
| In-kind distribution and sale to related parties |
(525,000 | ) | (129,855,150 | ) | ||||
|
|
|
|
|
|||||
| Balance as of December 31, 2023 |
$ | 211,294,011 | $ | 123,059,089 | ||||
| Transfers into MRP+ Program |
1,146,284 | (1,146,284 | ) | |||||
| Gains on loans held for investment, net |
(153,600 | ) | 3,321,204 | |||||
| Loan repayments |
(6,280,759 | ) | (10,378,805 | ) | ||||
| Purchases of Non-MRP+ loans |
— | 2,825,000 | ||||||
| In-kind contribution and purchase from related parties |
— | 4,025,000 | ||||||
| In-kind distribution and sale to related parties |
(4,900,000 | ) | (44,240,000 | ) | ||||
|
|
|
|
|
|||||
| Balance as of December 31, 2024 |
$ | 201,105,936 | $ | 77,465,204 | ||||
|
|
|
|
|
|||||
Net change in estimated fair value from Level 3 loans still held at December 31, 2024 and 2023, included in gains on loans held for investment, net on the Consolidated Statements of Operations, was a net decrease of $3,372,052 and net increase of $2,176,762, for the years ended December 31, 2024 and 2023, respectively.
With respect to instruments valued by management, the valuation techniques employed are an income approach reflecting a discounted cash flow analysis, and a market approach that includes market transactions.
The following table summarizes the valuation techniques and significant unobservable inputs used for DePalma’s assets that are categorized within Level 3 of the fair value hierarchy as of December 31, 2024:
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Input | Low Range |
High Range |
Weighted Average5 |
||||||||||||||||||
| MRP+ Loans |
$ | 201,105,936 | |
Income Approach1 |
|
Discount Rate2 | 8.25 | % | 8.25 | % | 8.25 | % | ||||||||||||
| Non-MRP+ Loans — NYC |
60,995,794 | |
Market Approach3 |
|
|
Discounted Medallion Price4 |
|
$ | 166,250 | $ | 166,250 | $ | 166,250 | |||||||||||
| Non-MRP+ Loans — Other |
16,469,410 | |
Market Approach |
|
|
Market Medallion Price |
|
$ | 10,000 | $ | 12,000 | $ | 10,735 | |||||||||||
|
|
|
|||||||||||||||||||||||
| Total |
$ | 278,571,140 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
F-27
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
| 1 | Used to value MRP+ loan cash flows. |
| 2 | The discount rate is utilized to present value cash flows from loans restructured by the City of New York under the MRP+ program (at a price of $170,000). To determine the discount rate, DePalma considers the internal rate of return on the investment, changes in the US Treasury rates to maturity of the loans and a risk premium for the likelihood of whether a loan will be successfully restructured under the MRP+ program. |
| 3 | The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $210,000), the amount backstopped under the MRP+ ($170,000), and certain market prices reported by the TLC (ranging from $30,000 to $200,000). In addition, loans are valued at the lesser of unpaid principal balance and the medallion or other collateral value (such as commercial and residential real estate which generally does not exceed 5% of the total loans held for investment, at fair value), less a discount applied to the collateral value. In instances where loans are overcollateralized with an unpaid principal balance less than or equal to $165,000 as of December 31, 2024, these loans are determined to have a fair value equal to par. Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 4 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which the low value was $165,000 and the high value was $185,000. A 5% discount is applied to the Market Medallion Price for New York City medallions to estimate costs associated with taking ownership of a medallion as the medallions are not directly held by DePalma. |
| 5 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
The following table summarizes the valuation techniques and significant unobservable inputs used for DePalma’s assets that are categorized within Level 3 of the fair value hierarchy as of December 31, 2023:
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Input | Low Range |
High Range |
Weighted Average5 |
||||||||||||||||||
| MRP+ Loans |
$ | 211,294,011 | |
Income Approach1 |
|
Discount Rate2 | 8.75 | % | 8.75 | % | 8.75 | % | ||||||||||||
| Non-MRP+ Loans — NYC |
101,547,979 | |
Market Approach3 |
|
|
Discounted Medallion Price4 |
|
$ | 166,250 | $ | 166,250 | $ | 166,250 | |||||||||||
| Non-MRP+ Loans — Other |
21,511,110 | |
Market Approach |
|
|
Market Medallion Price |
|
$ | 12,000 | $ | 12,500 | $ | 12,350 | |||||||||||
|
|
|
|||||||||||||||||||||||
| Total |
$ | 334,353,100 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| 1 | Used to value MRP+ loan cash flows. |
| 2 | The discount rate is applied to the unpaid principal balance as restructured by the City of New York under the MRP+ program (at a price of $170,000). To determine the discount rate, DePalma considers the internal rate of return on the investment, changes in the US Treasury rates to maturity of the loans and a risk premium for the likelihood of whether a loan will be successfully restructured under the MRP+ program. |
| 3 | The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $176,000), the amount backstopped under the MRP+ ($170,000), and certain market prices reported by the TLC (ranging from $40,000 to $200,000). In addition, loans are valued at the lesser of unpaid principal balance and the medallion or other collateral value (such as commercial and residential real estate which generally does not exceed 5% of the total loans held for investment, at fair value), less a discount applied to the collateral value. In instances where loans are overcollateralized with an unpaid principal balance less than or equal to $165,000 as of December 31, 2023, these loans are determined to have a fair value equal to par. |
F-28
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
| Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 4 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which the low value was $165,000 and the high value was $185,000. A 5% discount is applied to the Market Medallion Price for New York City medallions to estimate costs associated with taking ownership of a medallion as the medallions are not directly held by DePalma. |
| 5 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
The value of the underlying collateral and thus, the portfolio of loans may be impacted by multiple factors including, but not limited to, general macroeconomic conditions and state of the taxi industry, loan restructurings, governmental initiatives, and medallion transfers. Without a readily ascertainable market value, the estimated value of DePalma’s portfolio of loans held for investment, at fair value may differ significantly from the values that would be placed on the portfolio if a readily determinable market existed for the loans. The illiquidity of DePalma’s loan portfolio may adversely affect DePalma’s ability to dispose of loans at times when it may be advantageous for DePalma to liquidate such portfolio. In addition, if DePalma were required to liquidate some or all of the loans in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such loans. Changes in the various unobservable inputs used to determine valuations may have similar or diverging impacts on valuation. Significant increases or decreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements than noted in the tables above.
There were no transfers in and out of Level 3 during any of the periods presented.
4. Loans Held for Investment, at Fair Value
As mentioned in Note 2, DePalma’s loan portfolio consists of loans that are collateralized primarily by taxi medallions. The following table shows the composition of the difference between the aggregate principal balance outstanding and the aggregate fair value of the taxi medallion loans held for investment as of December 31, 2024 and 2023:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Total principal balance outstanding |
$ | 917,680,364 | $ | 990,997,104 | ||||
| Adjustment to reduce loans to fair value |
(639,109,224 | ) | (656,644,004 | ) | ||||
|
|
|
|
|
|||||
| Total loans held for investment, at fair value |
$ | 278,571,140 | $ | 334,353,100 | ||||
|
|
|
|
|
|||||
F-29
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
The following table shows the major classifications of loans held for investment as of December 31, 2024 and 2023:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Loans held for investment, at fair value |
||||||||
| MRP+ Loans (NYC): |
||||||||
| Performing |
$ | 5,968,744 | $ | 146,645,310 | ||||
| Non-performing |
195,137,192 | 64,648,701 | ||||||
| Non-MRP+ Loans (NYC): |
||||||||
| Performing |
604,279 | 10,386,740 | ||||||
| Non-performing |
60,391,515 | 91,161,239 | ||||||
| Non-MRP+ Loans (Other): |
||||||||
| Performing |
114,285 | 130,648 | ||||||
| Non-performing |
16,355,125 | 21,380,462 | ||||||
|
|
|
|
|
|||||
| Total loans held for investment, at fair value |
$ | 278,571,140 | $ | 334,353,100 | ||||
|
|
|
|
|
|||||
| Total performing loans |
$ | 6,687,308 | $ | 157,162,698 | ||||
|
|
|
|
|
|||||
| Total non-performing loans |
$ | 271,883,832 | $ | 177,190,402 | ||||
|
|
|
|
|
|||||
Non-performing loans are categorized as loans that are greater than 30 days past due, and therefore, placed on non-accrual status. The aggregate fair value and outstanding principal balances of taxi medallion loans that were non-performing were as follows as of December 31, 2024 and 2023:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Total principal balance outstanding |
$ | 910,917,503 | $ | 824,129,380 | ||||
| Adjustment to reduce loans to fair value |
(639,033,671 | ) | (646,938,978 | ) | ||||
|
|
|
|
|
|||||
| Total non-performing loans, at fair value |
$ | 271,883,832 | $ | 177,190,402 | ||||
|
|
|
|
|
|||||
5. Segment Information
Operating segments are defined as components of an enterprise that engage in business activities which may recognize revenues and incur expenses for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and to assess performance. In accordance with ASC 280, Segment Reporting, DePalma’s CODM has been identified as the Chief Executive Officer. DePalma operates in one segment focused on investments in loans secured by taxi medallions, which primarily derives revenue through servicing the loans and generating interest income.
The CODM assesses financial condition and segment operating results to allocate resources and assess segment profitability consistent with its significant accounting policies and results presented within these consolidated financial statements, including net income on the Consolidated Statements of Operations and total assets on the
F-30
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Consolidated Balance Sheets. In addition, the CODM reviews significant expenses consisting of those reported on the Consolidated Statements of Operations.
6. Risk Management
In the ordinary course of business, DePalma manages a variety of risks, including market risk and liquidity risk. Market risk is the risk of potential adverse changes to the value of its loans because of changes in market conditions, such as interest and currency rate movements and volatility in commodity or security prices. Liquidity risk arises in the general funding of DePalma’s trading activities.
DePalma’s exposure to market risk may be due to many factors, including the movements in interest rates, market volatility, and security values underlying these loans. DePalma manages its exposure to market risk through its loan restructuring strategies and how it chooses to resolve loans with borrowers.
DePalma may have investments in loans and other interests acquired through both assignments and/or participations. As with other types of debt instruments, such interests involve the risk of loss in the case of default or insolvency of the borrower, particularly if the borrowing is unsecured. When purchasing loan participations, DePalma may also assume the credit risk associated with a bank or other financial intermediary administering principal and interest payments and crediting such to DePalma as the holder of the loan. Disposal of these loan interests may involve time consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. As of December 31, 2024 and 2023, all loans were owned on assignment.
Since the collateral consists primarily of taxi medallions (in addition to some real estate and personal guaranties), if the overall market for taxi services, income generated from operating medallions, and the value of taxi medallions decreases, this will adversely affect the value of the collateral securing the outstanding medallion loans. If taxi medallion values decline in the future, there is likely to be an increase in medallion loan delinquencies, foreclosures and borrower bankruptcies. DePalma’s ability to recover on defaulted medallion loans by foreclosing on and selling the taxi medallion collateral would be diminished, which would result in future losses on defaulted medallion loans that could have an effect on DePalma’s business. If DePalma is required to liquidate all or a portion of the medallion loans quickly, DePalma could realize less than the value at which DePalma had previously recorded such loans.
DePalma relies heavily on third-party service providers to perform certain functions essential to its operations, including most of the day-to-day servicing of the taxi medallion loans. Any disruption to DePalma’s service providers’ business operations, resulting from business failures, financial instability, or operational problems could have a material adverse effect on DePalma’s business, financial condition and results of operations. In addition, if DePalma does not effectively develop and manage its outsourcing strategies, there could be a material adverse effect on DePalma’s business, financial condition and results of operations.
7. Related Party Transactions
DePalma II, an entity under the same ownership that operates alongside DePalma, was established to hold medallion assets that may produce effectively connected income. Due to some Member sensitivities around effectively connected income, upon foreclosure of a loan or surrender agreement, the underlying medallion collateral for the loan will be distributed out (in-kind) to the Members and their respective feeders who then contribute the medallion collateral (in-kind) into DePalma II, which is less sensitive to effectively connected
F-31
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
income. The Members of DePalma II have embedded in their fund structures a subchapter C corporation interposed within the applicable fund’s structure, in which the corporation pays corporate level tax. This insulates those investors that are effectively connected income-sensitive from direct taxes with respect to the medallions. Such investors do, however, bear the tax indirectly as indirect owners of the C corporation. DePalma, via its Members, distributed taxi medallions with a fair value of $49,140,000 and $130,380,150 in-kind into DePalma II as a result of foreclosures and paydown and surrender agreements during the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, DePalma II, via its members, contributed taxi medallions with a fair value of $4,025,000 and $1,750,000, respectively, in-kind into DePalma as a result of the reinstatement of certain taxi medallion loans and return of collateral to the borrower. The above transactions were reflected as in-kind contributions and distributions at the Members’ level.
In certain instances, DePalma will provide working capital to DePalma II and DePalma II will reimburse DePalma in a timely manner. When such transactions occur, the amounts are initially shown as due from related party in the Consolidated Balance Sheets. In addition, DePalma may, via its Members, distribute capital to DePalma II that is not reimbursable to DePalma. During the year ended December 31, 2024, DePalma, via its Members, distributed $35,150,000 to DePalma II, which was not reimbursable to DePalma and was used by DePalma II to pay certain expenses and fund future business operations. During the year ended December 31, 2023, DePalma provided financing on behalf of DePalma II to purchase cars (taxi vehicles) totaling $2,563,283, DePalma, via its Members, distributed $3,000,000 to DePalma II, a portion of which was used to reimburse DePalma for these taxi vehicle purchases, and DePalma II reimbursed DePalma $40,000 for medallion related expenses paid by DePalma on behalf of DePalma II. As of December 31, 2024 and 2023, no amounts are due from DePalma II within due from related party on the Consolidated Balance Sheets.
In addition, DePalma may provide advances to New MAC for operating and registration costs that are later reimbursed to DePalma. As of December 31, 2024, DePalma had a balance due from New MAC within due from related party on the Consolidated Balance Sheets of $16,000. As of December 31, 2023, no amounts were due from New MAC.
DePalma makes capital distribution payments to its Members at the discretion of the Investment Manager. During the years ended December 31, 2024 and 2023, DePalma made payments for capital distributions to its Members totaling $57,650,000 (inclusive of the aforementioned $35,150,000 to DePalma II via its Members) and $44,450,000, respectively.
8. Members’ Capital
Allocation of profits and losses
Net income or loss is allocated to the Members pro rata in proportion to their respective capital balance. Management and performance fees are charged directly to the Members at their respective funds, and are not charged to DePalma.
Contributions
Units are issued to the Members for contributions made to DePalma pursuant to the LLC Agreement. See Note 1 for additional information.
F-32
Table of Contents
DePalma Acquisition I LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Distributions
Distributions to Members are made at the times and amounts determined by the Members in proportion to the Members’ respective Units.
9. Subsequent Events
The Members have evaluated subsequent events through March 27, 2025, the date these consolidated financial statements were issued. Subsequent to December 31, 2024 and prior to the date these consolidated financial statements were issued, DePalma recorded in-kind capital distributions of medallions of $5,285,000, and recorded in-kind distributions of MRP+ loans having an aggregate unpaid principal balance of $54,157,635 and estimated fair value of $53,480,665, respectively.
The Business Combination received the requisite stockholder approval on March 25, 2025, and is expected to close on March 31, 2025 following the fulfillment of other customary closing conditions.
F-33
Table of Contents
Years Ended December 31, 2024 and 2023
Table of Contents
| F-35 – F-36 | ||||
| Consolidated Financial Statements |
||||
| Consolidated Balance Sheets as of December 31, 2024 and 2023 |
F-37 | |||
| Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 |
F-38 | |||
| F-39 | ||||
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 |
F-40 | |||
| F-41 | ||||
F-34
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of DePalma Acquisition II LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DePalma Acquisition II LLC (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in members’ capital, and cash flows, for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to those charged with governance and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-35
Table of Contents
Intangible Assets – Refer to Notes 2 and 9 to the financial statements
Critical Audit Matter Description
The Company holds taxi medallions that are recorded at the cost at time of acquisition, as Intangible Assets. The Company evaluates the recoverability of its Intangible Assets for impairment annually on October 1st of each year or whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In performing the annual impairment test, the Company determined fair value estimates associated with the taxi medallions using significant unobservable inputs with the assistance of a third-party valuation specialist.
We identified Intangible Assets as a critical audit matter because of the significant unobservable inputs that management used to estimate the fair value used in the annual impairment analysis. This required a high degree of auditor judgment and significant audit effort, including the need to involve our fair value specialists to audit and evaluate these inputs.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to Intangible Assets included the following, among others:
| • | We obtained an understanding of the Company’s process for assessing Intangible Assets for impairment annually, including the Company’s use of a third-party valuation specialist in the fair value measurement and evaluated whether the unobservable inputs used were appropriate in the context of accounting principles generally accepted in the United States of America. |
| • | We evaluated the design and implementation of relevant controls over the Intangible Assets impairment assessment, including the controls over the selection of fair value inputs used in the impairment assessment. |
| • | We evaluated the reasonableness of the average cost used in the impairment analysis and confirmed the appropriateness of the unit of account used. |
| • | With the assistance of our fair value specialists, we evaluated the reasonableness of the fair value estimate by evaluating whether the methods, data, and assumptions used, and the judgments applied were representative of current economic and industry conditions by comparison to market data. |
/s/ Deloitte & Touche LLP
New York, New York
March 27, 2025
We have served as the Company’s auditor since 2023.
F-36
Table of Contents
DePalma Acquisition II LLC
(Stated in United States Dollars)
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets: |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 32,809,108 | $ | 493,223 | ||||
| Interest receivable |
17,297 | 916 | ||||||
| Prepaid expenses and other current assets |
247,993 | — | ||||||
|
|
|
|
|
|||||
| Total current assets |
33,074,398 | 494,139 | ||||||
| Loans held for investment, at fair value |
2,426,821 | 473,400 | ||||||
| Property and equipment, net |
5,121,277 | 5,906,548 | ||||||
| Operating lease right-of-use asset, net |
4,909,944 | — | ||||||
| Intangible assets |
345,351,345 | 300,528,591 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 390,883,785 | $ | 307,402,678 | ||||
|
|
|
|
|
|||||
| Liabilities: |
||||||||
| Current liabilities: |
||||||||
| Deposit liability — related party (See Notes 4 and 12) |
$ | 7,085,772 | $ | 3,575,002 | ||||
| Operating lease liability, current portion |
314,920 | — | ||||||
| Accrued professional fees |
280,286 | 467,125 | ||||||
| Accrued expenses and other current liabilities |
187,619 | 305,787 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
7,868,597 | 4,347,914 | ||||||
| Operating lease liability, net of current portion |
4,602,754 | — | ||||||
| Other liabilities |
131,250 | — | ||||||
|
|
|
|
|
|||||
| Total liabilities |
12,602,601 | 4,347,914 | ||||||
| Commitments and contingencies (See Note 2) |
||||||||
| Total members’ capital (87,411,513 Units outstanding) |
378,281,184 | 303,054,764 | ||||||
|
|
|
|
|
|||||
| Total liabilities and members’ capital |
$ | 390,883,785 | $ | 307,402,678 | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-37
Table of Contents
DePalma Acquisition II LLC
Consolidated Statements of Operations
(Stated in United States Dollars)
| For the Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Revenue: |
||||||||
| Interest income |
$ | 543,682 | $ | 916 | ||||
|
|
|
|
|
|||||
| Total revenue |
543,682 | 916 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Depreciation expense |
$ | 1,883,838 | $ | 1,337,630 | ||||
| Professional fees |
2,918,289 | 1,600,880 | ||||||
| General and administrative |
340,515 | 151,204 | ||||||
| Fleet servicing fees, net |
542,374 | — | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
5,685,016 | 3,089,714 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(5,141,334 | ) | (3,088,798 | ) | ||||
|
|
|
|
|
|||||
| Other income: |
||||||||
| Gains from sale of medallions |
83,000 | — | ||||||
| Gains from in-kind medallion transfers, net — related parties (See Note 12) |
19,754 | 34,400 | ||||||
|
|
|
|
|
|||||
| Total other income |
102,754 | 34,400 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (5,038,580 | ) | $ | (3,054,398 | ) | ||
|
|
|
|
|
|||||
| Loss per unit — basic and diluted |
$ | (0.06 | ) | $ | (0.03 | ) | ||
|
|
|
|
|
|||||
| Weighted average units outstanding — basic and diluted |
87,411,513 | 87,411,513 | ||||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-38
Table of Contents
DePalma Acquisition II LLC
Consolidated Statements of Changes in Members’ Capital
(Stated in United States Dollars)
| Total Members’ Capital | ||||||||
| Units | Amount | |||||||
| Balance, January 1, 2023 |
87,411,513 | $ | 174,479,012 | |||||
| Net loss |
— | (3,054,398 | ) | |||||
| Capital distributions — related parties (See Note 12) |
— | (1,750,000 | ) | |||||
| Capital contributions — related parties (See Note 12) |
— | 133,380,150 | ||||||
|
|
|
|
|
|||||
| Balance, December 31, 2023 |
87,411,513 | $ | 303,054,764 | |||||
| Net loss |
— | (5,038,580 | ) | |||||
| Capital distributions — related parties (See Note 12) |
— | (4,025,000 | ) | |||||
| Capital contributions — related parties (See Note 12) |
— | 84,290,000 | ||||||
|
|
|
|
|
|||||
| Balance, December 31, 2024 |
87,411,513 | $ | 378,281,184 | |||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-39
Table of Contents
DePalma Acquisition II LLC
Consolidated Statements of Cash Flows
(Stated in United States Dollars)
| For the Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (5,038,580 | ) | $ | (3,054,398 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||
| Depreciation expense |
1,883,838 | 1,337,630 | ||||||
| Noncash portion of fleet servicing fees |
131,250 | — | ||||||
| Gains from sale of medallions |
(83,000 | ) | — | |||||
| Gains from in-kind medallion transfers — related
parties |
(19,754 | ) | (34,400 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Interest receivable |
(16,381 | ) | (916 | ) | ||||
| Prepaid expenses and other current assets |
(247,993 | ) | — | |||||
| Operating lease right-of-use asset, net |
57,771 | — | ||||||
| Deposit liability — related party (See Notes 4 and 12) |
3,510,770 | 2,326,521 | ||||||
| Operating lease liability |
(50,041 | ) | — | |||||
| Accrued professional fees |
(186,839 | ) | 376,000 | |||||
| Accrued expenses and other liabilities |
(118,168 | ) | 277,434 | |||||
|
|
|
|
|
|||||
| Net cash (used in) provided by operating activities |
(177,127 | ) | 1,227,871 | |||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Medallion sale down payment received (See Note 5) |
28,500 | — | ||||||
| Purchases of vehicles — related party (See Note 12) |
(1,098,567 | ) | (4,229,859 | ) | ||||
| Origination of Non-MRP+ loans — related parties (See Notes 5 and 12) |
(1,600,000 | ) | (473,400 | ) | ||||
| Loan repayments |
13,079 | — | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(2,656,988 | ) | (4,703,259 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities |
||||||||
| Capital contributions — related parties (See Note 12) |
35,150,000 | 3,000,000 | ||||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
35,150,000 | 3,000,000 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in cash and cash equivalents |
32,315,885 | (475,388 | ) | |||||
| Cash and cash equivalents, at beginning of year |
493,223 | 968,611 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, at end of year |
$ | 32,809,108 | $ | 493,223 | ||||
|
|
|
|
|
|||||
| Supplemental disclosure of non-cash investing and financing activities: |
||||||||
| In-kind contribution and purchase from related parties (See Note 12) |
$ | 49,140,000 | $ | 130,380,150 | ||||
|
|
|
|
|
|||||
| In-kind distribution and sale to related parties (See Note 12) |
$ | 4,025,000 | $ | 1,750,000 | ||||
|
|
|
|
|
|||||
| Non-MRP+ loan financing for medallion sales (See Note 5) |
$ | 366,500 | $ | — | ||||
|
|
|
|
|
|||||
| Recognition of operating lease right-of-use asset (See Note 8) |
$ | 4,967,715 | $ | — | ||||
|
|
|
|
|
|||||
See accompanying notes to consolidated financial statements.
F-40
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
1. Organization
DePalma Acquisition II LLC (“DePalma II”) is a Delaware limited liability company which was formed on February 23, 2018 and commenced operations on March 29, 2018. DePalma II invested in numerous wholly-owned limited liability companies (“Mini-LLCs”) which were incorporated in New York or Delaware, to hold at least two taxi medallions each. The financial position and results of operations of the Mini-LLCs have been consolidated with those of DePalma II. The Mini-LLCs are treated as disregarded entities for tax purposes. In September 2024, DePalma II formed a wholly-owned subsidiary, Yelo Cab LLC (“Yelo”), which was established to support DePalma II’s taxi medallion and vehicle operations. The objective of DePalma II is to achieve superior risk-adjusted returns through investing all of its assets in opportunistic investments in the taxi industry, including taxi medallions and loans secured by taxi medallions.
DePalma Acquisition I LLC (“DePalma I”), an entity under the same ownership as DePalma II, was established to hold taxi medallion loans, which are primarily collateralized by New York City taxi medallions. In March 2022, the New York City Taxi and Limousine Commission (“TLC”) implemented a certain Medallion Relief Program+ (“MRP+”) to support the recovery of the taxi industry in the City of New York. Under the MRP+, eligible borrowers are able to restructure and reduce the principal balance outstanding on New York City taxi medallion loans to $200,000, and further reduce to $170,000 per medallion after a principal reduction payment from a certain reserve fund established by the City of New York. DePalma I has had loans restructured pursuant to the MRP+, however, as of December 31, 2024 and 2023, DePalma II’s taxi medallion loans do not consist of any loans restructured under the MRP+. These loans are therefore referred to herein as “Non-MRP+ Loans” to be consistent with classifications of loans held by DePalma I.
Pursuant to the Third Amended and Restated Limited Liability Company Agreement dated July 1, 2020 (the “LLC Agreement”), DePalma II issued one class of equity units to its members in consideration for their cash contributions. DePalma II’s members consist of Marblegate Tactical Master Fund II, L.P., a Delaware limited partnership, DePalma Dispatch Inc., a Delaware corporation and an entity indirectly 100% owned by Marblegate Special Opportunities Master Fund, L.P, a Cayman Islands exempted limited partnership, Marblegate Strategic Opportunities Master Fund I, LP, a Delaware limited partnership, Marblegate Partners Master Fund II, L.P., a Cayman Islands exempted limited partnership, Marblegate Tactical III Master Fund II, L.P., a Delaware limited partnership and Marblegate Cobblestone Master Fund I, LP, a Delaware limited partnership (collectively, the “Members”). DePalma II is managed by its Members, each of which is managed by Marblegate Asset Management, LLC, a Delaware limited liability company (the “Investment Manager”).
The Members, by the affirmative vote of 100% of the Member Units, have full and complete authority, power, and discretion to manage and control the business, affairs and properties of DePalma II, make all decisions regarding those matters and perform any and all other acts or activities customary to the management of DePalma II’s business. The Members have limited liability and are managed and controlled by the Investment Manager and affiliates thereof, and none of the limited partners of the Members participate in the management of their respective partnerships.
As of December 31, 2024 and 2023, DePalma Dispatch Inc., Marblegate Strategic Opportunities Master Fund I, LP, Marblegate Partners Master Fund II, L.P., Marblegate Tactical Master Fund II, L.P., Marblegate Cobblestone Master Fund I, LP, and Marblegate Tactical III Master Fund II, L.P. owned 12.87%, 18.34%, 5.25%, 16.29%, 12.74% and 34.51%, respectively, of DePalma II.
F-41
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Pursuant to the LLC Agreement, all capital distributions made to the Members are made in proportion to the Members’ respective Units.
Field Point Servicing, LLC (the “Loan Servicer” or “Field Point”) is a third-party loan servicer for all of the loans held by DePalma II.
SS&C Financial Services LLC is a third-party administrator to DePalma II that performs certain middle-office and/or back-office support activities.
Business Combination Agreement
On February 14, 2023, DePalma I and DePalma II (together, the “DePalma Companies”), entered into a business combination agreement (the “BCA”) with Marblegate Acquisition Corp. (“MAC”), a Delaware corporation, Marblegate Asset Management, LLC, Marblegate Capital Corporation (“New MAC”), a Delaware corporation, and MAC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of New MAC, pursuant to which MAC agreed to combine with the DePalma Companies in a series of transactions that will result in New MAC becoming a publicly-traded company whose shares are expected to trade on the Nasdaq Global Market (the “Business Combination”). Under the BCA, the aggregate consideration payable to the DePalma Companies at the closing of the Business Combination is based on a valuation of the DePalma Companies of approximately $750 million plus minimum cash anticipated to be required at closing for working capital purposes. The closing of the Business Combination is subject to the satisfaction or waiver of certain conditions defined in the BCA, including, among others, approval by MAC shareholders and the Nasdaq Stock Market’s approval for listing the New MAC Common Stock to be issued in connection with the Business Combination. As of December 31, 2024, the BCA has not been closed.
Investment in Septuagint
In February 2019, DePalma II entered into a non-controlling joint venture with a third-party, Kirie Eleison Corp (“KE”), and formed Septuagint Solutions LLC (“Septuagint”). Septuagint is a Medallion Leasing Agent and Taxi Fleet operating company, licensed by the New York City Taxi and Limousine Commission as an agent/broker for managing New York City taxi medallions. DePalma II entered this venture in order to lease DePalma II medallions to a dedicated fleet of taxis managed by Septuagint in an effort to begin earning income on its medallions. The owners of KE have been in the business of managing taxis and can also monetize their medallions through Septuagint. Septuagint’s business is overseen by a board of directors comprised of two designated DePalma II members and two designated KE members. Septuagint was formed by issuance of units to its initial members for no monetary consideration, and was accompanied by funding via a promissory note from DePalma II. As of December 31, 2024 and 2023, DePalma II and KE each own 50% of Septuagint’s outstanding voting units. Septuagint was determined to be a variable interest entity (“VIE”) pursuant to Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), however it was determined that DePalma II was not the primary beneficiary from inception through December 31, 2024 as DePalma II does not have power to control the significant activities of Septuagint. Given the non-controlling nature of the relationship between DePalma II and Septuagint, Septuagint’s financial statements have not been consolidated with DePalma II, however DePalma II will continue to monitor its relationship with Septuagint for changes in facts and circumstances that could affect DePalma II’s consolidation requirements. The investment in Septuagint is an equity method investment for which DePalma II has elected the fair value option. Since the formation of Septuagint, and as of December 31, 2024 and 2023, the fair value of DePalma II’s equity investment in
F-42
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Septuagint was $0. DePalma II remains exposed to risk of loss on this investment and other contractual arrangements with Septuagint. DePalma II has no other guarantees or exposures occurring outside of the normal course of business other than those disclosed herein.
On September 26, 2024, DePalma II provided notice to KE of its default under certain provisions of the Septuagint Operating Service Agreement (the “OSA”) and DePalma II’s intention to terminate its relationship with KE under the OSA and wind down Septuagint upon expiration of a 30-day cure period. On October 17, 2024, DePalma II and KE signed an amendment that eliminated Septuagint’s exclusive right to lease DePalma II’s medallions and provided for a transition period until December 15, 2024, and gave DePalma II the right to decide whether to wind down Septuagint or have KE transfer its 50% ownership interest in Septuagint to DePalma II or a designee. While the transition period originally expired on December 15, 2024, DePalma II and KE subsequently agreed to further extend the transition period through March 31, 2025. See Notes 4 and 14 for additional information.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are stated in United States Dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of DePalma II and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.
The following is a summary of the significant accounting policies followed by DePalma II in the preparation of its consolidated financial statements.
Use of Estimates
Financial statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Management evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. DePalma II’s significant estimates and assumptions include the estimation of the testing of impairment for the indefinite-lived intangible assets, the fair value of loans held for investment, and the incremental borrowing rate to determine the present value of lease payments. Actual results could differ from these estimates.
Cash and Cash Equivalents
DePalma II considers money market accounts and highly liquid investments with an original maturity of three months or less to be cash equivalents. DePalma II’s cash and cash equivalents are held by major financial institutions, for which accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per legal entity. At times, cash and cash equivalents balances may exceed federally insured limits, and this potentially subjects DePalma II to concentration of credit risk. DePalma II has not experienced any losses in such accounts. Furthermore, DePalma II reduces risk by maintaining accounts with high quality financial institutions that management believes are creditworthy, and by monitoring this credit risk and adjusting when necessary.
F-43
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Intangible Assets
DePalma II’s taxi medallions are determined to be indefinite-lived intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other. Costs incurred for renewal of taxi medallions are included within general and administrative expenses in the Consolidated Statements of Operations.
Indefinite-lived intangible assets are not amortized but instead tested for impairment. DePalma II evaluates indefinite-lived intangible assets for impairment annually on October 1st of each year or more frequently whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired. DePalma II evaluates its taxi medallions as a single unit of accounting for purposes of testing for impairment, as taxi medallions are homogeneous assets, which are interchangeable and have identical characteristics. In DePalma II’s evaluation of indefinite-lived intangible assets for impairment, a qualitative assessment is typically performed prior to performing the quantitative analysis. If, after assessing the qualitative factors, DePalma II determines that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, a quantitative assessment is performed. The fair value of the indefinite-lived intangible asset is compared to its carrying amount and if the carrying value exceeds its fair value, an impairment loss will be recognized. Determining the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. DePalma II performed its annual impairment analysis and concluded the fair value of its taxi medallions exceeded the carrying value. Therefore, no impairment losses were recognized for the years ended December 31, 2024 and 2023.
Gains and losses on the sale of medallions are recorded in the Consolidated Statements of Operations and reported as the difference between the sale proceeds and the carrying value of a medallion on an average cost basis.
Property and Equipment, net
Property and equipment, net are stated at cost, less accumulated depreciation. Maintenance and repairs are charged to expense when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings as income or loss from operations. Depreciation is recognized using the straight-line method in amounts considered to be sufficient to allocate the cost of the assets to operations over the estimated useful lives, as follows:
| Asset Category |
Depreciable Life | |||
| Taxi vehicles |
5 years | |||
Long-lived assets, including property, plant and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Factors that DePalma II considers in deciding when to perform an impairment review include significant changes in DePalma II’s forecasted projections for the asset or asset group for reasons including, but not limited to, significant changes, or planned changes in DePalma II’s use of the assets and significant negative industry or economic trends. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized. For the years ended
F-44
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
December 31, 2024 and 2023, there were no indicators of impairment of the value of long-lived assets and no impairment losses were recognized.
Loans Held for Investment, at Fair Value
DePalma II holds loans for investment that are collateralized by New York City taxi medallions. DePalma II has elected the fair value option and measures these collateralized loans at fair value with changes in fair value recorded in the Consolidated Statements of Operations in the period of the change. DePalma II made this accounting election upon adopting ASC 825, Financial Instruments (“ASC 825”), to better align reported results with the underlying economic changes in the value of the loans on the Consolidated Balance Sheets. After the initial adoption, the election is made at the acquisition of an eligible financial asset or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made.
Gains and losses on disposals of loans held for investment, at fair value, if any, are recorded in the Consolidated Statements of Operations and reported as the difference between the sale proceeds and the carrying value of a loan.
A loan is considered to be non-performing, when based on current information and events, it is likely that DePalma II will be unable to collect all amounts due according to the contractual terms of the original loan agreement. If the medallion collateral is foreclosed on, DePalma II recognizes the collateral at its fair value less foreclosure related costs. As of December 31, 2024 and 2023, the loan portfolio did not consist of any non-performing loans.
Interest income is recorded on the accrual basis.
Taxi medallion loans are placed on non-accrual status when there is doubt as to the collectibility of interest or principal, unless management has determined that they are both well-secured and in the process of collection. Generally, loans are placed on non-accrual status when they are greater than 30 days past due. Interest income previously accrued but not paid on loans that have been placed on non-accrual status is reversed.
Leases
DePalma II determines if an arrangement is a lease at inception in accordance with ASC 842, Leases (“ASC 842”). Operating lease assets are presented net of accumulated amortization as operating lease right-of-use asset, net and the corresponding lease liabilities are included in operating lease liability on the Consolidated Balance Sheets. Right-of-use (“ROU”) assets represent DePalma II’s right to use an underlying asset, and lease liabilities represent DePalma II’s obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.
DePalma II has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component when the payments are fixed. As such, variable lease payments not dependent on an index or rate, such as real estate taxes, utility charges, and other costs that are subject to fluctuation from period to period are not included in lease measurement. Renewal options are included in the lease term only when it is reasonably certain that DePalma II will elect that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Additionally, DePalma II does not recognize short-term leases that have a term of twelve months or less at lease commencement date as right-of-use assets or lease liabilities.
F-45
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
ROU assets and lease liabilities are recognized at lease commencement and determined using the present value of the future minimum lease payments over the lease term. DePalma II uses its incremental borrowing rate based on the information available at commencement date to determine the present value of the lease when the rate implicit in the lease is not readily determinable. See Note 8 for additional information.
Revenue Recognition
DePalma II generates revenue from the following sources: (1) interest earned on loans held for investment and (2) consulting arrangements to lease taxicab vehicles. In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. DePalma II applies the following five-step model in relation to its revenue recognition: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when (or as) performance obligations are satisfied. In arrangements where another party is involved in providing specified services to a customer, DePalma II evaluates whether the performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent). In this evaluation, DePalma II considers if control is obtained of the specified services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for discretion in establishing price. See Note 7 for additional information.
Loss per Unit
Basic loss per unit is computed by dividing net loss by the weighted average number of units outstanding. There were no dilutive securities for the years ended December 31, 2024 and 2023.
The following table sets forth the computation of basic and diluted loss per unit:
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net loss |
$ | (5,038,580 | ) | $ | (3,054,398 | ) | ||
|
|
|
|
|
|||||
| Weighted average units outstanding — basic and diluted |
87,411,513 | 87,411,513 | ||||||
|
|
|
|
|
|||||
| Loss per unit — basic and diluted |
$ | (0.06 | ) | $ | (0.03 | ) | ||
|
|
|
|
|
|||||
Income Taxes
DePalma II is treated as a partnership for U.S. tax purposes and therefore is not subject to federal, state, or local income taxes. Such taxes are the liabilities of the individual partners and the amounts thereof will vary depending on the individual situation of each partner. Accordingly, there is no provision for income taxes in the accompanying consolidated financial statements. DePalma II applies the provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for and reporting of income tax uncertainties, and requires additional disclosures related to uncertain income tax positions. ASC 740 requires that DePalma II determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a
F-46
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
tax position has met the more-likely-than-not recognition threshold, DePalma II presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. DePalma II classifies interest and penalties associated with uncertain tax positions, if any, as income tax expense. DePalma II is subject to other state and local tax in New York. As of December 31, 2024, the earliest year DePalma II remains subject to examination by the Internal Revenue Service is for tax year December 31, 2021.
In accordance with provisions set forth in ASC 740, DePalma II has evaluated its tax positions, including interest and penalties, for all open tax years and concluded that the application of ASC 740 had no effect on its financial position, results of operations or cash flows. Based on DePalma II’s analysis, no provision for income taxes is required as of December 31, 2024 and 2023.
Commitments and Contingencies
As of December 31, 2024 and 2023, DePalma II had no unfunded loan commitments. In the normal course of business, DePalma II enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. DePalma II’s maximum exposure under these arrangements cannot be estimated, as this would involve future claims that may be made against DePalma II that have not yet occurred. However, based on experience, DePalma II expects the risk of loss to be remote.
Accounting Pronouncements Recently Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. DePalma II adopted ASU 2023-07 during the year ended December 31, 2024. The adoption of ASU 2023-07 did not have a material impact on the financial statement disclosures. See Note 10 for additional information.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 issued ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 31, 2027, with early adoption permitted. DePalma II is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements and related disclosures.
F-47
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
3. Fair Value Measurements
DePalma II applies the provisions of ASC Topic 820, Fair Value Measurement (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Under U.S. GAAP, a fair value hierarchy is implemented for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of DePalma II. Unobservable inputs reflect the Members’ own assumptions about the inputs market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The fair value hierarchy is categorized into three levels based on the inputs as follows:
| • | Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities and in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly. |
| • | Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. In addition to using the above inputs in asset or liability valuations, DePalma II continues to employ the valuation policy that is consistent with ASC 820.
F-48
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
The following table presents information about DePalma II’s assets by levels within the valuation hierarchy. Refer to Note 5 for further detail on the industry and geographic concentration:
| Level 1 | Level 2 | Level 3 | Amount at Fair Value |
|||||||||||||
| December 31, 2024 |
||||||||||||||||
| Assets: |
||||||||||||||||
| Working Capital Note (See Note 4) |
$ | — | $ | — | $ | — | $ | — | ||||||||
| Loans held for investment, at fair value Private loans: |
||||||||||||||||
| Non-MRP+ Loans — NYC |
— | — | 2,426,821 | 2,426,821 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total loans held for investment, at fair value |
— | — | 2,426,821 | 2,426,821 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | — | $ | — | $ | 2,426,821 | $ | 2,426,821 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Level 1 | Level 2 | Level 3 | Amount at Fair Value |
|||||||||||||
| December 31, 2023 |
||||||||||||||||
| Assets: |
||||||||||||||||
| Working Capital Note (See Note 4) |
$ | — | $ | — | $ | — | $ | — | ||||||||
| Loans held for investment, at fair value Private loans: |
||||||||||||||||
| Non-MRP+ Loans — NYC |
— | — | 473,400 | 473,400 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total loans held for investment, at fair value |
— | — | 473,400 | 473,400 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | — | $ | — | $ | 473,400 | $ | 473,400 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
DePalma II recognizes its equity interest in Septuagint as an equity method investment to which DePalma II has elected the fair value option pursuant to ASC 825. As of December 31, 2024 and 2023, based on an assessment of Septuagint’s creditworthiness and uncertainty of ability to generate positive cash flows from operations, DePalma II determined the investment in Septuagint to be a Level 3 measurement with a fair value of $0. The fair value will continue to be evaluated based on the facts and circumstances at each reporting period.
The following table provides a reconciliation of the beginning and ending balances for loans held for investment, at fair value that use Level 3 inputs:
| Non-MRP+ Loans |
||||
| Balance as of January 1, 2023 |
$ | — | ||
| Origination of Non-MRP+ loans — related parties (See Note 12) |
473,400 | |||
|
|
|
|||
| Balance as of December 31, 2023 |
473,400 | |||
| Non-MRP+ loan financing for medallion sales |
366,500 | |||
| Origination of Non-MRP+ loans — related parties (See Note 12) |
1,600,000 | |||
| Loan repayments |
(13,079 | ) | ||
|
|
|
|||
| Balance as of December 31, 2024 |
$ | 2,426,821 | ||
|
|
|
|||
F-49
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
For the years ended December 31, 2024 and 2023, there was no net change in estimated fair value from Level 3 loans still held at December 31, 2024 and 2023.
With respect to instruments valued by management, the valuation techniques employed are an income approach reflecting a discounted cash flow analysis, and a market approach that includes market transactions.
The following tables summarize the valuation techniques and significant unobservable inputs used for DePalma II’s assets that are categorized within Level 3 of the fair value hierarchy as of December 31, 2024 and 2023:
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Inputs | Low Range |
High Range |
Weighted Average3 |
||||||||||||||
| Non-MRP+ Loans — NYC |
$ | 2,426,821 | Market Approach1, 2 |
Discounted Medallion Price2 |
$ | 166,250 | $ | 166,250 | $ | 166,250 | ||||||||||
|
|
|
|||||||||||||||||||
| $2,426,821 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| 1 | Increased significance is placed on data that DePalma II assesses to indicate market transactions. The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $210,000), the amount restructured by the City of New York under a certain taxi medallion relief program (“MRP+”) ($170,000), and certain market prices reported by the TLC (ranging from $30,000 to $200,000). Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 2 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which low value was $165,000 and the high value was $185,000. |
| 3 | Weighted average medallion prices are calculated based on the total fair value of underlying medallion collateral. |
| Loans held for investment, at fair value |
Fair Value | Approach | Unobservable Inputs | Low Range |
High Range |
Weighted Average3 |
||||||||||||||
| Non-MRP+ Loans — NYC |
$ | 473,400 | Market Approach1, 2 |
Discounted Medallion Price2 |
$ | 157,500 | $ | 158,400 | $ | 157,800 | ||||||||||
|
|
|
|||||||||||||||||||
| $473,400 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| 1 | Increased significance is placed on data that DePalma II assesses to indicate market transactions. The most significant inputs include recent DePalma I medallion sale prices (ranging from $175,000 to $176,000), the amount restructured by the City of New York under a certain taxi medallion relief program (“MRP+”) ($170,000), and certain market prices reported by the TLC (ranging from $40,000 to $200,000). Significant increases or decreases in such factors, or structural and/or regulatory changes to the New York City taxi industry would result in a significantly lower or higher fair value measurement. |
| 2 | New York City medallion price valuation inputs were determined using a value of $175,000 for each medallion, calculated as the midpoint between an estimated range, of which low value was $165,000 and the high value was $185,000. |
| 3 | Calculated based on the total fair value of medallions or underlying medallion collateral, using the applicable unobservable input. |
F-50
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
4. Septuagint
As discussed in Note 1, Septuagint is a Medallion Leasing Agent and Taxi Fleet operating company, licensed by the TLC as an agent/broker for managing New York City taxi medallions, in which DePalma II has a non-controlling interest and does not consolidate within its consolidated financial statements. The investment in Septuagint is accounted for as an equity method investment for which DePalma II has elected the fair value option. As of December 31, 2024 and 2023, the fair value of the equity investment in Septuagint was determined to be $0. As further detailed in Note 1, as of December 31, 2024, the Septuagint OSA is in a transition period through March 31, 2025 in which DePalma II has the right to either wind down Septuagint or require KE to transfer its 50% ownership interest in Septuagint to DePalma II or a designee. Refer to Notes 1 and 14 for additional information.
Working Capital Note
Since its formation in 2019, DePalma II has provided working capital to Septuagint through various promissory note agreements. DePalma II extended promissory notes to Septuagint aggregating $3,396,595 inclusive of payment-in-kind (“PIK”) interest through December 31, 2024 (collectively, the “Working Capital Note”). The Working Capital Note accrues interest at a rate of 12% per annum and had a maturity date of June 3, 2023. In June 2023, the Working Capital Note was amended to extend the maturity date to June 3, 2026. Any accrued unpaid interest is automatically treated as PIK interest. As of December 31, 2024 and 2023, the fair value of the Working Capital Note was determined to be $0 (see Note 3). No interest income was recognized on the Working Capital Note during the years ended December 31, 2024 and 2023, due to an assessment that the amounts were not collectible.
Reimbursable Expenses
Separate from the Working Capital Note, DePalma II has a $191,341 non-interest bearing receivable from Septuagint, relating to reimbursable expenses incurred during the year ended December 31, 2020. Based on an assessment of Septuagint’s creditworthiness and consistent with other arrangements with Septuagint, DePalma II determined this receivable was not probable to be collected, and therefore determined the appropriate carrying value of this receivable to be $0. As of December 31, 2024 and 2023, no payments have been received pursuant to this receivable.
Lease Agreements
DePalma II enters into promissory note agreements with various Mini-LLCs to provide the Mini-LLCs with funding to purchase vehicles (the “Promissory Notes”), which each have a maturity date of approximately three years from issuance and accrue interest at 6% per annum. In addition to the Promissory Notes, DePalma II enters into a guaranty agreement with Septuagint that names Septuagint as the guarantor of the Promissory Notes between DePalma II and the Mini-LLCs (the “Guaranty Agreement”). The Guaranty Agreement states Septuagint “absolutely, unconditionally and irrevocably guarantees” to DePalma II, its successor and assigns, the full and prompt payment and performance of all present and future obligations of the Mini-LLCs to DePalma II under the Promissory Notes, including payments of principal and interest when due, whether at stated maturity, by required prepayment, upon acceleration or demand. Under the Guaranty Agreement, Septuagint is required to make monthly Promissory Note payments directly to DePalma II, on behalf of the Mini-LLCs, primarily with cash flows it generates from separate agreements it enters with taxi drivers for the use of the medallions and vehicles. In instances where Septuagint is unable to make scheduled Promissory Notes payments, for example
F-51
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
during the COVID-19 pandemic as further detailed below, DePalma II does not require the Mini-LLCs to make payments under the Promissory Notes as Septuagint has guaranteed these payments pursuant to the Guaranty Agreements. Upon an event of default of a Promissory Note, DePalma II may accelerate payment by Septuagint of the entire unpaid principal balance and accrued interest at its discretion.
In addition, the Mini-LLCs enter into various medallion owner lease agreements with Septuagint (the “Lease Agreements”), whereby the Mini-LLCs lease one or more medallions (the “Medallions”) per agreement and related taxi vehicles to be used in connection with the operation of each Medallion (the “Vehicles”) to Septuagint. Pursuant to each Lease Agreement, Septuagint is granted the exclusive right to operate or sublease the Medallions in return for monthly rental payments of $1,500 per Medallion and has an initial noncancellable term of two-years with two consecutive automatic one-year renewal options. The Guaranty Agreements and the Lease Agreements are considered a single contract as they are entered into at or near the same time with the same counterparty (Septuagint). As such, Septuagint is separately obligated to pay for the Vehicles under the various Guaranty Agreements. Septuagint is granted full and exclusive authority to sell (or lease) the Vehicles on behalf of the Mini-LLCs at such price as Septuagint shall determine in its sole discretion. The Mini-LLCs retain ownership interest in the Medallions and Vehicles throughout the contractual term, unless otherwise agreed upon.
Upon commencement of the initial Lease Agreements in 2020, DePalma II assessed the collectibility of substantially all payments associated with the Lease Agreements and concluded the payments would not be collectible due to Septuagint’s lack of operating history and ability to pay its obligations when due. In addition, as a result of COVID-19, Septuagint’s ability to pay significantly deteriorated. DePalma II continues to assess whether it is probable that it will collect the consideration for the Lease Agreements and concluded the payments would not be collectible through December 31, 2024.
Medallions
As noted above, the Medallions are determined to be intangible assets not subject to ASC 842, therefore DePalma II determined ASC 606 should be applied. As noted above, DePalma II concluded the monthly medallion rental payments would not be collectible at inception through December 31, 2024 and, as such, the Medallion leases are not considered a revenue contract under ASC 606 from inception through December 31, 2024, and no income was recorded for the years ended December 31, 2024 and 2023. DePalma II continues to assess collectibility by reviewing Septuagint’s payment history and financial condition to determine whether collectibility of the Medallion payments are deemed probable. As of December 31, 2024 and 2023, no payments were received related to the Medallions.
Vehicles
DePalma II accounts for leases in accordance with ASC 842 and determined all active leases to be sales-type leases. As a result of COVID-19, Septuagint’s ability to pay significantly deteriorated and DePalma II implemented a payment holiday beginning March 2020 through April 30, 2022. In light of the COVID-19 pandemic, the FASB provided certain acceptable methods to account for such lease deferrals under the relief. During this payment holiday, DePalma II recognized lease income on a cash basis due to the collectibility assessment, resulting in the recognition of no lease income during the period of January 1, 2022 through April 30, 2022 as no payments were received during this period. After the payment holiday ended, DePalma II began receiving lease payments beginning May 1, 2022. Through December 31, 2024, DePalma II has received recurring vehicle lease payments on most of its vehicle leases, however, as DePalma II has still not received payments on Medallions or the Working Capital Note, DePalma II still viewed collectibility as not probable
F-52
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
through December 31, 2024. As such, DePalma II recognized the underlying leased Vehicles within property and equipment, net in the Consolidated Balance Sheets as of December 31, 2024.
DePalma II will continue to assess the collectibility of the Vehicle lease payments which, if deemed collectible, could affect the presentation of DePalma II’s Vehicles and related leases. As of December 31, 2024 and 2023, DePalma II received lease payments totaling $7,085,772 and $3,575,002, respectively, which are recorded as a deposit liability — related party in the Consolidated Balance Sheets until the applicable leases are subsequently deemed collectible.
Future contractual undiscounted cash flows for Vehicle leases as of December 31, 2024 are as follows:
| 2025 |
$ | 2,491,446 | ||
| 2026 |
1,419,010 | |||
| 2027 |
350,169 | |||
| 2028 |
13,076 | |||
|
|
|
|||
| Total |
$ | 4,273,701 | ||
|
|
|
5. Loans Held for Investment, at Fair Value
During the year ended December 31, 2024, DePalma II sold two taxi medallions to third-party buyers and provided loan financing totaling $366,500. DePalma II received $28,500 in down payments from the medallion sales during such period. In addition, DePalma II also provided financing to third-parties purchasing taxi medallions from DePalma I during the years ended December 31, 2024 and 2023 (all of which are referred to as Non-MRP+ loans). The Non-MRP+ loans are collateralized by the underlying medallion and require the borrowers to make monthly payments of principal and interest based on a 25-year amortization schedule, with the remaining principal and interest due at maturity. Refer to Note 12 for additional information related to these loans.
The Septuagint Working Capital Note is not presented within the below table and has a carrying value of $0 as of December 31, 2024 and 2023. Refer to Notes 4 and 12 for additional information.
The following table shows the Non-MRP+ loans held for investment, at fair value as of December 31, 2024 and 2023:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Loans held for investment, at fair value |
||||||||
| Non-MRP+ Loans |
$ | 2,426,821 | $ | 473,400 | ||||
|
|
|
|
|
|||||
| Total loans held for investment, at fair value |
$ | 2,426,821 | $ | 473,400 | ||||
|
|
|
|
|
|||||
| Total performing loans |
$ | 2,426,821 | $ | 473,400 | ||||
|
|
|
|
|
|||||
| Total non-performing loans |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
Non-performing loans are categorized as loans that are greater than 30 days past due, and therefore, placed on non-accrual status.
F-53
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
6. Property and Equipment, net
Property and equipment, net consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Taxi vehicles |
$ | 10,350,575 | $ | 9,252,008 | ||||
| Less: accumulated depreciation |
(5,229,298 | ) | (3,345,460 | ) | ||||
|
|
|
|
|
|||||
| Property and equipment, net |
$ | 5,121,277 | $ | 5,906,548 | ||||
|
|
|
|
|
|||||
Depreciation expense totaled $1,883,838 and $1,337,630 for the years ended December 31, 2024 and 2023, respectively.
7. Fleet Servicing Agreement
On November 15, 2024, DePalma II, via its subsidiary Yelo, entered into a consulting agreement (the “Consulting Agreement”) with a third party (the “Consultant”). The Consultant has historically operated a taxi fleet operation as a TLC agent in New York City, primarily earning revenues from leasing operational taxicab vehicles to end-user drivers under daily and weekly arrangements. DePalma II and the Consultant entered into the Consulting Agreement primarily to assist Yelo in establishing and growing Yelo’s taxi fleet operations. The Consultant will provide services generally required to operate and grow commercial taxicab fleet operations, including, but not limited to, servicing vehicles, leasing, insurance, and providing the appropriate personnel on behalf of Yelo. In connection with the Consulting Agreement, DePalma II, as lessee, entered into a lease agreement for taxicab business office and garage space to run its taxicab operations (the “Garage Lease”). The Consulting Agreement and Garage Lease each have an initial term of five years, with the Garage Lease having an additional renewal option available to DePalma II. The Consulting Agreement can be terminated by DePalma II upon a material breach by the Consultant, or upon mutual agreement by both parties. The Consulting Agreement will consist of two phases (Phase 1 and Phase 2), with Phase 2 commencing at the discretion of DePalma II. During Phase 1, the Consultant may continue operating and entering into leases with taxicab drivers under its historical practices; however during Phase 2 all new driver leases will be using DePalma II’s vehicles and medallions, and DePalma II will be named as lessor on the driver leases. DePalma II will have control over its taxicab operations and shall have the right to exercise decision making authority in establishing terms for new driver leases, preparation of business plans, and developing and optimizing management and organizational structure and systems of its operations.
For their services, DePalma II will pay the Consultant a base fee of $100,000 per month as well as reimburse the third-party for certain of its operating and other reimbursable expenses. At the end of each month, the Consultant and DePalma II will reconcile amounts due to each party, which is determined by the total revenues generated by the taxi fleet operations, less the base fee and the reimbursable operating expenses. DePalma II determined it is acting as the agent from inception of the Consulting Agreement through December 31, 2024 pursuant to ASC 606, as during this period the Consultant continues to be the party obligated to fulfill the performance obligation of leasing an operational taxicab to the end-user driver. As such, DePalma II will report all revenues generated by the taxi fleet operations and expenses incurred as a result of the Consulting Agreement on a net basis through December 31, 2024 as fleet servicing fees, net on the Consolidated Statements of Operations as further detailed below.
Further, the Consultant is entitled to a medallion incentive payment of six (6) NYC taxi medallions per year to be earned on November 15th of each year and payable at the end of the five year term or upon earlier termination. In
F-54
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
the event the Consulting Agreement is terminated prior to November 15 of a given year, no medallion consideration will be earned by the Consultant for that year, whether on a pro rata basis or otherwise. DePalma II ratably recognizes to expense the fair value of the medallions to be earned by the Consultant over the term of the Consulting Agreement within fleet servicing fees, net on the Consolidated Statement of Operations through December 31, 2024, and recognizes a liability within other liabilities on the Consolidated Balance Sheets. DePalma II will remeasure such liability at each reporting period based on the fair value of the medallions earned at each period end, with any changes in fair value being reported within earnings. DePalma II determined the fair value of a medallion for purposes of measuring the medallion incentive liability to be $175,000 as of November 15, 2024 and December 31, 2024. See Note 3 for additional information.
The following table sets forth the components of DePalma II’s fleet servicing fees, net for the year ended December 31, 2024:
| Fleet revenues |
$ | 936,644 | ||
| Less: Base consulting fees |
150,000 | |||
| Less: Noncash medallion incentive |
131,250 | |||
| Less: Fleet operating and reimbursable expenses |
1,197,767 | |||
|
|
|
|||
| Fleet servicing fees, net |
$ | (542,374 | ) | |
|
|
|
DePalma II may make advances for the base consulting fees and other fleet operating expenses prior to period end reconciliations with the Consultant. As of December 31, 2024, $7,531 is due from the Consultant which is included within prepaid expenses and other current assets on the Consolidated Balance Sheets.
8. Leases
DePalma II, as lessee, has one active operating lease arrangement for the Garage Lease (refer to Note 7), which commenced on November 15, 2024. The Garage Lease has an initial five-year term through November 15, 2029 with an option to renew for an additional five-year period. The lease has initial base rent payments of $55,000 escalating 1.5% annually through the expiration date in November 2034, which assumes and includes the exercise of the five-year renewal option. DePalma II had no active leases, as lessee, during the year ended December 31, 2023.
The table below presents certain information related to DePalma II’s lease costs which are included within general and administrative expenses in the Consolidated Statements of Operations:
| For the Year Ended December 31, 2024 |
||||
| Operating lease cost |
$ | 117,730 | ||
|
|
|
|||
| Total lease cost |
$ | 117,730 | ||
|
|
|
|||
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Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
The right-of-use asset and lease liability for the operating lease were recorded in the Consolidated Balance Sheet as follows:
| December 31, 2024 |
||||
| Assets |
||||
| Operating lease right-of-use asset, net |
$ | 4,909,944 | ||
|
|
|
|||
| Total lease assets |
$ | 4,909,944 | ||
|
|
|
|||
| Liabilities |
||||
| Current liabilities: |
||||
| Operating lease liability, current portion |
$ | 314,920 | ||
| Non-current liabilities: |
||||
| Operating lease liability, net of current portion |
4,602,754 | |||
|
|
|
|||
| Total lease liabilities |
$ | 4,917,674 | ||
|
|
|
|||
The weighted average remaining lease term for the operating lease was 9.8 years and the weighted-average discount rate was 7.26% as of December 31, 2024.
Supplemental cash flow information related to DePalma II’s lease was as follows:
| For the Year Ended December 31, 2024 |
||||
| Operating cash flows from operating leases |
$ | 110,000 | ||
| Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets |
$ | 4,967,715 | ||
Future minimum lease payments under operating leases as of December 31, 2024 are as follows:
| 2025 |
$ | 661,650 | ||
| 2026 |
671,575 | |||
| 2027 |
681,648 | |||
| 2028 |
691,873 | |||
| 2029 |
702,251 | |||
| Thereafter |
3,544,799 | |||
|
|
|
|||
| Total minimum lease payments |
6,953,796 | |||
|
|
|
|||
| Less effects of discounting |
(2,036,122 | ) | ||
|
|
|
|||
| Present value of future minimum lease payments |
$ | 4,917,674 | ||
|
|
|
F-56
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
9. Intangible Assets
Intangible assets consisted of the following:
| December 31, 2024 | ||||||||
| Indefinite-lived intangible assets |
Number of Taxi Medallions |
Carrying Value | ||||||
| Taxi Medallions by jurisdiction: |
||||||||
| New York City(1) |
2,061 | $ | 344,332,895 | |||||
| Chicago |
119 | 1,003,000 | ||||||
| Philadelphia |
30 | 15,450 | ||||||
|
|
|
|||||||
| Total |
$ | 345,351,345 | ||||||
|
|
|
|||||||
| December 31, 2023 | ||||||||
| Indefinite-lived intangible assets |
Number of Taxi Medallions |
Carrying Value | ||||||
| Taxi Medallions by jurisdiction: |
||||||||
| New York City(1) |
1,807 | $ | 299,825,141 | |||||
| Chicago |
89 | 688,000 | ||||||
| Philadelphia |
28 | 15,450 | ||||||
|
|
|
|||||||
| Total |
$ | 300,528,591 | ||||||
|
|
|
|||||||
| (1) | During the year ended December 31, 2024, DePalma I contributed 279 medallions in-kind to DePalma II, DePalma II distributed 23 medallions in-kind to DePalma I, and DePalma II sold two medallions to third parties. During the year ended December 31, 2023, DePalma I contributed 745 medallions in-kind to DePalma II, and DePalma II distributed 10 medallions in-kind to DePalma I. See Notes 5 and 12 for additional information. |
10. Segment Information
Operating segments are defined as components of an enterprise that engage in business activities which may recognize revenues and incur expenses for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and to assess performance. In accordance with ASC 280, Segment Reporting, DePalma II’s CODM has been identified as the Chief Executive Officer. DePalma II operates in one segment focused on taxi medallion operations, which primarily intends to derive revenue through leasing operational taxicabs and medallions.
The CODM assesses financial condition and segment operating results to allocate resources and assess segment profitability consistent with its significant accounting policies and results presented within these consolidated financial statements, including net loss on the Consolidated Statements of Operations and total assets on the Consolidated Balance Sheets. In addition, the CODM reviews significant expenses consisting of those reported on the Consolidated Statements of Operations.
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Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
11. Risk Management
In the ordinary course of business, DePalma II manages a variety of risks, including market risk and liquidity risk. Market risk is the risk of potential adverse changes to the value of its taxi medallions because of changes in market conditions, such as interest and currency rate movements and volatility in commodity or security prices. Liquidity risk is present in DePalma II’s taxi medallion assets.
DePalma II’s exposure to market risk may be due to many factors, including the movements in interest rates, indexes, market volatility, and market interest and perception of taxi medallion values.
As of December 31, 2024, DePalma II holds taxi medallions and loans collateralized by medallions. For the loans, as similar with other types of debt instruments, such interests in loans involve the risk of loss in the case of default or insolvency of the borrower.
Since the collateral of these loans consists of taxi medallions, if the overall market for taxi services, income generated from operating medallions, and the market value of taxi medallions decreases, this will adversely affect the value of the collateral securing the outstanding medallion loans and the medallions themselves that DePalma II holds. If taxi medallion values decline in the future, there is likely to be an increase in medallion loan delinquencies, foreclosures and borrower bankruptcies. DePalma II’s ability to recover on defaulted medallion loans by foreclosing on and selling the taxi medallion collateral would be diminished, which would result in future losses on defaulted medallion loans that could have an effect on DePalma II’s business. If DePalma II is required to liquidate all or a portion of the medallion loans quickly, DePalma II could realize less than the value at which DePalma II had previously recorded such loans.
DePalma II relies heavily on third party service providers to perform certain functions essential to its operations, including most of the day-to-day servicing of the taxi medallions and loans. Any disruption to DePalma II’s service providers’ business operations, resulting from business failures, financial instability, or operational problems could have a material adverse effect on DePalma II’s business, financial condition and results of operations. In addition, if DePalma II does not effectively develop and manage its outsourcing strategies, there could be a material adverse effect on DePalma II’s business, financial condition and results of operations. DePalma II may not invoiced directly for services by third party service providers, however is subject to reimbursement to a related party for costs incurred on behalf of DePalma II (see Note 12).
DePalma II relies on Septuagint’s ability to pay its debt obligations to DePalma II. Septuagint’s ability to pay is driven by market conditions and the credit risk of the drivers with whom Septuagint interfaces. The inability of Septuagint to pay its debt obligations could have a material adverse effect on DePalma II’s business, financial condition and results of operations. As further detailed in Note 1, as of December 31, 2024, the Septuagint OSA is in a transition period through March 31, 2025 in which DePalma II has the right to either wind down Septuagint or require KE to transfer its 50% ownership interest in Septuagint to DePalma II or a designee. Refer to Notes 1, 4, and 14 for additional information.
12. Related Party Transactions
DePalma I
DePalma I was established to hold taxi medallion loans that are collateralized by taxi medallions. Due to some member sensitivities around effectively connected income, upon foreclosure of a loan or surrender agreement
F-58
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
being executed by DePalma I, the underlying medallion collateral for the loan will be distributed out (in-kind) to the Members and their respective feeder funds who then re-contribute the medallion collateral (in-kind) into DePalma II which is less sensitive to effectively connected income. The Members of DePalma II have embedded in their fund structures a subchapter C corporation interposed within the applicable fund’s structure, in which the corporation pays corporate level tax. This insulates those investors that are effectively connected income-sensitive from direct taxes with respect to the medallions. Such investors do, however, bear the tax indirectly as indirect owners of the C corporation. DePalma I, via its members, contributed taxi medallions with a fair value of $49,140,000 and $130,380,150 in-kind into DePalma II as a result of foreclosures and paydown and surrender agreements during the years ended December 31, 2024 and 2023, respectively. DePalma II, via its members, distributed taxi medallions with a fair value and cost basis of $4,025,000 and $1,750,000 in-kind into DePalma I as a result of the reinstatement of certain taxi medallion loans and return of collateral to the borrower during the years ended December 31, 2024 and 2023, respectively (see Note 3 regarding fair value measurements). The above transactions were reflected as in-kind purchases and sales of taxi medallions at the Members’ level.
In certain circumstances, DePalma I has foreclosed on medallion collateral from certain taxi medallion loans in default and the medallion collateral was auctioned for sale to third-party buyers, with the buyers paying a portion of the purchase price up front directly to DePalma I, and the remainder through financing provided by DePalma II, with the underlying medallion serving as collateral (Non-MRP+ Loans). This loan origination process intends to insulate those investors that are effectively connected income-sensitive. During the years ended December 31, 2024 and 2023, DePalma II provided financing in such transactions in the aggregate amount of $1,600,000 and $473,400, respectively. Refer to Notes 3 and 5 for additional information related to these loans.
In certain instances, DePalma I will provide working capital to DePalma II and DePalma II will reimburse DePalma I in a timely manner. When such transactions occur, the amounts are initially shown as due to related party in the Consolidated Balance Sheets. In addition, DePalma I may, via its Members, distribute capital to DePalma II that is not reimbursable to DePalma I. During the year ended December 31, 2024, DePalma I, via its Members, contributed $35,150,000 to DePalma II, which was not reimbursable to DePalma I, and was used by DePalma II to pay certain expenses and fund future business operations. During the year ended December 31, 2023, DePalma I provided financing on behalf of DePalma II to purchase cars (taxi vehicles) totaling $2,563,283, which are recorded within property and equipment, net in the Consolidated Balance Sheets. In addition, during the year ended December 31, 2023, DePalma I, via its Members, contributed $3,000,000 to DePalma II, a portion of which was used to reimburse DePalma I for these taxi vehicle purchases. Further, DePalma II reimbursed DePalma I $40,000 for medallion related expenses paid by DePalma I on behalf of DePalma II which are recorded within professional fees in the Consolidated Statements of Operations during the year ended December 31, 2023. As of December 31, 2024 and 2023, no amounts were due to DePalma I within due to related party on the Consolidated Balance Sheets.
Septuagint
In February 2019, DePalma II entered into a non-controlling joint venture with an unrelated party and formed Septuagint as a means of generating additional revenue by leasing its medallions to a dedicated fleet of taxis managed by Septuagint and to invest in a business that may be exited for capital gains in the future. As further detailed in Note 1, as of December 31, 2024, the Septuagint OSA is in a transition period through March 31, 2025 in which DePalma II has the right to either wind down Septuagint or require KE to transfer its 50% ownership interest in Septuagint to DePalma II or a designee.
F-59
Table of Contents
DePalma Acquisition II LLC
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Stated in United States Dollars)
Refer to Notes 1, 4, and 14 for additional information.
13. Members’ Capital
Allocation of profits and losses
Net income or loss is allocated to the Members pro rata in proportion to their respective capital balance. Management and performance fees are charged directly to the Members at their respective funds, and are not charged at DePalma II.
Contributions
Units were issued to the Members for contributions made to DePalma II pursuant to the LLC Agreement. See Note 1 for additional information.
Distributions
Distributions to Members are made at the times and amounts determined by the Members in proportion to the Members’ respective Units.
14. Subsequent Events
The Members have evaluated subsequent events through March 27, 2025, the date these consolidated financial statements were issued. Subsequent to December 31, 2024 and prior to the date these consolidated financial statements were issued, DePalma II recorded in-kind capital contributions of medallions of $5,285,000, and recorded in-kind contributions of MRP+ loans having an aggregate unpaid principal balance of $54,157,635 and estimated fair value of $53,480,665, respectively.
As of the date these consolidated financial statements were issued, the transition period of the Septuagint OSA is still in effect through March 31, 2025.
The Business Combination received the requisite stockholder approval on March 25, 2025, and is expected to close on March 31, 2025 following the fulfillment of other customary closing conditions.
F-60
Exhibit 2.2
WAIVER TO THE
BUSINESS COMBINATION AGREEMENT
This WAIVER, dated as of April 5, 2025 (this “Waiver”), to the Business Combination Agreement, dated February 14, 2023 (the “Agreement”), by and among Marblegate Asset Management, LLC, a Delaware limited liability company (“Marblegate”), Marblegate Acquisition Corp., a Delaware corporation (“Acquiror”), Marblegate Capital Corporation, a Delaware corporation (“Newco”), MAC Merger Sub, Inc., a Delaware corporation and a direct wholly-owned Subsidiary of Newco (“Merger Sub”), DePalma Acquisition I LLC, a Delaware limited liability company (“DePalma I”), and DePalma Acquisition II LLC, a Delaware limited liability company (“DePalma II,” and each of DePalma I and DePalma II a “DePalma Company” and together, the “DePalma Companies”). Marblegate, Acquiror, Newco, Merger Sub and the DePalma Companies shall be referred to herein from time to time collectively as the “Parties.” Unless otherwise defined herein, capitalized terms used herein are defined in the Agreement.
WITNESSETH:
WHEREAS, the Parties have entered into the Agreement; and
WHEREAS, the Parties hereto wish to waive certain covenants and closing conditions under the Agreement as set forth in this Waiver.
NOW, THEREFORE, in consideration of the rights and obligations contained herein, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the Parties agree as follows:
1. Waiver: So long as Nasdaq, as of immediately prior to the Effective Time, shall have neither (i) provided its approval of Newco’s initial Listing Application with Nasdaq nor (ii) indicated to any Party or such Party’s respective Affiliates that approval of Newco’s initial Listing Application would be given prior to Acquiror’s liquidation, dissolution and winding up in accordance with the Governing Documents of Acquiror, the Parties hereby irrevocably waive the following conditions to Closing set forth in Section 7.3(d) of the Agreement: that, immediately following the Effective Time (A) Newco shall be in compliance with any applicable initial and continuing listing requirements of Nasdaq; (B) Newco shall not have received any notice of non- compliance therewith that has not been cured or would not be cured; and (C) the Newco Shares included in the Listing Application shall have been approved for listing on Nasdaq. For the avoidance of doubt, in the event that either condition in the foregoing clauses (i) or (ii) is not satisfied as of immediately prior to the Effective Time, then each of the conditions to Closing set forth in Section 7.3(d) of the Agreement shall remain in full force and effect.
2. Parties in Interest. This Waiver shall be binding upon and inure solely to the benefit of each Party hereto, and nothing in this Waiver, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Waiver.
3. Entire Agreement. This Waiver constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements and undertaking, both written and oral, among the Parties, or any of them, with respect to the subject matter hereof.
4. Counterparts. This Waiver may be executed and delivered (including by facsimile or portable document format (pdf) transmission) in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
5. Governing Law. This Waiver shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State.
[Signature Page Follows]
2
IN WITNESS WHEREOF, the Parties have hereunto caused this Waiver to be duly executed as of the date first set forth above.
| MARBLEGATE ASSET MANAGEMENT, LLC By: /s/ Andrew Milgram Name: Andrew Milgram Title: Managing Partner |
| MARBLEGATE ACQUISITION CORP.
By: /s/ Andrew Milgram Name: Andrew Milgram Title: Chief Executive Officer |
| MARBLEGATE CAPITAL CORPORATION
By: /s/ Andrew Milgram Name: Andrew Milgram Title: Chief Executive Officer |
| MAC MERGER SUB, INC.
By: /s/ Jeffrey Kravetz Name: Jeffrey Kravetz Title: Chief Financial Officer |
| DEPALMA ACQUISITION I LLC
By: /s/ Andrew Milgram Name: Andrew Milgram Title: President |
| DEPALMA ACQUISITION II LLC
By: /s/ Andrew Milgram Name: Andrew Milgram Title: President |
[Signature Page to Waiver to the Business Combination Agreement]
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MARBLEGATE CAPITAL CORPORATION
(Pursuant to Sections 241 and 245 of the General Corporation Law of the State of Delaware)
Marblegate Capital Corporation, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (“Delaware Law”),
DOES HEREBY CERTIFY:
1. That the name of this corporation is Marblegate Capital Corporation; and that this corporation was originally incorporated pursuant to Delaware Law on February 2, 2023.
2. That this corporation has not received any payment for any of its stock.
3. That the Board of Directors duly adopted a resolution proposing to amend and restate the certificate of incorporation of this corporation (the “Original Certificate”) in accordance with Sections 241 and 245 of Delaware Law, declaring said amendment and restatement to be advisable and in the best interests of this corporation, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Original Certificate be amended and restated in its entirety to read as follows:
ARTICLE 1.
NAME
The name of the corporation is Marblegate Capital Corporation (the “Corporation”).
ARTICLE 2.
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is 251 Little Falls Drive, Wilmington, Delaware 19808 in New Castle County. The name of its registered agent at such address is Corporation Service Company.
ARTICLE 3.
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”).
ARTICLE 4.
CAPITAL STOCK
| (A) | Authorized Shares |
The total number of shares of all classes of stock that the Corporation shall have authority to issue is 260,000,000 shares, of which 250,000,000 shares shall be classified as common stock, $0.0001 par value per share (the “Common Stock”), and of which 10,000,000 shares shall be classified as preferred stock, $0.0001 par value per share (the “Preferred Stock”).
The Corporation may issue Preferred Stock in such one or more series as shall from time to time be created and authorized to be issued by the Board of Directors as hereafter provided. The Board of Directors is hereby expressly authorized, by resolution or resolutions from time to time adopted providing for the issuance of Preferred Stock, to fix and state the designations, powers, preferences and relative, participating, optional and other special rights of the shares of each series of Preferred Stock, and the qualifications, limitations and restrictions thereof, including (but without limiting the generality of the foregoing) any of the following with respect to which the Board of Directors shall determine to make affirmative provisions:
| (i) | the distinctive name and serial designations; |
| (ii) | the annual dividend rate or rates and the dividend payment dates; |
| (iii) | whether dividends are to be cumulative or non-cumulative and the participating or other special rights, if any, with respect to the payment of dividends; |
| (iv) | whether any series shall be subject to redemption and, if so, the manner of redemption and the redemption price or prices; |
| (v) | the amount or amounts of preferential or other payment to which any series is entitled over any other series or over the Common Stock on voluntary or involuntary liquidation, dissolution or winding up; |
| (vi) | any sinking fund or other retirement provisions and the extent to which the charges therefor are to have priority over the payment of dividends on or the making of sinking fund or other like retirement provisions for shares of any other series or over dividends on the Common Stock; |
| (vii) | any conversion, exchange, purchase or other privileges to acquire shares of any other series or of the Common Stock; |
| (viii) | the number of shares of such series; |
| (ix) | the voting rights, if any, of such series; |
| (x) | the stated value, if any, for such series, the consideration for which shares of such series may be issued and the amount of such consideration which shall be credited to the capital account. |
Each share of such series of Preferred Stock shall have the same relative rights and be identical in all respects with all the other shares of the same series.
Before the Corporation shall issue any shares of Preferred Stock of any series authorized as hereinbefore provided, a certificate setting forth a copy of the resolution or resolutions with respect to such series adopted by the Board of Directors of the Corporation pursuant to the foregoing authority vested in said Board shall be made, filed and recorded in accordance with the then applicable requirements, if any, of the laws of the State of Delaware, or, if no certificate is then so required, such certificate shall be signed and acknowledged on behalf of the Corporation by its President or a Vice President and its corporate seal shall be affixed thereto and attested by its Secretary or an Assistant Secretary and such certificate shall be filed and kept on file at the principal office of the Corporation in the State of Delaware and in such other place or places as the Board of Directors shall designate.
Shares of any series of Preferred Stock which shall be issued and thereafter acquired by the Corporation through purchase, redemption, conversion or otherwise, may by resolution or resolutions of the Board of Directors be returned to the status of authorized but unissued Preferred Stock of the same series. Unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issue thereof, the number of authorized shares of stock of any such series may be increased or
2
decreased (but not below the number of shares thereof then outstanding) by resolution or resolutions of the Board of Directors and the filing of a certificate complying with the foregoing requirements. In case the number of shares of any such series of Preferred Stock shall be decreased, the shares representing such decrease shall, unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, resume the status of authorized but unissued Preferred Stock, undesignated as to series.
| (B) | Voting Rights |
Each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which holders of Common Stock generally are entitled to vote.
ARTICLE 5.
BYLAWS
The Board of Directors is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the bylaws of the Corporation (as in effect from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”).
The stockholders may make, repeal, alter, amend or rescind, in whole or in part, the Bylaws; provided, however, that, notwithstanding any other provisions of this Certificate of Incorporation, the Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of capital stock of the Corporation or any particular class or series thereof required by this Certificate of Incorporation, the Bylaws or applicable law, the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of stock entitled to vote at an election of directors, voting together as a single class, shall be required in order for the stockholders of the Corporation to alter, amend or repeal, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.
ARTICLE 6.
BOARD OF DIRECTORS
| (A) | Power of the Board of Directors. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. |
| (B) | Number of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. The initial Board of Directors shall consist of five directors. |
| (C) | Election of Directors. |
| (1) | The directors shall be elected at the annual meetings of stockholders as specified in this Certificate of Incorporation, and each director shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification or removal in accordance with this Certificate of Incorporation and the Bylaws. No decrease in the number of directors shall shorten the term of any incumbent director. |
| (2) | There shall be no cumulative voting in the election of directors. Election of directors need not be by written ballot unless the Bylaws so provide. |
| (D) | Vacancies. Vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors shall, except as otherwise required by law, be filled solely by a majority of the directors then in office (although less than a quorum) or by the sole remaining director. |
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| (E) | Term. Any director appointed in accordance with the preceding clause (D) shall hold office for a term expiring at the next annual meeting of stockholders and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal. |
| (F) | Resignation. Any director may resign from the Board of Directors at any time by giving notice to the Board of Directors and the Secretary of the Corporation. Any such notice must be in writing or by electronic transmission to the Board of Directors and the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. |
| (G) | Removal. No director may be removed from office other than by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote on the election of such director, voting together as a single class. |
ARTICLE 7.
MEETINGS OF STOCKHOLDERS
| (A) | Annual Meetings. An annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such place, on such date, and at such time as the Board of Directors shall determine. |
| (B) | Special Meetings. Special meetings of the stockholders may be called only by the Board of Directors acting pursuant to a resolution adopted by the Board of Directors. |
| (C) | No Action by Written Consent. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with Delaware Law, as amended from time to time, and this Article 7 and may not be taken by written consent of stockholders without a meeting. |
ARTICLE 8.
INDEMNIFICATION
| (A) | Limited Liability. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware Law. To the fullest extent permitted by Section 145 of Delaware Law, no director or officer of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director or officer. Without limiting the effect of the preceding sentence, if Delaware Law is hereafter amended to authorize the further elimination or limitation of the liability of a director or officer, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by Delaware Law, as so amended. For purposes of this Article 8 and Article 9, references to “director” or “officer” shall include, for the avoidance of doubt, any person who has served as a director or officer of Marblegate Acquisition Corporation, a Delaware corporation. |
| (B) | Right to Indemnification. The Corporation, to the fullest extent permitted by law, shall indemnify, advance expenses to and hold harmless all persons whom it may indemnify pursuant thereto (including current and former directors and officers). The Corporation may, by action of its Board of Directors, provide rights to indemnification and to advancement of expenses to such of the employees and agents of the Corporation or its subsidiaries to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by Delaware Law. Expenses (including attorneys’ fees) incurred by a current or former officer or director of the Corporation in defending any civil, criminal, |
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| administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized hereby. Any amendment, repeal or modification of this Article 8 shall not adversely affect any rights or protection existing hereunder immediately prior to such repeal or modification. |
| (C) | Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under Delaware Law. |
| (D) | Nonexclusivity of Rights. The rights and authority conferred in this Article 8 shall not be exclusive of any other right that any person may otherwise have or hereafter acquire. |
| (E) | Preservation of Rights. Neither the amendment nor repeal of this Article 8, nor the adoption of any provision of this Certificate of Incorporation or the Bylaws, nor, to the fullest extent permitted by Delaware Law, any modification of law, shall adversely affect any right, protection or limitation on personal liability of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification (regardless of when any proceeding (or part thereof) relating to such event, act or omission arises or is first threatened, commenced or completed). |
ARTICLE 9.
AMENDMENTS
The Corporation reserves the right to amend this Certificate of Incorporation in any manner permitted by Delaware Law and all rights and powers conferred upon stockholders, directors and officers herein are granted subject to this reservation. Notwithstanding the foregoing, the provisions set forth in Articles 4(B), 5, 6, 7 and this Article 9 may not be repealed or amended in any respect, and no other provision may be adopted, amended or repealed which would have the effect of modifying or permitting the circumvention of the provisions set forth in any of Articles 4(B), 5, 6, 7 or this Article 9, unless such action is approved by the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of stock entitled to vote at an election of directors, voting together as a single class. For the avoidance of doubt, to the fullest extent possible, the provisions of this Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its current or former directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by law.
ARTICLE 10.
CORPORATE OPPORTUNITY
In the event that a member of the Board of Directors who is not an employee of the Corporation or its subsidiaries, or any employee or agent of such member, other than someone who is an employee of the Corporation or its subsidiaries (collectively, the “Covered Persons”), acquires knowledge of any business opportunity matter, potential transaction, interest or other matter, unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in connection with such individual’s service as a member of the Board of Directors of the Corporation (a “Corporate Opportunity”), then the Corporation to the maximum extent permitted from time to time under Delaware Law (including Section 122(17) thereof):
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| (a) | renounces any expectancy that such Covered Person offer an opportunity to participate in such Corporate Opportunity to the Corporation; and |
| (b) | waives any claim that such opportunity constituted a Corporate Opportunity that should have been presented by such Covered Person to the Corporation or any of its affiliates. |
No amendment or repeal of this paragraph shall apply to or have any effect on the liability or alleged liability of any officer, director or stockholder of the Corporation for or with respect to any opportunities of which such officer, director or stockholder becomes aware prior to such amendment or repeal.
ARTICLE 11.
FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, (A) (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of Delaware Law, this Certificate of Incorporation or the Bylaws (as either may be amended or restated) or as to which Delaware Law confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article 11.
[Signature Page follows.]
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IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Certificate of Incorporation as of this 7th day of April, 2025.
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer |
[Marblegate Capital Corporation – A&R COI]
Exhibit 3.2
BYLAWS
OF
MARBLEGATE CAPITAL CORPORATION.
(the “Corporation”)
* * * * *
ARTICLE I.
OFFICES
Section 1.01 Registered Office and Agent. The address of the registered office of the Corporation is 251 Little Falls Drive, Wilmington, Delaware 19808 in New Castle County. The name of its registered agent at such address is Corporation Service Company.
Section 1.02 Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of the Corporation may require.
Section 1.03 Books. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 2.01 Time and Place of Meetings. All meetings of stockholders shall be held at such place, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors (or the chairman of the Board of Directors in the absence of a designation by the Board of Directors). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.
Section 2.02 Annual Meetings. An annual meeting of stockholders shall be held for the election of directors and to transact such other business as may properly be brought before the meeting.
Section 2.03 Special Meetings. Special meetings of the stockholders may be called only by the Board of Directors acting pursuant to a resolution adopted by the Board of Directors.
Section 2.04 Notice of Meetings and Adjourned Meetings; Waivers of Notice.
(a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by Delaware Law, the Certificate of Incorporation of the Corporation, as amended from time to time (the “Certificate of Incorporation”) or these Bylaws, such notice shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting. The Board of Directors or the chairman of the meeting may adjourn the meeting to another time or place (whether or not a quorum
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is present), and notice need not be given of the adjourned meeting if the time, place, if any, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which such adjournment is made. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.05 Quorum. Unless otherwise provided under the Certificate of Incorporation, these Bylaws and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the total voting power of all outstanding securities of the Corporation generally entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chairman of the meeting or a majority in voting interest of the stockholders present in person or represented by proxy may adjourn the meeting, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified.
Section 2.06 Voting.
(a) Unless otherwise provided in the Certificate of Incorporation and subject to Delaware Law, each stockholder shall be entitled to one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Any share of capital stock of the Corporation held by the Corporation shall have no voting rights. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the votes cast at the meeting on the subject matter shall be the act of the stockholders. Abstentions and broker non-votes shall not be counted as votes cast. Directors shall be elected by a plurality of the votes cast in respect of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
(b) Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, or by proxy sent by cable, telegram or by any means of electronic communication permitted by law, which results in a writing from such stockholder or by his attorney, and delivered to the secretary of the meeting. No proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period.
Section 2.07 No Action by Written Consent. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with Delaware Law, as amended from time to time, the Certificate of Incorporation and these Bylaws, and may not be taken by written consent of stockholders without a meeting.
Section 2.08 Organization. At each meeting of stockholders, the chairman of the Board of Directors, if one shall have been elected, or in the chairman’s absence or if one shall not have been elected, the director designated by the vote of the majority of the directors present at such meeting, shall act as chairman of the meeting. The Secretary (or in the Secretary’s absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof.
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Section 2.09 Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.
Section 2.10 Nomination of Directors and Proposal of Other Business.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board of Directors or the proposal of other business to be transacted by the stockholders at an annual meeting of stockholders may be made only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (B) by or at the direction of the Board of Directors or any committee thereof, or (C) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in paragraph (ii) of this Section 2.10(a) and at the time of the annual meeting, who shall be entitled to vote at the meeting and who complies with the procedures set forth in this Section 2.10(a), and, except as otherwise required by law, any failure to comply with these procedures shall result in the nullification of such nomination or proposal.
(ii) For nominations or other business to be properly brought before an annual meeting of stockholders by a stockholder pursuant to clause (C) of paragraph (i) of this Section 2.10(a), the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders (which date shall, for purposes of the Corporation’s annual meeting of stockholders in the year of the closing of the merger contemplated by that certain Business Combination Agreement, dated as of February 14, 2023, by and among the Corporation, Marblegate Acquisition Corp., a Delaware corporation, DePalma Acquisition I LLC, a Delaware limited liability company, DePalma Acquisition II LLC, a Delaware limited liability company, and the other parties thereto, be deemed to have occurred on March 25, 2025); provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to such anniversary date or delayed more than 70 days after such anniversary date then to be timely such notice must be so delivered, or mailed and received, not later than the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting was first made. In no event shall the adjournment or postponement of any meeting, or any announcement thereof, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. The number of nominees a stockholder may nominate for election at the annual meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected as such annual meeting.
(iii) A stockholder’s notice to the Secretary shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director: (1) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (as amended (together with the rules and regulations promulgated thereunder), the “Exchange Act”) including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (2) a reasonably detailed description of any compensatory, payment or other financial agreement, arrangement or understanding that such person has with any other person or entity other than the Corporation including the amount of any payment or payments received or receivable thereunder, in each case in connection with candidacy or service as a director of the Corporation (a “Third-Party Compensation Arrangement”), (B) as
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to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the text of the proposed amendment), the reasons for conducting such business and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made:
(1) the name and address of such stockholder (as they appear on the Corporation’s books) and any such beneficial owner;
(2) for each class or series, the number of shares of capital stock of the Corporation that are held of record or are beneficially owned by such stockholder and by any such beneficial owner;
(3) a description of any agreement, arrangement or understanding between or among such stockholder and any such beneficial owner, any of their respective affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such nomination or other business;
(4) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into by or on behalf of, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or any such beneficial owner or any such nominee with respect to the Corporation’s securities;
(5) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting;
(6) a representation as to whether such stockholder or any such beneficial owner intends or is part of a group that intends to (i) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the voting power of the Corporation’s outstanding capital stock required to approve or adopt the proposal or to elect each such nominee and/or (ii) otherwise to solicit proxies from stockholders in support of such proposal or nomination;
(7) any other information relating to such stockholder, beneficial owner, if any, or director nominee or proposed business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of such nominee or proposal pursuant to Section 14 of the Exchange Act; and
(8) such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action.
If requested by the Corporation, the information required under clauses 2.10(a)(iii)(C)(2), (3) and (4) of the preceding sentence of this Section 2.10 shall be supplemented by such stockholder and any such beneficial owner not later than 10 days after the record date for the meeting to disclose such information as of the record date.
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(b) Special Meetings of Stockholders. If the election of directors is included as business to be brought before a special meeting in the Corporation’s notice of meeting, then nominations of persons for election to the Board of Directors at a special meeting of stockholders may be made by any stockholder who is a stockholder of record at the time of giving of notice provided for in this Section 2.10(b) and at the time of the special meeting, who shall be entitled to vote at the meeting and who complies with the procedures set forth in this Section 2.10(b); provided, however that the number of nominees a stockholder may nominate for election at the special meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected as such special meeting. For nominations to be properly brought by a stockholder before a special meeting of stockholders pursuant to this Section 2.10(b), the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (A) not earlier than 150 days prior to the date of the special meeting nor (B) later than the later of 120 days prior to the date of the special meeting and the 10th day following the day on which public announcement of the date of the special meeting was first made. A stockholder’s notice to the Secretary shall comply with the notice requirements of Section 2.10(a)(iii).
(c) General.
(i) To be eligible to be a nominee for election as a director, the proposed nominee must provide to the Secretary of the Corporation in accordance with the applicable time periods prescribed for delivery of notice under Section 2.10(a)(ii) or Section 2.10(b): (1) a completed D&O questionnaire (in the form provided by the Secretary of the Corporation at the request of the nominating stockholder) containing information regarding the nominee’s background and qualifications and such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation or to serve as an independent director of the Corporation, (2) a written representation that, unless previously disclosed to the Corporation, the nominee is not and will not become a party to any voting agreement, arrangement or understanding with any person or entity as to how such nominee, if elected as a director, will vote on any issue or that could interfere with such person’s ability to comply, if elected as a director, with his/her fiduciary duties under applicable law, (3) a written representation and agreement that, unless previously disclosed to the Corporation pursuant to Section 2.10(a)(iii)(A)(2), the nominee is not and will not become a party to any Third-Party Compensation Arrangement and (4) a written representation that, if elected as a director, such nominee would be in compliance and will continue to comply with the Corporation’s corporate governance guidelines, as amended from time to time. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation the information that is required to be set forth in a stockholder’s notice of nomination that pertains to the nominee.
(ii) No person shall be eligible to be nominated by a stockholder to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.10. No business proposed by a stockholder shall be conducted at a stockholder meeting except in accordance with this Section 2.10.
(iii) The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws or that business was not properly brought before the meeting, and if he/she should so determine, he/she shall so declare to the meeting and the defective nomination shall be disregarded or such business shall not be transacted, as the case may be. Notwithstanding the foregoing provisions of this Section 2.10, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or other proposed business, such nomination shall be disregarded or such proposed business shall not be transacted, as the case may be, notwithstanding that proxies in respect of such vote may have been received by the Corporation and counted for purposes of determining a quorum. For purposes of this Section 2.10, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by
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such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(iv) Without limiting the foregoing provisions of this Section 2.10, a stockholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this Section 2.10; provided, however, that any references in these Bylaws to the Exchange Act are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.10, and compliance with paragraphs (a)(i)(C) and (b) of this Section 2.10 shall be the exclusive means for a stockholder to make nominations or submit other business (other than as provided in Section 2.10(c)(v)).
(v) Notwithstanding anything to the contrary, the notice requirements set forth herein with respect to the proposal of any business pursuant to this Section 2.10 shall be deemed satisfied by a stockholder if such stockholder has submitted a proposal to the Corporation in compliance with Rule 14a-8 under the Exchange Act, and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for the meeting of stockholders.
ARTICLE III.
DIRECTORS
Section 3.01 General Powers. Except as otherwise provided in Delaware Law or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
Section 3.02 Number, Election and Term of Office. Subject to the Certificate of Incorporation, the number of directors which shall constitute the whole Board of Directors shall be fixed from time to time solely by resolution adopted by the Board. Except as otherwise provided in the Certificate of Incorporation, each director shall serve for a term expiring on the date of the first annual meeting of stockholders next following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director shall hold office until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders.
Section 3.03 Quorum and Manner of Acting. Unless the Certificate of Incorporation or these Bylaws require a greater number, a majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors and, except as otherwise expressly required by law or by the Certificate of Incorporation, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat shall adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 3.04 Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the chairman of the Board of Directors in the absence of a determination by the Board of Directors).
Section 3.05 Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual
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meeting of the Board of Directors may be held at such place either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.07 herein or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.
Section 3.06 Regular Meetings. After the place and time of regular meetings of the Board of Directors shall have been determined and notice thereof shall have been once given to each member of the Board of Directors, regular meetings may be held without further notice being given.
Section 3.07 Special Meetings. Special meetings of the Board of Directors may be called by the chairman of the Board of Directors or the President and shall be called by the chairman of the Board of Directors, President or the Secretary, on the written request of three directors. Notice of special meetings of the Board of Directors shall be given to each director at least 24 hours before the date of the meeting in such manner as is determined by the Board of Directors.
Section 3.08 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by Delaware Law to be submitted to the stockholders for approval or (b) adopting, amending or repealing any Bylaw of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.
Section 3.09 Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission and any consent may be documented, signed and delivered in any manner permitted by Section 116 of Delaware Law. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board of Directors or committee in the same paper or electronic form as the minutes are maintained.
Section 3.10 Remote Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
Section 3.11 Resignation. Any director may resign from the Board of Directors at any time by giving notice to the Board of Directors and the Secretary of the Corporation. Any such notice must be in writing or by electronic transmission to the Board of Directors and the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
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Section 3.12 Vacancies. Unless otherwise provided in the Certificate of Incorporation, vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors shall, except as otherwise required by law, be filled solely by a majority of the directors then in office (although less than a quorum) or by the sole remaining director, and each director so elected shall hold office for a term expiring at the next annual meeting of stockholders and until his or her successor has been elected and qualified . If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the Certificate of Incorporation, when one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of the other vacancies.
Section 3.13 Removal. No director may be removed from office other than by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote on the election of such director, voting together as a single class.
Section 3.14 Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.
Section 3.15 Chairman of the Board of Directors. Subject to the provisions of Section 2.08 herein, the chairman of the Board of Directors shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided herein and as the Board of Directors may from time to time prescribe. The chairman of the Board may or may not be an officer of the Corporation.
Section 3.16 Lead Independent Director. The Board of Directors may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “Lead Independent Director”). The Lead Independent Director shall preside at all meetings at which the chairman of the Board of Directors is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “Independent Director” has the meaning ascribed to such term under the rules of the exchange upon which the Corporation’s common stock is primarily traded.
ARTICLE IV.
OFFICERS
Section 4.01 Principal Officers. The principal officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Treasurer and a Secretary who shall have the duty, among other things, to record the proceedings of the meetings of stockholders and directors in a book kept for that purpose. The Corporation may also have such other principal officers, including one or more Controllers, as the Board of Directors may in its discretion appoint. One person may hold the offices and perform the duties of any two or more of said offices.
Section 4.02 Appointment, Term of Office and Remuneration. The principal officers of the Corporation shall be appointed by the Board of Directors or in the manner determined by the Board of Directors. Each such officer shall hold office until his or her successor is appointed, or until his or her earlier death, resignation or removal. The remuneration of all officers of the Corporation shall be fixed by the Board of Directors. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine.
Section 4.03 Delegation of Authority. In addition to the principal officers enumerated in Section 4.01 herein, the Corporation may have one or more Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such other subordinate officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period as the Board of Directors may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees. The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.
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Section 4.04 Removal. Except as otherwise permitted with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors.
Section 4.05 Resignations. Any officer may resign at any time by giving notice to the Board of Directors and the Secretary of the Corporation. Any such notice must be in writing or by electronic transmission to the Board of Directors and the Secretary of the Corporation. The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 4.06 Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.
ARTICLE V.
CAPITAL STOCK
Section 5.01 Certificates For Stock; Uncertificated Shares. The shares of the Corporation shall be uncertificated, provided that the Board by resolution may provide that some or all of the shares of any class or series of stock of the Corporation shall be represented by certificates. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The chairman or vice chairman of the Board, the president, vice president, the treasurer, any assistant treasurer, the secretary or any assistant secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. A Corporation shall not have power to issue a certificate in bearer form.
Section 5.02 Lost Certificates. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
Section 5.03 Shares Without Certificates. The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.
Section 5.04 Transfer Of Shares. Shares of the stock of the Corporation may be transferred on the record of stockholders of the Corporation by the holder thereof or by such holder’s duly authorized attorney upon surrender of a certificate therefor properly endorsed or upon receipt of proper transfer instructions from the registered holder of uncertificated shares or by such holder’s duly authorized attorney and upon compliance with appropriate procedures for transferring shares in uncertificated form, unless waived by the Corporation.
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Section 5.05 Authority for Additional Rules Regarding Transfer. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of the stock of the Corporation, as well as for the issuance of new certificates in lieu of those which may be lost or destroyed, and may require of any stockholder requesting replacement of lost or destroyed certificates, bond in such amount and in such form as they may deem expedient to indemnify the Corporation, and/or the transfer agents, and/or the registrars of its stock against any claims arising in connection therewith.
ARTICLE VI.
GENERAL PROVISIONS
Section 6.01 Fixing the Record Date.
(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing such record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may in its discretion or as required by law fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall fix the same date or an earlier date as the record date for stockholders entitled to notice of such adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 6.02 Dividends. Subject to limitations contained in Delaware Law and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital stock of the Corporation.
Section 6.03 Year. The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year.
Section 6.04 Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 6.05 Voting of Stock Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any corporation (except this Corporation) in which the Corporation may hold stock.
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Section 6.06 Amendments. The Board of Directors is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, these Bylaws without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or the Certificate of Incorporation. The stockholders may make, repeal, alter, amend or rescind, in whole or in part, these Bylaws; provided, however, that, notwithstanding any other provisions of the Certificate of Incorporation, these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of capital stock of the Corporation or any particular class or series thereof required by the Certificate of Incorporation, these Bylaws or applicable law, the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of stock entitled to vote at an election of directors, voting together as a single class, shall be required in order for the stockholders of the Corporation to alter, amend or repeal, in whole or in part, any provision of these Bylaws or to adopt any provision inconsistent therewith.
Section 6.07 Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
ARTICLE VII.
INDEMNIFICATION
Section 7.01 Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of the foregoing (a “Proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VII, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing or Section 7.02, subject to Section 7.05 of this Article VII, the Corporation shall not be required to indemnify or advance expenses incurred by any Indemnitee seeking indemnity or advancement of expenses in connection with a Proceeding (or part thereof) initiated by such Indemnitee or in defending any counterclaim, cross-claim, affirmative defense, or like claim of the Corporation in such a Proceeding unless such Proceeding (or part thereof) was authorized by the Board of Directors or such indemnification is authorized by an agreement approved by the Board of Directors.
Section 7.02 Advance of Expenses. Except as otherwise provided in a written indemnification agreement between the Corporation and an Indemnitee, the Corporation shall pay all expenses (including attorneys’ fees) incurred by an Indemnitee in defending any Proceeding as they are incurred in advance of its final disposition; provided, however, that if Delaware Law then so requires, the advancement of such expenses (i.e., payment of such expenses as incurred or otherwise in advance of the final disposition of
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the Proceeding) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article VII or otherwise.
Section 7.03 Non-Exclusivity of Rights. The rights conferred on any person in this Article VII shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VII shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VII.
Section 7.04 Indemnification Contracts. The Board of Directors is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VII.
Section 7.05 Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 7.04 above.
(a) Right to Bring Suit. If a claim under Section 7.01 or 7.02 of this Article VII is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee also shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.
(b) Effect of Determination. Neither the absence of a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
(c) Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VII, or otherwise, shall be on the Corporation.
Section 7.06 Nature of Rights. The rights conferred upon Indemnitees in this Article VII shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VII that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VII and existing at the time of such amendment, repeal or modification.
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Section 7.07 Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under Delaware Law.
Section 7.08 Other Indemnification. The Corporation’s obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
ARTICLE VIII.
NOTICES
Section 8.01 Form and Delivery. Except as otherwise specifically required in these Bylaws or by applicable law, all notices required to be given pursuant to these Bylaws may in every instance in connection with any delivery to a member of the Board of Directors, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by overnight express courier, facsimile, electronic mail or other form of electronic transmission. Whenever, by applicable law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any stockholder, such notice may be given in writing directed to such stockholder’s mailing address or by electronic transmission directed to such stockholder’s electronic mail address, as applicable, as it appears on the records of the Corporation or by such other form of electronic transmission consented to by the stockholder. A notice to a stockholder shall be deemed given as follows: (a) if mailed, when the notice is deposited in the United States mail, postage prepaid, (b) if delivered by courier service, the earlier of when the notice is received or left at such stockholder’s address, (c) if given by electronic mail, when directed to such stockholder’s electronic mail address unless the stockholder has notified the corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail or such notice is prohibited by Section 232(e) of Delaware Law, and (d) if given by a form of electronic transmission consented to by the stockholder to whom the notice is given, (i) if by facsimile transmission, when directed to a number at which such stockholder has consented to receive notice, (ii) if by a posting on an electronic network together with separate notice to the stockholder of such specified posting, upon the later of (A) such posting and (B) the giving of such separate notice, and (iii) if by any other form of electronic transmission, when directed to such stockholder. A stockholder may revoke such stockholder’s consent to receiving notice by means of electronic transmission by giving written notice or by electronic transmission of such revocation to the Corporation. A notice may not be given by an electronic transmission from and after the time that (x) the Corporation is unable to deliver by such electronic transmission two consecutive notices and (y) such inability becomes known to the Secretary or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to discover such inability shall not invalidate any meeting or other action. Any notice given by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation.
Section 8.02 Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 8.03 Waiver of Notice. Whenever notice is required to be given under any provision of Delaware Law, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
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ARTICLE IX.
INTERESTED DIRECTORS
Section 9.01 Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 9.02 Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes a contract or transaction described in Section 9.01.
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Exhibit 4.1
[FORM OF SPECIMEN COMMON STOCK CERTIFICATE]
| NUMBER | ||
| C- | ||
| SHARES | ||
| SEE REVERSE FOR CERTAIN DEFINITIONS | ||
| CUSIP 56608R 108 | ||
MARBLEGATE CAPITAL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
This Certifies that _______________________ is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.0001 OF EACH, OF
MARBLEGATE CAPITAL CORPORATION
(THE “COMPANY”)
transferable on the books of the Company in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the Company and the facsimile signatures of its duly authorized officers.
| Chief Executive Officer | [Corporate Seal] Delaware | Chief Financial Officer |
MARBLEGATE CAPITAL CORPORATION
The Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences and/or rights. This certificate and the shares represented thereby are issued and shall be held subject to all the provisions of the Company’s amended and restated certificate of incorporation and all amendments thereto and resolutions of the Board of Directors providing for the issue of securities (copies of which may be obtained from the secretary of the Company), to all of which the holder of this certificate by acceptance hereof assents. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
| TEN COM | — | as tenants in common | UNIF GIFT MIN ACT | — |
|
Custodian |
| |||||||
| TEN ENT | — | as tenants by the entireties | (Cust) | (Minor) | ||||||||||
| JT TEN | — | as joint tenants with right of survivorship and not as tenants in common | UNIF GIFT MIN ACT | under Uniform Gifts to Minors Act | (State) | |||||||||
Additional abbreviations may also be used though not in the above list.
For value received, hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER(S) OF ASSIGNEE(S))
(PLEASE PRINT OR TYPEWRITE NAME(S) AND ADDRESS(ES), INCLUDING ZIP CODE, OF ASSIGNEE(S))
shares of the capital stock represented by the within Certificate, and hereby irrevocably constitutes and appoints
Attorney to transfer the said stock on the books of the within named Company with full power of substitution in the premises.
| Dated: |
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE).
Exhibit 4.2
[Form of Warrant Certificate]
[FACE]
Number
Warrants
THIS WARRANT SHALL BE VOID IF NOT EXERCISED PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
MARBLEGATE CAPITAL CORPORATION
Incorporated Under the Laws of the State of Delaware
CUSIP 56608R 116
Warrant Certificate
This Warrant Certificate certifies that, _________ or registered assigns, is the registered holder of warrant(s) evidenced hereby (the “Warrants” and each, a “Warrant”) to purchase shares of common stock, $0.0001 par value per share (“Common Stock”), of Marblegate Capital Corporation, a Delaware corporation (the “Company”). Each whole Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and non-assessable shares of Common Stock as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable in lawful money (or through “cashless exercise” as provided for in the Warrant Agreement) of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Each whole Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. No fractional shares will be issued upon exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Common Stock, the Company will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the Warrant holder. The number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
The initial Exercise Price per share of Common Stock for any Warrant is equal to $11.50 per whole share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the end of such Exercise Period, such Warrants shall become void.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.
[Signature Page Follows]
| MARBLEGATE CAPITAL CORPORATION | ||
| By: |
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| Name: | ||
| Title: | ||
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent | ||
| By: |
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| Name: | ||
| Title: | ||
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of September 30, 2021, as amended by the Warrant Assumption Agreement, dated as of April 7, 2025 (and so amended, the “Warrant Agreement”), duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (or successor warrant agent) (collectively, the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder” meaning the Registered Holders or Registered Holder, respectively) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Warrants may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” as provided for in the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise” as provided for in the Warrant Agreement.
The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock issuable upon exercise of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the holder of the Warrant.
Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares of Common Stock to the order of Marblegate Capital Corporation (the “Company”) in the amount of $________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of ________, whose address is ______, and that such shares of Common Stock be delivered to __________ , whose address is ______. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of ________, whose address is __________ , and that such Warrant Certificate be delivered to ______, whose address is _____.
In the event that the Warrant has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with subsection 3.3.1(b) and Section 6.3 of the Warrant Agreement.
In the event that the Warrant is a Private Placement Warrant, Working Capital Warrant or Post-IPO Warrant that is to be exercised on a “cashless” basis pursuant to subsection 3.3.1(c) of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with subsection 3.3.1(c) of the Warrant Agreement.
In the event that the Warrant is to be exercised on a “cashless” basis pursuant to Section 7.4 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.
In the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares of Common Stock that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares of Common Stock. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder (after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of ________, whose address is ________, and that such Warrant Certificate be delivered to ______, whose address is ______.
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE)).
Exhibit 4.4
WARRANT ASSUMPTION AGREEMENT
This Warrant Assumption Agreement (this “Warrant Assumption Agreement”) is entered into as of April 7, 2025, by and among Marblegate Acquisition Corp., a Delaware corporation (“MAC”), Marblegate Capital Corporation a Delaware corporation (“PubCo”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”). Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Business Combination Agreement (as defined below).
WHEREAS, MAC and the Warrant Agent are parties to that certain Warrant Agreement, dated as of September 30, 2021 (the “Warrant Agreement”);
WHEREAS, MAC, PubCo, MAC Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of PubCo (“Merger Sub”), DePalma Acquisition I LLC, a Delaware limited liability company (“DePalma I”), and DePalma Acquisition II LLC, a Delaware limited liability company (“DePalma II,” and each of DePalma I and DePalma II, a “DePalma Company” and together, the “DePalma Companies” or “DePalma”) are parties to that certain Business Combination Agreement, dated as of February 14, 2023 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), pursuant to which, on the terms and subject to the conditions set forth therein, among other things: (i) PubCo and the DePalma Companies will effect a series of reorganization transactions, resulting in PubCo becoming the majority owner of the DePalma Companies (the “Pre-Closing Transactions”); and (ii) Merger Sub will merge with and into MAC (the “Merger”), with MAC surviving the Merger as a wholly-owned subsidiary of PubCo, in accordance with the terms and subject to the conditions of the Business Combination Agreement as more fully described in the accompanying proxy statement/prospectus, and (x) each share of MAC’s Class A common stock, par value $0.0001 per share (“MAC Class A Common Stock”), outstanding immediately prior to the effectiveness of the Merger is being converted into the right to receive a number of shares of common stock, par value $0.0001 per share, of PubCo (“PubCo Common Stock”), determined in accordance with the Business Combination Agreement, having an aggregate value of $49,788,790 (at a deemed value of $10.00 per share and assuming no redemptions of MAC Class A Common Stock), (y) each share of MAC’s Class B common stock, par value $0.0001 per share (“MAC Class B Common Stock,” and, together with the MAC Class A Common Stock, the “MAC Common Stock”), outstanding immediately prior to the effectiveness of the Merger is being converted into the right to receive a number of shares of PubCo Common Stock, determined in accordance with the Business Combination Agreement, having an aggregate value of $63,033,330 (at a deemed value of $10.00 per share and assuming no redemptions of MAC Class A Common Stock and giving effect to the forfeiture and donation of shares), and (z) each warrant of MAC outstanding immediately prior to the effectiveness of the Merger is being converted into the right to receive one warrant of PubCo (the “PubCo Warrants”), with PubCo assuming MAC’s obligations under the existing warrant agreement.
WHEREAS, pursuant to the terms and conditions of each of the Warrant Agreement and the Business Combination Agreement, upon the Effective Time, each MAC Warrant issued and outstanding immediately prior to the Effective Time will automatically become a PubCo Warrant at the same exercise price per share and on the same terms in effect immediately prior to the Effective Time, and the rights and obligations of MAC under the Warrant Agreement will be irrevocably assigned and assumed by PubCo; and
WHEREAS, as a result of this Warrant Assumption Agreement, at the Effective Time, PubCo will assume all of the obligations of MAC with respect to each MAC Warrant, each of which will, at the Effective Time, become a warrant to purchase shares of Pubco common stock (“PubCo Shares”) pursuant to the terms and conditions of the Warrant Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MAC, PubCo and the Warrant Agent hereby agree as follows:
| 1. | Assignment and Assumption. |
(a) Upon and subject to the occurrence of the Effective Time, MAC hereby assigns, and PubCo hereby assumes, the rights and obligations of MAC under the Warrant Agreement and the MAC Warrants (which shall be converted into PubCo Warrants), including the obligation to issue PubCo Shares upon the exercise of the PubCo Warrants, and PubCo hereby agrees to faithfully perform, satisfy and discharge when due, the liabilities and obligations of MAC under the Warrant Agreement and the MAC Warrants (which shall be converted into PubCo Warrants). As a result of the Merger, upon and subject to the occurrence of the Effective Time, each MAC Warrant will be automatically and irrevocably modified, pursuant to and in accordance with Section 4.4 of the Warrant Agreement, with the effect that, at the Effective Time, each MAC Warrant will be exchanged for a warrant to purchase shares of PubCo Shares pursuant to the terms and conditions of the Warrant Agreement.
(b) PubCo acknowledges and agrees that, subject to the terms of the Warrant Agreement, the MAC Warrants and this Warrant Assumption Agreement, the Warrant Agreement and the MAC Warrants (which shall be converted into PubCo Warrants) shall continue in full force and effect following the Effective Time and that, from and after the Effective Time, all of MAC’s obligations thereunder shall be valid and enforceable as against PubCo and shall not be impaired or limited by the execution or effectiveness of this Warrant Assumption Agreement.
(c) This Warrant Assumption Agreement is being executed and delivered pursuant and subject to the Warrant Agreement. Nothing in this Warrant Assumption Agreement shall, or shall be deemed to, defeat, limit, alter, impair, enhance or enlarge any right, obligation, claim or remedy created by the Warrant Agreement or any other document or instrument delivered pursuant to or in connection with it.
(d) The choice of law and jurisdiction provisions set forth in the Warrant Agreement and this Warrant Assumption Agreement shall continue to govern the rights and obligations of the parties to the Warrant Agreement and this Warrant Assumption Agreement in all respects. PubCo hereby waives any objection to the jurisdiction provision governing the terms of the Warrant Agreement and this Warrant Assumption Agreement.
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| 2. | Miscellaneous. |
(a) Governing Law and Jurisdiction. The validity, interpretation, and performance of this Warrant Assumption Agreement shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. PubCo hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Warrant Assumption Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction. PubCo hereby waives any objection to such jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon PubCo may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to PubCo at the address set forth below:
| Marblegate Capital Corporation
5 Greenwich Office Park, Suite 400
Greenwich, CT 06831 | ||
| Attention: |
Andrew Milgram, CEO | |
| Email: |
amilgram@marblegate.com | |
| with a copy to: | ||
| Paul Hastings LLP 2050 Main Street NW Washington, DC 20036 | ||
| Attention: |
Brandon Bortner Brett Lawrence | |
| E-mail: |
brandonbortner@paulhastings.com brettlawrence@paulhastings.com | |
or to such other address or addresses as the parties may from time to time designate in writing.
(b) Binding Effect. This Warrant Assumption Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective successors and assigns.
(c) Entire Agreement. This Warrant Assumption Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Except as expressly set forth in this Warrant Assumption Agreement, provisions of the
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Warrant Agreement which are not inconsistent with this Warrant Assumption Agreement shall remain in full force and effect. This Warrant Assumption Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
(d) Severability. This Warrant Assumption Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Assumption Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Assumption Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
(e) Amendment. This Warrant Assumption Agreement may not be amended, except by an instrument in writing signed by each party hereto.
(f) Termination. If the Business Combination Agreement is terminated in accordance with its terms before the Effective Time, this Warrant Assumption Agreement shall immediately terminate and cease to have any force or effect, without any liability on the part of any party hereto, as if this Warrant Assumption Agreement had not been executed and delivered.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant Assumption Agreement as of the date first written above.
| MARBLEGATE ACQUSITION CORP. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer | ||
| MARBLEGATE CAPITAL CORPORATION | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer | ||
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY | ||
| By: | /s/ Steven Vacante | |
| Name: Steven Vacante | ||
| Title: Vice President | ||
[Signature Page to Warrant Assumption Agreement]
Exhibit 4.5
DESCRIPTION OF CAPITAL STOCK
The following summary of the material terms of Marblegate Capital Corporation (the “Company”, “we” or “our”) capital stock is not intended to be a complete summary of the rights and preferences of such securities. The full text of the Amended and Restated Certificate of Incorporation (the “Charter”) and Amended and Restated Bylaws (the “Bylaws”) are included as exhibits to the Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). You are encouraged to read the applicable provisions of Delaware law, the Charter and Bylaws in their entirety for a complete description of the rights and preferences of our securities.
Authorized and Outstanding Capital Stock
The Charter authorizes the issuance of 260,000,000 shares of capital stock, of which 250,000,000 shares are shares of common stock, par value $0.0001 per share (“Common Stock”), and 10,000,000 shares are shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).
Voting Power
Except as otherwise provided in the Charter or as required by applicable law, holders of Common Stock will each be entitled to one vote per share.
Dividends
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Common Stock will be entitled to receive dividends and other distributions as may from time to time be declared by our board of directors (the “Board”) in its discretion out of legally available assets, ratably in proportion to the number of shares held by each such holder, and at such times and in such amounts as the Board in its discretion may determine.
Liquidation, Dissolution or Winding Up
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment of debts and other liabilities and of preferential claims, and after the rights of holders of preferred stock, if any, have been satisfied, the holders of all outstanding shares of Common Stock will be entitled to receive the remaining assets of the Company available for distribution ratably in proportion to the number of shares held by each such stockholder.
Election of Directors
Directors of the Company shall be elected by a majority of the votes cast at an annual meeting of stockholders by holders of the Common Stock.
Warrants
Marblegate Acquisition Corp. (“MAC”) assigned to us all of MAC’s right, title and interest in and to the Warrant Agreement, dated September 30, 2021, between MAC and Continental Stock Transfer & Trust Company (“Continental”) (as amended, the “Warrant Agreement”), and pursuant to a Warrant Assumption Agreement, by and among MAC, Continental, and the Company, dated as of April 7, 2025, we assumed, and agreed to pay, perform, satisfy and discharge in full, all of MAC’s liabilities and obligations under the Warrant Agreement arising from and after the consummation of the Business Combination (as defined in the Warrant Agreement). You should review a copy of the Warrant Agreement, which is filed as an exhibit to the Annual Report on Form 10-K, for a complete description of the terms and conditions applicable to the warrants. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the warrants and the Warrant Agreement set forth herein, or to correct any defective provision, but requires the approval by the holders of at least a majority of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
Each outstanding whole warrant will entitle the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time 30 days after the completion of the Business Combination. A warrant holder may exercise its warrants only for a whole number of shares of Common Stock. The warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
Redemption of Warrants
The Company will not be obligated to deliver any shares of Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) with respect to the shares of Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration. No warrant will be exercisable, and the Company will not be obligated to issue shares of Common Stock upon exercise of a warrant unless Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant, and such warrant may have no value and expire worthless, in which case the purchaser of a unit containing such public warrants will have paid the full purchase price for the unit solely for the share of Common Stock underlying such unit. In no event will the Company be required to net cash settle any warrant.
Once the warrants become exercisable, the Company may call the warrants for redemption:
| • | in whole and not in part; |
| • | at a price of $0.01 per warrant; |
| • | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
| • | if, and only if, the reported last sale price of the Company’s Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of Common Stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws, or we are unable to effect such registration or qualification. In the event that the Company elects to redeem all of the redeemable warrants as described above, it will fix a date for the redemption (the “Redemption Date”). Pursuant to the terms of the Warrant Agreement, notice of redemption will be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the Redemption Date to the registered holders of the redeemable warrants to be redeemed at their last addresses as they appear on the registration books. In addition, the Company will issue a press release and file a current report on Form 8-K with the SEC containing notice of redemption. The Company is not contractually obligated to notify investors when its warrants become eligible for redemption and does not intend to so notify investors upon eligibility of the warrants for redemption, unless and until it elects to redeem such warrants pursuant to the terms of the Warrant Agreement. The Company will use its best efforts to register or qualify such shares of Common Stock under the blue sky laws of the state of residence in those states in which the warrants were offered by MAC in its initial public offering (the “IPO”).
The Company has established the last of the redemption criteria discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Company’s Common Stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If the Company calls the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” The Company’s management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of the Company’s Common Stock issuable upon the exercise of its warrants. If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of the Company’s Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the difference
between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Company’s Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. The Company believes this feature is an attractive option to it if it does not need the cash from the exercise of the warrants after consummation of the Business Combination. If the Company calls its warrants for redemption and its management does not take advantage of this option, holders of private placement units and their permitted transferees would still be entitled to exercise their private placement warrants that are included in the private placement units for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for the Company’s Common Stock) and (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for the Company’s Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of the Company’s Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the warrants are outstanding and unexpired,
pays a dividend or make a distribution in cash, securities or other assets to the holders of Common Stock on account of such shares of Common Stock (or other shares of its capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends or (c) to satisfy the redemption rights of the holders of Common Stock in connection with a stockholder vote to amend the Charter with respect to any provision relating to stockholders’ rights, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Common Stock in respect of such event.
If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.
Whenever the number of shares of Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of the Company’s Common Stock and any voting rights until they exercise their warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by stockholders.
The Company has agreed that, subject to applicable law, any action, proceeding or claim against the Company arising out of or relating in any way to the Warrant Agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and the Company irrevocably submits to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. This provision applies to claims under the Securities Act but does not apply to claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Redemption Procedures
A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Common Stock outstanding immediately after giving effect to such exercise.
Anti-Dilution Adjustments
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than the “historical fair market value” (as defined below) will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (1) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Common Stock) multiplied by (2) one minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the historical fair market value. For these purposes (1) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (2) “historical fair market value” means the volume weighted average price of Common Stock as reported during the 10-trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the warrants are outstanding and unexpired, pays a dividend or make a distribution in cash, securities or other assets to the holders of Common Stock on account of such shares of Common Stock (or other shares of its capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends or (c) to satisfy the redemption rights of the holders of Common Stock in connection with a stockholder vote to amend the Charter with respect to any provision relating to stockholders’ rights, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Common Stock in respect of such event.
If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.
Whenever the number of shares of Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the company in connection with redemption rights held by stockholders of the company as provided for in the Charter) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any
group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of Common Stock, the holder of a warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the Warrant Agreement. Additionally, if less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the per share consideration minus Black-Scholes Warrant Value (as defined in the Warrant Agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants in order to determine and realize the option value component of the warrant. This formula is to compensate the warrant holder for the loss of the option value portion of the warrant due to the requirement that the warrant holder exercise the warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no quoted market price for an instrument is available.
Private Placement Warrants
The private placement warrants are identical to the public warrants except that the private placement warrants: (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, as described in the prospectus related to the IPO, so long as they are held by Marblegate Acquisition LLC (the “Sponsor”), Cantor Fitzgerald & Co. or any of their permitted transferees. If the private placement warrants are held by holders other than the Sponsor or any of its permitted transferees, they will be redeemable by the Company and exercisable by the holders on the same basis as the public warrants in the units sold in the IPO. The private placement warrants (including the shares of Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of the Business Combination.
Anti-Takeover Effects of the Charter, the Bylaws and Certain Provisions of Delaware Law
The Charter, the Bylaws and the DGCL contain provisions, which as summarized in the following paragraphs, are intended to enhance the likelihood of continuity and stability in the composition of the Board and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company. These provisions are intended to avoid costly takeover battles, reduce the Company’s vulnerability to a hostile change of control or other unsolicited acquisition proposal, and enhance the ability of the Board to maximize stockholder value in connection with any unsolicited offer to acquire the Company. However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of the Company by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including attempts that might result in a premium over the prevailing market price for the shares of Common Stock. The Charter provides that any action required or permitted to be taken by the Company’s stockholders must be effected at a duly called annual or special stockholder meeting of such stockholders and may not be effected by any consent in writing by such holders unless such action is recommended or approved by all directors of the Board then in office, except that holders of Common Stock or one or more series of Preferred Stock, if such series are expressly permitted to do so by the certificate of designation relating to such series, may take any action by written consent if such action permitted to be taken by such holders and the written consent is signed by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting. See “Risk Factors — Risks Related to Our Corporate Structure —Delaware law, our amended and restated certificate of incorporation (the “certificate of incorporation”) and amended and restated bylaws (“bylaws”) contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable” in the Annual Report on Form 10-K for more information.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of authorized shares. However, the Nasdaq listing requirements, which would apply so long as the Common Stock is listed on Nasdaq, require stockholder approval of certain issuances equal to or exceeding 20% of then outstanding voting power or then outstanding number of shares of Common Stock. Additional shares that may be issued in the future may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common stock may be to enable the Board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity of management and possibly deprive stockholders of opportunities to sell their shares of Common Stock at prices higher than prevailing market prices.
Election of Directors and Vacancies
The Charter will provide that the Board will determine the number of directors who will serve on the board.
In addition, the Charter provides that any vacancy on the Board, including a vacancy that results from an increase in the number of directors or a vacancy that results from the removal of a director with cause, may be filled only by a majority of the directors then in office, subject to any rights of the holders of Preferred Stock.
Notwithstanding the foregoing provisions of this section, each director will serve until his successor is duly elected and qualified or until his earlier death, resignation, retirement, disqualification or removal. No decrease in the number of directors constituting the Board will shorten the term of any incumbent director.
Quorum
The Bylaws provide that at any meeting of the Board a majority of the total number of directors then in office constitutes a quorum for all purposes.
No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the Charter expressly authorizes cumulative voting. The Charter does not authorize cumulative voting.
General Stockholder Meetings
The Charter provides that special meetings of stockholders may be called only by the Board acting pursuant to a resolution adopted by the Board.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
The Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Board or a committee of the Board. For any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice requirements and provide the Company with certain information. Generally, to be timely, a stockholder’s notice must be received at the Company’s principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of stockholders (for the purposes of the first annual meeting of the stockholders of the Company following the adoption of the Bylaws, the date of the preceding annual meeting will be deemed to be March 25, 2025 of the preceding calendar year). The Bylaws also specify requirements as to the form and content of a stockholder’s notice. The Bylaws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to influence or obtain control of the Company.
Supermajority Provisions
The Charter and the Bylaws provide that the Board is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, the Bylaws without a stockholder vote in any matter not inconsistent with the laws of the State of Delaware or the Charter. Any amendment, alteration, rescission or repeal of the Charter by the Company’s stockholders requires the affirmative vote of the holders of at least 66 2/3%, in case of provisions in Articles 4(B), 5, 6, 7 or 9 of the Charter, and a majority, in case of any other provisions, in voting power of all then outstanding shares of the Company’s stock entitled to vote thereon.
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon is required to amend a corporation’s Charter, unless the Charter requires a greater percentage.
These provisions may have the effect of deterring hostile takeovers or delaying or preventing changes in control of the Company or its management, such as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of the Board and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company. These provisions are designed to reduce the Company’s vulnerability to an unsolicited acquisition proposal. The provisions are also intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for the Company’s shares and, as a consequence, may inhibit fluctuations in the market price of the Company’s shares that could result from actual or rumored takeover attempts. Such provisions may also have the effect of preventing changes in management.
Exclusive Forum
The Charter provides that, unless the Company consents in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee, agent or stockholder of the Company to the Company or its stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against the Company or any current or former director, officer, other employee, agent or stockholder of the Company (a) arising pursuant to any provision of the DGCL, the Charter (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against the Company or any current or former director, officer, other employee, agent or stockholder of the Company governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act of 1933, as amended, as to which the federal district
courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum. Notwithstanding the foregoing, the provisions of Article 11 of the Charter does not apply to suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum. While Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in any shares of the Company’s capital stock shall be deemed to have notice of and to have consented to the forum provisions in the Charter. If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”) and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder. This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers, stockholders, agents or other employees, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce this provision, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. Further, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find this provision of the Charter inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect the Company’s business, financial condition and results of operations and result in a diversion of the time and resources of the Company’s management and board of directors.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. The Charter, to the maximum extent permitted from time to time by Delaware law, renounces any interest or expectancy that the Company has in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to the Company’s officers, directors or stockholders or their respective affiliates, other than those officers, directors, stockholders or affiliates who are employees of the Company or its subsidiaries. The Charter provides that, to the fullest extent permitted by law, none of the non-employee directors or his or her affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which the Company or its affiliates now engage or propose to engage or (ii) otherwise competing with the Company or its
affiliates. In addition, to the fullest extent permitted by law, in the event that any non-employee director or any of his or her affiliates acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself or himself or herself or its or his or her affiliates or for the Company or its affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to the Company or any of its affiliates and they may take any such opportunity for themselves or offer it to another person or entity. The Charter does not renounce the Company’s interest in any business opportunity that is expressly offered to, or acquired or developed by a non-employee director solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Company if it is a business opportunity that (i) the Company is neither financially or legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line of the Company’s business or is of no practical advantage to the Company, (iii) is one in which the Company has no interest or reasonable expectancy, or (iv) is one presented to any account for the benefit of a member of the Board or such member’s affiliate over which such member of the Board has no direct or indirect influence or control, including, but not limited to, a blind trust.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties, subject to certain exceptions. The Charter includes a provision that eliminates, to the fullest extent permitted by law, the personal liability of directors for monetary damages for any breach of fiduciary duty as a director. The effect of these provisions is to eliminate the rights of the Company and its stockholders, through stockholders’ derivative suits on the Company’s behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director.
The Bylaws provide that the Company must indemnify and advance expenses to directors and officers to the fullest extent permitted by Delaware law. The Company is also expressly authorized to carry directors’ and officers’ liability insurance providing indemnification for directors, officers and certain employees for some liabilities. The Company believes that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability, indemnification and advancement provisions in the Charter and the Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. The Company believes that these provisions, liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Company’s directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Registration Rights Agreement
Certain holders of our securities are entitled to registration rights pursuant to that certain Registration Rights Agreement, dated April 7, 2025, by and among the Company and certain security holders requiring us to register such securities for resale. We will bear the expenses incurred in connection with the filing of any such registration statements.
Transfer Agent and Warrant Agent
The transfer agent of our Common Stock and the warrant agent for our warrants is Continental Stock Transfer & Trust Company.
Exhibit 10.14
FORM OF INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this “Agreement”) is made as of [•], 2025, by and between Marblegate Capital Corporation, a Delaware corporation (the “Company”), and _________________ (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of such corporations;
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Amended and Restated Certificate of Incorporation (the “Charter”) and the By-laws (the “By-laws”) of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to applicable provisions of the Delaware General Corporation Law (“DGCL”). The Charter, By-laws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification, hold harmless, exoneration, advancement and reimbursement rights;
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;
WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless, exonerate and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so protected against liabilities;
WHEREAS, this Agreement is a supplement to and in furtherance of the Charter and By laws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee may not be willing to serve as an officer or director, advisor or in another capacity without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
TERMS AND CONDITIONS
1. SERVICES TO THE COMPANY Indemnitee will serve or continue to serve as an officer, director, advisor, key employee or any other capacity of the Company, as applicable, for so long as Indemnitee is duly elected or appointed or retained or until Indemnitee tenders Indemnitee’s resignation or until Indemnitee is removed. The foregoing notwithstanding, this Agreement shall continue in full force and effect after Indemnitee has ceased to serve as a director, officer, advisor, key employee or in any other capacity of the Company, as provided in Section 17. This Agreement, however, shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.
2. DEFINITIONS. As used in this Agreement:
(a) References to “agent” shall mean any person who is or was a director, officer or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.
(b) The terms “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as defined below) as in effect on the date hereof.
(c) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Other than an affiliate of Marblegate Acquisition LLC (the “Sponsor”), any Person (as defined below) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors, unless (1) the change in the relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors (as defined below) and such acquisition would not constitute a Change in Control under part (iii) of this definition;
2
(ii) Change in Board of Directors. Individuals who, as of the date hereof, constitute the Board, and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds of the directors then still in office who were directors on the date hereof or whose election for nomination for election was previously so approved (collectively, the “Continuing Directors”), cease for any reason to constitute at least a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses (a “Business Combination”), in each case, unless, following such Business Combination: (1) all or substantially all of the individuals and entities who were the Beneficial Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty-one percent (51%) of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries (as defined below)) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the securities entitled to vote generally in the election of directors; (2) other than an affiliate of the Sponsor, no Person (excluding any corporation resulting from such Business Combination) is the Beneficial Owner, directly or indirectly, of fifteen percent (15%) or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the surviving corporation except to the extent that such ownership existed prior to the Business Combination; and (3) at least a majority of the Board of Directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination;
(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s current receivables or escrows due (or, if such stockholder approval is not required, the decision by the Board to proceed with such a liquidation, sale, or disposition in one transaction or a series of related transactions); or
(v) Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule) (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
(d) “Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, manager, managing member, fiduciary, employee or agent of the Company or of any other Enterprise (as defined below) which such person is or was serving at the request of the Company.
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(e) “Delaware Court” shall mean the Court of Chancery of the State of Delaware.
(f) “Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.
(g) “Enterprise” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.
(h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(i) “Expenses” shall include all direct and indirect costs, fees and expenses of any type or nature whatsoever, including, without limitation, all reasonable attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, fees of private investigators and professional advisors, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, fax transmission charges, secretarial services and all other disbursements, obligations or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settlement or appeal of, or otherwise participating in, a Proceeding (as defined below), including reasonable compensation for time spent by Indemnitee for which he or she is not otherwise compensated by the Company or any third party. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding (as defined below), including without limitation the principal, premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. “Expenses,” however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(j) References to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
(k) “Independent Counsel” shall mean a law firm or a member of a law firm with significant experience in matters of corporation law and that neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or
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(ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
(l) The term “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided, however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries (as defined below) of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(m) The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative or related nature, in which Indemnitee was, is, will or might be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken by Indemnitee or of any action (or failure to act) on Indemnitee’s part while acting as a director or officer of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.
(n) The term “Subsidiary,” with respect to any Person, shall mean any corporation, limited liability company, partnership, joint venture, trust or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.
3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness, deponent or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 3, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable
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in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually, and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful; provided, in no event shall Indemnitee be entitled to be indemnified, held harmless or advanced any amounts hereunder in respect of any Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (if any) that Indemnitee may incur by reason of his or her own actual fraud or intentional misconduct. Indemnitee shall not be found to have committed actual fraud or intentional misconduct for any purpose of this Agreement unless or until a court of competent jurisdiction shall have made a finding to that effect.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness, deponent or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 4, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless or to exoneration.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provisions of this Agreement except for Section 27, to the extent that Indemnitee was or is, by reason of Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. If Indemnitee is not wholly successful in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which Indemnitee was successful. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
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6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other provision of this Agreement except for Section 27, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or deponent in any Proceeding to which Indemnitee was or is not a party or threatened to be made a party, Indemnitee shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
7. ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS. Notwithstanding any limitation in Sections 3, 4, or 5 and except for Section 27, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding. No indemnification, hold harmless or exoneration rights shall be available under this Section 7 on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.
8. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.
(a) To the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless or exonerating Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.
(b) The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.
(c) The Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.
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9. EXCLUSIONS. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification, advance expenses, hold harmless or exoneration payment in connection with any claim made against Indemnitee:
(a) for which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity or advancement provision, except with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity or advancement provision or otherwise;
(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (or any successor rule) or similar provisions of state statutory law or common law; or
(c) except as otherwise provided in Sections 14(f)-(g) hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law. Indemnitee shall seek payments or advances from the Company only to the extent that such payments or advances are unavailable from any insurance policy of the Company covering Indemnitee.
10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM.
(a) Notwithstanding any provision of this Agreement to the contrary, except for Section 27, and to the fullest extent not prohibited by applicable law, the Company shall pay the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three (3) months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, prior to the final disposition of any Proceeding. Advances shall, to the fullest extent permitted by law, be unsecured and interest free. Advances shall, to the fullest extent permitted by law, be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. To the fullest extent required by applicable law, such payments of Expenses in advance of the final disposition of the Proceeding shall be made only upon the Company’s receipt of an undertaking, by or on behalf of Indemnitee, to repay the advanced amounts to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified, held harmless or exonerated by the Company under the provisions of this Agreement, the Charter, the By-laws, applicable law or otherwise. If it shall be determined by a final judgment or other final adjudication that Indemnitee was not so entitled to indemnification, any advancement shall be returned to the Company (without interest) by the Indemnitee. This Section 10(a) shall not apply to any claim made by Indemnitee for which an indemnification, hold harmless or exoneration payment is excluded pursuant to Section 9 but shall apply to any Proceeding referenced in Section 9(b) prior to a final determination that Indemnitee is liable therefor.
(b) The Company will be entitled to participate in the Proceeding at its own expense.
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(c) The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, liability, fine, penalty or limitation on Indemnitee without Indemnitee’s prior written consent.
11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.
(a) Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding, claim, issue or matter therein which may be subject to indemnification, hold harmless or exoneration rights, or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement, or otherwise.
(b) Indemnitee may deliver to the Company a written application to indemnify, hold harmless or exonerate Indemnitee in accordance with this Agreement. Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion. Following such a written application for indemnification by Indemnitee, Indemnitee’s entitlement to indemnification shall be determined according to Section 12(a) of this Agreement.
12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
(a) A determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following methods, which shall be at the election of Indemnitee: (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (ii) by a committee of such directors designated by majority vote of such directors, (iii) if there are no Disinterested Directors or if such directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (iv) by vote of the stockholders. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby agrees to indemnify and to hold Indemnitee harmless therefrom.
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(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11(b) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
(c) The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(b) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by the Disinterested Directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by the Disinterested Directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
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(b) If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent permitted by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, manager, or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member, or on information or records given or reports made to the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member, by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.
(e) The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, manager, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
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14. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a) of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of Section 12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of this Agreement, (vi) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) payment to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise is not made in accordance with this Agreement, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, hold harmless, exoneration, contribution or advancement rights. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.
(c) In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee shall be presumed to be entitled to be indemnified, held harmless, and exonerated and to receive advancement of Expenses under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, and exonerated and to receive advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).
(d) If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
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(e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(f) The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) pay to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee: (i) to enforce his or her rights under, or to recover damages for breach of, this Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution agreement or provision of the Charter, or the By-laws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of the outcome and whether Indemnitee ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right, advancement, contribution or insurance recovery, as the case may be (unless such judicial proceeding or arbitration was not brought by Indemnitee in good faith).
(g) Interest shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies, holds harmless or exonerates, or advances, or is obliged to indemnify, hold harmless or exonerate or advance for the period commencing with the date on which Indemnitee requests indemnification, to be held harmless, exonerated, contribution, reimbursement or advancement of any Expenses and ending with the date on which such payment is made to Indemnitee by the Company.
15. SECURITY. Notwithstanding anything herein to the contrary, except for Section 27, to the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.
16. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the By-laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or completed) or claim, issue or matter therein arising out of, or related to, any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless or exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the By-laws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
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(b) The DGCL, the Charter and the By-laws permit the Company to purchase and maintain insurance or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any liability asserted against Indemnitee or incurred by or on behalf of Indemnitee or in such capacity as a director, officer, employee or agent of the Company, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.
(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managers, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managers, managing member, fiduciary, employee or agent under such policy or policies. If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness, deponent or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter use commercially reasonably efforts to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.
(d) In the event of any payment under this Agreement, the Company, to the fullest extent permitted by law, shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. No such payment by the Company shall be deemed to relieve any insurer of its obligations.
(e) The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary except for Section 27, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue or apportion
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any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution or insurance coverage rights against any person or entity other than the Company.
17. DURATION OF AGREEMENT. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement) by reason of Indemnitee’s Corporate Status, whether or not Indemnitee is acting in any such capacity at the time any liability or expense is incurred for which indemnification or advancement can be provided under this Agreement.
18. SEVERABILITY. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
19. ENFORCEMENT AND BINDING EFFECT.
(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.
(b) Without limiting any of the rights of Indemnitee under the Charter or By-laws as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.
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(c) The indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, officer, trustee, general partner, manager, managing member, fiduciary, employee or agent of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
(d) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
(e) The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may, to the fullest extent permitted by law, enforce this Agreement by seeking, among other things, injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled. The Company and Indemnitee further agree that Indemnitee shall, to the fullest extent permitted by law, be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court of competent jurisdiction. The Company hereby waives any such requirement of such a bond or undertaking to the fullest extent permitted by law.
20. MODIFICATION AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the Company and Indemnitee. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
21. NOTICES. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company.
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(b) If to the Company, to:
Marblegate Capital Corporation
5 Greenwich Office Park, Suite 400
Greenwich, CT 06831
Attention: Andrew Milgram
With a copy, which shall not constitute notice, to
Paul Hastings LLP
2050 M Street NW
Washington, DC 20036
Attention: Brandon Bortner / Brett Lawrence
E-mail: brandonbortner@paulhastings.com
brettlawrence@paulhastings.com
or to any other address as may have been furnished to Indemnitee in writing by the Company.
22. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, to the fullest extent permitted by law, the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial. To the fullest extent permitted by law, the parties hereby agree that the mailing of process and other papers in connection with any such action or proceeding in the manner provided by Section 21 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.
23. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
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25. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
26. ADDITIONAL ACTS. If for the validation of any of the provisions in this Agreement any act, resolution, approval or other procedure is required to the fullest extent permitted by law, the Company undertakes to cause such act, resolution, approval or other procedure to be affected or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.
27. WAIVER OF CLAIMS TO TRUST ACCOUNT. Indemnitee hereby agrees that it does not have any right, title, interest or claim of any kind (each, a “Claim”) in or to any monies in the trust account established in connection with the Company’s initial public offering for the benefit of the Company and holders of shares issued in such offering, and hereby waives any Claim it may have in the future as a result of, or arising out of, any services provided to the Company and will not seek recourse against such trust account for any reason whatsoever. Accordingly, Indemnitee acknowledges and agrees that any indemnification provided hereto will only be able to be satisfied by the Company if (i) the Company has sufficient funds outside of the Trust Account to satisfy its obligations hereunder or (ii) the Company consummates a Business Combination.
28. MAINTENANCE OF INSURANCE. The Company shall use commercially reasonable efforts to obtain and maintain in effect during the entire period for which the Company is obligated to indemnify the Indemnitee under this Agreement, one or more policies of insurance with reputable insurance companies to provide the officers/directors of the Company with coverage for losses from wrongful acts and omissions and to ensure the Company’s performance of its indemnification obligations under this Agreement. The Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director or officer under such policy or policies. In all such insurance policies, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee with the same rights and benefits as are accorded to the most favorably insured of the Company’s directors and officers.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Indemnity Agreement to be signed as of the day and year first above written.
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| MARBLEGATE CAPITAL CORPORATION | ||
| By: |
| |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer | ||
| INDEMNITEE | ||
| By: |
| |
| Name: | ||
| Address: | ||
[Signature page to Indemnity Agreement]
Exhibit 10.19
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of April 7, 2025, is made and entered into by and among Marblegate Capital Corporation, a Delaware corporation (the “Company”), Marblegate Acquisition LLC, a Delaware limited liability company (the “Sponsor”), and the undersigned parties listed on the signature page hereto under “Supporting Shareholders” (each such party, together with the Sponsor and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “Holder” and collectively the “Holders”).
RECITALS
WHEREAS, the Company has entered into that certain Business Combination Agreement, dated as of February 14, 2023 (as it may be amended or supplemented from time to time, the “Combination Agreement”), by and among Marblegate Asset Management, LLC, a Delaware limited liability company, Marblegate Acquisition Corp., a Delaware corporation (“Acquiror”), the Company, MAC Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company (“Merger Sub”), DePalma Acquisition I LLC, a Delaware limited liability company (“DePalma I”), and DePalma Acquisition II LLC, a Delaware limited liability company (“DePalma II,” and together with DePalma I, the “DePalma Companies”);
WHEREAS, pursuant to the Combination Agreement and the transactions contemplated thereby, among other things, (i) immediately prior to the consummation of the transactions contemplated thereby, the Company and the DePalma Companies will effect a series of reorganization transactions, resulting in the DePalma Companies becoming wholly-owned subsidiaries of the Company, (ii) Merger Sub will merge with and into Acquiror, with Acquiror continuing as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”), and (iii) the Holders will receive a number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) as determined in accordance with the provisions of the Combination Agreement (collectively, the “Shares”); and
WHEREAS, the Company and the Holders desire to enter into this Agreement, pursuant to which the Company shall grant the Holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below.
“Acquiror” shall have the meaning given in the Preamble.
“Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.
“Agreement” shall have the meaning given in the Preamble.
“Board” shall mean the Board of Directors of the Company.
“Combination Agreement” shall have the meaning given in the Recitals hereto.
“Commission” shall mean the Securities and Exchange Commission.
“Common Stock” shall have the meaning given in the Recitals hereto.
“Company” shall have the meaning given in the Preamble.
“Demand Registration” shall have the meaning given in subsection 2.1.1.
“Demanding Holder” shall have the meaning given in subsection 2.1.1.
“DePalma I” shall have the meaning given in the Recitals hereto.
“DePalma II” shall have the meaning given in the Recitals hereto.
“DePalma Companies” shall have the meaning given in the Recitals hereto.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Form S-1” shall have the meaning given in subsection 2.1.1.
“Form S-3” shall have the meaning given in subsection 2.3.
“Founder Shares” shall mean the shares of Acquiror’s Class B Common Stock, par value $0.0001 per share, issued to Sponsor by Acquiror prior to the date hereof.
“Founder Shares Lock-up Period” shall mean, with respect to any Shares issued to Sponsor in respect of the Founder Shares, the period ending on the earlier of (A) one year after the date hereof or (B) the earlier to occur of (x) the first date on which the last reported sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted stock sub-divisions, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date hereof or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
“Holders” shall have the meaning given in the Preamble.
“Insider Letter” shall mean that certain letter agreement, dated as of September 30, 2021, by and among Acquiror, the Sponsor and each of Acquiror’s officers, directors and director nominees.
“Maximum Number of Securities” shall have the meaning given in subsection 2.1.4.
“Merger” shall have the meaning given in the Recitals hereto.
“Merger Sub” shall have the meaning given in the Recitals hereto.
“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the light of the circumstances under which they were made) not misleading.
“Permitted Transferees” shall mean any person or entity to whom a Holder of Registrable Securities is permitted to transfer such Registrable Securities prior to the expiration of the Founder Shares Lock-up Period or Private Placement Lock-up Period, as the case may be, under the Insider Letter, the Placement Units Purchase Agreements, this Agreement and any other applicable agreement between such Holder and the Company, and to any transferee thereafter.
“Piggyback Registration” shall have the meaning given in subsection 2.2.1.
“Placement Units Purchase Agreement” shall mean that certain Private Placement Units Purchase Agreement, dated as of September 30, 2021, between Acquiror and Sponsor.
“Private Placement Lock-up Period” shall mean, with respect to any Shares issued in respect of Private Placement Units, the period ending 30 days after the date hereof.
“Private Placement Units” shall mean the units of Acquiror issued to the Sponsor pursuant to the Placement Units Purchase Agreement.
“Pro Rata” shall have the meaning given in subsection 2.1.4.
“Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable Security” shall mean (a) the Shares and (b) any other equity security of the Company issued or issuable with respect to any such Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; (D) such securities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission) (but with no volume or other restrictions or limitations); or (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
“Registration” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registration Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:
| (A) | all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Common Stock is then listed; |
| (B) | fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities); |
| (C) | printing, messenger, telephone and delivery expenses; |
| (D) | reasonable fees and disbursements of counsel for the Company; |
| (E) | reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and |
| (F) | reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders initiating a Demand Registration to be registered for offer and sale in the applicable Registration. |
“Registration Statement” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder” shall have the meaning given in subsection 2.1.1.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
“Shares” shall have the meaning given in the Recitals hereto.
“Sponsor” shall have the meaning given in the Preamble.
“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.
“Underwritten Registration” or “Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
ARTICLE 2
REGISTRATIONS
2.1 Demand Registration.
2.1.1 Request for Registration. Subject to the provisions of subsection 2.1.4 and Section 2.4 hereof, at any time and from time to time on or after the date hereof, the Holders of at least a majority in interest of the then-outstanding number of Registrable Securities (the “Demanding Holders”) may make a written demand for Registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such Registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). The Company shall, within ten (10) days of the Company’s receipt of the Demand Registration, notify, in writing, all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Registration, a “Requesting Holder”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration and the Company shall effect, as soon thereafter as practicable, but not more than forty five (45) days immediately after the Company’s receipt of the Demand Registration, the Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall the Company be obligated to effect more than an aggregate of three (3) Registrations pursuant to a Demand Registration under this subsection 2.1.1 with respect to any or all Registrable Securities; provided, however, that a Registration shall not be counted for such purposes unless a Form S-1 or any similar long-form registration statement that may be available at such time (“Form S-1”) has become effective and all of the Registrable Securities requested by the Requesting Holders to be registered on behalf of the Requesting Holders in such Form S-1 Registration have been sold, in accordance with Section 3.1 of this Agreement.
2.1.2 Effective Registration. Notwithstanding the provisions of subsection 2.1.1 above or any other part of this Agreement, a Registration pursuant to a Demand Registration shall not count as a Registration unless and until (i) the Registration Statement filed with the Commission with respect to a Registration pursuant to a Demand Registration has been declared effective by the Commission and (ii) the Company has complied with all of its
obligations under this Agreement with respect thereto; provided, further, that if, after such Registration Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant to a Demand Registration is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental agency the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders initiating such Demand Registration thereafter affirmatively elect to continue with such Registration and accordingly notify the Company in writing, but in no event later than five (5) days, of such election; and provided, further, that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been previously filed with respect to a Registration pursuant to a Demand Registration becomes effective or is subsequently terminated.
2.1.3 Underwritten Offering. Subject to the provisions of subsection 2.1.4 and Section 2.4 hereof, if a majority-in-interest of the Demanding Holders so advise the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.1.3 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the majority-in-interest of the Demanding Holders initiating the Demand Registration.
2.1.4 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Registration pursuant to a Demand Registration, in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing that the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Common Stock or other equity securities that the Company desires to sell and the Common Stock, if any, as to which a Registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows: (i) first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities that each Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities that the Demanding Holders and Requesting Holders have requested be included in such Underwritten Registration (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Registrable Securities of Holders (Pro Rata, based on the respective number of Registrable Securities that each Holder has so requested) exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iv) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the Common Stock or other equity securities of other persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Securities.
2.1.5 Demand Registration Withdrawal. A majority-in-interest of the Demanding Holders initiating a Demand Registration or a majority-in-interest of the Requesting Holders (if any), pursuant to a Registration under subsection 2.1.1 shall have the right to withdraw from a Registration pursuant to such Demand Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to the Registration of their Registrable Securities pursuant to such Demand Registration. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration prior to its withdrawal under this subsection 2.1.5.
2.2 Piggyback Registration.
2.2.1 Piggyback Rights. If, at any time on or after the date hereof, the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.1 hereof), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.2.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.2.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
2.2.2 Reduction of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of the shares of Common Stock that the Company desires to sell, taken together with (i) the shares of Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.2 hereof, and the shares of Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(a) If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first, the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof (pro rata based on the respective number of Registrable Securities that such Holder has requested be included in such Registration), which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;
(b) If the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (A) first, the Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1, pro rata based on the number of Registrable Securities that each Holder has requested be included in such Registration and the aggregate number of Registrable Securities that the Holders have requested to be included in such Registration, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has
not been reached under the foregoing clauses (A) and (B), the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), the Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.
2.2.3 Piggyback Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this subsection 2.2.3.
2.2.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.2 hereof shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.1 hereof.
2.3 Registrations on Form S-3. Any Holder of Registrable Securities may at any time, and from time to time, request in writing that the Company, pursuant to Rule 415 under the Securities Act (or any successor rule promulgated thereafter by the Commission), register the resale of any or all of their Registrable Securities on Form S-3 or any similar short form registration statement that may be available at such time (“Form S-3”); provided, however, that the Company shall not be obligated to effect such request through an Underwritten Offering. Within five (5) days of the Company’s receipt of a written request from a Holder or Holders of Registrable Securities for a Registration on Form S-3, the Company shall promptly give written notice of the proposed Registration on Form S-3 to all other Holders of Registrable Securities, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in such Registration on Form S-3 shall so notify the Company, in writing, within ten (10) days after the receipt by the Holder of the notice from the Company. As soon as practicable thereafter, but not more than twelve (12) days after the Company’s initial receipt of such written request for a Registration on Form S-3, the Company shall register all or such portion of such Holder’s Registrable Securities as are specified in such written request, together with all or such portion of Registrable Securities of any other Holder or Holders joining in such request as are specified in the written notification given by such Holder or Holders; provided, however, that the Company shall not be obligated to effect any such Registration pursuant to Section 2.3 hereof if (i) a Form S-3 is not available for such offering; or (ii) the Holders of Registrable Securities, together with the Holders of any other equity securities of the Company entitled to inclusion in such Registration, propose to sell the Registrable Securities and such other equity securities (if any) at any aggregate price to the public of less than $10,000,000.
2.4 Restrictions on Registration Rights. If (A) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Company initiated Registration and provided that the Company has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant to subsection 2.1.1 and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable Registration Statement to become effective; (B) the Holders have requested an Underwritten Registration and the Company and the Holders are unable to obtain the commitment of underwriters to firmly underwrite the offer; or (C) in the good faith judgment of the Board such Registration would be seriously detrimental to the Company and the Board concludes as a result that it is essential to defer the filing of such Registration Statement at such time, then in each case the Company shall furnish to such Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board it would be seriously detrimental to the Company for such Registration Statement to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement. In such event, the Company shall have the right to defer such filing for a period of not more than thirty (30) days; provided, however, that the Company shall not defer its obligation in this manner more than once in any 12-month period.
ARTICLE 3
COMPANY PROCEDURES
3.1 General Procedures. If at any time on or after the date hereof, the Company is required to effect the Registration of Registrable Securities, the Company shall use its best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as possible:
3.1.1 prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;
3.1.2 prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be requested by any Holder or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
3.1.3 prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and each Holder of Registrable Securities included in such Registration, and each such Holder’s legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and each Holder of Registrable Securities included in such Registration or the legal counsel for any such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;
3.1.4 prior to any public offering of Registrable Securities, use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as any Holder of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
3.1.5 cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
3.1.6 provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
3.1.7 advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
3.1.8 at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities and its counsel, including, without limitation, providing copies promptly upon receipt of any comment letters received with respect to any such Registration Statement or Prospectus;
3.1.9 notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.4 hereof;
3.1.10 permit a representative of the Holders (such representative to be selected by a majority of the participating Holders), the Underwriters, if any, and any attorney or accountant retained by such Holders, or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information; and provided further, the Company may not include the name of any Holder or Underwriter or any information regarding any Holder or Underwriter in any Registration Statement or Prospectus, any amendment or supplement to such Registration Statement or Prospectus, any document that is to be incorporated by reference into such Registration Statement or Prospectus, or any response to any comment letter, without the prior written consent of such Holder or Underwriter and providing each such Holder or Underwriter a reasonable amount of time to review and comment on such applicable document, which comments the Company shall include unless contrary to applicable law;
3.1.11 obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Registration which the participating Holders may rely on, in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders;
3.1.12 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders;
3.1.13 in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such offering;
3.1.14 make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);
3.1.15 if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any Underwritten Offering; and
3.1.16 otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.
3.2 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.
3.3 Requirements for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.
3.4 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until he, she, or it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until he, she, or it is advised in writing by the Company that the use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4.
3.5 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
4.1 Indemnification.
4.1.1 The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.
4.1.2 In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; provided, however, that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability of each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.
4.1.3 Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
4.1.4 The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.
4.1.5 If the indemnification provided under Section 4.1 hereof from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1, 4.1.2 and 4.1.3 above, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS
5.1 Notices. Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail, telecopy, telegram, or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail, telecopy, telegram, or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: c/o Paul Hastings LLP, 200 Park Avenue New York, NY 10166 and, if to any Holder, at such Holder’s address or contact information as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 5.1.
5.2 Assignment; No Third Party Beneficiaries.
5.2.1 This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.
5.2.2 Prior to the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as the case may be, neither Sponsor nor any Holder that is a director or executive officer of the Company (together with Sponsor, the “Specified Holders”) may assign or delegate such Specified Holder’s rights, duties or obligations under this Agreement, in whole or in part, except in connection with a transfer of Registrable Securities by such Specified Holder to a Permitted Transferee but only if such Permitted Transferee agrees to become bound by the transfer restrictions set forth in this Agreement.
5.2.3 This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders, which shall include Permitted Transferees.
5.2.4 This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and Section 5.2 hereof.
5.2.5 No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.1 hereof and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.2 shall be null and void.
5.3 Counterparts. This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.
5.4 Governing Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT (I) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION AND (II) THE VENUE FOR ANY ACTION TAKEN WITH RESPECT TO THIS AGREEMENT SHALL BE ANY STATE OR FEDERAL COURT IN NEW YORK COUNTY IN THE STATE OF NEW YORK.
5.5 Amendments and Modifications. Upon the written consent of the Company and the Holders of at least a majority in interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in his, her, or its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
5.6 Other Registration Rights. The Company represents and warrants that no person, other than a Holder of Registrable Securities, has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
5.7 Term. This Agreement shall terminate upon the earlier of (i) the tenth anniversary of the date of this Agreement or (ii) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (B) the Holders of all Registrable Securities are permitted to sell the Registrable Securities without registration pursuant to Rule 144 (or any similar provision) under the Securities Act with no volume or other restrictions or limitations. The provisions of Section 3.5 and Article IV shall survive any termination.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
| COMPANY: | ||||
| MARBLEGATE CAPITAL CORPORATION, | ||||
| a Delaware corporation | ||||
| By: | /s/ Andrew Milgram | |||
| Name: | Andrew Milgram | |||
| Title: | Chief Executive Officer and President | |||
[Signature Page to the Registration Rights Agreement]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
| SPONSOR: | ||||
| MARBLEGATE ACQUISITION LLC, | ||||
| a Delaware limited liability company | ||||
| By its managing member, Marblegate Asset Management, LLC | ||||
| By: | /s/ Andrew Milgram | |||
| Name: | Andrew Milgram | |||
| Title: | Managing Partner of Marblegate Asset | |||
| Management, LLC | ||||
[Signature Page to the Registration Rights Agreement]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
| SUPPORTING SHAREHOLDERS: | ||
| MARBLEGATE ASSET MANAGEMENT, LLC, | ||
| a Delaware limited liability company, as Managing Member of the Sponsor | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| MARBLEGATE SPECIAL OPPORTUNITIES MASTER FUND, L.P., as Member of the Sponsor | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| HARVEY GOLUB REVOCABLE TRUST DATED AUGUST 28, 2018, as Member of the Sponsor | ||
| By: | /s/ Harvey Golub | |
| Name: Harvey Golub | ||
| Title: Trustee | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer and Executive | ||
| Director of Marblegate Acquisition Corp. | ||
| By: | /s/ Paul Arrouet | |
| Name: Paul Arrouet | ||
| Title: President and Executive Director of | ||
| Marblegate Acquisition Corp. | ||
| By: | /s/ Jeffrey Kravetz | |
| Name: Jeffrey Kravetz | ||
| Title: Chief Financial Officer of | ||
| Marblegate Acquisition Corp. | ||
| By: | /s/ Harvey Golub | |
| Name: Harvey Golub | ||
| Title: Chairman of the Board of | ||
| Marblegate Acquisition Corp. | ||
[Signature Page to the Registration Rights Agreement]
| By: | /s/ Patrick J. Bartels, Jr. | |
| Name: Patrick J. Bartels, Jr. | ||
| Title: Director of Marblegate Acquisition Corp. | ||
| By: | /s/ Alan Mintz | |
| Name: Alan Mintz | ||
| Title: Director of Marblegate Acquisition Corp. | ||
| By: | /s/ Richard Goldman | |
| Name: Richard Goldman | ||
| Title: Director of Marblegate Acquisition Corp. | ||
| By: | /s/ Wallace Mathai-Davis | |
| Name: Wallace Mathai-Davis | ||
| Title: Director of Marblegate Acquisition Corp. | ||
| MARBLEGATE COBBLESTONE MASTER FUND I, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| MARBLEGATE STRATEGIC OPPORTUNITIES MASTER FUND I, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| MARBLEGATE PARTNERS MASTER FUND I, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| MARBLEGATE PARTNERS MASTER FUND II, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
[Signature Page to the Registration Rights Agreement]
| MARBLEGATE TACTICAL III MASTER FUND I, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
| MARBLEGATE TACTICAL III MASTER FUND II, L.P. | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
[Signature Page to the Registration Rights Agreement]
Exhibit 10.20
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
MARBLEGATE CAPITAL CORPORATION
AND
MARBLEGATE ASSET MANAGEMENT, LLC
Dated as of April 7, 2025
TABLE OF CONTENTS
| Article I DEFINITIONS | 04 | |||||
| Section 1.1 |
Definitions |
04 | ||||
| Article II APPOINTMENT OF THE MANAGER; TERM | 08 | |||||
| Section 2.1 |
Appointment |
08 | ||||
| Section 2.2 |
Term |
08 | ||||
| Article III OBLIGATIONS OF THE PARTIES | 08 | |||||
| Section 3.1 |
Obligations of the Manager |
08 | ||||
| Section 3.2 |
Non-Exclusivity |
10 | ||||
| Section 3.3 |
Obligations of the Company |
10 | ||||
| Section 3.4 |
Business Opportunities |
11 | ||||
| Section 3.5 |
Change of Services |
12 | ||||
| Article IV POWERS OF THE MANAGER | 12 | |||||
| Section 4.1 |
Powers of the Manager |
12 | ||||
| Section 4.2 |
Delegation |
13 | ||||
| Article V INSPECTION OF RECORDS | 13 | |||||
| Section 5.1 |
Books and Records of the Company |
13 | ||||
| Section 5.2 |
Books and Records of the Manager |
14 | ||||
| Article VI AUTHORITY OF THE COMPANY AND THE MANAGER | 14 | |||||
| Article VII MANAGEMENT FEE; EXPENSES | 14 | |||||
| Section 7.1 |
Management Fee |
14 | ||||
| Section 7.2 |
Incentive Fee |
17 | ||||
| Section 7.3 |
Reimbursement of Expenses |
17 | ||||
| Article VIII TERMINATION | 19 | |||||
| Section 8.1 |
Termination by the Manager |
19 | ||||
| Section 8.2 |
Termination by the Company |
19 | ||||
| Section 8.3 |
Directions |
20 | ||||
| Section 8.4 |
Payments Upon Termination |
20 | ||||
| Article IX INDEMNITY | 21 | |||||
| Section 9.1 |
Indemnity |
21 | ||||
| Section 9.2 |
Insurance |
22 | ||||
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| Article X LIMITATION OF LIABILITY OF THE MANAGER | 22 | |||||
| Section 10.1 |
Limitation of Liability |
22 | ||||
| Section 10.2 |
Reliance of Manager |
22 | ||||
| Article XI LEGAL ACTIONS | 23 | |||||
| Section 11.1 |
Third Party Claims |
23 | ||||
| Article XII MISCELLANEOUS | 23 | |||||
| Section 12.1 |
Obligation of Good Faith; No Fiduciary Duties |
23 | ||||
| Section 12.2 |
Binding Effect |
23 | ||||
| Section 12.3 |
Compliance |
23 | ||||
| Section 12.4 |
Effect of Termination |
23 | ||||
| Section 12.5 |
Notices |
23 | ||||
| Section 12.6 |
Headings |
24 | ||||
| Section 12.7 |
Applicable Law |
24 | ||||
| Section 12.8 |
Submission to Jurisdiction; Waiver of Jury Trial |
24 | ||||
| Section 12.9 |
Amendment; Waivers |
25 | ||||
| Section 12.10 |
Remedies to Prevailing Party |
26 | ||||
| Section 12.11 |
Severability |
26 | ||||
| Section 12.12 |
Benefits Only to Parties |
26 | ||||
| Section 12.13 |
Further Assurances |
26 | ||||
| Section 12.14 |
No Strict Construction |
26 | ||||
| Section 12.15 |
Entire Agreement |
26 | ||||
| Section 12.16 |
Assignment |
26 | ||||
| Section 12.17 |
Confidentiality |
27 | ||||
| Section 12.18 |
Consent To The Use Of Name |
28 | ||||
| Section 12.19 |
Counterparts |
28 | ||||
3
THIS MANAGEMENT SERVICES AGREEMENT (this “Agreement”) is made as of April 7, 2025, with effect as of April 7, 2025 (“the Effective Date”) by and between Marblegate Capital Corporation, a Delaware corporation (the “Company”), and Marblegate Asset Management, LLC, a Delaware limited liability company (the “Manager”). Each party hereto shall be referred to as, individually, a “Party” and, collectively, the “Parties.”
WHEREAS, the Company desires to retain the Manager to provide the Services described herein on the terms and subject to the conditions set forth herein, and the Manager wishes to be retained to provide such Services.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Except as otherwise noted, for all purposes of this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1, which meanings shall apply equally to the singular and plural forms of the terms so defined and the words “herein,” “hereof’ and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision:
“Adjusted Management Fee” has the meaning set forth in Section 7.1(c) hereof.
“Adjusted Net Assets” means, as of a specified date, the sum of the Company’s consolidated total assets, including but not limited to taxi medallion licenses and other intangibles, plus the absolute amount of consolidated accumulated amortized amounts on intangibles owned on that date, minus Adjusted Total Liabilities, determined in accordance with GAAP and procedures approved by the Board.
“Adjusted Total Liabilities” means the Company’s consolidated total liabilities after excluding the effect of any outstanding third-party Indebtedness of the Company, determined in accordance with GAAP and procedures approved by the Board.
“Adjustment Date” has the meaning set forth in Section 7.1(c) hereof.
“Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person or (ii) any officer, director, general member, member, manager or trustee of such Person. For purposes of this definition, the terms “controlling,” “controlled by” or “under common control with” shall mean, with respect to
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any Persons, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least 50% of the directors, managers, general members, or Persons exercising similar authority with respect to such Person.
“Agreement” has the meaning set forth in the preamble of this Agreement.
“Automatic Renewal Term” has the meaning set forth in Section 2.2 hereof.
“Board” means the board of directors of the Company, or any committee thereof that has been duly authorized by the Board to make a decision on the matter in question or bind the Company as to the matter in question.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in The City of New York are required, permitted or authorized, by applicable law or executive order, to be closed for regular banking business.
“Calculation Date” means, with respect to any Fiscal Quarter, the last day of such Fiscal Quarter.
“Chief Financial Officer” means the Chief Financial Officer of the Company, including any interim Chief Financial Officer.
“Company” has the meaning set forth in the preamble of this Agreement.
“Effective Date” has the meaning set forth in the preamble of this Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Expenses” has the meaning set forth in Section 7.2(a) hereof.
“Federal Securities Laws” means, collectively, the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder.
“Final Management Fee” has the meaning set forth in Section 7.1(b) hereof.
“Fiscal Quarter” means the Company’s fiscal quarter for purposes of its reporting obligations under the Exchange Act.
“Fiscal Year” means the Company’s fiscal year for purposes of reporting its income for federal income tax purposes.
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“GAAP” means generally accepted accounting principles in effect in the United States, consistently applied.
“Incentive Fee” has the meaning ascribed in Section 7.2 hereof.
“Incur” means, with respect to any Indebtedness or other obligation of a Person, to create, issue, acquire (by conversion, exchange or otherwise), assume, suffer, guarantee or otherwise become liable in respect of such Indebtedness or other obligation.
“Indebtedness” means, with respect to any Person, (i) any liability for borrowed money, or under any reimbursement obligation relating to a letter of credit, (ii) all indebtedness (including bond, note, debenture, purchase money obligation or similar instrument) for the acquisition of any businesses, properties or assets of any kind (other than property, including inventory, and services purchased, trade payables, other expenses accruals and deferred compensation items arising in the Ordinary Course of Business), (iii) all obligations under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (iv) any liabilities of others described in the preceding clauses (i) to (iii) (inclusive) that such Person has guaranteed or that is otherwise its legal liability, and (v) (without duplication) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (i) through (iv) above.
“Independent Director” means a director who satisfies the independence requirements under the Exchange Act and Rules 5605(a)(2) of The Nasdaq Stock Market.
“Initial Term” has the meaning set forth in Section 2.2 hereof.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“Investments” means investments of the Company and the Subsidiaries, including the acquisition of additional assets or Portfolio Companies.
“Losses” has the meaning set for in Section 9.1 hereof.
“Management Fee” has the meaning set forth in Section 7.1(a) hereof.
“Management Fee Payment Date” means, with respect to any Calculation Date, the date that is five (5) Business Days following the receipt by the Company of the calculation of the Management Fee from the MSA Administrator with respect to such Calculation Date.
“Manager” has the meaning set forth in the preamble of this Agreement.
“Manager Termination Notice” has the meaning set forth in Section 8.1 hereof.
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“MSA Administrator” means, as of any Calculation Date, (i) for so long as this Agreement remains in full force and effect as of such Calculation Date, the Manager, and (ii) thereafter, the Chief Financial Officer.
“Ordinary Course of Business” means, with respect to any Person, an action taken by such Person if such action is (i) consistent with the past practices of such Person and is taken in the normal day-to-day business or operations of such Person and (ii) which is not required to be specifically authorized or approved by the board of directors of such Person.
“Over-Paid Management Fees” means, as of any Calculation Date, the amount by which (i) Adjusted Management Fees that were actually paid on all Management Fee Payment Dates preceding such Calculation Date, exceeded (ii) Adjusted Management Fees that were actually due and payable by the Company on all such Management Fee Payment Dates, as determined by the MSA Administrator upon availability of the Company’s final consolidated financial statements in accordance with Section 7.1(e); provided, that such amount shall not be less than zero.
“Party” and “Parties” have the meaning set forth in the preamble of this Agreement.
“Person” means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an estate, a nominee, an unincorporated organization or a government or any department or agency or political subdivision thereof.
“Portfolio Company,” individually or, collectively, “Portfolio Companies,” means each entity in which the Company or a Subsidiary has an existing equity or debt investment, any new portfolio company in which the Company or a Subsidiary makes an equity or debt investment after the Effective Date and that the Board determines is a Portfolio Company.
“Securities Act” means the Securities Act of 1933, as amended.
“Services” has the meaning set forth in Section 3.1(b) hereof.
“Subsidiary” means any other Person in which the Company, directly or indirectly through one or more Affiliates or otherwise, beneficially owns at least fifty percent (50%) of either the ownership interest (determined by equity or economic interests) in, or the voting control of, such other Person.
“Termination Date” has the meaning set forth in Section 8.3 hereof.
“Termination Fee” means, as of the Termination Date, the amount equal to (x) the average monthly Management Fee earned by the Manager during the twenty-four (24) month period immediately preceding such Termination Date multiplied by (y) the remaining number of months in the Term.
7
“Termination Notice” has the meaning set forth in Section 8.3 hereof.
“Under-Paid Management Fees” means, as of any Calculation Date, the amount by which (i) Adjusted Management Fees that were actually due and payable by the Company on all Management Fee Payment Dates preceding such Calculation Date, as determined by the MSA Administrator upon availability of the Company’s final consolidated financial statements in accordance with in Section 7.1(e) exceeded (ii) Adjusted Management Fees that were actually paid on all such Management Fee Payment Dates; provided, that such amount shall not be less than zero.
ARTICLE II
APPOINTMENT OF THE MANAGER; TERM
Section 2.1 Appointment. The Company hereby agrees to, and hereby does, appoint the Manager to perform the Services as set forth in Section 3.1 hereof and in accordance with the terms of this Agreement.
Section 2.2 Term. This Agreement is effective as of the Effective Date and shall continue in operation, unless terminated in accordance with the terms hereof, until the fifth (5th) anniversary of the Effective Date (the “Initial Term”). After the Initial Term, this Agreement shall be deemed renewed automatically for additional successive five-year periods (each, an “Automatic Renewal Term”) unless terminated in accordance with the terms hereof.
ARTICLE III
OBLIGATIONS OF THE PARTIES
Section 3.1 Obligations of the Manager.
(a) Subject to the oversight and supervision of the Board and the terms and conditions of this Agreement, the Manager shall during the term of this Agreement (including any Automatic Renewal Term) perform the Services as set forth in Section 3.1(b) below and (ii) comply with the operational objectives and business plans of the Company in existence from time to time. The Company shall promptly provide the Manager with all stated operational objectives and business plans of the Company (and the Subsidiaries, as applicable) approved by the Board and any other available information reasonably requested by the Manager.
8
(b) Subject to Article VII, the Manager agrees and covenants that it shall perform the following services (as may be modified from time to time pursuant to Section 3.5 hereof, the “Services”):
| (i) | evaluate, manage, perform due diligence on, negotiate and oversee the acquisition and disposition of the Company’s and the Subsidiaries’ assets, including taxi medallions, taxi-medallion loans and other assets or property; |
| (ii) | evaluate, manage, negotiate and oversee the origination, structuring, restructuring and workout of taxi-medallion loans and other loans held by the Company and the Subsidiaries, provided, however, that the Manager shall not be responsible for typical daily loan servicing activities including but not limited to collecting and reconciling loan payments, preparing and sending statements and invoices to borrowers, reporting payment activity, Uniform Commercial Code and other lien searches and filings, credit report searches, and activities related to the foregoing items; |
| (iii) | manage the Company’s and the Subsidiaries’ day-to-day business and operations, including assisting the Company and the Subsidiaries in complying with any regulatory requirements applicable to the Company and the Subsidiaries in respect of the Company’s and the Subsidiaries’ business activities; |
| (iv) | evaluate the financial and operational performance of any Subsidiaries, including monitoring the business and operations thereof, and the financial performance of any of the Company’s or the Subsidiaries’ other assets; |
| (v) | provide, as determined by the Manager and in accordance with the terms and conditions of this Agreement, a management team to serve as executive officers of the Company and/or the Subsidiaries or as members of the Board. Notwithstanding the above, nothing shall prevent the Company from employing executive officers directly as appropriate |
| (vi) | identify, evaluate, manage, perform due diligence on, negotiate and oversee the provision of debt or equity financing by the Company; |
| (vii) | subject to the provisions of this Agreement, perform any other services for and on behalf of the Company and the Subsidiaries to the extent that such services are consistent with those that are customarily performed by the executive officers and employees of a publicly listed company; and |
| (viii) | identify, evaluate, manage, perform due diligence on, negotiate and oversee the acquisition of all or a portion of target businesses or assets by the Company. |
The foregoing Services shall include, but are not limited to, the following: (1) establishing and maintaining books and records of the Company and the Subsidiaries in accordance with customary practice and GAAP; (2) recommending to the Board changes or other modifications in the capital structure of the Company or the Subsidiaries, including share repurchases; (3) recommending to the Board the engagement of or, if approval is not otherwise required hereunder, engage agents,
9
consultants or other third party service providers on behalf of the Company and the Subsidiaries, including accountants, lawyers or experts, in each case, as may be needed by the Company or the Subsidiaries from time to time; (4) managing or overseeing litigation, administrative or regulatory proceedings, investigations or any other reviews of the Company’s and/or the Subsidiaries’ business or operations that may arise in the Ordinary Course of Business or otherwise, subject to the approval of the Board to the extent necessary in connection with the settlement, compromise, consent to the entry of an order or judgment or other agreement resolving any of the foregoing; (5) recommending to the Board the payment of dividends or other distributions on the equity interests of the Company; (6) attending to the timely calculation and payment of taxes payable, and the filing of all taxes return due, by the Company and the Subsidiaries; and (7) making loans to, or arranging loans on behalf of, the Portfolio Companies.
(c) In connection with the performance of its obligations under this Agreement, the Manager shall be required to comply with the Company’s internal policies and procedures regarding any actions requiring Board approval, as otherwise required by the Board (or any applicable committee thereof) or the Company’s officers or as otherwise required by applicable law.
(d) In connection with the performance of the Services under this Agreement, the Manager shall be required to comply with the Company’s internal compliance policies and procedures.
(e) In connection with the performance of the Services under this Agreement, the Manager shall have all necessary power and authority to perform, or cause to be performed, such Services on behalf of the Company and the Subsidiaries.
Section 3.2 Non-Exclusivity
(a) While the Manager is providing the Services under this Agreement, the Manager shall also be permitted to provide services, including services similar to the Services covered hereby, to other Persons, including Affiliates of the Manager. The Manager agrees not to render any services to any other Person on behalf of the Company or the Subsidiaries. This Agreement and the Manager’s obligation to provide the Services under this Agreement shall not create an exclusive relationship between the Manager and its Affiliates, on the one hand, and the Company and the Subsidiaries, on the other.
Section 3.3 Obligations of the Company
(a) The Company shall, and shall cause the Subsidiaries to, do all things reasonably necessary as requested by the Manager consistent with the terms of this Agreement to enable the Manager to fulfill its obligations under this Agreement.
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(b) The Company shall:
| i. | direct its officers and employees to act in accordance with the terms of this Agreement and the reasonable directions of the Manager in fulfilling the Manager’s obligations hereunder and allowing the Manager to exercise its powers and rights hereunder; and |
| ii. | provide to the Manager all access, information and reports (including monthly management reports and all other relevant reports), which the Manager may reasonably require and on such dates as the Manager may reasonably require. |
(c) The Company agrees that, in connection with the performance by the Manager of its obligations hereunder, the Manager may recommend to the Company, and may engage in, transactions with any of the Manager’s Affiliates; provided, that any such transactions shall be subject to the authorization and approval of the Company’s Audit Committee.
(d) The Company shall maintain a Board consisting of a majority of Independent Directors.
(e) The Company shall take any and all actions necessary to ensure that it does not engage in any activities that would cause the Company to become an “investment company” as defined in Section 3(a)(1) of the Investment Company Act, or any successor provision thereto.
Section 3.4 Business Opportunities.
(a) Except to the extent otherwise agreed between the Manager and the Company, the Manager, its members (including any natural persons) and any of its covered Affiliates or employees may engage in or possess an interest in other investments, business ventures or entities of any nature or description, independently or with others, similar or dissimilar to, or that compete with, the Investments or business of the Company, and may provide advice and other assistance to any such investment, business venture or entity, and the Company shall have no rights by virtue of this Agreement in and to such investments, business ventures or entities or the income or profits derived therefrom, and the pursuit of any such investment or venture, even if competitive with the business of the Company or the Subsidiaries, shall not be deemed wrongful or improper. Except as provided below, none of the Manager, its members or any of its Affiliates or employees shall be obligated to present any particular investment or business opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company or its Subsidiaries, and the Manager, its members or any of its Affiliates or employees shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity.
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(b) While information and recommendations supplied to the Company and the Subsidiaries shall, in the Manager’s reasonable and good faith judgment, be appropriate under the circumstances and in light of the policies of the Company and the Subsidiaries, such information and recommendations may be different in certain material respects from the information and recommendations supplied by the Manager or any Affiliate of the Manager to others.
(c) The Company acknowledges and agrees that (i) personnel and members of the Manager and its Affiliates may from time to time work on other projects and matters, and that conflicts may arise with respect to the allocation of personnel, (ii) there may be circumstances where the Manager and/or its members acquire knowledge of a potential transaction or matter which may be a corporate opportunity of the Company or the Subsidiaries and the Manager, its members and/or its Affiliates, and such corporate opportunity may be pursued by the Manager, its members and/or its Affiliates or shared with other parties (in lieu of the Company or the Subsidiaries), and (iii) the Manager, its members and/or its Affiliates may from time to time receive fees, compensation, profits interests and/or equity grants from third parties, including Portfolio Companies, for administrative or advisory services, or otherwise, and, while such fees, compensation and/or equity grants may give rise to conflicts of interest, the Company and the Subsidiaries will not receive the benefit of any such fees, compensation, profits interest and/or equity grants. The Manager shall keep the Company’s Audit Committee reasonably informed on a periodic basis in connection with the foregoing.
Section 3.5 Change of Services.
(a) The Company and the Manager shall have the right at any time during the term of this Agreement (including any Automatic Renewal Term) to change the Services provided by the Manager, and any such changes shall in no way otherwise affect the rights or obligations of any Party hereunder.
(b) Any change in the Services shall be authorized in writing and evidenced by an amendment to this Agreement, as provided in Section 12.9 hereof. Unless otherwise agreed in writing, the provisions of this Agreement shall apply to all changes in the Services.
ARTICLE IV
POWERS OF THE MANAGER
Section 4.1 Powers of the Manager.
(a) The Manager shall, subject to the oversight and supervision of the Board and the terms and conditions of this Agreement, have general supervision of the day-to-day business of the Company (and the Subsidiaries, as applicable), including general executive charge,
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management and control of the properties, business and operations of the Company (and the Subsidiaries, as applicable), with all such powers as may reasonably be incident to such responsibilities. The Manager shall also perform such other duties and may exercise such other powers as from time to time may be assigned to the Manager by the Board.
(b) Subject to Section 4.2 and for purposes other than to delegate its duties and powers to perform the Services hereunder, the Manager shall have the power to engage agents, valuation firms, contractors and advisors (including accounting, financial, tax and legal advisors) that it deems necessary or desirable in connection with the performance of its obligations hereunder, which costs therefor shall be subject to reimbursement in accordance with Section 7.3 hereof. For the avoidance of doubt, the Manager may not engage investment advisers on behalf of the Company or the Subsidiaries.
Section 4.2 Delegation. The Manager may delegate or appoint:
(a) Any of its Affiliates as its agent, at its own cost and expense, to perform any or all of the Services hereunder; or
(b) Any other Person, whether or not an Affiliate of the Manager, as its agent, at its own cost and expense, to perform those Services hereunder which, in the sole discretion of the Manager, are not critical to the ability of the Manager to satisfy its obligations hereunder; provided, however, that, in each case, the Manager shall not be relieved of any of its obligations or duties owed to the Company or the Subsidiaries hereunder as a result of such delegation. The Manager shall be permitted to share information of the Company and the Subsidiaries with its appointed agents subject to appropriate and reasonable confidentiality arrangements. For the avoidance of doubt, any reference to Manager herein shall include its delegates or appointees pursuant to this Section 4.2.
ARTICLE V
INSPECTION OF RECORDS
Section 5.1 Books and Records of the Company. At all reasonable times and on reasonable notice, the Manager and any Person authorized by the Manager shall have access to, and the right to inspect, for any reasonable purpose, during the term of this Agreement (including any Automatic Renewal Term) and for a period of five (5) years after termination hereof, the books, records and data stored in computers and all documentation of the Company and the Subsidiaries pertaining to all Services performed by the Manager or the Management Fee to be paid by the Company to the Manager, in each case, hereunder. There shall be no cost or expense charged by any Party to another Party pursuant to the reasonable exercise of rights under this Section 5.1.
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Section 5.2 Books and Records of the Manager. At all reasonable times and on reasonable prior notice, to the extent authorized by the Company, any Person shall have access to, and the right to inspect the books, records and data stored in computers and all documentation of the Manager pertaining specifically to the Services performed by the Manager specifically related to or on behalf of the Company or the Subsidiaries or the Management Fee to be paid by the Company to the Manager, in each case, hereunder. The Manager may require that the inspecting Person enter into a customary non-disclosure and confidentiality agreement in connection with the inspection. There shall be no cost or expense charged by any Party to another Party pursuant to the reasonable exercise of rights under this Section 5.2.
ARTICLE VI
AUTHORITY OF THE COMPANY
AND THE MANAGER
Each Party represents to the others that it is duly authorized with full power and authority to execute, deliver and perform its obligations and duties under this Agreement. The Company represents that the engagement of the Manager has been duly authorized by the Board and is in accordance with all governing documents of the Company.
ARTICLE VII
MANAGEMENT FEE; EXPENSES
Section 7.1 Management Fee.
(a) Obligation. Subject to the terms and conditions set forth in this Section 7.1, for the term of this Agreement, including any Automatic Renewal Term, (i) the MSA Administrator shall calculate the fee payable to the Manager in accordance with this Section 7.1 (the “Management Fee”), and the components thereof, in accordance with Section 7.1(b) hereof and (ii) the Company shall pay the Management Fee to the Manager in accordance with Section 7.1(d) hereof.
(b) Calculation of Management Fee. Subject to Section 7.1(e) hereof, as payment to the Manager for performing Services hereunder during any Fiscal Quarter or any part thereof, the MSA Administrator, as of any Calculation Date with respect to such Fiscal Quarter, shall calculate, on or promptly following such Calculation Date, the Management Fee with respect to such Fiscal Quarter, which shall be equal to, as of such Calculation Date, (a) the product of (i) 0.375%,
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multiplied by (ii) the Company’s Adjusted Net Assets; provided, further, however, that, with respect to the Fiscal Quarter in which this Agreement is terminated, the Management Fee shall be equal to the product of (i)(x) 0.375%, multiplied by (y) the Company’s Adjusted Net Assets, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the first day of such Fiscal Quarter to but excluding the date upon which this Agreement is terminated and the denominator of which is the number of days in such Fiscal Quarter (such amount so calculated in accordance with this proviso, the “Final Management Fee”).
(c) Adjustment of Management Fee. The amount of any Management Fee calculated in accordance with Section 7.1(b) hereof as of any Calculation Date shall be adjusted, on a dollar-for-dollar basis (such Management Fee, as adjusted, the “Adjusted Management Fee”), by the MSA Administrator immediately prior to the Management Fee Payment Date with respect to such Calculation Date (such date of adjustment, the “Adjustment Date”) as follows:
| i. | reduced, on a dollar-for-dollar basis, by the aggregate amount of all Over-Paid Management Fees, if any, existing as of such Calculation Date; |
| ii. | increased, on a dollar-for-dollar basis, by the aggregate amount of all Under-Paid Management Fees, if any, existing as of such Calculation Date; and |
| iii. | increased, on a dollar-for-dollar basis, by the aggregate amount of all accrued and unpaid Management Fees, if any, as of such Calculation Date, without duplication of any of the foregoing. |
(d) Payment of Adjusted Management Fee. Following the MSA Administrator’s calculation of the Adjusted Management Fee, the MSA Administrator shall promptly deliver a copy of the Adjusted Management Fee to the Company. Following such delivery, subject to Section 7.1(f) hereof, the Company shall pay to the Manager, on the Management Fee Payment Date with respect to any Calculation Date, the Adjusted Management Fee as of such Calculation Date. Any such payment shall be made in U.S. dollars by wire transfer in immediately available funds to an account or accounts designated by the Manager from time to time. The Manager shall have the right, in its sole discretion, to elect to waive all or a portion of the Management Fee and Adjusted Management Fee that would otherwise be paid to it. Before the payment of any fee to the Manager, the Manager will send written instructions to the Company and the MSA Administrator with respect to any waiver of any portion of such fee. No fee waiver for one or more periods constitutes an obligation of the Manager to continue the waiver. The Manager may remove or change any fee waiver at any time except to the extent otherwise agreed in writing.
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(e) Basis for Calculation of Management Fee and Adjusted Management Fee. The calculation of the Management Fee, including the components thereof, with respect to any Fiscal Quarter on any Calculation Date shall be based on (i) the Company’s audited consolidated financial statements to the extent available, (ii) if audited consolidated financial statements are not available, then the Company’s unaudited consolidated financial statements to the extent available, and (iii) if neither audited nor unaudited consolidated financial statements are available, then the Company’s books and records then available; provided, that, with respect to any calculation of the Management Fee based on the Company’s books and records, upon availability of the earlier of (x) the Company’s audited consolidated financial statements and (y) the Company’s unaudited consolidated financial statements, in each case, relating to amounts previously calculated on such Calculation Date by reference to the Company’s books and records, the MSA Administrator shall recalculate (A) any Management Fees, and any components thereof, that were previously calculated based on such books and records and (B) any Adjusted Management Fees that were calculated based on such Management Fees, in each case, to determine if any Over-Paid Management Fee or Under-Paid Management Fee was outstanding as of such Calculation Date; provided, further, that the amount so recalculated shall be conclusive and binding on the Parties hereto and no further recalculations shall be required or permitted except that a further recalculation shall be required and performed (A) upon a demonstration of clear error with respect to any prior calculation or recalculation or (B) upon the restatement of the consolidated financial statements of the Company, or any amounts therein, underlying any prior calculation or recalculation, in each case, at any time. The calculation of Adjusted Management Fees, including the components thereof, as of any Adjustment Date shall be made based on information that is available as of such Adjustment Date; provided, that if any events occur after such Adjustment Date that would affect the amount of Adjusted Management Fees calculated as of such Adjustment Date, then the MSA Administrator shall recalculate Adjusted Management Fees as of such Adjustment Date to determine if any Over-Paid Management Fee or Under-Paid Management Fee was created as of the Calculation Date immediately succeeding such Adjustment Date. Notwithstanding the foregoing, the calculation of the Final Management Fee, including the components thereof, shall be made and based on the Company’s unaudited consolidated financial statements for the applicable Fiscal Quarter when such unaudited consolidated financial statements are available; provided, that, once calculated, no further recalculation of Final Management Fee shall be required or permitted.
(f) Sufficient Liquidity. If the Company does not have sufficient liquid assets to timely pay the entire amount of the Management Fee due on any Management Fee Payment Date, the Company shall liquidate assets or Incur Indebtedness in order to pay such Management Fee in full on such Management Fee Payment Date;
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(g) Manager Fee Accrual. The Manager may elect, in its sole discretion by delivery of written notice to the Company prior to such Management Fee Payment Date, to allow the Company to defer the payment of all or any portion of the Management Fee otherwise due and payable on such Management Fee Payment Date until the next succeeding Management Fee Payment Date or such other date agreed with the Company. If the Manager elects to allow such a deferral of payment of the Management Fee, interest will be charged on such Management Fee at a rate equal to the “prime” rate, as announced from time to time by The Wall Street Journal, plus 5% per annum until the date of payment of such Management Fee by the Company to the Manager. For the avoidance of doubt, the Manager may make such election to allow the Company to defer the payment of Management Fees more than once.
(h) Books and Records. The MSA Administrator shall maintain cumulative books and records with respect to the details of any calculations made pursuant to this Section 7.1, which records shall be available for inspection and reproduction at any time upon request by the Board and, if the Manager is not the MSA Administrator, the Manager.
Section 7.2 Incentive Fee. The Company will pay the Manager an incentive fee (the “Incentive Fee”) based on the financial performance of the Company under the specific structure, terms and conditions contained in a separate agreement between the Company and the Manager that is approved by the Board and separately approved by a majority of the Independent Directors. The Manager and the Company (and its Board) agree to use their respective best efforts to enter into an agreement within 180 days after the Effective Date to provide for the payment of a mutually agreeable Incentive Fee.
Section 7.3 Reimbursement of Expenses.
(a) The Company shall pay all of its own expenses and shall reimburse the Manager for the following documented expenses that are actually incurred by the Manager on the Company’s or the Subsidiaries’ behalf during the term of this Agreement, including but not limited to:
| i. | costs and expenses associated with the issuance and transaction costs incident to the acquisition, origination, disposition and financing of Investments; |
| ii. | costs of loan servicing, including but not limited to collecting and reconciling payments by borrower on loans held by the Company and the Subsidiaries, issuing statements, invoices and reports, Uniform Commercial Code and other lien searches and filings, credit report searches, and activities related to the foregoing items rendered for the Company and the Subsidiaries by providers retained by the Manager or the Company, or if provided by an Affiliate of the Manager, in amounts that are no greater than those which would be payable to independent loan servicing organizations engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis; |
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| iii. | costs of legal, tax, accounting, consulting, auditing, lobbying, regulatory, administrative and other similar services rendered for the Company and the Subsidiaries by providers retained by the Manager or, if provided by the Manager’s personnel, in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis; |
| iv. | the compensation and expenses of the Company’s directors and the cost of liability insurance to indemnify the Company’s directors and officers; |
| v. | costs associated with the establishment and maintenance of any of the Company’s or any Subsidiary’s credit or other indebtedness of the Company or any Subsidiary (including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of the Company’s or any Subsidiary’s securities offerings |
| vi. | expenses connected with complying with the continuous reporting and other requirements of governmental bodies or agencies, including, without limitation, all costs of preparing and filing required reports with the Securities and Exchange Commission, the costs payable by the Company to any transfer agent and registrar in connection with the listing and/or trading of the Company’s stock on any exchange, the fees payable by the Company to any such exchange in connection with its listing, costs of preparing, printing and mailing the Company’s annual report to its stockholders and proxy materials with respect to any meeting of the Company’s stockholders; |
| vii. | costs associated with any computer software or hardware, electronic equipment or purchased information technology services from third party vendors that is used by the Company and/or the Subsidiaries; |
| viii. | expenses incurred by managers, officers, personnel and agents of the Manager for travel on the Company’s or any Subsidiary’s behalf and other out-of-pocket expenses incurred by managers, officers, personnel and agents of the Manager while providing the Services; |
| ix. | the costs of maintaining, on behalf of the Company and the Subsidiaries, compliance with all U.S. federal, state and local rules and regulations or those of any other regulatory agency; |
| x. | expenses relating to any office(s) or office facilities, including, but not limited to disaster backup recovery sites and facilities, maintained for the Company and the Subsidiaries or Investments separate from the office or offices of the Manager; |
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| xi. | any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against the Company or any of the Subsidiaries, or against any trustee, director, partner, member or officer of the Company or of any of the Subsidiaries in his, her or its capacity as such for which the Company or any of the Subsidiaries is required to indemnify such Person by any court or governmental agency; and |
| xii. | all other costs and expenses, the reimbursement of which is specifically approved by the Board. |
(b) Any Expense reimbursement shall be made upon demand by the Manager in U.S. dollars by wire transfer in immediately available funds to an account or accounts designated by the Manager from time to time.
(c) Except as otherwise provided for in this Section 7.2, all reimbursements made pursuant to this Section 7.2 shall be reviewed by the Company on an annual basis in connection with the preparation of the Company’s year-end audited consolidated financial statements. If the Company identifies any discrepancy in such reimbursements, then the Company and the Manager shall mutually resolve such discrepancy.
ARTICLE VIII
TERMINATION
Section 8.1 Termination by the Manager. The Manager may resign and terminate this Agreement at any time with at least 180 days’ prior written notice to the Company of the Manager’s intention to terminate this Agreement (the “Manager Termination Notice”), which right shall not be contingent upon the finding of a replacement manager. However, if the Manager resigns, until the date upon which the resignation becomes effective, the Manager shall, upon request of the Board, use reasonable efforts to assist the Board to find a replacement manager at no cost or expense to the Company.
Section 8.2 Termination by the Company. The Board may terminate this Agreement, as follows:
(a) at any time, if there is a finding by a court of competent jurisdiction in a final, non-appealable order that the Manager materially breached the terms of this Agreement and such breach continued unremedied for sixty (60) days after the Manager received written notice from the Company setting forth the terms of such breach;
(b) at any time if (i) there is a finding by a court of competent jurisdiction in a final, non-appealable order that the Manager (x) acted with gross negligence, willful misconduct, bad faith or reckless disregard in performing its duties and obligations under this Agreement or (y) engaged in fraudulent or dishonest acts in connection with the business and operations of the Company, and (ii) at least seventy-five percent (75%) of the Board votes to terminate this Agreement;
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(c) at the expiration of the Initial Term or any Automatic Renewal Term, with written notice to the Manager at least 180 days before the applicable expiration as approved in advance by a majority of the Independent Directors voting in favor of providing that notice and terminating this Agreement; or
(d) at any time if (i) at least seventy-five percent (75%) of the Board votes to terminate this Agreement and (ii) the holders of at least seventy-five percent (75%) of the then outstanding shares of common stock of the Company vote in favor of terminating this Agreement.
Section 8.3 Directions. If an election is made to terminate this Agreement pursuant to Section 8.2 hereof, the Company shall deliver to the Manager prior written notice of the Company’s intention to terminate this Agreement (the “Termination Notice”) designating the date on which the Manager shall cease to provide Services under this Agreement, and this Agreement shall terminate on such date (the “Termination Date”). If the election to terminate this Agreement is made pursuant to Section 8.2(c), the Company shall deliver the Termination Notice not less than 180 days prior to the Termination Date. During the period between the Company’s delivery of the Termination Notice and the Termination Date, the Manager shall continue to perform its duties and obligations as Manager under this Agreement and take all actions necessary to execute an orderly transition of the management of the Company’s assets and bring the appointment of the Manager to an end. In addition, the Manager shall, at the Company’s expense, deliver to any new manager or the Company any books or records held by the Manager under this Agreement and shall execute and deliver such instruments and do such things as may reasonably be required to permit new management of the Company to effectively assume its responsibilities.
Section 8.4 Payments Upon Termination.
(a) Notwithstanding anything in this Agreement to the contrary, the fees, costs and expenses payable to the Manager pursuant to Article VII hereof shall be payable to the Manager upon, and with respect to, the termination of this Agreement pursuant to this Article VIII. All payments made pursuant to this Section 8.4(a) shall be made in accordance with Article VII hereof.
(b) Upon termination of this Agreement pursuant to the events set forth in Section 8.2(c) hereof, the Company shall pay the Termination Fee to the Manager. Any payments made pursuant to this Section 8.4(b) shall be made in U.S. dollars by wire transfer in immediately available funds to an account or accounts designated by the Manager from time to time.
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(c) Subject to Section 8.4(a) hereof, no Termination Fee shall be due or payable by the Company to the Manager upon termination of this Agreement pursuant to any of the events set forth in Section 8.1, Section 8.2(a) or Section 8.2(b) hereof.
ARTICLE IX
INDEMNITY
Section 9.1 Indemnity. The Company shall indemnify reimburse, defend and hold harmless the Manager and its successors and permitted assigns, together with their respective employees, officers, members, managers, directors, agents and representatives (collectively the “Indemnified Parties”), from and against all losses (including lost profits), costs, damages, injuries, taxes, penalties, interests, expenses, obligations, claims and liabilities (joint or severable) of any kind or nature whatsoever (collectively “Losses”) that are incurred by such Indemnified Parties in connection with, relating to or arising out of (i) the breach of any term or condition of this Agreement, or (ii) the performance of any Services hereunder; provided, however, that the Company shall not be obligated to indemnify, reimburse, defend or hold harmless any Indemnified Party for any Losses incurred, by such Indemnified Party in connection with, relating to or arising out of:
(a) a breach by such Indemnified Party of this Agreement;
(b) the gross negligence, willful misconduct, bad faith or reckless disregard of such Indemnified Party in the performance of any Services hereunder; or
(c) fraudulent or dishonest acts of such Indemnified Party with respect to the Company or any of its Subsidiaries.
The rights of any Indemnified Party referred to above shall be in addition to any rights that such Indemnified Party shall otherwise have at law or in equity.
Without the prior written consent of the Company, no Indemnified Party shall settle, compromise or consent to the entry of any judgment in, or otherwise seek to terminate any, claim, action, proceeding or investigation in respect of which indemnification could be sought hereunder unless (a) such Indemnified Party indemnifies the Company from any liabilities arising out of such claim, action, proceeding or investigation, (b) such settlement, compromise or consent includes an unconditional release of the Company and Indemnified Party from all liability arising out of such claim, action, proceeding or investigation and (c) the parties involved agree that the terms of such settlement, compromise or consent shall remain confidential.
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Section 9.2 Insurance. The Manager acknowledges that Company may (but is not required to) maintain adequate insurance in support of the indemnity obligation set forth in this Article IX, which shall be an expense of the Company under Section 7.3(a).
ARTICLE X
LIMITATION OF LIABILITY OF THE MANAGER
Section 10.1 Limitation of Liability. The Manager shall not be liable for, and the Company shall not take, or permit to be taken, any action against the Manager to hold the Manager liable for, any error of judgment or mistake of law or for any loss suffered by the Company or the Subsidiaries (including, without limitation, by reason of the purchase, sale or retention of any security) in connection with the performance of the Manager’s duties under this Agreement, except for a loss resulting from gross negligence, willful misconduct, bad faith or reckless disregard on the part of the Manager in the performance of its duties and obligations under this Agreement, or its fraudulent or dishonest acts with respect to the Company or any of the Subsidiaries.
Section 10.2 Reliance of Manager. The Manager may take and may act and rely upon:
(a) the opinion or advice of legal counsel, which may be in-house counsel to the Company or the Manager, any U.S.-based law firm, or other legal counsel reasonably acceptable to the Board, in relation to the interpretation of this Agreement or any other document (whether statutory or otherwise) or generally in connection with the Company;
(b) advice, opinions, statements or information from bankers, accountants, auditors, valuation consultants and other Persons consulted by the Manager who are in each case believed by the Manager in good faith to be expert in relation to the matters upon which they are consulted; and
(c) any other document provided to the Manager in connection with the Company or the Subsidiaries upon which it is reasonable for the Manager to rely. The Manager shall not be liable for anything done, suffered or omitted by it in good faith in reliance upon such opinion, advice, statement, information or document.
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ARTICLE XI
LEGAL ACTIONS
Section 11.1 Third Party Claims.
(a) The Manager shall notify the Company promptly of any claim made by any third party in relation to the assets of the Company and shall send to the Company any notice, claim, summons or writ served on the Manager concerning the Company
(b) The Manager shall not, without the prior written consent of the Board, purport to accept or admit any claims or liabilities of which it receives notification pursuant to Section 11.1(a) hereof on behalf of the Company or make any settlement or compromise with any third party in respect of the Company
ARTICLE XII
MISCELLANEOUS
Section 12.1 Obligation of Good Faith; No Fiduciary Duties. The Manager shall perform its duties under this Agreement in good faith and for the benefit of the Company. The relationship of the Manager to the Company is as an independent contractor and nothing in this Agreement shall be construed to impose on the Manager an express or implied fiduciary duty.
Section 12.2 Binding Effect. This Agreement shall be binding upon, shall inure to the benefit of and be enforceable by the Parties hereto and their respective successors and permitted assigns.
Section 12.3 Compliance. The Manager shall (and must ensure that each of its officers, agents and employees) comply with any law, including the Federal Securities Laws and the securities laws of any applicable jurisdiction and the rules of The Nasdaq Stock Market, in each case, as in effect from time to time, to the extent that it concerns the functions of the Manager under this Agreement.
Section 12.4 Effect of Termination. This Agreement shall be effective as of the Effective Date and shall continue in full force and effect during the Initial Term and any Automatic Renewal Term thereafter until termination hereof in accordance with Article VIII. The obligations of the Company set forth in Articles VIII and IX and Sections 7.2, 10.1, 12.5, 12.9 and 12.17 hereof shall survive such termination of this Agreement, subject to applicable law.
Section 12.5 Notices. Any notice or other communication required or permitted under this Agreement shall be deemed to have been duly given (i) five (5) Business Days following deposit in the mails if sent by registered or certified mail, postage prepaid, (ii) when sent, if sent by facsimile transmission, if receipt thereof is confirmed by telephone, (iii) when delivered, if delivered personally to the intended recipient and (iv) two (2) Business Days following deposit with a nationally recognized overnight courier service, in each case addressed as follows:
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If to the Company, to:
Marblegate Capital Corporation
5 Greenwich Office Park, Suite 400
Greenwich, CT 06831
Attn: Chief Executive Officer
If to the Manager, to:
Marblegate Asset Management, LLC
5 Greenwich Office Park, Suite 400
Greenwich, Connecticut 06831
Attn: General Counsel
or to such other address or facsimile number as any such Party may, from time to time, designate in writing to all other Parties hereto, and any such communication shall be deemed to be given, made or served as of the date so delivered or, in the case of any communication delivered by mail, as of the date so received.
Section 12.6 Headings. The headings in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
Section 12.7 Applicable Law. This Agreement, the legal relations between and among the Parties and the adjudication and the enforcement thereof shall be governed by and interpreted and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions thereof to the extent such principles or rules would require or permit the application of the laws of another jurisdiction.
Section 12.8 Submission to Jurisdiction; Waiver of Jury Trial. Each of the Parties irrevocably and unconditionally submits to the exclusive jurisdiction of the Chancery Court of the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction, any state or federal court within State of New York, New York County) and each of the Parties hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. Each Party hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Party, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or the transactions contemplated hereby brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Party. Each Party irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party, at its address for notices set forth in Section 12.5 hereof; such service to become effective ten (10) days after such mailing. Each Party
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hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other documents contemplated hereby that service of process was in any way invalid or ineffective. The foregoing shall not limit the rights of any Party to serve process in any other manner permitted by applicable law.
Each of the Parties hereby waives any right it may have under the laws of any jurisdiction to commence by publication any legal action or proceeding with respect this Agreement. To the fullest extent permitted by applicable law, each of the Parties hereby irrevocably waives the objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement in any of the courts referred to in this Section 12.8 and hereby further irrevocably waives and agrees not to plead or claim that any such court is not a convenient forum for any such suit, action or proceeding.
The Parties agree that any judgment obtained by any Party or its successors or assigns in any action, suit or proceeding referred to above may, in the discretion of such Party (or its successors or assigns), be enforced in any jurisdiction, to the extent permitted by applicable law.
The Parties agree that the remedy at law for any breach of this Agreement may be inadequate and that should any dispute arise concerning any matter hereunder, this Agreement shall be enforceable in a court of equity by an injunction or a decree of specific performance. Such remedies shall, however, be cumulative and nonexclusive, and shall be in addition to any other remedies which the Parties may have.
Each Party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation as between the Parties directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto. Each Party (i) certifies that no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 12.8.
Section 12.9 Amendment; Waivers. No term or condition of this Agreement may be amended, modified or waived without the prior written consent of the Party against whom such amendment, modification or waiver will be enforced; provided, that any amendment shall not be effective as to any Party hereto unless at least seventy-five percent (75%) of the Board votes in favor of approving such amendment and the amendment also is approved in advance by a majority of the Independent Directors voting in favor of the amendment. Any waiver granted hereunder shall be deemed a specific waiver relating only to the specific event giving rise to such waiver and not as a general waiver of any term or condition hereof.
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Section 12.10 Remedies to Prevailing Party. If any action at law or equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.
Section 12.11 Severability. Each provision of this Agreement is intended to be severable from the others so that if, any provision or term hereof is illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect or impair the validity of the remaining provisions and terms hereof; provided, however, that the provisions governing payment of the Management Fee described in Article VII hereof are not severable.
Section 12.12 Benefits Only to Parties. Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give any Person other than the Parties and their respective successors or permitted assigns, other than an indemnified Person, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the Parties and their respective successors and permitted assigns, and for the benefit of no other Person, other than an indemnified Person.
Section 12.13 Further Assurances. Each Party hereto shall take any and all such actions, and execute and deliver such further agreements, consents, instruments and any other documents as may be necessary from time to time to give effect to the provisions and purposes of this Agreement.
Section 12.14 No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
Section 12.15 Entire Agreement. This Agreement constitutes the sole and entire agreement of the Parties with regards to the subject matter of this Agreement. Any written or oral agreements, statements, promises, negotiations or representations not expressly set forth in this Agreement are of no force and effect.
Section 12.16 Assignment. This Agreement shall not be assignable by either Party without the prior written consent of the other Party, except by the Manager to any Person with which the Manager may merge or consolidate or to which the Manager transfers substantially all of its assets, and then only in the event that such assignee assumes all of the obligations to the Company and the Subsidiaries hereunder.
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Section 12.17 Confidentiality.
(a) The Manager shall not, and the Manager shall cause its Affiliates and their respective agents and representatives not to, at any time from and after the date of this Agreement, directly or indirectly, disclose or use any confidential or proprietary information involving or relating to (x) the Company, including any information contained in the books and records of the Company and (y) the Subsidiaries, including any information contained in the books and records of any such Subsidiaries; provided, however, that disclosure and use of any information shall be permitted (i) with the prior written consent of the Company, (ii) as, and solely to the extent, necessary or required for the performance by the Manager, any of its Affiliates or its delegates of any of their respective obligations under this Agreement, (iii) as, and to the extent, necessary or required in the operation of the Company’s business or operations in the Ordinary Course of Business, (iv) to the extent such information is generally available to, or known by, the public or otherwise has entered the public domain (other than as a result of disclosure in violation of this 7 by the Manager or any of its Affiliates), (v) as, and to the extent, necessary or required by any governmental order, applicable law or any governmental authority, subject to Section 12.17(c), and (vi) as, and to the extent, necessary or required or reasonably appropriate in connection with the enforcement of any right or remedy relating to this Agreement or any other agreement between the Manager and the Company or any of the Subsidiaries.
(b) The Manager shall produce and implement policies and procedures that are reasonably designed to ensure compliance by the Manager’s directors, officers, employees, agents and representatives with the requirements of this Section 12.17.
(c) For the avoidance of doubt, confidential information includes business plans, financial information, operational information, strategic information, legal strategies or legal analysis, formulas, production processes, lists, names, research, marketing, sales information and any other information similar to any of the foregoing or serving a purpose similar to any of the foregoing with respect to the business or operations of the Company or any of the Subsidiaries. However, the Parties are not required to mark or otherwise designate information as “confidential or proprietary information,” “confidential” or “proprietary” in order to receive the benefits of this Section 12.17.
(d) In the event that the Manager is required by governmental order, applicable law or any governmental authority to disclose any confidential information of the Company or any of the Subsidiaries that is subject to the restrictions of this Section 12.17, the Manager shall (i) notify the Company or any of the Subsidiaries in writing as soon as possible, unless it is otherwise
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affirmatively prohibited by such governmental order, applicable law or such governmental authority from notifying the Company or any such Subsidiaries, as the case may be, (ii) cooperate with the Company or any such Subsidiaries to preserve the confidentiality of such confidential information consistent with the requirements of such governmental order, applicable law or such governmental authority and (iii) use its reasonable best efforts to limit any such disclosure to the minimum disclosure necessary or required to comply with such governmental order, applicable law or such governmental authority, in each case, at the sole cost and expense of the Company.
(e) Nothing in this Section 12.17 shall prohibit the Manager from keeping or maintaining any copies of any records, documents or other information that may contain information that is otherwise subject to the requirements of this Section 12.17, subject to its compliance with this Section 12.17.
(f) The Manager shall be responsible for any breach or violation of the requirements of this Section 12.17 by any of its agents or representatives.
Section 12.18 Consent To The Use Of Name. The Manager hereby consents to the use by the Company of the name “Marblegate” as part of the Company’s name; provided, however, that such consent shall be conditioned upon the employment of the Manager or one of its affiliates in the provision of management services to the Company. The name “Marblegate” or any variation thereof may be used from time to time in other connections and for other purposes by the Manager and its affiliates and other investment companies that have obtained consent to the use of the name “Marblegate.” The Manager shall have the right to require the Company to cease using the name “Marblegate” as part of the Company’s name if the Company ceases, for any reason, to employ the Manager or one of its affiliates to provide management services. Future names adopted by the Company for itself, insofar as such names include identifying words requiring the consent of the Manager, shall be the property of the Manager and shall be subject to the same terms and conditions.
Section 12.19 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have executed this Management Services Agreement as of the date first written above.
| Company | ||
| MARBLEGATE CAPITAL CORPORATION | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Chief Executive Officer | ||
| Manager | ||
| MARBLEGATE ASSET MANAGEMENT, LLC | ||
| By: | /s/ Andrew Milgram | |
| Name: Andrew Milgram | ||
| Title: Managing Partner | ||
[Signature Page to Management Services Agreement]
Exhibit 14.1
MARBLEGATE CAPITAL CORPORATION
CODE OF BUSINESS CONDUCT AND ETHICS
INTRODUCTION
Marblegate Capital Corporation and its subsidiaries (the “Company,” “us,” “we,” “our”) is committed to maintaining the highest standards of business conduct and ethics. This Code of Business Conduct and Ethics (this “Code”) reflects the business practices and principles of behavior that support this commitment. We expect every employee, officer and director of the Company to read and understand this Code and its application to the performance of their business responsibilities. References in this Code to “employees” are intended to cover officers and, as applicable, directors.
Officers, managers and other supervisors are expected to develop in employees a sense of commitment to the spirit, as well as the letter, of this Code. Supervisors are also expected to ensure that all agents and contractors conform to Code standards when working for or on behalf of the Company. The compliance environment within each supervisor’s assigned area of responsibility will be an important factor in evaluating the quality of that individual’s performance. In addition, any employee who makes an exemplary effort to implement and uphold our legal and ethical standards may be recognized for that effort in the employee’s performance review. Nothing in this Code alters the at-will employment policy of the Company.
This Code addresses conduct that is particularly important to proper dealings with the people and entities with whom we interact, but reflects only a part of our commitment. We may adopt additional policies and procedures with which our employees, officers and directors are expected to comply, if applicable. However, it is the responsibility of each employee to apply common sense, together with the employee’s own highest personal ethical standards, in making business decisions where there is no stated guideline in this Code.
Action by members of your immediate family, significant others or other persons who live in your household (referred to in this Code, collectively, as “family members”) may also potentially result in ethical issues to the extent that they involve the Company’s business. For example, acceptance of inappropriate gifts by a family member from one of our partners or suppliers could create a conflict of interest and result in a Code violation attributable to you. Consequently, in complying with this Code, you should consider not only your own conduct, but also that of your family members.
You should not hesitate to ask questions about whether any conduct may violate this Code, voice concerns or clarify gray areas. Section 22 below details the compliance resources available to you. In addition, you should be alert to possible violations of this Code by others and report suspected violations without fear of any form of retaliation, as further described in Section 22. Violations of this Code will not be tolerated. Any employee who violates the standards in this Code may be subject to disciplinary action, which, depending on the nature of the violation and the history of the employee, may range from a warning or reprimand, up to and including termination of employment and, in appropriate cases, civil legal action or referral for regulatory or criminal prosecution.
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After carefully reviewing this Code, you must sign the acknowledgment attached as EXHIBIT A hereto, indicating that you have received, read, understand and agree to comply with this Code. The acknowledgment must be returned either electronically in a manner provided for by the Company or to the person designated as the Compliance Officer (as further described in Section 22) or such Compliance Officer’s designee within ten business days of your receipt of this Code and on an annual basis as the Company may require.
1. Honest and Ethical Conduct
It is the policy of the Company to promote high standards of integrity by conducting our affairs in an honest and ethical manner. The integrity and reputation of the Company depends on the honesty, fairness and integrity brought to the job by each person associated with us.
2. No Discrimination or Harassment
The Company is committed to providing a work environment free of any form of unlawful harassment or discrimination. The Company is committed to maintaining a respectful, courteous work environment that respects the dignity and worth of each employee and that recognizes the various cultural, ethnic and religious backgrounds of our employees. The Company is an equal opportunity employer and does not discriminate against its employees, officers or directors on the basis of race, color, sex, religion, national origin, ancestry, citizenship, age, disability, sexual orientation, gender identity or expression, pregnancy, marital status, military or veteran status, medical condition, genetic information or any other characteristic protected by applicable federal, state or local law. The Company is committed to actions and policies to assure fair employment, including equal treatment in hiring, promotion, training, compensation, termination and corrective action.
Inappropriate workplace behavior, discrimination and unlawful harassment are wholly inconsistent with these commitments. The Company does not tolerate discrimination by any member of its personnel and does not tolerate harassment (including sexual harassment) of its employees, contract workers, customers or vendors in any form. Our work environment must remain free of all forms of discrimination, harassment, bullying and retaliation. No employee, contract worker, customer, vendor or other person who does business with this organization is exempt from the prohibitions within this policy.
3. Legal Compliance; Lawsuits and Legal Proceedings
Obeying the law, both in letter and in spirit, is the foundation of this Code. You must comply with the Code even where applicable laws are less restrictive than the Code. Where applicable laws are more restrictive than the Code, you must comply with applicable law. Our success depends upon each employee’s operating within legal guidelines and cooperating with local, regional and national authorities (as further described in Section 6). We expect employees to understand the legal and regulatory requirements applicable to their business units and areas of responsibility including, without limitation, laws covering bribery and kickbacks, copyrights, trademarks and trade secrets, information privacy, insider trading, illegal political contributions,
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antitrust prohibitions, foreign corrupt practices, offering or receiving gratuities, environmental hazards, employment discrimination or harassment, occupational health and safety, false or misleading financial information or misuse of corporate assets. We expect employees to comply with all such requirements.
While we do not expect you to memorize every detail of all of the laws, rules and regulations associated with your employment, including laws prohibiting insider trading (which are discussed in further detail in Section 4 below), we want you to be able to determine when to seek advice from others. If you do have a question in the area of legal compliance, it is important that you not hesitate to seek answers from your supervisor or the Compliance Officer (as further described in Section 22).
Disregard of the law will not be tolerated. Violation of laws, rules and regulations may subject an individual, as well as the Company, to civil and/or criminal penalties. You should be aware that conduct and records, including emails, are subject to internal and external audits and to discovery by third parties in the event of a government investigation or civil litigation. It is in everyone’s best interests to know and comply with our legal obligations.
The Company must comply with all laws and regulations regarding the preservation of records. Lawsuits, legal proceedings and investigations concerning the Company must be handled promptly and properly. An employee must approach the Compliance Officer immediately if the employee receives a court order or a court issued document, or notice of a threatened lawsuit, legal proceeding or investigation with respect to the Company. A “legal hold” suspends all document destruction procedures in order to preserve appropriate records under special circumstances, such as litigation or government investigations. When there is a legal hold in place, employees may not alter, destroy or discard documents relevant to the lawsuit, legal proceeding or investigation. The Compliance Officer determines and identifies what types of records or documents are required to be placed under a legal hold and will notify employees if a legal hold is placed on records for which they are responsible. If an employee is involved on the Company’s behalf in a lawsuit or other legal dispute, the employee must avoid discussing it with anyone inside or outside of the Company without prior approval of the Compliance Officer. Employees and their managers are required to cooperate fully with the legal department in the course of any lawsuit, legal proceeding or investigation.
4. Insider Trading
Employees who have access to confidential (or “nonpublic”) information are not permitted to use or share that information for stock trading purposes or for any other purpose except to conduct our business. All nonpublic information about the Company or about companies with which we do business is considered confidential information. To use material, nonpublic information in connection with buying or selling securities, including “tipping” others who might make an investment decision based on this information, is both unethical and illegal. Employees must exercise the utmost care when handling material nonpublic information.
We have adopted a separate Insider Trading Policy with which you will be expected to comply as a condition of your employment with the Company. You should consult our Insider Trading Policy for more specific information on the definition of “insider” information and on buying and selling our securities or securities of companies with which we do business.
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While not part of this Code, the Company’s other policies that apply to the Company’s employees, which may differ by business area and jurisdiction, are developed to support and reinforce the principles set forth in this Code. These various separate policies and standards can be accessed electronically through the Company’s intranet site or by request to the Compliance Officer.
5. Human Capital Development
We are committed to promoting human capital development through, among other things, attracting, developing, and retaining talent with a diverse set of backgrounds who provide us with different perspectives and experiences, thereby fostering innovation, creativity, and differentiated insights in decision making.
We seek to cultivate a workforce in which all voices are valued and heard, where collaboration is encouraged and differences are respected. We believe this approach will contribute to the success of our endeavors, serving our clients and their constituents well. We believe that focusing on all aspects of human capital development will improve and enhance consistency, resilience, talent retention, employee loyalty, and reputation.
As part of this policy, we are committed to a workplace culture that values and promotes employees’ diverse background and perspectives, positive and inclusive work environments, equal employment opportunities, a work environment free of harassment and hostility and that encourages employee communications, bottom-up innovation and collaboration, and rewards and provides growth and advancement opportunities for all employees.
6. Regulating International Business Activity
Our employees are expected to comply with the applicable laws in all countries to which they travel, in which they operate and where we otherwise do business, including laws prohibiting bribery, corruption or the conduct of business with specified individuals, companies or countries. The fact that in some countries certain laws are not enforced or that violation of those laws is not subject to public criticism will not be accepted as an excuse for noncompliance. In addition, we expect employees to comply with U.S. laws, rules and regulations governing the conduct of business by its citizens and corporations outside the United States.
These U.S. laws, rules and regulations, which extend to all our activities outside the United States, include:
| • | The Foreign Corrupt Practices Act, which prohibits directly or indirectly giving anything of value to a government official to obtain or retain business or favorable treatment and requires the maintenance of accurate books of account, with all company transactions being properly recorded; |
| • | U.S. Sanctions, which generally prohibit U.S. companies, their subsidiaries and their employees from doing business with or traveling to countries subject to sanctions imposed by the U.S. government, as well as specific companies and individuals identified on lists published by the U.S. Treasury Department; |
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| • | U.S. Export Controls, which restrict exports from the United States and re-exports from other countries of goods, software and technology to many countries, and prohibits transfers of U.S.-origin items to denied persons and entities; and |
| • | Anti-boycott Regulations, which prohibit U.S. companies from taking any action that has the effect of furthering or supporting a restrictive trade practice or boycott imposed by a foreign country against a country friendly to the United States or against any U.S. person. |
If you have any questions as to whether an activity is restricted or prohibited, seek assistance before taking any action, including giving any verbal assurances that might be regulated by laws.
7. Antitrust
Antitrust laws are designed to promote competition. These laws are based on the premise that the public interest is best served by vigorous competition and will suffer from illegal agreements or collusion among competitors. Antitrust laws generally prohibit:
| • | agreements, formal or informal, among industry competitors that would harm competition or customers, directly or indirectly, including price fixing and allocations of customers, territories or contracts; |
| • | agreements, formal or informal, and including agreements which may be inferred from conduct, among industry competitors that raise, lower, or stabilize prices or competitive; and |
| • | the acquisition or maintenance of a monopoly or an attempted monopoly through anti-competitive conduct. |
Certain kinds of information, such as pricing, production, inventory, business plans, strategies, budgets, projections, forecasts, financial and operating information, methods and development plans should not be exchanged with competitors, regardless of how innocent or casual the exchange may be and regardless of the setting, whether business or social.
Antitrust laws impose severe penalties for certain types of violations, including, but not limited to criminal penalties, monetary fines and awards for damages, which may be tripled under certain circumstances. Understanding the requirements of antitrust and unfair competition laws of the various jurisdictions where we do business can be difficult, and you are urged to seek assistance from your supervisor or the Compliance Officer whenever you have a question relating to these laws.
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8. Conflicts of Interest
We respect the rights of our employees to manage their personal affairs and investments and do not wish to intrude upon their personal lives. At the same time, employees should avoid actual or potential conflicts of interest that occur when their personal interests may interfere in any way with the performance of their duties to, or the best interests of, the Company. A conflicting personal interest could result from an expectation of personal benefit or gain (for you or a family member) now or in the future, regardless of whether such expected gain is actually realized, or from a need to satisfy a prior or concurrent personal obligation. We expect our employees to be free from influences that conflict with the best interests of the Company or that might deprive the Company of their undivided loyalty in business dealings. Even the appearance of a conflict of interest where none actually exists can be damaging and should be avoided. Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest are prohibited unless specifically authorized as described below.
If you have any questions about a potential conflict or if you become aware of an actual or potential conflict and you are not an officer or director of the Company, you should discuss the matter with your supervisor or the Compliance Officer (as further described in Section 22). Supervisors may not authorize conflict-of-interest matters or make determinations as to whether a problematic conflict of interest exists without first seeking the approval of the Compliance Officer and providing the Compliance Officer with a written description of the activity. If the supervisor is involved in the potential or actual conflict, you should discuss the matter directly with the Compliance Officer. Officers and directors may seek authorizations and determinations from the Audit Committee (the “Audit Committee”) of the Company’s Board of Directors (the “Board of Directors”). Factors that may be considered in evaluating a potential conflict of interest are, among others:
| • | whether it may interfere with the employee’s job performance, responsibilities or morale; |
| • | whether the employee has access to confidential information; |
| • | whether it may interfere with the job performance, responsibilities or morale of others within the organization; |
| • | any potential adverse or beneficial impact on our business; |
| • | any potential adverse or beneficial impact on our relationships with our customers, suppliers or other service providers; |
| • | whether it would enhance or support a competitor’s position; |
| • | the extent to which it would result in financial or other benefit (direct or indirect) to the employee; |
| • | the extent to which it would result in financial or other benefit (direct or indirect) to one of our customers, suppliers or other service providers; and |
| • | the extent to which it would appear improper to an outside observer. |
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Although no list can include every possible situation in which a conflict of interest could arise, the following are examples of situations that may, depending on the facts and circumstances, involve problematic conflicts of interests:
| • | Employment by (including consulting for) or service on the board of a competitor, collaborator, partner, customer, supplier or other service provider. Activity that enhances or supports the position of a competitor, directly or indirectly, to the detriment of the Company is prohibited, including employment by or service on the board of a competitor. Employment by or service on the board of a collaborator, partner, customer, supplier or other service provider is generally discouraged and you must seek authorization in advance if you plan to take such a position. |
| • | Owning, directly or indirectly, a significant financial interest in or lending to any entity that does business, seeks to do business or competes with us. In addition to the factors described above, persons evaluating ownership in other entities for conflicts of interest will consider the size and nature of the investment, the nature of the relationship between the other entity and the Company, the employee’s access to confidential information and the employee’s ability to influence Company decisions. If you would like to acquire a financial interest of that kind, you must seek approval in advance. |
| • | Soliciting or accepting gifts, favors, loans or preferential treatment from any person or entity that does business or seeks to do business with us. See Section 12 for further discussion of the issues involved in this type of conflict. |
| • | Soliciting contributions to any charity or for any political candidate from any person or entity that does business or seeks to do business with us. Solicitations made by our employees, officers or directors for contributions for any political party, political candidate or any political activist group are expressly prohibited. Solicitations for contributions to a charitable organization, as defined in the Internal Revenue Code, from any party that does or seeks to do business with us is generally discouraged; you must seek prior approval from the Governance Committee before commencing any such charitable solicitation. |
| • | Taking personal advantage of corporate opportunities. See Section 9 for further discussion of the issues involved in this type of conflict. |
| • | Moonlighting without permission. Other than with the prior written consent of the Compliance Officer, simultaneous employment with any other entity or enterprise where such employment interferes with your ability to perform or carry out job responsibilities is strictly prohibited. It is your responsibility to consult with the Compliance Officer to determine whether a planned activity will interfere with your ability to perform or carry out job responsibilities before you pursue the activity in question. |
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| • | Conducting our business transactions with your family member or a business in which you have a significant financial interest. Material-related party transactions approved by the Audit Committee and involving any executive officer or director will be publicly disclosed as required by applicable laws and regulations in keeping with the Company’s Policy and Procedures with Respect to Related Person Transactions. |
| • | Exercising supervisory or other authority on behalf of the Company over a co-worker who is also a family member, friend or relative. The employee’s supervisor and/or the Compliance Officer will consult with the Human Resources department to assess the advisability of reassignment. |
| • | Maintaining a financial relationship with a member of the Board of Directors or an employee of the Company, which could influence the independent judgment of the director or the employee. |
Loans to or guarantees of obligations of employees or their family members by the Company could constitute an improper personal benefit to the recipients of these loans or guarantees, depending on the facts and circumstances. Some loans are expressly prohibited by law and applicable law requires that the Board of Directors approve all loans and guarantees to employees. As a result, all loans and guarantees by the Company must be approved in advance by the Board of Directors or the Audit Committee.
Where a business relationship is determined to be in the Company’s best interests, despite a potential conflict of interest, to mitigate the risk, certain procedures may be implemented, such as: clearing a potential conflict (potentially subject to conditions to mitigate any conflict, such as procedural safeguards); removal of an employee’s discretion in the area of conflict; reassignment of job responsibilities; or prohibition against continued participation in the conflicting activity.
This Code in no way impairs the right of any employee to engage in concerted activity to improve the terms and conditions of their employment.
9. Corporate Opportunities
You may not take personal advantage of opportunities for the Company that are presented to you, discovered by you as a result of your position with the Company or through your use of corporate property or information unless authorized by your supervisor, the Compliance Officer or the Audit Committee as described in Section 8 above. Even opportunities that are acquired privately by you may be questionable if they are related to our existing or proposed lines of business. Participation in an investment or outside business opportunity that is directly related to our lines of business must be pre-approved. You may not use your position with the Company, corporate property or corporate or confidential information for any improper personal gain, nor should you compete with the Company in any way.
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10. Maintenance of Corporate Books, Records, Documents and Accounts; Financial Integrity; Public Reporting
The integrity of our records and public disclosure depends upon the validity, accuracy and completeness of the information supporting the entries to our books of account. Therefore, our corporate and business records must be completed accurately and honestly. The making of false or misleading entries, whether they relate to financial results or otherwise, is strictly prohibited. Our records serve as a basis for managing our business and are important in meeting our obligations to customers, suppliers, partners, creditors, employees and others with whom we do business. As a result, it is important that our books, records and accounts accurately and fairly reflect, in reasonable detail, our assets, liabilities, revenues, costs and expenses, as well as all transactions and changes in assets and liabilities. We require that:
| • | no entry be made in our books and records that intentionally hides or disguises the nature of any transaction or of any of our liabilities or misclassifies any transactions as to accounts or accounting periods; |
| • | all transactions be supported by appropriate documentation; |
| • | the terms of all sales and other commercial transactions be reflected accurately in the documentation for those transactions and all such documentation be reflected accurately in our books and records; |
| • | employees comply with our system of internal controls; and |
| • | no cash or other assets be maintained for any purpose in any unrecorded or “off-the-books” fund. |
Our accounting records are also relied upon to produce reports for our management, stockholders and creditors, as well as for governmental agencies. In particular, we rely upon our accounting and other business and corporate records in preparing the periodic and current reports that we file with the Securities and Exchange Commission (the “SEC”). Securities laws require that these reports provide full, fair, accurate, timely and understandable disclosure and fairly present our financial condition and results of operations. Employees who collect, provide or analyze information for or otherwise contribute in any way in preparing or verifying these reports should strive to ensure that our financial disclosure is accurate and transparent and that our reports contain all of the information about the Company that would be important to enable stockholders and potential investors to assess the soundness and risks of our business and finances and the quality and integrity of our accounting and disclosures. In addition:
| • | no employee may take or authorize any action that would cause our financial records or financial disclosure to fail to comply with generally accepted accounting principles, the rules and regulations of the SEC or other applicable laws, rules and regulations; |
| • | all employees must cooperate fully with our finance and accounting personnel, as well as our independent public accountants and counsel, respond to their questions with candor and provide them with complete and accurate information to help ensure that our books and records, as well as our reports filed with the SEC, are accurate and complete; |
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| • | no employee, director or person acting under their direction may coerce, manipulate, mislead or fraudulently influence our finance and accounting personnel, our independent public accountants or counsel; and |
| • | no employee should knowingly make (or cause or encourage any other person to make) any false or misleading statement in any of our reports filed with the SEC or knowingly omit (or cause or encourage any other person to omit) any information necessary to make the disclosure in any of our reports accurate in all material respects. |
Any employee who becomes aware of any departure from these standards has a responsibility to report the employee’s knowledge promptly to a supervisor, the Compliance Officer, the Audit Committee or one of the other compliance resources described in Section 22 or in accordance with the provisions of the Company’s Open Door Policy for Reporting Violations and Complaints (the “Open Door Policy”).
11. Fair Dealing
We strive to outperform our competition fairly and honestly. Advantages over our competitors are to be obtained through superior performance of our products and services, not through unethical or illegal business practices. Acquiring proprietary information from others through improper means, possessing trade secret information that was improperly obtained or inducing improper disclosure of confidential information from past or present employees of other companies is expressly prohibited, even if motivated by an intention to advance our interests. If information is obtained by mistake that may constitute a trade secret or other confidential information of another business, or if you have any questions about the legality of proposed information gathering, you must consult your supervisor or the Compliance Officer, as further described in Section 22.
You are expected to deal fairly with our customers, suppliers, partners, employees and anyone else with whom you have contact in the course of performing your job. Be aware that the Federal Trade Commission Act provides that “unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are declared unlawful.” It is a violation of the Federal Trade Commission Act to engage in any deceptive, unfair or unethical practices and to make misrepresentations in connection with sales activities.
Employees involved in procurement have a special responsibility to adhere to principles of fair competition in the purchase of products and services by selecting suppliers based exclusively on normal commercial considerations, such as quality, cost, availability, service and reputation, and not on the receipt of special favors.
12. Gifts and Entertainment
Business gifts and entertainment are meant to create goodwill and sound working relationships and not to gain improper advantage with partners or customers or facilitate approvals from government officials. The exchange, as a normal business courtesy, of meals or entertainment (such as tickets to a game or the theatre or a round of golf) is a common and acceptable practice
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as long as it is not extravagant. Unless express permission is received from a supervisor, the Compliance Officer or the Audit Committee, gifts and entertainment cannot be offered, provided or accepted by any employee unless consistent with customary business practices and not (a) of more than token or nominal monetary value, (b) in cash, (c) susceptible of being construed as a bribe or kickback, (d) made or received on a regular or frequent basis or (e) in violation of any laws. This principle applies to our transactions everywhere in the world, even where the practice is widely considered “a way of doing business.” Employees should not accept gifts or entertainment that may reasonably be deemed to affect their judgment or actions in the performance of their duties. Our customers, suppliers, partners and the public at large should know that our employees’ judgment is not for sale.
Under some statutes, such as the U.S. Foreign Corrupt Practices Act (as further described in Section 6 above), giving anything of value to a government official to obtain or retain business or favorable treatment is a criminal act subject to prosecution and conviction. Discuss with your supervisor or the Compliance Officer any proposed entertainment or gifts if you are uncertain about their appropriateness.
13. Protection and Proper Use of Company Assets
All employees are expected to protect our assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on our financial condition and results of operations. Our property, such as office supplies, computer equipment, and office space are expected to be used only for legitimate business purposes, although incidental personal use may be permitted. You may not, however, use the Company’s corporate name, any brand name or trademark owned or associated with the Company or any letterhead stationery for any personal purpose.
You may not, while acting on behalf of the Company or while using our computing or communications equipment or facilities, either:
| • | access the internal computer system (also known as “hacking”) or other resource of another entity without express written authorization from the entity responsible for operating that resource; or |
| • | commit any unlawful or illegal act, including harassment, libel, fraud, sending of unsolicited bulk email (also known as “spam”) or material of objectionable content in violation of applicable law, trafficking in contraband of any kind or any kind of espionage. |
If you receive authorization to access another entity’s internal computer system or other resource, you must make a permanent record of that authorization so that it may be retrieved for future reference and you may not exceed the scope of that authorization.
Unsolicited bulk email is regulated by law in a number of jurisdictions. If you intend to send unsolicited bulk email to persons outside of the Company, either while acting on our behalf or while using our computing or communications equipment or facilities, you should contact your supervisor or the Compliance Officer for prior approval.
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All data residing on or transmitted through our computing and communications facilities, including email and word processing documents, is the property of the Company and is subject to inspection, retention and review by the Company at any time, with or without an employee’s or third party’s knowledge, consent or approval in accordance with applicable law. Any misuse or suspected misuse of our assets must be immediately reported to your supervisor or the Compliance Officer.
14. Personal Data
We are accountable for protecting personal data and for only using that data in accordance with the Company’s policies and procedures, and applicable laws and regulations.
15. Confidentiality
One of our most important assets is our confidential information. As an employee of the Company, you may learn of information about the Company that is confidential and proprietary. You also may learn of information before that information is released to the general public. Employees who have received or have access to confidential information should take care to keep this information confidential. Confidential information includes any and all non-public knowledge, data or information of the Company that might, directly or indirectly, be of use to competitors or harmful to the Company or its customers, licensors, vendors or partners if disclosed, such as business plans, financial information, information related to the Company’s research, testing platforms and sequencing methods, data and results, designs, ideas, inventions and new developments and methods, works of authorship, trade secrets, processes, protocols, conceptions, formulas, patents, patent applications, licenses, suppliers, manufacturers, raw material and product specifications customers, market data, personnel data, personally identifiable information pertaining to our employees, customers or other individuals (including, for example, names, addresses, telephone numbers and social security numbers) and similar types of information provided to the Company by our customers, suppliers and partners. This information may be protected by patent, trademark, copyright and trade secret laws.
In addition, because we interact with other companies and organizations, there may be times when you learn confidential and/or proprietary knowledge, data or information about other companies before that information has been made available to the public. You must treat this information in the same manner as you are required to treat our confidential and proprietary information. There may even be times when you must treat as confidential the fact that we have an interest in or are involved with another company.
At all times during and after your association with the Company, you are expected to keep confidential and proprietary information confidential unless and until that information is released to the public through approved channels (usually through a press release, an SEC filing or a formal communication from a member of senior management, as further described in Section 16) or it is otherwise legally mandated. You must obtain the Company’s written approval before publishing or submitting for publication any material (written, oral or otherwise) that discloses and/or incorporates any such information. Every employee has a duty to refrain from disclosing to any person confidential or proprietary information about the Company or any other company learned in the course of employment with the Company, until that information is disclosed to the public
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through approved channels. This policy requires you to refrain from discussing confidential or proprietary information with outsiders and even with other employees of the Company, unless those fellow employees have a legitimate need to know the information in order to perform their job duties. These prohibitions on disclosing confidential or proprietary information apply with equal force to social media postings (for additional information, please refer to the Company’s Social Media Policy). Unauthorized use or distribution of this information could also be illegal and result in civil liability and/or criminal penalties.
You should also take care not to inadvertently disclose confidential information. Materials that contain, or could reasonably be expected to contain, confidential information, such as memos, notebooks, mobile devices, thumb drives or other data storage devices and laptop computers should be stored securely. Unauthorized posting or discussion of any information concerning our business, information or prospects on the Internet or any social media outlet, forum or other platform of a similar type is prohibited. You may not discuss our business, information or prospects in any “chat room,” regardless of whether you use your own name or a pseudonym. Be cautious when discussing sensitive information in public places like elevators, airports, restaurants and “quasi-public” areas in and around our place of business. All Company emails, voicemails and other communications are presumed confidential and should not be forwarded or otherwise disseminated outside of the Company except where required for legitimate business purposes.
In addition to the above responsibilities, if you are handling information protected by any privacy policy published by us, such as our website privacy policy, then you must handle that information in accordance with the applicable policy.
16. Media/Public Discussions
The Company places a high value on its credibility and reputation in the community. What is written or said about the Company in the news media, on social media and in the investment community directly impacts our reputation, positively or negatively. We are committed to ensuring that the Company’s communications are truthful, meaningful, consistent and in compliance with all laws.
To ensure compliance with the Company’s standards and its legal obligations, it is our policy to disclose material information concerning the Company to the public only through specific limited channels to avoid inappropriate publicity and to ensure that all those with an interest in the Company will have equal access to information. All inquiries or calls from the press and financial analysts should be referred to the Company’s Chief Executive Officer (the “CEO”) or Chief Financial Officer (the “CFO”). We have designated our CEO and CFO as our official spokespersons for financial, technical and other related information. Unless a specific exception has been made by the CEO or CFO, these designees are the only people who may communicate with the press on behalf of the Company. You also may not provide any information to the media about the Company off the record, for background, confidentially or secretly.
The Board of Directors should not speak for the Company. Individual directors (other than the CEO or CFO, if applicable) wishing to communicate with the media, current or potential future investors in the Company or any other constituency of the Company in any manner relating to the Company must first seek approval for such communication from the chairperson of the Board of
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Directors or the CEO and otherwise comply with any corporate disclosure or communication policy that may be adopted by the Company (except in those rare cases when a member of a committee of the Board of Directors may be required to communicate with a third party without the knowledge of any of such persons, as may be advised by counsel).
Please also refer to the Company’s Disclosure and Regulation FD Policy and Social Media Policy.
17. Political Activities and Contributions
We encourage our team members, officers and directors to contribute to the community and to fully participate in local, national and international political processes. However, business contributions to political campaigns are strictly regulated by federal, state, local and foreign law in the United States and other jurisdictions. Accordingly, there are certain ethical guidelines for doing so.
As a private citizen, you are free to make contributions to causes, candidates or political parties of your choice. If you express a personal view in a public forum (such as social media posts), do not use the Company’s letterhead or Company e-mail. Team members should avoid activities such as campaigning for an elected official while on duty. All lobbying activities, including the retention of outside lobbyists, must be pre-cleared through the Compliance Officer.
The Company will comply with all relevant laws regulating its participation in political affairs, including political contributions. All political contributions proposed to be made with the Company’s funds must be coordinated through and approved by the Compliance Officer.
18. Charitable Contributions
The Company supports community development throughout the world. Company team members may contribute to these efforts, or may choose to contribute to organizations of their own choice. However, as with political activities, you may not use Company resources to personally support charitable or other non-profit institutions not specifically sanctioned or supported by the Company. You should consult with the Compliance Officer if you have questions about permissible use of Company resources.
19. Human Rights
The Company is committed to upholding fundamental human rights and believes that all human beings around the world should be treated with dignity, fairness and respect. The Company will only engage suppliers and direct contractors who demonstrate a serious commitment to the health and safety of their workers and operate in compliance with human rights laws. The Company does not use or condone the use of slave labor or human trafficking, denounces any degrading treatment of individuals or unsafe working conditions and supports our products being free of conflict minerals.
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20. Collaborating Responsibly with Third Parties
We seek to engage with trustworthy third parties who can help us achieve our goals and work collaboratively to innovate and create social and economic value. Our employees are expected to perform risk reviews on third parties and obtain proper approvals prior to engagement to ensure they are ethical, qualified, reputable and accountable. You should aim to source and partner responsibly by requiring third parties to adhere to the Company’s expectations and relevant laws and regulations, such as privacy and security requirements, anti-corruption laws, trade and sanction laws.
21. Waivers
Any waiver of this Code for executive officers (including, where required by applicable laws, our principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions)) or directors may be authorized only by the Board of Directors or, to the extent permitted by the rules of The Nasdaq Stock Market LLC (“Nasdaq”) (or such other applicable exchange or over-the-counter market) and our Corporate Governance Guidelines, a committee of the Board of Directors, and will be disclosed as required by applicable laws, rules and regulations.
22. Compliance Standards and Procedures
Compliance Resources
To facilitate compliance with this Code, we have implemented a program of Code awareness, training and review. We have appointed the General Counsel and Chief Compliance Officer of Marblegate Asset Management LLC to the position of Compliance Officer to oversee this program. In the future, we may appoint another senior officer as the Compliance Officer. The Compliance Officer may also designate additional individuals to assist him or her in carrying out all duties of the Compliance Officer. The Compliance Officer and the Compliance Officer’s designees, if any, can be reached at (203) 210-6500. The Compliance Officer is a person to whom you can address any questions or concerns. In addition to fielding questions or concerns with respect to potential violations of this Code, the Compliance Officer is responsible for:
| • | investigating possible violations of this Code; |
| • | training new employees in Code policies; |
| • | conducting training sessions to refresh employees’ familiarity with this Code; |
| • | distributing copies of this Code from time to time via email and the Company’s secure internal human resources website to each employee with a reminder that each employee is responsible for reading, understanding and complying with this Code; |
| • | updating this Code as needed and alerting employees to any updates, with appropriate approval of the Board of Directors or the Audit Committee, to reflect changes in the law, Company operations and recognized best practices and to reflect the Company’s experience; and |
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| • | otherwise promoting an atmosphere of responsible and ethical conduct. |
Your most immediate resource for any matter related to this Code is your supervisor. Your supervisor may have the information you need or may be able to refer the question to another appropriate source. However, there may be times when you prefer not to go to your supervisor. In these instances, you should feel free to discuss your concern with the Compliance Officer. If you are uncomfortable speaking with the Compliance Officer because the Compliance Officer works in your department or is one of your supervisors, please contact the CEO. Of course, if your concern involves potential misconduct by another person and relates to questionable accounting or auditing matters under the Company’s Open Door Policy, you may report that violation as set forth in such policy.
The Company established a toll-free hotline through NAVEX at 833-718-4780 and a website address at https://marblegate.navexone.com for those who wish to ask questions about Company policy, seek guidance on specific situations or report violations of this Code. You may call the toll-free number or submit reports through the website anonymously, although if you do so, the Compliance Officer will be unable to obtain follow-up details from you that may be necessary to investigate the matter. Whether you identify yourself or remain anonymous, your telephonic or email contact with the Compliance Officer will be kept strictly confidential to the extent reasonably possible within the objectives of this Code, and subject to applicable law, regulations or legal proceeding.
Clarifying Questions and Concerns; Reporting Possible Violations
If you encounter a situation or are considering a course of action and its appropriateness is unclear, discuss the matter promptly with your supervisor or the Compliance Officer. Even the appearance of impropriety can be very damaging and should be avoided.
If you are aware of a suspected or actual violation of Code standards by others, you have a responsibility to report it. Whether you decide to report anonymously or not, you are expected to promptly provide a compliance resource with a specific description of the violation that you believe has occurred, including any information you have about the persons involved and the time of the violation. Whether you choose to speak with your supervisor or the Compliance Officer, you should do so without fear of any form of retaliation. We will take prompt disciplinary action against any employee who retaliates against you, including termination of employment.
Supervisors must promptly report any complaints or observations of Code violations to the Compliance Officer. If you believe your supervisor has not taken appropriate action, you should contact the Compliance Officer directly. Unless a conflict of interest exists, the Compliance Officer or the Compliance Officer’s designee will investigate all reported possible Code violations promptly and with the highest degree of confidentiality that is possible under the specific circumstances. Neither you nor your supervisor may conduct any preliminary investigation unless authorized to do so by the Compliance Officer. Your cooperation in the investigation will be expected. As needed, the Compliance Officer will consult with legal counsel, the Human Resources department, the Audit Committee, the Nominating and Corporate Governance Committee and/or others with expertise concerning the core issue(s) under investigation. It is our policy to employ a fair process by which to determine violations of this Code.
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With respect to any complaints or observations of violations that may involve accounting, internal accounting controls and auditing concerns under the Company’s Open Door Policy, the Compliance Officer shall promptly inform the Audit Committee. The Audit Committee shall be responsible for supervising and overseeing the inquiry and any investigation that is undertaken. If a potential violation is reported via the confidential hotline or email address as provided under the Open Door Policy and this Code, the Audit Committee will be notified automatically and directly.
We all have a duty to fully cooperate with any audit and investigation requests by the Company. That means promptly responding to these requests, making yourself available for meetings, providing full, accurate and truthful information, preserving relevant documents and keeping confidential information you learn during an investigation. This helps the Company meet its responsibility to ensure that its processes and controls are operating effectively. If you receive a request for information or documents about the Company from a government or regulatory agency, law enforcement or an outside lawyer, you should immediately contact the Compliance Officer for assistance.
If any investigation indicates that a violation of this Code has probably occurred, we will take such action as we believe to be appropriate under the circumstances. If we determine that an employee is responsible for a Code violation, the employee will be subject to disciplinary action up to and including termination of employment and, in appropriate cases, civil action or referral for criminal prosecution. Appropriate action may also be taken to deter any future Code violations.
No Retaliation
The Company prohibits retaliation against an employee who, in good faith, seeks help or reports known or suspected violations. As such, if you report an actual or suspected violation by another, you will not be subject to discipline, detrimental treatment or retaliation of any kind for making a report in good faith. Any reprisal or retaliation against an employee because the employee, in good faith, sought help or filed a report will be subject to disciplinary action, including potential termination of employment.
23. No Rights Created
This Code is a statement of certain fundamental principles, policies and procedures that is intended to govern the conduct of the Company’s business. It is not intended to, and does not create, any rights for any employee, customer, client, visitor, supplier, competitor, stockholder or any other person or entity. Nothing in this Code creates or implies an employment contract or term of employment nor does it limit the Company’s or the employee’s right to terminate employment at any time for any reason. No employee of the Company except the CEO has any authority to enter into any agreement for employment for a specified period of time or to make any agreement or representation contrary to the Company’s policy of at-will employment, and any such agreement or representation must be in writing.
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24. Changes; Review
The Company is committed to continuously reviewing and updating its policies and procedures. Subject to applicable rules and regulations of the SEC and Nasdaq (or such other applicable exchange or over-the-counter market), the Company reserves the right to amend or terminate this Code at any time and for any reason. Any changes to this Code will be effective upon approval by the Board of Directors. The Audit Committee will review and reassess the adequacy of this Code from time to time and recommend to the Board of Directors any changes the Audit Committee determines are appropriate. All changes must be promptly disclosed as required by law or regulation.
25. Website Disclosure
This Code, as may be amended from time to time, shall be posted on the Company’s website. The Company shall state in its annual meeting of stockholders proxy statement that this Code is available on the Company’s website and provide the website address as required by law or regulation.
Effective as of April 7, 2025
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Exhibit A
MARBLEGATE CAPITAL CORPORATION
CODE OF BUSINESS CONDUCT AND ETHICS ACKNOWLEDGMENT
I hereby acknowledge that I have received, read and understand and will comply with Marblegate Capital Corporation’s Code of Business Conduct and Ethics (the “Code”).
I will seek guidance from and raise concerns about possible violations of this Code with my supervisor, management and Marblegate Capital Corporation’s Compliance Officer.
I understand that my agreement to comply with this Code does not constitute a contract of employment.
Please sign here:
Print Name:
Date:
This signed and completed form must be returned to Marblegate Capital Corporation’s Compliance Officer within ten business days of receiving this Code.
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Exhibit 19.1
MARBLEGATE CAPITAL CORPORATION
INSIDER TRADING POLICY
Section 1. All Employees, Officers, Directors and their Family Members and Affiliates Are Subject to this Policy. This Insider Trading Policy (“Policy”) applies to all employees, directors, officers and consultants (each a “Covered Party”) of Marblegate Capital Corporation, a Delaware corporation (“MCC” or the “Company”), their family members and entities over which such individuals have or share voting or investment control. This Policy also applies to any other person who receives material nonpublic information (as defined below) from any MCC insider, or is otherwise designated by the Compliance Officer (as defined below). For purposes of this Policy, “family members” include immediate family, people who live with you or are financially dependent on you, and family members who live elsewhere but whose transactions in securities are directed by you or are subject to your influence or control. For the purposes of this Policy, an “officer” means an “officer” as defined under Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Every director, officer and employee of the Company has the individual responsibility (and must take appropriate measures to cause such person’s family members) to comply with this Policy regardless of whether a transaction is executed outside a blackout period or is pre-cleared by the Compliance Officer. The restrictions and procedures are intended to help avoid inadvertent instances of improper insider trading, but appropriate judgment should always be exercised by each director, officer and employee of the Company in connection with any transaction in the Company’s securities. Employees, officers and directors of the Company are responsible for ensuring compliance with this Policy by their family members.
This Policy continues to apply following termination of employment or other relationship with MCC until after the second trading day that any material non-public information in your possession has become public or is no longer material. Each employee, officer, consultant and director is personally responsible for the actions of their family members and other persons with whom they have a relationship who are subject to this Policy, including any pre-clearances required.
As used in this Policy, the term “trading day” shall mean a day on which The Nasdaq Stock Market LLC (“Nasdaq”) or the primary quotation system or national securities exchange on which the Company’s common stock is then traded or listed is open for trading. As used in this Policy, the term “business day” shall mean a day on which the Securities and Exchange Commission (the “SEC”)’s EDGAR system will receive and accept filings.
Section 2. Trading in MCC Securities While in Possession of Material Nonpublic Information is Prohibited. The purchase or sale of securities by any person who possesses material nonpublic information is a violation of U.S. federal and state securities laws. It is important to avoid the appearance as well as the fact of trading based on material nonpublic information.
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No person subject to this Policy who is aware of material nonpublic information relating to MCC may, directly or indirectly (through family members, other persons, entities or otherwise), buy, sell or otherwise trade in the securities of MCC, or advise anyone else to do so other than pursuant to a trading plan that complies with Rule 10b5-1 promulgated by the SEC and is implemented in accordance with Section 9 of this Policy, or as specifically exempted in Section 10(B) of this Policy, or otherwise engage in any action to take personal advantage of that information during any period commencing on the date that the person possesses material nonpublic information and ending at the close of business on the second trading day following the date of public disclosure of such information, or at such time as such nonpublic information is no longer material. For purposes of this Policy, the term “trade” includes any transaction in MCC securities, including gifts and pledges.
Each person subject to this Policy may, from time to time, have to forego a proposed transaction even if they planned to make the transaction before learning material nonpublic information and even if they may suffer economic loss or forego anticipated profit by waiting.
Section 3. Trading in Other Public Companies’ Securities While in Possession of Material Nonpublic Information is Prohibited. No person subject to this Policy who possesses material nonpublic information relating to other publicly traded companies, including our vendors, customers and partners, as a result of employment with MCC or the performance of services on our behalf may, directly or indirectly (through family members, other persons, entities or otherwise), buy or sell securities of such companies, or advise anyone else to do so, or otherwise engage in any action to take personal advantage of that information. Civil and criminal penalties and termination of employment or removal from our Board of Directors (the “Board of Directors”) may result from trading on inside information regarding the Company’s business partners. All Company employees should treat material nonpublic information about the Company’s business partners with the same care required with respect to information related directly to the Company.
Section 4. Certain Types of Transactions Are Prohibited.
A. Short Sales. Short sales of MCC securities, including a “sale against the box,” are prohibited, as short sales evidence the seller’s expectation that MCC securities will decline in value, signal to the market that the seller has no confidence in the Company or its short-term prospects and may reduce the seller’s incentive to improve MCC performance. In addition, Section 16(c) of the Exchange Act expressly prohibits certain officers and directors from engaging in short sales.
B. Publicly Traded Options. Transactions in puts, calls or other derivative securities involving MCC stock are prohibited, as any such transaction is, in effect, a bet on the short-term movement of the Company’s stock, creates the appearance of trading based on inside information and may focus attention on short-term performance at the expense of MCC long-term objectives.
C. Hedging Transactions. Hedging or monetization transactions (including, but not limited to, zero-cost collars, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments) are prohibited, as such transactions allow you to continue to own MCC securities without the full risks and rewards of ownership. When that occurs, your interests and the interests of MCC and its stockholders may be misaligned and may signal a message to the trading market when disclosed in Section 16 reports that may not be in the best interests of MCC and its stockholders at the time it is conveyed.
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D. Margin Accounts and Pledges. Directors, officers and other employees are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, as such securities may be traded without your consent (for failing to meet a margin call or if you default on the loan) at a time when you possess material nonpublic information or otherwise are not permitted to trade. An exception to the foregoing prohibition on pledging Company securities may be granted with the approval of the Audit Committee, the Compensation Committee or the Nominating and Corporate Governance Committee of the Board where a person wishes to pledge securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities; provided that any person who wishes to pledge Company securities as collateral for a loan must further submit a request for approval to the Compliance Officer at least two weeks prior to the proposed execution of documents evidencing the proposed pledge.
E. Standing Orders. Standing orders should be used only for a very brief period of time. A standing order placed with a broker or other nominee to sell or purchase stock at a specified price leaves an employee, officer or director of the Company with no control over the timing of the transaction. A standing order transaction executed by the broker or other nominee when such employee, officer or director of the Company is aware of material nonpublic information may result in unlawful insider trading.
F. Gifts. Because charitable and other nonprofit organizations may sell securities given to them very soon after receiving them, and because there is also the potential for manipulation (or perceived manipulation) by the donor to gain a larger tax deduction by donating securities before the release of material negative news, charitable gifts may not be made at a time when the donor is aware of material nonpublic information.
Section 5. Sharing Material Nonpublic Information is Prohibited. No person subject to this Policy who possesses material nonpublic information relating to MCC or any other publicly traded companies may directly or indirectly (through family members, other persons, entities or otherwise) pass that information on to others outside the Company, including friends, family or other acquaintances (referred to as “tipping”), until such information has been disseminated to the public. You must treat material nonpublic information about our business partners with the same care required with respect to such information related directly to MCC.
Tipping includes passing information under circumstances that could suggest that you were trying to help another profit or avoid a loss. Exercise care when speaking with others who do not “need to know,” even if they are subject to this Policy, as well as when communicating with family, friends and others not associated with MCC. To avoid the appearance of impropriety, refrain from discussing our business or prospects or making recommendations about buying or selling our securities or the securities of other companies with which we have a relationship. Inquiries about MCC should be directed to our internal Corporate Communications team.
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Section 6. Recommendations Regarding Trading in Company Securities are Prohibited. No person subject to this Policy may make recommendations or express opinions on trading in MCC securities while in possession of material nonpublic information, except to advise others not to trade in MCC securities if doing so might violate the law or this Policy.
Section 7. Only Designated Company Spokespersons Are Authorized to Disclose Material Nonpublic Information. U.S. federal securities laws prohibit the Company from selectively disclosing material nonpublic information. MCC has established procedures for releasing material information in a manner that is designed to achieve broad dissemination of the information immediately upon its release. Employees may not, therefore, disclose material nonpublic information to anyone outside the Company, including family members and friends, other than in accordance with those established procedures. Any inquiries about the Company should be directed to our internal Corporate Communications team. Additionally, the Company’s legal advisors will be involved in handling legal matters that may involve certain disclosures.
Section 8. Employees Must Follow Company Guidelines Pertaining to Electronic Communications. Employees must follow the MCC Disclosure and Regulation FD Policy before participating in any Internet electronic communication forums concerning the Company.
Section 9. Rule 10b5-1 Trading Plans. SEC Rule 10b5-1 provides an affirmative defense from insider trading liability under the federal securities laws for trading plans that meet certain requirements. It does not prevent someone from bringing a lawsuit. This Policy permits individuals to adopt SEC Rule 10b5-1 trading plans with brokers that outline a pre-set plan for transacting in the Company’s securities, including the exercise of equity awards.
As required by SEC Rule 10b5-1, a director, officer or other employee of the Company may implement, amend or terminate a trading plan under SEC Rule 10b5-1 only when the individual is not in possession of material nonpublic information and provided that such individual and trading plan comply with the provisions under Appendix I hereto.
Any Covered Party who wishes to implement a trading plan under SEC Rule 10b5-1 must first pre-clear the plan with the Compliance Officer at least four (4) full trading days prior to the entry into the plan, and must also pre-clear any amendment to such plan and any termination of a plan in advance of its expiration date, with the Compliance Officer. Except as set forth above, no further pre-approval of transactions conducted pursuant to trading plan under SEC Rule 10b5-1 will be required. The terms of any trading plan under SEC Rule 10b5-1 adopted by an officer or director of the Company must be publicly disclosed by the Company in accordance with Item 408 of Regulation S-K promulgated by the SEC.
Establishing a trading plan under SEC Rule 10b5-1 does not exempt transactions from the short-swing profit provisions of Section 16 of the Exchange Act.
Section 10. Other Transactions in Company Securities.
A. General Rule. This Policy applies to all transactions in MCC securities, including any securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by MCC, such as exchange-traded options.
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B. Exclusions.
1. Equity Award Exercise. The trading restrictions set forth in this Policy do not apply to the exercise of stock options or other equity awards for cash under MCC’s equity incentive plans, including any net exercise of an equity award pursuant to which you have elected to have the Company withhold shares of stock to satisfy tax-withholding requirements or the exercise price of the equity award, to be exempt from this Policy. This Policy does apply, however, to all sales of securities acquired through the exercise of stock options or other equity awards, including “same-day sale” or cashless exercise of Company stock options.
2. Restricted Stock Awards; Restricted Stock Unit Awards. This Policy does not apply to the vesting of restricted stock or restricted stock units or the exercise of a tax-withholding right pursuant to which an individual elects to have the Company withhold shares of stock to satisfy tax-withholding requirements upon the vesting of any restricted stock or restricted stock units. The Policy does apply, however, to any market sale of stock or restricted stock.
3. 401(k) Plan. This Policy does not apply to purchases of Company stock in the Company’s 401(k) plan resulting from periodic contributions of money to the plan pursuant to payroll deduction elections. This Policy does apply, however, to certain elections that may be made under the 401(k) plan, including: (a) an election to increase or decrease the percentage of periodic contributions that will be allocated to the Company stock fund, if any; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against a 401(k) plan account if the loan will result in a liquidation of some or all of a participant’s Company stock fund balance; and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund.
4. Employee Stock Purchase Plans. The trading restrictions set forth in this Policy do not apply to purchases of Company securities pursuant to the employee’s advance instructions under employee stock purchase plans. However, no alteration to instructions regarding the level of withholding or the purchase of Company securities in such plans is permitted while in the possession of material nonpublic information. Any sale of securities acquired under such plans remains subject to the prohibitions and restrictions of this Policy.
5. Dividend Reinvestment Plans. This Policy does not apply to purchases of Company stock under any dividend reinvestment plan of the Company resulting from reinvestment of dividends paid on Company securities. This Policy does apply, however, to voluntary purchases of Company stock that result from additional contributions a participant chooses to make to the plan, and to a participant’s election to participate in the plan or increase the participant’s level of participation in the plan. This Policy also applies to the participant’s sale of any Company stock purchased pursuant to the plan.
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Section 11. Directors and Section 16 Officers Are Subject to Additional Restrictions.
A. Section 16 Insiders. The Company’s directors and certain officers (“Section 16 Insiders”) are subject to the reporting provisions and trading restrictions of Section 16 of the Exchange Act and the underlying rules and regulations promulgated by the SEC.
B. Section 16 Liability. The Company’s directors and certain officers must also comply with the reporting obligations and limitations on short-swing profit transactions set forth in Section 16 of the Exchange Act. The practical effect of these provisions is that these officers and directors who purchase and sell the Company’s securities in non-exempt transactions (under Section 16 of the Exchange Act) within a six-month period must disgorge all profits to the Company whether or not they had knowledge of any material nonpublic information. Under these provisions, and so long as certain other criteria are met, neither the receipt of stock or stock options under the Company’s stock plans, nor the exercise of options or the receipt of stock under a Company dividend reinvestment plan or the Company’s 401(k) retirement plan is deemed a purchase that can be matched against a sale for Section 16(b) short-swing profit disgorgement purposes; however, the sale of any such shares so obtained is a sale for these purposes. The rules on recovery of short-swing profits are absolute and do not depend on whether a person has material nonpublic information.
C. Additional Restrictions. Section 16 Insiders (and other Covered Parties) are subject to the additional restrictions, including, but not limited to, pre-clearance of trades, set forth in Appendix II hereto.
Section 12. Suspected Policy Violations Must Be Reported. Any person who violates this Policy, the Company’s Disclosure and Regulation FD Policy or any federal or state laws governing insider trading or knows of or suspects any such violation by any other person must report the violation immediately to the Compliance Officer. Upon learning of any such violation, the Compliance Officer will determine whether the Company should release any material nonpublic information or whether the Company should report the violation to the SEC or other appropriate governmental authority. The Company will comply with all requests from the SEC, The Financial Industry Regulatory Authority, Inc., Nasdaq and any other quotation system or national securities exchange on which the Company’s common stock is then traded or listed, and other agencies for information related to insider trading investigations.
Section 13. Insider Trading Compliance Officers. Unless the Board of Directors provides otherwise, the Company’s Chief Financial Officer (the “Chief Financial Officer”) shall act as the Company’s initial Insider Trading Compliance Officer (“Compliance Officer”); provided, however, that if the Chief Financial Officer is a party to a proposed trade, transaction or inquiry relating to this Policy, the Company’s Chief Executive Officer (the “Chief Executive Officer”) shall act as the Compliance Officer with respect to such proposed trade, transaction or inquiry. The Compliance Officer may delegate their authority to act as the Compliance Officer as they deem necessary or appropriate in their discretion. The duties of the Compliance Officer and his/her delegees may include the following:
| • | Administering, monitoring and enforcing compliance with the Policy. |
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| • | Responding to all inquiries relating to this Policy and its procedures. |
| • | Designating and announcing special trading blackout periods during which no employees may trade in Company securities. |
| • | Providing copies of this Policy and other appropriate materials to all current and new directors, officers, employees and such other persons as the Compliance Officer determines have access to material nonpublic information concerning the Company. |
| • | Administering, monitoring and enforcing compliance with federal and state insider trading laws and regulations. |
| • | Assisting in the preparation and filing of all required SEC reports relating to trading in Company securities, including, without limitation, Forms 3, 4, 5 and 144 and Schedules 13D and 13G. |
| • | Maintaining as Company records originals or copies of all documents required by the provisions of this Policy or the procedures set forth herein, and copies of all required SEC reports relating to insider trading, including, without limitation, Forms 3, 4, 5 and 144 and Schedules 13D and 13G. |
| • | Revising the Policy as necessary to reflect changes in federal or state insider trading laws and regulations. |
The Compliance Officer may designate one or more individuals who may perform the Compliance Officer’s duties under this Policy in the event that a Compliance Officer is unable or unavailable to perform such duties.
Section 14. Definition of “Material Nonpublic Information.”
A. “Material.” Information about the Company is “material” if it would be expected to affect the investment decisions to buy, hold or sell voting decisions of a reasonable stockholder or investor or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about MCC. In simple terms, material information is any type of information that could reasonably be expected to affect the market price of MCC securities or an investor’s decision to buy or sell MCC securities. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information may include:
| • | Financial performance, especially quarterly and year-end operating results, and significant changes in financial performance or liquidity. |
| • | Projections of future earnings or losses, or other earnings guidance, and any changes to previously announced earnings guidance or any decision to suspend earnings guidance. |
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| • | Communications with government agencies, such as the SEC. |
| • | Company projections and strategic plans. |
| • | New major contracts, suppliers or finance sources or the loss thereof. |
| • | Development or release of a significant new service. |
| • | Major discoveries or significant changes or developments in products or product lines, research or technologies. |
| • | Important business developments such as trial and study results or developments regarding strategic collaborators. |
| • | Significant pricing or cost changes. |
| • | Issuance of patents or the acquisition or disposition of other material intellectual property rights. |
| • | Regulatory changes, actions, approvals or rejections or material correspondence from regulatory bodies. |
| • | Impending bankruptcy or financial liquidity problems. |
| • | Defaults on borrowings. |
| • | Gain or loss of a significant customer or supplier. |
| • | Significant expansion or curtailment of operations. |
| • | Significant write-downs in assets or increases or decreases in revenues. |
| • | News of or developments in any potential mergers or acquisitions, the sale of Company assets or subsidiaries, tender offer or major partnering, joint venture or collaboration agreements. |
| • | Changes in management or the Board of Directors. |
| • | Significant labor disputes or negotiations. |
| • | A change in auditors or notification that an auditor’s report may no longer be relied upon. |
| • | A significant cybersecurity incident. |
| • | Significant changes in the Company’s capital structure or distribution policies. |
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| • | Stock splits, stock repurchase programs, public or private securities/debt offerings or changes in Company dividend policies or amounts. |
| • | Actual or threatened major litigation, or the resolution of such litigation. |
| • | The imposition of an event-specific restriction on trading in Company securities or the securities of another company or the extension or termination of such restriction. |
B. “Nonpublic.” Material information is “nonpublic” if it has not been widely disseminated to the general public through a report filed with the SEC or through major newswire services, national news services or financial news services, a broadcast on widely available radio or television programs or publication in a widely available newspaper, magazine or news website. For purposes of this Policy, information will be considered public after the close of trading on the second full trading day following the Company’s widespread public release of the information. For purposes of this Policy, if such public disclosure occurs on a trading day before the markets close, then that day shall be considered the first trading day. If such public disclosure occurs after the markets close on a trading day, then the date of public disclosure shall not be considered the first trading day following the date of public disclosure.
C. Consult Compliance Officer When in Doubt. Any employees who are unsure whether the information that they possess is material or nonpublic must consult the Compliance Officer for guidance before trading in any Company securities.
Section 15. Trading Blackout Period. To ensure compliance with this Policy and applicable securities laws, and to avoid even the appearance of trading on the basis of inside information, the Company requires that Covered Parties are subject to a blackout period (as defined below) prohibitions because of their access to the Company’s internal financial statements or other material nonpublic information regarding the Company’s performance during annual and quarterly fiscal periods (such individuals collectively referred to herein as the “Designated Insiders”), and Family Members of the foregoing refrain from conducting transactions involving the purchase or sale of the Company’s securities during the blackout periods established below. Each of the following periods will constitute a “blackout period”:
The period commencing on the 16th day of the last month of a fiscal quarter and ending at the close of business on the second trading day following the date of public disclosure of the Company’s financial results for such fiscal quarter. If such public disclosure occurs after the markets close on a trading day, then the date of public disclosure shall not be considered the first trading day following the date of public disclosure.
In addition to the blackout periods described above, the Company may announce “special” blackout periods from time to time if, in the judgment of the Chief Executive Officer or the Compliance Officer, there are nonpublic developments that would be considered material for insider trading law purposes, such as, among other things, developments relating to regulatory matters, litigation or a major corporate transaction. Depending on the circumstances, a “special” blackout period may apply to all Designated Insiders or only to a specific group of Designated
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Insiders. The Compliance Officer will provide written notice to Designated Insiders subject to a “special” blackout period. Any person made aware of the existence of a “special” blackout period should not disclose the existence of the “special” blackout period to any other person. The failure of the Company to designate a person as being subject to a “special” blackout period will not relieve that person of the obligation not to trade while the person is aware of any material nonpublic information concerning the Company. As used in this Policy, the term “blackout period” shall mean all periodic blackout periods and all “special” blackout periods announced by the Company.
The purpose behind the blackout period is to help establish a diligent effort to avoid any improper transactions. Trading in the Company’s securities outside a blackout period should not be considered a “safe harbor,” and all directors, officers and employees of the Company and other persons subject to this Policy should use good judgment at all times. Even outside a blackout period, any person possessing material nonpublic information concerning the Company should not engage in any transactions in the Company’s securities until such information has been known publicly for at least two trading days after the date of announcement. Although the Company may from time to time impose “special” blackout periods because of developments known to the Company and not yet disclosed to the public, each person is individually responsible at all times for compliance with the prohibitions against insider trading.
Transactions effected pursuant to a trading plan under SEC Rule 10b5-1 implemented in accordance with this Policy are not subject to blackout periods.
Section 16. Violations of Insider Trading Laws or this Policy can Result in Severe Consequences.
A. Liability for Insider Trading. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be subject to an SEC civil investigation, cease-and-desist order or other administrative action, and incur federal and state law penalties and sanctions, including, but not limited to: (1) jail sentences; (2) criminal fines; (3) civil penalties; (4) SEC civil enforcement injunctions; (5) administrative sanctions; and (6) a permanent bar from serving as an officer or director of a public company.
There is no de minimis exception to the rule against insider trading. Use of inside information to gain personal benefit is as illegal with respect to one share of stock as it is with respect to a large number of shares.
B. Any employee, officer or director of the Company who tips (“tippers”) a third party (commonly referred to as a “tippee”) may also be liable for improper transactions by tippees to whom they have tipped material nonpublic information regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in the Company’s securities. Tippers and tippees would be subject to the same penalties and sanctions as described above, and the SEC has imposed large penalties even when the tipper or tippee did not profit from the trading. The SEC and the national securities exchanges use sophisticated electronic surveillance techniques to assess and uncover insider trading.
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C. Control Persons. The Company and/or the supervisors of the person violating the rules, if they fail to take appropriate steps to prevent insider trading, may in certain circumstances be subject to major civil or criminal penalties.
D. Company Discipline. Violation of this Policy or federal or state insider trading laws by any director, officer or employee may subject the director to removal proceedings and the officer or employee to disciplinary action by the Company, including termination for cause and, in appropriate cases, civil legal action or referral for regulatory or criminal prosecution.
Section 17. This Policy Is Subject to Revision. MCC may change the terms of this Policy from time to time and reserves the right to amend, supplement or discontinue this Policy and the matters addressed herein without prior notice at any time. The Company anticipates that modifications to this Policy will be necessary from time to time, as the Company’s needs and circumstances evolve and to respond to developments in law and practice, and will take steps to inform all affected persons of any material changes. The Nominating and Corporate Governance Committee of the Board of Directors will be responsible for monitoring and recommending any modification to this Policy, if necessary or advisable, to the Board of Directors.
Section 18. All Persons Must Acknowledge Their Agreement to Comply with this Policy. The Policy will be available on the Company’s internal website. Upon first receiving a copy of the Policy or any revised versions, each such person shall be requested to sign an acknowledgment that they have received a copy and agree to comply with the Policy’s terms. This acknowledgment and agreement will constitute consent for MCC to impose sanctions for violation of this Policy and to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with this Policy.
Section 19. Additional Information. Nothing in this Policy creates or implies an employment contract or term of employment. Employment at the Company is employment at-will unless otherwise expressly provided in an employment contract signed by the employee and the Chief Executive Officer (or another authorized officer of the Company). Employment at-will may be terminated with or without cause and with or without notice at any time by the employee or the Company. Nothing in this Policy shall limit the right to terminate employment at-will. No one other than the Chief Executive Officer is authorized to change this at-will employment relationship, or to enter into an agreement to employ employees for a specified period of time. If the Chief Executive Officer makes this kind of different agreement with an employee, it will not be effective unless it is in writing, clearly states that the at-will employment relationship is changed and is signed by the employee and the Chief Executive Officer (or another authorized officer of the Company).
Section 20. Amendments. This Policy will be subject to the periodic review of the Board of Directors. The Company anticipates that modifications to this Policy will be necessary from time to time as the Company’s needs and circumstances evolve, and as applicable legal or listing standards change. The Company reserves the right to amend, supplement or discontinue this Policy and the matters addressed herein, without prior notice, at any time. However, employees are expected to adhere to this Policy and the procedures established under it until they receive any contrary instruction from the Compliance Officer.
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Adopted on April 7, 2025
Effective as of April 7, 2025
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APPENDIX I
Rule 10b5-1 Plan Guidelines
Any officer, director or other employee of the Company (a “participant”) adopting a trading plan (the “Plan”) under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each such Plan must meet the following requirements.
| 1. | The Plan must be a written plan or binding agreement entered into with a national brokerage firm or other financial professional reasonably acceptable to the Company. |
| 2. | The Plan must clearly state that both the Plan participant and the brokerage firm intend that all transactions will comply with Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”). |
| 3. | The Plan must include a representation by the participant to the Company at the time of adoption or modification of the Plan that: (i) the participant is not aware of any material nonpublic information about the Company or Company securities, and (ii) the participant is adopting the Plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act. |
| 4. | The participant is solely responsible for determining Plan compliance with Rule 10b5-1 and other applicable laws and regulations. Pre-clearance of the Plan by the Company should not be characterized or understood to signify consent, approval or a legal opinion as to the Plan’s effectiveness or the participant’s compliance with Rule 10b5-1. None of the Company, the Compliance Officer or any of the Company’s officers, employees or other representatives shall be deemed, solely by their authorization of a Plan on behalf of the Company, to have assumed any liability or responsibility to the participant or any other party if such Plan fails to comply with Rule 10b5-1. |
| 5. | The Plan must: (i) specify the amount of securities to be purchased or sold and the price at which and the date on which the securities are to be purchased or sold, or (ii) include a written formula, algorithm or computer program for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities are to be purchased or sold. In any case, the Plan must prohibit the participant and any other person who possesses material nonpublic information concerning the Company from exercising any subsequent influence over how, when or whether to effectuate purchases or sales. |
| 6. | The Plan must be adopted while the Company is not in a blackout period. |
| 7. | For Plan participants that are officers and directors, no transaction may take place under the Plan until the later of (a) 90 days after adoption or modification (as specified in Rule 10b5-1) of the Plan, or (b) two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the fiscal quarter (or the Company’s fourth fiscal quarter in the case of a Form 10-K) in which the Plan was adopted or modified (as specified in Rule 10b5-1), in all cases not to exceed 120 days after adoption or modification of the Plan. |
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| 8. | For Plan participants other than officers and directors, no transaction may take place under the Plan until 30 days following the adoption or modification (as specified in Rule 10b5-1) of the Plan. |
| 9. | Subject to certain limited exceptions specified in Rule 10b5-1, Plan participants may not have more than one Plan outstanding at the same time. |
| 10. | The Plan participant may not be at the time of entering into the Plan and may not during the term of the Plan become a party to a corresponding or hedging transaction involving Company securities. |
| 11. | The Plan participant must cooperate with the Company’s decisions regarding public disclosure of the Plan. If the Plan participant is a director or officer, the Plan participant (i) acknowledges that the Company and such director or officer must make certain disclosures in SEC filings concerning the Plan, and (ii) must promptly provide any information requested by the Company regarding the Plan (including any amendment or termination thereof) for the purpose of providing the required disclosures or any other disclosures that the Company deems to be required or appropriate under the circumstances. |
| 12. | Although modifications to the Plan are not prohibited, the Plan should be adopted with the intention that it will not be amended, modified or terminated prior to its expiration. |
| 13. | The Plan must provide for multiple transactions (as opposed to a single transaction); provided that Plan participants may, subject to certain limited exceptions specified in Rule 10b5-1, adopt one Plan that provides for a single transaction in any consecutive 12-month period. |
| 14. | The Plan must provide for same-day confirmation (by e-mail) by the financial institution to one or more individuals specified by the Company of each transaction made under the Plan, and of any proposed modification, amendment or termination of the Plan. |
| 15. | If required with respect to a transaction under the Plan, an SEC Form 144 will be filled out and filed by the participant or the participant’s brokerage firm in accordance with the existing rules regarding Form 144 filings. For directors and officers, Form 4s should be filed timely with respect to transactions under the Plan. A similar footnote should be included in the Form 4 as outlined above. |
| 16. | The Plan must provide for the suspension of all transactions under such Plan in the event that the Company, in its sole discretion, deems such suspension necessary and advisable, including suspensions necessary to comply with trading restrictions imposed in connection with any lock-up agreement required in connection with a securities issuance transaction or other similar events. |
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APPENDIX II
Special Restrictions on Transactions in Company Securities
by Section 16 Insiders and other Covered Parties
To minimize the risk of apparent or actual violations of the rules governing insider trading, we have adopted these special restrictions relating to transactions in our securities by Section 16 Insiders. Section 16 Insiders are responsible for ensuring compliance with this Appendix II, including restrictions on all trading during certain periods by family members and members of their households and by entities over which they exercise voting or investment control. Section 16 Insiders should provide each of these persons or entities with a copy of this Policy.
Section 1. Trade Pre-Clearance Required. As part of this Policy, all purchases and sales of equity securities of the Company by a Covered Party, other than transactions that are not subject to the Policy or transactions pursuant to a Rule 10b5-1 trading plan authorized by the Compliance Officer, must be pre-cleared by the Compliance Officer. This requirement is intended to prevent inadvertent Policy violations, avoid trades involving the appearance of improper insider trading, facilitate timely Form 4 reporting by Section 16 Insiders and avoid transactions that are subject to disgorgement under Section 16(b) of the Exchange Act.
Requests for pre-clearance must be submitted via email to the Compliance Officer at least four (4) business days in advance of each proposed transaction. If the Covered Party does not receive a response from a Compliance Officer within twenty four (24) hours, the Section 16 Insider must follow up to ensure that the message was received. Each Covered Party request for pre-clearance should include the nature of the proposed transaction and the expected date of the transaction. In addition, each request by a Covered Party for pre-clearance should also include the following information:
| • | Number of shares involved; |
| • | If the transaction involves a stock option exercise, the specific option to be exercised; and |
| • | Contact information for the broker who will execute the transaction. |
Once the proposed transaction is pre-cleared, the Covered Party may proceed with it on the approved terms; provided that the Covered Party complies with all other securities law requirements, such as Rule 144 and prohibitions regarding trading on the basis of inside information, and with any special trading blackout imposed by the Company prior to the completion of the trade.
Neither the Company nor the Compliance Officer: (a) will have any liability for any delay in reviewing or refusal of a pre-clearance request, or (b) assumes any liability for the legality or consequences of any transaction that is the subject of a pre-clearance request to the party requesting such pre-clearance.
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Section 2. Pre-Clearance of Rule 10b5-1 Plans Required. Pre-clearance is required for the establishment of a Rule 10b5-1 trading plan at least four (4) full trading days prior to entry into, modification of or termination of the plan. However, pre-clearance will not be required for individual transactions effected pursuant to a pre-cleared Rule 10b5-1 trading plan. All Section 16 Insiders must immediately report the results of transactions effected under a trading plan to the Compliance Officer since they will be reportable on Form 4 within two (2) business days following the execution of the trade, subject to an extension of not more than two (2) additional business days where the Section 16 Insider is not immediately aware of the execution of the trade. Notwithstanding the foregoing, any transactions by the Compliance Officer, or a delegee of the Compliance Officer under this Policy, shall be subject to pre-clearance by the Chief Executive Officer. Pre-clearance of a plan by the Company should not be characterized or understood to signify consent, approval or a legal opinion as to the plan’s effectiveness or the participant’s compliance with Rule 10b5-1.
Section 3. Hardship Exemptions. The Compliance Officer may, on a case-by-case basis, authorize a transaction in MCC securities during a regular, quarterly blackout period (but in no event during a special blackout period) due to financial or other hardship. Any request for a hardship exemption must be in writing and must describe the amount and nature of the proposed transaction and the circumstances of the hardship. The Section 16 Insider requesting the hardship exemption must also certify to the Compliance Officer within two (2) business days prior to the date of the proposed trade that such insider is not in possession of material nonpublic information concerning MCC. The existence of the foregoing procedure does not in any way obligate the Compliance Officer to approve any hardship exemption requested by a Section 16 Insider.
Section 4. Brokers. All Section 16 Insiders must ensure that their broker does not execute any transaction for the Section 16 Insider (other than under a previously authorized Rule 10b5-1 trading plan) until the broker has verified with the Compliance Officer that the transaction has been pre-cleared.
Section 5. Reporting of Transactions Required. To facilitate timely reporting under Section 16 of the Exchange Act, Section 16 Insiders are required to, on the same day as the trade date or, with respect to transactions effected pursuant to a Rule 10b5-1 plan, on the day the Section 16 Insider is advised of the terms of the transaction: (a) report the details of each transaction to the Compliance Officer, and (b) arrange with persons whose trades must be reported by the Section 16 Insider under Section 16 of the Exchange Act (such as immediate family members living in the Section 16 Insider’s household) to immediately report directly to the Company and to the Section 16 Insider the following transaction details:
| • | Transaction date (trade date); |
| • | Number of shares involved; |
| • | Price per share at which the transaction was executed (before addition or deduction of brokerage commission and other transaction fees); |
| • | For stock option exercises, the specific option exercised; |
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| • | Contact information for the broker who executed the transaction; and |
| • | Specific representation that the Section 16 Insider is not in possession of material non-public information. |
The transaction details must be reported to the Compliance Officer, with copies to MCC personnel who will assist the Section 16 Insider in preparing their Form 4.
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Exhibit 21.1
Subsidiaries of the Registrant
| Name of Subsidiary | Jurisdiction of Incorporation | |
| Marblegate Acquisition Corp. | Delaware | |
| DePalma Acquisition I LLC | Delaware | |
| DePalma Acquisition II LLC | Delaware |
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
RULE 13a-14(a) AND RULE 15d-14(a) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew Milgram, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Marblegate Capital Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | (paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 7, 2025 |
|
By: | /s/ Andrew Milgram | |||
| Andrew Milgram | ||||||
| Chief Executive Officer | ||||||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
RULE 13a-14(a) AND RULE 15d-14(a) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey Kravetz, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Marblegate Capital Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | (paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 7, 2025 |
|
By: | /s/ Jeffrey Kravetz | |||
| Jeffrey Kravetz | ||||||
| Chief Financial Officer | ||||||
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report on Form 10-K of Marblegate Capital Corporation (the “Company”) for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew Milgram, Chief Executive Officer and Executive Director of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: April 7, 2025 | By: | /s/ Andrew Milgram | ||||
| Andrew Milgram | ||||||
| Chief Executive Officer and Executive Director | ||||||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report on Form 10-K of Marblegate Capital Corporation (the “Company”) for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Kravetz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: April 7, 2025 | By: | /s/ Jeffrey Kravetz | ||||
| Jeffrey Kravetz | ||||||
| Chief Financial Officer | ||||||
| (Principal Financial Officer) |
Exhibit 97.1
MARBLEGATE CAPITAL CORPORATION
COMPENSATION RECOVERY POLICY
Marblegate Capital Corporation, a Delaware corporation (the “Company”), has adopted a Compensation Recovery Policy (this “Policy”) as described below.
| 1. | OVERVIEW |
The Policy sets forth the circumstances and procedures under which the Company shall recover Erroneously Awarded Compensation from Covered Persons (as defined below) in accordance with rules issued by the United States Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and The Nasdaq Stock Market LLC. Capitalized terms used and not otherwise defined herein shall have the meanings given in Section 3 below.
| 2. | COMPENSATION RECOVERY REQUIREMENT |
In the event the Company is required to prepare a Financial Restatement, the Company shall recover reasonably promptly all Erroneously Awarded Compensation with respect to such Financial Restatement.
| 3. | DEFINITIONS |
| a. | “Applicable Recovery Period” means the three completed fiscal years immediately preceding the Restatement Date for a Financial Restatement. In addition, in the event the Company has changed its fiscal year: (i) any transition period of less than nine months occurring within or immediately following such three completed fiscal years shall also be part of such Applicable Recovery Period and (ii) any transition period of nine to 12 months will be deemed to be a completed fiscal year. |
| b. | “Applicable Rules” means any rules or regulations adopted by the Exchange pursuant to Rule 10D-1 under the Exchange Act and any applicable rules or regulations adopted by the SEC pursuant to Section 10D of the Exchange Act. |
| c. | “Board” means the Board of Directors of the Company. |
| d. | “Committee” means the Compensation Committee of the Board or, in the absence of such committee, a majority of independent directors serving on the Board. |
| e. | “Covered Person” means any Executive Officer and any other person designated by the Board or the Committee as being subject to this Policy. A person’s status as a Covered Person with respect to Erroneously Awarded Compensation shall be determined as of the time of receipt of such Erroneously Awarded Compensation regardless of the person’s current role or status with the Company (e.g., if a person began service as an Executive Officer after the beginning of an Applicable Recovery Period, that person would not be considered a Covered Person with respect to Erroneously Awarded Compensation received before the person began service as an |
| Executive Officer, but would be considered a Covered Person with respect to Erroneously Awarded Compensation received after the person began service as an Executive Officer where such person served as an Executive Officer at any time during the performance period for such Erroneously Awarded Compensation). |
| f. | “Effective Date” means the effective date of this Policy. |
| g. | “Erroneously Awarded Compensation” means the amount of any Incentive-Based Compensation received by a Covered Person on or after the Effective Date and during the Applicable Recovery Period that exceeds the amount that otherwise would have been received by the Covered Person had such compensation been determined based on the restated amounts in a Financial Restatement, computed without regard to any taxes paid. Calculation of Erroneously Awarded Compensation with respect to Incentive-Based Compensation based on stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in a Financial Restatement, shall be based on a reasonable estimate of the effect of the Financial Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was received, and the Company shall maintain documentation of the determination of such reasonable estimate and provide such documentation to the Exchange in accordance with the Applicable Rules. Incentive-Based Compensation is deemed received, earned or vested when the Financial Reporting Measure is attained, not when the actual payment, grant or vesting occurs. |
| h. | “Exchange” means The Nasdaq Stock Market LLC (or such other applicable exchange or over-the-counter market). |
| i. | An “Executive Officer” means any person who served the Company in any of the following roles at any time during the performance period applicable to Incentive-Based Compensation and received Incentive-Based Compensation after beginning service in any such role (regardless of whether such Incentive-Based Compensation was received during or after such person’s service in such role): the president, principal financial officer, principal accounting officer (or if there is no such accounting officer the controller), any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the Company. Executive officers of parents or subsidiaries of the Company may be deemed executive officers of the Company if they perform such policy making functions for the Company. |
| j. | “Financial Reporting Measures” mean measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, any measures that are derived wholly or in part from such measures (including, for example, a non-GAAP financial measure), and stock price and total shareholder return. |
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| k. | “Incentive-Based Compensation” means any compensation provided, directly or indirectly, by the Company or any of its subsidiaries that is granted, earned or vested based, in whole or in part, upon the attainment of a Financial Reporting Measure. |
| l. | A “Financial Restatement” means a restatement of previously issued financial statements of the Company due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required restatement to correct an error in previously-issued financial statements that is material to the previously-issued financial statements or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. |
| m. | “Restatement Date” means, with respect to a Financial Restatement, the earlier to occur of: (i) the date the Board concludes, or reasonably should have concluded, that the Company is required to prepare the Financial Restatement or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare the Financial Restatement. |
| 4. | EXCEPTION TO COMPENSATION RECOVERY REQUIREMENT |
The Company may elect not to recover Erroneously Awarded Compensation pursuant to this Policy if the Committee determines that recovery would be impracticable, and one or more of the following conditions, together with any further requirements set forth in the Applicable Rules, are met: (i) the direct expense paid to a third party, including outside legal counsel, to assist in enforcing this Policy would exceed the amount to be recovered, and the Company has made a reasonable attempt to recover such Erroneously Awarded Compensation or (ii) recovery would likely cause an otherwise tax-qualified retirement plan to fail to be so qualified under applicable regulations.
| 5. | TAX CONSIDERATIONS |
To the extent that, pursuant to this Policy, the Company is entitled to recover any Erroneously Awarded Compensation that is received by a Covered Person, the gross amount received (i.e., the amount the Covered Person received, or was entitled to receive, before any deductions for tax withholding or other payments) shall be returned by the Covered Person.
| 6. | METHOD OF COMPENSATION RECOVERY |
The Committee shall determine, in its sole discretion, the method for recovering Erroneously Awarded Compensation hereunder, which may include, without limitation, any one or more of the following:
| a. | requiring reimbursement of cash Incentive-Based Compensation previously paid; |
| b. | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards; |
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| c. | cancelling or rescinding some or all outstanding vested or unvested equity-based awards; |
| d. | adjusting or withholding from unpaid compensation or other set-off; |
| e. | cancelling or offsetting against planned future grants of equity-based awards; and/or |
| f. | any other method permitted by applicable law or contract. |
Notwithstanding the foregoing, a Covered Person will be deemed to have satisfied such person’s obligation to return Erroneously Awarded Compensation to the Company if such Erroneously Awarded Compensation is returned in the exact same form in which it was received; provided that equity withheld to satisfy tax obligations will be deemed to have been received in cash in an amount equal to the tax withholding payment made.
| 7. | POLICY INTERPRETATION |
This Policy shall be interpreted in a manner that is consistent with the Applicable Rules and any other applicable law. The Committee shall take into consideration any applicable interpretations and guidance of the SEC in interpreting this Policy, including, for example, in determining whether a financial restatement qualifies as a Financial Restatement hereunder. To the extent the Applicable Rules require recovery of Incentive-Based Compensation in additional circumstances besides those specified above, nothing in this Policy shall be deemed to limit or restrict the right or obligation of the Company to recover Incentive-Based Compensation to the fullest extent required by the Applicable Rules.
| 8. | POLICY ADMINISTRATION |
This Policy shall be administered by the Committee; provided, however, that the Board shall have exclusive authority to authorize the Company to prepare a Financial Restatement. In doing so, the Board may rely on a recommendation of the Audit Committee of the Board. The Committee shall have such powers and authorities related to the administration of this Policy as are consistent with the governing documents of the Company and applicable law. The Committee shall have full power and authority to take, or direct the taking of, all actions and to make all determinations required or provided for under this Policy and shall have full power and authority to take, or direct the taking of, all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of this Policy that the Committee deems to be necessary or appropriate to the administration of this Policy. The interpretation and construction by the Committee of any provision of this Policy and all determinations made by the Committee under this policy shall be final, binding and conclusive.
| 9. | COMPENSATION RECOVERY REPAYMENTS NOT SUBJECT TO INDEMNIFICATION |
Notwithstanding anything to the contrary set forth in any agreement with, or the organizational documents of, the Company or any of its subsidiaries, Covered Persons are not entitled to indemnification for Erroneously Awarded Compensation or for any losses arising out of or in any way related to Erroneously Awarded Compensation recovered under this Policy.
Effective as of April 7, 2025
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