UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
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Introductory Note
As previously disclosed, on May 25, 2022, Southland Holdings, Inc. (the “Company”, known prior to the Closing Date (as defined below) as Legato Merger Corp. II (“Legato II”)) entered into an Agreement and Plan of Merger, dated as of May 25, 2022 (the “Merger Agreement”), by and among the Company, Southland Holdings LLC, a Texas limited liability company (“Southland”), and Legato Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Legato II (“Merger Sub”).
On February 14, 2023 (the “Closing Date”), as contemplated by the Merger Agreement, Merger Sub merged with and into Southland, with Southland surviving as a wholly-owned subsidiary of the Company, and with the securityholders of Southland becoming securityholders of the Company (the “Merger”). The Merger and other transactions contemplated by the Merger Agreement are referred to collectively herein as the “Business Combination”, and the consummation of the Business Combination on the Closing Date is referred to herein as the “Closing”.
At Closing, the Company issued 33,793,111 shares of common stock (“Common Stock”) to the former members of Southland (“Southland Members”) in exchange for their membership interests in Southland (“Southland Membership Interests”) (such shares of Common Stock, the “Merger Consideration Common Shares”). After giving effect to such issuance, and the redemption of an aggregate of 25,296,280 shares of Legato II Common Stock in accordance with the terms of Legato II’s amended and restated certificate of incorporation (such certificate of incorporation the “Prior Charter”, such redemptions the “SPAC Redemptions”), but without giving effect to the issuance of shares of Common Stock which may be issued by the Company pursuant to the earnout conditions set forth in the Merger Agreement, the Southland Members own approximately 77.8% of the outstanding shares of Common Stock of the Company.
The description of the Merger Agreement contained in this Current Report on Form 8-K does not purport to be complete and is qualified in its entirety by the text of the Merger Agreement, which was filed as Exhibit 2.1 to Legato II’s Current Report on Form 8-K filed on May 25, 2022 and is incorporated by reference herein.
Item 1.01 Entry into a Material Definitive Agreement
The information set forth in the Introductory Note of this Current Report on Form 8-K is incorporated herein by reference.
Amended and Restated Registration Rights Agreement
In connection with the Business Combination, on the Closing Date, that certain Registration Rights Agreement, dated November 22, 2021, was amended and restated and the Company, certain Southland Members, the Company’s stockholders prior to its initial public offering (the “Initial Stockholders”), including each of Legato II’s officers and directors, and EarlyBirdCapital, Inc. (“EBC”) entered into the Amended and Restated Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”). Pursuant to the Amended and Restated Registration Rights Agreement, among other things, the Company will, within 45 days after the Closing Date, file a registration statement on Form S-1 to register for resale under the Securities Act the shares of Common Stock issued or issuable in connection with the Merger, the shares of Common Stock held by the Initial Stockholders or issuable upon the exercise of the Company’s warrants, each whole warrant to purchase one share of Common Stock for $11.50 per share (the “Warrants”), held by the Initial Stockholders (or their transferees) as of immediately after the Closing Date, and the shares of Common Stock and units issued to EBC (and its designees) in connection with the Company’s initial public offering. The material terms of the Amended and Restated Registration Rights Agreement are described in the definitive proxy statement/prospectus for the Business Combination, filed by Legato II on February 1, 2023 (the “Proxy Statement/Prospectus”) in the section entitled “Proposal No. 1 — The Business Combination Proposal — The Merger Agreement — Related Agreements”.
The foregoing description of the Registration Rights Agreement is qualified in its entirety by the full text of the Amended and Restated Registration Rights Agreement, a copy of which is attached hereto as Exhibit 10.5 and incorporated herein by reference.
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Incentive Plan
On May 24, 2022, Legato II’s board of directors approved the Company 2022 Equity Incentive Plan (the “Incentive Plan”). On February 14, 2023, the Company’s stockholders approved the Incentive Plan at the Company’s annual meeting of stockholders (the “Meeting”), and on February 14, 2023, the newly constituted board of directors of the Company ratified the Incentive Plan. The purpose of the Incentive Plan is to advance the interests of the Company and its stockholders by providing an incentive program that will enable the Company to attract, retain and award employees, consultants and directors and to provide them with an equity interest in the growth and profitability of the Company. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other awards. No awards were granted under the Incentive Plan prior to its approval by the stockholders of the Company. All awards under the Incentive Plan will be granted at the discretion of the board of directors of the Company.
The foregoing description is not complete and is qualified in its entirety by reference to the complete text of the Incentive Plan, a copy of which is attached hereto as Exhibit 10.3, and the text of the forms of award agreements, copies of which are attached hereto as Exhibits 10.3.1 through 10.3.5, which are incorporated herein by reference.
Executive Employment Agreements
On the Closing Date, each of Messrs. Frankie “Frank” S. Renda, Walter Timothy “Tim” Winn, Rudolph “Rudy” V. Renda, and Cody Gallarda entered into employment agreements with the Company (the “New Employment Agreements”). The New Employment Agreements generally provide for at-will employment and each executive’s annual base salary, eligibility to receive an annual cash performance bonus, eligibility to receive equity grants pursuant to the Company’s equity plans and eligibility to participate in the Company’s benefit plans.
The annual base salary of each executive, and such executive’s annual cash performance bonus, are expected to be reviewed annually by the Company. Mr. Frank Renda’s New Employment Agreement provides for an initial annual base salary of $650,000. Mr. Winn’s New Employment Agreement provides for an initial annual base salary of $500,000. Mr. Rudy Renda’s New Employment Agreement provides for an initial annual base salary of $500,000. Mr. Gallarda’s New Employment Agreement provides for an initial annual base salary of $400,000. Each executive’s New Employment Agreement provides for an annual cash performance bonus that is targeted, but not guaranteed, to be between 80% and 200% of such executive’s annual base salary for that particular year.
The New Employment Agreements also restrict Messrs. Frank Renda, Tim Winn, and Rudy Renda’s ability to sell more than a certain percentage of his total, aggregate equity holdings in the Company or any of the Company’s affiliates during any calendar year. Each executive officer is subject to certain restrictive covenants, including but not limited to confidentiality, non-disclosure and non-solicitation covenants under his New Employment Agreement.
Further, the New Employment Agreements provide for the following payments upon termination of an executive’s employment, including in connection with a change in control:
● | Termination by the Company for Cause or Termination by Executive Without Good Reason. If the Company terminates an executive’s employment for cause or an executive terminates his employment without good reason, the Company will pay to the executive his base salary due through the date of termination and all accrued benefits, if any, to which the executive is entitled as of the date of termination, at the time such payments are due, and the executive’s rights with respect to equity or equity-related awards will be governed by the applicable terms of the related plan and/or separate award agreement. |
● | Termination by the Company without Cause or Termination by Executive with Good Reason. If the Company terminates an executive’s employment other than for cause or disability or if an executive terminates his employment with good reason: (i) the Company will pay the executive (A) the executive’s base salary due through the date of termination, (B) a pro rata bonus at the time other employees receive annual bonuses for the calendar year in which the date of termination occurs and in all events by March 15 of the calendar year following the year in which such termination occurs, (C) all accrued benefits, if any, to which the executive is entitled as of the date of termination, in each case at the time such payments are due, (D) a cash lump sum in an amount equal to one (1) times the sum of the executive’s base salary and target annual bonus for the year of termination, payable in a lump sum on the 60th day following the date of termination (ii) all outstanding equity awards held by the executive immediately prior to his termination will immediately vest (with outstanding options remaining exercisable for the length of their remaining term), and (iii) the executive and his covered dependents will be entitled to continued participation in benefit plans on the same terms and conditions as applicable immediately prior to his date of termination for 18 months; provided that if such continued coverage is not permitted under the terms of such benefit plans, the Company will pay the executive an additional, lump sum amount that, on an after-tax basis, is equal to the cost of comparable coverage obtained by the executive, and (E) a cash, lump sum in an amount equal to any unpaid portion of the signing bonus and the deferred compensation, if any, payable in a lump sum on the 60th day following the date of termination. |
● | Termination Upon a Change in Control. If there is (i) a termination of an executive’s employment by the Company without cause (and not as a result of death or disability) or a resignation by an executive with good reason during the two-year period following a change in control or (ii) a termination of an executive’s employment by the Company without cause (and not as a result of death or disability) within six (6) months prior to a change in control, if the termination was at the request of a third party or otherwise arose in anticipation of the change in control, the executive will receive the payments and benefits set forth in Termination by the Company without Cause or Termination by Executive with Good Reason, except that in lieu of the lump-sum payment under subsection (i)(D) thereof, the executive will receive a cash payment in an amount equal to two (2) times the sum of his base salary and target annual bonus for the year of termination (without taking into account any reductions which would constitute good reason), payable in a lump sum on the 60th day following the date of termination. |
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The foregoing description of the New Employment Agreements is not complete and is qualified in its entirety by reference to the complete text of each of the New Employment Agreements, copies of which are attached hereto and filed as Exhibits 10.6.1 through 10.6.4 to this Current Report on Form 8-K and are incorporated herein by reference.
Indemnification Agreements
In connection with the consummation of the Merger, the Company entered into indemnification agreements (the “Indemnification Agreements”) with each of its directors and executive officers. Subject to certain exceptions, the Indemnification Agreements provide that the Company will indemnify each of its directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of the Company’s directors or officers or any other company or enterprise to which the person provides services at the Company’s request.
The foregoing description of the Indemnification Agreements is a summary only and is qualified in its entirety by reference to the form of Indemnification Agreement, a copy of which is attached as Exhibit 10.8 to this Current Report on Form 8-K and is incorporated herein by reference.
Merger Consideration Notes
At Closing, in addition to the Merger Consideration Common Shares and in lieu of the Cash Consideration (as defined in the Merger Agreement), the Company issued unsecured promissory notes (the “Merger Consideration Notes”) to the Southland Members in exchange for the Southland Membership Interests. The Merger Consideration Notes are for the aggregate principal amount of $50,000,000, with each Southland Member’s Merger Consideration Note being for a principal amount equal to (a) $50,000,000 multiplied by (b) such Southland Member’s percentage of all Southland Membership Interests issued and outstanding immediately prior to the effective time on the Closing Date. The Merger Consideration Notes bear interest at a rate of seven percent per annum. There are no installment payments of principal or accrued interest due under the Merger Consideration Notes prior to maturity, and the unpaid principal thereunder, together with outstanding accrued interest, shall become due and payable on February 14, 2028.
The foregoing description of the Merger Consideration Notes is a summary only and is qualified in its entirety by reference to the form of Merger Consideration Note, a copy of which is attached as Exhibit 10.9 to this Current Report on Form 8-K and is incorporated herein by reference.
Letter Agreement
On the Closing Date, certain stockholders of Legato II (the “Legato Insiders”) entered into a letter agreement (the “Letter Agreement) with certain members of Southland (the “Recipients”). Pursuant to the Letter Agreement, the Legato Insiders agreed that, upon consummation of the transactions contemplated by the Merger Agreement (the “Transactions”), they would transfer to the Recipients an aggregate of 765,544 shares of Common Stock. In consideration of the foregoing, the Recipients agreed, in both their capacities as members of Southland and as officers and/or managers of Southland, to use their best efforts to cause Southland to close the Transactions.
The foregoing description of the Letter Agreement is a summary only and is qualified in its entirety by reference to the complete text of the Letter Agreement, a copy of which is attached as Exhibit 10.10 to this Current Report on Form 8-K and is incorporated herein by reference.
Underwriter Notes
As previously disclosed, the Company was obligated to pay an aggregate of $9,660,000 in deferred underwriting commissions (the “Commissions”) to EBC, D.A. Davidson & Co. (“D.A. Davidson”), Thompson Davis & Co., Inc. (“Thompson Davis”) and Crag-Hallum Capital Group LLC (“Crag-Hallum” and together with EBC, D.A. Davidson and Thompson Davis, the “Underwriters”) upon the consummation of the Transactions. On the Closing Date, the Company paid the Commissions to the Underwriters via a combination of cash and promissory notes issued in favor of the Underwriters (the “Underwriter Notes”). The Underwriter Notes are for the aggregate principal amount of $4,831,100, with (a) EBC’s Underwriter Note being for a principal amount of $3,311,100, (b) D.A. Davidson’s Underwriter Note being for a principal amount of $500,000, (c) Thompson Davis’s Note being for a principal amount of $500,000 and (d) Crag-Hallum’s Underwriter Note being for a principal amount of $500,000. The Underwriter Notes bear interest at a rate of eight percent per annum. There are no installment payments of principal or accrued interest due under the Underwriter Notes prior to maturity, and the unpaid principal thereunder, together with outstanding accrued interest, shall become due and payable on February 14, 2024; provided, however, that the Company agreed to make mandatory prepayments on the Underwriter Notes from to time to time in amounts equal to fifteen percent of the gross proceeds received by the Company from any equity lines, forward purchase agreements or other equity financing consummated by the Company prior to the maturity date.
The foregoing description of the Underwriter Notes is a summary only and is qualified in its entirety by reference to the form of Underwriter Note, a copy of which is attached as Exhibit 10.11 to this Current Report on Form 8-K and is incorporated herein by reference.
Non Redemption Agreements
On February 13, 2023, the Legato Insiders entered into agreements (“Non-Redemption Agreements”) with several unaffiliated third parties in exchange for them agreeing not to redeem certain shares of Legato II’s common stock at the Meeting to approve the Transactions. In exchange for the foregoing commitment not to redeem such shares, the Legato Insiders transferred an aggregate of 102,532 shares of Legato II Common Stock held by the Legato Insiders. The foregoing description of the Non-Redemption Agreements is a summary only and is qualified in its entirety by reference to the form of Non-Redemption Agreement, a copy of which is attached as Exhibit 10.12 to this Current Report on Form 8-K and is incorporated herein by reference.
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Item 1.02 Termination of a Material Definitive Agreement.
The information set forth in the Introductory Note of this Current Report on Form 8-K is incorporated herein by reference.
On the Closing Date, in connection with the consummation of the Merger, that certain Administrative Services Agreement, dated as of November 22, 2021, between Legato II and Crescendo Advisors II, LLC, an affiliate of certain officers and directors of Legato II, pursuant to which such entity provided office space, utilities, and secretarial and administrative support to Legato II for a fee of $15,000 per month, terminated in accordance with its terms.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The disclosure set forth in the Introductory Note of this Current Report on Form 8-K is incorporated into this Item 2.01 by reference.
The Business Combination was approved by Legato II’s stockholders at the Meeting on February 14, 2023. In connection with the Meeting, holders of 25,296,280 shares of Common Stock exercised their redemption rights and such shares were redeemed at a per share price of approximately $10.30.
In connection with the consummation of the Business Combination, each outstanding share of Legato II Common Stock and each outstanding warrant of Legato II continued in existence as shares of Common Stock and warrants of the Company (“Warrants”).
As of the Closing Date and following the completion of the Business Combination and the SPAC Redemptions, the Company had the following outstanding registered securities:
● | 44,407,831 shares of Common Stock; and |
● | 14,385,500 Warrants, including 13,800,000 Warrants contained in the units sold in Legato II’s initial public offering (such Warrants the “Public Warrants”, such units the “Public Units”) and 585,500 Warrants contained in the units sold in the private placement consummated concurrently and in connection with the initial public offering (such Warrants the “Private Placement Warrants”, such units the “Private Placement Units” and collectively with the Public Units the “Units”), each exercisable for one share of Common Stock exercisable at a price of $11.50 per share. |
FORM 10 INFORMATION
Prior to the Closing, Legato II was a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with no operations, formed as a vehicle to effect a business combination with one or more businesses or entities. After the Closing, the Company became a holding company with Southland as its wholly-owned subsidiary and whose only assets consist of equity interests in Southland.
Cautionary Note Regarding Forward-Looking Statements
This document and the information incorporated by reference herein include “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of present or historical fact included in or incorporated by reference in this Current Report on Form 8-K, regarding the Company’s future financial performance, as well as the Company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Current Report on Form 8-K, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. The Company cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company, incident to its business.
These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
● | the Company’s ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitability following the Closing; |
● | the ability to obtain and/or maintain the listing of the Company’s Common Stock and Public Warrants on Nasdaq following the Closing; |
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● | the business, operations and financial performance of the Company following the Business Combination; |
● | expansion plans and opportunities, including future acquisitions or additional business combinations; |
● | the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the Closing; |
● | risks related to disruption of management’s time from ongoing business operations due to the Business Combination; |
● | litigation, complaints, product liability claims and/or adverse publicity; |
● | the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; |
● | privacy and data protection laws, privacy or data breaches, or the loss of data; |
● | the impact of the COVID-19 pandemic and its effect on business and financial conditions of the Company; and |
● | other risks and uncertainties set forth in the Proxy Statement/Prospectus in the section titled “Risk Factors” beginning on page 28 of the Proxy Statement/Prospectus. |
Business and Properties
The information set forth in the section of the Proxy Statement/Prospectus entitled “Information About Southland” beginning on page 137, and in the section of the Proxy Statement/Prospectus entitled “Information About Legato II” beginning on page 122 is incorporated herein by reference.
Risk Factors
The risks associated with Southland’s business and operations are described in the Proxy Statement/Prospectus in the section entitled “Risk Factors” beginning on page 28, which is incorporated herein by reference.
Financial Information
Unaudited Condensed Consolidated Financial Statements
The following historical financial statements of Legato II and the related notes beginning on page F-2 of the Proxy Statement/Prospectus are incorporated herein by reference: (i) unaudited financial statements as of September 30, 2022 and for the three and nine month periods then ended and (ii) audited financial statements as of December 31, 2021 and for the period from July 14, 2021 (inception) through December 31, 2021.
The following historical financial statements of Southland and the related notes beginning on page F-38 of the Proxy Statement/Prospectus are incorporated herein by reference: (i) audited consolidated statements of operations, income equity and cash flows respectively for the years ended December 31, 2021, 2020 and 2019, (ii) audited consolidated balance sheets data as of December 31, 2021 and 2020, (iii) unaudited consolidated statements of operations, income equity and cash flows respectively for the three and nine months ended September 30, 2022, and (iv) unaudited consolidated balance sheet data as of September 30, 2022.
Selected Historical Financial and Other Information
The selected historical financial information set forth in the section of the Proxy Statement/Prospectus entitled “Unaudited Historical Comparative and Pro Forma Combined Per Share Information” beginning on page 25 is incorporated herein by reference.
Unaudited Pro Forma Condensed Combined Financial Information
The information set forth in Exhibit 99.1 to this Current Report on Form 8-K is incorporated by reference herein.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Managements’ discussion and analysis of the financial condition and results of operation prior to the Merger is included in the Proxy Statement/Prospectus in the sections entitled “Legato II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 133 and “Southland’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 145, which are incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us regarding the beneficial ownership of Company Common Stock immediately following the consummation of the Business Combination by:
● | each person who is the beneficial owner of more than 5% of issued and outstanding Company Common Stock; |
● | each of our current executive officers and directors; and |
● | all executive officers and directors of the Company as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and Warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of Company Common Stock is based on 44,407,831 shares of Common Stock issued and outstanding immediately following the consummation of the Business Combination.
Name and Address of Beneficial Owner(1) | Number of shares of Common Stock | % | ||||||
Gregory Monahan(2) | 609,674 | 1.4 | ||||||
Brian Pratt(3) | 2,480,822 | 5.6 | ||||||
Frank S. Renda(4) | 22,117,537 | 49.8 | ||||||
Tim Winn(5) | 6,220,558 | 14.0 | ||||||
Rudy V. Renda(6) | 6,220,560 | 14.0 | ||||||
Cody Gallarda | - | * | ||||||
Mario Ramirez | - | * | ||||||
Izzy Martins | - | * | ||||||
Kyle Burtnett | - | * | ||||||
All Directors and Executive Officers of the Company as a Group (9 Individuals) | 37,678,891 | 84.8 | ||||||
Five Percent Holders | ||||||||
Frank S. Renda(4) | 22,117,537 | 49.8 | ||||||
Tim Winn(5) | 6,220,558 | 14.0 | ||||||
Rudy V. Renda(6) | 6,220,560 | 14.0 | ||||||
Frank Renda 2015 Irrevocable Trust | 5,571,932 | 12.5 |
* | Less than one percent. |
(1) | Unless otherwise noted, the business address of each person is c/o Southland Holdings, Inc., 1100 Kubota Drive, Grapevine, Texas 76051. | |
(2) | Represents (i) 609,674 shares and (ii) 2,500 shares issuable upon exercise of warrants exercisable within 60 days held directly by Mr. Monahan. |
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(3) | Represents (i) 121,386 shares held directly by Mr. Pratt, (ii) 1,750,000 shares and 125,000 shares issuable upon exercise of warrants exercisable within 60 days held by Pratt Capital I, LP, with which Mr. Pratt is affiliated, and (iii) 484,436 shares held by Pratt Capital LLC, with which Mr. Pratt is affiliated. With respect to the shares referenced in (ii)-(iii) in this footnote. Mr. Pratt disclaims beneficial ownership of such shares except to the extent of his ultimate pecuniary interest therein. |
(4) | Represents (i) 10,462,844 shares held directly by Mr. Renda; (ii) 5,571,932 shares held by the Frank Renda 2015 Irrevocable Trust; (iii) 2,006,635 shares held by the Dominic Vincent Renda Trust; (iv) 2,006,635 shares held by the Madison Nicole Renda Trust; (v) 2,006,635 shares held by the Santino Leonidas Renda Trust; and (vi) 62,856 shares held directly by Mr. Renda’s spouse. With respect to the shares referenced in (ii)-(vi) in this footnote, Mr. Renda disclaims beneficial ownership of such shares except to the extent of his ultimate pecuniary interest therein. |
(5) | Represents (i) 1,527,501 shares held directly by Mr. Winn; (ii) 1,520,690 shares held by the Walter Timothy Winn 2015 Irrevocable Trust; (iii) 1,520,690 shares held by the Debra Nicole Winn Irrevocable 2020 Trust; and (iv) 1,651,677 shares held directly by Mr. Winn’s spouse. With respect to the shares referenced in (ii)-(iv) in this footnote, Mr. Winn disclaims beneficial ownership of such shares except to the extent of his ultimate pecuniary interest therein. |
(6) | Represents (i) 3,517,109 shares held directly by Mr. Renda; (ii) 1,351,725 shares held by the Rudolph V. Renda, Jr. 2015 Irrevocable Trust; (iii) 675,863 shares held by the Angelo Joseph Renda Trust; and (iv) 675,863 shares held directly by the Lola Sofia Renda Trust. With respect to the shares referenced in (ii)-(iv) in this footnote, Mr. Renda disclaims beneficial ownership of such shares except to the extent of his ultimate pecuniary interest therein. |
(7) | Represents shares held by Adage Capital Partners, L.P. Adage Capital Partners has the power to dispose of and the power to vote the Common Stock beneficially owned by it, which power may be exercised by its general partner, Adage Capital Partners GP, L.L.C. (“ACPGP”). Adage Capital Advisors, L.L.C. (“ACA”), as managing member of ACPGP, directs ACPGP’s operations. Robert Atchinson and Phillip Gross are managing members of ACA. The business address of each of Adage Capital Partners, L.P., ACPGP, ACA, Mr. Atchinson and Mr. Gross is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116. Information derived from a Schedule 13G filed on December 6, 2021. |
Information about Directors and Executive Officers
Name | Age | Position | ||
Brian Pratt | 70 | Chairman (Class II Director) | ||
Frankie “Frank” S. Renda | 46 | Class III Director; President and Chief Executive Officer | ||
Walter Timothy “Tim” Winn | 46 | Class III Director; Co-Chief Operating Officer and Executive Vice President | ||
Gregory Monahan | 49 | Class III Director | ||
Izilda “Izzy” Martins | 51 | Class II Director | ||
Michael “Kyle” Burtnett | 46 | Class I Director | ||
Mario Ramirez | 56 | Class I Director | ||
Rudolph “Rudy” V. Renda | 45 | Co-Chief Operating Officer and Executive Vice President – Strategy and Special Projects | ||
Cody Gallarda | 36 | Chief Financial Officer, Executive Vice President and Treasurer |
Information with respect to the Company’s directors appointed immediately after the Closing on the Closing Date, including biographical information regarding these individuals, is set forth in the Proxy Statement/Prospectus in the section entitled “Proposal No. 3 — The Director Election Proposal” beginning on page 106, which information is incorporated herein by reference. Information with respect to the Company’s officers appointed immediately after the Closing, including biographical information regarding these individuals, is set forth in the Proxy Statement/Prospectus in the section entitled “Management of New Southland After the Merger” beginning on page 165, which information is incorporated herein by reference.
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Resignations and Appointments
In connection with the Closing, other than Mr. Pratt and Mr. Monahan, each of Legato II’s directors prior to the Closing resigned from their respective position as a director, in each case effective as of the effective time on the Closing Date.
Effective as of immediately following the Closing, the board of directors appointed Messrs. Frank Renda, Winn, Burtnett, and Ramirez and Ms. Martins to serve on the board of directors, until the expiration of such director’s initial term (as set forth below) or until their successors have been duly elected and qualified, or until their earlier death, resignation, retirement or removal. Biographies of each of Messrs. Frank Renda, Winn, Burtnett, and Ramirez and Ms. Martins are set forth in the Proxy Statement/Prospectus entitled “Proposal No. 3 — The Director Election Proposal” beginning on page 106 and are incorporated by reference herein. Additionally, the board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term. Messrs. Burtnett and Ramirez are Class I directors serving until Southland’s 2024 annual meeting of stockholders; Mr. Pratt and Ms. Martins are Class II directors serving until Southland’s 2025 annual meeting of stockholders; and Messrs. Frank Renda, Winn, and Monahan are Class III directors serving until Southland’s 2026 annual meeting of stockholders, and in each case, until their successors are elected and qualified.
In connection with the Closing, each of Legato II’s and its subsidiaries’ executive officers prior to the Closing resigned from his respective position as an executive officer, in each case effective as of the effective time on the Closing Date.
Effective as of immediately following the Closing, on the Closing Date, Mr. Frank Renda was appointed to serve as the Company’s Chief Executive Officer and President, Mr. Winn was appointed to serve as the Company’s Co-Chief Operating Officer and Executive Vice President, Mr. Rudy Renda was appointed to serve as the Company’s Co-Chief Operating Officer and Executive Vice President – Strategy and Special Projects, and Mr. Gallarda was appointed to serve as the Company’s Chief Financial Officer, Executive Vice President and Treasurer.
Role of Board in Risk Oversight
One of the key functions of the board of directors of the Company is informed oversight of the Company’s risk management process. The board of directors of the Company does not anticipate having a standing risk management committee, but rather anticipates administering this oversight function directly through the board of directors of the Company as a whole, as well as through various standing committees of the board of directors of the Company that address risks inherent in their respective areas of oversight. In particular, the board of directors of the Company is responsible for monitoring and assessing strategic risk exposure and the Company’s audit committee (the “Audit Committee”) has the responsibility to consider and discuss the Company’s major financial risk exposures and the steps management takes to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements. The Company’s compensation committee (the “Compensation Committee”) also assesses and monitors whether the Company’s compensation plans, policies and programs comply with applicable legal and regulatory requirements.
Director Independence
As a result of the Common Stock being listed on Nasdaq, the Company adheres to the listing rules of Nasdaq in affirmatively determining whether a director is independent. Nasdaq listing standards generally define an “independent director” as a person, other than an executive officer of a company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The board of directors of the Company has determined that each of the directors other than Mr. Renda and Mr. Winn qualifies as an independent director, as defined under the listing rules of Nasdaq, and that the board of directors of the Company consists of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq listing rules relating to director independence requirements.
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Committees of the Board of Directors
Messrs. Monahan and Burtnett and Ms. Martins serve as members of the Audit Committee of the board of directors, with Ms. Martins serving as its chair. Messrs. Burtnett and Pratt and Ms. Martins serve as members of the Compensation Committee of the board of directors, with Mr. Burtnett serving as its chair. Messrs. Ramirez, Monahan and Pratt serve as members of the nominating and governance committee of the board of directors (the “Nominating and Governance Committee”), with Mr. Ramirez servings as its chair. Each committee operates under a charter that has been approved by our board of directors and is available on our website at www.southlandholdings.com. The committees have the composition and responsibilities described below.
Audit Committee
In connection with the Closing, Ms. Martins was appointed the chair and member of the Audit Committee, along with Mr. Monahan and Mr. Burtnett being appointed as members. The Audit Committee meets Nasdaq audit committee composition requirements. Each member of the Audit Committee is financially literate. The board of directors of the Company has determined that each of Ms. Martins, Mr. Burtnett and Mr. Monahan qualifies as an “audit committee financial expert” as defined by the SEC.
The functions of the Audit Committee include, among other things:
● | evaluating the performance, independence and qualifications of the Company’s independent auditors and determining whether to retain the Company’s existing independent auditors or engage new independent auditors; |
● | reviewing the Company’s financial reporting processes and disclosure controls; |
● | reviewing and approving the engagement of the Company’s independent auditors to perform audit services and any permissible non-audit services; |
● | reviewing the adequacy and effectiveness of the Company’s internal control policies and procedures, including the responsibilities, budget, staffing and effectiveness of the Company’s internal audit function; |
● | reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by the Company; |
● | obtaining and reviewing at least annually a report by the Company’s independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review; |
● | monitoring the rotation of partners of the Company’s independent auditors on the Company’s engagement team as required by law; |
● | prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of the Company’s independent auditor; |
● | reviewing the Company’s annual and quarterly financial statements and reports, including the disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s periodic reports to be filed with the SEC and discussing the statements and reports with the Company’s independent auditors and management; |
● | reviewing with the Company’s independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of the Company’s financial controls and critical accounting policies; |
● | reviewing with management and the Company’s auditors any earnings announcements and other public announcements regarding material developments; |
● | establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding financial controls, accounting, auditing or other matters; |
● | preparing the report that the SEC requires in the Company’s annual proxy statement; |
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● | reviewing and providing oversight of any related party transactions in accordance with the Company’s related party transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including the Company’s code of ethics; |
● | reviewing the Company’s major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and |
● | reviewing and evaluating on an annual basis the performance of the Audit Committee and the Audit Committee charter. |
The composition and function of the Audit Committee complies with all applicable requirements of the Sarbanes-Oxley Act, all applicable SEC rules and regulations and all applicable Nasdaq listing rules. The Company will comply with future requirements of the SEC, Nasdaq or other applicable authority to the extent they become applicable to the Company.
It is expected that following the Closing, the Audit Committee will establish a procedure whereby complaints or concerns regarding accounting, internal controls or auditing matters may be submitted anonymously to the Audit Committee by email.
Compensation Committee
In connection with the Closing, Mr. Burtnett was appointed the chair and member of the Compensation Committee, along with Mr. Pratt and Ms. Martins being appointed as members. The board of directors of the Company has determined that each of the members of the Compensation Committee satisfies the independence requirements of Nasdaq and is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act.
The functions of the Compensation Committee include, among other things:
● | reviewing and approving the corporate objectives that pertain to the determination of executive compensation; |
● | reviewing and approving the compensation and other terms of employment of the Company’s executive officers; |
● | reviewing and approving performance goals and objectives relevant to the compensation of the Company’s executive officers and assessing their performance against these goals and objectives; |
● | making recommendations to the board of directors of the Company regarding the adoption or amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by the board of directors of the Company; |
● | reviewing and making recommendations to the board of directors of the Company regarding the type and amount of compensation to be paid or awarded to the Company non-employee board members; |
● | reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act; |
● | administering the Company’s equity incentive plans, to the extent such authority is delegated by the board of directors of the Company; |
● | reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections, indemnification agreements and any other material arrangements for the Company’s executive officers; |
● | reviewing with management the Company’s disclosures under the caption “Compensation Discussion and Analysis” in the Company’s periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement; |
● | preparing an annual report on executive compensation that the SEC requires in the Company’s annual proxy statement; and |
● | reviewing and evaluating on an annual basis the performance of the Compensation Committee and recommending such changes as deemed necessary with the board of directors of the Company. |
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The Compensation Committee may also, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
The composition and function of the Compensation Committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and Nasdaq rules and regulations. The Company will comply with future requirements of the SEC, Nasdaq or other applicable authority to the extent they become applicable to the Company.
Nominating and Governance Committee
In connection with the Closing, Mr. Ramirez was appointed as the chair and member of the Nominating and Governance Committee, along with Mr. Monahan and Mr. Pratt being appointed as members. Therefore, the Nominating and Governance Committee comprises at least three directors, with all such directors meeting Nasdaq independence requirements, in accordance with Nasdaq standards. The Nominating and Governance Committee assists the board of directors by identifying and recommending individuals qualified to become members of the board. The Nominating and Corporate Governance Committee is responsible for evaluating the composition, size and governance of the board and its committees and making recommendations regarding future planning and the appointment of directors to the committees, establishing a policy for considering stockholder nominees to the board, reviewing the corporate governance principles and making recommendations to the board regarding possible changes; and reviewing and monitoring compliance with the Company’s Code of Business Conduct and Ethics.
Director Compensation
The Compensation Committee will determine the annual compensation to be paid to the members of the board of directors. Directors’ fees have yet to be determined but are expected to consist of an annual cash retainer, committee retainers and equity awards subject to time-based vesting. The Company anticipates that directors who also serve as an employee of the Company will not receive additional compensation for their service as a director.
Executive Compensation
The compensation for each of Legato II’s and Southland’s executive officers before the Closing is described in the Proxy Statement/Prospectus in the section entitled “Legato II and Southland Executive and Director Compensation Prior to the Business Combination” beginning on page 161, which information is incorporated herein by reference.
The general compensation programs of the Company’s executive officers after the Closing are described in the section of the Proxy Statement/Prospectus entitled “New Southland Executive and Director Compensation” beginning on page 169, which information is incorporated herein by reference. The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K under the section entitled “Executive Employment Agreements” is incorporated herein by reference.
The Incentive Plan was approved by the Company’s stockholders at the Meeting. A description of the Incentive Plan is set forth in the section of the Proxy Statement/Prospectus entitled “Proposal No. 5—The Incentive Plan Proposal” beginning on page 110 and is incorporated herein by reference. The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K under the section entitled “Incentive Plan” is also incorporated herein by reference. A copy of the complete text of the Incentive Plan is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.
On February 14, 2023, the Company issued 173,333 restricted stock units to Mr. Gallarda pursuant to an award under the Incentive Plan. The restricted stock units will vest over a two-year period, with one-half (1/2) of the shares vesting on February 14, 2024 and the remaining shares vesting on February 14, 2025, based on Mr. Gallarda’s continuous employment with the Company or an affiliate. The restricted stock units were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as applicable.
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Certain Relationships and Related Transactions
Certain relationships and related party transactions are described in the Proxy Statement/Prospectus in the section titled “Certain Relationships and Related Person Transactions” beginning on page 175 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Legal Proceedings
From time to time, the Company and its subsidiaries may become involved in additional legal proceedings arising in the ordinary course of its business. The Company and its subsidiaries have been and continue to be involved in legal proceedings that arise in the ordinary course of business, the outcome of which, if determined adversely to the Company or any of its subsidiaries, would not individually or in the aggregate have a material adverse effect on the Company’s business, financial condition and results of operations.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Market Information and Holders
Legato II’s Common Stock and Warrants were historically quoted on Nasdaq under the symbols “LGTO” and “LGTOW,” respectively. The Common Stock and Public Warrants will be listed on Nasdaq under the new trading symbols of “SLND” and “SLNDW,” respectively, on February 15, 2023.
As of the Closing Date and following the completion of the Business Combination, the Company had 44,407,831 shares of Common Stock issued and outstanding held of record by 47 holders and 14,385,500 Warrants outstanding held of record by 27 holders. Such numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
Dividends
The Company has not paid any cash dividends on its Common Stock to date. The Company may retain future earnings, if any, for future operations, expansion and debt repayment and has no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the board of directors and will depend on, among other things, the Company’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that the board of directors may deem relevant. In addition, the Company’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness the Company or its subsidiaries incur. The Company does not anticipate declaring any cash dividends to holders of Common Stock in the foreseeable future.
Recent Sales of Unregistered Securities
The description of the issuances pursuant to the Merger Agreement and the transactions contemplated thereby, as set forth in Item 2.01 of this Current Report on Form 8-K, is incorporated herein by reference. The disclosure set forth below in Item 3.02 of this Current Report on Form 8-K concerning the issuance and sale by the Company of certain unregistered securities is incorporated herein by reference.
Information regarding unregistered sales of securities is set forth in Part II, Item 2 of Legato II’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022.
Description of Registrant’s Securities
Authorized Capital Stock
The Company’s Second Amended and Restated Certificate of Incorporation (the “Second A&R Charter”) authorizes the issuance of 550,000,000 shares of capital stock, consisting of (i) 500,000,000 shares of Common Stock, par value $0.0001 per share, and (ii) 50,000,000 shares of preferred stock (the “Preferred Shares”), par value $0.0001 per share.
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Common Stock
The Second A&R Charter provides that the Company has one class of Common Stock.
Preferred Stock
The Second A&R Charter provides that Preferred Shares may be issued from time to time in one or more series. The board of directors of the Company is authorized to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Company board is able, without stockholder approval, to issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the Common Stock and could have anti-takeover effects. The ability of the board of directors of the Company to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control or the removal of existing management. We have no Preferred Shares outstanding at the date hereof. Although we do not currently intend to issue any Preferred Shares, we cannot assure you that we will not do so in the future.
Warrants
As of the Closing Date, there were 14,385,500 Warrants outstanding, consisting of 13,800,000 Public Warrants and 585,500 Private Placement Warrants.
Each whole Warrant entitles the registered 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 commencing 30 days after the Closing, except as described below. Pursuant to the Warrant Agreement, a Warrant holder may exercise its Warrants only for a whole number of shares of Common Stock. This means that only a whole Warrant may be exercised at any given time by a Warrant holder. The Warrants will expire five years after the Closing, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
No Public Warrants are exercisable for cash unless the Company has an effective and current registration statement covering the issuance of the Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such Common Stock. At the time of its IPO, Legato II agreed that as soon as practicable following its initial business combination (such as the Business Combination would constitute), it would use its best efforts to file a registration statement under the Securities Act covering the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants and use its best efforts to cause such registration statement to become effective and maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Common Stock until the Warrants expire or are redeemed. Notwithstanding the foregoing, if a registration statement covering the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants is not effective within 90 days following the Closing, holders of Public Warrants may, until such time as there is such an effective registration statement and during any period when the Company shall have failed to maintain such an effective registration statement, exercise Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the fair market value (as defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the trading day prior to the date of exercise.
Redemption of Warrants. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants:
● | 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; |
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● | if, and only if, the last reported sale price per share of 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 on which the Company sends the notice of redemption to the Warrant holders; and |
● | if, and only if, there is a current registration statement in effect with respect to the issuance of the share(s) of Common Stock underlying such Warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
The Company does not intend to take any steps to notify holders of Warrants that such Warrants have become eligible for redemption except if it actually seeks to redeem the Warrants. In order to redeem the Warrants, the Company must provide 30 days’ prior written notice of redemption to each Warrant holder and have a current registration statement in effect with respect to the Common Stock underlying such Warrants. If the foregoing conditions are satisfied and the Company issues a notice of redemption, each Warrant holder can exercise his, her or its Warrant prior to the scheduled redemption date in accordance with the above. However, the price of the Common Stock may fall below the $18.00 trigger price (as adjusted) as well as the $11.50 Warrant exercise price (as adjusted) after the redemption notice is issued.
If the Company calls the Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Warrants for that number of shares of 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 by (y) the fair market value, as described above.
Exercise Limitations. 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 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 Common Stock, or by a split-up 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 the Common Stock.
In addition, if the Company, at any time while the Warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of Common Stock on account of such Common Stock (or other shares of our capital stock into which the Warrants are convertible), 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; provided, however, that the following would trigger an such an adjustment: (a) the anti-dilution adjustments described above with respect to stock dividends, split-ups and similar events; or (b) any cash dividends or cash distributions which, when combined on a per share basis with all other cash dividends and cash distributions paid on Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 per share (taking into account all of the outstanding shares of Common Stock at such time (whether or not any shareholders waived their right to receive such dividend) and as adjusted to appropriately to reflect any of the events referred to herein and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares of Common Stock issuable on exercise of each Warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50.
If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification 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 Common Stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding Common Stock.
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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 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.
The Warrant holders do not have the rights or privileges of holders of Common Stock or any voting rights until they exercise their Warrants and receive Common Stock. After the issuance of Common Stock upon exercise of the Warrants, each holder will be entitled to one vote for each Common Stock held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number of shares of Common Stock to be issued to the Warrant holder.
Indemnification of Directors and Officers
A description of the Company’s indemnification obligations in respect of its directors and officers is included in the Proxy Statement/Prospectus in the section entitled “Description of New Southland Capital Stock—Limitations on Liability and Indemnification of Officers and Directors” beginning on pages 179 of the Proxy Statement/Prospectus, which is incorporated herein by reference. The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K under the section entitled “Indemnification Agreements” is also incorporated herein by reference.
Financial Statements and Supplementary Data
The information set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The description of the issuances pursuant to the Merger Agreement and the transactions contemplated thereby, as set forth in Item 2.01 of this Current Report on Form 8-K, is incorporated herein by reference.
Information regarding unregistered sales of securities is set forth in Part II, Item 2 of Legato II’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022.
Item 3.03 Material Modification to Rights of Security Holders.
On the Closing Date, the Company filed the Second A&R Charter with the Secretary of State of the State of Delaware. The material terms of the Second A&R Charter and the general effect upon the rights of holders of the Company’s capital stock are described in the sections of the Proxy Statement/Prospectus entitled “Proposal Nos. 2—The Charter Proposals” beginning on page 104 of the Proxy Statement/Prospectus, which information is incorporated herein by reference. A copy of the Second A&R Charter is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
In addition, upon the Closing, pursuant to the terms of the Merger Agreement, the Company adopted the Amended and Restated Bylaws (the “Bylaws”). A copy of the Bylaws is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 5.01 Changes in Control of Registrant.
The information set forth in the Introductory Note of this Current Report on Form 8-K and in the section entitled “Security Ownership of Certain Beneficial Owners and Management” in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The information set forth in the Introductory Note of this Current Report on Form 8-K is incorporated by reference herein.
In accordance with the terms of the Merger Agreement, and effective as of the Closing, each of Legato II’s officers and directors resigned as a member of Legato II’s board of directors and/or from each officer position previously held, as applicable, except that Gregory Monahan and Brian Pratt, two former directors of Legato II, became directors of the Company as of the Closing. These resignations were not a result of any disagreement between Legato II and the officers and directors on any matter relating to Legato II’s operations, policies or practices.
Incentive Plan
The information set forth under the heading “Incentive Plan” in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Directors and Executive Officers
The information regarding the Company’s directors and executive officers set forth under the headings “Directors and Executive Officers” and “Executive Compensation” in Item 2.01 of this Current Report on Form 8-K, as well as the information set forth under the headings “Executive Employment Agreements” and “Merger Consideration Notes” in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth in Item 3.03 of this Current Report on Form 8-K is incorporated herein by reference.
Item 5.06 Change in Shell Company Status
As a result of the Business Combination, which fulfilled the definition of a business combination as required by the Prior Charter, the Company ceased to be a shell company (as defined in Rule 12b-2 of the Exchange Act) as of the Closing. The material terms of the Business Combination are described in the Proxy Statement/Prospectus in the section entitled “Proposal No.1—The Business Combination Proposal—The Merger Agreement” beginning on page 67 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Item 5.07. Submission of Matters to a Vote of Security Holders
On February 14, 2023, Legato II held the Meeting by means of live audio webcast, which was called to approve the proposals relating to the entry into and consummation of the transactions contemplated by the Merger Agreement. An aggregate of 24,736,053 shares of Common Stock, which represented a quorum of the outstanding common stock entitled to vote on the record date of January 24, 2023, were represented at the Meeting in person (which includes presence at the virtual meeting) or by proxy.
Legato II’s stockholders voted on the following proposals at the Meeting, each of which was approved and each of which is described in greater detail in the Proxy Statement/Prospectus:
The Business Combination Proposal – To approve and adopt the Merger Agreement, and the Transactions, including the Merger and the issuance of shares of Common Stock to the Southland Members in the Merger. The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
24,519,067 | 3,216,386 | 600 | 0 |
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The Charter Proposals – To approve amendments to the Prior Charter, to:
a. increase the number of authorized shares of Common Stock from 50 million shares to 500 million shares and increase the number of authorized shares of Preferred Stock from one million shares to 50 million shares. The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
21,519,667 | 3,216,386 | 0 | 0 |
b. change Legato II’s name from “Legato Merger Corp. II” to “Southland Holdings, Inc.” The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
21,519,667 | 3,216,386 | 0 | 0 |
c. remove the various provisions applicable only to special purpose acquisition companies that will no longer be applicable to Legato II after the consummation of the Transactions, including the elimination of Article VI. The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
24,062,051 | 2 | 674,000 | 0 |
The Director Election Proposal — To elect seven directors to the board of directors of the Company serve following the consummation of the Transactions. The following is a tabulation of the votes with respect to each director elected at the Meeting:
Director | For | Withheld | Broker Non-Vote | |||||||||
Mario Ramirez | 19,609,870 | 2,542,386 | 2,583,797 | |||||||||
Michael Kyle Burtnett | 19,609,870 | 2,542,386 | 2,583,797 | |||||||||
Brian Pratt | 22,152,256 | 0 | 2,583,797 | |||||||||
Izilda Izzy Martins | 19,609,870 | 2,542,386 | 2,583,797 | |||||||||
Frankie Frank S. Renda | 19,609,870 | 2,542,386 | 2,583,797 | |||||||||
Walter Timothy Tim Winn | 19,609,870 | 2,542,386 | 2,583,797 | |||||||||
Gregory Monahan | 22,152,256 | 0 | 2,583,797 |
The NASDAQ Proposal – To approve (a) the issuance of Legato II Common Stock in the Merger in an amount greater than 20% of the number of shares of Legato II Common Stock outstanding before such issuances and (b) the issuance of Legato II Common Stock resulting in a change of control of Legato II, as such approval is required by the rules of the Nasdaq Stock Market. The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
21,519,065 | 3,216,388 | 600 | 0 |
The Incentive Plan Proposal – To approve the Incentive Plan. The following is a tabulation of the votes with respect to this proposal, which was approved by Legato II’s stockholders:
For | Against | Abstain | Broker Non-Votes | |||||||||||
21,519,665 | 3,216,338 | 0 | 0 |
Because each of the foregoing proposals were approved and because Legato II and Southland did not anticipate requiring additional time to complete the Merger, the proposal to adjourn the Meeting to a later date or dates was not presented at the Meeting.
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Item 8.01 Other Events
Any stockholder proposal submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 for inclusion in the Company’s proxy materials for the 2024 Annual Meeting must be received by our corporate secretary at our principal executive offices no later than the close of business on October 4, 2023.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The following historical financial statements of Legato II and the related notes beginning on page F-2 of the Proxy Statement/Prospectus are incorporated herein by reference: (i) unaudited financial statements as of September 30, 2022 and for the three and nine month periods then ended and (ii) audited financial statements as of December 31, 2021 and for the period from July 14, 2021 (inception) through December 31, 2021.
The following historical financial statements of Southland and the related notes beginning on page F-38 of the Proxy Statement/Prospectus are incorporated herein by reference: (i) audited consolidated statements of operations, income equity and cash flows respectively for the years ended December 31, 2021, 2020 and 2019, (ii) audited consolidated balance sheets data as of December 31, 2021 and 2020, (iii) unaudited consolidated statements of operations, income equity and cash flows respectively for the three and nine months ended September 30, 2022, and (iv) unaudited consolidated balance sheet data as of September 30, 2022.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined balance sheet as of September 30, 2022 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, and the nine months ended September 30, 2022, is set forth in Exhibit 99.1 hereto and is incorporated by reference herein.
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(d) Exhibits
Exhibit Index
+ | Schedule and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). Legato II agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. |
* | Filed herewith. |
*** | Previously filed. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 14, 2023 | SOUTHLAND HOLDINGS, INC. | |
By: |
/s/ Frank S. Renda | |
Name: Frank S. Renda | ||
Title: President and Chief Executive Officer |
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Exhibit 3.1
SECOND
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LEGATO MERGER CORP. II
Legato Merger Corp. II, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), by its Chief Executive Officer, hereby certifies as follows:
1. | The name of the Corporation is “Legato Merger Corp. II.” |
2. | The Corporation’s Certificate of Incorporation was filed in the office of the Secretary of State of the State of Delaware on July 14, 2021. |
3. | The Corporation’s Certificate of Incorporation was previously amended and restated upon the filing of the Corporation’s Amended and Restated Certificate of Incorporation in the office of the Secretary of State of the State of Delaware on November 22, 2021. |
4. | This Second Amended and Restated Certificate of Incorporation amends and restates the Amended and Restated Certificate of Incorporation of the Corporation. |
5. | This Second Amended and Restated Certificate of Incorporation was duly adopted and approved by the directors and stockholders of the Corporation in accordance with the applicable provisions of Sections 141(f), 228, 242 and 245 of the General Corporation Law of the State of Delaware. |
6. | The text of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated to read in full as follows: |
ARTICLE
I
NAME OF THE CORPORATION
The name of the corporation is “Southland Holdings, Inc.” (the “Corporation”).
ARTICLE
II
REGISTERED AGENT
The address of the registered office of the Corporation in the State of Delaware is 108 W. 13th Street, Suite 100, Wilmington, New Castle County, Delaware 19801. The name of the registered agent of the Corporation at such address is Vcorp Services, LLC.
ARTICLE
III
BUSINESS PURPOSE
The nature of the business or purposes to be conducted or promoted by 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 (the “DGCL”).
ARTICLE
IV
CAPITAL STOCK
Section 4.01 Authorized Classes of Stock. The total number of shares of stock of all classes of capital stock that the Corporation is authorized to issue is 550,000,000, of which 500,000,000 shares shall be shares of common stock having a par value of $0.0001 per share (“Common Stock”) and 50,000,000 shares shall be shares of preferred stock having a par value of $0.0001 per share (“Preferred Stock”).
Section 4.02 Common Stock. Except as otherwise required by law, as provided in this Second Amended and Restated Certificate of Incorporation, and as otherwise provided in the resolution or resolutions, if any, adopted by the board of directors of the Corporation (the “Board of Directors”) with respect to any series of the Preferred Stock, the holders of the Common Stock shall exclusively possess all voting power. Each holder of shares of Common Stock shall be entitled to one vote for each share held by him. Subject to the rights of holders of any series of outstanding Preferred Stock, holders of shares of Common Stock shall have equal rights of participation in the dividends and other distributions in cash, stock, or property of the Corporation when, as and if declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor and shall have equal rights to receive the assets and funds of the Corporation available for distribution to stockholders in the event of any liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary.
Section 4.03 Preferred Stock. The Board of Directors is hereby authorized to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional, or other special rights, if any, and any qualifications, limitations, or restrictions thereof, of the shares of such series, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors. The authority of the Board with respect to each series of Preferred Stock shall include, but not be limited to, determination of the following:
(a) the designation of the series;
(b) the number of shares of the series;
(c) the dividend rate or rates on the shares of that series, whether dividends will be cumulative, and if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(d) whether the series will have voting rights, generally or upon specified events, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(e) whether the series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
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(f) whether or not the shares of that series shall be redeemable, in whole or in part, at the option of the Corporation or the holder thereof, and if made subject to such redemption, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemptions, which amount may vary under different conditions and at different redemption rates;
(g) the terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series;
(h) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(i) the restrictions, if any, on the issue or reissue of any additional Preferred Stock; and
(j) any other relative rights, preferences, and limitations of that series.
ARTICLE
V
BOARD OF DIRECTORS
Section 5.01 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
Section 5.02 Number. Subject to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation which shall constitute the entire Board of Directors shall be fixed from time to time in accordance with the by-laws of the Corporation (as the same may be amended from time to time, the “By-Laws”).
Section 5.03 Classes of Directors. Subject to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the Board of Directors shall be and is divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one third of the total number of directors constituting the entire Board of Directors. The Board of Directors is authorized to assign members of the Board already in office to Class I, Class II or Class III at the time such classification becomes effective. In case of any increase or decrease, from time to time, in the number of directors, the number of directors in each class shall be apportioned as nearly equal as possible.
Section 5.04 Terms of Office. Subject to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this provision; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held after the effectiveness of this provision; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held after the effectiveness of this provision; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal.
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Section 5.05 Newly Created Directorships and Vacancies. Except as otherwise required by law and subject to any rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, any newly created directorships resulting from an increase in the authorized number of directors and any vacancies occurring in the Board of Directors, shall be filled solely by the affirmative votes of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director. A director so elected shall be elected to hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation, or removal.
Section 5.06 Written Ballot. Unless and except to the extent that the By-Laws shall so require, the election of directors of the Corporation need not be by written ballot.
ARTICLE
VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.01 Limitation of Liability. To the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, a director or officer of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for any breach of fiduciary duty as a director or officer. No amendment to, modification of, or repeal of this Section 6.01 shall apply to or have any effect on the liability or alleged liability of any director or officer of the Corporation for or with respect to any acts or omissions of such director or officer occurring prior to such amendment.
Section 6.02 Indemnification. The corporation shall indemnify to the fullest extent permitted by law as it presently exists or may hereafter be amended any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative, or investigative, by reason of the fact that he, his testator, or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation. Any amendment, repeal, or modification of this Section 6.02 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE
VII
STOCKHOLDER ACTION
Section 7.01 Stockholder Consent Prohibition. Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation and may not be effected by any consent by such stockholders.
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Section 7.02 Special Meetings of Stockholders. Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation shall be called only by: (i) the Board of Directors; or (ii) the Secretary of the Corporation, following receipt of one or more written demands to call a special meeting of the stockholders from stockholders of record who own, in the aggregate, at least 25% of the voting power of the outstanding shares of the Corporation then entitled to vote on the matter or matters to be brought before the proposed special meeting that complies with the procedures for calling a special meeting of the stockholders as may be set forth in the By-Laws.
ARTICLE
VIII
BY-LAWS
Section 8.01 Board of Directors. In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered to adopt, amend, alter, or repeal the By-Laws without any action on the part of the stockholders.
Section 8.02 Stockholders. The stockholders shall also have the power to adopt, amend, alter, or repeal the By-Laws; provided that, in addition to any affirmative vote of the holders of any particular class or series of capital stock of the Corporation required by applicable law or this Second Amended and Restated Certificate of Incorporation, such adoption, amendment, alteration, or repeal shall be approved by the affirmative vote of the holders of at least 662/3% of the voting power of the shares of the then outstanding voting stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
ARTICLE
IX
AMENDMENTS
The Corporation reserves the right to amend, alter, or repeal any provision contained in this Second Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation; provided however, that notwithstanding any other provision of this Second Amended and Restated Certificate of Incorporation or applicable law that might permit a lesser vote or no vote and in addition to any affirmative vote of the holders of any particular class or series of capital stock of the Corporation required by applicable law or this Second Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least 662/3% of the voting power of the shares of the then outstanding voting stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter, repeal, or adopt any provisions inconsistent with this Article IX or Articles V, VI, VII and VIII of this Second Amended and Restated Certificate of Incorporation.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the Corporation has caused this Second Amended and Restated Certificate of Incorporation to be signed as of February 14, 2023.
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer |
[Signature Page to Second Amended and Restated Certificate of Incorporation]
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Exhibit 3.2
AMENDED
AND RESTATED BY-LAWS
OF
SOUTHLAND HOLDINGS, INC.
ARTICLE
I
Offices
Section 1.01 Registered Office. The registered office of Southland Holdings, Inc. (the “Corporation”) will be fixed in the Certificate of Incorporation of the Corporation (as the same may be amended from time to time, the “Certificate of Incorporation”).
Section 1.02 Other Offices. The Corporation may have other offices, both within and without the State of Delaware, as the board of directors of the Corporation (the “Board of Directors”) from time to time shall determine or the business of the Corporation may require.
ARTICLE
II
Meetings of the Stockholders
Section 2.01 Place of Meetings. All meetings of the stockholders shall be held at such place, if any, either within or without the State of Delaware, or by means of remote communication, as shall be designated from time to time by resolution of the Board of Directors and stated in the notice of meeting.
Section 2.02 Annual Meeting. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting in accordance with these by-laws shall be held at such date, time, and place, if any, as shall be determined by the Board of Directors and stated in the notice of the meeting.
Section 2.03 Special Meetings.
(a) Purpose. Special meetings of stockholders for any purpose or purposes shall be called only:
(i) by the Board of Directors; or
(ii) by the Secretary (as defined in Section 4.01), following receipt of one or more written demands to call a special meeting of the stockholders in accordance with, and subject to, this Section 2.03 from stockholders of record satisfying the ownership requirements as set forth in the Certificate of Incorporation.
(b) Notice. A request to the Secretary shall be delivered to him or her at the Corporation’s principal executive offices and signed by each stockholder, or a duly authorized agent of such stockholder, requesting the special meeting and shall set forth:
(i) a brief description of each matter of business desired to be brought before the special meeting;
(ii) the reasons for conducting such business at the special meeting;
(iii) the text of any proposal or business to be considered at the special meeting (including the text of any resolutions proposed to be considered and in the event that such business includes a proposal to amend these by-laws, the language of the proposed amendment); and
(iv) the information required in Section 2.12(b) of these by-laws (for stockholder nomination demands) or Section 2.12(c) of these by-laws (for all other stockholder proposal demands), as applicable.
(c) Business. Business transacted at a special meeting requested by stockholders shall be limited to the matters described in the special meeting request; provided, however, that nothing herein shall prohibit the Board of Directors from submitting matters to the stockholders at any special meeting requested by stockholders.
(d) Time and Date. A special meeting requested by stockholders shall be held at such date and time as may be fixed by the Board of Directors; provided, however, that the date of any such special meeting shall be not more than 90 days after the request to call the special meeting is received by the Secretary. Notwithstanding the foregoing, a special meeting requested by stockholders shall not be held if:
(i) the Board of Directors has called or calls for an annual or special meeting of the stockholders to be held within 90 days after the Secretary receives the request for the special meeting and the Board of Directors determines in good faith that the business of such meeting includes (among any other matters properly brought before the meeting) the business specified in the request;
(ii) the stated business to be brought before the special meeting is not a proper subject for stockholder action under applicable law;
(iii) an identical or substantially similar item (a “Similar Item”) was presented at any meeting of stockholders held within 120 days prior to the receipt by the Secretary of the request for the special meeting (and, for purposes of this Section 2.03(d)(iii), the election of directors shall be deemed a Similar Item with respect to all items of business involving the election or removal of directors); or
(iv) the special meeting request was made in a manner that involved a violation of Regulation 14A under the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder (the “Exchange Act”).
(e) Revocation. A stockholder may revoke a request for a special meeting at any time by written revocation delivered to the Secretary at the Corporation’s principal executive offices, and if, following such revocation, there are unrevoked requests from stockholders holding in the aggregate less than the requisite number of shares entitling the stockholders to request the calling of a special meeting, the Board of Directors, in its discretion, may cancel the special meeting.
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Section 2.04 Adjournments. Any meeting of the stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, if any, and notice need not be given of any such adjourned meeting if the time, place, if any, thereof and the means of remote communication, if any, are announced at the meeting at which the adjournment is taken. 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, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date is fixed for stockholders entitled to vote at the adjourned meeting, the Board of Directors shall fix a new record date for notice of the adjourned meeting and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at the adjourned meeting as of the record date fixed for notice of the adjourned meeting.
Section 2.05 Notice of Meetings. Notice of the place (if any), date, hour, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), and means of remote communication, if any, of every meeting of stockholders shall be given by the Corporation not less than ten days nor more than 60 days before the meeting (unless a different time is specified by law) to every stockholder entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting. Notices of special meetings shall also specify the purpose or purposes for which the meeting has been called. Notices of meetings to stockholders may be given by mailing the same, addressed to the stockholder entitled thereto, at such stockholder’s mailing address as it appears on the records of the corporation and such notice shall be deemed to be given when deposited in the U.S. mail, postage prepaid. Without limiting the manner by which notices of meetings otherwise may be given effectively to stockholders, any such notice may be given by electronic transmission in accordance with applicable law. Notice of any meeting need not be given to any stockholder who shall, either before or after the meeting, submit a waiver of notice or who shall attend such meeting, except when the stockholder attends 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. Any stockholder so waiving notice of the meeting shall be bound by the proceedings of the meeting in all respects as if due notice thereof had been given.
Section 2.06 List of Stockholders. The Corporation shall prepare a complete list of the stockholders entitled to vote at any meeting of stockholders (provided, however, if the record date for determining the stockholders entitled to vote is less than ten days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares of capital stock of the Corporation registered in the name of each stockholder at least ten days before any meeting of the stockholders. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days before the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list was provided with the notice of the meeting; or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting the whole time thereof and may be inspected by any stockholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for inspection by any stockholder during the whole time of the meeting as provided by applicable law. Except as provided by applicable law, the stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger and the list of stockholders or to vote in person or by proxy at any meeting of stockholders.
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Section 2.07 Quorum. Unless otherwise required by law, the Certificate of Incorporation or these by-laws, at each meeting of the stockholders, a majority in voting power of the shares of the Corporation entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chair of the meeting or the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power, by the affirmative vote of a majority in voting power thereof, to adjourn the meeting from time to time, in the manner provided in Section 2.04, until a quorum shall be present or represented. A quorum, once established, shall not be broken by the subsequent withdrawal of enough votes to leave less than a quorum. At any such adjourned meeting at which there is a quorum, any business may be transacted that might have been transacted at the meeting originally called.
Section 2.08 Organization. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of the stockholders as it shall deem appropriate. At every meeting of the stockholders, the Chair of the Board, or in his or her absence or inability to act, the Chief Executive Officer (as defined in Section 4.01), or, in his or her absence or inability to act, the officer or director whom the Board of Directors shall appoint, shall act as chair of, and preside at, the meeting. The Secretary or, in his or her absence or inability to act, the person whom the chair of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chair of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper conduct of the meeting. Such rules, regulations, or procedures, whether adopted by the Board of Directors or prescribed by the chair of the meeting, may include, without limitation, the following:
(a) the establishment of an agenda or order of business for the meeting;
(b) the determination of when the polls shall open and close for any given matter to be voted on at the meeting;
(c) rules and procedures for maintaining order at the meeting and the safety of those present;
(d) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies, or such other persons as the chair of the meeting shall determine;
(e) restrictions on entry to the meeting after the time fixed for the commencement thereof; and
(f) limitations on the time allotted to questions or comments by participants.
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Section 2.09 Voting; Proxies.
(a) General. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock held by such stockholder.
(b) Election of Directors. Unless otherwise required by the Certificate of Incorporation, the election of directors shall be by written ballot. If authorized by the Board of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder. Unless otherwise required by law, the Certificate of Incorporation, or these by-laws, the election of directors shall be decided by a majority of the votes cast at a meeting of the stockholders, at which a quorum is present, by the holders of stock entitled to vote in the election; provided, however, that, if the Secretary determines that the number of nominees for director exceeds the number of directors to be elected, directors shall be elected by a plurality of the votes of the shares represented in person or by proxy at any meeting of stockholders, at which a quorum is present, held to elect directors and entitled to vote on such election of directors. For purposes of this Section 2.09(b), a majority of the votes cast means that the number of shares voted “for” a nominee must exceed the votes cast “against” such nominee’s election. If a nominee for director who is not an incumbent director does not receive a majority of the votes cast, the nominee shall not be elected.
(c) Other Matters. Unless otherwise required by law, the Certificate of Incorporation, or these by-laws, any matter, other than the election of directors, brought before any meeting of stockholders, at which a quorum is present, shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the matter.
(d) Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The authorization of a person to act as proxy may be documented, signed, and delivered in accordance with Section 116 of the General Corporation Law of the State of Delaware (the “DGCL”) provided that such authorization shall set forth, or be delivered with, information enabling the corporation to determine the identity of the stockholder granting such authorization. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or a new proxy bearing a later date.
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Section 2.10 Inspectors at Meetings of Stockholders. In advance of any meeting of the stockholders, the Board of Directors shall, appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors may appoint or retain other persons or entities to assist the inspector or inspectors in the performance of their duties. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders, the inspector or inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election. When executing the duties of inspector, the inspector or inspectors shall:
(a) ascertain the number of shares outstanding and the voting power of each;
(b) determine the shares represented at the meeting and the validity of proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots.
Section 2.11 Fixing the Record Date.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at 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 the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than ten days before the date of such meeting. 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 fix a new record date for the determination of stockholders entitled to notice of or to vote at the 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.
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Section 2.12 Advance Notice of Stockholder Nominations and Proposals.
(a) Annual Meetings. At a meeting of the stockholders, only such nominations of persons for the election of directors and such other business shall be conducted as shall have been properly brought before the meeting. Except for nominations that are included in the Corporation’s annual meeting proxy statement pursuant to Section 2.13, to be properly brought before an annual meeting, nominations or such other business must be:
(i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or any committee thereof;
(ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or any committee thereof; or
(iii) otherwise properly brought before an annual meeting by a stockholder who is a stockholder of record of the Corporation at the time such notice of meeting is delivered, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section 2.12.
In addition, any proposal of business (other than the nomination of persons for election to the Board of Directors) must be a proper matter for stockholder action. For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder pursuant to Section 2.12(a)(iii), the stockholder or stockholders of record intending to propose the business (the “Proposing Stockholder”) must have given timely notice thereof pursuant to this Section 2.12(a), in writing to the Secretary even if such matter is already the subject of any notice to the stockholders or Public Disclosure from the Board of Directors. To be timely, a Proposing Stockholder’s notice for an annual meeting must be delivered to the Secretary at the principal executive offices of the Corporation: (x) not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, in advance of the anniversary of the previous year’s annual meeting if such meeting is to be held on a day which is not more than 30 days in advance of the anniversary of the previous year’s annual meeting or not later than 60 days after the anniversary of the previous year’s annual meeting; and (y) with respect to any other annual meeting of stockholders, including in the event that no annual meeting was held in the previous year, not earlier than the close of business on the 120th day prior to the annual meeting and not later than the close of business on the later of: (1) the 90th day prior to the annual meeting and (2) the close of business on the tenth day following the first date of Public Disclosure of the date of such meeting. In no event shall the Public Disclosure of an adjournment or postponement of an annual meeting commence a new notice time period (or extend any notice time period). For the purposes of this Section 2.12 and Section 2.13, “Public Disclosure” shall mean a disclosure made in a press release reported by the Dow Jones News Services, The Associated Press, or a comparable national news service or in a document filed by the Corporation with the Securities and Exchange Commission (“SEC”) pursuant to Section 13, 14, or 15(d) of the Exchange Act.
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(b) Stockholder Nominations. For the nomination of any person or persons for election to the Board of Directors pursuant to Section 2.12(a)(iii) or Section 2.12(d), a Proposing Stockholder’s timely notice to the Secretary (in accordance with the time periods for delivery of timely notice as set forth in this Section 2.01) shall set forth or include:
(i) the name, age, business address, and residence address of each nominee proposed in such notice;
(ii) the principal occupation or employment of each such nominee;
(iii) the class and number of shares of capital stock of the Corporation which are owned of record and beneficially by each such nominee (if any);
(iv) such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed, under Section 14(a) of the Exchange Act;
(v) a written statement and agreement executed by each such nominee acknowledging that such person:
(A) consents to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected,
(B) intends to serve as a director for the full term for which such person is standing for election, and
(C) makes the following representations: (1) that the director nominee has read and agrees to adhere to the Corporation’s policies and guidelines applicable to directors, (2) that the director nominee is not and will not become a party to any agreement, arrangement, or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any nomination or other business proposal, issue, or question (a “Voting Commitment”) that has not been disclosed to the Corporation or any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, and (3) that the director nominee is not and will not become a party to any agreement, arrangement, or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement, or indemnification (“Compensation Arrangement”) that has not been disclosed to the Corporation in connection with such person’s nomination for director or service as a director; and
(vi) as to the Proposing Stockholder:
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(A) the name and address of the Proposing Stockholder as they appear on the Corporation’s books and of the beneficial owner, if any, on whose behalf the nomination is being made,
(B) the class and number of shares of the Corporation which are owned by the Proposing Stockholder (beneficially and of record) and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the Proposing Stockholder’s notice, and a representation that the Proposing Stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting within five business days after the record date for such meeting,
(C) a description of any agreement, arrangement, or understanding with respect to such nomination between or among the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the Proposing Stockholder will notify the Corporation in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,
(D) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder’s notice by, or on behalf of, the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such person or any of their affiliates or associates with respect to shares of stock of the Corporation, and a representation that the Proposing Stockholder will notify the Corporation in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,
(E) a representation that the Proposing Stockholder is a holder of record of shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and
(F) a representation whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from stockholders in support of the nomination.
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The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
(c) Other Stockholder Proposals. For all business other than director nominations, a Proposing Stockholder’s timely notice to the Secretary (in accordance with the time periods for delivery of timely notice as set forth in this Section 2.12) shall set forth as to each matter the Proposing Stockholder proposes to bring before the annual meeting:
(i) a brief description of the business desired to be brought before the annual meeting;
(ii) the reasons for conducting such business at the annual meeting;
(iii) the text of any 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 by-laws, the language of the proposed amendment);
(iv) any substantial interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such stockholder and the beneficial owner (within the meaning of Section 13(d) of the Exchange Act), if any, on whose behalf the business is being proposed;
(v) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;
(vi) a description of all agreements, arrangements, or understandings between or among such stockholder, the beneficial owner, if any, on whose behalf the proposal is being made, any of their affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such stockholder, beneficial owner, or any of their affiliates or associates, in such business, including any anticipated benefit therefrom to such stockholder, beneficial owner, or their affiliates or associates; and
(vii) all of the other information required by Section 2.12(b)(vi) above.
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(d) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders called by the Board of Directors at which directors are to be elected pursuant to the Corporation’s notice of meeting:
(i) by or at the direction of the Board of Directors or any committee thereof; or
(ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.12(d) is delivered to the Secretary, who is entitled to vote at the meeting, and upon such election and who complies with the notice procedures set forth in this Section 2.12.
In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if such stockholder delivers a stockholder’s notice that complies with the requirements of Section 2.12(b) to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of: (x) the 90th day prior to such special meeting; or (y) the tenth (10th) day following the date of the first Public Disclosure of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the Public Disclosure of an adjournment or postponement of a special meeting commence a new time period (or extend any notice time period).
(e) Effect of Noncompliance. Only such persons who are nominated in accordance with the procedures set forth in this Section 2.12 or Section 2.13 shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as directors and only such other business shall be conducted at a meeting as shall be brought before the meeting in accordance with the procedures set forth in this Section 2.12 or Section 2.13, as applicable. If any proposed nomination was not made or proposed in compliance with this Section 2.12 or Section 2.13, as applicable, or other business was not made or proposed in compliance with this Section 2.12, then except as otherwise required by law, the chair of the meeting shall have the power and duty to declare that such nomination shall be disregarded or that such proposed other business shall not be transacted. Notwithstanding anything in these by-laws to the contrary, unless otherwise required by law, if a Proposing Stockholder intending to propose business or make nominations at an annual meeting or propose a nomination at a special meeting pursuant to this Section 2.12 does not provide the information required under this Section 2.12 to the Corporation, including the updated information required by Section 2.12(b)(vi)(B), Section 2.12(b)(vi)(C), and Section 2.12(b)(vi)(D) within five business days after the record date for such meeting or the Proposing Stockholder (or a qualified representative of the Proposing Stockholder) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation.
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(f) Rule 14a-8. This Section 2.12 and Section 2.13 shall not apply to a proposal proposed to be made by a stockholder if the stockholder has notified the Corporation of the stockholder’s intention to present the proposal at an annual or special meeting only pursuant to and in compliance with Rule 14a-8 under the Exchange Act and such proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such meeting.
Section 2.13 Proxy Access.
(a) Inclusion of Proxy Access Stockholder Nominee in Proxy Statement. Subject to the provisions of this Section 2.13, the Corporation shall include in its proxy statement (including its form of proxy and ballot) for an annual meeting of stockholders the name of any stockholder nominee for election to the Board of Directors submitted pursuant to this Section 2.13 (each a “Proxy Access Stockholder Nominee”) provided:
(i) timely written notice of such Proxy Access Stockholder Nominee satisfying this Section 2.13 (“Proxy Access Notice”) is delivered to the Corporation by or on behalf of a stockholder or stockholders that, at the time the Proxy Access Notice is delivered, satisfy the ownership and other requirements of this Section 2.13 (such stockholder or stockholders, and any person on whose behalf they are acting, the “Eligible Stockholder”);
(ii) the Eligible Stockholder expressly elects in writing at the time of providing the Proxy Access Notice to have its Proxy Access Stockholder Nominee included in the Corporation’s proxy statement pursuant to this Section 2.13; and
(iii) the Eligible Stockholder and the Proxy Access Stockholder Nominee otherwise satisfy the requirements of this Section 2.13.
(b) Timely Notice. To be timely, the Proxy Access Notice must be delivered to the Secretary at the principal executive offices of the Corporation, not later than 120 days nor more than 150 days prior to the first anniversary of the date (as stated in the Corporation’s proxy materials) that the Corporation’s definitive proxy statement was first sent to stockholders in connection with the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, the Proxy Access Notice must be so delivered not earlier than the close of business on the 150th day prior to such annual meeting and not later than the close of business on the later of: (i) the 120th day prior to such annual meeting; or (ii) the 10th day following the day on which Public Disclosure of the date of such annual meeting is first made by the Corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of the Proxy Access Notice.
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(c) Information to be Included in Proxy Statement. In addition to including the name of the Proxy Access Stockholder Nominee in the Corporation’s proxy statement for the annual meeting, the Corporation shall also include (collectively, the “Required Information”):
(i) the information concerning the Proxy Access Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement pursuant to the Exchange Act, and the rules and regulations promulgated thereunder; and
(ii) if the Eligible Stockholder so elects, a written statement of the Eligible Stockholder (or in the case of a group, a written statement of the group), not to exceed 500 words, in support of its Proxy Access Stockholder Nominee, which must be provided at the same time as the Proxy Access Notice for inclusion in the Corporation’s proxy statement for the annual meeting (a “Statement”).
Notwithstanding anything to the contrary contained in this Section 2.13, the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is untrue in any material respect (or omits a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule, regulation, or listing standard. Additionally, nothing in this Section 2.13 shall limit the Corporation’s ability to solicit against and include in its proxy statement its own statements relating to any Proxy Access Stockholder Nominee.
(d) Proxy Access Stockholder Nominee Limits. The number of Proxy Access Stockholder Nominees (including Proxy Access Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in the Corporation’s proxy statement pursuant to this Section 2.13 but either are subsequently withdrawn or that the Board of Directors decides to nominate (a “Board Nominee”)) appearing in the Corporation’s proxy statement with respect to a meeting of stockholders shall not exceed the greater of: (x) two; or (y) 20% of the number of directors in office as of the last day on which notice of a nomination may be delivered pursuant to this Section 2.13 (the “Final Proxy Access Nomination Date”) or, if such amount is not a whole number, the closest whole number below 20% (the “Permitted Number”); provided, however, that:
(i) in the event that one or more vacancies for any reason occurs on the Board of Directors at any time after the Final Proxy Access Nomination Date and before the date of the applicable annual meeting of stockholders and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced;
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(ii) any Proxy Access Stockholder Nominee who is included in the Corporation’s proxy statement for a particular meeting of stockholders but either: (A) withdraws from or becomes ineligible or unavailable for election at the meeting, or (B) does not receive a number of votes cast in favor of his or her election at least equal to 25% of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the Proxy Access Stockholder Nominee’s election, shall be ineligible to be included in the Corporation’s proxy statement as a Proxy Access Stockholder Nominee pursuant to this Section 2.13 for the next two annual meetings of stockholders following the meeting for which the Proxy Access Stockholder Nominee has been nominated for election; and
(iii) any director in office as of the nomination deadline who was included in the Corporation’s proxy statement as a Proxy Access Stockholder Nominee for any of the three preceding annual meetings and whom the Board of Directors decides to nominate for election to the Board of Directors also will be counted against the Permitted Number.
In the event that the number of Proxy Access Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.13 exceeds the Permitted Number, each Eligible Stockholder shall select one Proxy Access Stockholder Nominee for inclusion in the Corporation’s proxy statement until the Permitted Number is reached, going in order of the amount (from greatest to least) of voting power of the Corporation’s capital stock entitled to vote on the election of directors as disclosed in the Proxy Access Notice. If the Permitted Number is not reached after each Eligible Stockholder has selected one Proxy Access Stockholder Nominee, this selection process shall continue as many times as necessary, following the same order each time, until the Permitted Number is reached.
(e) Eligibility of Nominating Stockholder; Stockholder Groups. An Eligible Stockholder must have owned (as defined below) continuously for at least three years a number of shares that represents 3% or more of the outstanding shares of the Corporation entitled to vote in the election of directors (the “Required Shares”) as of both the date the Proxy Access Notice is delivered to or received by the Corporation in accordance with this Section 2.13 and the record date for determining stockholders entitled to vote at the meeting. For purposes of satisfying the ownership requirement under this Section 2.13, the voting power represented by the shares of the Corporation’s capital stock owned by one or more stockholders, or by the person or persons who own shares of the Corporation’s capital stock and on whose behalf any stockholder is acting, may be aggregated, provided that:
(i) the number of stockholders and other persons whose ownership of shares is aggregated for such purpose shall not exceed 20; and
(ii) each stockholder or other person whose shares are aggregated shall have held such shares continuously for at least three years.
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Whenever an Eligible Stockholder consists of a group of stockholders and/or other persons, any and all requirements and obligations for an Eligible Stockholder set forth in this Section 2.13 must be satisfied by and as to each such stockholder or other person, except that shares may be aggregated to meet the Required Shares as provided in this Section 2.13(e). With respect to any one particular annual meeting, no stockholder or other person may be a member of more than one group of persons constituting an Eligible Stockholder under this Section 2.13.
(f) Funds. A group of two or more funds shall be treated as one stockholder or person for this Section 2.13 provided that the other terms and conditions in this Section 2.13 are met (including Section 2.13(h)(v)(A)) and the funds are:
(i) under common management and investment control;
(ii) under common management and funded primarily by the same employer (or by a group of related employers that are under common control); or
(iii) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended.
(g) Ownership. For purposes of this Section 2.13, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of the Corporation’s capital stock as to which the person possesses both:
(i) the full voting and investment rights pertaining to the shares; and
(ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares:
(A) sold by such person or any of its affiliates in any transaction that has not been settled or closed,
(B) borrowed by such person or any of its affiliates for any purposes or purchased by such person or any of its affiliates pursuant to an agreement to resell, or
(C) subject to any option, warrant, forward contract, swap, contract of sale, other derivative, or similar agreement entered into by such person or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Corporation’s capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (1) reducing in any manner, to any extent or at any time in the future, such person’s or affiliates’ full right to vote or direct the voting of any such shares; and/or (2) hedging, offsetting, or altering to any degree gain or loss arising from the full economic ownership of such shares by such person or affiliate.
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An Eligible Stockholder “owns” shares held in the name of a nominee or other intermediary so long as the Eligible Stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. An Eligible Stockholder’s ownership of shares shall be deemed to continue during any period in which the Eligible Stockholder has delegated any voting power by means of a proxy, power of attorney, or other instrument or arrangement that is revocable at any time by the person. An Eligible Stockholder’s ownership of shares shall be deemed to continue during any period in which the Eligible Stockholder has loaned such shares, provided that the Eligible Stockholder has the power to recall such loaned shares on three business days’ notice and recalls such loaned shares not more than three business days after being notified that any of its Proxy Access Stockholder Nominees will be included in the Corporation’s proxy statement. The terms “owned,” “owning,” and other variations of the word “own” shall have correlative meanings. For purposes of this Section 2.13, the term “affiliate” shall have the meaning ascribed thereto in the regulations promulgated under the Exchange Act.
(h) Nomination Notice and Other Eligible Stockholder Deliverables. An Eligible Stockholder must provide with its Proxy Access Notice the following information in writing to the Secretary:
(i) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three-year holding period) verifying that, as of a date within seven calendar days prior to the date the Proxy Access Notice is delivered to or received by the Corporation, the Eligible Stockholder owns, and has owned continuously for the preceding three years, the Required Shares, and the Eligible Stockholder’s agreement to provide:
(A) within five business days after the record date for the meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date, and
(B) immediate notice if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the applicable annual meeting of stockholders;
(ii) the Eligible Stockholder’s representation and agreement that the Eligible Stockholder (including each member of any group of stockholders that together is an Eligible Stockholder under this Section 2.13):
(A) intends to continue to satisfy the eligibility requirements described in this Section 2.13 through the date of the annual meeting,
(B) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not presently have such intent,
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(C) has not nominated and will not nominate for election to the Board of Directors at the meeting any person other than the Proxy Access Stockholder Nominee(s) being nominated pursuant to this Section 2.13,
(D) has not engaged and will not engage in, and has not and will not be, a “participant” in another person’s “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the meeting other than its Proxy Access Stockholder Nominee(s) or a Board Nominee,
(E) will not distribute to any stockholder any form of proxy for the meeting other than the form distributed by the Corporation,
(F) has provided and will provide facts, statements, and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading,
(G) agrees to assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the Corporation’s stockholders or out of the information that the Eligible Stockholder provides to the Corporation,
(H) agrees to indemnify and hold harmless the Corporation and each of its directors, officers, and employees individually against any liability, loss, or damages in connection with any threatened or pending action, suit, or proceeding, whether legal, administrative, or investigative, against the Corporation or any of its directors, officers, or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.13,
(I) will file with the SEC any solicitation or other communication with the Corporation’s stockholders relating to the meeting at which the Proxy Access Stockholder Nominee will be nominated, regardless of whether any such filing is required under Section 14 of the Exchange Act and the rules and regulations promulgated thereunder or whether any exemption from filing is available for such solicitation or other communication under Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, and
(J) will comply with all other applicable laws, rules, regulations, and listing standards with respect to any solicitation in connection with the meeting;
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(iii) the written consent of each Proxy Access Stockholder Nominee to be named in the Corporation’s proxy statement, and form of proxy and ballot and, as a nominee and, if elected, to serve as a director;
(iv) a copy of the Schedule 14N (or any successor form) that has been filed with the SEC as required by Rule 14a-18 under the Exchange Act;
(v) in the case of a nomination by a group of stockholders that together is an Eligible Stockholder:
(A) documentation satisfactory to the Corporation demonstrating that a group of funds qualifies pursuant to the criteria set forth in Section 2.13(f) to be treated as one stockholder or person for purposes of this Section 2.13, and
(B) the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and
(vi) if desired, a Statement.
(i) Stockholder Nominee Agreement. Each Proxy Access Stockholder Nominee must:
(i) provide within five business days of the Corporation’s request an executed agreement, in a form deemed satisfactory to the Corporation, providing the following representations:
(A) the Proxy Access Stockholder Nominee has read and agrees to adhere to the Corporation’s policies and guidelines applicable to directors, and
(B) the Proxy Access Stockholder Nominee is not and will not become a party to: (1) any Voting Commitment that has not been disclosed to the Corporation; or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, and
(C) the Proxy Access Stockholder Nominee is not and will not become a party to any Compensation Arrangement in connection with such person’s nomination for director or service as a director that has not been disclosed to the Corporation;
(ii) complete, sign, and submit all questionnaires required of the Corporation’s Board of Directors within five business days of receipt of each such questionnaire from the Corporation; and
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(iii) provide within five business days of the Corporation’s request such additional information as the Corporation determines may be necessary to permit the Board of Directors to determine whether such Proxy Access Stockholder Nominee meets the requirements of this Section 2.13 or the Corporation’s requirements with regard to director qualifications and policies and guidelines applicable to directors, including whether:
(A) such Proxy Access Stockholder Nominee is independent under the independence requirements, including the committee independence requirements, set forth in the listing standards of the stock exchange on which shares of the Corporation’s capital stock are listed, any applicable rules of the SEC, and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the directors (the “Independence Standards”),
(B) such Proxy Access Stockholder Nominee has any direct or indirect relationship with the Corporation that has not been deemed categorically immaterial pursuant to the Corporation’s corporate governance guidelines, and
(C) such Proxy Access Stockholder Nominee is not and has not been subject to: (1) any event specified in Item 401(f) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), or (2) any order of the type specified in Rule 506(d) of Regulation D under the Securities Act.
(j) Eligible Stockholder/Proxy Access Stockholder Nominee Undertaking. In the event that any information or communications provided by the Eligible Stockholder or Proxy Access Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in any respect or omits a fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Proxy Access Stockholder Nominee, as the case may be, shall promptly notify the Secretary in writing of any such inaccuracy or omission in such previously provided information and of the information that is required to make such information or communication true and correct. Notwithstanding the foregoing, the provision of any such notification pursuant to the preceding sentence shall not be deemed to cure any defect or limit the Corporation’s right to omit a Proxy Access Stockholder Nominee from its proxy materials as provided in this Section 2.13.
(k) Exceptions Permitting Exclusion of Proxy Access Stockholder Nominee. The Corporation shall not be required to include pursuant to this Section 2.13 a Proxy Access Stockholder Nominee in its proxy statement (or, if the proxy statement has already been filed, to allow the nomination of a Proxy Access Stockholder Nominee, notwithstanding that proxies in respect of such vote may have been received by the Corporation):
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(i) if the Eligible Stockholder who has nominated such Proxy Access Stockholder Nominee has nominated for election to the Board of Directors at the meeting any person other than pursuant to this Section 2.13, or has or is engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the meeting other than its Proxy Access Stockholder Nominee(s) or a Board Nominee;
(ii) if the Corporation has received a notice (whether or not subsequently withdrawn) that a stockholder intends to nominate any candidate for election to the Board of Directors pursuant to the advance notice requirements in Section 2.12 of these by-laws;
(iii) who is not independent under the Independence Standards;
(iv) whose election as a member of the Board of Directors would violate or cause the Corporation to be in violation of these by-laws, the Corporation’s policies and guidelines applicable setting forth qualifications for directors, the listing standards of the stock exchange on which shares of the Corporation’s capital stock is listed, or any applicable state or federal law, rule, or regulation;
(v) if the Proxy Access Stockholder Nominee is or becomes a party to any undisclosed Voting Commitment;
(vi) if the Proxy Access Stockholder Nominee is or becomes a party to any undisclosed Compensation Arrangement;
(vii) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914;
(viii) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten years;
(ix) who is subject to any order of the type specified in Rule 506(d) of Regulation D under the Securities Act; or
(x) if such Proxy Access Stockholder Nominee or the applicable Eligible Stockholder shall have provided information to the Corporation in respect of such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading or shall have breached its or their agreements, representations, undertakings, or obligations pursuant to this Section 2.13.
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(l) Invalidity. Notwithstanding anything to the contrary set forth herein, the Board of Directors or the person presiding at the meeting shall be entitled to declare a nomination by an Eligible Stockholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation; and the Corporation shall not be required to include in its proxy statement any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder if:
(i) the Proxy Access Stockholder Nominee and/or the applicable Eligible Stockholder shall have breached its or their agreements, representations, undertakings, or obligations pursuant to this Section 2.13, as determined by the Board of Directors or the person presiding at the meeting; or
(ii) the Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting to present any nomination pursuant to this Section 2.13.
(m) Interpretation. The Board of Directors (and any other person or body authorized by the Board of Directors) shall have the power and authority to interpret this Section 2.13 and to make any and all determinations necessary or advisable to apply this Section 2.13 to any persons, facts, or circumstances, including the power to determine whether:
(i) a person or group of persons qualifies as an Eligible Stockholder;
(ii) outstanding shares of the Corporation’s capital stock are “owned” for purposes of meeting the ownership requirements of this Section 2.13;
(iii) a notice complies with the requirements of this Section 2.13;
(iv) a person satisfies the qualifications and requirements to be a Proxy Access Stockholder Nominee;
(v) inclusion of the Required Information in the Corporation’s proxy statement is consistent with all applicable laws, rules, regulations, and listing standards; and
(vi) any and all requirements of this Section 2.13 have been satisfied.
Any such interpretation or determination adopted in good faith by the Board of Directors (or any other person or body authorized by the Board of Directors) shall be conclusive and binding on all persons, including the Corporation and all record or beneficial owners of stock of the Corporation.
Section 2.14 No Action by Stockholder Consent in Lieu of a Meeting. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of Corporation and may not be effected by any consent by such stockholders.
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Section 2.15 Notices to the Corporation. Whenever notice is to be given to the Corporation by a stockholder under any provision of law or of the Certificate of Incorporation or these by-laws, such notice shall be delivered to the Secretary at the principal executive offices of the Corporation. If delivered by electronic transmission, the stockholder’s notice shall be directed to the Secretary at the electronic mail address or facsimile number, as the case may be, specified in the Corporation’s most recent proxy statement.
ARTICLE
III
Board of Directors
Section 3.01 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may adopt such rules and procedures, not inconsistent with the Certificate of Incorporation, these by-laws, or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation.
Section 3.02 Number. The Board of Directors shall consist of a number directors as fixed from time to time by resolution of the Board of Directors.
Section 3.03 Classes of Directors. The Board of Directors shall be and is divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one third of the total number of directors constituting the entire Board of Directors. The Board of Directors is authorized to assign members of the Board already in office to Class I, Class II or Class III at the time such classification becomes effective. In case of any increase or decrease, from time to time, in the number of directors, the number of directors in each class shall be apportioned as nearly equal as possible.
Section 3.04 Terms of Office. Each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this provision; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held after the effectiveness of this provision; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held after the effectiveness of this provision; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal.
Section 3.05 Newly Created Directorships and Vacancies. Any newly created directorships resulting from an increase in the authorized number of directors and any vacancies occurring in the Board of Directors, shall be filled solely by the affirmative votes of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director. A director so elected shall be elected to hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation, or removal.
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Section 3.06 Resignation. Any director may resign at any time by notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the date of receipt of such notice by the Corporation or at such later effective date or upon the happening of an event or events as is therein specified. A verbal resignation shall not be deemed effective until confirmed by the director in writing or by electronic transmission to the Corporation.
Section 3.07 Removal. Except as prohibited by applicable law or the Certificate of Incorporation, the stockholders holding a majority of the shares then entitled to vote at an election of directors may remove any director from office with or without cause.
Section 3.08 Fees and Expenses. Directors shall receive such reasonable fees for their services on the Board of Directors and any committee thereof and such reimbursement of their actual and reasonable expenses as may be fixed or determined by the Board of Directors.
Section 3.09 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such times and at such places as may be determined from time to time by the Board of Directors.
Section 3.10 Special Meetings. Special meetings of the Board of Directors may be held at such times and at such places as may be determined by the Chair of the Board, the lead independent director of the Board of Directors, or the Chief Executive Officer on at least 24 hours’ notice to each director given by one of the means specified in Section 3.13 hereof other than by mail or on at least three days’ notice if given by mail. Special meetings shall be called by the Chair of the Board or the Chief Executive Officer in like manner and on like notice on the written request of any two or more directors.
Section 3.11 Telephone Meetings. Board of Directors or Board of Directors committee meetings may be held by means of telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other and be heard. Participation by a director in a meeting pursuant to this Section 3.11 shall constitute presence in person at such meeting.
Section 3.12 Adjourned Meetings. A majority of the directors present at any meeting of the Board of Directors, including an adjourned meeting, whether or not a quorum is present, may adjourn and reconvene such meeting to another time and place. At least 24 hours’ notice of any adjourned meeting of the Board of Directors shall be given to each director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.13 hereof other than by mail, or at least three days’ notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called.
Section 3.13 Notices. Subject to Section 3.10, Section 3.12, and Section 3.14 hereof, whenever notice is required to be given to any director by applicable law, the Certificate of Incorporation, or these by-laws, such notice shall be deemed given effectively if given in person or by telephone, mail addressed to such director at such director’s address as it appears on the records of the Corporation, facsimile, email, or by other means of electronic transmission.
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Section 3.14 Waiver of Notice. Whenever notice to directors is required by applicable law, the Certificate of Incorporation, or these by-laws, a waiver thereof, in writing signed by, or by electronic transmission by, the director entitled to the notice, whether before or after such notice is required, shall be deemed equivalent to notice. Attendance by a director at a meeting shall constitute a waiver of notice of such meeting except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special Board of Directors or committee meeting need be specified in any waiver of notice.
Section 3.15 Organization. At each regular or special meeting of the Board of Directors, the Chair of the Board or, in his or her absence, another director selected by the Board of Directors shall preside. The Secretary shall act as secretary at each meeting of the Board of Directors. If the Secretary is absent from any meeting of the Board of Directors, an assistant secretary of the Corporation shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all assistant secretaries of the Corporation, the person presiding at the meeting may appoint any person to act as secretary of the meeting.
Section 3.16 Quorum of Directors. Except as otherwise provided by these by-laws, the Certificate of Incorporation, or required by applicable law, the presence of a majority of the total number of directors on the Board of Directors shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board of Directors.
Section 3.17 Action by Majority Vote. Except as otherwise provided by these by-laws, the Certificate of Incorporation, or required by applicable law, the vote 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.
Section 3.18 Directors’ Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, 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 directors or members of such 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 the DGCL 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 accordance with applicable law.
Section 3.19 Chair of the Board. The Board of Directors shall annually elect one of its members to be its chair (the “Chair of the Board”) and shall fill any vacancy in the position of Chair of the Board at such time and in such manner as the Board of Directors shall determine. Except as otherwise provided in these by-laws, the Chair of the Board shall preside at all meetings of the Board of Directors and of stockholders. The Chair of the Board shall perform such other duties and services as shall be assigned to or required of the Chair of the Board by the Board of Directors.
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Section 3.20 Committees of the Board of Directors. 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. If a member of a committee shall be absent from any meeting, or disqualified from voting, the remaining member or members present at the 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 permitted by applicable law, 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 that may require it to the extent so authorized by the Board of Directors. Unless the Board of Directors provides otherwise, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board of Directors provides otherwise, each committee designated by the Board of Directors may make, alter and repeal rules and procedures for the conduct of its business. In the absence of such rules and procedures each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to this ARTICLE III.
ARTICLE
IV
Officers
Section 4.01 Positions and Election. The officers of the Corporation shall be chosen by the Board of Directors and shall include a chief executive officer (the “Chief Executive Officer”), a president (the “President”), a chief financial officer (the “Chief Financial Officer”), a treasurer (the “Treasurer”), and a secretary (the “Secretary”). The Board of Directors, in its discretion, may also elect one or more vice presidents, assistant treasurers, assistant secretaries, and other officers in accordance with these by-laws. Any two or more offices may be held by the same person.
Section 4.02 Term. Each officer of the Corporation shall hold office until such officer’s successor is elected and qualified or until such officer’s earlier death, resignation, or removal. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors at any time with or without cause by the majority vote of the members of the Board of Directors then in office. The removal of an officer shall be without prejudice to his or her contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. Any officer of the Corporation may resign at any time by giving notice of his or her resignation in writing, or by electronic transmission, to the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Should any vacancy occur among the officers, the position shall be filled for the unexpired portion of the term by appointment made by the Board of Directors.
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Section 4.03 Chief Executive Officer. The Chief Executive Officer shall, subject to the provisions of these by-laws and the control of the Board of Directors, have general supervision, direction, and control over the business of the Corporation and over its officers. The Chief Executive Officer shall perform all duties incident to the office of the Chief Executive Officer, and any other duties as may be from time to time assigned to the Chief Executive Officer by the Board of Directors, in each case subject to the control of the Board of Directors.
Section 4.04 President. The President shall report and be responsible to the Chief Executive Officer. The President shall have such powers and perform such duties as from time to time may be assigned or delegated to the President by the Board of Directors or the Chief Executive Officer or that are incident to the office of president.
Section 4.05 Vice Presidents. Each vice president of the Corporation shall have such powers and perform such duties as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer, or the President, or that are incident to the office of vice president.
Section 4.06 Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings, and shall perform like duties for committees of the Board of Directors when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chair of the Board, or the Chief Executive Officer. The Secretary shall keep in safe custody the seal of the Corporation and have authority to affix the seal to all documents requiring it and attest to the same.
Section 4.07 Chief Financial Officer. The Chief Financial Officer shall be the principal financial officer of the Corporation and shall have such powers and perform such duties as may be assigned by the Board of Directors, the Chair of the Board, or the Chief Executive Officer.
Section 4.08 Treasurer. The treasurer of the Corporation shall have the custody of the Corporation’s funds and securities, except as otherwise provided by the Board of Directors, and shall keep full and accurate accounts of receipts and disbursements in records belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the President and the directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.
Section 4.09 Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
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Section 4.10 Duties of Officers May Be Delegated. In case any officer is absent, or for any other reason that the Board of Directors may deem sufficient, the Chief Executive Officer or the President or the Board of Directors may delegate for the time being the powers or duties of such officer to any other officer or to any director.
ARTICLE
V
INDEMNIFICATION
Section 5.01 Indemnification. The Corporation shall indemnify and hold harmless to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, enterprise, or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) actually and reasonably incurred by such person. Notwithstanding the preceding sentence, the Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) commenced by such person only if the commencement of such Proceeding (or part thereof) by the person was authorized in the specific case by the Board of Directors.
Section 5.02 Advancement of Expenses. The Corporation shall pay the expenses (including attorneys’ fees) actually and reasonably incurred by a director or officer of the Corporation in defending any Proceeding in advance of its final disposition, upon receipt of an undertaking by or on behalf of such person to repay all amounts advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be indemnified for such expenses under this Section 5.02 or otherwise. Payment of such expenses actually and reasonably incurred by such person, may be made by the Corporation, subject to such terms and conditions as the general counsel of the Corporation in his or her discretion deems appropriate.
Section 5.03 Non-Exclusivity of Rights. The rights conferred on any person by this ARTICLE V will not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these by-laws, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees, or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL.
Section 5.04 Other Indemnification. The Corporation’s obligation, if any, to indemnify 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 nonprofit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise, or nonprofit entity.
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Section 5.05 Insurance. The Corporation may 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 Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, enterprise, or nonprofit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.
Section 5.06 Repeal, Amendment, or Modification. Any amendment, repeal, or modification of this ARTICLE V shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE
VI
Stock Certificates and Their Transfer
Section 6.01 Certificates Representing Shares. The shares of stock of the Corporation shall be represented by certificates; provided that the Board of Directors may provide by resolution or resolutions that some or all of any class or series shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock. If shares are represented by certificates, such certificates shall be in the form, other than bearer form, approved by the Board of Directors. The certificates representing shares of stock shall be signed by, or in the name of, the Corporation by any two authorized officers of the Corporation. Any or all such signatures may be facsimiles. In case any officer, transfer agent, or registrar who has signed such a certificate ceases to be an officer, transfer agent, or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if the signatory were still such at the date of its issue.
Section 6.02 Transfers of Stock. Stock of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Transfers of stock shall be made on the books administered by or on behalf of the Corporation only by the direction of the registered holder thereof or such person’s attorney, lawfully constituted in writing, and, in the case of certificated shares, upon the surrender to the Company or its transfer agent or other designated agent of the certificate thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued.
Section 6.03 Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.
Section 6.04 Lost, Stolen, or Destroyed Certificates. The Board of Directors or the Secretary may direct a new certificate or uncertificated shares to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact by the owner of the allegedly lost, stolen, or destroyed certificate. When authorizing such issue of a new certificate or uncertificated shares, the Board of Directors or the Secretary may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen, or destroyed certificate, or the owner’s legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate or uncertificated shares.
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ARTICLE
VII
General Provisions
Section 7.01 Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise, as may be prescribed by law or custom or by the Board of Directors.
Section 7.02 Fiscal Year. The fiscal year of the Corporation shall be the calendar year.
Section 7.03 Checks, Notes, Drafts, Etc. All checks, notes, drafts, or other orders for the payment of money of the Corporation shall be signed, endorsed, or accepted in the name of the Corporation by such officer, officers, person, or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.
Section 7.04 Conflict with Applicable Law or Certificate of Incorporation. These by-laws are adopted subject to any applicable law and the Certificate of Incorporation. Whenever these by-laws may conflict with any applicable law or the Certificate of Incorporation, such conflict shall be resolved in favor of such law or the Certificate of Incorporation.
Section 7.05 Books and Records. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be maintained on any information storage device, method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases); provided that the records so kept can be converted into clearly legible paper form within a reasonable time, and, with respect to the stock ledger, the records so kept comply with Section 224 of the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to applicable law.
Section 7.06 Forum for Adjudication of Disputes.
(a) Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for:
(i) any derivative action or proceeding brought on behalf of the Corporation;
(ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or stockholder of the Corporation to the Corporation or the Corporation’s stockholders;
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(iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation, or these by-laws (as either may be amended or restated) or as to which the DGCL 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.
If any action the subject matter of which is within the scope of this Section 7.06 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: (i) 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 this Section 7.06 (an “Enforcement Action”); and (ii) 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. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.06(a).
(b) Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.06(b).
ARTICLE
VIII
Amendments
These by-laws may be adopted, amended, or repealed by the stockholders entitled to vote; provided, however, that the Corporation may, in its Certificate of Incorporation, confer the power to adopt, amend, or repeal these by-laws upon the Board of Directors; and, provided further, that any proposal by a stockholder to amend these by-laws will be subject to the provisions of ARTICLE II of these by-laws except as otherwise required by law. The fact that such power has been so conferred upon the Board of Directors will not divest the stockholders of the power, nor limit their power to adopt, amend, or repeal by-laws.
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Exhibit 10.3
SOUTHLAND
HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
On May 24, 2022, the board of directors of Legato Merger Corp. II, a Delaware corporation, adopted this Southland Holdings, Inc. 2022 Equity Incentive Plan subject to the approval of the stockholders in accordance with the bylaws of Legato Merger Corp. II.
SECTION 1. PURPOSE OF THIS PLAN
1.1 Eligible Award Recipients. The individuals eligible to receive Awards are the Employees, Directors, and Consultants of Southland Holdings, Inc. (the “Company”) and its Affiliates.
1.2 General Purpose. The Company, by means of the Southland Holdings, Inc. 2022 Equity Incentive Plan (the “Plan”), seeks to retain the services of Eligible Individuals, to secure and retain the services of new members of this group, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. The Plan provides a means by which eligible recipients of Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Awards: (i) Incentive Stock Options, (ii) Non-Qualified Stock Options, (iii) Restricted Shares, (iv) Restricted Share Units, (v) Stock Appreciation Rights, or (vi) any other award the Plan Administrator, in its sole and absolute discretion, deems appropriate to meet the objectives of this Plan.
SECTION 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set forth below unless the context requires otherwise:
2.1 “Affiliate” shall mean, when used hereunder in connection with an Incentive Stock Option, any Parent Corporation or Subsidiary Corporation; when used hereunder in connection a Non-Qualified Stock Option or other Award intended to be exempt from Section 409A of the Code, any entity related to the Company under Section 414 of the Code, as modified by Section 409A of the Code; and for all other purposes hereunder, any entity controlling, controlled by, or under common control with the Company, in all instances, whether now or hereafter existing.
2.2 “Award” shall mean the grant under this Plan of a Stock Option, a Stock Appreciation Right, a Restricted Share, a Restricted Share Unit or any other grant of incentive compensation pursuant to this Plan.
2.3 “Award Agreement” shall mean the written agreement evidencing the terms and conditions of a grant of one or more Awards under this Plan to an Eligible Individual. Each Award Agreement shall be subject to the terms and conditions of the Plan and need not be identical.
2.4 “Award Date” shall mean the date on which an Award is granted to an Eligible Individual.
2.5 “Award Term” shall mean the maximum period during which a Participant may exercise, purchase, or otherwise benefit from an Award granted under this Plan.
2.6 “Board” shall mean the Board of Directors of the Company, as the same may be constituted from time to time.
2.7 “Breach Event” shall mean the Participant’s breach or default of an agreement, commitment or obligation to or with the Company or any Affiliate either during Participant’s Continuous Service or after Participant’s Termination Date, including, without limitation, breaching a confidentiality, noncompetition or non-solicitation agreement, covenant or obligation. The determination of whether a Breach Event has occurred shall be made in the sole and absolute discretion of the Plan Administrator.
2.8 “Cause” shall mean, unless the applicable Award Agreement states otherwise:
(a) If a Participant is a party to an employment or service agreement with the Company or an Affiliate and such agreement provides for a definition of “Cause,” the definition therein; or
(b) If no such agreement exists, or if such agreement does not define Cause: (i) Participant’s conviction of any action constituting a criminal felony (other than automobile related violations) or other serious crime; (ii) Participant’s willful and continued refusal to follow reasonable instructions of the Board that are material to the Company’s operations or prospects and only after the Board provides written notice to the Participant which identifies with reasonable specificity the manner in which the Participant refused to follow such instructions and Participant has been provided a reasonable opportunity to cure such deficiency; (iii) Participant’s engagement in conduct that is materially injurious to the Company or an Affiliate; (iv) Participant devoting less than substantially all of his full time during normal business hours to the Company and which is not promptly cured after written notice from the Board to the Participant; or (v) Participant committing any Breach Event.
The determination of a Participant’s termination for “Cause” shall be made in the sole and absolute discretion of the Plan Administrator.
2.9 “Change in Control” shall mean the occurrence of any one of the following events:
(a) a sale, transfer or other conveyance of all or substantially all of the assets of the Company on a consolidated basis;
(b) the acquisition of beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) by any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), directly or indirectly, of securities representing 50% or more of the total number of votes that may be cast for the election of directors of the Company;
(c) the failure at any annual or special meeting of the Company’s stockholders held during the three-year period following a “solicitation in opposition” as defined in Rule 14a-6 promulgated under the Exchange Act, of a majority of the persons nominated by the Company in the proxy material mailed to shareholders by the management of the Company to win election to seats on the Board (such majority calculated based upon the total number of persons nominated by the Company failing to win election to seats on the Board divided by the total number of Board members of the Board as of the beginning of such three year period), excluding only those who die, retire voluntarily, are disabled or are otherwise disqualified in the interim between their nomination and the date of the meeting; or
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(d) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as amended from time to time. The determination of whether a “Change in Control” has occurred shall be made in the sole and absolute discretion of the Board.
2.10 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time (or any successor to such legislation), along with the regulations and guidance published in the Internal Revenue Bulletin from time to time.
2.11 “Committee” shall mean any person or persons to whom all or a portion of the authority to administer this Plan has been delegated by the Board pursuant to subsection 3.1 hereof.
2.12 “Common Stock” shall mean the authorized shares of common stock of the Company, par value $0.0001 per share.
2.13 “Company” shall mean Southland Holdings, Inc. and any successor thereto.
2.14 “Consultant” shall mean any person, including an advisor, engaged by the Company or any Affiliate to render consulting or advisory services and who is compensated for such services or who provides bona fide services to the Company or any Affiliate pursuant to a written agreement. However, the term “Consultant” shall not include Directors.
2.15 “Continuous Service” means that the Participant’s service with the Company or any Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which Participant renders service to the Company or any Affiliate as an Employee, Director or Consultant or a change in the entity for which Participant renders such service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. Notwithstanding the foregoing, with respect to an Incentive Stock Option, an Employee’s Continuous Service shall be deemed to have terminated in the event of a change in capacity from an Employee to a Consultant or non-Employee Director. The Plan Administrator, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Company, including sick leave, military leave or any other personal leave.
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2.16 “Director” shall mean a member of the Board, whether an Employee, former Employee or other non-Employee member.
2.17 “Disability” shall mean the Participant’s permanent and total inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which can be expected to last for a continuous period of not less than 12 months. The term “Disability” shall also include any definition of disability that may be contained in any long-term disability plan maintained or sponsored by the Company from time to time. The determination of a Participant’s “Disability” shall be made in the sole and absolute discretion of the Plan Administrator.
2.18 “Effective Date” shall mean the date on which the Plan is approved by the stockholders of the Company in accordance with the bylaws of the Company.
2.19 “Eligible Individual” shall mean an Employee, Consultant or Director eligible to receive an Award under Section 5 of this Plan.
2.20 “Employee” shall mean, for purposes of this Plan, a common-law employee of the Company or any Affiliate. Mere service as a Director or payment in accordance with any Director compensation policies adopted by the Board from time to time shall not be sufficient to constitute “employment” by the Company or an Affiliate.
2.21 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time (or any successor to such legislation).
2.22 “Exercise Agreement” shall mean the written or electronic agreement delivered by Participant to the Plan Administrator to evidence Participant’s exercise of those rights provided under the applicable Award Agreement.
2.23 “Exercise Date” shall mean the date set forth in the Exercise Agreement on which Participant exercises those rights provided under the applicable Award Agreement.
2.24 “Exercise Price” shall mean the consideration required, as determined by the Plan Administrator and set out in the Award Agreement, to be remitted upon exercise of an Award.
2.25 “Expiration Date” shall mean the date that is ten (10) years from the Effective Date, or, in the event the Plan is subsequently amended to make any change described in clause (iii) of subsection 16.1, the date that is ten (10) years from the earlier of the date on which such amendment is approved by the Board or the stockholders of the Company in accordance with the bylaws of the Company.
2.26 “Fair Market Value” shall mean, with respect to each Share,
(a) If the Common Stock is listed on a national securities exchange or a national market system, including without limitation the Nasdaq Capital Market, the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the date of determination, as reported in The Wall Street Journal or such other source as the Plan Administrator, in its sole and absolute discretion deems reliable;
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(b) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the mean of the high bid and low asked prices for the Common Stock on the last market trading day prior to the date of determination; or
(c) In the absence of an established market for the Common Stock, the value established, in good faith, by the Board as of the determination date in accordance with the applicable regulations and guidance promulgated under Code Section 409A (or any successor provision thereto) and published in the Internal Revenue Bulletin.
2.27 “Incentive Stock Option” shall mean any option to purchase Shares awarded pursuant to Section 6 of this Plan that qualifies as an “incentive stock option” pursuant to Section 422 of the Code.
2.28 “Non-Qualified Stock Option” shall mean any option to purchase Shares awarded pursuant to Section 6 of this Plan that does not qualify as an Incentive Stock Option (including, without limitation, any option to purchase Shares originally designated as or intended to qualify as an Incentive Stock Option but that does not, for any reason whatsoever, qualify as an Incentive Stock Option).
2.29 “Parent Corporation” shall mean any entity (other than the Company) in an unbroken chain of entities ending with the Company, provided each entity in the unbroken chain (other than the Company) owns, at the time of the determination, ownership interests possessing fifty percent (50%) or more of the total combined voting power of all classes of ownership interests in one of the other entities in such chain; provided, however, that with respect to an Award of an Incentive Stock Option, the term “Parent Corporation” shall refer solely to an entity that is taxed under Federal income tax laws as a corporation.
2.30 “Participant” shall mean any Eligible Individual who has been granted and holds an Award granted pursuant to this Plan.
2.31 “Plan” shall mean this Southland Holdings, Inc. 2022 Equity Incentive Plan, as amended from time to time.
2.32 “Plan Administrator” shall mean the Committee appointed by the Board to administer the Plan or if no Committee is appointed or then serving, the Board.
2.33 “Purchase Price” shall mean the consideration required, as determined by the Plan Administrator and set out in the Award Agreement, to be remitted upon grant of an Award of Restricted Shares.
2.34 “Restricted Shares” shall mean any Shares granted pursuant to Section 9 of this Plan that are subject to transferability restrictions and a substantial risk of forfeiture.
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2.35 “Restricted Share Units” shall mean any Award granted pursuant to Section 10 of this Plan denominated in Shares and subject to the terms, conditions and restrictions determined by the Plan Administrator and set forth in the applicable Award Agreement.
2.36 “Restriction Period” shall mean the period during which Restricted Shares issued pursuant to Section 9 hereof or Restricted Share Units issued pursuant to Section 10 hereof are subject to transferability restrictions and a substantial risk of forfeiture.
2.37 “Retirement” shall mean the Participant’s termination of Continuous Service at any time after the attainment of age 65, provided that such Participant has provided at least five years of Continuous Service.
2.38 “Securities Act” shall mean the Securities Act of 1933, as amended from time to time and all rules and regulations promulgated thereunder (or any successor to such legislation).
2.39 “Shares” shall mean shares of the Common Stock and any shares of capital stock or other securities hereafter issued or issuable upon, in respect of or in substitution or exchange for shares of Common Stock.
2.40 “Stock Appreciation Right” shall mean any Award granted pursuant to Section 7 of this Plan for the right to receive cash, Shares or a combination of both, with a value equal to the excess of the Fair Market Value of the aggregate number of Shares subject to such Stock Appreciation Right on the Exercise Date over the Fair Market Value of the aggregate number of Shares subject to such Stock Appreciation Right on the Award Date.
2.41 “Stock Option” shall mean any Incentive Stock Option or Non-Qualified Stock Option.
2.42 “Subsidiary Corporation” shall mean any entity (other than the Company) in an unbroken chain of entities beginning with the Company, provided each entity (other than the last entity) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of ownership interests in one of the other entities in such chain; provided, however, that with respect to an Award of an Incentive Stock Option, the term “Subsidiary Corporation” shall refer solely to an entity that is taxed under Federal income tax laws as a corporation.
2.43 “Ten Percent Stockholder” shall mean an individual who, at the time a Stock Option is granted pursuant to Section 6 hereof, owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.
2.44 “Termination Date” shall mean the date on which Participant’s Continuous Service with the Company (and all Affiliates) terminates due to death, Disability, voluntary termination, with or without Cause, or otherwise.
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SECTION 3. ADMINISTRATION OF THIS PLAN
3.1 Administration.
(a) The Plan shall be administered by, and the Plan Administrator shall be, the Committee; provided, however, that any power, authority or discretion granted to the Committee as the Plan Administrator may also be taken by the Board (subject to Section 3.1(c)); provided, further, that if a transaction is intended to be exempt under Rule 16b-3 of the Exchange Act, it shall be structured to satisfy the requirements for exemption under Rule 16b-3 of the Exchange Act.
(b) The Committee shall be authorized to act with respect to all matters relating to the administration of the Plan. The Committee will act by a majority of its members (or by unanimous vote if the Committee is comprised of two (2) members). To the extent the Committee shall cease to exist or no longer be authorized to act hereunder, the functions delegated to the Committee shall revert to the Board.
(c) Notwithstanding anything contained herein to the contrary, any action taken by the Board under this Plan shall require the affirmative vote of a majority of Directors who are independent, if any, as determined under the rules of any national securities exchange on which the Common Stock is listed or traded or, if the Common Stock is not listed or traded on any national securities exchange, the Nasdaq Stock Market.
3.2 Powers of Plan Administrator. The Plan Administrator shall have the power, in its sole and absolute discretion, but subject to and within the limitations of, the express provisions of the Plan:
(a) To determine from time to time which Eligible Persons shall be granted Awards under the Plan, provided that any Award granted to a member of the Committee shall be subject to the approval or ratification of the Board;
(b) To determine when and how each Award shall be granted; what type or combination of types of Awards shall be granted; the provisions of each Award granted (which need not be identical), including the time or times when an Award may be exercised; the number of Shares with respect to which an Award shall be granted to each such Person; the Exercise Price or the Purchase Price for Shares under an Award; the terms or other conditions, vesting periods or any restrictions for an Award and any restrictions on Shares acquired pursuant to an Award; and any other terms and conditions of an Award that the Plan Administrator deems appropriate and as are not inconsistent with the terms of the Plan;
(c) To determine whether, to what extent, and under what circumstances, to allow alternative payment options to exercise Awards, or pay withholding taxes imposed upon the grant, exercise or vesting of any Award, and the terms and conditions of such payment options;
(d) To rely upon Employees for such clerical and recordkeeping duties as may be necessary in connection with the administration of this Plan;
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(e) To accelerate or defer (with the consent of the subject Participant) the vesting of any rights under an Award;
(f) To establish, amend and revoke such rules and regulations as it may deem appropriate for the conduct of meetings and the proper administration of the Plan;
(g) To delegate to one or more Persons the right to act on its behalf in such matters as authorized by the Plan Administrator;
(h) To construe and interpret the Plan and Award Agreements issued hereunder;
(i) To amend the Plan or an Award Agreement to the extent provided under Section 15 hereof. The Plan Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective; and
(j) To take any and all other actions that are deemed necessary or advisable by the Plan Administrator for the administration of the Plan.
3.3 Effect of Plan Administrator’s Decision. All determinations, interpretations and constructions made by the Plan Administrator in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. The Plan Administrator, any member of the Board or Committee (or subcommittee) and any officer or Employee of the Company or any Affiliate acting at the direction of, or on behalf of, the Plan Administrator shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent provided in subsection 17.6 hereof, be fully indemnified by the Company with respect to any such action or determination.
SECTION 4. SHARES SUBJECT TO PLAN AND RELATED ADJUSTMENTS
4.1 Share Reserve. Except as otherwise provided in this Section 4, the maximum number of Shares that may be issued with respect to Awards granted pursuant to this Plan shall not exceed FIVE PERCENT (5%) of the issued and outstanding Shares as of [the Closing Date]. All or any portion of the Share reserve may be issued in connection with the exercise of Incentive Stock Options. The Shares issued pursuant to this Plan may be authorized but unissued Shares or may be issued Shares that have been repurchased or acquired by the Company, including shares purchased by the Company on the open market for purposes of the Plan.
4.2 Cancellation, Expiration, or Forfeiture of Awards. To the extent that any Award granted pursuant to this Plan shall, on and after the Effective Date hereof, be forfeited, expire or be cancelled, in whole or in part, then the number of Shares subject to the Plan, as provided in subsection 4.1, shall be increased by the portion of such awards so forfeited, expired or cancelled and such forfeited, expired or cancelled Shares may again be awarded pursuant to the provisions of this Plan.
4.3 Payment in Shares. Notwithstanding anything contained herein to the contrary, Shares tendered in payment of the Exercise Price, Purchase Price or withholding taxes with respect to an Award shall not become, or again be, available for Awards under this Plan.
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4.4 Awards Payable in Shares. The grant of Awards that may not be satisfied by issuance of Shares shall not count against the maximum number of Shares that may be issued under the Plan pursuant to subsection 4.1. Shares attributable to Awards that may be satisfied either by the issuance of Shares or by cash or other consideration shall be counted against the maximum number of Shares that may be issued under the Plan pursuant to subsection 4.1.
4.5 Repurchases of Shares. If Shares issued in connection with any Award granted pursuant to this Plan, shall, on and after the Effective Date, be repurchased by the Company, in whole or in part, then the number of Shares subject to the Plan pursuant to subsection 4.1 shall not be increased by that portion of the Shares repurchased by the Company and such repurchased Shares may not again be awarded pursuant to the provisions of this Plan.
4.6 Issuance of Share Certificates. Prior to the issuance of Common Stock hereunder, whether upon grant, exercise, or purchase under the applicable Award, Participant shall submit the consideration, if any, required under the applicable Award Agreement; payment or other provision for any applicable tax withholding obligations; and all documents to be executed and delivered by Participant in accordance with the provisions of this Plan and the applicable Award Agreement or as may otherwise be required by the Company or the Plan Administrator, including, without limitation, with respect to Restricted Shares, a stock power, endorsed in blank, relating to the Shares covered by such Award. The Company will evidence the issuance of Shares hereunder by any means appropriate, including, without limitation, book-entry registration or issuance of a duly executed Share certificate in the name of Participant, provided that stock certificates evidencing Restricted Shares granted pursuant to this Plan shall, if directed by the Company, be held in the custody of the Company or its duly authorized delegate until the restrictions thereon have lapsed. If certificates are issued, a separate certificate or certificates will be issued for Shares issued in connection with each type of Award granted to the Participant.
SECTION 5. ELIGIBILITY
5.1 Individuals Eligible to Participate. The Plan Administrator shall determine, within the limitations of the Plan, the Employees, Consultants, and Directors to whom Awards are to be granted. In making the determination of whether to grant an Award to an Employee, Consultant, or Director, as well as the determination of the type of Award and terms of such Award, the Plan Administrator may consider such factors as the Plan Administrator, in its sole and absolute discretion, may deem relevant in connection with the purposes of this Plan.
5.2 Evidence of Participation. Each Award granted to an Eligible Person shall be evidenced by an Award Agreement, in such form as prescribed by the Plan Administrator and containing such terms and provisions as are not inconsistent with this Plan. The provisions of separate Award Agreements need not be identical, but each Award Agreement shall include (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) the substance of the terms of the Plan. Each Award will be deemed to have been granted as of the date on which the Plan Administrator has completed the action declaring the Award, which date shall be specified by the Plan Administrator in the applicable Award Agreement, notwithstanding any delay which may elapse in executing and delivering such Award Agreement.
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SECTION 6. STOCK OPTIONS
6.1 Grant of Stock Options. The Plan Administrator may, in its sole and absolute discretion, grant Stock Options, whether alone or in addition to other Awards granted pursuant to this Plan, to any Eligible Individual; provided, however, that Incentive Stock Options may only be granted to Employees. Each Eligible Individual so selected shall be offered a Stock Option to purchase the number of Shares determined by the Plan Administrator and set forth in an Award Agreement. The Plan Administrator shall specify in the Award Agreement the number of Shares subject to the Award, whether such Stock Option is an Incentive Stock Option or Non-Qualified Stock Option, and such other terms or conditions as the Plan Administrator shall, in its sole and absolute discretion, determine appropriate and which are not inconsistent with the terms of the Plan.
6.2 Award Term. No Stock Option shall be exercisable after the expiration of the Award Term determined by the Plan Administrator and set out in Participant’s Award Agreement. Notwithstanding any provision to the contrary, the Award Term of any Stock Option granted under this Plan shall not exceed ten (10) years from the Award Date; provided, however, that no Incentive Stock Option granted to a Ten Percent Stockholder will be exercisable after the expiration of five (5) years from the date such Incentive Stock Option is granted.
6.3 Exercise Price. The Exercise Price of each Stock Option granted under this Section 6 shall be established by the Plan Administrator as of the Award Date. Notwithstanding the foregoing, the Exercise Price of any Stock Option shall not be less than 100% of the Fair Market Value of a Share on the Award Date (or if greater, the par value of such Common Stock) or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110% of the Fair Market Value of a Share on the Award Date.
6.4 Vesting of Stock Options. Except as may otherwise be provided in an Award Agreement, each Stock Option granted pursuant to this Plan may only be exercised to the extent that Participant is vested in such Stock Option. Except as otherwise provided under subsection 15.2 herein, each Stock Option shall vest separately in accordance with the vesting schedule determined by the Plan Administrator, which shall be set out in the applicable Award Agreement. Notwithstanding the foregoing, the Plan Administrator may accelerate the vesting schedule of any outstanding Stock Option to the extent the Plan Administrator determines, in its sole and absolute discretion, that such acceleration is not inconsistent with the purposes of this Plan.
6.5 Transferability of Option.
(a) Rights to Transfer. A Stock Option shall be transferable to the extent provided in the Award Agreement; provided, however, that an Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of Participant only by Participant. If the Award Agreement does not provide for transferability, then the Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of Participant only by Participant.
(b) Evidence of Rights. The transferee of a Stock Option shall not be permitted to exercise the Stock Option unless and until such transferee has provided the Plan Administrator a copy of the will and/or such other evidence as the Plan Administrator determines necessary to establish the validity of the transfer.
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6.6 Qualification of Incentive Stock Options.
(a) Stockholder Approval of Plan. To the extent stockholder approval of this Plan is required by Section 422 of the Code, no Eligible Person shall be granted an Incentive Stock Option unless this Plan is approved by the stockholders of the Company within twelve (12) months before or after the date this Plan is adopted (or, if applicable, amended pursuant to clause (iii) of subsection 16.1) by the Board.
(b) Fair Market Value Restrictions. To the extent that the aggregate Fair Market Value (determined on the Award Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Stock Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
(c) Termination of Authority to Issue Incentive Stock Options. Notwithstanding any provision of this Plan to the contrary, no Incentive Stock Option shall be granted to any Employee after the Expiration Date.
(d) Qualification of Incentive Stock Option. To the extent that a Stock Option designated as an Incentive Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions, the failure of the stockholders of the Company to timely approve the Plan, or the time or manner of its exercise or otherwise) such Stock Option or the portion thereof that does not qualify as an Incentive Stock Option shall be deemed to constitute a Non-Qualified Stock Option under this Plan.
(e) Failure to Qualify. Notwithstanding any provision herein to the contrary, none of the Plan Administrator, the Company, any Affiliates, or the directors, officers or employees of the foregoing, shall have any liability to any Participant or any other Person if a Stock Option designated as an Incentive Stock Option fails to qualify as such at any time.
6.7 Payment in Lieu of Shares. Notwithstanding any provision to the contrary herein, upon exercise of any one or more Stock Options on or after Participant’s Termination Date, the Company may, in lieu of the issuance of Shares, remit to Participant (or his legal representative, estate, heirs, or designated beneficiary, as the case may be) a lump sum cash payment equal to the Fair Market Value of the Common Stock that would otherwise be issued under the applicable Stock Option(s), less the aggregate Exercise Price; provided, however, that such payment shall not be made unless the Company has sufficient capital and liquidity, as determined by the Board, in its sole and absolute discretion, to make such cash payment.
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SECTION 7. stock appreciation rights
7.1 Grant of Stock Appreciation Rights. The Plan Administrator may grant Stock Appreciation Rights, whether alone or in addition to other Awards granted pursuant to this Plan, to any Eligible Individual. Each Stock Appreciation Right shall be evidenced by an Award Agreement, which shall include any conditions and restrictions as the Plan Administrator shall impose as are not inconsistent with the terms of the Plan.
7.2 Award Term. No Stock Appreciation Right shall be exercisable after the expiration of the Award Term determined by the Plan Administrator and set out in Participant’s Award Agreement.
7.3 Exercise Price. The Exercise Price of each Stock Appreciation Right granted under this Section 7 shall be established by the Plan Administrator or shall be determined by a method established by the Plan Administrator as of the Award Date, but in no event shall the Exercise Price be less than the Fair Market Value of a Share on the Award Date.
7.4 Vesting of Stock Appreciation Rights. Except as may otherwise be provided in an Award Agreement, each Stock Appreciation Right granted pursuant to this Plan may only be exercised to the extent that Participant is vested in such Stock Appreciation Right. Except as otherwise provided under subsection 15.2 herein, each Stock Appreciation Right shall vest separately in accordance with the vesting schedule determined by the Plan Administrator and set out in the applicable Award Agreement. Notwithstanding the foregoing, the Plan Administrator may accelerate the vesting schedule of any outstanding Stock Appreciation Right to the extent the Plan Administrator determines, in its sole and absolute discretion, that such acceleration is not inconsistent with the purposes of this Plan.
7.5 Transferability
(a) Right to Transfer. Except to the extent otherwise provided in the applicable Award Agreement, a Stock Appreciation Right shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of Participant only by Participant.
(b) Designation of Beneficiary. Notwithstanding the foregoing, Participant may, by delivering written notice to the Plan Administrator, in a form satisfactory to the Plan Administrator, designate a third party who, in the event of the death of Participant, shall thereafter be entitled to exercise the Stock Appreciation Right.
(c) Evidence of Rights. The transferee of a Stock Appreciation Right shall not be evidenced on the books and records of the Company unless and until such transferee has provided the Plan Administrator a copy of the will and/or such other evidence as the Plan Administrator determines necessary to establish the validity of the transfer.
7.6 Payment of Benefit. Except as otherwise expressly provided in the applicable Award Agreement, Participant shall be paid for the value of the Stock Appreciation Right in cash, Shares, or a combination thereof, as determined by the Plan Administrator in its sole and absolute discretion.
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SECTION 8. EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Each Stock Option and Stock Appreciation Right shall be exercised subject to, and in accordance with, this Section 8.
8.1 Time of Exercise.
(a) Termination of Service. Unless otherwise provided in the applicable Award Agreement, in the event Participant’s Continuous Service terminates (other than upon Participant’s death or Disability or Retirement by a Director), Participant may exercise his Stock Option or Stock Appreciation Right (to the extent that Participant was entitled to exercise such Award as of the Termination Date) but only within such period of time ending on the earlier of (i) the day that is three (3) months from Participant’s Termination Date or (ii) the expiration of the Award Term. Notwithstanding any provision in the Plan or an Award Agreement to the contrary, in the event of a change in capacity of Participant from an Employee of the Company to either a non-Employee Director or Consultant, if Participant fails to exercise an Incentive Stock Option within the 3-month period from such Termination Date, as provided herein, the Incentive Stock Option shall, upon expiration of such 3-month period, become a Non-Qualified Stock Option under the Plan.
(b) Death of Participant. Unless otherwise provided in the applicable Award Agreement, in the event Participant’s Continuous Service terminates by reason of such Participant’s death, Participant’s estate, heirs or designated beneficiary may exercise Participant’s Stock Option or Stock Appreciation Right (to the extent that Participant was entitled to exercise such Award as of the Termination Date) but only within such period of time ending on the earlier of (i) the day that is twelve (12) months from Participant’s Termination Date or (ii) the expiration of the Award Term.
(c) Disability of Participant. Unless otherwise provided in the applicable Award Agreement, in the event Participant’s Continuous Service terminates by reason of such Participant’s Disability, Participant (or his legal representative) may exercise Participant’s Stock Option or Stock Appreciation Right (to the extent that Participant was entitled to exercise such Award as of the Termination Date) but only within such period of time ending on the earlier of (i) the day that is twelve (12) months from the Participant’s Termination Date or (ii) the expiration of the Award Term.
(d) Retirement of Directors. Unless otherwise provided in the applicable Award Agreement, in the event of the Retirement of a Participant who is a Director, such Participant’s Stock Options or Stock Appreciation Rights will not terminate as a result of such Retirement, and such Participant shall be entitled to exercise such Stock Options or Stock Appreciation Rights (to the extent that Participant is entitled to exercise such Award as of the date of Retirement) during the applicable Award Term.
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(e) Termination for Cause. The Plan Administrator may, in its sole and absolute discretion, specify in an Award Agreement that in the event Participant’s Continuous Service terminates for Cause, as determined in the sole and absolute discretion of the Plan Administrator, the Participant’s Stock Options, whether or not vested, shall immediately terminate and be no longer exercisable as of the date of such termination or determination, as applicable, and Participant shall not be entitled to any payment or other consideration from the Company in connection with the cancellation of such Award.
(f) Discretion of Plan Administrator. The Plan Administrator shall have the sole discretion, exercisable at any time while the Stock Option or Stock Appreciation Right remains outstanding, to extend the time during which such Award is to remain exercisable following Participant’s Termination Date from the period otherwise in effect for that Award and set forth in the Award Agreement to such greater period of time as the Plan Administrator shall deem appropriate; provided, however, that the period in which the Award is exercisable shall not be extended to a date beyond the expiration of the Award Term. If the Plan Administrator extends the time during which an Incentive Stock Option will remain exercisable, then such extension shall be treated as the grant of a new Option as of the date of the extension.
(g) Expiration of Award. If Participant does not exercise his Stock Option or Stock Appreciation Right within the periods specified in this Section 8, the Award shall terminate and will no longer be exercisable.
(h) Lapsed and Cancelled Awards. Nothing contained in this Plan will be deemed to extend the term of an Award or to revive any Award that has previously lapsed or been cancelled, terminated or surrendered.
8.2 Procedure for Exercise. Each exercise of a Stock Option or Stock Appreciation Right shall be evidenced by an Exercise Agreement in the form prescribed by the Plan Administrator and duly executed by Participant (or his legal representative, estate, heirs, or designated beneficiary, as the case may be) and shall be accompanied by payment, if applicable, of the Exercise Price and withholding taxes imposed upon exercise of the Award.
SECTION 9. RESTRICTED SHARES
9.1 Grants of Restricted Shares. The Plan Administrator may, in its sole and absolute discretion, grant Restricted Shares, whether alone or in addition to other Awards granted pursuant to this Plan, to any Eligible Person. Each Eligible Person granted Restricted Shares shall execute an Award Agreement setting forth the terms and conditions of such Restricted Shares, including, without limitation, the Purchase Price, if any; and the Restriction Period, which shall in no event exceed ten (10) years from the Award Date, and conditions of forfeitability, whether based on period of service or otherwise.
9.2 Payment for Restricted Shares. Upon Participant’s acceptance of an applicable Award Agreement for Restricted Shares, Participant shall pay to the Company the Purchase Price, if any, for the Restricted Shares. Such Purchase Price may be paid in any manner permitted under Section 13 herein and set forth in the applicable Award Agreement. The Purchase Price, if any, shall be determined by the Plan Administrator, in its sole and absolute discretion, and set forth in the applicable Award Agreement.
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9.3 Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to subsection 9.3(b) herein, and except as otherwise provided in the applicable Award Agreement, all Restricted Shares shall be forfeited and returned to the Company and all rights of Participant with respect to such Restricted Shares shall terminate unless Participant satisfies the requirements of the Award Agreement, which may include requirements for continuation of service and such other terms and conditions as the Plan Administrator, in its sole and absolute discretion, shall determine applicable with respect to the Restricted Shares.
(b) Waiver of Restriction Period. Notwithstanding anything contained in this Section 9 to the contrary, the Plan Administrator may, in its sole and absolute discretion, waive the Restriction Period and any other conditions set forth in the applicable Award Agreement in the event of the death or Disability of Participant and impose such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Plan Administrator shall deem appropriate.
9.4 Transferability of Restricted Shares.
(a) Rights to Transfer. An Award of Restricted Shares shall be transferable to the extent provided in the Award Agreement. If the Award Agreement does not provide for transferability, then the Restricted Shares shall not be transferable except by will or by the laws of descent and distribution.
(b) Evidence of Rights. The transferee of an Award of Restricted Shares shall not be evidenced on the books and records of the Company unless and until such transferee has provided the Plan Administrator a copy of the will and/or such other evidence as the Plan Administrator determines necessary to establish the validity of the transfer.
SECTION 10. RESTRICTED SHARE UNITS
10.1 Grant of Restricted Share Units. The Plan Administrator may, in its sole and absolute discretion, grant Restricted Share Units, whether alone or in addition to other Awards granted pursuant to this Plan, to any Eligible Person. Each Eligible Person granted Restricted Share Units shall execute an Award Agreement, which shall set forth such terms and conditions applicable to the Restricted Share Units as the Plan Administrator shall determine are appropriate and consistent with the provisions of the Plan, including the Restriction Period, which shall in no event exceed ten (10) years from the Award Date, and conditions of forfeitability, whether based on period of service or otherwise. A Restricted Share Unit shall represent an unfunded, unsecured right to receive one Share or cash equal to the Fair Market Value of a Share, as provided in the Award Agreement.
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10.2 Terms of Restricted Share Units.
(a) Forfeiture of Restricted Share Units. Subject to subsection 10.2(b) herein, and except as otherwise provided in the applicable Award Agreement, all Restricted Share Units shall be forfeited and all rights of a Participant with respect to such Restricted Share Units shall terminate unless the Participant satisfies the requirements of the Award Agreement, which may include requirements for continuation of service and such other terms and conditions as the Plan Administrator, in its sole and absolute discretion, shall determine to be applicable with respect to the Restricted Share Units.
(b) Waiver of Restriction Period. Notwithstanding anything contained in this Section 9 to the contrary, the Plan Administrator may, in its sole and absolute discretion, waive the Restriction Period and any other conditions set forth in the applicable Award Agreement in the event of the death or Disability of Participant and impose such terms and conditions (including forfeiture of a proportionate number of the Restricted Share Units) as the Plan Administrator shall deem appropriate.
10.3 Settlement. Except as otherwise provided in an applicable Award Agreement, Restricted Share Units shall be settled no later than March 15th of the calendar year following the end of the calendar year in which such Restricted Share Units are no longer subject to a substantial risk of forfeiture. Notwithstanding the foregoing, settlement may occur after such date if (i) it is administratively impracticable to settle a Restricted Share Unit by such date and such impracticability was unforeseeable on the Award Date, provided that settlement occurs as soon as administratively practicable thereafter; or (ii) settlement by such date would jeopardize the ability of the Company to continue as a going concern, provided that settlement occurs as soon as doing so would not have such effect.
10.4 Transferability of Restricted Share Units.
(a) Rights to Transfer. An Award of Restricted Share Units shall be transferable to the extent provided in the Award Agreement. If the Award Agreement does not provide for transferability, then the Restricted Share Units shall not be transferable except by will or by the laws of descent and distribution.
(b) Evidence of Rights. The transferee of an Award of Restricted Share Units shall not be evidenced on the books and records of the Company unless and until such transferee has provided the Plan Administrator a copy of the will or such other evidence as the Plan Administrator determines necessary to establish the validity of the transfer.
SECTION 11. OTHER AWARDS
The Plan Administrator may grant to any Eligible Individual other forms of Awards based upon, payable in or otherwise related to, in whole or in part, the Common Stock, if the Plan Administrator, in its sole discretion, determines that such other form of Award is consistent with the purposes of this Plan. The terms and conditions of such other form of Award shall be specified in an Award Agreement that sets forth the terms and conditions of such Award, including, but not limited to, the price, if any, and the vesting schedule, if any, of such Award and shall include any conditions and restrictions as the Plan Administrator shall impose as are not inconsistent with the terms of the Plan. Such Awards may be granted for such minimum consideration, if any, as may be required by applicable law or for such other greater consideration as may be determined by the Plan Administrator, in its sole discretion.
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SECTION 12. STOCKHOLDER RIGHTS
Except to the extent otherwise provided in the applicable Award Agreement, no Person shall have any rights as a stockholder of the Company with respect to any Shares of Common Stock subject to an Award unless and until such Person becomes the holder of record of such Shares pursuant to subsection 4.6 hereof, and except as otherwise permitted by subsection 15.1, no adjustment will be made for dividends or other distributions in respect of such Shares for which the record date is prior to the date on which such Person has become the holder of record. For these purposes, a Participant who receives a grant of Restricted Shares shall become a holder of record as of the Award Date or, if later, the date on which the applicable Purchase Price is paid, and shall thereafter be entitled to the voting and dividend rights appurtenant to such Shares (provided that such dividends shall continue to be subject to any restrictions applicable to the Restricted Shares themselves).
SECTION 13. PAYMENT OF CONSIDERATION FOR AWARDS
13.1 Consideration for Shares. Except as otherwise provided in this Plan, consideration for Shares purchased under Awards may be submitted only in such amounts and at such intervals of time as specified in the applicable Award Agreement
(a) by payment to the Company of the amount of such consideration by cash, wire transfer, certified check or bank draft;
(b) by execution of a promissory note, to be submitted with a stock power, endorsed in blank relating to the Shares held as collateral for such note;
(c) by “net exercise,” pursuant to which the Company withholds from the Shares that would otherwise be issued upon exercise of an Award that number of Shares with a Fair Market Value equal to the Exercise Price for the Award;
(d) through a broker-dealer acting on behalf of Participant if (i) the broker-dealer has received a fully and duly endorsed copy of the Award Agreement and a fully and duly endorsed notice of exercise or purchase, along with written instructions signed by Participant requesting that the Company deliver Shares to the broker-dealer to be held in a designated account on behalf of Participant; (ii) adequate provision has been made with respect to the payment of any withholding taxes due upon grant, exercise, or vesting; and (iii) the broker-dealer and Participant have otherwise complied with applicable securities laws;
(e) through the delivery of unrestricted Shares having a Fair Market Value equal to the Exercise Price and owned by Participant for more than six (6) months (or such shorter or longer period of time as is necessary to avoid a charge to earnings on the Company’s financial statements) or that otherwise meet the conditions established by the Company to avoid adverse accounting consequences (as determined by the Company);
(f) any combination of one or more methods described herein; or
(g) any other consideration deemed acceptable by the Plan Administrator, in its sole and absolute discretion.
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Notwithstanding any provision herein to the contrary, Participant shall not be permitted to exercise an Incentive Stock Option pursuant to paragraphs (c) - (g) above unless the Award Agreement specifically permits such method of exercise on the Award Date.
13.2 Withholding Requirements. The amount, as determined by the Plan Administrator, of any federal, state or local tax required to be withheld by the Company due to the grant, exercise, or vesting of an Award must be submitted in such amounts and at such time as specified in the applicable Award Agreement:
(a) by payment to the Company of the amount of such withholding obligation by cash, wire transfer, certified check or bank draft;
(b) through either (i) the retention by the Company of a number of Shares out of the Shares being acquired through the Award or (ii) the delivery of unrestricted Shares owned by Participant for more than six (6) months (or such shorter or longer period as is necessary to avoid a charge to earnings on the Company’s financial statements) and having a Fair Market Value equal to the minimum withholding obligation or that otherwise meet the conditions established by the Company to avoid adverse accounting consequences (as determined by the Company); or
(c) pursuant to a written agreement between Participant and the Company authorizing the Company to withhold from such Participant’s regular wages the amount of such withholding tax obligation.
If Participant elects to use and the Plan Administrator permits either method described in subsection 13.2(b) herein in full or partial satisfaction of any withholding tax liability resulting from the grant, exercise or vesting of an Award hereunder, the Company shall remit an amount equal to the Fair Market Value of the Shares so withheld or delivered, as the case may be, to the appropriate taxing authorities.
SECTION 14. COMPLIANCE WITH SECURITIES AND OTHER LAWS
14.1 Securities Laws. Notwithstanding any other provision of this Plan, the Company shall not be obligated to sell or issue any Shares pursuant to any Award granted under this Plan unless (a) the Shares have been registered under applicable Federal securities law, (b) the prior approval of such sale or issuance has been obtained from any state regulatory body having jurisdiction to the extent necessary to comply with applicable state securities laws, (c) the Shares have been duly listed or quoted on a national securities exchange or automated quotation system of a registered securities association in accordance with the procedures specified thereunder and (d) with respect to Participants subject to Section 16 of the Exchange Act, the Company determines that the Plan, the Award Agreement and the sale or issuance of Shares thereunder, comply with all applicable provisions of Rule 16b-3 of the Exchange Act (or any successor provision thereto). The Plan Administrator may modify or revoke all or any provision of an Award Agreement in order to comply with applicable federal and state securities laws and none of the Company, the Plan Administrator, or any Director, officer, employee, agent or representative thereof will have liability to any Person for refusing to issue, deliver or transfer any Award or any Share issuable in connection with such Award if such refusal is based upon the foregoing provisions of this subsection 14.1.
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14.2 Prohibition on Deferred Compensation. Notwithstanding any provision herein to the contrary, any Award issued hereunder that constitutes a deferral of compensation under a “nonqualified deferred compensation plan”, as such term is defined under Section 409A(d)(1) of the Code (or a successor provision thereto), shall be modified or cancelled to comply with the requirements of Section 409A of the Code (or a successor provision thereto) and applicable guidance published in the Internal Revenue Bulletin.
SECTION 15. ADJUSTMENTS TO AWARDS
15.1 Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of Shares, exchange of Shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan shall be appropriately adjusted in the class(es) and maximum number of Shares available for issuance under the Plan pursuant to subsection 4.1 and available for issuance to an Eligible Individual pursuant to subsection 4.2, and all outstanding Awards shall be appropriately adjusted in the class(es) and number of Shares and price per Share of Common Stock subject to such outstanding Awards. The Plan Administrator shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company).
15.2 Change in Control. In the event of a Change in Control, then with respect to Awards held by Participants whose Continuous Service has not terminated:
(a) Notice and Acceleration. (i) The Company shall provide each Participant written notice of such Change in Control, (ii) all outstanding Stock Options and Stock Appreciation Rights of such Participant shall automatically accelerate and become fully exercisable, and (iii) the restrictions and conditions on all outstanding Restricted Shares and Restricted Share Units held by such Participant shall immediately lapse.
(b) Assumption of Grants. Upon a Change in Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Plan Administrator determines otherwise, all outstanding Stock Options and Stock Appreciation Rights that are not exercised shall be assumed by, or replaced with comparable options or rights, by the surviving corporation.
(c) Other Alternatives. Notwithstanding Section 15.2(b), in the event of a Change in Control, the Plan Administrator may take one or both of the following actions: the Plan Administrator may (i) require that Participants surrender their outstanding Stock Options and Stock Appreciation Rights in exchange for a payment by the Company, in cash or Common Stock as determined by the Plan Administrator, in an amount equal to the amount by which the then Fair Market Value of the shares of Common Stock subject to the Participant’s unexercised Stock Options and Stock Appreciation Rights exceeds the Exercise Price of the Stock Options, or the Fair Market Value of the Stock Appreciation Rights on the Award Date, as applicable, or (ii) after giving Participants an opportunity to exercise their outstanding Stock Options and Stock Appreciation Rights, terminate any or all unexercised Stock Options and Stock Appreciation Rights at such time as the Plan Administrator deems appropriate. Such surrender or termination shall take place as of the date of the Change in Control or such other date as the Committee may specify.
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SECTION 16. AMENDMENT AND TERMINATION
16.1 Amendment of Plan. Notwithstanding anything contained in this Plan to the contrary, all provisions of this Plan may at any time, or from time to time, be modified or amended by the Board; provided, however, that no amendment or modification shall be made to the Plan that would (i) impair the rights of any Participant with respect to an outstanding Award issued to such Participant, unless the Participant impaired by the amendment or modification consents to such change in writing; (ii) expand the types of Awards available under the Plan or otherwise materially revise the Plan; or (iii) increase the number of Shares reserved for issuance under the Plan (other than in accordance with an adjustment pursuant to subsection 15.1 hereof), modify the class of Persons eligible to receive Awards under the Plan, or change the identity of the granting company or the Shares issued upon exercise of Incentive Stock Options, unless an amendment under (ii) or (iii) above is approved by the stockholders of the Company within twelve (12) months before or after such amendment. In addition, the Plan Administrator shall be authorized, to the same extent as the Board, to correct any defect, omission or inconsistency in the Plan in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
16.2 Amendment of Award. The Plan Administrator may amend, modify or terminate any outstanding Award at any time prior to payment or exercise in any manner not inconsistent with the terms of this Plan; provided, however, that a Participant’s rights under the Award shall not be impaired by such amendment unless (i) the Plan Administrator requests the consent of such Participant and (ii) Participant consents in writing.
16.3 Termination of Plan. The Board may suspend or terminate this Plan at any time, and such suspension or termination may be retroactive or prospective; provided that the termination of this Plan shall not impair or affect any Award previously granted hereunder and the rights of the holder thereof shall remain in effect until the Award has been exercised in its entirety or has expired or otherwise has been terminated by the terms of such Award. Absent any action by the Board to terminate or suspend the Plan, the Plan shall automatically terminate on the Expiration Date.
SECTION 17. GENERAL PROVISIONS
17.1 General Assets. The proceeds to be received by the Company upon exercise of any Award or purchase of Shares pursuant to any Award will constitute general assets of the Company and may be used for any proper purposes.
17.2 No Assignment or Alienation. Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Award or Shares issued in connection with an Award contrary to the provisions of this Plan, the applicable Award Agreement, or the levy of any execution, attachment or similar process upon an Award or Shares issued in connection with an Award shall be null and void and without effect.
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17.3 No Limit on Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.
17.4 Tax Withholding. The Plan Administrator shall notify each Participant of any tax withholding obligations arising as a result of the grant, exercise or vesting of an Award. As a condition to Participant’s exercise of an Award and, if applicable, the issuance of Shares, Participant must satisfy the applicable withholding obligation as may be required by law in a manner permitted under Section 13.2 hereof
17.5 No Right to Employment or Continuation of Relationship. Nothing in this Plan or in any Award Agreement, nor the grant of any Award, shall confer upon or be construed as giving any Participant any right to remain in the employ of the Company or an Affiliate or to continue as a Consultant or non-Employee Director. Further, the Company or an Affiliate may at any time dismiss a Participant from employment or terminate the relationship of any Consultant or non-Employee Director with the Company or any Affiliate, free from any liability or any claim pursuant to this Plan, unless otherwise expressly provided in this Plan or in any Award Agreement. No Consultant, Director or Employee of the Company or any Affiliate shall have any claim to be granted an Award, and there is no obligation for uniformity of treatment of any Consultant, Director or Employee of the Company or any Affiliate, or of any Participant.
17.6 Indemnification of Plan Administrator. The Company shall indemnify each present and future member of the Committee or the Board acting in its capacity as Plan Administrator, as well as any officer or employee acting at the direction of the Plan Administrator or its authorized delegate, for all expenses (including the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his performance of services in connection with the administration of this Plan, whether or not he continues to perform such services at the time of incurring such expenses; provided, however, that such indemnity shall not include any expenses incurred by such individual (a) in respect of matters as to which he shall be finally adjudged in any such action, suit, or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duties hereunder or (b) in respect of any matter in which any settlement is effected in an amount in excess of the amount approved by the Company on the advice of its legal counsel. The foregoing right of indemnification shall inure to the benefit of the heirs, executors, or administrators of the estate of each such member of the Committee or the Board, as well as any employee acting at the direction of the Plan Administrator or its authorized delegate, and shall be in addition to all other rights to which such member, officer or employee shall be entitled as a matter of law, contract, or otherwise.
17.7 No Limitation Upon the Rights of the Company. The grant of an Award pursuant to this Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, or changes of its capital or business structure; to merge, convert or consolidate; to dissolve or liquidate; or sell or transfer all or any part of its business or assets.
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17.8 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan. If an Award vests or becomes exercisable with respect to a fractional Share, such installment will instead be rounded to the next highest whole number of Shares, except for the final installment, which will be for the balance of the total Shares subject to the Award. If a fractional Share is granted or issuable under an Award, the Plan Administrator shall pay cash to Participant in an amount equal to the proportional Fair Market Value of such fractional Share in lieu of any such fractional Share, and any rights with respect to such fractional Share shall be cancelled, terminated and otherwise eliminated.
17.9 Restriction on Repricing. Notwithstanding any provision in this Plan to the contrary, repricing of Stock Options and Stock Appreciation Rights shall not be permitted. For this purpose, a repricing means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of a Stock Option or a Stock Appreciation Right to lower its exercise price; (ii) any other action that is treated as a repricing under generally accepted accounting principles; and (iii) repurchasing or canceling a Stock Option or Stock Appreciation Right at a time when its exercise price is equal to or greater than the fair market value of the underlying Shares in exchange for cash, another Stock Option, Stock Appreciation Right, Restricted Shares or other equity award. Such cancellation and exchange would be considered a repricing regardless of whether it is treated as a repricing under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Participant.
17.10 Clawback of Benefits. Notwithstanding any other provisions in this Plan or an Award Agreement to the contrary, the Company may cancel any Award, require the Participant to reimburse any or all amounts paid pursuant to an Award or under the terms of this Plan, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time, or as necessary or appropriate to comply with applicable laws.
17.11 GOVERNING LAW. TO THE EXTENT NOT OTHERWISE PREEMPTED BY FEDERAL LAW, THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS PLAN AND ANY RULES AND REGULATIONS RELATING TO THIS PLAN SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
17.12 Qualification of Plan. This Plan is not intended to be, and shall not be, qualified under Section 401(a) of the Code.
17.13 Unfunded Benefits. Each Award represents an unfunded, unsecured right to receive cash or Shares upon settlement of the Award. The Company shall not be obligated to set aside any amounts or establish a trust for the payment of benefits hereunder, unless otherwise specifically provided herein.
17.14 Compliance within Jurisdiction. Notwithstanding any provision herein to the contrary, this Plan shall not be effective in any jurisdiction, and no Awards shall be granted to residents thereof, unless the Plan has been properly qualified under the applicable securities laws, if any, of such jurisdiction, if such proper qualification is required pursuant to such securities laws, if any.
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17.15 Severability. If any provision of this Plan or any Award is, or becomes, or is deemed to be, invalid, illegal or unenforceable in any jurisdiction or as to any individual or Award, or would cause this Plan or any Award to fail to comply under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable law, or if it cannot be construed or deemed amended without, in the sole determination of the Plan Administrator, materially altering the intent of this Plan or the Award, such provision shall be stricken as to such jurisdiction, individual or Award and the remainder of this Plan and any such Award shall remain in full force and effect.
17.16 Headings. Headings are given throughout this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.
17.17 Gender and Number. In construing the Plan, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
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Exhibit 10.3.1
SOUTHLAND
HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AWARD AGREEMENT
This Incentive Stock Option Award Agreement (the “Agreement”) is made and entered into as of the award date set forth below (the “Award Date”) by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2022 Equity Incentive Plan (the “Plan”).
Participant: ___________________________________
Total Award Shares: ______ Shares
Exercise Price Per Share: $______/Share
Award Date: ______ ___, 20___
Expiration Date: ______ ___, 20___
Section 1. Grant of Award. The Company hereby grants to Participant Incentive Stock Options (this “Award”) to purchase the total number of Shares of the Company set forth above as Total Award Shares (the “Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Agreement and the Plan. These stock options (the “Stock Options”) are intended to qualify as “incentive stock options” under Code Section 422.
Section 2. Vesting Schedule. The Award shall initially be unvested and unexercisable. The Award shall become exercisable upon vesting in accordance with the following schedule, provided the Participant is in Continuous Service with the Company (or an Affiliate) on the applicable Vesting Date:
Percentage | Vesting Date |
[33%] | [1st anniversary of Award Date] |
[67%] | [2nd anniversary of Award Date] |
[100%] | [3rd anniversary of Award Date] |
Notwithstanding the foregoing, the Plan Administrator may, in its sole discretion, provide that the vesting of any or all Stock Options granted pursuant to this Agreement will accelerate immediately prior to the consummation of a Change in Control, provided the Participant remains in Continuous Service as of such date. If the Plan Administrator exercises such discretion with respect to the Stock Options, the Stock Options will become exercisable to the extent provided by the Plan Administrator prior to the consummation of the Change in Control at such time and on such conditions as the Plan Administrator determines, and any vested Stock Options not exercised prior to the consummation of such event shall terminate at such time as determined by the Plan Administrator.
Section 3. Exercise of Stock Options. Each Stock Option shall be exercisable during the Award Term to the extent provided under this Section 3.
3.1 Exercise Period.
(i) Voluntary Termination of Service. In the event Participant is terminated for any reason (other than upon Participant’s death, Disability, Retirement by a Director, or for Cause, or upon occurrence of a Breach Event), Participant may thereafter exercise the vested portion of this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) the date that is three (3) months following Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant does not exercise this Award within the time specified herein, this Award shall terminate and will no longer be exercisable. Notwithstanding the foregoing, in the event a Participant has a change in capacity from an Employee of the Company to either a non-Employee Director or Consultant and the Participant fails to exercise this Award within the three (3)-month period following such Termination Date, the Incentive Stock Options granted hereunder shall become Non-Qualified Stock Options upon expiration of such three (3)-month period.
(ii) Death of Participant. In the event Participant is terminated by reason of Participant’s death, Participant’s estate, heirs or designated beneficiary, as applicable, may thereafter exercise this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) twelve (12) months following the Participant’s death and (B) the Expiration Date. If, after Participant’s death, Participant’s estate, heirs or designated beneficiary has not exercised this Award within the time specified herein, this Award shall terminate and will no longer be exercisable.
(iii) Disability of Participant. In the event Participant is terminated by reason of Participant’s Disability, Participant (or his legal representative) may thereafter exercise this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) twelve (12) months following the Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant, or his legal representative, has not exercised this Award within the time specified herein, this Award shall terminate and will no longer be exercisable.
(iv) Termination for Cause or Occurrence of a Breach Event. Notwithstanding any provision herein to the contrary, in the event Participant is terminated for Cause or upon the occurrence of a Breach Event, this Stock Option, whether or not vested, shall immediately terminate and will no longer be exercisable.
(v) Expiration of Stock Option. This Award will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Incentive Stock Option Award Agreement
2
3.2 Manner of Exercise.
(i) Stock Option Exercise Agreement. To exercise this Award, Participant (or his legal representative, estate, heirs, or designated beneficiary, as the case may be) must deliver to the Company an executed Exercise Agreement in the form attached hereto as Appendix I, and, if applicable, spousal consent, and such other documents as may be required by the Company and the Plan Administrator. If someone other than Participant exercises this Stock Option, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise this Award under the Plan. The Award shall be deemed exercised as of the date: (i) the Company receives (A) the fully executed Exercise Agreement, including spousal consent if applicable and (B) payment of the aggregate Exercise Price, and (ii) all other applicable terms and conditions of this Agreement and the Plan are satisfied, as determined in the sole discretion of the Plan Administrator.
(ii) Limitations on Exercise. This Award must be exercised in whole Shares and may not be exercised for less than one (1) Share.
(iii) Payment. Except as otherwise permitted by the Plan Administrator, the Exercise Price for the Shares being purchased may be paid pursuant to the following methods:
(A) by cash, wire transfer, certified check or bank draft;
(B) by execution of a promissory note, to be submitted with a stock power, endorsed in blank relating to the Shares held as collateral for such note;
(C) by “net exercise”, pursuant to which the Company withholds from the Shares that would otherwise be issued upon exercise of an Award that number of Shares with a Fair Market Value equal to the Exercise Price for the Award;
(D) through a broker-dealer acting on behalf of Participant if (i) the broker-dealer has received a fully and duly endorsed copy of the Award Agreement and a fully and duly endorsed notice of exercise or purchase, along with written instructions signed by Participant requesting that the Company deliver Shares to the broker-dealer to be held in a designated account on behalf of Participant; (ii) adequate provision has been made with respect to the payment of any withholding taxes due upon grant, exercise, or vesting; and (iii) the broker-dealer and Participant have otherwise complied with applicable securities laws;
Southland Holdings, Inc. 2022 Equity Incentive Plan
Incentive Stock Option Award Agreement
3
(E) through the delivery of unrestricted Shares having a Fair Market Value equal to the Exercise Price and owned by Participant for more than six (6) months (or such shorter or longer period of time as is necessary to avoid a charge to earnings on the Company’s financial statements) or that otherwise meet the conditions established by the Company to avoid adverse accounting consequences (as determined by the Company); or
(F) by any combination of the foregoing or other methods authorized by the Plan Administrator.
(iv) Issuance of Shares. Upon satisfaction of the foregoing provisions of this subsection 3.2, Participant shall become a stockholder of record. The Company may, but is not required to, issue certificated Shares registered in the name of Participant, which may include the appropriate legends affixed thereto.
Section 4. Consent of Spouse. If the Participant is married as of the date of this Agreement, the Participant’s spouse shall execute and deliver to the Company a Consent of Spouse in the form attached hereto as Appendix II, effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in the Restricted Shares that do not otherwise exist by operation of law or the agreement of the parties. If the Participant should marry or remarry subsequent to the date of this Agreement, the Participant shall within [30 / 60] days thereafter obtain his or her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by such spouse’s executing and delivering a Consent of Spouse in the form of Appendix II.
Section 5. Restrictions on Transfer. The Award may not be transferred in any manner other than by will or by the laws of descent and distribution and, during the lifetime of Participant, only Participant (or, in the event of Participant’s incapacity, Participant’s legal representative) may exercise this Stock Option.
Section 6. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Affiliate, or limit in any way the right of the Company or any Affiliate to terminate Participant’s employment or other relationship at any time, with or without Cause.
Section 7. Rights as a Stockholder. Participant shall not have any of the rights of a stockholder as a result of the grant of this Award or the vesting of the Stock Options. Upon exercise of vested Stock Options, Participant shall become a stockholder of record and will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Participant until such time as Participant disposes of the Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which the SARs are exercised.
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Incentive Stock Option Award Agreement
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Section 8. Compliance with Laws and Regulations. The exercise of a Stock Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Participant with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer.
Section 9. Tax Consequences. Set forth below is a brief summary as of the effective date of the Plan of some of the federal and state tax consequences upon exercise of a Stock Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISOR.
9.1 Grant of Award. There will be no regular federal or state income tax liability upon the grant of the Award.
9.2 Vesting of Award. There will be no regular federal or state income tax liability upon vesting of the Award. However, there may be federal and state employment taxes due upon vesting of the Award.
9.3 Exercise of Stock Option. There will be no regular federal or state income tax liability upon the exercise of the Stock Option, although the excess, if any, of the Fair Market Value of the Shares on the exercise date over the Exercise Price will be treated as a tax preference item for federal alternative minimum tax purposes and may subject the Participant to the alternative minimum tax in the year of exercise.
9.4 Disposition of Shares. If the Shares are held for more than one (1) year after the date of the transfer of the Shares pursuant to the exercise of a Stock Option and more than two (2) years after the Award Date, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal and state income tax purposes. If Shares purchased hereunder are disposed of within the applicable one (1) year or (2) year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the Fair Market Value of the Shares on the exercise date over the Exercise Price.
9.5 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social security, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Stock Options under this Award or the subsequent sale of any Shares acquired upon exercise of a Stock Option; and (ii) does not commit to structure this Award to reduce or eliminate the Participant’s liability for Tax-Related Items.
9.6 Non-Qualification of Stock Options. To the extent the Stock Options granted under this Award do not qualify as Incentive Stock Option (whether because of its provisions, the failure of the shareholders of the Company to authorize the issuance of Incentive Stock Options, the time or manner of its exercise or otherwise), such Stock Options, or the portion thereof which do not qualify as Incentive Stock Options, shall be deemed to constitute Non-Qualified Stock Options under the Plan, and shall be subject to tax treatment applicable to such types of Awards.
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Incentive Stock Option Award Agreement
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Section 10. Notices. Any notice required to be given or delivered to the Plan Administrator or the Company under the terms of this Agreement shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to the Plan Administrator at the principal corporate office of the Company. Any notice required to be given or delivered to Participant shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Plan Administrator. All notices shall be deemed to have been given or delivered upon: (a) personal delivery; (b) five (5) days after deposit in the United States mail by certified or registered mail (return receipt requested); (c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d) when receipt is acknowledged after transmission by facsimile or electronic mail.
Section 11. Interpretation. Any dispute regarding the interpretation of this Agreement shall be resolved by the Plan Administrator, which decision shall be final and binding on the Company and Participant. In the event of an ambiguity, the Plan Administrator shall, to the extent necessary, interpret this Agreement in a manner that is intended to ensure that the Award is exempt from or compliant with Code Section 409A.
Section 12. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to applicable restrictions on transfer, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives and designated beneficiary.
Section 13. Governing Law. To the extent not otherwise preempted by federal law, the validity, construction and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of law principles.
Section 14. Choice of Forum. Participant hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Exercise Agreement, the Shares issued in connection herewith or for recognition or enforcement of any judgment relating thereto, and Participant hereby (i) agrees not commence any such action or proceeding except in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware).
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Incentive Stock Option Award Agreement
6
Section 15. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS EXERCISE AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.
Section 16. Amendment of Award. The Plan Administrator may amend, modify or terminate this Agreement at any time prior to payment or exercise in any manner not inconsistent with the terms of this Plan; provided, however, that Participant’s rights under this Award shall not be impaired by such amendment unless (i) Participant consents in writing or (ii) the Plan Administrator determines that the amendment is required to ensure that the Award is exempt from or compliant with Code Section 409A.
Section 17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
Section 18. Discretionary Nature of Plan. The grant of this Award does not create any contractual right or other right to receive any Awards in the future. Future Awards, if any, will be at the sole discretion of the Plan Administrator. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment or other service relationship with the Company (or any Subsidiary or Affiliate).
Section 19. Severability. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
Section 20. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.
Section 21. Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement.
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Incentive Stock Option Award Agreement
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Section 22. Gender and Number. In construing this Agreement, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
Section 23. Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. If any inconsistency should exist between the nondiscretionary terms and conditions of this Agreement and the Plan, the Plan shall govern and control.
Section 24. Acceptance. Participant hereby acknowledges that he has read and understands the terms and provisions of this Agreement, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement. Participant has had an opportunity to obtain the advice of legal counsel prior to executing this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of this Award and disposition of the Shares, and that Participant should consult a tax advisor prior to such exercise or disposition. Participant attests that he is relying solely on such advisors and not on any statements or representations of the Plan Administrator, the Company, or any Affiliate, or any agents thereof. Further, Participant hereby acknowledges and understands that he (and not the Company) shall be solely responsible for his tax liability that may arise as a result of receiving this Award Agreement.
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Incentive Stock Option Award Agreement
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IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to be executed in duplicate, effective as of the Award Date.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
(Please print name) | ||
(Please print title) | ||
PARTICIPANT | ||
(Signature) | ||
(Please print name) | ||
Address: | ||
Facsimile: | ||
E-mail: | ||
Southland Holdings, Inc. 2022 Equity Incentive Plan
Incentive Stock Option Award Agreement
Signature Page
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APPENDIX I
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION EXERCISE AGREEMENT
A-I
APPENDIX II
CONSENT OF SPOUSE TO AWARD AGREEMENT
I, ______________________, the spouse of Participant (as defined in the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement to which this consent is attached), have read, understand, and hereby approve all the terms and conditions of (a) such Award Agreement to which this consent is attached and (b) the Plan (as defined therein).
I hereby agree to be irrevocably bound by all the terms and conditions of Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan and further agree that any community property interest I may have in the Award or any Common Stock that is ultimately held by Participant will be similarly bound by the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan.
I hereby appoint Participant, with unrestricted power of substitution and resubstitution, as my attorney-in-fact, to act in my name, place, and stead with respect to any amendment of the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement or the Plan or the exercise of any rights or satisfaction of any obligations thereunder. This grant of power of attorney is irrevocable, shall not be affected by my subsequent death, disability or incapacity, is binding upon each of my legatees, heirs, personal representatives and administrators and is coupled with an interest.
Dated: ___________ ___, _____
Signature: |
A-II
Exhibit 10.3.2
SOUTHLAND
HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
This Non-Qualified Stock Option Award Agreement (the “Agreement”) is made and entered into as of the award date set forth below (the “Award Date”) by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2022 Equity Incentive Plan (the “Plan”).
Participant: ___________________________________
Total Award Shares: ______ Shares
Exercise Price Per Share: $______/Share
Award Date: ______ ___, 2017
Expiration Date: ______ ___, 2027
Section 1. Grant of Award. The Company hereby grants to Participant Non-Qualified Stock Options (this “Award”) to purchase the total number of Shares of the Company set forth above as Total Award Shares (the “Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Agreement and the Plan. These stock options (the “Stock Options”) are not intended to qualify as “incentive stock options” under Code Section 422.
Section 2. Vesting Schedule. The Award shall initially be unvested and unexercisable. The Award shall become exercisable upon vesting in accordance with the following schedule, provided the Participant is in Continuous Service with the Company (or an Affiliate) on the applicable Vesting Date:
Percentage | Vesting Date |
[33%] | [1st anniversary of Award Date] |
[67%] | [2nd anniversary of Award Date] |
[100%] | [3rd anniversary of Award Date] |
Notwithstanding the foregoing, the Plan Administrator may, in its sole discretion, provide that the vesting of any or all Stock Options granted pursuant to this Agreement will accelerate immediately prior to the consummation of a Change in Control, provided the Participant remains in Continuous Service as of such date. If the Plan Administrator exercises such discretion with respect to the Stock Options, the Stock Options will become exercisable to the extent provided by the Plan Administrator prior to the consummation of the Change in Control at such time and on such conditions as the Plan Administrator determines, and any vested Stock Options not exercised prior to the consummation of such event shall terminate at such time as determined by the Plan Administrator.
Section 3. Exercise of Stock Options. Each Stock Option shall be exercisable during the Award Term to the extent provided under this Section 3.
3.1 Exercise Period.
(i) Voluntary Termination of Service. In the event Participant is terminated for any reason (other than upon Participant’s death, Disability, Retirement by a Director, or for Cause, or upon occurrence of a Breach Event), Participant may thereafter exercise the vested portion of this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) the date that is three (3) months following Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant does not exercise this Award within the time specified herein, this Award shall terminate and will no longer be exercisable.
(ii) Death of Participant. In the event Participant is terminated by reason of Participant’s death, Participant’s estate, heirs or designated beneficiary, as applicable, may thereafter exercise this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) twelve (12) months following the Participant’s death and (B) the Expiration Date. If, after Participant’s death, Participant’s estate, heirs or designated beneficiary has not exercised this Award within the time specified herein, this Award shall terminate and will no longer be exercisable.
(iii) Disability of Participant. In the event Participant is terminated by reason of Participant’s Disability, Participant (or his legal representative) may thereafter exercise this Award (to the extent that Participant was entitled to exercise this Award as of the Termination Date) but only within such period of time ending on the earlier of (A) twelve (12) months following the Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant, or his legal representative, has not exercised this Award within the time specified herein, this Award shall terminate and will no longer be exercisable.
(iv) Termination for Cause or Occurrence of a Breach Event. Notwithstanding any provision herein to the contrary, in the event Participant is terminated for Cause or upon the occurrence of a Breach Event, this Stock Option, whether or not vested, shall immediately terminate and will no longer be exercisable.
(v) Expiration of Stock Option. This Award will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
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Non-qualified Stock Option Award Agreement
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3.2 Manner of Exercise.
(i) Stock Option Exercise Agreement. To exercise this Award, Participant (or his legal representative, estate, heirs, or designated beneficiary, as the case may be) must deliver to the Company an executed Exercise Agreement in the form attached hereto as Appendix I, and, if applicable, spousal consent, and such other documents as may be required by the Company and the Plan Administrator. If someone other than Participant exercises this Stock Option, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise this Award under the Plan. The Award shall be deemed exercised as of the date: (i) the Company receives (A) the fully executed Exercise Agreement, including spousal consent if applicable and (B) payment of the aggregate Exercise Price, and (ii) all other applicable terms and conditions of this Agreement and the Plan are satisfied including applicable tax withholding), as determined in the sole discretion of the Plan Administrator.
(ii) Limitations on Exercise. This Award must be exercised in whole Shares and may not be exercised for less than one (1) Share.
(iii) Payment. Except as otherwise permitted by the Plan Administrator, the Exercise Price for the Shares being purchased and the amount of the applicable federal, state and local tax withholding imposed upon exercise of this Stock Option may be paid pursuant to the following methods:
(A) by cash, wire transfer, certified check or bank draft;
(B) by execution of a promissory note, to be submitted with a stock power, endorsed in blank relating to the Shares held as collateral for such note;
(C) by “net exercise”, pursuant to which the Company withholds from the Shares that would otherwise be issued upon exercise of an Award that number of Shares with a Fair Market Value equal to the Exercise Price for the Award;
(D) through a broker-dealer acting on behalf of Participant if (i) the broker-dealer has received a fully and duly endorsed copy of the Award Agreement and a fully and duly endorsed notice of exercise or purchase, along with written instructions signed by Participant requesting that the Company deliver Shares to the broker-dealer to be held in a designated account on behalf of Participant; (ii) adequate provision has been made with respect to the payment of any withholding taxes due upon grant, exercise, or vesting; and (iii) the broker-dealer and Participant have otherwise complied with applicable securities laws;
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Non-qualified Stock Option Award Agreement
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(E) through the delivery of unrestricted Shares having a Fair Market Value equal to the Exercise Price and owned by Participant for more than six (6) months (or such shorter or longer period of time as is necessary to avoid a charge to earnings on the Company’s financial statements) or that otherwise meet the conditions established by the Company to avoid adverse accounting consequences (as determined by the Company); or
(F) by any combination of the foregoing or other methods authorized by the Plan Administrator.
(iv) Issuance of Shares. Upon satisfaction of the foregoing provisions of this subsection 3.2, Participant shall become a stockholder of record. The Company may, but is not required to, issue certificated Shares registered in the name of Participant, which may include the appropriate legends affixed thereto.
Section 4. Consent of Spouse. If the Participant is married as of the date of this Agreement, the Participant’s spouse shall execute and deliver to the Company a Consent of Spouse in the form attached hereto as Appendix II, effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in the Restricted Shares that do not otherwise exist by operation of law or the agreement of the parties. If the Participant should marry or remarry subsequent to the date of this Agreement, the Participant shall within [30 / 60] days thereafter obtain his or her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by such spouse’s executing and delivering a Consent of Spouse in the form of Appendix II.
Section 5. Restrictions on Transfer. Absent the written approval of the Plan Administrator, the Award may not be transferred in any manner other than by will or by the laws of descent and distribution and, during the lifetime of Participant, only Participant (or, in the event of Participant’s incapacity, Participant’s legal representative) may exercise this Stock Option.
Section 6. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Affiliate, or limit in any way the right of the Company or any Affiliate to terminate Participant’s employment or other relationship at any time, with or without Cause.
Section 7. Rights as a Stockholder. Participant shall not have any of the rights of a stockholder as a result of the grant of this Award or the vesting of the Stock Options. Upon exercise of vested Stock Options, Participant shall become a stockholder of record and will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Participant until such time as Participant disposes of the Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which the SARs are exercised.
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Non-qualified Stock Option Award Agreement
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Section 8. Compliance with Laws and Regulations. The exercise of a Stock Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Participant with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer.
Section 9. Tax Consequences. Set forth below is a brief summary as of the effective date of the Plan of some of the federal and state tax consequences upon exercise of a Stock Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISOR.
9.1 Grant of Award. There will be no regular federal or state income tax liability upon the grant of the Award.
9.2 Vesting of Award. There will be no regular federal or state income tax liability upon vesting of the Award. However, there may be federal and state employment taxes due upon vesting of the Award.
9.3 Exercise of Stock Option. There may be regular U.S. Federal and state income tax liability upon the exercise of this Stock Option. Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Participant is a current or former employee of the Company or a Subsidiary or an Affiliate, the Company or such Subsidiary or Affiliate may be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.
9.4 Disposition of Shares. If the Shares are held for one (1) year or less following the date of the purchase of the Shares pursuant to the exercise of this Stock Option, any gain realized on disposition of the Shares will be treated as short-term capital gain. If the Shares are held for more than one (1) year after the date of the purchase of the Shares pursuant to the exercise of this Stock Option, any gain realized on disposition of the Shares will be treated as long-term capital gain.
9.5 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social security, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Stock Options under this Award or the subsequent sale of any Shares acquired upon exercise of a Stock Option; and (ii) does not commit to structure this Award to reduce or eliminate the Participant’s liability for Tax-Related Items.
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Non-qualified Stock Option Award Agreement
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Section 10. Notices. Any notice required to be given or delivered to the Plan Administrator or the Company under the terms of this Agreement shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to the Plan Administrator at the principal corporate office of the Company. Any notice required to be given or delivered to Participant shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Plan Administrator. All notices shall be deemed to have been given or delivered upon: (a) personal delivery; (b) five (5) days after deposit in the United States mail by certified or registered mail (return receipt requested); (c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d) when receipt is acknowledged after transmission by facsimile or electronic mail.
Section 11. Interpretation. Any dispute regarding the interpretation of this Agreement shall be resolved by the Plan Administrator, which decision shall be final and binding on the Company and Participant. In the event of an ambiguity, the Plan Administrator shall, to the extent necessary, interpret this Agreement in a manner that is intended to ensure that the Award is exempt from or compliant with Code Section 409A.
Section 12. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to applicable restrictions on transfer, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives and designated beneficiary.
Section 13. Governing Law. To the extent not otherwise preempted by federal law, the validity, construction and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of law principles.
Section 14. Choice of Forum. Participant hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Exercise Agreement, the Shares issued in connection herewith or for recognition or enforcement of any judgment relating thereto, and Participant hereby (i) agrees not commence any such action or proceeding except in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware).
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Non-qualified Stock Option Award Agreement
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Section 15. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS EXERCISE AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.
Section 16. Amendment of Award. The Plan Administrator may amend, modify or terminate this Agreement at any time prior to payment or exercise in any manner not inconsistent with the terms of this Plan; provided, however, that Participant’s rights under this Award shall not be impaired by such amendment unless (i) Participant consents in writing or (ii) the Plan Administrator determines that the amendment is required to ensure that the Award is exempt from or compliant with Code Section 409A.
Section 17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
Section 18. Discretionary Nature of Plan. The grant of this Award does not create any contractual right or other right to receive any Awards in the future. Future Awards, if any, will be at the sole discretion of the Plan Administrator. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment or other service relationship with the Company (or any Subsidiary or Affiliate).
Section 19. Severability. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
Section 20. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.
Section 21. Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement.
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Non-qualified Stock Option Award Agreement
7
Section 22. Gender and Number. In construing this Agreement, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
Section 23. Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. If any inconsistency should exist between the nondiscretionary terms and conditions of this Agreement and the Plan, the Plan shall govern and control.
Section 24. Acceptance. Participant hereby acknowledges that he has read and understands the terms and provisions of this Agreement, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement. Participant has had an opportunity to obtain the advice of legal counsel prior to executing this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of this Award and disposition of the Shares, and that Participant should consult a tax advisor prior to such exercise or disposition. Participant attests that he is relying solely on such advisors and not on any statements or representations of the Plan Administrator, the Company, or any Affiliate, or any agents thereof. Further, Participant hereby acknowledges and understands that he (and not the Company) shall be solely responsible for his tax liability that may arise as a result of receiving this Award Agreement.
[Remainder of page intentionally left blank.]
Southland Holdings, Inc. 2022 Equity Incentive Plan
Non-qualified Stock Option Award Agreement
8
IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to be executed in duplicate, effective as of the Award Date.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
(Please print name) | ||
(Please print title) | ||
PARTICIPANT | ||
(Signature) | ||
(Please print name) | ||
Address: | ||
Facsimile: | ||
E-mail: |
Southland Holdings, Inc. 2022 Equity Incentive Plan
Non-qualified Stock Option Award Agreement
Signature Page
9
APPENDIX I
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION EXERCISE AGREEMENT
A-I
APPENDIX II
CONSENT OF SPOUSE TO AWARD AGREEMENT
I, ______________________, the spouse of Participant (as defined in the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement to which this consent is attached), have read, understand, and hereby approve all the terms and conditions of (a) such Award Agreement to which this consent is attached and (b) the Plan (as defined therein).
I hereby agree to be irrevocably bound by all the terms and conditions of Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan and further agree that any community property interest I may have in the Award or any Common Stock that is ultimately held by Participant will be similarly bound by the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan.
I hereby appoint Participant, with unrestricted power of substitution and resubstitution, as my attorney-in-fact, to act in my name, place, and stead with respect to any amendment of the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement or the Plan or the exercise of any rights or satisfaction of any obligations thereunder. This grant of power of attorney is irrevocable, shall not be affected by my subsequent death, disability or incapacity, is binding upon each of my legatees, heirs, personal representatives and administrators and is coupled with an interest.
Dated: ___________ ___, _____
Signature: |
A-II
Exhibit 10.3.3
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
RESTRICTED SHARE AWARD AGREEMENT
This Restricted Share Award Agreement (the “Agreement”) is made and entered into as of the award date set forth below (the “Award Date”) by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2022 Equity Incentive Plan (the “Plan”).
Participant: ___________________________________
Award Date: __________________
Number of Restricted Shares: _______ Shares
Purchase Price per Restricted Share: $_______
1. Award of Restricted Shares. The Company hereby grants to Participant this Award for the Number of Restricted Shares set forth above (the “Restricted Shares”), subject to the terms and conditions as set forth in the Plan and this Award Agreement.
2. Restrictions on Shares. Except as provided in the Plan or this Agreement, the Participant’s unvested Restricted Shares shall be subject to forfeiture by the Participant if the Participant ceases to provide Continuous Service to the Company or an Affiliate, whether as an Employee, Director or Consultant.
3. Vesting Schedule. The Award shall initially be unvested. The Award shall vest, and the restrictions on the Restricted Shares shall lapse, in accordance with the following schedule, provided Participant is in Continuous Service with the Company (or an Affiliate) on the applicable Vesting Date:
Vesting Percentage | Vesting Date |
[33%] | [1st anniversary of Award Date] |
[67%] | [2nd anniversary of Award Date] |
[100%] | [3rd anniversary of Award Date] |
Notwithstanding the foregoing, the Plan Administrator may, in its sole discretion, provide that the restrictions on all outstanding Restricted Shares granted pursuant to this Agreement will immediately lapse prior to the consummation of a Change in Control, provided the Participant remains in Continuous Service as of such date. If the Plan Administrator exercises such discretion with respect to the Restricted Shares, the Restricted Shares will vest to the extent provided by the Plan Administrator prior to the consummation of the Change in Control at such time and on such conditions as the Plan Administrator determines.
4. Shares Issued. If the Company desires to evidence this Award by means of certificated shares, the Company shall issue a certificate in the name of Participant for the number of Restricted Shares granted or purchased, as applicable, which certificate shall be deposited with the Company (or an escrow agent designated by the Company) (the “Escrow Holder”), together with a stock power, in the form attached hereto as Appendix I, endorsed in blank. Upon the lapse of the restrictions, the Escrow Holder shall deliver to Participant (or his or her personal representative, estate or heirs, as the case may be) Share certificates for the Shares of the Company deposited with it without any legend, except as otherwise provided by the Plan, this Agreement, or as otherwise required by applicable law, or as counsel to the Company may deem appropriate. Notwithstanding the foregoing, the Plan Administrator, in its discretion, may require the Company to retain possession of any certificate evidencing Shares issued under this Award, if those Shares remain subject to repurchase or redemption under the provisions of this Agreement or any other agreement between the Company and the Participant.
5. Consent of Spouse. If the Participant is married as of the date of this Agreement, the Participant’s spouse shall execute and deliver to the Company a Consent of Spouse in the form attached hereto as Appendix II, effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in the Restricted Shares that do not otherwise exist by operation of law or the agreement of the parties. If the Participant should marry or remarry subsequent to the date of this Agreement, the Participant shall within [30 / 60] days thereafter obtain his or her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by such spouse’s executing and delivering a Consent of Spouse in the form of Appendix II.
6. Restrictions on Transfer. Prior to vesting, Participant may not transfer his or her rights with respect to the Shares, whether voluntary or involuntary, by operation of law or otherwise, unless approved by the Plan Administrator. Immediately upon any attempt to make an unapproved transfer of such rights, such Shares, and all of the rights related thereto, shall be forfeited by Participant.
7. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Affiliate, or limit in any way the right of the Company, or as applicable, an Affiliate to terminate Participant’s employment or other relationship at any time, with or without Cause.
8. Rights as a Stockholder. Except as otherwise provided herein, commencing upon the date the Company transfers Restricted Shares to Participant, Participant shall have all the rights of a shareholder of the Company with respect to the Restricted Shares registered in his or her name, including the right to vote such Restricted Shares and receive dividends and other distributions paid or made with respect to such Restricted Shares.
9. Compliance with Laws and Regulations. The issuance and transfer of the Shares will be subject to, and conditioned upon compliance by the Company and the Participant with, all applicable federal, state and local laws and regulations and all applicable requirements of any stock exchange or automated quotation system on which the Shares may be listed or quoted at the time of such issuance or transfer.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
2
10. Tax Consequences. Set forth below is a brief summary as of the Effective Date of the Plan of some of the federal and state tax consequences of holding Restricted Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISOR BEFORE ACCEPTING THIS AWARD.
10.1 Grant of Award. There will be no regular federal or state income tax liability upon the grant of the Award.
10.2 Lapse of Restrictions. Except to the extent a proper election under Section 83(b) of the Code has been made, the excess of the Fair Market Value of the Shares on the date on which the restrictions lapse over the amount paid for the Restricted Shares, if any, shall be includible as compensation income (taxable at ordinary income tax rates) in the Participant’s taxable income for the calendar year in which the restrictions lapse. In the event a proper Section 83(b) election has been made, the Participant shall include as compensation income in the Participant’s taxable income for the calendar year in which the Restricted Shares were transferred to Participant an amount equal to the excess of the Fair Market Value of the Shares on the date on which the Shares were transferred over the aggregate Purchase Price paid for the Shares, if any. If Participant is a current or former Employee of the Company, the Company may be required to withhold from Participant’s compensation, or collect from Participant, and pay to the applicable taxing authorities an amount equal to a percentage of this income at the time of payment.
10.3 Holding Restricted Shares. There may be a regular federal and state income tax liability resulting from holding Restricted Shares. Participant will be treated as having received income (taxable at ordinary income tax rates) equal to the dividends or other income paid with respect to Restricted Shares granted under this Agreement. If Participant is a current or former employee of the Company, the Company may be required to withhold from Participant’s compensation, or collect from Participant, and pay to the applicable taxing authorities an amount equal to a percentage of this income at the time of payment. In the event a proper Section 83(b) election has been made, or following the lapse of the restrictions described in this Agreement, the Participant shall be treated as having received income (taxable at income tax rates applicable to dividends) equal to the dividends or other income paid with respect to Restricted Shares granted under this Agreement.
10.4 Disposition of Restricted Shares. If the Restricted Shares are held for more than twelve (12) months following the Award Date, any gain realized on disposition of the Restricted Shares to the Company will be treated as long-term capital gain.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
3
10.5 Tax Liability and Withholding.
(i) Withholding Upon Lapse of Restrictions. No later than the date as of which the restrictions in Section 3 hereof lapse with respect to all or any portion of the Restricted Shares awarded under this Agreement, Participant shall pay to the Company (in cash, including check, bank draft or money order, or such other method approved by the Company) any applicable federal, state and local taxes of any kind required by law to be withheld by the Company, if any, with respect to the Shares for which the restrictions have lapsed. Subject to the Plan Administrator’s authorization, Participant may provide for payment of the Company’s withholding obligation by submitting Shares, the Fair Market Value of which equals the minimum amount of taxes required to be withheld by the Company. The Company (or any Affiliate) shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Participant any federal, state or local taxes of any kind required by law to be withheld with respect to such Shares.
(ii) Withholding Upon Section 83(b) Election. If Participant properly elects, in the form attached hereto as Appendix III, within thirty (30) days of the date on which Company transfers Shares to Participant in accordance with this Agreement, to include in gross income for federal income tax purposes an amount equal to the Fair Market Value of the Restricted Shares awarded hereunder pursuant to Section 83(b) of the Code, Participant shall pay to the Company (in cash, including check, bank draft or money order, or such other method approved by the Company) any applicable federal, state and local taxes of any kind required by law to be withheld by the Company, if any, with respect to the Shares for which such election was made. If Participant fails to make such payments, the Company (or any Affiliate) shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Participant any federal, state or local taxes of any kind required by law to be withheld with respect to such Shares.
11. Notices. Any notice required to be given or delivered to the Plan Administrator or the Company under the terms of this Agreement shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to the Plan Administrator at the principal corporate office of the Company. Any notice required to be given or delivered to Participant shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Plan Administrator. All notices shall be deemed to have been given or delivered upon: (a) personal delivery; (b) five (5) days after deposit in the United States mail by certified or registered mail (return receipt requested); (c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d) when receipt is acknowledged after transmission by facsimile or electronic mail.
12. Interpretation. Any dispute regarding the interpretation of this Agreement shall be resolved by the Plan Administrator, which decision shall be final and binding on the Company and Participant.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
4
13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to applicable restrictions on transfer, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives and designated beneficiary.
14. Governing Law. To the extent not otherwise preempted by federal law, the validity, construction and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of law principles.
15. Choice of Forum. Participant hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Award Agreement, the Shares issued in connection herewith or for recognition or enforcement of any judgment relating thereto, and Participant hereby (i) agrees not commence any such action or proceeding except in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware).
16. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS AWARD AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.
17. Amendment of Award. The Plan Administrator may amend, modify or terminate this Agreement at any time prior to vesting in any manner not inconsistent with the terms of this Plan; provided, however, that Participant’s rights under this Award shall not be impaired by such amendment unless Participant consents in writing.
18. Counterparts. This Award Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
5
19. Severability. If any provision of this Award Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
20. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.
21. Headings. The captions and headings of this Award Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Award Agreement.
22. Gender and Number. In construing this Award Agreement, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
23. Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. If any inconsistency should exist between the nondiscretionary terms and conditions of this Agreement and the Plan, the Plan shall govern and control.
24. Acceptance. Participant hereby acknowledges that he has read and understands the terms and provisions of this Agreement, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement. Participant has had an opportunity to obtain the advice of legal counsel prior to executing this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of this Award and disposition of the Shares, and that Participant should consult a tax advisor prior to such exercise or disposition. Participant attests that he is relying solely on such advisors and not on any statements or representations of the Plan Administrator, the Company, or any Affiliate, or any agents thereof. Further, Participant hereby acknowledges and understands that he (and not the Company) shall be solely responsible for his tax liability that may arise as a result of receiving this Award Agreement.
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Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
6
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in triplicate by its duly authorized representative and Participant has executed this Agreement in triplicate, effective as of the Award Date.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
PARTICIPANT | ||
(Signature) | ||
(Please print name) | ||
Address: | ||
Facsimile: | ||
E-mail: |
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Award Agreement
Signature Page
7
APPENDIX I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, ________________________________, in my capacity as owner of those certain shares of Common Stock of Southland Holdings, Inc. (the “Company”) awarded pursuant to the Restricted Share Award Agreement, dated as of ____________________ (the “Award Agreement”), hereby sell, assign and transfer to the Company ___________________________________ (_________) Shares standing in my name, on the books of the Company represented by Certificate No. ______, and do hereby irrevocably constitute and appoint ______________________ as attorney to transfer said stock on the books of the Company with full power of substitution in the premises.
This Assignment Separate from Certificate may only be used in accordance with the Award Agreement.
PARTICIPANT | |||
Dated: |
A-I
APPENDIX II
CONSENT OF SPOUSE TO AWARD AGREEMENT
I, ______________________, the spouse of Participant (as defined in the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement to which this consent is attached), have read, understand, and hereby approve all the terms and conditions of (a) such Award Agreement to which this consent is attached and (b) the Plan (as defined therein).
I hereby agree to be irrevocably bound by all the terms and conditions of Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan and further agree that any community property interest I may have in the Award or any Common Stock that is ultimately held by Participant will be similarly bound by the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan.
I hereby appoint Participant, with unrestricted power of substitution and resubstitution, as my attorney-in-fact, to act in my name, place, and stead with respect to any amendment of the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement or the Plan or the exercise of any rights or satisfaction of any obligations thereunder. This grant of power of attorney is irrevocable, shall not be affected by my subsequent death, disability or incapacity, is binding upon each of my legatees, heirs, personal representatives and administrators and is coupled with an interest.
Dated: ___________ ___, _____
Signature: |
A-II
APPENDIX III
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include the excess of the fair market value of the property described below at the time of transfer over the amount paid for such property, as compensation for services in the calculation of the Taxpayer’s federal taxable income.
1. | TAXPAYER’S NAME: | ||
TAXPAYER’S ADDRESS: | |||
SOCIAL SECURITY NUMBER: | |||
2. | The property with respect to which the election is made is described as follows: ____ shares of common stock of Southland Holdings, Inc. (the “Company”), which were [purchased/awarded ] in accordance with the terms of a Restricted Share Award Agreement between the Company and the Taxpayer. The Company is the Taxpayer’s employer or the corporation for whom the Taxpayer performs services. | ||
3. | The date on which the shares of common stock were transferred was ____________________, and this election is made for calendar year _____. | ||
4. | The unvested shares of common stock received are subject to forfeiture upon termination of Taxpayer’s employment for any reason. | ||
5. | The fair market value of the shares of common stock (without regard to restrictions other than restrictions which by their terms will never lapse) was $_____ per share at the time of purchase. | ||
6. | The amount paid for the shares of common stock was $_____ per share. | ||
7. | The Taxpayer has submitted a copy of this statement to the Company. |
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE AT THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER THE DATE OF TRANSFER OF THE SHARES OF COMMON STOCK. THE ELECTION CANNOT BE REVOKED WITHOUT THE CONSENT OF THE INTERNAL REVENUE SERVICE.
Dated: | |||
Taxpayer’s Signature |
A-III
Exhibit 10.3.4
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
RESTRICTED SHARE UNIT AWARD AGREEMENT
This Restricted Share Unit Award Agreement (the “Agreement”) is made and entered into as of the award date set forth below (the “Award Date”) by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2022 Equity Incentive Plan (the “Plan”).
Participant: ___________________________________
Award Date: __________________
Number of Restricted Stock Units: __________________
1. Award of Restricted Share Units. The Company hereby issues to Participant an Award of the Number of Restricted Share Units set forth above (the “RSUs”), subject to the terms and conditions set forth in this Agreement. An RSU represents an unfunded, unsecured right to receive a Share of Common Stock of the Company or cash equal to the Fair Market Value of a Share.
2. Restrictions on RSUs. Except as otherwise provided in the Plan and this Agreement, the restrictions on Participant’s unvested RSUs are that the RSUs shall be subject to forfeiture by Participant if Participant fails to satisfy the vesting conditions set forth below.
3. Vesting of RSUs. The RSUs awarded hereunder shall vest, and the restrictions on such RSUs shall lapse, only if Participant remains in Continuous Service with the Company or an Affiliate until the applicable anniversary of the Award Date, as set forth below (each, a “Vesting Date”).
(i) | [25% of the original grant shall vest on the first anniversary of the Award Date, rounded up to the nearest whole share;] | |
(ii) | [25% of the original grant shall vest on the second anniversary of the Award Date, rounded up to the nearest whole share;] | |
(iii) | [25% of the original grant shall vest on the first anniversary of the Award Date, rounded up to the nearest whole share; and] | |
(iv) | [the remaining Shares shall vest on the fourth anniversary of the Award Date.] |
Notwithstanding the foregoing, a Participant who dies or becomes disabled shall become immediately 100% vested in the RSUs. Furthermore, the Plan Administrator may, in its sole discretion, provide that the restrictions on all or any portion of the outstanding RSUs granted pursuant to this Agreement will immediately lapse prior to the consummation of a Change in Control. If the Plan Administrator exercises such discretion with respect to the RSUs, the vested RSUs will be settled prior to the consummation of the Change in Control at such time and on such conditions as the Plan Administrator determines.
4. Settlement of RSUs. Each vested RSU shall be settled during the period beginning on the applicable Vesting Date and ending on the later of: (a) the last day of the calendar year in which such Vesting Date occurs or (b) March 15th of the calendar year following the end of the calendar year in which such Vesting Date occurs (the “Settlement Date”). The Company will settle vested RSUs by issuing to Participant, on a one-for-one basis, Shares of Common Stock of the Company or cash equal to the Fair Market Value of such Shares. In no event shall Participant be permitted to designate the taxable year in which settlement of an RSU shall occur.
5. Restrictions on Transfer. Participant may not sell, assign, pledge as security or otherwise transfer or encumber the unvested RSUs, whether voluntary or involuntary, and if involuntary, whether by process of law in any civil or criminal suit, action or proceeding, whether in the nature of an insolvency or bankruptcy proceeding or otherwise.
6. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Affiliate, or limit in any way the right of the Company, or as applicable, an Affiliate to terminate Participant’s employment or other relationship at any time, with or without Cause.
7. Rights as a Stockholder. Participant shall not have any rights of a stockholder as a result of the grant of this Award or the vesting of the RSUs. If Shares are issued upon settlement of vested RSUs, Participant shall become a stockholder of record and will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Participant until such time as Participant disposes of the Shares.
8. Compliance with Laws and Regulations. Notwithstanding any other provision of the Plan or the Agreement to the contrary, the grant, vesting and holding of the Shares by Participant is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Participant agrees to cooperate with the Company to ensure compliance with such laws.
9. Tax Consequences. Set forth below is a brief summary as of the effective date of the Plan of some of the federal and state tax consequences of the grant and vesting of the RSU and, where applicable, the disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. RECIPIENT SHOULD CONSULT A TAX ADVISOR BEFORE ACCEPTING THIS AWARD.
9.1 Grant of Award. There will be no regular federal or state income tax liability upon the grant of the Award.
9.2 Vesting of Award. There will be no regular federal or state income tax liability upon vesting of the Award. However, there may be federal and state employment taxes due upon vesting of the Award.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Unit Award Agreement
2
9.3 Settlement of Award. There may be regular federal and state income tax liability upon settlement of the Award. Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the cash or Fair Market Value of the Shares issued to Participant. If Participant is a current or former employee of the Company or an Affiliate, the Company or such Affiliate may be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of settlement.
9.4 Disposition of Shares. If Shares are issued to Participant and the Shares are held for one (1) year or less following the Settlement Date, any gain realized on disposition of the Shares will be treated as short-term capital gain. If the Shares are held for more than one (1) year following the Settlement Date, any gain realized on disposition of the Shares will be treated as long-term capital gain.
9.5 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social security, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement of the RSUs; and (b) does not commit to structure the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items.
10. Notices. Any notice required to be given or delivered to the Plan Administrator or the Company under the terms of this Agreement shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to the Plan Administrator at the principal corporate office of the Company. Any notice required to be given or delivered to Participant shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Plan Administrator. All notices shall be deemed to have been given or delivered upon: (a) personal delivery; (b) five (5) days after deposit in the United States mail by certified or registered mail (return receipt requested); (c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d) when receipt is acknowledged after transmission by facsimile or electronic mail.
11. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or the Company to the Plan Administrator for review. The resolution of such a dispute by the Plan Administrator shall be final and binding on the Company and Participant.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Unit Award Agreement
3
12. Successors and Assigns. The Company may assign any of its rights or obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, and legal representatives.
13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its conflict of law principles. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
14. Choice of Forum. Participant hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Award Agreement, the Shares issued in connection herewith or for recognition or enforcement of any judgment relating thereto, and Participant hereby (i) agrees not commence any such action or proceeding except in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware).
15. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS AWARD AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.
16. Counterparts. This Award Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
17. Severability. If any provision of this Award Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Unit Award Agreement
4
18. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.
19. Headings. The captions and headings of this Award Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Award Agreement.
20. Gender and Number. In construing this Award Agreement, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
21. Entire Agreement. The Plan is incorporated herein by reference. This Award Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. If any inconsistency should exist between the nondiscretionary terms and conditions of this Award Agreement and the Plan, the Plan shall govern and control.
22. Acceptance. Participant hereby acknowledges that he has read and understands the terms and provisions of this Agreement, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement. Participant has had an opportunity to obtain the advice of legal counsel prior to executing this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of this Award and disposition of the Shares, and that Participant should consult a tax advisor prior to such exercise or disposition. Participant attests that he is relying solely on such advisors and not on any statements or representations of the Plan Administrator, the Company, or any Affiliate, or any agents thereof. Further, Participant hereby acknowledges and understands that he (and not the Company) shall be solely responsible for his tax liability that may arise as a result of receiving this Award Agreement.
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Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Unit Award Agreement
5
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed duplicate by its duly authorized representative and Participant has executed this Agreement in duplicate, effective as of the Award Date.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
PARTICIPANT | ||
(Signature) | ||
(Please print name) | ||
Address: | ||
Facsimile: | ||
E-mail: |
Southland Holdings, Inc. 2022 Equity Incentive Plan
Restricted Share Unit Award Agreement
Signature Page
6
Exhibit 10.3.5
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AWARD AGREEMENT
This Stock Appreciation Right Award Agreement (the “Agreement”) is made and entered into as of the award date set forth below (the “Award Date”) by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2022 Equity Incentive Plan (the “Plan”).
Participant: ___________________________________
Award Date: __________________
Fair Market Value on Award Date: $ _______ per Share
Number of Shares under Award: _______ Shares of Common Stock
Expiration Date: __________________
Section 1. Grant of Award. The Company hereby grants to Participant a Stock Appreciation Right (the “SAR”) to receive from the Company an amount equal to 100% of the excess of the Fair Market Value of the Common Stock on the Exercise Date over the Fair Market Value of the Common Stock on the Award Date (the “Spread”).
Section 2. Vesting Schedule. The Award shall initially be unvested and unexercisable. The Award shall become exercisable upon vesting, in accordance with the following vesting schedule, provided Participant remains in Continuous Service with the Company (or an Affiliate) on the Vesting Date.
Percentage | Vesting Date |
[33%] | [1st anniversary of Award Date] |
[67%] | [2nd anniversary of Award Date] |
[100%] | [3rd anniversary of Award Date] |
Notwithstanding the foregoing, the Plan Administrator may, in its sole discretion, provide that the vesting of any or all SARs granted pursuant to this Agreement will accelerate immediately prior to the consummation of a Change in Control, provided the Participant remains in Continuous Service as of such date. If the Plan Administrator exercises such discretion with respect to the SARs, the SARs will become exercisable to the extent provided by the Plan Administrator prior to the consummation of the Change in Control at such time and on such conditions as the Plan Administrator determines, and any vested SARs not exercised prior to the consummation of such event shall terminate at such time as determined by the Plan Administrator.
Section 3. Exercise of SARs. Each SAR shall be exercisable during the Award Term to the extent provided under this Section 3.
3.1 Exercise Period.
(i) Voluntary Termination of Service. In the event Participant is terminated for any reason (other than upon Participant’s death, Disability, Retirement by a Director, or for Cause, or upon occurrence of a Breach Event), Participant may thereafter exercise the vested portion of the SAR (to the extent that Participant was entitled to exercise the SAR as of the Termination Date) but only within such period of time ending on the earlier of (A) the date that is ninety (90) days following Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant does not exercise this SAR within the time specified herein, the SAR shall terminate and will no longer be exercisable.
(ii) Death of Participant. In the event Participant is terminated by reason of Participant’s death, Participant’s estate, heirs or designated beneficiary, as applicable, may thereafter exercise the SAR (to the extent that Participant was entitled to exercise the SAR as of the Termination Date) but only within such period of time ending on the earlier of (A) the first anniversary of Participant’s death and (B) the Expiration Date. If, after Participant’s death, Participant’s estate or heirs have not exercised the SAR within the time specified herein, the SAR shall terminate and will no longer be exercisable.
(iii) Disability of Participant. In the event Participant is terminated by reason of Participant’s Disability, Participant (or his legal representative) may thereafter exercise the SAR (to the extent that Participant was entitled to exercise the SAR as of the Termination Date) but only within such period of time ending on the earlier of (A) the date that is the first anniversary of the Participant’s Termination Date and (B) the Expiration Date. If, after termination, Participant, or his legal representative, has not exercised the SAR within the time specified herein, the SAR shall terminate and will no longer be exercisable.
(iv) Termination for Cause or Occurrence of a Breach Event. Notwithstanding any provision herein to the contrary, in the event Participant is terminated for Cause or upon the occurrence of a Breach Event, the SAR, whether or not vested, shall immediately terminate and will no longer be exercisable.
(v) Expiration. The SAR shall expire on the Expiration Date set forth above or earlier as provided in this Agreement or the Plan.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
2
3.2 Manner of Exercise.
(i) SAR Exercise Agreement. To exercise the SAR, Participant (or his legal representative, estate, heirs, or designated beneficiary, as the case may be) must deliver to the Company an executed Exercise Agreement in the form attached hereto as Appendix I, and, if applicable, spousal consent, and such other documents as may be required by the Company and the Plan Administrator. If someone other than Participant exercises the SAR, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise the SAR under the Plan. The SAR shall be deemed exercised as of the date: (i) the Company receives (A) the fully executed Exercise Agreement, including spousal consent if applicable and (B) payment of the aggregate Exercise Price, and (ii) all other applicable terms and conditions of this Agreement and the Plan are satisfied as determined in the sole discretion of the Plan Administrator.
(ii) Limitations on Exercise. This Award must be exercised in respect to whole Shares and may not be exercised in respect to less than one (1) Share.
(iii) Settlement. Following Plan Administrator’s receipt of the Exercise Agreement, the SAR granted hereunder shall entitle Participant to receive the Spread to be paid in cash, or by delivery to Participant of whole Shares of Common Stock valued on the Exercise Date, or by any combination of the foregoing, as the Plan Administrator shall, in its sole and absolute discretion, determine appropriate. If Shares are issued in settlement of the Exercised SARs, Participant shall become a stockholder of record. The Company may, but is not required to, issue certificated Shares registered in the name of Participant, which may include the appropriate legends affixed thereto.
(iv) Tax Withholding. Unless otherwise determined by Plan Administrator, the amount payable to Participant upon exercise of the Award shall be reduced by the applicable amount of taxes required to be withheld. The Company shall remit the applicable tax withholding to the applicable taxing authorities.
Section 4. Consent of Spouse. If the Participant is married as of the date of this Agreement, the Participant’s spouse shall execute and deliver to the Company a Consent of Spouse in the form attached hereto as Appendix II, effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in the Restricted Shares that do not otherwise exist by operation of law or the agreement of the parties. If the Participant should marry or remarry subsequent to the date of this Agreement, the Participant shall within [30 / 60] days thereafter obtain his or her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by such spouse’s executing and delivering a Consent of Spouse in the form of Appendix II.
Section 5. Restrictions on Transfer. Absent the written approval by the Plan Administrator, the SAR may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Participant only by Participant (or, in the event of Participant’s incapacity, Participant’s legal representative).
Section 6. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Affiliate, or limit in any way the right of the Company or any Affiliate to terminate Participant’s employment or other relationship at any time, with or without Cause.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
3
Section 7. Rights of a Stockholder. Participant shall not have any of the rights of a stockholder as a result of the grant of this Award or the vesting of the SARs. If Shares are issued as payment of vested SARs, Participant shall become a stockholder of record and will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Participant until such time as Participant disposes of the Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which the SARs are exercised.
Section 8. Compliance with Laws and Regulations. The exercise of the SAR and, if applicable, the issuance and transfer of Shares will be subject to, and conditioned upon compliance by the Company and the Participant with, all applicable federal, state and local laws and regulations and all applicable requirements of any stock exchange or automated quotation system on which the Shares may be listed or quoted at the time of such issuance or transfer.
Section 9. Tax Consequences. Set forth below is a brief summary as of the effective date of the Plan of some of the federal and state tax consequences upon exercise of the SAR. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE SAR.
9.1 Grant of Award. There will be no regular federal or state income tax liability upon the grant of the Award.
9.2 Vesting of Award. There will be no regular federal or state income tax liability upon vesting of the Award. However, there may be federal and state employment taxes due upon vesting of the Award.
9.3 Exercise of SAR. There may be a regular federal and state income tax liability upon the exercise of the SAR. Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the Spread. If Participant is a current or former Employee of the Company, the Company may be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.
9.4 Disposition of Shares. To the extent that Participant has, upon exercise of the SAR, received payment in the form of Shares of Common Stock, in the event that any such Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of the SAR, any gain realized on disposition of such Shares will be treated as long-term capital gain.
9.5 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social security, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or payment of the SARs or the subsequent sale of any Shares acquired as a result of payment of the SARs; and (b) does not commit to structure the SARs to reduce or eliminate the Participant’s liability for Tax-Related Items.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
4
Section 10. Notices. Any notice required to be given or delivered to the Plan Administrator or the Company under the terms of this Agreement shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to the Plan Administrator at the principal corporate office of the Company. Any notice required to be given or delivered to Participant shall be in writing (including a writing delivered by facsimile transmission or electronic mail) and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Plan Administrator. All notices shall be deemed to have been given or delivered upon: (a) personal delivery; (b) five (5) days after deposit in the United States mail by certified or registered mail (return receipt requested); (c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d) when receipt is acknowledged after transmission by facsimile or electronic mail.
Section 11. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or the Company to the Plan Administrator for review. The resolution of such a dispute by the Plan Administrator shall be final and binding on the Company and Participant.
Section 12. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to applicable restrictions on transfer, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives and designated beneficiary.
Section 13. Governing Law. To the extent not otherwise preempted by federal law, the validity, construction and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of law principles.
Section 14. Choice of Forum. Participant hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Exercise Agreement, the Shares issued in connection herewith or for recognition or enforcement of any judgment relating thereto, and Participant hereby (i) agrees not commence any such action or proceeding except in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in the state courts of Delaware (and if jurisdiction in the state courts of Delaware shall be unavailable, the Federal courts of the United States of America sitting in the state of Delaware).
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
5
Section 15. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS EXERCISE AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.
Section 16. Amendment. The Plan Administrator may amend, modify or terminate this Award at any time prior to payment or exercise in any manner not inconsistent with the terms of this Plan; provided, however, that Participant’s rights under the Award shall not be impaired by such amendment unless (a) the Plan Administrator requests the consent of such Participant and (b) Participant consents in writing.
Section 17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
Section 18. Severability. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
Section 19. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.
Section 20. Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement.
Section 21. Gender and Number. In construing this Agreement, any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context.
Section 22. Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. If any inconsistency should exist between the nondiscretionary terms and conditions of this Agreement and the Plan, the Plan shall govern and control.
Section 23. Acceptance. Participant hereby acknowledges that he has read and understands the terms and provisions of this Agreement, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement. Participant has had an opportunity to obtain the advice of legal counsel prior to executing this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of this Award and disposition of the Shares, and that Participant should consult a tax advisor prior to such exercise or disposition. Participant attests that he is relying solely on such advisors and not on any statements or representations of the Plan Administrator, the Company, or any Affiliate, or any agents thereof. Further, Participant hereby acknowledges and understands that he (and not the Company) shall be solely responsible for his tax liability that may arise as a result of receiving this Award Agreement.
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
6
IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to be executed in duplicate, effective as of the Award Date.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
PARTICIPANT | ||
(Signature) | ||
(Please print name) | ||
Address: | ||
Facsimile: | ||
E-mail: |
Southland Holdings, Inc. 2022 Equity Incentive Plan
Stock Appreciation Right Award Agreement
Signature Page
7
APPENDIX I
SOUTHLAND HOLDINGS, INC.
2022 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT EXERCISE AGREEMENT
A-I
APPENDIX II
CONSENT OF SPOUSE TO AWARD AGREEMENT
I, ______________________, the spouse of Participant (as defined in the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement to which this consent is attached), have read, understand, and hereby approve all the terms and conditions of (a) such Award Agreement to which this consent is attached and (b) the Plan (as defined therein).
I hereby agree to be irrevocably bound by all the terms and conditions of Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan and further agree that any community property interest I may have in the Award or any Common Stock that is ultimately held by Participant will be similarly bound by the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement and the Plan.
I hereby appoint Participant, with unrestricted power of substitution and resubstitution, as my attorney-in-fact, to act in my name, place, and stead with respect to any amendment of the Southland Holdings, Inc. 2022 Equity Incentive Plan Award Agreement or the Plan or the exercise of any rights or satisfaction of any obligations thereunder. This grant of power of attorney is irrevocable, shall not be affected by my subsequent death, disability or incapacity, is binding upon each of my legatees, heirs, personal representatives and administrators and is coupled with an interest.
Dated: ___________ ___, _____
Signature: |
A-II
Exhibit 10.5
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of February 14, 2023, is made and entered into by and among (a) Southland Holdings, Inc., a Delaware corporation (the “Company”), (b) the undersigned initial stockholders of the Company (together with their respective Permitted Transferees (as defined herein), the “Initial Holders”), (c) EarlyBirdCapital, Inc. (“EarlyBirdCapital”) and its undersigned designees (together with their respective Permitted Transferees, the “EarlyBirdCapital Holders”), and (d) the undersigned members of Southland Holdings LLC, a Texas limited liability company (“Southland”), who are Affiliates (as defined herein) of Southland (together with their respective Permitted Transferees, the “Southland Holders”). The Initial Holders, the EarlyBirdCapital Holders, the Southland Holders 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, in July 2021, the Company issued an aggregate of 5,750,000 shares (the “Founder Shares”) of the Company’s common stock, par value $0.0001 per share (“Common Stock”), to the Initial Holders, and in November 2021, the Company effectuated a stock dividend of 0.2 shares of Common Stock for each outstanding share of Common Stock, resulting in the Initial Holders holding an aggregate of 6,900,000 shares of Common Stock.
WHEREAS, in August 2021, the Company issued an aggregate of 240,000 shares of Common Stock (after giving effect to the stock dividend referred to above) to the EarlyBirdCapital Holders;
WHEREAS, on November 24, 2021, in a private placement transaction occurring simultaneously with the closing of the Company’s initial public offering, the Company issued an aggregate of 1,045,000 units (“Private Units”), each consisting of one share of Common Stock and one-half of one redeemable warrant, with each whole warrant entitling the holder to purchase one share of Common Stock at a price of $11.50 per share, to the Initial Holders and EarlyBirdCapital;
WHEREAS, on November 13, 2019, as a result of the full exercise of the overallotment option granted to the underwriters of the Company’s initial public offering, the Company issued an additional 126,000 Private Units to the Initial Holders and EarlyBirdCapital in a private placement transaction, resulting in the Initial Holders and EarlyBirdCapital holding an aggregate of 1,171,000 Private Units;
WHEREAS, on November 22, 2021, the Company, the Initial Holders and the EarlyBirdCapital Holders entered into that certain Registration Rights Agreement (the “Existing Registration Rights Agreement”), pursuant to which the Company granted the Initial Holders and the EarlyBirdCapital Holders certain registration rights with respect to certain securities of the Company;
WHEREAS, upon the closing of the transactions (the “Transactions”) contemplated by that certain Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Company, Legato Merger Sub Inc., a Delaware corporation, and Southland, in accordance with the Merger Agreement, the Southland Holders shall receive shares of Common Stock (“Merger Shares”);
WHEREAS, the Southland Holders may receive additional shares of Common Stock (the “Earn Out Shares”) pursuant to the earn out provisions of the Merger Agreement; and
WHEREAS, the Company, the Initial Holders and the EarlyBirdCapital Holders desire to amend and restate the Existing Registration Rights Agreement in order to provide the Holders with registration rights with respect to the Registrable Securities on the terms set forth herein.
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
I
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:
“Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer of the Company or the Board, after consultation with counsel to the Company, (a) 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 Misstatement, (b) would not be required to be made at such time if the Registration Statement were not being filed, declared effective or used, as the case may be, and (c) the Company has a bona fide business purpose for not making such information public.
“Affiliate” means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified; provided, however, that no Holder shall be deemed an Affiliate of any other Holder solely by reason of an investment in, or holding of Common Stock (or securities convertible or exchangeable for share of Common Stock) of, the Company. As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement); provided, however, that in no event shall the term “Affiliate” include any portfolio company of any Holder or their respective Affiliates (other than the Company).
“Aggregate Blocking Period” shall have the meaning given in Section 2.4.
“Agreement” shall have the meaning given in the Preamble.
“Block Trade” means a registered offering and/or sale of Registrable Securities with a total offering price reasonably expected to exceed $10,000,000 by any Holder on a coordinated or underwritten basis commonly known as a “block trade” (whether firm commitment or otherwise) not involving a roadshow or other substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction.
“Board” shall mean the Board of Directors of the Company.
“Claims” shall have the meaning given in subsection 4.1.1.
“Closing Date” shall mean the date of this Agreement.
“Commission” shall mean the Securities and Exchange Commission.
“Commission Guidance” means (a) any publicly-available written guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (b) the Securities Act and the rules and regulations thereunder.
“Common Stock” shall have the meaning given in the Recitals hereto.
“Company” shall have the meaning given in the Preamble.
“Company Shelf Takedown Notice” shall have the meaning given in subsection 2.1.3.
2 |
“Demanding Holder” shall mean, as applicable, (a) the applicable Holders making a written demand for the Registration of Registrable Securities pursuant to subsection 2.2.1, collectively, or (b) the applicable Holders making a written demand for a Shelf Underwritten Offering of Registrable Securities pursuant to subsection 2.1.3, collectively.
“Demand Registration” shall have the meaning given in subsection 2.2.1.
“EarlyBirdCapital Holders” shall have the meaning given in the Preamble.
“Earn Out Shares” shall have the meaning given in the Recitals hereto.
“Effectiveness Deadline” shall have the meaning given in subsection 2.1.1.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Existing Registration Rights Agreement” shall have the meaning given in the Recitals hereto.
“FINRA” means the Financial Industry Regulatory Authority, Inc. or any successor thereto.
“Form S-1 Shelf” shall have the meaning given in subsection 2.1.2.
“Form S-3 Shelf” shall have the meaning given in subsection 2.1.2.
“Founder Shares” shall have the meaning given in the Recitals hereto.
“Initial Holders” shall have the meaning given in the Preamble.
“Initial-EBC Demanding Holders” shall have the meaning given in subsection 2.2.1.
“Initial-Southland Holders” shall mean the Initial Holders together with the Southland Holders.
“Lock-up Period” shall mean, (i) with respect to the Founder Shares, the period ending on the earlier of 180 days following the Closing Date and the date on which the closing price of the Common Shares equals or exceeds $12.50 per share (as adjusted for share splits, share capitalizations, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period, and (ii) with respect to the Merger Shares, the period ending 180 days following the Closing Date.
“Maximum Number of Securities” shall have the meaning given in subsection 2.2.4.
“Merger Shares” 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 therein, or necessary to make the statements therein (in the case of any Prospectus or any preliminary Prospectus, in the light of the circumstances under which they were made) not misleading.
“Permitted Transferees” shall mean a person or entity to whom an Initial Holder, EarlyBirdCapital Holder or Southland Holder of Registrable Securities is permitted to Transfer such Registrable Securities prior to the expiration of the Lock-up Period, the bylaws of the Company as in effect from time to time or any other applicable agreement between such Initial Holder, EarlyBirdCapital Holder or such Southland Holder, as applicable, and the Company.
“Person” shall mean any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, governmental agency or instrumentality or other entity of any kind.
“Piggyback Registration” shall have the meaning given in subsection 2.3.1.
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“Private Units” shall have the meaning given in the Recitals hereto.
“Pro Rata” shall have the meaning given in subsection 2.2.4.
“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) any outstanding share of Common Stock or Private Unit (and underlying securities) of the Company held by a Holder (i) as of the date of this Agreement or (ii) hereafter acquired by a Holder to the extent such shares of Common Stock or Private Units (and underlying securities) are “restricted securities” (as defined in Rule 144) or are otherwise held by an “affiliate” (as defined in Rule 144) of the Company; (b) any share of Common Stock issued upon the exercise of any warrants underlying Private Units; (c) any share of Common Stock issued or issuable as Merger Shares or Earn Out Shares to the Southland Holders; and (d) any other equity security of the Company issued or issuable with respect to any such share of Common Stock referred to in the foregoing clauses (a) through (d) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (i) 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 by the applicable Holder in accordance with such Registration Statement; (ii) such securities shall have been otherwise transferred, new certificates for such securities not bearing (or book entry positions not subject to) 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; (iii) such securities shall have ceased to be outstanding; or (iv) 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, including a Shelf Takedown, effected by preparing and filing a registration statement, Prospectus 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 FINRA) and any national 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
(g) reasonable fees and expenses of one (1) legal counsel (and any local or foreign counsel) selected by (i) in the case of a Demand Registration pursuant to Section 2.2 or a Shelf Underwritten Offering pursuant to Section 2.1, a majority-in-interest of the Demanding Holders initiating a Demand Registration or Shelf Underwritten Offering (including, without limitation, a Block Trade), as applicable, or (ii) in the case of a Registration under Section 2.3 initiated by the Company for its own account or that of a Company stockholder other than pursuant to rights under this Agreement, a majority-in-interest of participating Holders, in the case of (i) and (ii), not to exceed $50,000 without the consent of the Company.
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“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.
“Removed Shares” shall have the meaning given in Section 2.6.
“Requesting Holder” shall have the meaning given in subsection 2.2.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
“Shelf Takedown Notice” shall have the meaning given in subsection 2.1.3.
“Shelf Underwritten Offering” shall have the meaning given in subsection 2.1.3.
“Southland” shall have the meaning given in the Preamble.
“Southland Demanding Holders” shall have the meaning given in subsection 2.1.1.
“Southland Holders” shall have the meaning given in the Preamble.
“Transactions” shall have the meaning given in the Recitals hereto.
“Transfer” shall mean the (a) sale or assignment of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).
“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.
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ARTICLE
II
REGISTRATIONS
2.1 Shelf Registration.
2.1.1 The Company shall, as soon as reasonably practicable, but in any event within forty-five (45) days after the Closing Date (the “Filing Deadline”), file a Registration Statement under the Securities Act to permit the public resale of all the Registrable Securities held by the Holders from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) on the terms and conditions specified in this subsection 2.1.1 and shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective as soon as practicable after the filing thereof, but in no event later than seventy-five (75) days following the Filing Deadline (the “Effectiveness Deadline”); provided, that the Effectiveness Deadline shall be extended to one hundred five (105) days after the Filing Deadline if the Registration Statement is reviewed by, and receives comments from, the Commission. The Registration Statement filed with the Commission pursuant to this subsection 2.1.1 shall be on Form S-3 or, if Form S-3 is not then available to the Company, on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of such Registrable Securities, covering such Registrable Securities, and shall contain a Prospectus in such form as to permit any Holder to sell such Registrable Securities pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) beginning on the effective date for such Registration Statement. A Registration Statement filed pursuant to this subsection 2.1.1 shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders. The Company shall use its commercially reasonable efforts to cause a Registration Statement filed pursuant to this subsection 2.1.1 to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. As soon as practicable following the effective date of a Registration Statement filed pursuant to this subsection 2.1.1, but in any event within three (3) business days of such date, the Company shall notify the Holders of the effectiveness of such Registration Statement. When effective, a Registration Statement filed pursuant to this subsection 2.1.1 (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any Prospectus contained in such Registration Statement, in the light of the circumstances under which such statement is made).
2.1.2 If the Company files a shelf registration statement on Form S-3 (a “Form S-3 Shelf”) and thereafter the Company becomes ineligible to use Form S-3 for secondary sales, the Company shall use its commercially reasonable efforts to file a shelf registration on Form S-1 (a “Form S-1 Shelf”) as promptly as practicable to replace the Form S-3 Shelf and to have the Form S-1 Shelf declared effective as promptly as practicable and to cause such Form S-1 Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. Upon such date as the Company becomes eligible to use Form S-3 for secondary sales or, in the case of a Form S-1 Shelf filed to register the resale of Removed Shares pursuant to Section 2.6 hereof, upon such date as the Company becomes eligible to register all of the Removed Shares for resale on a Form S-3 Shelf pursuant to the Commission Guidance and, if applicable, without a requirement that any of the Initial-Southland Holders be named as an “underwriter” therein, the Company shall use its commercially reasonable efforts to file a Form S-3 Shelf as promptly as practicable to replace the applicable Form S-1 Shelf and to have the Form S-3 Shelf declared effective as promptly as practicable and to cause such Form S-3 Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of all the Registrable Securities thereunder held by the applicable Holders until all such Registrable Securities have ceased to be Registrable Securities.
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2.1.3 At any time and from time to time following the effectiveness of the shelf registration statement required by subsection 2.1.1, any Holder may request to sell all or a portion of their Registrable Securities in an underwritten offering that is registered pursuant to such shelf registration statement, including a Block Trade (a “Shelf Underwritten Offering”), provided that such Holder(s) reasonably expects to sell Registrable Securities yielding aggregate gross proceeds in excess of $10,000,000 from such Shelf Underwritten Offering (the “Minimum Amount”). All requests for a Shelf Underwritten Offering shall be made by giving written notice to the Company (the “Shelf Takedown Notice”). Each Shelf Takedown Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Promptly after receipt of any Shelf Takedown Notice, the Company shall give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of subsection 2.2.4, shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which the Company has received written requests for inclusion therein, within five (5) business days after sending the Company Shelf Takedown Notice, or, in the case of a Block Trade, as provided in Section 2.5. The Company shall enter into an underwriting agreement in a form as is customary in Underwritten Offerings of securities by the Company with the managing Underwriter or Underwriters selected by the Holders requesting such Shelf Underwritten Offering (which managing Underwriter or Underwriters shall be subject to approval of the Company, which approval shall not be unreasonably withheld) and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the terms of this Agreement. In connection with any Shelf Underwritten Offering contemplated by this subsection 2.1.3, subject to Section 3.3 and Article IV, the underwriting agreement into which each Holder and the Company shall enter shall contain such representations, covenants, indemnities and other rights and obligations as are customary in underwritten offerings of securities by the Company. Notwithstanding any other provision of this Agreement to the contrary, the Initial Holders and EarlyBirdCapital Holders, together, on the one hand, and the Southland Holders, on the other hand, may each demand not more than two (2) Shelf Underwritten Offerings, and the Company shall not be obligated to participate in more than four (4) Shelf Underwritten Offerings, pursuant to this Section 2.1.3 in any twelve (12)-month period.
2.2 Demand Registration.
2.2.1 Request for Registration. Subject to the provisions of subsection 2.2.5 and Sections 2.4 and 3.4 hereof, at any time and from time to time after the date the Closing Date, each of (a) the Initial Holders and EarlyBirdCapital Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Initial Holders and EarlyBirdCapital Holders (the “Initial-EBC Demanding Holders”) and (b) the Southland Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Southland Holders (the “Southland Demanding Holders”), may make a written demand for Registration of all or part of their Registrable Securities, on (i) Form S-1 or (ii) if available, Form S-3, which in the case of either clause (i) or (ii), may be a shelf registration statement filed pursuant to Rule 415 under the Securities Act, 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, promptly following the Company’s receipt of a 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. For the avoidance of doubt, to the extent a Requesting Holder also separately possesses Demand Registration rights pursuant to this Section 2.2, but is not the Holder who exercises such Demand Registration rights, the exercise by such Requesting Holder of its rights pursuant to the foregoing sentence shall not count as the exercise by it of one of its Demand Registration rights. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, subject to subsection 2.2.4 below, 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 use its commercially reasonable efforts to file a registration statement on Form S-1 or Form S-3, as applicable, as soon thereafter as practicable, but not more than forty-five (45) days following the Company’s receipt of the Demand Registration, for Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. The Company shall not be obligated to effect more than (A) an aggregate of three (3) Registrations pursuant to a Demand Registration initiated by the Initial Holders and/or EarlyBirdCapital Holders and (B) an aggregate of six (6) Registrations pursuant to a Demand Registration initiated by the Southland Holders, in each case under this subsection 2.2 with respect to any or all Registrable Securities; provided, however, that a Registration shall not be counted for such purposes unless a Registration Statement that may be available at such time has become effective and all of the Registrable Securities requested by the Requesting Holders to be registered on behalf of the Demanding Holders and the Requesting Holders in such Registration have been sold, in accordance with Section 3.1 of this Agreement; provided further, that, notwithstanding any other provision of this Agreement to the contrary, the Initial Holders and EarlyBirdCapital Holders, on the one hand, and the Southland Holders, on the other hand, may each demand not more than two (2) Demand Registrations or Shelf Underwritten Offerings, and the Company shall not be obligated to participate in more than four (4) Demand Registrations or Shelf Underwritten Offerings, in any twelve (12)-month period.
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2.2.2 Effective Registration. Notwithstanding the provisions of subsection 2.2 above or any other part of this Agreement, a Registration pursuant to a Demand Registration shall not count as a Registration unless and until (a) 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 (b) 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 after the removal, rescission or other termination of such stop order or injunction, of such election; 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 by the same Demanding Holder becomes effective or is subsequently terminated.
2.2.3 Underwritten Offering. Subject to the provisions of subsection 2.2.4 and Sections 2.4 and 3.4 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 2.2.3, subject to Section 3.3 and Article IV, shall enter into an underwriting agreement in customary form with the Company and the Underwriter(s) selected for such Underwritten Offering by a majority-in-interest of the Demanding Holders initiating the Demand Registration, which managing Underwriter or Underwriters shall be subject to approval of the Company, which approval shall not be unreasonably withheld.
2.2.4 Reduction of Underwritten Offering. If a Demand Registration is to be an Underwritten Offering and the managing Underwriter or Underwriters, in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing, in its or their opinion, 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 for its own account and the shares of Common Stock, if any, that have been requested to be sold in such Demand Registration pursuant to separate written contractual piggy-back registration rights held by any other stockholders of the Company, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such 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: (a) first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the total amount of Registrable Securities held by each such Demanding Holder and Requesting Holder (if any) (such proportion is referred to herein as “Pro Rata”)) that 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 shares of Common Stock or other equity securities that the Company desires to sell for its own account, 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 shares of Common Stock or other equity securities of other Persons that the Company is obligated to include in such Demand Registration pursuant to separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.
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2.2.5 Demand Registration Withdrawal. A Demanding Holder or a Requesting Holder shall have the right to withdraw all or a portion of its Registrable Securities included in a Demand Registration pursuant to subsection 2.2.1 or a Shelf Underwritten Offering pursuant to subsection 2.1.3 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of its intention to so withdraw at any time prior to (a) in the case of a Demand Registration not involving an Underwritten Offering, the effectiveness of the applicable Registration Statement, or (b) in the case of any Demand Registration involving an Underwritten Offering or any Shelf Underwritten Offering, prior to the filing of the applicable “red herring” prospectus or prospectus supplement used for marketing such Underwritten Offering or Shelf Underwritten Offering; provided, however, that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities included by the Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Minimum Amount), the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the Underwritten Offering, as applicable. If withdrawn, such requested Demand Registration or Shelf Underwritten Offering shall constitute a demand for a Demand Registration or Shelf Underwritten Offering for purposes of Section 2.2.1 unless either (i) the Demanding Holders have not previously withdrawn any Demand Registration or (ii) the Demanding Holders reimburse the Company for all Registration Expenses with respect to such Underwritten Shelf Takedown. 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 or a Shelf Underwritten Offering prior to and including its withdrawal under this subsection 2.2.5 unless the Demanding Holders elect to pay such Registration Expenses pursuant to clause (ii) of this subsection 2.2.5.
2.3 Piggyback Registration.
2.3.1 Piggyback Rights. If 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 Article II hereof), other than a Registration Statement (or any registered offering with respect thereto) (a) filed in connection with any employee stock option or other benefit, (b) for an exchange offer or offering of securities solely to the Company’s existing stockholders or pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), (c) for an offering of debt that is convertible into equity securities of the Company, (d) filed in connection with an “at-the-market” offering or (e) for a dividend reinvestment plan or a rights offering, 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 (or, in the case of a Block Trade, three (3) business days) before the anticipated filing date of such Registration Statement, which notice shall (i) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution (including whether such registration will be pursuant to a shelf registration statement), and the proposed price and name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (iii) offer to all of the Holders of Registrable Securities (provided that, with respect to the Initial Holders and the EarlyBirdCapital Holders, no such notice shall be required to the extent the Registrable Securities of such Holders are included in an effective shelf registration statement in accordance with Section 2.1, if the date the notice is sent to Holders of Registrable Securities is more than three (3) months prior to the expiration of the Lock-Up Period, then the notice is not required to be sent to the Holders of Founder Shares and Merger Shares) 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 (or in the case of a Block Trade, within one (1) business day) (such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities identified in a Holder’s response notice described in the foregoing sentence to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering, if any, to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.3.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company or Company stockholder(s) for whose account such Registration Statement is to be filed 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 2.3.1, subject to Section 3.3 and Article IV, shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company or the Holders as provided in subsection 2.1.3 or subsection 2.2.3, as applicable. For purposes of this Section 2.3, the filing by the Company of an automatic shelf registration statement for offerings pursuant to Rule 415(a) that omits information with respect to any specific offering pursuant to Rule 430B shall not trigger any notification or participation rights hereunder until such time as the Company amends or supplements such Registration Statement to include information with respect to a specific offering of Securities (and such amendment or supplement shall trigger the notice and participation rights provided for in this Section 2.3).
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2.3.2 Reduction of Piggyback Registration. If a Piggyback Registration is to be an Underwritten Offering and the managing Underwriter or Underwriters, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing, in its or their opinion, that the dollar amount or number of shares of Common Stock that the Company desires to sell, taken together with (a) the shares of Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with Persons other than the Holders of Registrable Securities hereunder (b) the Registrable Securities as to which registration has been requested pursuant Section 2.3.3 hereof, and (c) 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:
2.3.2.1 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 for its own account, 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 2.3.1 hereof, Pro Rata, 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; and
2.3.2.2 if the Registration is pursuant to a request by Persons other than the Holders of Registrable Securities, then the Company shall include in any such Registration (a) first, the shares of Common Stock or other equity securities, if any, of such requesting Persons, 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 2.3.1 hereof, Pro Rata, 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 for its own account, 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 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.
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2.3.3 Piggyback Registration Withdrawal. Any Holder of Registrable Securities (other than a Demanding Holder, whose right to withdraw from an Underwritten Shelf Takedown, and related obligations, shall be governed by subsection 2.2.5) shall have the right to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw such Registrable Securities from such Piggyback Registration prior to (a) in the case of a Piggyback Registration not involving an Underwritten Offering or Shelf Underwritten Offering, the effectiveness of the applicable Registration Statement, or (b), in the case of any Piggyback Registration involving an Underwritten Offering or any Shelf Underwritten Offering, prior to the filing of the applicable “red herring” prospectus or prospectus supplement used to market such Underwritten Offering or Shelf Underwritten Offering. The Company (whether on its own good faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement (other than subsection 2.2.5), the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to and including its withdrawal under this subsection 2.3.3.
2.3.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.33 hereof shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.12 hereof or a Shelf Underwritten Offering effected under subsection 2.1.3.
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 2.2 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 such offering; 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 have the right to defer such filing for a period of not more than sixty (60) consecutive days; provided, however, that the Company shall not defer its obligation in this manner more than one hundred twenty (120) total calendar days in any twelve (12)-month period (the “Aggregate Blocking Period”).
2.5 Block Trades. Notwithstanding any other provision of this Article II, but subject to Sections 2.4 and 3.4, if the Holders desire to effect a Block Trade, then notwithstanding any other time periods in this Article II, the Holders shall provide written notice to the Company at least five (5) business days prior to the date such Block Trade will commence. As expeditiously as possible, the Company shall use its commercially reasonable efforts to facilitate such Block Trade, provided that the Holders engaging in such Block Trade use their reasonable best efforts to work with the Company and the Underwriters (including by disclosing the maximum number of Registrable Securities proposed to be the subject of such Block Trade) in order to facilitate preparation of the Registration Statement, Prospectus and other offering documentation related to the Block Trade and any related due diligence and comfort procedures. In the event of a Block Trade, and after consultation with the Company, the Demanding Holders and the Requesting Holders (if any) shall determine the Maximum Number of Securities, the underwriter or underwriters (which shall consist of one or more reputable nationally recognized investment banks) and share price of such offering.
2.6 Rule 415; Removal. If at any time the Commission takes the position that the offering of some or all of the Registrable Securities in a Registration Statement on Form S-3 filed pursuant to this Article II is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the Securities Act (provided, however, that the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the Commission Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09) or requires an Initial-Southland Holder to be named as an “underwriter,” the Company shall promptly notify each holder of Registrable Securities thereof (or in the case of the Commission requiring an Initial-Southland Holder to be named as an “underwriter,” the Initial-Southland Holders) and the Company will use commercially reasonable efforts to persuade the Commission that the offering contemplated by such Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415. In the event that the Commission refuses to alter its position, the Company shall (a) remove from such Registration Statement such portion of the Registrable Securities (the “Removed Shares”) and/or (b) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the Commission may require to assure the Company’s compliance with the requirements of Rule 415; provided, however, that the Company shall not agree to name any Initial-Southland Holder as an “underwriter” in such Registration Statement without the prior written consent of such Initial-Southland Holder and, if the Commission requires such Initial-Southland Holder to be named as an “underwriter” in such Registration Statement, notwithstanding any provision in this Agreement to the contrary, the Company shall not be under any obligation to include any Registrable Securities of such Initial-Southland Holder in such Registration Statement. In the event of a share removal pursuant to this Section 2.6, the Company shall give the applicable Holders at least five (5) days prior written notice along with the calculations as to such Holder’s allotment. Any removal of shares of the Holders pursuant to this Section 2.6 shall first be applied to Holders other than the Initial-Southland Holders with securities registered for resale under the applicable Registration Statement and thereafter allocated between the Initial-Southland Holders on a pro rata basis based on the aggregate amount of Registrable Securities held by the Initial-Southland Holders. In the event of a share removal of the Holders pursuant to this Section 2.6, the Company shall promptly register the resale of any Removed Shares pursuant to subsection 2.1.2 hereof and in no event shall the filing of such Registration Statement on Form S-1 or subsequent Registration Statement on Form S-3 filed pursuant to the terms of subsection 2.1.2 be counted as a Demand Registration hereunder. Until such time as the Company has registered all of the Removed Shares for resale pursuant to Rule 415 on an effective Registration Statement, the Company shall not be able to defer the filing of a Registration Statement pursuant to Section 2.4 hereof.
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ARTICLE
III
COMPANY PROCEDURES
3.1 General Procedures. If the Company is required to effect the Registration of Registrable Securities, the Company shall use its commercially reasonable 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 commercially reasonable 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 reasonably requested by the Holders of at least five percent (5%) of the Registrable Securities registered on such Registration Statement 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 the Holders of Registrable Securities included in such Registration, and such Holders’ 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 the Holders 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, but in any case no later than the effective date of the applicable Registration Statement, use its commercially reasonable efforts to (a) 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 the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request to keep such registration or qualification in effect for so long as such Registration Statement remains in effect and (b) 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 or otherwise and do any and all other acts and things that may be necessary or advisable, in each case, 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;
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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 promptly furnish to each seller of Registrable Securities covered by such Registration Statement such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the Prospectus contained in such Registration Statement (including each preliminary Prospectus and any summary Prospectus) and any other Prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request;
3.1.8 notify each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of any request by the Commission that the Company amend or supplement such Registration Statement or Prospectus or of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or Prospectus or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to amend or supplement such Registration Statement or Prospectus or prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued, as applicable;
3.1.9 notify each Holder of Registrable Securities covered by such Registration Statement, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed;
3.1.10 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 furnish a copy thereof to each seller of such Registrable Securities or its counsel;
3.1.11 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 or the existence of any condition as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, or in the opinion of counsel for the Company it is necessary to supplement or amend such Prospectus to comply with law, and then to correct such Misstatement or include such information as is necessary to comply with law, in each case as set forth in Section 3.4 hereof;
3.1.12 permit a representative of the Holders, the Underwriters, if any, and any attorney or accountant retained by such Holders or Underwriter, at each such Person’s own expense, to participate in the preparation of any 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 such Registration Statement; provided, however, that if requested by the Company, 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;
3.1.13 obtain a “cold comfort” letter (including a bring-down letter dated as of the date the Registrable Securities are delivered for sale pursuant to such Registration) from the Company’s independent registered public accountants in the event of an Underwritten Offering, 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 and the managing Underwriter;
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3.1.14 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion and negative assurance letter, 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 and the managing Underwriter;
3.1.15 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;
3.1.16 otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and to make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) 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 the rules and regulations thereunder, including Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);
3.1.17 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
3.1.18 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, 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 Participation in Underwritten Offerings.
3.3.1 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 (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all customary questionnaires, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.
3.3.2 Holders participating in an Underwritten Offering may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of the Underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such Underwriters shall also be made to and for the benefit of such Holders; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Holder in writing for inclusion in the Registration Statement.
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3.4 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, or in the opinion of counsel for the Company it is necessary to supplement or amend such Prospectus to comply with law, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement or including the information counsel for the Company believes to be necessary to comply with law (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 such that the Registration Statement or Prospectus, as so amended or supplemented, as applicable, will not include a Misstatement and complies with applicable law), or until 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 forty-five (45) days, determined in good faith by the Chief Executive Officer of the Company or the Board to be necessary for such purpose; provided, that each day of any such suspension pursuant to this Section 3.4 shall correspondingly decrease the Aggregate Blocking Period available to the Company during any twelve (12)-month period pursuant to Section 2.4 hereof; and provided further that that notwithstanding the foregoing, (a) if the Company is unable to file the Registration Statement or have it declared effective, as applicable, prior to the date on which the Company’s financial statements for the nine (9)-months ended September 30, 2022 become stale, the Company shall be permitted to delay the filing of the Registration Statement, or any required amendment to the Registration Statement to include the audited financial statements of the Company for the year ended December 31, 2022, until no later than the date on which the Company would be required to file its Annual Report on Form 10-K for the year ended December 31, 2022, and (b) if the Company is required to file a post-effective amendment to the Registration Statement in order to include the audited consolidated financial statements of the Company for the year ended December 31, 2022 and update certain disclosures in connection therewith, the use of Registration Statement prior to the SEC’s declaration of the effectiveness of the post-effective amendment shall be suspended (together with clause (a), each an “Anticipated Suspension Event”), and each Holder agrees that the occurrence of any Anticipated Suspension Event shall not count toward the forty five (45) total calendar day period set forth above. 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 Market Stand-off. In connection with any Underwritten Offering or Shelf Underwritten Offering of equity securities of the Company (other than a Block Trade), if requested by the managing Underwriter(s), each participating Holder will agree that it shall not Transfer any shares of Common Stock or other equity securities of the Company (other than those included in such offering pursuant to this Agreement), without the prior written consent of the managing Underwriter(s), during a period the ninety (90)-day period beginning on the date of pricing of such offering or such shorter period during which the Company agrees not to conduct an underwritten primary offering of Common Stock, except in the event the Underwriters managing the offering otherwise agree by written consent. Each Holder agrees to execute a customary lock-up agreement in favor of the Underwriters to such effect (in each case on substantially the same terms and conditions as all such participating Holders).
3.6 Covenants of the Company. As long as any Holder shall own Registrable Securities, the Company hereby covenants and agrees:
3.6.1 the Company will not file any Registration Statement or Prospectus included therein or any other filing or document (other than this Agreement) with the Commission which refers to any Holder of Registrable Securities by name without the prior written approval of such Holder, which may not be unreasonably withheld, unless required by applicable law or the Commission Guidance;
3.6.2 at all times while it shall be a reporting company under the Exchange Act, 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, provided that any documents publicly filed or furnished with the Commission pursuant to the Electronic Data Gathering Analysis and Retrieval System (or any successor thereto) shall be deemed to have been furnished to the Holders pursuant to this subsection 3.5.2. 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). 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; and
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3.6.3 upon request of a Holder, the Company shall (i) authorize the Company’s transfer agent to remove any legend on share certificates of such Holder’s Common Stock or Private Units (and underlying securities) restricting further transfer (or any similar restriction in book entry positions of such Holder) if such restrictions are no longer required by the Securities Act or any applicable state securities laws or any agreement with the Company to which such Holder is a party, including if such shares subject to such a restriction have been sold pursuant to a Registration Statement, (ii) request the Company’s transfer agent to issue in lieu thereof shares of Common Stock or Private Units (and underlying securities) without such restrictions to the Holder upon, as applicable, surrender of any stock certificates evidencing such shares of Common Stock, or warrant certificates evidencing such Private Units (and underlying securities) or to update the applicable book entry position of such Holder so that it no longer is subject to such a restriction, and (iii) use commercially reasonable efforts to cooperate with such Holder to have such Holder’s shares of Common Stock or Private Units (and underlying securities), as the case may be, transferred into a book-entry position at The Depository Trust Company, in each case, subject to delivery of customary documentation, including any documentation required by such restrictive legend or book-entry notation.
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, directors and agents and each Person who controls such Holder (within the meaning of the Securities Act) from and against all losses, claims, damages, liabilities and out-of-pocket expenses (including reasonable attorneys’ fees) (or actions or proceedings, whether commenced or threatened, in respect thereof) (collectively, “Claims”), resulting from any untrue or alleged untrue statement of any 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 Claim arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such filing in reliance upon and in conformity with information furnished in writing to the Company by such Holder expressly for use therein.
4.1.2 In connection with any Registration Statement in which a Holder of Registrable Securities is participating, the Company may require that, as a condition to including any Registrable Securities in any Registration Statement the Company shall have received an undertaking reasonably satisfactory to it from such Holder, to indemnify the Company, its directors and officers and agents and each Person who controls the Company (within the meaning of the Securities Act) from and against Claims resulting from any untrue statement of any 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 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. If any Underwriter shall require any Holder of Registrable Securities to provide any indemnification other than that provided hereinabove in this subsection 4.1.2, such Holder may elect not to participate in such Underwritten Offering (but shall not have any claim against the Company as a result of such election).
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4.1.3 Any Person entitled to indemnification herein shall (a) 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 (b) 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. An indemnifying party who is not entitled to, or elects not to, assume the defense of a Claim shall not be obligated to pay the fees and expenses of more than one (1) counsel for all parties indemnified by such indemnifying party with respect to such Claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such Claim. 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) and which settlement includes a statement or admission of fault or culpability on the part of such indemnified party or 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, partners, stockholders or members, employees, agents, investment advisors or controlling person of such indemnified party and shall survive the Transfer of Registrable Securities. The Company and each Holder of Registrable Securities participating in a Registration 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 Claims, 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 Claims (a) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Registrable Securities or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but also to reflect the relative fault of the indemnifying party or parties on the other hand in connection with the statements or omissions that resulted in such Claims, 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 related 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 or any director, officer, agent or controlling Person thereof 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.
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ARTICLE
V
MISCELLANEOUS
5.1 Notices. Any notice or communication under this Agreement must be in writing and given by (a) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (b) delivery in person or by courier service providing evidence of delivery, or (c) 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: Southland Holdings, Inc., 1100 Kubota Drive, Grapevine, Texas 76051, and, if to any Holder, at such Holder’s address, e-mail address or facsimile number 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 Lock-up Period, no Holder may assign or delegate such 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 Holder to a Permitted Transferee.
5.2.3 Subject to subsection 5.2.2, a Holder may assign or delegate such Holder’s rights, duties or obligations under this Agreement, in whole or in part, to any Person to whom it Transfers Registrable Securities, provided that such Registrable Securities remain Registrable Securities following such Transfer and such Person agreed to become bound by the terms and provisions of this Agreement in accordance with subsection 5.2.6.
5.2.4 This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors and the permitted assigns of the applicable Holders, which shall include Permitted Transferees.
5.2.5 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.
5.2.6 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 (a) written notice of such assignment as provided in Section 5.1 hereof and (b) 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 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
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5.5 Jurisdiction; Waiver of Jury Trial. Any action based upon, arising out of or related to this Agreement, or the transactions contemplated hereby, shall be brought in the Court of Chancery of the State of Delaware or, if such court declines to exercise jurisdiction, any federal or state court located in New York County, New York, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the action shall be heard and determined only in any such court, and agrees not to bring any action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law, or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction, in each case, to enforce judgments obtained in any action brought pursuant to this Section 5.5.
5.6 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, (a) any amendment hereto or waiver hereof that would materially and adversely affect a Holder of at least one percent (1%) of the Registrable Securities, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is adverse and different from the other Holders (solely in their capacities as holders of the shares of capital stock of the Company) shall require the consent of the Holder so affected, (b) any amendment hereto or waiver hereof that adversely affects any of the material rights of the Initial Holders, EarlyBirdCapital Holders, or Southland Holders, as applicable, solely in their respective capacities as Initial Holders, EarlyBirdCapital Holders, or Southland Holders, as applicable, in a manner that is adverse and different from the other Holders, shall require the consent of the Initial Holders, EarlyBirdCapital Holders, or Southland Holders, as applicable, representing a majority-in-interest of the then-outstanding number of Registrable Securities held by the Initial Holders, EarlyBirdCapital Holders, or Southland Holders, as applicable. 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.
5.7 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 and each of the Holders agree that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions among the parties hereto and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
5.8 Term. This Agreement shall terminate (a) as to all Holders and the Company, upon the earlier of 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) as to any Holder individually, the date on which such Holder no longer holds any Registrable Securities or is permitted to sell all of such Holder’s Registrable Securities under Rule 144 (or any similar provision) under the Securities Act without limitation on the amount of securities sold or the manner of sale and because the reporting requirements of Rule 144(i)(2) are not applicable. The provisions of Section 3.5 and Article IV shall survive any termination.
5.9 Holder Information. Each Holder agrees, if requested in writing, to represent to the Company the total number of Registrable Securities held by such Holder in order for the Company to make determinations hereunder.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
COMPANY: | ||
Southland Holdings, Inc., | ||
a Delaware corporation | ||
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer |
[Signature Page to Amended and Restated Registration Rights Agreement]
INITIAL HOLDERS: | ||
/s/ Gregory Monahan | ||
Gregory Monahan | ||
/s/ Eric Rosenfeld | ||
Eric Rosenfeld | ||
/s/ Shahrez Nadeem | ||
Shahrez Nadeem | ||
ERIC S. ROSENFELD 2017 TRUST NO. 1 | ||
By: | /s/ David D. Sgro | |
Name: | David D. Sgro | |
Title: | Trustee | |
ERIC S. ROSENFELD 2017 TRUST NO. 2 | ||
By: | /s/ David D. Sgro | |
Name: | David D. Sgro | |
Title: | Trustee | |
/s/ David D. Sgro | ||
David D. Sgro | ||
/s/ Adam Jaffe | ||
Adam Jaffe | ||
TRIPLE J HOLDINGS II, LLC | ||
By: | /s/ Adam J. Semler | |
Name: | Adam J. Semler | |
Title: | Manager |
[Signature Page to Amended and Restated Registration Rights Agreement]
INITIAL HOLDERS: | ||
PRATT CAPITAL I, LP | ||
By: | /s/ Brian Pratt | |
Name: | Brian Pratt | |
Title: | Manager of G.P. of Pratt Capital I, LP | |
WHITE STAR PARTNERS LP | ||
By: | /s/ D. Blair Baker | |
Name: | D. Blair Baker | |
Title: | General Partner, President and CEO | |
MONT BLANC INVESTMENT CORPORATION | ||
By: | /s/ John Ing | |
Name: | John Ing | |
Title: | President and CEO | |
/s/ Craig Martin | ||
Craig Martin | ||
/s/ Ryan Hummer | ||
Ryan Hummer |
[Signature Page to Amended and Restated Registration Rights Agreement]
INITIAL HOLDERS: | ||
MERLIN 3C7 | ||
By: | /s/ Ryan Hummer | |
Name: | Ryan Hummer | |
Title: | Director | |
MERLIN 3C1 | ||
By: | /s/ Ryan Hummer | |
Name: | Ryan Hummer | |
Title: | Director | |
CATALYST 3C7 | ||
By: | /s/ Ryan Hummer | |
Name: | Ryan Hummer | |
Title: | Director | |
MERLIN 3C1 | ||
By: | /s/ Ryan Hummer | |
Name: | Ryan Hummer | |
Title: | Director | |
/s/ Michael Martino | ||
Michael Martino | ||
/s/ Kenneth Garschina | ||
Kenneth Garschina | ||
/s/ Sang Kim | ||
Sang Kim | ||
/s/ Samuel Read | ||
Samuel Read |
[Signature Page to Amended and Restated Registration Rights Agreement]
INITIAL HOLDERS: | ||
CNSA LLC | ||
By: | /s/ Charles Clarvit | |
Name: | Charles Clarvit | |
Title: | Investment Manager | |
ARBUTUS FAMILY HOLDINGS LTD. | ||
By: | /s/ J. Kelly Edmison | |
Name: | J. Kelly Edmison | |
Title: | President | |
TAH CAPITAL LLC | ||
By: | /s/ Tom Harrington | |
Name: | Tom Harrington | |
Title: | Chief Executive Officer | |
/s/ Jeremy Sg. Fowden and Louise E. Fowden | ||
Jeremy Sg. Fowden and Louise E. Fowden | ||
8874867 CANADA INC. | ||
By: | /s/ Frank Cristiano | |
Name: | Frank Cristiano | |
Title: | President | |
/s/ Stephen Lack | ||
Stephen Lack | ||
/s/ Justin Katz | ||
Justin Katz |
[Signature Page to Amended and Restated Registration Rights Agreement]
INITIAL HOLDERS: | ||
COHANZICK ABSOLUTE RETURN | ||
MASTER FUND, LTD. | ||
By: | /s/ David Sherman | |
Name: | David Sherman | |
Title: | Authorized Agent |
[Signature Page to Amended and Restated Registration Rights Agreement]
EARLYBIRDCAPITAL HOLDERS: | ||
EARLYBIRDCAPITAL INC. | ||
By: | /s/ Steven Levine | |
Name: | Steven Levine | |
Title: | Chief Executive Officer | |
/s/ Steven Levine | ||
Steven Levine | ||
/s/ David Nussbaum | ||
David Nussbaum |
[Signature Page to Amended and Restated Registration Rights Agreement]
SOUTHLAND HOLDERS: | ||
/s/ Frankie S. Renda | ||
Frankie S. Renda | ||
/s/ Amanda Delee Renda | ||
Amanda Delee Renda | ||
FRANK RENDA 2015 IRREVOCABLE TRUST | ||
By: | /s/ Frankie S. Renda | |
Name: | Frankie S. Renda | |
Title: | Trustee | |
DOMINIC VINCENT RENDA TRUST | ||
By: | /s/ Frankie S. Renda | |
Name: | Frankie S. Renda | |
Title: | Trustee | |
MADISON NICOLE RENDA TRUST | ||
By: | /s/ Frankie S. Renda | |
Name: | Frankie S. Renda | |
Title: | Trustee | |
SANTINO LEONIDAS RENDA TRUST | ||
By: | /s/ Frankie S. Renda | |
Name: | Frankie S. Renda | |
Title: | Trustee |
[Signature Page to Amended and Restated Registration Rights Agreement]
SOUTHLAND HOLDERS: | ||
/s/ Rudolph V. Renda | ||
Rudolph V. Renda | ||
RUDOLPH V. RENDA, JR. 2015 IRREVOCABLE TRUST | ||
By: | /s/ Rudolph V. Renda | |
Name: | Rudolph V. Renda | |
Title: | Trustee | |
ANGELO JOSEPH RENDA TRUST | ||
By: | /s/ Rudolph V. Renda | |
Name: | Rudolph V. Renda | |
Title: | Trustee | |
LOLA SOFIA RENDA TRUST | ||
By: | /s/ Rudolph V. Renda | |
Name: | Rudolph V. Renda | |
Title: | Trustee |
[Signature Page to Amended and Restated Registration Rights Agreement]
SOUTHLAND HOLDERS: | ||
/s/ Walter Timothy Winn | ||
Walter Timothy Winn | ||
/s/ Debra Nicole Winn | ||
Debra Nicole Winn | ||
WALTER TIMOTHY WINN 2015 IRREVOCABLE TRUST | ||
By: | /s/ Walter Timothy Winn | |
Name: | Walter Timothy Winn | |
Title: | Trustee | |
DEBRA NICOLE WINN IRREVOCABLE 2020 TRUST | ||
By: | /s/ Walter Timothy Winn | |
Name: | Walter Timothy Winn | |
Title: | Trustee |
[Signature Page to Amended and Restated Registration Rights Agreement]
Exhibit 10.6.1
EMPLOYMENT AGREEMENT
BETWEEN
Legato Merger Corp. II
AND
Frank Renda
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between Legato Merger Corp. II, a Delaware corporation (the “Employer”), and Frank Renda (the “Employee”), effective as of the Closing Date (as defined in that certain Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Employer, Legato Merger Sub Inc., a Delaware corporation, and Southland Holdings LLC, a Texas limited liability company) (the “Effective Date”). On the Effective Date, the Employer will change its name to “Southland Holdings, Inc.”
WHEREAS, the Employer desires to employ the Employee, and the Employee desires to accept such employment, on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Employer will provide to Employee, in the course and scope of Employee’s employment with the Employer and in the performance of Employee’s duties for the Employer, highly confidential, sensitive, and proprietary information, as well as intellectual property and trade secrets, belonging to the Employer, regarding, among other things, the Employer and its employees and contractors, methods and strategies of production and service, finances and other financial information, clients, customers, suppliers, vendors, business partners, and business plans and strategies and that such access will be subject to the terms and conditions of this Agreement;
WHEREAS, the Employee understands that execution of this Agreement is a condition precedent to commencing employment with the Employer, to being paid compensation by the Employer under this Agreement, and to receiving any Confidential Information (as defined herein) belonging to the Employer, as well as to receiving other valuable and specialized training; and,
NOW, THEREFORE, in consideration of the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
Section 1. Effectiveness. Employee’s employment with the Employer shall commence, and this Agreement shall become effective, on the Effective Date.
Section 2. Employment Agreement. On the terms and conditions set forth in this Agreement, the Employer agrees to employ Employee and Employee agrees to be employed by the Employer for the Employment Period set forth in Section 3 and in the position and with the duties set forth in Section 4. Terms used herein with initial capitalization not otherwise defined are defined in Section 26.
Section 3. At-Will Employment. Subject to the terms and conditions set forth in this Agreement, including Section 9 below, Employee is employed on an at-will basis, meaning that either Employee or the Employer may terminate the employment relationship at any time for any reason, with or without notice. The Parties acknowledge and agree that nothing in this Agreement will be interpreted or construed to alter this at-will employment relationship or to confer on the Employee any right with respect to continued employment by the Employer for any specified duration.
Section 4. Position and Duties.
(a) During the Employee’s employment with the Employer, Employee shall serve as President and Chief Executive Officer of the Employer. In such capacity, Employee shall report directly to the Company’s Board of Directors. Except for absences or leave permitted or excused under the Company’s policies and procedures or under applicable law, the Employee will, throughout Employee’s employment, devote Employee’s full working time, attention, and skill set to Employee’s duties and will perform Employee’s duties loyally and faithfully, and to the best of Employee’s ability, in furtherance of the business affairs and activities of the Employer.
(b) The employment relationship between the Employer and the Employee is governed by, and the Employee will at all times be subject to, comply with, observe, and carry out: (1) this Agreement; (2) any other confidentiality and nondisclosure agreement or restrictive covenant which the Company may require the Employee to execute from time to time; (3) the Employer’s rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including any employee handbooks; and, (4) such rules, regulations, policies, codes of ethics and/or conduct, directions, and restrictions as the Employer may from time to time establish or approve for employees of the Employer, including any employee handbooks. The Parties acknowledge and agree that this Agreement governs their relationship to the extent there are any conflicts between this Agreement and any Employer rules, regulations, policies, plans, programs, procedures, codes of ethics and/or conduct, directions, instructions, orders, and restrictions, including any employee handbooks.
Section 5. Place of Performance. During Employee’s employment with the Employer, Employee shall be based at the Employer’s headquarters in Grapevine, TX. Employee acknowledges and agrees that Employee’s duties may require Employee to engage in reasonable business travel from time to time during the course and scope of Employee’s employment with the Employer.
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Section 6. Compensation and Benefits.
(a) Base Salary. During Employee’s employment with the Employer, the Employer shall pay to Employee a base salary of Fifty Four Thousand One Hundred Sixty Seven Dollars and No Cents ($54,167.00) per month, which annualizes to Six Hundred Thousand Fifty Dollars and No Cents ($650,000.00), less applicable and authorized taxes, deductions, withholdings and payable in accordance with the Company’s regular payroll practices (the “Base Salary”). The Base Salary may be reviewed for increase by the Employer, annually, and may be increased in the sole discretion of the Employer; and any such adjusted Base Salary shall constitute the “Base Salary” for purposes of this Agreement.
(b) Discretionary Annual Bonus. During Employee’s employment with the Employer, Employee is eligible to receive an annual cash performance bonus (an “Annual Bonus”) during each calendar year that ends during the Employment Period, to the extent earned based on the performance of Employee and the Employer and as determined, calculated and paid by the Employer in its sole discretion. Employee’s Annual Bonus for a calendar year is targeted, but not guaranteed, to be between eighty percent (80%) and two hundred percent (200%) of Employee’s Base Salary for that particular year, with greater or lesser amounts (including zero) paid based on Employee’s and Employer’s performance and as determined, calculated, and paid in the Employer’s sole discretion. Annual Bonuses will be paid around December 31st of a given year, but in no event later than March 15 of the following calendar year. If Employee ceases to be employed by the Employer on the established date of payment of the Annual Bonus at issue, Employee and the Employer acknowledge and agree that Employee is not eligible to receive, and will not receive, an Annual Bonus, or any portion thereof.
(c) Signing Bonus. Reserved.
(d) Equity. During Employee’s employment with the Employer, Employee is eligible to receive certain equity holdings in the Employer in its sole discretion. Any equity awarded by the Employer to Employee will be governed by the applicable terms and conditions of any Employer equity plan, including any modifications or amendments, that may be established, approved, and may be in effect from time to time. Such Employer equity plan is subject to annual review by the Employer and may be modified or amended from time to time. Employee’s election to participate in an Employer equity plan will be subject to a separate award agreement, which will outline the specifics of the Employee’s participation, including, but not limited to, Employee’s purchase and sale or resale rights, vesting schedule, conditions pertaining to forfeiture of such equity, and the Employer’s buyback rights.
(e) Founder Equity Sale Limitation. During Employee’s employment with the Employer, Employee shall sell no more than twenty percent (20%) of its total, aggregate equity holdings in the Employer or any of Employer’s Affiliates during any calendar year.
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(f) Perquisites.
(1) During Employee’s employment with the Employer (and in addition to the general benefits outlined in Section 6(h) below), Employee shall be entitled to (i) to participate in all fringe benefits and perquisites made available generally to senior Employees of the Employer, such participation to be at levels, and on terms and conditions, that are commensurate with Employee’s positions and responsibilities at the Employer, and (ii) to receive such additional fringe benefits and perquisites as the Employer may, in its sole and absolute discretion, from time to time provide.
(2) In addition, during Employee’s employment with the Employer, Employee shall be entitled to receive an automobile allowance of One Thousand Five Hundred Dollars and no Cents ($1,500.00) per month, less applicable and authorized taxes, deductions, withholdings, along with fuel cards and toll tags. The Employee shall be responsible for maintenance and repairs of such automobile during Employee’s employment with the Employer.
(3) During Employee’s employment with the Employer, Employee is eligible to use any aircraft owned by Employer or any of Employer’s Affiliates for personal, nonbusiness-related travel, up to, but not exceeding, twenty (20) hours per calendar year. In the event Employer or an Employer Affiliate does not own an aircraft in a given calendar year, Employer will provide a chartered, private aircraft, of a class or size similar to any aircraft owned by Employer in the past, for Employee’s personal use, up to, but not exceeding, twenty (20) hours per calendar year. Prior to December 31, 2023, any unused hours will expire at the end of the calendar year. Beginning January 1, 2024, any unused hours will accrue and rollover while Employee is employed by Employer.
(4) During Employee’s employment with the Employer, if sufficient resources or support are available, Employer will provide Employer’s or an Employer Affiliate’s financial, accounting, human resources, and other executive administrative-type support for Employee’s personal matters consistent with Employer’s past practice; provided that Employee complies with this Agreement and does not create any conflict of interest; and provided further, that Employer’s or Employer’s Affiliate’s business matters and needs take priority over Employee’s personal matters. Nothing in this Section shall require Employer to obtain any resources or support for Employee’s personal use or matters.
(5) Further, during Employee’s employment with the Employer, Employee is eligible to receive up to, but not exceeding, Eight Five Thousand Dollars and no Cents ($85,000.00) per calendar year, less applicable and authorized taxes, deductions, withholdings, for approved miscellaneous perquisites including, but not limited to, personal travel on a company plane or private charter, preventative health care services, private security services, country club membership, school contributions or sporting events, or other perquisites of customary nature for Employee’s position. In order to receive any amount in this Section 6(f)(5), Employee must submit a written request for the miscellaneous perquisite for the Employer’s review and approval in advance of the same. Any amount of additional compensation in this Section 6(f)(5) shall not be reduced by any specific perquisites outlined in Sections 6(f)(3) or Section 6(f)(4) above, if any.
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(g) Vacation / Paid Time Off. During Employee’s employment with the Employer, Employee is eligible for certain paid time off (“PTO”) commensurate with Employee’s position and in no case less than what is established for other senior Employer employees of Employer, provided that Employee is not eligible to, and will not, accrue more than fifteen (15) days of PTO in any given calendar year during Employee’s employment or be paid any amount for PTO upon termination. Further, any unused PTO does not carry over from year to year during Employee’s employment. Employee may request to take and schedule any PTO pursuant to and in accordance with Employer policies, practices, and procedures applicable to the same, subject to the business needs of the Employer and provided that Employee otherwise complies with this Agreement.
(h) Benefits. During Employee’s employment with the Employer, Employee will be entitled to participate in all standard Employer benefits including holidays, pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements that may from time to time be made available generally to other senior Employees of the Employer, all to the extent Employee is eligible under the terms of such plans, programs and arrangements. The Employer may change or terminate the benefits it offers to employees from time to time, and this Agreement does not restrict, limit, or preclude Employer’s right to make such changes or terminate such benefits, except that in no case will other Employer employees of the same level as Employee be offered benefits greater than was may be offered to Employee.
(i) Relocation. Reserved.
(j) Reasonable Attorneys’ Fees Incurred with Respect to This Agreement. During Employee’s employment with the Employer, Employee is eligible to receive a one-time, lump sum reimbursement of up to, but not exceeding, Two Thousand Dollars and no Cents ($2,000.00), less applicable and authorized taxes, deductions, withholdings for Employee’s reasonable and necessary attorneys’ fees incurred in connection with the review, negotiation and execution of this Agreement.
(k) Clawback of Certain Incentive Compensation. Notwithstanding any other provision herein to the contrary, any “incentive-based compensation” within the meaning of Section 10D of the Securities Exchange Act of 1934, as amended (the “Act”) shall be subject to clawback by the Employer in the manner required by the Employer’s recoupment policy as in effect from time to time and in the manner required by Section 10D(b)(2) of the Act, as determined by the applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
Section 7. Expenses. During Employee’s employment with the Employer, Employee is eligible seek reimbursement for all reasonable and necessary business expenses incurred by Employee in the course and scope of Employee’s duties on Company’s behalf under this Agreement, provided that such expenses are consistent with the Company’s policies, plans, and procedures in effect from time to time with respect to the same. Employee agrees that any reimbursement for reasonable and necessary business expenses is subject to and must be properly and timely submitted in accordance with the Company’s policies, plans, and procedures with respect to reporting, documentation, and payment of such business expenses.
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Section 8. Confidentiality and Non-Disclosure Agreement. The Employer and Employee acknowledge and agree that during Employee’s employment with the Employer, Employee will have access to and may assist in developing Confidential Information and will occupy a position of trust and confidence with respect to the Employer’s affairs and business and the affairs and business of its Affiliates, including the business relationships and goodwill of the Employer and its Affiliates. Employee agrees that the following obligations are necessary to preserve the confidential and proprietary nature of Confidential Information and to protect the Employer and its Affiliates against harmful solicitation of employees and customers, harmful competition and other actions by Employee that would result in serious adverse consequences for the Employer and any of its Affiliates:
(a) Non-Disclosure. During and after Employee’s employment with the Employer, Employee will not knowingly use, disclose or transfer any Confidential Information other than as specifically and expressly authorized in writing by the Employer or as reasonably necessary for the exercise of Employee’s job duties in the best interests of the Employer and its Affiliates. Anything herein to the contrary notwithstanding, the provisions of this Section 8(a) shall not apply (i) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Employee to disclose or make accessible any information; (ii) to the extent necessary in connection with any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (iii) as to information that becomes generally known to the public or within the relevant trade or industry other than due to Employee’s violation of this Section 8(a); or (iv) as to information that is or becomes available to Employee on a non-confidential basis from a source that is entitled to disclose it to Employee. Further, Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Employee files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee and/or Employee’s attorney (x) files any document containing the trade secret under seal; and, (y) does not disclose the trade secret, except pursuant to court order.
(b) Intellectual Property. Employee agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Employer’s business, including without limitation information of a technical or business nature such as ideas, discoveries, designs, inventions, improvements, trade secrets, know-how, software, writings and other works of authorship, computer programs, financial figures, client or customer rosters/lists and data, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of research and development of the Employer and its Affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Employee alone or jointly with others during Employee’s employment with the Employer is the property of and belong exclusively to the Employer. Employee will promptly and fully disclose to the Employer the origination or development by Employee of any such material and will provide the Employer with any information that it may reasonably request about such material. Either during or subsequent to Employee’s employment, upon the request and at the expense of the Employer or its nominee, and for no remuneration other than or in addition to that due Employee under this Agreement, but at no expense to Employee, Employee will execute, acknowledge, and deliver to the Employer or its attorneys any and all instruments which, in the judgment of the Employer or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Employer adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
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(c) Materials; Return of Employer Property. Employee will not remove any Confidential Information or any other property of the Employer or any of its Affiliates from the Employer’s premises or make copies of such materials except for normal and customary use in the Employer’s business. Employee will return to the Employer all Confidential Information and copies thereof and all other property of the Employer or any of its Affiliates at any time upon the request of the Employer and in any event promptly after the end of Employee’s employment. Anything to the contrary notwithstanding, nothing in this Section 8 shall prevent Employee from retaining a home computer, papers and other materials of a personal nature, including diaries, calendars and information relating to his compensation or relating to reimbursement of expenses, information that he reasonably believes may be needed for tax purposes, and copies of plans, programs and agreements relating to his employment, provided that Employee shall identify in writing all such materials for the Employer and obtain Employer’s approval of the same prior to copying or removing them from any Employer electronic device.
(d) Covenant Not to Solicit Employer’s Employees, Contractors, or Suppliers or Vendors. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly, solicit, entice, encourage, persuade or induce any Company current or prospective employee to leave his or her employment with the Company or refrain from seeking employment by the Company, any current or prospective contractor of the Company to cease providing services to or for the Company or refrain from providing services to or for the Company, or any current or prospective supplier or vendor of the Company to cease doing business with the Company or refrain from doing business with the Company, to the extent Employee had a business relationship with the current or prospective employee, contractor, vendor, or supplier at any time during Employee’s employment or about which Employee had Confidential Information.
(e) Covenant Not to Solicit Employer’s Clients and Customers. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training to Employee, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly solicit, call-on, conduct business with, sell products or services to, or otherwise provide assistance to the Employer’s current or prospective clients or customers with whom Employee had a business relationship during Employee’s employment with the Employer or about which Employee had Confidential Information.
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(f) Nondisparagement. The Parties acknowledge and agree that the business reputation and goodwill of the Employer and its Affiliates and each of their former, current, and prospective clients, customers, officers, directors, employees, members, partners, managers, owners, agents, or representatives are valuable assets critical to the Employer’s and its Affiliates’ goodwill and business relationships and to the continued growth, sustainability and success of the Employer and its Affiliates. Accordingly, during Employee’s employment with the Employer and thereafter, Employee will not make negative comments about or otherwise disparage the Employer or any of its Affiliates; former, current, or prospective Employer or any Employer Affiliate clients or customers; or any of their respective former, current, or prospective officers, directors, employees, members, partners, managers, owners, agents, or representatives, or their respective products or services. Notwithstanding the restrictions imposed in this paragraph, Employee does not violate the terms of this Section by making any truthful statement about the Employer or any of its Affiliates required to be given pursuant to a subpoena or other compulsory process in a court or arbitration proceeding, and provided that Employee otherwise complies with this Agreement.
(g) Reasonableness. In signing this Agreement, Employee represents to and assures the Employer that Employee has carefully read and considered all of the terms and conditions of this Agreement, including, without limitation, the restraints imposed under this Section. Employee acknowledges and agrees that these restraints are necessary for the reasonable and proper protection of the Employer and its Confidential Information, including its trade secrets, and that each and every one of the restraints is reasonable, and that these restraints, individually or in the aggregate, do and would not prevent Employee from obtaining other suitable employment during the period in which Employee is bound by the restraints. Employee acknowledges and agrees that each of these covenants has a unique, special, substantial, and immeasurable value to the Employer and that Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. It is also agreed that the Employer and/or its Affiliates have the right to enforce all of Employee’s obligations to that individual or entity under this Agreement, including, without limitation, those obligations set forth in this Section.
(h) Tolling Provision and Reformation. The Parties acknowledge and agree that the period for the restrictions set forth in this Section will be tolled on a day-for-day basis for each day during which Employee participates in any activity in violation of the restrictions as determined by a court of competent jurisdiction, as well as for each day during which a matter is pending in any court for the purpose of enforcing the restrictions set forth in this Section, provided that such sections are determined by a court of competent jurisdiction to be enforceable in whole or in part or as reformed. In the event any court determines that the time and scope contained in any covenant set forth in this Section is overly broad or unreasonable, the court will reform such provision to the extent necessary to make such provision reasonable. In the event a bond is required to secure temporary or preliminary injunctive restraint or relief, the Parties acknowledge and agree that a bond in the amount of $500.00 is sufficient security for the pendency of the injunctive restraint or relief.
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(i) Injunctive Relief. Employee acknowledges and agrees that Employee’s breach or threatened breach of any of the provisions of this Section would result in irreparable injury to the Employer for which monetary damages would not provide an adequate remedy and that the amount of such damages would be difficult to determine. Therefore, if Employee breaches or threatens to breach any provision of this Section, the Employer and/or its Affiliates have the right and remedy to seek specific performance or other injunctive relief, in a court of competent jurisdiction located in or with jurisdiction over Dallas, TX, in addition to any other available legal or equitable remedies. In addition to the foregoing, the Employer and/or its Affiliates may seek to recover by appropriate proceedings or action the amount of any actual or other available damages suffered by the Employer and/or its Affiliates by any failure, refusal, or neglect of Employee to perform Employee’s obligations under this Agreement, together with any and all costs and expenses incurred by the Employer and/or its Affiliates, including reasonable attorneys’ fees, in seeking such relief. The Parties acknowledge and agree that the remedies provided in this Section, and in this Agreement generally, are deemed cumulative and the exercise of one does not preclude the exercise of any other remedy at law or in equity for the same event or any other event.
(j) Cooperation. During the Employee’s employment with the Employer and for three (3) years thereafter Employee will, upon the Employer’s reasonable request: (a) cooperate with the Employer in connection with any matter that arose during Employee’s employment and that relates to the business or operations of the Employer or any of its Affiliates, or of which Employee may have any knowledge or involvement; and (b) consult with and provide information to the Employer and its representatives concerning such matters. Such cooperation shall be rendered at reasonable times and places. Nothing in this Agreement shall be construed or interpreted as requiring Employee to provide any testimony or affidavit that is not accurate or truthful.
(k) Protected Communications. Nothing in this Agreement will or is intended to prohibit any communication by any Party permitted by any applicable law, including the National Labor Relations Act, or any communication by any Party with any government agency, including (without limitation) the Equal Employment Opportunity Commission, the Texas Workforce Commission, the United States Securities and Exchange Commission, or the National Labor Relations Board with respect to any possible violation by the Employer or any of its Affiliate of any laws, rules, or regulations.
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Section 9. Termination of Employment.
(a) Permitted Terminations. Employee’s employment hereunder may be terminated during the Employment Period under the following circumstances:
(1) Death. The Employee’s employment hereunder shall terminate upon Employee’s death;
(2) By the Employer. The Employer may terminate Employee’s employment with the Employer:
A. Disability. If Employee has been substantially unable to perform Employee’s material job duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for 180 consecutive days or 270 days in any 24-month period (a “Disability”) (provided, that until such termination, Employee shall continue to receive his compensation and benefits hereunder, reduced by any benefits payable to Employee under any disability insurance policy or plan applicable to Employee); or
B. Cause. With or without Cause; and,
(3) By Employee. Employee may terminate Employee’s employment with the Employer with or without Good Reason.
(b) Termination. Any termination of Employee’s employment by the Employer or Employee (other than because of Employee’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any; and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated. Termination of Employee’s employment shall take effect on the Date of Termination, after which Employee shall not be considered and may not hold himself or herself as an officer, director, manager, employee, contractor, representative, or agent of the Employer.
(c) Dispute as to a Disability. Employee agrees, in the event of any dispute under Section 9(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer, to submit to a physical examination by a licensed physician selected by mutual consent of the Employer and Employee (which shall not unreasonably be withheld), the cost of such examination to be paid by the Employer. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. This Section shall be interpreted and applied so as to comply with the provisions of the Americans with Disabilities Act and any applicable state or local laws.
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(d) Nothing in this Section, or in this Agreement generally, is intended to, or will, modify Employee’s at-will employment relationship with the Employer.
Section 10. Compensation Upon Termination.
(a) Death. If Employee’s employment with the Employer is terminated as a result of Employee’s death, this Agreement and the Employment Period shall terminate without further notice or any action required by the Employer or Employee’s legal representatives. Upon Employee’s death, the Employer shall pay or provide the following to Employee’s designated beneficiary: (i) Employee’s Base Salary due through the Date of Termination; and, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due. Except as set forth herein, the Employer shall have no further obligation to Employee under this Agreement upon Employee’s death.
(b) Disability. If the Employer terminates Employee’s employment with the Employer because of Employee’s Disability, the Employer shall pay or provide the following: (i) Employee’s Base Salary due through the Date of Termination, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due, and (iii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term). Except as set forth herein, the Employer shall have no further obligations to Employee under this Agreement upon Employees Disability.
(c) Termination by the Employer for Cause or Termination by Employee Without Good Reason. If, the Employer terminates Employee’s employment with the Employer for Cause pursuant to Section 9(a)(ii)(B) or Employee terminates Employee’s employment without Good Reason, the Employer shall pay to Employee Employee’s Base Salary due through the Date of Termination and all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, at the time such payments are due, and Employee’s rights with respect to equity or equity-related awards shall be governed by the applicable terms of the related plan and/or separate award agreement.
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(d) Termination by the Employer without Cause or Termination by Employee with Good Reason. If the Employer terminates Employee’s employment with Employer other than for Cause or Disability pursuant to Section 9(a) or if Employee terminates his employment hereunder with Good Reason: (i) the Employer shall pay Employee (A) Employee’s Base Salary due through the Date of Termination, (B) a Pro Rata Bonus at the time other employees of the Employer receive annual bonuses for the calendar year in which the Date of Termination occurs and in all events by March 15 of the calendar year following the year in which such termination occurs, (C) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, in each case at the time such payments are due, (D) a cash lump sum in an amount equal to one (1) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination, payable in a lump sum on the 60th day following the date of termination (ii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term), and (iii) Employee and his covered dependents shall be entitled to continued participation in benefit plans on the same terms and conditions as applicable immediately prior to Employee’s Date of Termination for 18 months; provided that if such continued coverage is not permitted under the terms of such benefit plans, the Employer shall pay Employee an additional, lump sum amount that, on an after-tax basis, is equal to the cost of comparable coverage obtained by Employee, and (E) a cash, lump sum in an amount equal to any unpaid portion of the Signing Bonus and the Deferred Compensation, if any, payable in a lump sum on the 60th day following the date of termination.
(e) Termination Upon a Change in Control. This Section 10(e) shall apply if there is (i) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability), or a resignation by Employee with Good Reason during the two-year period following a Change in Control or (ii) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability) within six (6) months prior to a Change in Control, if the termination was at the request of a third party or otherwise arose in anticipation of the Change in Control. If any such termination occurs, Employee shall receive the payments and benefits set forth in Section 10(d), except that in lieu of the lump-sum payment under Section 10(d)(i)(D), Employee shall receive a cash payment in an amount equal to two (2) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination (without taking into account any reductions which would constitute Good Reason), payable in a lump sum on the 60th day following the date of termination.
(f) Liquidated Damages. The Parties acknowledge and agree that damages which will result to Employee for termination by the Employer of Employee’s employment without Cause or by Employee for Good Cause shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to Employee under Section 10 shall constitute liquidated damages for any such termination. Accordingly, Employee agrees that, except for such other payments and benefits to which Employee may be entitled as expressly provided by the terms of this Agreement or any other applicable benefit plan or under applicable law, such liquidated damages shall be in lieu of all other claims that Employee may make by reason of any such termination of his employment and that, as a condition to receiving the Severance Payments, Employee will execute a release of claims in or substantially in a form provided by the Employer. Within five (5) business days of the Date of Termination, the Employer shall deliver to Employee the appropriate form of release of claims for Employee to execute. The Severance Payments shall be made within three (3) business days of the expiration of the revocation period without the release being revoked and otherwise as they become due.
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(g) No Offset. In the event of termination of his employment, Employee shall be under no obligation to seek other employment and there shall be no offset against amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain. The Employer’s obligation to make any payment pursuant to, and otherwise to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim or other right that the Employer or its affiliates may have against him for any reason.
(h) Section 409A.
(1) Notwithstanding the timing of the payments pursuant to Section 10 of this Agreement, to the extent Employee would otherwise be entitled to a payment during the six months beginning on the Date of Termination that would be subject to the additional tax imposed under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the payment will not be made to Employee and instead will be made to an account established to fund such payments (provided that such funds shall be at all times subject to the creditors of the Employer) and (ii) the payment, together with interest thereon at the rate of “prime” plus 1%, will be paid to Employee on the six-month anniversary of Date of Termination. Similarly, to the extent Employee would otherwise be entitled to any benefit (other than a cash payment) during the six months beginning on the Date of Termination that would be subject to the additional tax under Section 409A of the Code, the benefit will be delayed and will begin being provided (together, if applicable, with an adjustment to compensate Employee for the delay, with such adjustment to be determined in the Employer’s reasonable good faith discretion) on the six month anniversary of the Date of Termination. The Employer will establish the account, as applicable, no later than ten days after Employee’s Date of Termination.
(2) It is the intention of the parties that the payments and benefits to which Employee could become entitled in connection with termination of employment under this Agreement comply with Section 409A of the Code. In the event that the parties determine that any such benefit or right does not so comply, they will negotiate reasonably and in good faith to amend the terms of this Agreement such that it complies (in a manner that attempts to minimize the economic impact of such amendment on Employee and the Employer and its affiliates).
(3) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
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(4) For purposes of compliance with Code Section 409A, (i) all expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee, (ii) any right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(5) For purposes of Code Section 409A, the Employee’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(6) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.
Section 11. Indemnification. During the Employee’s employment with the Employer and thereafter, the Employer agrees to indemnify and hold Employee and Employee’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against Employee that arises out of or relates to Employee’s service as an officer, director or employee, as the case may be, of the Employer, or Employee’s service in any such capacity or similar capacity with an Affiliate of the Employer or other entity at the request of the Employer, both prior to and after the Effective Date, and to promptly advance to Employee or Employee’s heirs or representatives such expenses upon written request with appropriate documentation of such expense upon receipt of an undertaking by Employee or on Employee’s behalf to repay such amount if it shall ultimately be determined that Employee is not entitled to be indemnified by the Employer. The Parties agree and acknowledge that this Section and the Company’s obligations hereunder apply only if and to the extent no other applicable insurance policy provides any coverage or other benefit to the Employee with respect to the claim or proceeding at issue. In that regard, during the Employee’s employment with the Employer and thereafter, the Employer also shall provide Employee with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other Employee officers. If Employee has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which Employee may request indemnity under this provision, Employee will give the Employer prompt written notice thereof; provided that the failure to give such notice shall not affect Employee’s right to indemnification. The Employer shall be entitled to assume the defense of any such proceeding and Employee will use reasonable efforts to cooperate with such defense. To the extent that Employee in good faith determines that there is an actual or potential conflict of interest between the Employer and Employee in connection with the defense of a proceeding, Employee shall so notify the Employer and shall be entitled to separate representation at the Employer’s expense by counsel selected by Employee (provided that the Employer may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Employer’s counsel and minimize the expense of such separate representation to the extent consistent with Employee’s separate defense. This Section shall continue in effect after the termination of Employee’s employment or the termination of this Agreement.
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Section 12. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by facsimile transmission addressed as follows:
If to the Employer:
Southland Holdings, Inc.
1100 Kubota Dr.
Grapevine, TX 76051
Attention: Corporate Secretary and General Counsel
If to Employee:
Address last shown on the Employer’s Records
Each Party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
Section 13. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.
Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the Parties respecting the employment of Employee and supersedes all prior agreements, there being no representations, warranties or commitments except as set forth herein, and the terms of any other agreements and/or Company policies in force with regard to Employee’s post-employment obligations (including any confidentiality or nondisclosure agreements and other restrictive covenants).
Section 15. Survival. It is the express intention and agreement of the Parties hereto that the provisions of Section 8, Section 10, Section 11, Section 12, Section 14, Section 16, Section 17, Section 18, Section 20 and Section 24 hereof and this Section 15 shall survive the termination of employment of Employee. In addition, all obligations of the Employer to make payments to the Employee after Employee’s employment with the Employer ends hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.
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Section 16. Assignment. The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of Employee’s death, the personal representative or legatees or distributees of Employee’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to Employee hereunder and (ii) the rights and obligations of the Employer hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale of all or substantially all of the assets or equity interests of the Employer or similar transaction involving the Employer or a successor corporation.
Section 17. Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the Parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.
Section 18. Amendment: Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the Party against whom enforcement is sought. Neither the waiver by either of the Parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the Parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.
Section 19. Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
Section 20. Governing Law; Venue. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement are governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions that could cause the applications of the laws of any jurisdiction other than the State of Texas. The Parties irrevocably consent to and waive any objection or complaint to the personal jurisdiction of or venue in the state and federal courts located in Dallas County, Texas, for claims related to this Agreement and for any claim for injunctive or other equitable relief arising hereunder.
(a) The Parties further agree that service of process in any such proceeding arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at his or its address as provided in Section 12. Nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Texas.
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(b) WAIVER OF JURY TRIAL. The Parties hereby irrevocably waive their respective rights to trial by jury in any proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement.
Section 21. Representations Regarding Fair Competition. Employee represents, warrants and covenants to the Employer that:
(a) On or prior to the date hereof, Employee has informed the Employer of any judgment, order, agreement or arrangement of which he is currently aware and which may affect his right to enter into this Agreement and to fully perform his duties hereunder;
(b) Employee is knowledgeable and sophisticated as to business matters, and that prior to assenting to the terms of this Agreement or giving the representations and warranties herein, he has been given a reasonable time to review it and has consulted with counsel of his choice;
(c) In entering into this Agreement, Employee is not knowingly breaching or violating any provision of any law or regulation; and,
(d) Employee has not knowingly provided to the Employer, nor been requested by the Employer to provide, any confidential or non-public document or information of a former employer that constitutes or contains any protected trade secret, and will not knowingly use any protected trade secrets of any former employer in the course of his employment hereunder.
Section 22. No Reliance. No person has any authority to make any representation or promise for or on behalf of any Party not set forth in this Agreement. The Parties agree that, in executing this Agreement, they do not and have not relied on any document, representation or statement, whether written or oral, other than those specifically set forth or specifically referenced in this Agreement. Neither Party is relying upon a legal duty, even if one might exist, on the part of the other Party (or such Party’s employees, executives, managers, officers, agents, representatives, or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation. The Parties expressly acknowledge and agree that no lack of information on the part of either Party is a ground for challenging this Agreement. The recitals to this Agreement are incorporated into and made a part of this Agreement for all purposes.
Section 23. Counterparts; Electronic Signature. The Parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one agreement. Either Party may execute this Agreement by facsimile or electronic signature, and the other Parties are entitled to rely upon such facsimile or electronic signature as conclusive evidence that this Agreement has been duly executed by such Party.
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Section 24. Withholding. The Employer may withhold from any benefit payment under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling; provided that any withholding obligation arising in connection with the exercise of an equity holding or stock option or the transfer of equity or stock or other property shall be satisfied through withholding an appropriate number of shares of stock or appropriate amount of such other property.
Section 25. Attorneys’ Fees. Should a Party sue another Party in court for a breach of any provision of this Agreement, the prevailing Party, as determined by a court of competent jurisdiction, is entitled to recover its reasonable attorneys’ fees, costs of court and other expenses of litigation, in addition to any other remedy.
Section 26. Definitions.
“Accrued Benefits” means (i) any compensation deferred by Employee prior to the Date of Termination and not paid by the Employer or otherwise specifically addressed by this Agreement; (ii) any amounts or benefits owing to Employee or to Employee’s beneficiaries under the then applicable benefit plans of the Employer; (iii) any amounts owing to Employee for reimbursement of expenses properly incurred by Employee prior to the Date of Termination and which are reimbursable in accordance with Section 7; and (iv) any other benefits or amounts due and owing to Employee under the terms of any plan, program or arrangement of the Employer.
“Affiliate” means any entity controlled by, in control of, or under common control with the Employer, including Employer’s parent, subsidiaries, affiliates, divisions and departments, and any joint venture partners (if any).
“Cause” means: (i) Employee’s breach of any of Employee’s material obligations under any agreement with the Employer, including this Agreement and any other nondisclosure/confidentiality agreement; (ii) Employee’s willful failure or refusal to perform Employee’s duties or responsibilities for the Employer, consistent with this Agreement (other than as a result of Employee’s death / Disability); (iii) Employee’s willful violation of other Employer policies or procedures (including, without limitation, any anti-harassment, workplace violence, and EEO policies), and provided that a mere unsubstantiated accusation of harassment will not rise to the level of willful violation absent an investigation and substantiated of accusation; (iv) Employee’s conviction of, or plea of guilty or nolo contendere to, (x) a felony or (y) any crime which is, or could reasonably be expected to be, injurious or harmful to the Employer (except any traffic offenses); (v) Employee’s fraud, embezzlement, bribery, theft, dishonesty or other misconduct that is, or could reasonably be expected to be, injurious or harmful to the Employer; (vi) Employee’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or property of the Employer’s (including, without limitation, your unauthorized use or disclosure of the Employer’s Confidential Information, trade secrets, or intellectual property); or (vii) Employee’s use of illegal drugs, or abuse of alcohol or prescription drugs, that substantially impairs Employee’s ability to perform Employee’s duties or responsibilities for the Employer; provided that, solely with respect clause (ii) above, Employee’s failure or refusal to perform Employee’s duties or responsibilities for the Employer, which is susceptible to cure, shall not be deemed “Cause” for termination for purposes of the amounts in Sections 10(d) and 10(e), unless the Employer first gives Employee written notice of its intention to terminate for “Cause” pursuant to clause (ii) and the grounds for such termination, and Employee fails or refuses to cure such Cause within thirty (30) business days following receipt of such notice. For purposes of this definition of “Cause,” no act or failure to act, on the part of Employee, shall be considered “willful” unless it is done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employee’s action or omission was in the best interests of the Employer.
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“Change in Control” means (i) a merger of the Employer with another entity, a consolidation involving the Employer, or the sale of all or substantially all of the assets of the Employer to another entity if, in any such case, the holders of equity securities or interests of the Employer (and their respective affiliates) immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities or interests of the resulting entity entitled to greater than 50% of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, (ii) the dissolution or liquidation of the Employer, (iii) when any person or entity, including a group as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the Employer’s outstanding equity securities or interests, or (iv) as a result of or in connection with a contested election of the Employer’s board of directors, the persons who were members of the Employer’s board of directors immediately before such election shall cease to constitute a majority of the Employer’s board of directors after such election. For purposes of the preceding sentence, “resulting entity” in the context of a transaction or event that is a merger or consolidation shall mean the surviving entity unless the surviving entity is a subsidiary of another entity and the holders of common stock of the Employer receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity.
“Confidential Information” means information constituting trade secrets or proprietary information belonging to or regarding the Employer or any of its Affiliates or other confidential financial information, operating budgets, strategic plans or research or estimating methods, personnel data, customer and client contacts, projects or plans, or nonpublic information regarding the Employer or any of its Affiliates. Without limiting the foregoing, “Confidential Information” shall include, but shall not be limited to, any of the following information relating to the Employer: (i) information regarding the Employer’s business proposals; (ii) manner of the Employer’s operations, and methods of selling or pricing any products or services; (iii) the identity, contact information, preferences, requirements, and quality of persons or entities actually conducting or considering conducting business with the Employer, and any information in any form relating to such persons or entities and their relationship or dealings with the Employer; (iv) any intellectual property or trade secret of or concerning any business operation or any business relationship of the Employer; (v) computer databases, sourcecode, software programs and information relating to the nature of the hardware or software and how said hardware or software are used in combination or alone; (vi) information concerning personnel, confidential financial information, customer or customer prospect information, information concerning customers, customer lists and data, methods and formulas for estimating costs and setting prices, engineering design standards, testing procedures, research results (such as marketing surveys, programming trials or product trials), cost data (such as billing, equipment and programming cost projection models), compensation information and models, business or marketing plans or strategies, deal or business terms, budgets, supplier and vendor names and contact information (as well as preferences, requirements, and quality), programming operations, product names, information on proposed acquisitions or dispositions, actual performance compared to budgeted performance, long-range plans, internal financial information (including but not limited to financial and operating results for certain offices, divisions, departments, and key market areas that are not disclosed to the public in such form), results of internal analyses, computer programs and programming information, techniques and designs, and trade secrets; (vii) information concerning the Employer’s employees, officers, directors and shareholders (including contact information, salaries, wages, incentives, bonuses, incentives, and benefits, and quality); and (viii) any other information that is designated or marked “confidential,” “private,” “sensitive,” or similar labels. For purposes of the preceding sentence, “Employer” shall include the Employer and any and all of its Affiliates.
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“Date of Termination” means: (i) if Employee’s employment is terminated by Employee’s death, the date of Employee’s death; (ii) if Employee’s employment is terminated because of Employee’s Disability pursuant to Section 9(a)(ii)(A), 30 days after Notice of Termination, provided that Employee shall not have returned to the performance of Employee’s duties on a full-time basis during such 30-day period; (iii) if Employee’s employment is terminated by the Employer pursuant to Section 9(a)(ii)(B) or by Employee pursuant to Section 9(a)(ii)(B), the date specified in the Notice of Termination; or (iv) if Employee’s employment is terminated during the Employment Period other than pursuant to Section 9(a), the date on which Notice of Termination is given.
“Good Reason” means the occurrence of any of the following without Employee’s prior written consent: (i) a reduction in Employee’s Base Salary of ten percent (10%) or more (other than an across-the-board reduction, in whatever amount or percentage, approved by the Employer that applies on similar terms to other Employees of similar management level); or (ii) a materially adverse change in Employee’s authority, duties, or responsibilities (other than an across-the-board change, in whatever form, approved by the Employer that applies on similar terms to other Employees of similar management-level); or (iii) Employee is required by Employer to conduct themselves in violation of applicable law, Company policies or procedures, or any ethical or professional standards applicable to Employee’s performance of their duties. Notwithstanding the foregoing, in order to resign for Good Reason, Employee must (1) provide written notice to the Employer within thirty (30) days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Employee’s resignation, (2) allow the Employer at least thirty (30) days, or in the case of item (iii) no later than the next applicable SEC deadline for disclosure or filing, from receipt of such written notice to cure such event or, if applicable, provide Employee with written evidence or documentation that the acts or events claimed to constitute Good Reason did not occur or otherwise do not constitute Good Reason as described in this Agreement, and (3) if such event is not reasonably cured within such period, resign not later than seven (7) days after the expiration of the cure period by a written notice which shall state that Employee is exercising the right to terminate for Good Reason.
“Pro Rata Bonus” means an amount equal to the product of (i) the Annual Bonus that would have been earned by Employee for the calendar year that includes the Date of Termination if his employment had not terminated and (ii) a fraction the numerator of which is the number of days that have elapsed as of the Date of Termination during the calendar year that includes the Date of Termination and the denominator of which is 365.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have caused this Agreement to be duly executed and delivered on their behalf, with all Parties knowingly, voluntarily entering this Agreement with the specific intent to be bound by the same.
LEGATO MERGER CORP. II | ||
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer | |
EMPLOYEE | ||
By: | /s/ Frank Renda | |
Name: | Frank Renda |
[Signature Page to Employment Agreement]
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Exhibit 10.6.2
EMPLOYMENT AGREEMENT
BETWEEN
Legato Merger Corp. II
AND
Walter “Tim” Winn
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between Legato Merger Corp. II, a Delaware corporation (the “Employer”), and Walter “Tim” Winn (the “Employee”), effective as of the Closing Date (as defined in that certain Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Employer, Legato Merger Sub Inc., a Delaware corporation, and Southland Holdings LLC, a Texas limited liability company) (the “Effective Date”). On the Effective Date, the Employer will change its name to “Southland Holdings, Inc.”
WHEREAS, the Employer desires to employ the Employee, and the Employee desires to accept such employment, on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Employer will provide to Employee, in the course and scope of Employee’s employment with the Employer and in the performance of Employee’s duties for the Employer, highly confidential, sensitive, and proprietary information, as well as intellectual property and trade secrets, belonging to the Employer, regarding, among other things, the Employer and its employees and contractors, methods and strategies of production and service, finances and other financial information, clients, customers, suppliers, vendors, business partners, and business plans and strategies and that such access will be subject to the terms and conditions of this Agreement;
WHEREAS, the Employee understands that execution of this Agreement is a condition precedent to commencing employment with the Employer, to being paid compensation by the Employer under this Agreement, and to receiving any Confidential Information (as defined herein) belonging to the Employer, as well as to receiving other valuable and specialized training; and,
NOW, THEREFORE, in consideration of the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
Section 1. Effectiveness. Employee’s employment with the Employer shall commence, and this Agreement shall become effective, on the Effective Date.
Section 2. Employment Agreement. On the terms and conditions set forth in this Agreement, the Employer agrees to employ Employee and Employee agrees to be employed by the Employer for the Employment Period set forth in Section 3 and in the position and with the duties set forth in Section 4. Terms used herein with initial capitalization not otherwise defined are defined in Section 26.
Section 3. At-Will Employment. Subject to the terms and conditions set forth in this Agreement, including Section 9 below, Employee is employed on an at-will basis, meaning that either Employee or the Employer may terminate the employment relationship at any time for any reason, with or without notice. The Parties acknowledge and agree that nothing in this Agreement will be interpreted or construed to alter this at-will employment relationship or to confer on the Employee any right with respect to continued employment by the Employer for any specified duration.
Section 4. Position and Duties.
(a) During the Employee’s employment with the Employer, Employee shall serve as Executive Vice President and Co-Chief Operating Officer of the Employer. In such capacity, Employee shall report directly to the President and Chief Executive Officer. Except for absences or leave permitted or excused under the Company’s policies and procedures or under applicable law, the Employee will, throughout Employee’s employment, devote Employee’s full working time, attention, and skill set to Employee’s duties and will perform Employee’s duties loyally and faithfully, and to the best of Employee’s ability, in furtherance of the business affairs and activities of the Employer.
(b) The employment relationship between the Employer and the Employee is governed by, and the Employee will at all times be subject to, comply with, observe, and carry out: (1) this Agreement; (2) any other confidentiality and nondisclosure agreement or restrictive covenant which the Company may require the Employee to execute from time to time; (3) the Employer’s rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including any employee handbooks; and, (4) such rules, regulations, policies, codes of ethics and/or conduct, directions, and restrictions as the Employer may from time to time establish or approve for employees of the Employer, including any employee handbooks. The Parties acknowledge and agree that this Agreement governs their relationship to the extent there are any conflicts between this Agreement and any Employer rules, regulations, policies, plans, programs, procedures, codes of ethics and/or conduct, directions, instructions, orders, and restrictions, including any employee handbooks.
Section 5. Place of Performance. During Employee’s employment with the Employer, Employee shall be based at the Employer’s headquarters in Grapevine, TX. Employee acknowledges and agrees that Employee’s duties may require Employee to engage in reasonable business travel from time to time during the course and scope of Employee’s employment with the Employer.
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Section 6. Compensation and Benefits.
(a) Base Salary. During Employee’s employment with the Employer, the Employer shall pay to Employee a base salary of Forty-One Thousand Six Hundred Sixty-Seven Dollars and No Cents ($41,667.00) per month, which annualizes to Five Hundred Thousand and No Cents ($500,000.00), less applicable and authorized taxes, deductions, withholdings and payable in accordance with the Company’s regular payroll practices (the “Base Salary”). The Base Salary may be reviewed for increase by the Employer, annually, and may be increased in the sole discretion of the Employer; and any such adjusted Base Salary shall constitute the “Base Salary” for purposes of this Agreement.
(b) Discretionary Annual Bonus. During Employee’s employment with the Employer, Employee is eligible to receive an annual cash performance bonus (an “Annual Bonus”) during each calendar year that ends during the Employment Period, to the extent earned based on the performance of Employee and the Employer and as determined, calculated and paid by the Employer in its sole discretion. Employee’s Annual Bonus for a calendar year is targeted, but not guaranteed, to be between eighty percent (80%) and two hundred percent (200%) of Employee’s Base Salary for that particular year, with greater or lesser amounts (including zero) paid based on Employee’s and Employer’s performance and as determined, calculated, and paid in the Employer’s sole discretion. Annual Bonuses will be paid around December 31st of a given year, but in no event later than March 15 of the following calendar year. If Employee ceases to be employed by the Employer on the established date of payment of the Annual Bonus at issue, Employee and the Employer acknowledge and agree that Employee is not eligible to receive, and will not receive, an Annual Bonus, or any portion thereof.
(c) Signing Bonus. Reserved.
(d) Equity. During Employee’s employment with the Employer, Employee is eligible to receive certain equity holdings in the Employer in its sole discretion. Any equity awarded by the Employer to Employee will be governed by the applicable terms and conditions of any Employer equity plan, including any modifications or amendments, that may be established, approved, and may be in effect from time to time. Such Employer equity plan is subject to annual review by the Employer and may be modified or amended from time to time. Employee’s election to participate in an Employer equity plan will be subject to a separate award agreement, which will outline the specifics of the Employee’s participation, including, but not limited to, Employee’s purchase and sale or resale rights, vesting schedule, conditions pertaining to forfeiture of such equity, and the Employer’s buyback rights.
(e) Founder Equity Sale Limitation. During Employee’s employment with the Employer, Employee shall sell no more than twenty percent (20%) of its total, aggregate equity holdings in the Employer or any of Employer’s Affiliates during any calendar year.
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(f) Perquisites.
(1) During Employee’s employment with the Employer (and in addition to the general benefits outlined in Section 6(h) below), Employee shall be entitled to (i) to participate in all fringe benefits and perquisites made available generally to senior Employees of the Employer, such participation to be at levels, and on terms and conditions, that are commensurate with Employee’s positions and responsibilities at the Employer, and (ii) to receive such additional fringe benefits and perquisites as the Employer may, in its sole and absolute discretion, from time to time provide.
(2) In addition, during Employee’s employment with the Employer, Employee shall be entitled to receive an automobile allowance of One Thousand Five Hundred Dollars and no Cents ($1,500.00) per month, less applicable and authorized taxes, deductions, withholdings, along with fuel cards and toll tags. The Employee shall be responsible for maintenance and repairs of such automobile during Employee’s employment with the Employer.
(3) Reserved.
(4) Reserved.
(5) Further, during Employee’s employment with the Employer, Employee is eligible to receive up to, but not exceeding, Sixty Thousand Dollars and no Cents ($60,000.00) per calendar year, less applicable and authorized taxes, deductions, withholdings, for approved miscellaneous perquisites including, but not limited to, personal travel on a company plane or private charter, preventative health care services, private security services, country club membership, school contributions or sporting events, or other perquisites of customary nature for Employee’s position. In order to receive any amount in this Section 6(f)(5), Employee must submit a written request for the miscellaneous perquisite for the Employer’s review and approval in advance of the same. Any amount of additional compensation in this Section 6(f)(5) shall not be reduced by any specific perquisites outlined in Sections 6(f)(3) or Section 6(f)(4) above, if any.
(g) Vacation / Paid Time Off. During Employee’s employment with the Employer, Employee is eligible for certain paid time off (“PTO”) commensurate with Employee’s position and in no case less than what is established for other senior Employer employees of Employer, provided that Employee is not eligible to, and will not, accrue more than fifteen (15) days of PTO in any given calendar year during Employee’s employment or be paid any amount for PTO upon termination. Further, any unused PTO does not carry over from year to year during Employee’s employment. Employee may request to take and schedule any PTO pursuant to and in accordance with Employer policies, practices, and procedures applicable to the same, subject to the business needs of the Employer and provided that Employee otherwise complies with this Agreement.
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(h) Benefits. During Employee’s employment with the Employer, Employee will be entitled to participate in all standard Employer benefits including holidays, pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements that may from time to time be made available generally to other senior Employees of the Employer, all to the extent Employee is eligible under the terms of such plans, programs and arrangements. The Employer may change or terminate the benefits it offers to employees from time to time, and this Agreement does not restrict, limit, or preclude Employer’s right to make such changes or terminate such benefits, except that in no case will other Employer employees of the same level as Employee be offered benefits greater than was may be offered to Employee.
(i) Relocation. Reserved.
(j) Reasonable Attorneys’ Fees Incurred with Respect to This Agreement. During Employee’s employment with the Employer, Employee is eligible to receive a one-time, lump sum reimbursement of up to, but not exceeding, Two Thousand Dollars and no Cents ($2,000.00), less applicable and authorized taxes, deductions, withholdings for Employee’s reasonable and necessary attorneys’ fees incurred in connection with the review, negotiation and execution of this Agreement.
(k) Clawback of Certain Incentive Compensation. Notwithstanding any other provision herein to the contrary, any “incentive-based compensation” within the meaning of Section 10D of the Securities Exchange Act of 1934, as amended (the “Act”) shall be subject to clawback by the Employer in the manner required by the Employer’s recoupment policy as in effect from time to time and in the manner required by Section 10D(b)(2) of the Act, as determined by the applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
Section 7. Expenses. During Employee’s employment with the Employer, Employee is eligible seek reimbursement for all reasonable and necessary business expenses incurred by Employee in the course and scope of Employee’s duties on Company’s behalf under this Agreement, provided that such expenses are consistent with the Company’s policies, plans, and procedures in effect from time to time with respect to the same. Employee agrees that any reimbursement for reasonable and necessary business expenses is subject to and must be properly and timely submitted in accordance with the Company’s policies, plans, and procedures with respect to reporting, documentation, and payment of such business expenses.
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Section 8. Confidentiality and Non-Disclosure Agreement. The Employer and Employee acknowledge and agree that during Employee’s employment with the Employer, Employee will have access to and may assist in developing Confidential Information and will occupy a position of trust and confidence with respect to the Employer’s affairs and business and the affairs and business of its Affiliates, including the business relationships and goodwill of the Employer and its Affiliates. Employee agrees that the following obligations are necessary to preserve the confidential and proprietary nature of Confidential Information and to protect the Employer and its Affiliates against harmful solicitation of employees and customers, harmful competition and other actions by Employee that would result in serious adverse consequences for the Employer and any of its Affiliates:
(a) Non-Disclosure. During and after Employee’s employment with the Employer, Employee will not knowingly use, disclose or transfer any Confidential Information other than as specifically and expressly authorized in writing by the Employer or as reasonably necessary for the exercise of Employee’s job duties in the best interests of the Employer and its Affiliates. Anything herein to the contrary notwithstanding, the provisions of this Section 8(a) shall not apply (i) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Employee to disclose or make accessible any information; (ii) to the extent necessary in connection with any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (iii) as to information that becomes generally known to the public or within the relevant trade or industry other than due to Employee’s violation of this Section 8(a); or (iv) as to information that is or becomes available to Employee on a non-confidential basis from a source that is entitled to disclose it to Employee. Further, Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Employee files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee and/or Employee’s attorney (x) files any document containing the trade secret under seal; and, (y) does not disclose the trade secret, except pursuant to court order.
(b) Intellectual Property. Employee agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Employer’s business, including without limitation information of a technical or business nature such as ideas, discoveries, designs, inventions, improvements, trade secrets, know-how, software, writings and other works of authorship, computer programs, financial figures, client or customer rosters/lists and data, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of research and development of the Employer and its Affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Employee alone or jointly with others during Employee’s employment with the Employer is the property of and belong exclusively to the Employer. Employee will promptly and fully disclose to the Employer the origination or development by Employee of any such material and will provide the Employer with any information that it may reasonably request about such material. Either during or subsequent to Employee’s employment, upon the request and at the expense of the Employer or its nominee, and for no remuneration other than or in addition to that due Employee under this Agreement, but at no expense to Employee, Employee will execute, acknowledge, and deliver to the Employer or its attorneys any and all instruments which, in the judgment of the Employer or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Employer adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
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(c) Materials; Return of Employer Property. Employee will not remove any Confidential Information or any other property of the Employer or any of its Affiliates from the Employer’s premises or make copies of such materials except for normal and customary use in the Employer’s business. Employee will return to the Employer all Confidential Information and copies thereof and all other property of the Employer or any of its Affiliates at any time upon the request of the Employer and in any event promptly after the end of Employee’s employment. Anything to the contrary notwithstanding, nothing in this Section 8 shall prevent Employee from retaining a home computer, papers and other materials of a personal nature, including diaries, calendars and information relating to his compensation or relating to reimbursement of expenses, information that he reasonably believes may be needed for tax purposes, and copies of plans, programs and agreements relating to his employment, provided that Employee shall identify in writing all such materials for the Employer and obtain Employer’s approval of the same prior to copying or removing them from any Employer electronic device.
(d) Covenant Not to Solicit Employer’s Employees, Contractors, or Suppliers or Vendors. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly, solicit, entice, encourage, persuade or induce any Company current or prospective employee to leave his or her employment with the Company or refrain from seeking employment by the Company, any current or prospective contractor of the Company to cease providing services to or for the Company or refrain from providing services to or for the Company, or any current or prospective supplier or vendor of the Company to cease doing business with the Company or refrain from doing business with the Company, to the extent Employee had a business relationship with the current or prospective employee, contractor, vendor, or supplier at any time during Employee’s employment or about which Employee had Confidential Information.
(e) Covenant Not to Solicit Employer’s Clients and Customers. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training to Employee, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly solicit, call-on, conduct business with, sell products or services to, or otherwise provide assistance to the Employer’s current or prospective clients or customers with whom Employee had a business relationship during Employee’s employment with the Employer or about which Employee had Confidential Information.
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(f) Nondisparagement. The Parties acknowledge and agree that the business reputation and goodwill of the Employer and its Affiliates and each of their former, current, and prospective clients, customers, officers, directors, employees, members, partners, managers, owners, agents, or representatives are valuable assets critical to the Employer’s and its Affiliates’ goodwill and business relationships and to the continued growth, sustainability and success of the Employer and its Affiliates. Accordingly, during Employee’s employment with the Employer and thereafter, Employee will not make negative comments about or otherwise disparage the Employer or any of its Affiliates; former, current, or prospective Employer or any Employer Affiliate clients or customers; or any of their respective former, current, or prospective officers, directors, employees, members, partners, managers, owners, agents, or representatives, or their respective products or services. Notwithstanding the restrictions imposed in this paragraph, Employee does not violate the terms of this Section by making any truthful statement about the Employer or any of its Affiliates required to be given pursuant to a subpoena or other compulsory process in a court or arbitration proceeding, and provided that Employee otherwise complies with this Agreement.
(g) Reasonableness. In signing this Agreement, Employee represents to and assures the Employer that Employee has carefully read and considered all of the terms and conditions of this Agreement, including, without limitation, the restraints imposed under this Section. Employee acknowledges and agrees that these restraints are necessary for the reasonable and proper protection of the Employer and its Confidential Information, including its trade secrets, and that each and every one of the restraints is reasonable, and that these restraints, individually or in the aggregate, do and would not prevent Employee from obtaining other suitable employment during the period in which Employee is bound by the restraints. Employee acknowledges and agrees that each of these covenants has a unique, special, substantial, and immeasurable value to the Employer and that Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. It is also agreed that the Employer and/or its Affiliates have the right to enforce all of Employee’s obligations to that individual or entity under this Agreement, including, without limitation, those obligations set forth in this Section.
(h) Tolling Provision and Reformation. The Parties acknowledge and agree that the period for the restrictions set forth in this Section will be tolled on a day-for-day basis for each day during which Employee participates in any activity in violation of the restrictions as determined by a court of competent jurisdiction, as well as for each day during which a matter is pending in any court for the purpose of enforcing the restrictions set forth in this Section, provided that such sections are determined by a court of competent jurisdiction to be enforceable in whole or in part or as reformed. In the event any court determines that the time and scope contained in any covenant set forth in this Section is overly broad or unreasonable, the court will reform such provision to the extent necessary to make such provision reasonable. In the event a bond is required to secure temporary or preliminary injunctive restraint or relief, the Parties acknowledge and agree that a bond in the amount of $500.00 is sufficient security for the pendency of the injunctive restraint or relief.
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(i) Injunctive Relief. Employee acknowledges and agrees that Employee’s breach or threatened breach of any of the provisions of this Section would result in irreparable injury to the Employer for which monetary damages would not provide an adequate remedy and that the amount of such damages would be difficult to determine. Therefore, if Employee breaches or threatens to breach any provision of this Section, the Employer and/or its Affiliates have the right and remedy to seek specific performance or other injunctive relief, in a court of competent jurisdiction located in or with jurisdiction over Dallas, TX, in addition to any other available legal or equitable remedies. In addition to the foregoing, the Employer and/or its Affiliates may seek to recover by appropriate proceedings or action the amount of any actual or other available damages suffered by the Employer and/or its Affiliates by any failure, refusal, or neglect of Employee to perform Employee’s obligations under this Agreement, together with any and all costs and expenses incurred by the Employer and/or its Affiliates, including reasonable attorneys’ fees, in seeking such relief. The Parties acknowledge and agree that the remedies provided in this Section, and in this Agreement generally, are deemed cumulative and the exercise of one does not preclude the exercise of any other remedy at law or in equity for the same event or any other event.
(j) Cooperation. During the Employee’s employment with the Employer and for three (3) years thereafter Employee will, upon the Employer’s reasonable request: (a) cooperate with the Employer in connection with any matter that arose during Employee’s employment and that relates to the business or operations of the Employer or any of its Affiliates, or of which Employee may have any knowledge or involvement; and (b) consult with and provide information to the Employer and its representatives concerning such matters. Such cooperation shall be rendered at reasonable times and places. Nothing in this Agreement shall be construed or interpreted as requiring Employee to provide any testimony or affidavit that is not accurate or truthful.
(k) Protected Communications. Nothing in this Agreement will or is intended to prohibit any communication by any Party permitted by any applicable law, including the National Labor Relations Act, or any communication by any Party with any government agency, including (without limitation) the Equal Employment Opportunity Commission, the Texas Workforce Commission, the United States Securities and Exchange Commission, or the National Labor Relations Board with respect to any possible violation by the Employer or any of its Affiliate of any laws, rules, or regulations.
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Section 9. Termination of Employment.
(a) Permitted Terminations. Employee’s employment hereunder may be terminated during the Employment Period under the following circumstances:
(1) Death. The Employee’s employment hereunder shall terminate upon Employee’s death;
(2) By the Employer. The Employer may terminate Employee’s employment with the Employer:
A. Disability. If Employee has been substantially unable to perform Employee’s material job duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for 180 consecutive days or 270 days in any 24-month period (a “Disability”) (provided, that until such termination, Employee shall continue to receive his compensation and benefits hereunder, reduced by any benefits payable to Employee under any disability insurance policy or plan applicable to Employee); or
B. Cause. With or without Cause; and,
(3) By Employee. Employee may terminate Employee’s employment with the Employer with or without Good Reason.
(b) Termination. Any termination of Employee’s employment by the Employer or Employee (other than because of Employee’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any; and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated. Termination of Employee’s employment shall take effect on the Date of Termination, after which Employee shall not be considered and may not hold himself or herself as an officer, director, manager, employee, contractor, representative, or agent of the Employer.
(c) Dispute as to a Disability. Employee agrees, in the event of any dispute under Section 9(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer, to submit to a physical examination by a licensed physician selected by mutual consent of the Employer and Employee (which shall not unreasonably be withheld), the cost of such examination to be paid by the Employer. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. This Section shall be interpreted and applied so as to comply with the provisions of the Americans with Disabilities Act and any applicable state or local laws.
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(d) Nothing in this Section, or in this Agreement generally, is intended to, or will, modify Employee’s at-will employment relationship with the Employer.
Section 10. Compensation Upon Termination.
(a) Death. If Employee’s employment with the Employer is terminated as a result of Employee’s death, this Agreement and the Employment Period shall terminate without further notice or any action required by the Employer or Employee’s legal representatives. Upon Employee’s death, the Employer shall pay or provide the following to Employee’s designated beneficiary: (i) Employee’s Base Salary due through the Date of Termination; and, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due. Except as set forth herein, the Employer shall have no further obligation to Employee under this Agreement upon Employee’s death.
(b) Disability. If the Employer terminates Employee’s employment with the Employer because of Employee’s Disability, the Employer shall pay or provide the following: (i) Employee’s Base Salary due through the Date of Termination, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due, and (iii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term). Except as set forth herein, the Employer shall have no further obligations to Employee under this Agreement upon Employees Disability.
(c) Termination by the Employer for Cause or Termination by Employee Without Good Reason. If, the Employer terminates Employee’s employment with the Employer for Cause pursuant to Section 9(a)(ii)(B) or Employee terminates Employee’s employment without Good Reason, the Employer shall pay to Employee Employee’s Base Salary due through the Date of Termination and all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, at the time such payments are due, and Employee’s rights with respect to equity or equity-related awards shall be governed by the applicable terms of the related plan and/or separate award agreement.
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(d) Termination by the Employer without Cause or Termination by Employee with Good Reason. If the Employer terminates Employee’s employment with Employer other than for Cause or Disability pursuant to Section 9(a) or if Employee terminates his employment hereunder with Good Reason: (i) the Employer shall pay Employee (A) Employee’s Base Salary due through the Date of Termination, (B) a Pro Rata Bonus at the time other employees of the Employer receive annual bonuses for the calendar year in which the Date of Termination occurs and in all events by March 15 of the calendar year following the year in which such termination occurs, (C) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, in each case at the time such payments are due, (D) a cash lump sum in an amount equal to one (1) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination, payable in a lump sum on the 60th day following the date of termination (ii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term), and (iii) Employee and his covered dependents shall be entitled to continued participation in benefit plans on the same terms and conditions as applicable immediately prior to Employee’s Date of Termination for 18 months; provided that if such continued coverage is not permitted under the terms of such benefit plans, the Employer shall pay Employee an additional, lump sum amount that, on an after-tax basis, is equal to the cost of comparable coverage obtained by Employee, and (E) a cash, lump sum in an amount equal to any unpaid portion of the Signing Bonus and the Deferred Compensation, if any, payable in a lump sum on the 60th day following the date of termination.
(e) Termination Upon a Change in Control. This Section 10(e) shall apply if there is (i) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability), or a resignation by Employee with Good Reason during the two-year period following a Change in Control or (ii) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability) within six (6) months prior to a Change in Control, if the termination was at the request of a third party or otherwise arose in anticipation of the Change in Control. If any such termination occurs, Employee shall receive the payments and benefits set forth in Section 10(d), except that in lieu of the lump-sum payment under Section 10(d)(i)(D), Employee shall receive a cash payment in an amount equal to two (2) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination (without taking into account any reductions which would constitute Good Reason), payable in a lump sum on the 60th day following the date of termination.
(f) Liquidated Damages. The Parties acknowledge and agree that damages which will result to Employee for termination by the Employer of Employee’s employment without Cause or by Employee for Good Cause shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to Employee under Section 10 shall constitute liquidated damages for any such termination. Accordingly, Employee agrees that, except for such other payments and benefits to which Employee may be entitled as expressly provided by the terms of this Agreement or any other applicable benefit plan or under applicable law, such liquidated damages shall be in lieu of all other claims that Employee may make by reason of any such termination of his employment and that, as a condition to receiving the Severance Payments, Employee will execute a release of claims in or substantially in a form provided by the Employer. Within five (5) business days of the Date of Termination, the Employer shall deliver to Employee the appropriate form of release of claims for Employee to execute. The Severance Payments shall be made within three (3) business days of the expiration of the revocation period without the release being revoked and otherwise as they become due.
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(g) No Offset. In the event of termination of his employment, Employee shall be under no obligation to seek other employment and there shall be no offset against amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain. The Employer’s obligation to make any payment pursuant to, and otherwise to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim or other right that the Employer or its affiliates may have against him for any reason.
(h) Section 409A.
(1) Notwithstanding the timing of the payments pursuant to Section 10 of this Agreement, to the extent Employee would otherwise be entitled to a payment during the six months beginning on the Date of Termination that would be subject to the additional tax imposed under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the payment will not be made to Employee and instead will be made to an account established to fund such payments (provided that such funds shall be at all times subject to the creditors of the Employer) and (ii) the payment, together with interest thereon at the rate of “prime” plus 1%, will be paid to Employee on the six-month anniversary of Date of Termination. Similarly, to the extent Employee would otherwise be entitled to any benefit (other than a cash payment) during the six months beginning on the Date of Termination that would be subject to the additional tax under Section 409A of the Code, the benefit will be delayed and will begin being provided (together, if applicable, with an adjustment to compensate Employee for the delay, with such adjustment to be determined in the Employer’s reasonable good faith discretion) on the six month anniversary of the Date of Termination. The Employer will establish the account, as applicable, no later than ten days after Employee’s Date of Termination.
(2) It is the intention of the parties that the payments and benefits to which Employee could become entitled in connection with termination of employment under this Agreement comply with Section 409A of the Code. In the event that the parties determine that any such benefit or right does not so comply, they will negotiate reasonably and in good faith to amend the terms of this Agreement such that it complies (in a manner that attempts to minimize the economic impact of such amendment on Employee and the Employer and its affiliates).
(3) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
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(4) For purposes of compliance with Code Section 409A, (i) all expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee, (ii) any right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(5) For purposes of Code Section 409A, the Employee’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(6) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.
Section 11. Indemnification. During the Employee’s employment with the Employer and thereafter, the Employer agrees to indemnify and hold Employee and Employee’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against Employee that arises out of or relates to Employee’s service as an officer, director or employee, as the case may be, of the Employer, or Employee’s service in any such capacity or similar capacity with an Affiliate of the Employer or other entity at the request of the Employer, both prior to and after the Effective Date, and to promptly advance to Employee or Employee’s heirs or representatives such expenses upon written request with appropriate documentation of such expense upon receipt of an undertaking by Employee or on Employee’s behalf to repay such amount if it shall ultimately be determined that Employee is not entitled to be indemnified by the Employer. The Parties agree and acknowledge that this Section and the Company’s obligations hereunder apply only if and to the extent no other applicable insurance policy provides any coverage or other benefit to the Employee with respect to the claim or proceeding at issue. In that regard, during the Employee’s employment with the Employer and thereafter, the Employer also shall provide Employee with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other Employee officers. If Employee has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which Employee may request indemnity under this provision, Employee will give the Employer prompt written notice thereof; provided that the failure to give such notice shall not affect Employee’s right to indemnification. The Employer shall be entitled to assume the defense of any such proceeding and Employee will use reasonable efforts to cooperate with such defense. To the extent that Employee in good faith determines that there is an actual or potential conflict of interest between the Employer and Employee in connection with the defense of a proceeding, Employee shall so notify the Employer and shall be entitled to separate representation at the Employer’s expense by counsel selected by Employee (provided that the Employer may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Employer’s counsel and minimize the expense of such separate representation to the extent consistent with Employee’s separate defense. This Section shall continue in effect after the termination of Employee’s employment or the termination of this Agreement.
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Section 12. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by facsimile transmission addressed as follows:
If to the Employer:
Southland Holdings, Inc.
1100 Kubota Dr.
Grapevine, TX 76051
Attention: Corporate Secretary and General Counsel
If to Employee:
Address last shown on the Employer’s Records
Each Party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
Section 13. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.
Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the Parties respecting the employment of Employee and supersedes all prior agreements, there being no representations, warranties or commitments except as set forth herein, and the terms of any other agreements and/or Company policies in force with regard to Employee’s post-employment obligations (including any confidentiality or nondisclosure agreements and other restrictive covenants).
Section 15. Survival. It is the express intention and agreement of the Parties hereto that the provisions of Section 8, Section 10, Section 11, Section 12, Section 14, Section 16, Section 17, Section 18, Section 20 and Section 24 hereof and this Section 15 shall survive the termination of employment of Employee. In addition, all obligations of the Employer to make payments to the Employee after Employee’s employment with the Employer ends hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.
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Section 16. Assignment. The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of Employee’s death, the personal representative or legatees or distributees of Employee’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to Employee hereunder and (ii) the rights and obligations of the Employer hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale of all or substantially all of the assets or equity interests of the Employer or similar transaction involving the Employer or a successor corporation.
Section 17. Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the Parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.
Section 18. Amendment: Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the Party against whom enforcement is sought. Neither the waiver by either of the Parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the Parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.
Section 19. Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
Section 20. Governing Law; Venue. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement are governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions that could cause the applications of the laws of any jurisdiction other than the State of Texas. The Parties irrevocably consent to and waive any objection or complaint to the personal jurisdiction of or venue in the state and federal courts located in Dallas County, Texas, for claims related to this Agreement and for any claim for injunctive or other equitable relief arising hereunder.
(a) The Parties further agree that service of process in any such proceeding arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at his or its address as provided in Section 12. Nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Texas.
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(b) WAIVER OF JURY TRIAL. The Parties hereby irrevocably waive their respective rights to trial by jury in any proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement.
Section 21. Representations Regarding Fair Competition. Employee represents, warrants and covenants to the Employer that:
(a) On or prior to the date hereof, Employee has informed the Employer of any judgment, order, agreement or arrangement of which he is currently aware and which may affect his right to enter into this Agreement and to fully perform his duties hereunder;
(b) Employee is knowledgeable and sophisticated as to business matters, and that prior to assenting to the terms of this Agreement or giving the representations and warranties herein, he has been given a reasonable time to review it and has consulted with counsel of his choice;
(c) In entering into this Agreement, Employee is not knowingly breaching or violating any provision of any law or regulation; and,
(d) Employee has not knowingly provided to the Employer, nor been requested by the Employer to provide, any confidential or non-public document or information of a former employer that constitutes or contains any protected trade secret, and will not knowingly use any protected trade secrets of any former employer in the course of his employment hereunder.
Section 22. No Reliance. No person has any authority to make any representation or promise for or on behalf of any Party not set forth in this Agreement. The Parties agree that, in executing this Agreement, they do not and have not relied on any document, representation or statement, whether written or oral, other than those specifically set forth or specifically referenced in this Agreement. Neither Party is relying upon a legal duty, even if one might exist, on the part of the other Party (or such Party’s employees, executives, managers, officers, agents, representatives, or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation. The Parties expressly acknowledge and agree that no lack of information on the part of either Party is a ground for challenging this Agreement. The recitals to this Agreement are incorporated into and made a part of this Agreement for all purposes.
Section 23. Counterparts; Electronic Signature. The Parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one agreement. Either Party may execute this Agreement by facsimile or electronic signature, and the other Parties are entitled to rely upon such facsimile or electronic signature as conclusive evidence that this Agreement has been duly executed by such Party.
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Section 24. Withholding. The Employer may withhold from any benefit payment under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling; provided that any withholding obligation arising in connection with the exercise of an equity holding or stock option or the transfer of equity or stock or other property shall be satisfied through withholding an appropriate number of shares of stock or appropriate amount of such other property.
Section 25. Attorneys’ Fees. Should a Party sue another Party in court for a breach of any provision of this Agreement, the prevailing Party, as determined by a court of competent jurisdiction, is entitled to recover its reasonable attorneys’ fees, costs of court and other expenses of litigation, in addition to any other remedy.
Section 26. Definitions.
“Accrued Benefits” means (i) any compensation deferred by Employee prior to the Date of Termination and not paid by the Employer or otherwise specifically addressed by this Agreement; (ii) any amounts or benefits owing to Employee or to Employee’s beneficiaries under the then applicable benefit plans of the Employer; (iii) any amounts owing to Employee for reimbursement of expenses properly incurred by Employee prior to the Date of Termination and which are reimbursable in accordance with Section 7; and (iv) any other benefits or amounts due and owing to Employee under the terms of any plan, program or arrangement of the Employer.
“Affiliate” means any entity controlled by, in control of, or under common control with the Employer, including Employer’s parent, subsidiaries, affiliates, divisions and departments, and any joint venture partners (if any).
“Cause” means: (i) Employee’s breach of any of Employee’s material obligations under any agreement with the Employer, including this Agreement and any other nondisclosure/confidentiality agreement; (ii) Employee’s willful failure or refusal to perform Employee’s duties or responsibilities for the Employer, consistent with this Agreement (other than as a result of Employee’s death / Disability); (iii) Employee’s willful violation of other Employer policies or procedures (including, without limitation, any anti-harassment, workplace violence, and EEO policies), and provided that a mere unsubstantiated accusation of harassment will not rise to the level of willful violation absent an investigation and substantiated of accusation; (iv) Employee’s conviction of, or plea of guilty or nolo contendere to, (x) a felony or (y) any crime which is, or could reasonably be expected to be, injurious or harmful to the Employer (except any traffic offenses); (v) Employee’s fraud, embezzlement, bribery, theft, dishonesty or other misconduct that is, or could reasonably be expected to be, injurious or harmful to the Employer; (vi) Employee’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or property of the Employer’s (including, without limitation, your unauthorized use or disclosure of the Employer’s Confidential Information, trade secrets, or intellectual property); or (vii) Employee’s use of illegal drugs, or abuse of alcohol or prescription drugs, that substantially impairs Employee’s ability to perform Employee’s duties or responsibilities for the Employer; provided that, solely with respect clause (ii) above, Employee’s failure or refusal to perform Employee’s duties or responsibilities for the Employer, which is susceptible to cure, shall not be deemed “Cause” for termination for purposes of the amounts in Sections 10(d) and 10(e), unless the Employer first gives Employee written notice of its intention to terminate for “Cause” pursuant to clause (ii) and the grounds for such termination, and Employee fails or refuses to cure such Cause within thirty (30) business days following receipt of such notice. For purposes of this definition of “Cause,” no act or failure to act, on the part of Employee, shall be considered “willful” unless it is done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employee’s action or omission was in the best interests of the Employer.
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“Change in Control” means (i) a merger of the Employer with another entity, a consolidation involving the Employer, or the sale of all or substantially all of the assets of the Employer to another entity if, in any such case, the holders of equity securities or interests of the Employer (and their respective affiliates) immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities or interests of the resulting entity entitled to greater than 50% of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, (ii) the dissolution or liquidation of the Employer, (iii) when any person or entity, including a group as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the Employer’s outstanding equity securities or interests, or (iv) as a result of or in connection with a contested election of the Employer’s board of directors, the persons who were members of the Employer’s board of directors immediately before such election shall cease to constitute a majority of the Employer’s board of directors after such election. For purposes of the preceding sentence, “resulting entity” in the context of a transaction or event that is a merger or consolidation shall mean the surviving entity unless the surviving entity is a subsidiary of another entity and the holders of common stock of the Employer receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity.
“Confidential Information” means information constituting trade secrets or proprietary information belonging to or regarding the Employer or any of its Affiliates or other confidential financial information, operating budgets, strategic plans or research or estimating methods, personnel data, customer and client contacts, projects or plans, or nonpublic information regarding the Employer or any of its Affiliates. Without limiting the foregoing, “Confidential Information” shall include, but shall not be limited to, any of the following information relating to the Employer: (i) information regarding the Employer’s business proposals; (ii) manner of the Employer’s operations, and methods of selling or pricing any products or services; (iii) the identity, contact information, preferences, requirements, and quality of persons or entities actually conducting or considering conducting business with the Employer, and any information in any form relating to such persons or entities and their relationship or dealings with the Employer; (iv) any intellectual property or trade secret of or concerning any business operation or any business relationship of the Employer; (v) computer databases, sourcecode, software programs and information relating to the nature of the hardware or software and how said hardware or software are used in combination or alone; (vi) information concerning personnel, confidential financial information, customer or customer prospect information, information concerning customers, customer lists and data, methods and formulas for estimating costs and setting prices, engineering design standards, testing procedures, research results (such as marketing surveys, programming trials or product trials), cost data (such as billing, equipment and programming cost projection models), compensation information and models, business or marketing plans or strategies, deal or business terms, budgets, supplier and vendor names and contact information (as well as preferences, requirements, and quality), programming operations, product names, information on proposed acquisitions or dispositions, actual performance compared to budgeted performance, long-range plans, internal financial information (including but not limited to financial and operating results for certain offices, divisions, departments, and key market areas that are not disclosed to the public in such form), results of internal analyses, computer programs and programming information, techniques and designs, and trade secrets; (vii) information concerning the Employer’s employees, officers, directors and shareholders (including contact information, salaries, wages, incentives, bonuses, incentives, and benefits, and quality); and (viii) any other information that is designated or marked “confidential,” “private,” “sensitive,” or similar labels. For purposes of the preceding sentence, “Employer” shall include the Employer and any and all of its Affiliates.
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“Date of Termination” means: (i) if Employee’s employment is terminated by Employee’s death, the date of Employee’s death; (ii) if Employee’s employment is terminated because of Employee’s Disability pursuant to Section 9(a)(ii)(A), 30 days after Notice of Termination, provided that Employee shall not have returned to the performance of Employee’s duties on a full-time basis during such 30-day period; (iii) if Employee’s employment is terminated by the Employer pursuant to Section 9(a)(ii)(B) or by Employee pursuant to Section 9(a)(ii)(B), the date specified in the Notice of Termination; or (iv) if Employee’s employment is terminated during the Employment Period other than pursuant to Section 9(a), the date on which Notice of Termination is given.
“Good Reason” means the occurrence of any of the following without Employee’s prior written consent: (i) a reduction in Employee’s Base Salary of ten percent (10%) or more (other than an across-the-board reduction, in whatever amount or percentage, approved by the Employer that applies on similar terms to other Employees of similar management level); or (ii) a materially adverse change in Employee’s authority, duties, or responsibilities (other than an across-the-board change, in whatever form, approved by the Employer that applies on similar terms to other Employees of similar management-level); or (iii) Employee is required by Employer to conduct themselves in violation of applicable law, Company policies or procedures, or any ethical or professional standards applicable to Employee’s performance of their duties. Notwithstanding the foregoing, in order to resign for Good Reason, Employee must (1) provide written notice to the Employer within thirty (30) days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Employee’s resignation, (2) allow the Employer at least thirty (30) days, or in the case of item (iii) no later than the next applicable SEC deadline for disclosure or filing, from receipt of such written notice to cure such event or, if applicable, provide Employee with written evidence or documentation that the acts or events claimed to constitute Good Reason did not occur or otherwise do not constitute Good Reason as described in this Agreement, and (3) if such event is not reasonably cured within such period, resign not later than seven (7) days after the expiration of the cure period by a written notice which shall state that Employee is exercising the right to terminate for Good Reason.
“Pro Rata Bonus” means an amount equal to the product of (i) the Annual Bonus that would have been earned by Employee for the calendar year that includes the Date of Termination if his employment had not terminated and (ii) a fraction the numerator of which is the number of days that have elapsed as of the Date of Termination during the calendar year that includes the Date of Termination and the denominator of which is 365.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have caused this Agreement to be duly executed and delivered on their behalf, with all Parties knowingly, voluntarily entering this Agreement with the specific intent to be bound by the same.
LEGATO MERGER CORP. II | ||
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer | |
EMPLOYEE | ||
By: | /s/ Walter “Tim” Winn | |
Name: | Walter “Tim” Winn |
[Signature Page to Employment Agreement]
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Exhibit 10.6.3
EMPLOYMENT AGREEMENT
BETWEEN
Legato Merger Corp. II
AND
Rudy V. Renda
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between Legato Merger Corp. II, a Delaware corporation (the “Employer”), and Rudy V. Renda (the “Employee”), effective as of the Closing Date (as defined in that certain Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Employer, Legato Merger Sub Inc., a Delaware corporation, and Southland Holdings LLC, a Texas limited liability company) (the “Effective Date”). On the Effective Date, the Employer will change its name to “Southland Holdings, Inc.”
WHEREAS, the Employer desires to employ the Employee, and the Employee desires to accept such employment, on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Employer will provide to Employee, in the course and scope of Employee’s employment with the Employer and in the performance of Employee’s duties for the Employer, highly confidential, sensitive, and proprietary information, as well as intellectual property and trade secrets, belonging to the Employer, regarding, among other things, the Employer and its employees and contractors, methods and strategies of production and service, finances and other financial information, clients, customers, suppliers, vendors, business partners, and business plans and strategies and that such access will be subject to the terms and conditions of this Agreement;
WHEREAS, the Employee understands that execution of this Agreement is a condition precedent to commencing employment with the Employer, to being paid compensation by the Employer under this Agreement, and to receiving any Confidential Information (as defined herein) belonging to the Employer, as well as to receiving other valuable and specialized training; and,
NOW, THEREFORE, in consideration of the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
Section 1. Effectiveness. Employee’s employment with the Employer shall commence, and this Agreement shall become effective, on the Effective Date.
Section 2. Employment Agreement. On the terms and conditions set forth in this Agreement, the Employer agrees to employ Employee and Employee agrees to be employed by the Employer for the Employment Period set forth in Section 3 and in the position and with the duties set forth in Section 4. Terms used herein with initial capitalization not otherwise defined are defined in Section 26.
Section 3. At-Will Employment. Subject to the terms and conditions set forth in this Agreement, including Section 9 below, Employee is employed on an at-will basis, meaning that either Employee or the Employer may terminate the employment relationship at any time for any reason, with or without notice. The Parties acknowledge and agree that nothing in this Agreement will be interpreted or construed to alter this at-will employment relationship or to confer on the Employee any right with respect to continued employment by the Employer for any specified duration.
Section 4. Position and Duties.
(a) During the Employee’s employment with the Employer, Employee shall serve as Executive Vice President – Strategy and Special Projects and Co-Chief Operating Officer of the Employer. In such capacity, Employee shall report directly to the President and Chief Executive Officer. Except for absences or leave permitted or excused under the Company’s policies and procedures or under applicable law, the Employee will, throughout Employee’s employment, devote Employee’s full working time, attention, and skill set to Employee’s duties and will perform Employee’s duties loyally and faithfully, and to the best of Employee’s ability, in furtherance of the business affairs and activities of the Employer.
(b) The employment relationship between the Employer and the Employee is governed by, and the Employee will at all times be subject to, comply with, observe, and carry out: (1) this Agreement; (2) any other confidentiality and nondisclosure agreement or restrictive covenant which the Company may require the Employee to execute from time to time; (3) the Employer’s rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including any employee handbooks; and, (4) such rules, regulations, policies, codes of ethics and/or conduct, directions, and restrictions as the Employer may from time to time establish or approve for employees of the Employer, including any employee handbooks. The Parties acknowledge and agree that this Agreement governs their relationship to the extent there are any conflicts between this Agreement and any Employer rules, regulations, policies, plans, programs, procedures, codes of ethics and/or conduct, directions, instructions, orders, and restrictions, including any employee handbooks.
Section 5. Place of Performance. During Employee’s employment with the Employer, Employee shall be based at the Employer’s headquarters in Grapevine, TX. Employee acknowledges and agrees that Employee’s duties may require Employee to engage in reasonable business travel from time to time during the course and scope of Employee’s employment with the Employer.
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Section 6. Compensation and Benefits.
(a) Base Salary. During Employee’s employment with the Employer, the Employer shall pay to Employee a base salary of Forty One Thousand Six Hundred Sixty Seven Dollars and No Cents ($41,667.00) per month, which annualizes to Five Hundred Thousand and No Cents ($500,000.00), less applicable and authorized taxes, deductions, withholdings and payable in accordance with the Company’s regular payroll practices (the “Base Salary”). The Base Salary may be reviewed for increase by the Employer, annually, and may be increased in the sole discretion of the Employer; and any such adjusted Base Salary shall constitute the “Base Salary” for purposes of this Agreement.
(b) Discretionary Annual Bonus. During Employee’s employment with the Employer, Employee is eligible to receive an annual cash performance bonus (an “Annual Bonus”) during each calendar year that ends during the Employment Period, to the extent earned based on the performance of Employee and the Employer and as determined, calculated and paid by the Employer in its sole discretion. Employee’s Annual Bonus for a calendar year is targeted, but not guaranteed, to be between eighty percent (80%) and two hundred percent (200%) of Employee’s Base Salary for that particular year, with greater or lesser amounts (including zero) paid based on Employee’s and Employer’s performance and as determined, calculated, and paid in the Employer’s sole discretion. Annual Bonuses will be paid around December 31st of a given year, but in no event later than March 15 of the following calendar year. If Employee ceases to be employed by the Employer on the established date of payment of the Annual Bonus at issue, Employee and the Employer acknowledge and agree that Employee is not eligible to receive, and will not receive, an Annual Bonus, or any portion thereof.
(c) Signing Bonus. Reserved.
(d) Equity. During Employee’s employment with the Employer, Employee is eligible to receive certain equity holdings in the Employer in its sole discretion. Any equity awarded by the Employer to Employee will be governed by the applicable terms and conditions of any Employer equity plan, including any modifications or amendments, that may be established, approved, and may be in effect from time to time. Such Employer equity plan is subject to annual review by the Employer and may be modified or amended from time to time. Employee’s election to participate in an Employer equity plan will be subject to a separate award agreement, which will outline the specifics of the Employee’s participation, including, but not limited to, Employee’s purchase and sale or resale rights, vesting schedule, conditions pertaining to forfeiture of such equity, and the Employer’s buyback rights.
(e) Founder Equity Sale Limitation. During Employee’s employment with the Employer, Employee shall sell no more than twenty percent (20%) of its total, aggregate equity holdings in the Employer or any of Employer’s Affiliates during any calendar year.
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(f) Perquisites.
(1) During Employee’s employment with the Employer (and in addition to the general benefits outlined in Section 6(h) below), Employee shall be entitled to (i) to participate in all fringe benefits and perquisites made available generally to senior Employees of the Employer, such participation to be at levels, and on terms and conditions, that are commensurate with Employee’s positions and responsibilities at the Employer, and (ii) to receive such additional fringe benefits and perquisites as the Employer may, in its sole and absolute discretion, from time to time provide.
(2) In addition, during Employee’s employment with the Employer, Employee shall be entitled to receive an automobile allowance of One Thousand Five Hundred Dollars and no Cents ($1,500.00) per month, less applicable and authorized taxes, deductions, withholdings, along with fuel cards and toll tags. The Employee shall be responsible for maintenance and repairs of such automobile during Employee’s employment with the Employer.
(3) Reserved.
(4) Reserved.
(5) Further, during Employee’s employment with the Employer, Employee is eligible to receive up to, but not exceeding, Sixty Thousand Dollars and no Cents ($60,000.00) per calendar year, less applicable and authorized taxes, deductions, withholdings, for approved miscellaneous perquisites including, but not limited to, personal travel on a company plane or private charter, preventative health care services, private security services, country club membership, school contributions or sporting events, or other perquisites of customary nature for Employee’s position. In order to receive any amount in this Section 6(f)(5), Employee must submit a written request for the miscellaneous perquisite for the Employer’s review and approval in advance of the same. Any amount of additional compensation in this Section 6(f)(5) shall not be reduced by any specific perquisites outlined in Sections 6(f)(3) or Section 6(f)(4) above, if any.
(g) Vacation / Paid Time Off. During Employee’s employment with the Employer, Employee is eligible for certain paid time off (“PTO”) commensurate with Employee’s position and in no case less than what is established for other senior Employer employees of Employer, provided that Employee is not eligible to, and will not, accrue more than fifteen (15) days of PTO in any given calendar year during Employee’s employment or be paid any amount for PTO upon termination. Further, any unused PTO does not carry over from year to year during Employee’s employment. Employee may request to take and schedule any PTO pursuant to and in accordance with Employer policies, practices, and procedures applicable to the same, subject to the business needs of the Employer and provided that Employee otherwise complies with this Agreement.
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(h) Benefits. During Employee’s employment with the Employer, Employee will be entitled to participate in all standard Employer benefits including holidays, pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements that may from time to time be made available generally to other senior Employees of the Employer, all to the extent Employee is eligible under the terms of such plans, programs and arrangements. The Employer may change or terminate the benefits it offers to employees from time to time, and this Agreement does not restrict, limit, or preclude Employer’s right to make such changes or terminate such benefits, except that in no case will other Employer employees of the same level as Employee be offered benefits greater than was may be offered to Employee.
(i) Relocation. Reserved.
(j) Reasonable Attorneys’ Fees Incurred with Respect to This Agreement. During Employee’s employment with the Employer, Employee is eligible to receive a one-time, lump sum reimbursement of up to, but not exceeding, Two Thousand Dollars and no Cents ($2,000.00), less applicable and authorized taxes, deductions, withholdings for Employee’s reasonable and necessary attorneys’ fees incurred in connection with the review, negotiation and execution of this Agreement.
(k) Clawback of Certain Incentive Compensation. Notwithstanding any other provision herein to the contrary, any “incentive-based compensation” within the meaning of Section 10D of the Securities Exchange Act of 1934, as amended (the “Act”) shall be subject to clawback by the Employer in the manner required by the Employer’s recoupment policy as in effect from time to time and in the manner required by Section 10D(b)(2) of the Act, as determined by the applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
Section 7. Expenses. During Employee’s employment with the Employer, Employee is eligible seek reimbursement for all reasonable and necessary business expenses incurred by Employee in the course and scope of Employee’s duties on Company’s behalf under this Agreement, provided that such expenses are consistent with the Company’s policies, plans, and procedures in effect from time to time with respect to the same. Employee agrees that any reimbursement for reasonable and necessary business expenses is subject to and must be properly and timely submitted in accordance with the Company’s policies, plans, and procedures with respect to reporting, documentation, and payment of such business expenses.
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Section 8. Confidentiality and Non-Disclosure Agreement. The Employer and Employee acknowledge and agree that during Employee’s employment with the Employer, Employee will have access to and may assist in developing Confidential Information and will occupy a position of trust and confidence with respect to the Employer’s affairs and business and the affairs and business of its Affiliates, including the business relationships and goodwill of the Employer and its Affiliates. Employee agrees that the following obligations are necessary to preserve the confidential and proprietary nature of Confidential Information and to protect the Employer and its Affiliates against harmful solicitation of employees and customers, harmful competition and other actions by Employee that would result in serious adverse consequences for the Employer and any of its Affiliates:
(a) Non-Disclosure. During and after Employee’s employment with the Employer, Employee will not knowingly use, disclose or transfer any Confidential Information other than as specifically and expressly authorized in writing by the Employer or as reasonably necessary for the exercise of Employee’s job duties in the best interests of the Employer and its Affiliates. Anything herein to the contrary notwithstanding, the provisions of this Section 8(a) shall not apply (i) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Employee to disclose or make accessible any information; (ii) to the extent necessary in connection with any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (iii) as to information that becomes generally known to the public or within the relevant trade or industry other than due to Employee’s violation of this Section 8(a); or (iv) as to information that is or becomes available to Employee on a non-confidential basis from a source that is entitled to disclose it to Employee. Further, Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Employee files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee and/or Employee’s attorney (x) files any document containing the trade secret under seal; and, (y) does not disclose the trade secret, except pursuant to court order.
(b) Intellectual Property. Employee agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Employer’s business, including without limitation information of a technical or business nature such as ideas, discoveries, designs, inventions, improvements, trade secrets, know-how, software, writings and other works of authorship, computer programs, financial figures, client or customer rosters/lists and data, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of research and development of the Employer and its Affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Employee alone or jointly with others during Employee’s employment with the Employer is the property of and belong exclusively to the Employer. Employee will promptly and fully disclose to the Employer the origination or development by Employee of any such material and will provide the Employer with any information that it may reasonably request about such material. Either during or subsequent to Employee’s employment, upon the request and at the expense of the Employer or its nominee, and for no remuneration other than or in addition to that due Employee under this Agreement, but at no expense to Employee, Employee will execute, acknowledge, and deliver to the Employer or its attorneys any and all instruments which, in the judgment of the Employer or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Employer adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
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(c) Materials; Return of Employer Property. Employee will not remove any Confidential Information or any other property of the Employer or any of its Affiliates from the Employer’s premises or make copies of such materials except for normal and customary use in the Employer’s business. Employee will return to the Employer all Confidential Information and copies thereof and all other property of the Employer or any of its Affiliates at any time upon the request of the Employer and in any event promptly after the end of Employee’s employment. Anything to the contrary notwithstanding, nothing in this Section 8 shall prevent Employee from retaining a home computer, papers and other materials of a personal nature, including diaries, calendars and information relating to his compensation or relating to reimbursement of expenses, information that he reasonably believes may be needed for tax purposes, and copies of plans, programs and agreements relating to his employment, provided that Employee shall identify in writing all such materials for the Employer and obtain Employer’s approval of the same prior to copying or removing them from any Employer electronic device.
(d) Covenant Not to Solicit Employer’s Employees, Contractors, or Suppliers or Vendors. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly, solicit, entice, encourage, persuade or induce any Company current or prospective employee to leave his or her employment with the Company or refrain from seeking employment by the Company, any current or prospective contractor of the Company to cease providing services to or for the Company or refrain from providing services to or for the Company, or any current or prospective supplier or vendor of the Company to cease doing business with the Company or refrain from doing business with the Company, to the extent Employee had a business relationship with the current or prospective employee, contractor, vendor, or supplier at any time during Employee’s employment or about which Employee had Confidential Information.
(e) Covenant Not to Solicit Employer’s Clients and Customers. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training to Employee, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly solicit, call-on, conduct business with, sell products or services to, or otherwise provide assistance to the Employer’s current or prospective clients or customers with whom Employee had a business relationship during Employee’s employment with the Employer or about which Employee had Confidential Information.
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(f) Nondisparagement. The Parties acknowledge and agree that the business reputation and goodwill of the Employer and its Affiliates and each of their former, current, and prospective clients, customers, officers, directors, employees, members, partners, managers, owners, agents, or representatives are valuable assets critical to the Employer’s and its Affiliates’ goodwill and business relationships and to the continued growth, sustainability and success of the Employer and its Affiliates. Accordingly, during Employee’s employment with the Employer and thereafter, Employee will not make negative comments about or otherwise disparage the Employer or any of its Affiliates; former, current, or prospective Employer or any Employer Affiliate clients or customers; or any of their respective former, current, or prospective officers, directors, employees, members, partners, managers, owners, agents, or representatives, or their respective products or services. Notwithstanding the restrictions imposed in this paragraph, Employee does not violate the terms of this Section by making any truthful statement about the Employer or any of its Affiliates required to be given pursuant to a subpoena or other compulsory process in a court or arbitration proceeding, and provided that Employee otherwise complies with this Agreement.
(g) Reasonableness. In signing this Agreement, Employee represents to and assures the Employer that Employee has carefully read and considered all of the terms and conditions of this Agreement, including, without limitation, the restraints imposed under this Section. Employee acknowledges and agrees that these restraints are necessary for the reasonable and proper protection of the Employer and its Confidential Information, including its trade secrets, and that each and every one of the restraints is reasonable, and that these restraints, individually or in the aggregate, do and would not prevent Employee from obtaining other suitable employment during the period in which Employee is bound by the restraints. Employee acknowledges and agrees that each of these covenants has a unique, special, substantial, and immeasurable value to the Employer and that Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. It is also agreed that the Employer and/or its Affiliates have the right to enforce all of Employee’s obligations to that individual or entity under this Agreement, including, without limitation, those obligations set forth in this Section.
(h) Tolling Provision and Reformation. The Parties acknowledge and agree that the period for the restrictions set forth in this Section will be tolled on a day-for-day basis for each day during which Employee participates in any activity in violation of the restrictions as determined by a court of competent jurisdiction, as well as for each day during which a matter is pending in any court for the purpose of enforcing the restrictions set forth in this Section, provided that such sections are determined by a court of competent jurisdiction to be enforceable in whole or in part or as reformed. In the event any court determines that the time and scope contained in any covenant set forth in this Section is overly broad or unreasonable, the court will reform such provision to the extent necessary to make such provision reasonable. In the event a bond is required to secure temporary or preliminary injunctive restraint or relief, the Parties acknowledge and agree that a bond in the amount of $500.00 is sufficient security for the pendency of the injunctive restraint or relief.
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(i) Injunctive Relief. Employee acknowledges and agrees that Employee’s breach or threatened breach of any of the provisions of this Section would result in irreparable injury to the Employer for which monetary damages would not provide an adequate remedy and that the amount of such damages would be difficult to determine. Therefore, if Employee breaches or threatens to breach any provision of this Section, the Employer and/or its Affiliates have the right and remedy to seek specific performance or other injunctive relief, in a court of competent jurisdiction located in or with jurisdiction over Dallas, TX, in addition to any other available legal or equitable remedies. In addition to the foregoing, the Employer and/or its Affiliates may seek to recover by appropriate proceedings or action the amount of any actual or other available damages suffered by the Employer and/or its Affiliates by any failure, refusal, or neglect of Employee to perform Employee’s obligations under this Agreement, together with any and all costs and expenses incurred by the Employer and/or its Affiliates, including reasonable attorneys’ fees, in seeking such relief. The Parties acknowledge and agree that the remedies provided in this Section, and in this Agreement generally, are deemed cumulative and the exercise of one does not preclude the exercise of any other remedy at law or in equity for the same event or any other event.
(j) Cooperation. During the Employee’s employment with the Employer and for three (3) years thereafter Employee will, upon the Employer’s reasonable request: (a) cooperate with the Employer in connection with any matter that arose during Employee’s employment and that relates to the business or operations of the Employer or any of its Affiliates, or of which Employee may have any knowledge or involvement; and (b) consult with and provide information to the Employer and its representatives concerning such matters. Such cooperation shall be rendered at reasonable times and places. Nothing in this Agreement shall be construed or interpreted as requiring Employee to provide any testimony or affidavit that is not accurate or truthful.
(k) Protected Communications. Nothing in this Agreement will or is intended to prohibit any communication by any Party permitted by any applicable law, including the National Labor Relations Act, or any communication by any Party with any government agency, including (without limitation) the Equal Employment Opportunity Commission, the Texas Workforce Commission, the United States Securities and Exchange Commission, or the National Labor Relations Board with respect to any possible violation by the Employer or any of its Affiliate of any laws, rules, or regulations.
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Section 9. Termination of Employment.
(a) Permitted Terminations. Employee’s employment hereunder may be terminated during the Employment Period under the following circumstances:
(1) Death. The Employee’s employment hereunder shall terminate upon Employee’s death;
(2) By the Employer. The Employer may terminate Employee’s employment with the Employer:
A. Disability. If Employee has been substantially unable to perform Employee’s material job duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for 180 consecutive days or 270 days in any 24-month period (a “Disability”) (provided, that until such termination, Employee shall continue to receive his compensation and benefits hereunder, reduced by any benefits payable to Employee under any disability insurance policy or plan applicable to Employee); or
B. Cause. With or without Cause; and,
(3) By Employee. Employee may terminate Employee’s employment with the Employer with or without Good Reason.
(b) Termination. Any termination of Employee’s employment by the Employer or Employee (other than because of Employee’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any; and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated. Termination of Employee’s employment shall take effect on the Date of Termination, after which Employee shall not be considered and may not hold himself or herself as an officer, director, manager, employee, contractor, representative, or agent of the Employer.
(c) Dispute as to a Disability. Employee agrees, in the event of any dispute under Section 9(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer, to submit to a physical examination by a licensed physician selected by mutual consent of the Employer and Employee (which shall not unreasonably be withheld), the cost of such examination to be paid by the Employer. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. This Section shall be interpreted and applied so as to comply with the provisions of the Americans with Disabilities Act and any applicable state or local laws.
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(d) Nothing in this Section, or in this Agreement generally, is intended to, or will, modify Employee’s at-will employment relationship with the Employer.
Section 10. Compensation Upon Termination.
(a) Death. If Employee’s employment with the Employer is terminated as a result of Employee’s death, this Agreement and the Employment Period shall terminate without further notice or any action required by the Employer or Employee’s legal representatives. Upon Employee’s death, the Employer shall pay or provide the following to Employee’s designated beneficiary: (i) Employee’s Base Salary due through the Date of Termination; and, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due. Except as set forth herein, the Employer shall have no further obligation to Employee under this Agreement upon Employee’s death.
(b) Disability. If the Employer terminates Employee’s employment with the Employer because of Employee’s Disability, the Employer shall pay or provide the following: (i) Employee’s Base Salary due through the Date of Termination, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due, and (iii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term). Except as set forth herein, the Employer shall have no further obligations to Employee under this Agreement upon Employees Disability.
(c) Termination by the Employer for Cause or Termination by Employee Without Good Reason. If, the Employer terminates Employee’s employment with the Employer for Cause pursuant to Section 9(a)(ii)(B) or Employee terminates Employee’s employment without Good Reason, the Employer shall pay to Employee Employee’s Base Salary due through the Date of Termination and all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, at the time such payments are due, and Employee’s rights with respect to equity or equity-related awards shall be governed by the applicable terms of the related plan and/or separate award agreement.
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(d) Termination by the Employer without Cause or Termination by Employee with Good Reason. If the Employer terminates Employee’s employment with Employer other than for Cause or Disability pursuant to Section 9(a) or if Employee terminates his employment hereunder with Good Reason: (i) the Employer shall pay Employee (A) Employee’s Base Salary due through the Date of Termination, (B) a Pro Rata Bonus at the time other employees of the Employer receive annual bonuses for the calendar year in which the Date of Termination occurs and in all events by March 15 of the calendar year following the year in which such termination occurs, (C) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, in each case at the time such payments are due, (D) a cash lump sum in an amount equal to one (1) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination, payable in a lump sum on the 60th day following the date of termination (ii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term), and (iii) Employee and his covered dependents shall be entitled to continued participation in benefit plans on the same terms and conditions as applicable immediately prior to Employee’s Date of Termination for 18 months; provided that if such continued coverage is not permitted under the terms of such benefit plans, the Employer shall pay Employee an additional, lump sum amount that, on an after-tax basis, is equal to the cost of comparable coverage obtained by Employee, and (E) a cash, lump sum in an amount equal to any unpaid portion of the Signing Bonus and the Deferred Compensation, if any, payable in a lump sum on the 60th day following the date of termination.
(e) Termination Upon a Change in Control. This Section 10(e) shall apply if there is (i) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability), or a resignation by Employee with Good Reason during the two-year period following a Change in Control or (ii) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability) within six (6) months prior to a Change in Control, if the termination was at the request of a third party or otherwise arose in anticipation of the Change in Control. If any such termination occurs, Employee shall receive the payments and benefits set forth in Section 10(d), except that in lieu of the lump-sum payment under Section 10(d)(i)(D), Employee shall receive a cash payment in an amount equal to two (2) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination (without taking into account any reductions which would constitute Good Reason), payable in a lump sum on the 60th day following the date of termination.
(f) Liquidated Damages. The Parties acknowledge and agree that damages which will result to Employee for termination by the Employer of Employee’s employment without Cause or by Employee for Good Cause shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to Employee under Section 10 shall constitute liquidated damages for any such termination. Accordingly, Employee agrees that, except for such other payments and benefits to which Employee may be entitled as expressly provided by the terms of this Agreement or any other applicable benefit plan or under applicable law, such liquidated damages shall be in lieu of all other claims that Employee may make by reason of any such termination of his employment and that, as a condition to receiving the Severance Payments, Employee will execute a release of claims in or substantially in a form provided by the Employer. Within five (5) business days of the Date of Termination, the Employer shall deliver to Employee the appropriate form of release of claims for Employee to execute. The Severance Payments shall be made within three (3) business days of the expiration of the revocation period without the release being revoked and otherwise as they become due.
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(g) No Offset. In the event of termination of his employment, Employee shall be under no obligation to seek other employment and there shall be no offset against amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain. The Employer’s obligation to make any payment pursuant to, and otherwise to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim or other right that the Employer or its affiliates may have against him for any reason.
(h) Section 409A.
(1) Notwithstanding the timing of the payments pursuant to Section 10 of this Agreement, to the extent Employee would otherwise be entitled to a payment during the six months beginning on the Date of Termination that would be subject to the additional tax imposed under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the payment will not be made to Employee and instead will be made to an account established to fund such payments (provided that such funds shall be at all times subject to the creditors of the Employer) and (ii) the payment, together with interest thereon at the rate of “prime” plus 1%, will be paid to Employee on the six-month anniversary of Date of Termination. Similarly, to the extent Employee would otherwise be entitled to any benefit (other than a cash payment) during the six months beginning on the Date of Termination that would be subject to the additional tax under Section 409A of the Code, the benefit will be delayed and will begin being provided (together, if applicable, with an adjustment to compensate Employee for the delay, with such adjustment to be determined in the Employer’s reasonable good faith discretion) on the six month anniversary of the Date of Termination. The Employer will establish the account, as applicable, no later than ten days after Employee’s Date of Termination.
(2) It is the intention of the parties that the payments and benefits to which Employee could become entitled in connection with termination of employment under this Agreement comply with Section 409A of the Code. In the event that the parties determine that any such benefit or right does not so comply, they will negotiate reasonably and in good faith to amend the terms of this Agreement such that it complies (in a manner that attempts to minimize the economic impact of such amendment on Employee and the Employer and its affiliates).
(3) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
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(4) For purposes of compliance with Code Section 409A, (i) all expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee, (ii) any right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(5) For purposes of Code Section 409A, the Employee’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(6) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.
Section 11. Indemnification. During the Employee’s employment with the Employer and thereafter, the Employer agrees to indemnify and hold Employee and Employee’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against Employee that arises out of or relates to Employee’s service as an officer, director or employee, as the case may be, of the Employer, or Employee’s service in any such capacity or similar capacity with an Affiliate of the Employer or other entity at the request of the Employer, both prior to and after the Effective Date, and to promptly advance to Employee or Employee’s heirs or representatives such expenses upon written request with appropriate documentation of such expense upon receipt of an undertaking by Employee or on Employee’s behalf to repay such amount if it shall ultimately be determined that Employee is not entitled to be indemnified by the Employer. The Parties agree and acknowledge that this Section and the Company’s obligations hereunder apply only if and to the extent no other applicable insurance policy provides any coverage or other benefit to the Employee with respect to the claim or proceeding at issue. In that regard, during the Employee’s employment with the Employer and thereafter, the Employer also shall provide Employee with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other Employee officers. If Employee has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which Employee may request indemnity under this provision, Employee will give the Employer prompt written notice thereof; provided that the failure to give such notice shall not affect Employee’s right to indemnification. The Employer shall be entitled to assume the defense of any such proceeding and Employee will use reasonable efforts to cooperate with such defense. To the extent that Employee in good faith determines that there is an actual or potential conflict of interest between the Employer and Employee in connection with the defense of a proceeding, Employee shall so notify the Employer and shall be entitled to separate representation at the Employer’s expense by counsel selected by Employee (provided that the Employer may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Employer’s counsel and minimize the expense of such separate representation to the extent consistent with Employee’s separate defense. This Section shall continue in effect after the termination of Employee’s employment or the termination of this Agreement.
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Section 12. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by facsimile transmission addressed as follows:
If to the Employer:
Southland Holdings, Inc.
1100 Kubota Dr.
Grapevine, TX 76051
Attention: Corporate Secretary and General Counsel
If to Employee:
Address last shown on the Employer’s Records
Each Party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
Section 13. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.
Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the Parties respecting the employment of Employee and supersedes all prior agreements, there being no representations, warranties or commitments except as set forth herein, and the terms of any other agreements and/or Company policies in force with regard to Employee’s post-employment obligations (including any confidentiality or nondisclosure agreements and other restrictive covenants).
Section 15. Survival. It is the express intention and agreement of the Parties hereto that the provisions of Section 8, Section 10, Section 11, Section 12, Section 14, Section 16, Section 17, Section 18, Section 20 and Section 24 hereof and this Section 15 shall survive the termination of employment of Employee. In addition, all obligations of the Employer to make payments to the Employee after Employee’s employment with the Employer ends hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.
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Section 16. Assignment. The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of Employee’s death, the personal representative or legatees or distributees of Employee’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to Employee hereunder and (ii) the rights and obligations of the Employer hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale of all or substantially all of the assets or equity interests of the Employer or similar transaction involving the Employer or a successor corporation.
Section 17. Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the Parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.
Section 18. Amendment: Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the Party against whom enforcement is sought. Neither the waiver by either of the Parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the Parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.
Section 19. Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
Section 20. Governing Law; Venue. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement are governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions that could cause the applications of the laws of any jurisdiction other than the State of Texas. The Parties irrevocably consent to and waive any objection or complaint to the personal jurisdiction of or venue in the state and federal courts located in Dallas County, Texas, for claims related to this Agreement and for any claim for injunctive or other equitable relief arising hereunder.
(a) The Parties further agree that service of process in any such proceeding arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at his or its address as provided in Section 12. Nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Texas.
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(b) WAIVER OF JURY TRIAL. The Parties hereby irrevocably waive their respective rights to trial by jury in any proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement.
Section 21. Representations Regarding Fair Competition. Employee represents, warrants and covenants to the Employer that:
(a) On or prior to the date hereof, Employee has informed the Employer of any judgment, order, agreement or arrangement of which he is currently aware and which may affect his right to enter into this Agreement and to fully perform his duties hereunder;
(b) Employee is knowledgeable and sophisticated as to business matters, and that prior to assenting to the terms of this Agreement or giving the representations and warranties herein, he has been given a reasonable time to review it and has consulted with counsel of his choice;
(c) In entering into this Agreement, Employee is not knowingly breaching or violating any provision of any law or regulation; and,
(d) Employee has not knowingly provided to the Employer, nor been requested by the Employer to provide, any confidential or non-public document or information of a former employer that constitutes or contains any protected trade secret, and will not knowingly use any protected trade secrets of any former employer in the course of his employment hereunder.
Section 22. No Reliance. No person has any authority to make any representation or promise for or on behalf of any Party not set forth in this Agreement. The Parties agree that, in executing this Agreement, they do not and have not relied on any document, representation or statement, whether written or oral, other than those specifically set forth or specifically referenced in this Agreement. Neither Party is relying upon a legal duty, even if one might exist, on the part of the other Party (or such Party’s employees, executives, managers, officers, agents, representatives, or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation. The Parties expressly acknowledge and agree that no lack of information on the part of either Party is a ground for challenging this Agreement. The recitals to this Agreement are incorporated into and made a part of this Agreement for all purposes.
Section 23. Counterparts; Electronic Signature. The Parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one agreement. Either Party may execute this Agreement by facsimile or electronic signature, and the other Parties are entitled to rely upon such facsimile or electronic signature as conclusive evidence that this Agreement has been duly executed by such Party.
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Section 24. Withholding. The Employer may withhold from any benefit payment under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling; provided that any withholding obligation arising in connection with the exercise of an equity holding or stock option or the transfer of equity or stock or other property shall be satisfied through withholding an appropriate number of shares of stock or appropriate amount of such other property.
Section 25. Attorneys’ Fees. Should a Party sue another Party in court for a breach of any provision of this Agreement, the prevailing Party, as determined by a court of competent jurisdiction, is entitled to recover its reasonable attorneys’ fees, costs of court and other expenses of litigation, in addition to any other remedy.
Section 26. Definitions.
“Accrued Benefits” means (i) any compensation deferred by Employee prior to the Date of Termination and not paid by the Employer or otherwise specifically addressed by this Agreement; (ii) any amounts or benefits owing to Employee or to Employee’s beneficiaries under the then applicable benefit plans of the Employer; (iii) any amounts owing to Employee for reimbursement of expenses properly incurred by Employee prior to the Date of Termination and which are reimbursable in accordance with Section 7; and (iv) any other benefits or amounts due and owing to Employee under the terms of any plan, program or arrangement of the Employer.
“Affiliate” means any entity controlled by, in control of, or under common control with the Employer, including Employer’s parent, subsidiaries, affiliates, divisions and departments, and any joint venture partners (if any).
“Cause” means: (i) Employee’s breach of any of Employee’s material obligations under any agreement with the Employer, including this Agreement and any other nondisclosure/confidentiality agreement; (ii) Employee’s willful failure or refusal to perform Employee’s duties or responsibilities for the Employer, consistent with this Agreement (other than as a result of Employee’s death / Disability); (iii) Employee’s willful violation of other Employer policies or procedures (including, without limitation, any anti-harassment, workplace violence, and EEO policies), and provided that a mere unsubstantiated accusation of harassment will not rise to the level of willful violation absent an investigation and substantiated of accusation; (iv) Employee’s conviction of, or plea of guilty or nolo contendere to, (x) a felony or (y) any crime which is, or could reasonably be expected to be, injurious or harmful to the Employer (except any traffic offenses); (v) Employee’s fraud, embezzlement, bribery, theft, dishonesty or other misconduct that is, or could reasonably be expected to be, injurious or harmful to the Employer; (vi) Employee’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or property of the Employer’s (including, without limitation, your unauthorized use or disclosure of the Employer’s Confidential Information, trade secrets, or intellectual property); or (vii) Employee’s use of illegal drugs, or abuse of alcohol or prescription drugs, that substantially impairs Employee’s ability to perform Employee’s duties or responsibilities for the Employer; provided that, solely with respect clause (ii) above, Employee’s failure or refusal to perform Employee’s duties or responsibilities for the Employer, which is susceptible to cure, shall not be deemed “Cause” for termination for purposes of the amounts in Sections 10(d) and 10(e), unless the Employer first gives Employee written notice of its intention to terminate for “Cause” pursuant to clause (ii) and the grounds for such termination, and Employee fails or refuses to cure such Cause within thirty (30) business days following receipt of such notice. For purposes of this definition of “Cause,” no act or failure to act, on the part of Employee, shall be considered “willful” unless it is done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employee’s action or omission was in the best interests of the Employer.
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“Change in Control” means (i) a merger of the Employer with another entity, a consolidation involving the Employer, or the sale of all or substantially all of the assets of the Employer to another entity if, in any such case, the holders of equity securities or interests of the Employer (and their respective affiliates) immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities or interests of the resulting entity entitled to greater than 50% of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, (ii) the dissolution or liquidation of the Employer, (iii) when any person or entity, including a group as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the Employer’s outstanding equity securities or interests, or (iv) as a result of or in connection with a contested election of the Employer’s board of directors, the persons who were members of the Employer’s board of directors immediately before such election shall cease to constitute a majority of the Employer’s board of directors after such election. For purposes of the preceding sentence, “resulting entity” in the context of a transaction or event that is a merger or consolidation shall mean the surviving entity unless the surviving entity is a subsidiary of another entity and the holders of common stock of the Employer receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity.
“Confidential Information” means information constituting trade secrets or proprietary information belonging to or regarding the Employer or any of its Affiliates or other confidential financial information, operating budgets, strategic plans or research or estimating methods, personnel data, customer and client contacts, projects or plans, or nonpublic information regarding the Employer or any of its Affiliates. Without limiting the foregoing, “Confidential Information” shall include, but shall not be limited to, any of the following information relating to the Employer: (i) information regarding the Employer’s business proposals; (ii) manner of the Employer’s operations, and methods of selling or pricing any products or services; (iii) the identity, contact information, preferences, requirements, and quality of persons or entities actually conducting or considering conducting business with the Employer, and any information in any form relating to such persons or entities and their relationship or dealings with the Employer; (iv) any intellectual property or trade secret of or concerning any business operation or any business relationship of the Employer; (v) computer databases, sourcecode, software programs and information relating to the nature of the hardware or software and how said hardware or software are used in combination or alone; (vi) information concerning personnel, confidential financial information, customer or customer prospect information, information concerning customers, customer lists and data, methods and formulas for estimating costs and setting prices, engineering design standards, testing procedures, research results (such as marketing surveys, programming trials or product trials), cost data (such as billing, equipment and programming cost projection models), compensation information and models, business or marketing plans or strategies, deal or business terms, budgets, supplier and vendor names and contact information (as well as preferences, requirements, and quality), programming operations, product names, information on proposed acquisitions or dispositions, actual performance compared to budgeted performance, long-range plans, internal financial information (including but not limited to financial and operating results for certain offices, divisions, departments, and key market areas that are not disclosed to the public in such form), results of internal analyses, computer programs and programming information, techniques and designs, and trade secrets; (vii) information concerning the Employer’s employees, officers, directors and shareholders (including contact information, salaries, wages, incentives, bonuses, incentives, and benefits, and quality); and (viii) any other information that is designated or marked “confidential,” “private,” “sensitive,” or similar labels. For purposes of the preceding sentence, “Employer” shall include the Employer and any and all of its Affiliates.
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“Date of Termination” means: (i) if Employee’s employment is terminated by Employee’s death, the date of Employee’s death; (ii) if Employee’s employment is terminated because of Employee’s Disability pursuant to Section 9(a)(ii)(A), 30 days after Notice of Termination, provided that Employee shall not have returned to the performance of Employee’s duties on a full-time basis during such 30-day period; (iii) if Employee’s employment is terminated by the Employer pursuant to Section 9(a)(ii)(B) or by Employee pursuant to Section 9(a)(ii)(B), the date specified in the Notice of Termination; or (iv) if Employee’s employment is terminated during the Employment Period other than pursuant to Section 9(a), the date on which Notice of Termination is given.
“Good Reason” means the occurrence of any of the following without Employee’s prior written consent: (i) a reduction in Employee’s Base Salary of ten percent (10%) or more (other than an across-the-board reduction, in whatever amount or percentage, approved by the Employer that applies on similar terms to other Employees of similar management level); or (ii) a materially adverse change in Employee’s authority, duties, or responsibilities (other than an across-the-board change, in whatever form, approved by the Employer that applies on similar terms to other Employees of similar management-level); or (iii) Employee is required by Employer to conduct themselves in violation of applicable law, Company policies or procedures, or any ethical or professional standards applicable to Employee’s performance of their duties. Notwithstanding the foregoing, in order to resign for Good Reason, Employee must (1) provide written notice to the Employer within thirty (30) days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Employee’s resignation, (2) allow the Employer at least thirty (30) days, or in the case of item (iii) no later than the next applicable SEC deadline for disclosure or filing, from receipt of such written notice to cure such event or, if applicable, provide Employee with written evidence or documentation that the acts or events claimed to constitute Good Reason did not occur or otherwise do not constitute Good Reason as described in this Agreement, and (3) if such event is not reasonably cured within such period, resign not later than seven (7) days after the expiration of the cure period by a written notice which shall state that Employee is exercising the right to terminate for Good Reason.
“Pro Rata Bonus” means an amount equal to the product of (i) the Annual Bonus that would have been earned by Employee for the calendar year that includes the Date of Termination if his employment had not terminated and (ii) a fraction the numerator of which is the number of days that have elapsed as of the Date of Termination during the calendar year that includes the Date of Termination and the denominator of which is 365.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have caused this Agreement to be duly executed and delivered on their behalf, with all Parties knowingly, voluntarily entering this Agreement with the specific intent to be bound by the same.
LEGATO MERGER CORP. II | ||
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer | |
EMPLOYEE | ||
By: | /s/ Rudy V. Renda | |
Name: | Rudy V. Renda |
[Signature Page to Employment Agreement]
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Exhibit 10.6.4
EMPLOYMENT AGREEMENT
BETWEEN
Legato Merger Corp. II
AND
Cody Gallarda
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between Legato Merger Corp. II, a Delaware corporation (the “Employer”), and Cody Gallarda (the “Employee”), effective as of the Closing Date (as defined in that certain Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Employer, Legato Merger Sub Inc., a Delaware corporation, and Southland Holdings LLC, a Texas limited liability company) (the “Effective Date”). On the Effective Date, the Employer will change its name to “Southland Holdings, Inc.”
WHEREAS, the Employer desires to employ the Employee, and the Employee desires to accept such employment, on the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Employer will provide to Employee, in the course and scope of Employee’s employment with the Employer and in the performance of Employee’s duties for the Employer, highly confidential, sensitive, and proprietary information, as well as intellectual property and trade secrets, belonging to the Employer, regarding, among other things, the Employer and its employees and contractors, methods and strategies of production and service, finances and other financial information, clients, customers, suppliers, vendors, business partners, and business plans and strategies and that such access will be subject to the terms and conditions of this Agreement;
WHEREAS, the Employee understands that execution of this Agreement is a condition precedent to commencing employment with the Employer, to being paid compensation by the Employer under this Agreement, and to receiving any Confidential Information (as defined herein) belonging to the Employer, as well as to receiving other valuable and specialized training; and,
NOW, THEREFORE, in consideration of the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
Section 1. Effectiveness. Employee’s employment with the Employer shall commence, and this Agreement shall become effective, on the Effective Date.
Section 2. Employment Agreement. On the terms and conditions set forth in this Agreement, the Employer agrees to employ Employee and Employee agrees to be employed by the Employer for the Employment Period set forth in Section 3 and in the position and with the duties set forth in Section 4. Terms used herein with initial capitalization not otherwise defined are defined in Section 26.
Section 3. At-Will Employment. Subject to the terms and conditions set forth in this Agreement, including Section 9 below, Employee is employed on an at-will basis, meaning that either Employee or the Employer may terminate the employment relationship at any time for any reason, with or without notice. The Parties acknowledge and agree that nothing in this Agreement will be interpreted or construed to alter this at-will employment relationship or to confer on the Employee any right with respect to continued employment by the Employer for any specified duration.
Section 4. Position and Duties.
(a) During the Employee’s employment with the Employer, Employee shall serve as Executive Vice President, Treasurer and Chief Financial Officer of the Employer. In such capacity, Employee shall report directly to the President and Chief Executive Officer. Except for absences or leave permitted or excused under the Company’s policies and procedures or under applicable law, the Employee will, throughout Employee’s employment, devote Employee’s full working time, attention, and skill set to Employee’s duties and will perform Employee’s duties loyally and faithfully, and to the best of Employee’s ability, in furtherance of the business affairs and activities of the Employer.
(b) The employment relationship between the Employer and the Employee is governed by, and the Employee will at all times be subject to, comply with, observe, and carry out: (1) this Agreement; (2) any other confidentiality and nondisclosure agreement or restrictive covenant which the Company may require the Employee to execute from time to time; (3) the Employer’s rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including any employee handbooks; and, (4) such rules, regulations, policies, codes of ethics and/or conduct, directions, and restrictions as the Employer may from time to time establish or approve for employees of the Employer, including any employee handbooks. The Parties acknowledge and agree that this Agreement governs their relationship to the extent there are any conflicts between this Agreement and any Employer rules, regulations, policies, plans, programs, procedures, codes of ethics and/or conduct, directions, instructions, orders, and restrictions, including any employee handbooks.
Section 5. Place of Performance. During Employee’s employment with the Employer, Employee shall be based at the Employer’s headquarters in Grapevine, TX. Employee acknowledges and agrees that Employee’s duties may require Employee to engage in reasonable business travel from time to time during the course and scope of Employee’s employment with the Employer.
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Section 6. Compensation and Benefits.
(a) Base Salary. During Employee’s employment with the Employer, the Employer shall pay to Employee a base salary of Thirty-Three Thousand Three Hundred Thirty-Three Dollars and No Cents ($33,333.00) per month, which annualizes to Four Hundred Thousand and No Cents ($400,000.00), less applicable and authorized taxes, deductions, withholdings and payable in accordance with the Company’s regular payroll practices (the “Base Salary”). The Base Salary may be reviewed for increase by the Employer, annually, and may be increased in the sole discretion of the Employer; and any such adjusted Base Salary shall constitute the “Base Salary” for purposes of this Agreement.
(b) Discretionary Annual Bonus. During Employee’s employment with the Employer, Employee is eligible to receive an annual cash performance bonus (an “Annual Bonus”) during each calendar year that ends during the Employment Period, to the extent earned based on the performance of Employee and the Employer and as determined, calculated and paid by the Employer in its sole discretion. Employee’s Annual Bonus for a calendar year is targeted, but not guaranteed, to be between eighty percent (80%) and two hundred percent (200%) of Employee’s Base Salary for that particular year, with greater or lesser amounts (including zero) paid based on Employee’s and Employer’s performance and as determined, calculated, and paid in the Employer’s sole discretion. Annual Bonuses will be paid around December 31st of a given year, but in no event later than March 15 of the following calendar year. If Employee ceases to be employed by the Employer on the established date of payment of the Annual Bonus at issue, Employee and the Employer acknowledge and agree that Employee is not eligible to receive, and will not receive, an Annual Bonus, or any portion thereof.
(c) Signing Bonus. Reserved.
(d) Equity. During Employee’s employment with the Employer, Employee is eligible to receive certain equity holdings in the Employer in its sole discretion. Any equity awarded by the Employer to Employee will be governed by the applicable terms and conditions of any Employer equity plan, including any modifications or amendments, that may be established, approved, and may be in effect from time to time. Such Employer equity plan is subject to annual review by the Employer and may be modified or amended from time to time. Employee’s election to participate in an Employer equity plan will be subject to a separate award agreement, which will outline the specifics of the Employee’s participation, including, but not limited to, Employee’s purchase and sale or resale rights, vesting schedule, conditions pertaining to forfeiture of such equity, and the Employer’s buyback rights.
(e) Founder Equity Sale Limitation. Reserved.
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(f) Perquisites.
(1) During Employee’s employment with the Employer (and in addition to the general benefits outlined in Section 6(h) below), Employee shall be entitled to (i) to participate in all fringe benefits and perquisites made available generally to senior Employees of the Employer, such participation to be at levels, and on terms and conditions, that are commensurate with Employee’s positions and responsibilities at the Employer, and (ii) to receive such additional fringe benefits and perquisites as the Employer may, in its sole and absolute discretion, from time to time provide.
(2) In addition, during Employee’s employment with the Employer, Employee shall be entitled to receive an automobile allowance of One Thousand Five Hundred Dollars and no Cents ($1,500.00) per month, less applicable and authorized taxes, deductions, withholdings, along with fuel cards and toll tags. The Employee shall be responsible for maintenance and repairs of such automobile during Employee’s employment with the Employer.
(3) Reserved.
(4) Reserved.
(5) Further, during Employee’s employment with the Employer, Employee is eligible to receive up to, but not exceeding, Fifty Thousand Dollars and no Cents ($50,000.00) per calendar year, less applicable and authorized taxes, deductions, withholdings, for approved miscellaneous perquisites including, but not limited to, personal travel on a company plane or private charter, preventative health care services, private security services, country club membership, school contributions or sporting events, or other perquisites of customary nature for Employee’s position. In order to receive any amount in this Section 6(f)(5), Employee must submit a written request for the miscellaneous perquisite for the Employer’s review and approval in advance of the same. Any amount of additional compensation in this Section 6(f)(5) shall not be reduced by any specific perquisites outlined in Sections 6(f)(3) or Section 6(f)(4) above, if any.
(g) Vacation / Paid Time Off. During Employee’s employment with the Employer, Employee is eligible for certain paid time off (“PTO”) commensurate with Employee’s position and in no case less than what is established for other senior Employer employees of Employer, provided that Employee is not eligible to, and will not, accrue more than fifteen (15) days of PTO in any given calendar year during Employee’s employment or be paid any amount for PTO upon termination. Further, any unused PTO does not carry over from year to year during Employee’s employment. Employee may request to take and schedule any PTO pursuant to and in accordance with Employer policies, practices, and procedures applicable to the same, subject to the business needs of the Employer and provided that Employee otherwise complies with this Agreement.
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(h) Benefits. During Employee’s employment with the Employer, Employee will be entitled to participate in all standard Employer benefits including holidays, pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements that may from time to time be made available generally to other senior Employees of the Employer, all to the extent Employee is eligible under the terms of such plans, programs and arrangements. The Employer may change or terminate the benefits it offers to employees from time to time, and this Agreement does not restrict, limit, or preclude Employer’s right to make such changes or terminate such benefits, except that in no case will other Employer employees of the same level as Employee be offered benefits greater than was may be offered to Employee.
(i) Relocation. Reserved.
(j) Reasonable Attorneys’ Fees Incurred with Respect to This Agreement. During Employee’s employment with the Employer, Employee is eligible to receive a one-time, lump sum reimbursement of up to, but not exceeding, Two Thousand Dollars and no Cents ($2,000.00), less applicable and authorized taxes, deductions, withholdings for Employee’s reasonable and necessary attorneys’ fees incurred in connection with the review, negotiation and execution of this Agreement.
(k) Clawback of Certain Incentive Compensation. Notwithstanding any other provision herein to the contrary, any “incentive-based compensation” within the meaning of Section 10D of the Securities Exchange Act of 1934, as amended (the “Act”) shall be subject to clawback by the Employer in the manner required by the Employer’s recoupment policy as in effect from time to time and in the manner required by Section 10D(b)(2) of the Act, as determined by the applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
Section 7. Expenses. During Employee’s employment with the Employer, Employee is eligible seek reimbursement for all reasonable and necessary business expenses incurred by Employee in the course and scope of Employee’s duties on Company’s behalf under this Agreement, provided that such expenses are consistent with the Company’s policies, plans, and procedures in effect from time to time with respect to the same. Employee agrees that any reimbursement for reasonable and necessary business expenses is subject to and must be properly and timely submitted in accordance with the Company’s policies, plans, and procedures with respect to reporting, documentation, and payment of such business expenses.
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Section 8. Confidentiality and Non-Disclosure Agreement. The Employer and Employee acknowledge and agree that during Employee’s employment with the Employer, Employee will have access to and may assist in developing Confidential Information and will occupy a position of trust and confidence with respect to the Employer’s affairs and business and the affairs and business of its Affiliates, including the business relationships and goodwill of the Employer and its Affiliates. Employee agrees that the following obligations are necessary to preserve the confidential and proprietary nature of Confidential Information and to protect the Employer and its Affiliates against harmful solicitation of employees and customers, harmful competition and other actions by Employee that would result in serious adverse consequences for the Employer and any of its Affiliates:
(a) Non-Disclosure. During and after Employee’s employment with the Employer, Employee will not knowingly use, disclose or transfer any Confidential Information other than as specifically and expressly authorized in writing by the Employer or as reasonably necessary for the exercise of Employee’s job duties in the best interests of the Employer and its Affiliates. Anything herein to the contrary notwithstanding, the provisions of this Section 8(a) shall not apply (i) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Employee to disclose or make accessible any information; (ii) to the extent necessary in connection with any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (iii) as to information that becomes generally known to the public or within the relevant trade or industry other than due to Employee’s violation of this Section 8(a); or (iv) as to information that is or becomes available to Employee on a non-confidential basis from a source that is entitled to disclose it to Employee. Further, Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Employee files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee and/or Employee’s attorney (x) files any document containing the trade secret under seal; and, (y) does not disclose the trade secret, except pursuant to court order.
(b) Intellectual Property. Employee agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Employer’s business, including without limitation information of a technical or business nature such as ideas, discoveries, designs, inventions, improvements, trade secrets, know-how, software, writings and other works of authorship, computer programs, financial figures, client or customer rosters/lists and data, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of research and development of the Employer and its Affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Employee alone or jointly with others during Employee’s employment with the Employer is the property of and belong exclusively to the Employer. Employee will promptly and fully disclose to the Employer the origination or development by Employee of any such material and will provide the Employer with any information that it may reasonably request about such material. Either during or subsequent to Employee’s employment, upon the request and at the expense of the Employer or its nominee, and for no remuneration other than or in addition to that due Employee under this Agreement, but at no expense to Employee, Employee will execute, acknowledge, and deliver to the Employer or its attorneys any and all instruments which, in the judgment of the Employer or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Employer adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
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(c) Materials; Return of Employer Property. Employee will not remove any Confidential Information or any other property of the Employer or any of its Affiliates from the Employer’s premises or make copies of such materials except for normal and customary use in the Employer’s business. Employee will return to the Employer all Confidential Information and copies thereof and all other property of the Employer or any of its Affiliates at any time upon the request of the Employer and in any event promptly after the end of Employee’s employment. Anything to the contrary notwithstanding, nothing in this Section 8 shall prevent Employee from retaining a home computer, papers and other materials of a personal nature, including diaries, calendars and information relating to his compensation or relating to reimbursement of expenses, information that he reasonably believes may be needed for tax purposes, and copies of plans, programs and agreements relating to his employment, provided that Employee shall identify in writing all such materials for the Employer and obtain Employer’s approval of the same prior to copying or removing them from any Employer electronic device.
(d) Covenant Not to Solicit Employer’s Employees, Contractors, or Suppliers or Vendors. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly, solicit, entice, encourage, persuade or induce any Company current or prospective employee to leave his or her employment with the Company or refrain from seeking employment by the Company, any current or prospective contractor of the Company to cease providing services to or for the Company or refrain from providing services to or for the Company, or any current or prospective supplier or vendor of the Company to cease doing business with the Company or refrain from doing business with the Company, to the extent Employee had a business relationship with the current or prospective employee, contractor, vendor, or supplier at any time during Employee’s employment or about which Employee had Confidential Information.
(e) Covenant Not to Solicit Employer’s Clients and Customers. In exchange for the Employer’s agreement to disclose and disclosure of the Confidential Information, including trade secrets, and agreement to provide and provision of specialized training to Employee, while employed by the Employer and for one (1) year thereafter, Employee shall not, directly or indirectly solicit, call-on, conduct business with, sell products or services to, or otherwise provide assistance to the Employer’s current or prospective clients or customers with whom Employee had a business relationship during Employee’s employment with the Employer or about which Employee had Confidential Information.
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(f) Nondisparagement. The Parties acknowledge and agree that the business reputation and goodwill of the Employer and its Affiliates and each of their former, current, and prospective clients, customers, officers, directors, employees, members, partners, managers, owners, agents, or representatives are valuable assets critical to the Employer’s and its Affiliates’ goodwill and business relationships and to the continued growth, sustainability and success of the Employer and its Affiliates. Accordingly, during Employee’s employment with the Employer and thereafter, Employee will not make negative comments about or otherwise disparage the Employer or any of its Affiliates; former, current, or prospective Employer or any Employer Affiliate clients or customers; or any of their respective former, current, or prospective officers, directors, employees, members, partners, managers, owners, agents, or representatives, or their respective products or services. Notwithstanding the restrictions imposed in this paragraph, Employee does not violate the terms of this Section by making any truthful statement about the Employer or any of its Affiliates required to be given pursuant to a subpoena or other compulsory process in a court or arbitration proceeding, and provided that Employee otherwise complies with this Agreement.
(g) Reasonableness. In signing this Agreement, Employee represents to and assures the Employer that Employee has carefully read and considered all of the terms and conditions of this Agreement, including, without limitation, the restraints imposed under this Section. Employee acknowledges and agrees that these restraints are necessary for the reasonable and proper protection of the Employer and its Confidential Information, including its trade secrets, and that each and every one of the restraints is reasonable, and that these restraints, individually or in the aggregate, do and would not prevent Employee from obtaining other suitable employment during the period in which Employee is bound by the restraints. Employee acknowledges and agrees that each of these covenants has a unique, special, substantial, and immeasurable value to the Employer and that Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. It is also agreed that the Employer and/or its Affiliates have the right to enforce all of Employee’s obligations to that individual or entity under this Agreement, including, without limitation, those obligations set forth in this Section.
(h) Tolling Provision and Reformation. The Parties acknowledge and agree that the period for the restrictions set forth in this Section will be tolled on a day-for-day basis for each day during which Employee participates in any activity in violation of the restrictions as determined by a court of competent jurisdiction, as well as for each day during which a matter is pending in any court for the purpose of enforcing the restrictions set forth in this Section, provided that such sections are determined by a court of competent jurisdiction to be enforceable in whole or in part or as reformed. In the event any court determines that the time and scope contained in any covenant set forth in this Section is overly broad or unreasonable, the court will reform such provision to the extent necessary to make such provision reasonable. In the event a bond is required to secure temporary or preliminary injunctive restraint or relief, the Parties acknowledge and agree that a bond in the amount of $500.00 is sufficient security for the pendency of the injunctive restraint or relief.
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(i) Injunctive Relief. Employee acknowledges and agrees that Employee’s breach or threatened breach of any of the provisions of this Section would result in irreparable injury to the Employer for which monetary damages would not provide an adequate remedy and that the amount of such damages would be difficult to determine. Therefore, if Employee breaches or threatens to breach any provision of this Section, the Employer and/or its Affiliates have the right and remedy to seek specific performance or other injunctive relief, in a court of competent jurisdiction located in or with jurisdiction over Dallas, TX, in addition to any other available legal or equitable remedies. In addition to the foregoing, the Employer and/or its Affiliates may seek to recover by appropriate proceedings or action the amount of any actual or other available damages suffered by the Employer and/or its Affiliates by any failure, refusal, or neglect of Employee to perform Employee’s obligations under this Agreement, together with any and all costs and expenses incurred by the Employer and/or its Affiliates, including reasonable attorneys’ fees, in seeking such relief. The Parties acknowledge and agree that the remedies provided in this Section, and in this Agreement generally, are deemed cumulative and the exercise of one does not preclude the exercise of any other remedy at law or in equity for the same event or any other event.
(j) Cooperation. During the Employee’s employment with the Employer and for three (3) years thereafter Employee will, upon the Employer’s reasonable request: (a) cooperate with the Employer in connection with any matter that arose during Employee’s employment and that relates to the business or operations of the Employer or any of its Affiliates, or of which Employee may have any knowledge or involvement; and (b) consult with and provide information to the Employer and its representatives concerning such matters. Such cooperation shall be rendered at reasonable times and places. Nothing in this Agreement shall be construed or interpreted as requiring Employee to provide any testimony or affidavit that is not accurate or truthful.
(k) Protected Communications. Nothing in this Agreement will or is intended to prohibit any communication by any Party permitted by any applicable law, including the National Labor Relations Act, or any communication by any Party with any government agency, including (without limitation) the Equal Employment Opportunity Commission, the Texas Workforce Commission, the United States Securities and Exchange Commission, or the National Labor Relations Board with respect to any possible violation by the Employer or any of its Affiliate of any laws, rules, or regulations.
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Section 9. Termination of Employment.
(a) Permitted Terminations. Employee’s employment hereunder may be terminated during the Employment Period under the following circumstances:
(1) Death. The Employee’s employment hereunder shall terminate upon Employee’s death;
(2) By the Employer. The Employer may terminate Employee’s employment with the Employer:
A. Disability. If Employee has been substantially unable to perform Employee’s material job duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for 180 consecutive days or 270 days in any 24-month period (a “Disability”) (provided, that until such termination, Employee shall continue to receive his compensation and benefits hereunder, reduced by any benefits payable to Employee under any disability insurance policy or plan applicable to Employee); or
B. Cause. With or without Cause; and,
(3) By Employee. Employee may terminate Employee’s employment with the Employer with or without Good Reason.
(b) Termination. Any termination of Employee’s employment by the Employer or Employee (other than because of Employee’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any; and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated. Termination of Employee’s employment shall take effect on the Date of Termination, after which Employee shall not be considered and may not hold himself or herself as an officer, director, manager, employee, contractor, representative, or agent of the Employer.
(c) Dispute as to a Disability. Employee agrees, in the event of any dispute under Section 9(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer, to submit to a physical examination by a licensed physician selected by mutual consent of the Employer and Employee (which shall not unreasonably be withheld), the cost of such examination to be paid by the Employer. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. This Section shall be interpreted and applied so as to comply with the provisions of the Americans with Disabilities Act and any applicable state or local laws.
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(d) Nothing in this Section, or in this Agreement generally, is intended to, or will, modify Employee’s at-will employment relationship with the Employer.
Section 10. Compensation Upon Termination.
(a) Death. If Employee’s employment with the Employer is terminated as a result of Employee’s death, this Agreement and the Employment Period shall terminate without further notice or any action required by the Employer or Employee’s legal representatives. Upon Employee’s death, the Employer shall pay or provide the following to Employee’s designated beneficiary: (i) Employee’s Base Salary due through the Date of Termination; and, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due. Except as set forth herein, the Employer shall have no further obligation to Employee under this Agreement upon Employee’s death.
(b) Disability. If the Employer terminates Employee’s employment with the Employer because of Employee’s Disability, the Employer shall pay or provide the following: (i) Employee’s Base Salary due through the Date of Termination, (ii) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination at the time such payments are due, and (iii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term). Except as set forth herein, the Employer shall have no further obligations to Employee under this Agreement upon Employees Disability.
(c) Termination by the Employer for Cause or Termination by Employee Without Good Reason. If, the Employer terminates Employee’s employment with the Employer for Cause pursuant to Section 9(a)(ii)(B) or Employee terminates Employee’s employment without Good Reason, the Employer shall pay to Employee Employee’s Base Salary due through the Date of Termination and all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, at the time such payments are due, and Employee’s rights with respect to equity or equity-related awards shall be governed by the applicable terms of the related plan and/or separate award agreement.
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(d) Termination by the Employer without Cause or Termination by Employee with Good Reason. If the Employer terminates Employee’s employment with Employer other than for Cause or Disability pursuant to Section 9(a) or if Employee terminates his employment hereunder with Good Reason: (i) the Employer shall pay Employee (A) Employee’s Base Salary due through the Date of Termination, (B) a Pro Rata Bonus at the time other employees of the Employer receive annual bonuses for the calendar year in which the Date of Termination occurs and in all events by March 15 of the calendar year following the year in which such termination occurs, (C) all Accrued Benefits, if any, to which Employee is entitled as of the Date of Termination, in each case at the time such payments are due, (D) a cash lump sum in an amount equal to one (1) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination, payable in a lump sum on the 60th day following the date of termination (ii) all outstanding equity awards held by Employee immediately prior to his termination shall immediately vest (with outstanding options remaining exercisable for the length of their remaining term), and (iii) Employee and his covered dependents shall be entitled to continued participation in benefit plans on the same terms and conditions as applicable immediately prior to Employee’s Date of Termination for 18 months; provided that if such continued coverage is not permitted under the terms of such benefit plans, the Employer shall pay Employee an additional, lump sum amount that, on an after-tax basis, is equal to the cost of comparable coverage obtained by Employee, and (E) a cash, lump sum in an amount equal to any unpaid portion of the Signing Bonus and the Deferred Compensation, if any, payable in a lump sum on the 60th day following the date of termination.
(e) Termination Upon a Change in Control. This Section 10(e) shall apply if there is (i) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability), or a resignation by Employee with Good Reason during the two-year period following a Change in Control or (ii) a termination of Employee’s employment by Employer without Cause (and not as a result of death or Disability) within six (6) months prior to a Change in Control, if the termination was at the request of a third party or otherwise arose in anticipation of the Change in Control. If any such termination occurs, Employee shall receive the payments and benefits set forth in Section 10(d), except that in lieu of the lump-sum payment under Section 10(d)(i)(D), Employee shall receive a cash payment in an amount equal to two (2) times the sum of Employee’s Base Salary and target Annual Bonus for the year of termination (without taking into account any reductions which would constitute Good Reason), payable in a lump sum on the 60th day following the date of termination.
(f) Liquidated Damages. The Parties acknowledge and agree that damages which will result to Employee for termination by the Employer of Employee’s employment without Cause or by Employee for Good Cause shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to Employee under Section 10 shall constitute liquidated damages for any such termination. Accordingly, Employee agrees that, except for such other payments and benefits to which Employee may be entitled as expressly provided by the terms of this Agreement or any other applicable benefit plan or under applicable law, such liquidated damages shall be in lieu of all other claims that Employee may make by reason of any such termination of his employment and that, as a condition to receiving the Severance Payments, Employee will execute a release of claims in or substantially in a form provided by the Employer. Within five (5) business days of the Date of Termination, the Employer shall deliver to Employee the appropriate form of release of claims for Employee to execute. The Severance Payments shall be made within three (3) business days of the expiration of the revocation period without the release being revoked and otherwise as they become due.
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(g) No Offset. In the event of termination of his employment, Employee shall be under no obligation to seek other employment and there shall be no offset against amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain. The Employer’s obligation to make any payment pursuant to, and otherwise to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim or other right that the Employer or its affiliates may have against him for any reason.
(h) Section 409A.
(1) Notwithstanding the timing of the payments pursuant to Section 10 of this Agreement, to the extent Employee would otherwise be entitled to a payment during the six months beginning on the Date of Termination that would be subject to the additional tax imposed under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the payment will not be made to Employee and instead will be made to an account established to fund such payments (provided that such funds shall be at all times subject to the creditors of the Employer) and (ii) the payment, together with interest thereon at the rate of “prime” plus 1%, will be paid to Employee on the six-month anniversary of Date of Termination. Similarly, to the extent Employee would otherwise be entitled to any benefit (other than a cash payment) during the six months beginning on the Date of Termination that would be subject to the additional tax under Section 409A of the Code, the benefit will be delayed and will begin being provided (together, if applicable, with an adjustment to compensate Employee for the delay, with such adjustment to be determined in the Employer’s reasonable good faith discretion) on the six month anniversary of the Date of Termination. The Employer will establish the account, as applicable, no later than ten days after Employee’s Date of Termination.
(2) It is the intention of the parties that the payments and benefits to which Employee could become entitled in connection with termination of employment under this Agreement comply with Section 409A of the Code. In the event that the parties determine that any such benefit or right does not so comply, they will negotiate reasonably and in good faith to amend the terms of this Agreement such that it complies (in a manner that attempts to minimize the economic impact of such amendment on Employee and the Employer and its affiliates).
(3) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
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(4) For purposes of compliance with Code Section 409A, (i) all expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee, (ii) any right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(5) For purposes of Code Section 409A, the Employee’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(6) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.
Section 11. Indemnification. During the Employee’s employment with the Employer and thereafter, the Employer agrees to indemnify and hold Employee and Employee’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against Employee that arises out of or relates to Employee’s service as an officer, director or employee, as the case may be, of the Employer, or Employee’s service in any such capacity or similar capacity with an Affiliate of the Employer or other entity at the request of the Employer, both prior to and after the Effective Date, and to promptly advance to Employee or Employee’s heirs or representatives such expenses upon written request with appropriate documentation of such expense upon receipt of an undertaking by Employee or on Employee’s behalf to repay such amount if it shall ultimately be determined that Employee is not entitled to be indemnified by the Employer. The Parties agree and acknowledge that this Section and the Company’s obligations hereunder apply only if and to the extent no other applicable insurance policy provides any coverage or other benefit to the Employee with respect to the claim or proceeding at issue. In that regard, during the Employee’s employment with the Employer and thereafter, the Employer also shall provide Employee with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other Employee officers. If Employee has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which Employee may request indemnity under this provision, Employee will give the Employer prompt written notice thereof; provided that the failure to give such notice shall not affect Employee’s right to indemnification. The Employer shall be entitled to assume the defense of any such proceeding and Employee will use reasonable efforts to cooperate with such defense. To the extent that Employee in good faith determines that there is an actual or potential conflict of interest between the Employer and Employee in connection with the defense of a proceeding, Employee shall so notify the Employer and shall be entitled to separate representation at the Employer’s expense by counsel selected by Employee (provided that the Employer may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Employer’s counsel and minimize the expense of such separate representation to the extent consistent with Employee’s separate defense. This Section shall continue in effect after the termination of Employee’s employment or the termination of this Agreement.
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Section 12. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by facsimile transmission addressed as follows:
If to the Employer:
Southland Holdings, Inc.
1100 Kubota Dr.
Grapevine, TX 76051
Attention: Corporate Secretary and General Counsel
If to Employee:
Address last shown on the Employer’s Records
Each Party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
Section 13. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.
Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the Parties respecting the employment of Employee and supersedes all prior agreements, there being no representations, warranties or commitments except as set forth herein, and the terms of any other agreements and/or Company policies in force with regard to Employee’s post-employment obligations (including any confidentiality or nondisclosure agreements and other restrictive covenants).
Section 15. Survival. It is the express intention and agreement of the Parties hereto that the provisions of Section 8, Section 10, Section 11, Section 12, Section 14, Section 16, Section 17, Section 18, Section 20 and Section 24 hereof and this Section 15 shall survive the termination of employment of Employee. In addition, all obligations of the Employer to make payments to the Employee after Employee’s employment with the Employer ends hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.
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Section 16. Assignment. The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of Employee’s death, the personal representative or legatees or distributees of Employee’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to Employee hereunder and (ii) the rights and obligations of the Employer hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale of all or substantially all of the assets or equity interests of the Employer or similar transaction involving the Employer or a successor corporation.
Section 17. Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the Parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.
Section 18. Amendment: Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the Party against whom enforcement is sought. Neither the waiver by either of the Parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the Parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.
Section 19. Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
Section 20. Governing Law; Venue. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement are governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions that could cause the applications of the laws of any jurisdiction other than the State of Texas. The Parties irrevocably consent to and waive any objection or complaint to the personal jurisdiction of or venue in the state and federal courts located in Dallas County, Texas, for claims related to this Agreement and for any claim for injunctive or other equitable relief arising hereunder.
(a) The Parties further agree that service of process in any such proceeding arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at his or its address as provided in Section 12. Nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Texas.
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(b) WAIVER OF JURY TRIAL. The Parties hereby irrevocably waive their respective rights to trial by jury in any proceeding (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or Employee’s employment by the Employer or any of its Affiliates, or his or its performance under or the enforcement of this Agreement.
Section 21. Representations Regarding Fair Competition. Employee represents, warrants and covenants to the Employer that:
(a) On or prior to the date hereof, Employee has informed the Employer of any judgment, order, agreement or arrangement of which he is currently aware and which may affect his right to enter into this Agreement and to fully perform his duties hereunder;
(b) Employee is knowledgeable and sophisticated as to business matters, and that prior to assenting to the terms of this Agreement or giving the representations and warranties herein, he has been given a reasonable time to review it and has consulted with counsel of his choice;
(c) In entering into this Agreement, Employee is not knowingly breaching or violating any provision of any law or regulation; and,
(d) Employee has not knowingly provided to the Employer, nor been requested by the Employer to provide, any confidential or non-public document or information of a former employer that constitutes or contains any protected trade secret, and will not knowingly use any protected trade secrets of any former employer in the course of his employment hereunder.
Section 22. No Reliance. No person has any authority to make any representation or promise for or on behalf of any Party not set forth in this Agreement. The Parties agree that, in executing this Agreement, they do not and have not relied on any document, representation or statement, whether written or oral, other than those specifically set forth or specifically referenced in this Agreement. Neither Party is relying upon a legal duty, even if one might exist, on the part of the other Party (or such Party’s employees, executives, managers, officers, agents, representatives, or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation. The Parties expressly acknowledge and agree that no lack of information on the part of either Party is a ground for challenging this Agreement. The recitals to this Agreement are incorporated into and made a part of this Agreement for all purposes.
Section 23. Counterparts; Electronic Signature. The Parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one agreement. Either Party may execute this Agreement by facsimile or electronic signature, and the other Parties are entitled to rely upon such facsimile or electronic signature as conclusive evidence that this Agreement has been duly executed by such Party.
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Section 24. Withholding. The Employer may withhold from any benefit payment under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling; provided that any withholding obligation arising in connection with the exercise of an equity holding or stock option or the transfer of equity or stock or other property shall be satisfied through withholding an appropriate number of shares of stock or appropriate amount of such other property.
Section 25. Attorneys’ Fees. Should a Party sue another Party in court for a breach of any provision of this Agreement, the prevailing Party, as determined by a court of competent jurisdiction, is entitled to recover its reasonable attorneys’ fees, costs of court and other expenses of litigation, in addition to any other remedy.
Section 26. Definitions.
“Accrued Benefits” means (i) any compensation deferred by Employee prior to the Date of Termination and not paid by the Employer or otherwise specifically addressed by this Agreement; (ii) any amounts or benefits owing to Employee or to Employee’s beneficiaries under the then applicable benefit plans of the Employer; (iii) any amounts owing to Employee for reimbursement of expenses properly incurred by Employee prior to the Date of Termination and which are reimbursable in accordance with Section 7; and (iv) any other benefits or amounts due and owing to Employee under the terms of any plan, program or arrangement of the Employer.
“Affiliate” means any entity controlled by, in control of, or under common control with the Employer, including Employer’s parent, subsidiaries, affiliates, divisions and departments, and any joint venture partners (if any).
“Cause” means: (i) Employee’s breach of any of Employee’s material obligations under any agreement with the Employer, including this Agreement and any other nondisclosure/confidentiality agreement; (ii) Employee’s willful failure or refusal to perform Employee’s duties or responsibilities for the Employer, consistent with this Agreement (other than as a result of Employee’s death / Disability); (iii) Employee’s willful violation of other Employer policies or procedures (including, without limitation, any anti-harassment, workplace violence, and EEO policies), and provided that a mere unsubstantiated accusation of harassment will not rise to the level of willful violation absent an investigation and substantiated of accusation; (iv) Employee’s conviction of, or plea of guilty or nolo contendere to, (x) a felony or (y) any crime which is, or could reasonably be expected to be, injurious or harmful to the Employer (except any traffic offenses); (v) Employee’s fraud, embezzlement, bribery, theft, dishonesty or other misconduct that is, or could reasonably be expected to be, injurious or harmful to the Employer; (vi) Employee’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or property of the Employer’s (including, without limitation, your unauthorized use or disclosure of the Employer’s Confidential Information, trade secrets, or intellectual property); or (vii) Employee’s use of illegal drugs, or abuse of alcohol or prescription drugs, that substantially impairs Employee’s ability to perform Employee’s duties or responsibilities for the Employer; provided that, solely with respect clause (ii) above, Employee’s failure or refusal to perform Employee’s duties or responsibilities for the Employer, which is susceptible to cure, shall not be deemed “Cause” for termination for purposes of the amounts in Sections 10(d) and 10(e), unless the Employer first gives Employee written notice of its intention to terminate for “Cause” pursuant to clause (ii) and the grounds for such termination, and Employee fails or refuses to cure such Cause within thirty (30) business days following receipt of such notice. For purposes of this definition of “Cause,” no act or failure to act, on the part of Employee, shall be considered “willful” unless it is done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employee’s action or omission was in the best interests of the Employer.
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“Change in Control” means (i) a merger of the Employer with another entity, a consolidation involving the Employer, or the sale of all or substantially all of the assets of the Employer to another entity if, in any such case, the holders of equity securities or interests of the Employer (and their respective affiliates) immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities or interests of the resulting entity entitled to greater than 50% of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, (ii) the dissolution or liquidation of the Employer, (iii) when any person or entity, including a group as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the Employer’s outstanding equity securities or interests, or (iv) as a result of or in connection with a contested election of the Employer’s board of directors, the persons who were members of the Employer’s board of directors immediately before such election shall cease to constitute a majority of the Employer’s board of directors after such election. For purposes of the preceding sentence, “resulting entity” in the context of a transaction or event that is a merger or consolidation shall mean the surviving entity unless the surviving entity is a subsidiary of another entity and the holders of common stock of the Employer receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity.
“Confidential Information” means information constituting trade secrets or proprietary information belonging to or regarding the Employer or any of its Affiliates or other confidential financial information, operating budgets, strategic plans or research or estimating methods, personnel data, customer and client contacts, projects or plans, or nonpublic information regarding the Employer or any of its Affiliates. Without limiting the foregoing, “Confidential Information” shall include, but shall not be limited to, any of the following information relating to the Employer: (i) information regarding the Employer’s business proposals; (ii) manner of the Employer’s operations, and methods of selling or pricing any products or services; (iii) the identity, contact information, preferences, requirements, and quality of persons or entities actually conducting or considering conducting business with the Employer, and any information in any form relating to such persons or entities and their relationship or dealings with the Employer; (iv) any intellectual property or trade secret of or concerning any business operation or any business relationship of the Employer; (v) computer databases, sourcecode, software programs and information relating to the nature of the hardware or software and how said hardware or software are used in combination or alone; (vi) information concerning personnel, confidential financial information, customer or customer prospect information, information concerning customers, customer lists and data, methods and formulas for estimating costs and setting prices, engineering design standards, testing procedures, research results (such as marketing surveys, programming trials or product trials), cost data (such as billing, equipment and programming cost projection models), compensation information and models, business or marketing plans or strategies, deal or business terms, budgets, supplier and vendor names and contact information (as well as preferences, requirements, and quality), programming operations, product names, information on proposed acquisitions or dispositions, actual performance compared to budgeted performance, long-range plans, internal financial information (including but not limited to financial and operating results for certain offices, divisions, departments, and key market areas that are not disclosed to the public in such form), results of internal analyses, computer programs and programming information, techniques and designs, and trade secrets; (vii) information concerning the Employer’s employees, officers, directors and shareholders (including contact information, salaries, wages, incentives, bonuses, incentives, and benefits, and quality); and (viii) any other information that is designated or marked “confidential,” “private,” “sensitive,” or similar labels. For purposes of the preceding sentence, “Employer” shall include the Employer and any and all of its Affiliates.
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“Date of Termination” means: (i) if Employee’s employment is terminated by Employee’s death, the date of Employee’s death; (ii) if Employee’s employment is terminated because of Employee’s Disability pursuant to Section 9(a)(ii)(A), 30 days after Notice of Termination, provided that Employee shall not have returned to the performance of Employee’s duties on a full-time basis during such 30-day period; (iii) if Employee’s employment is terminated by the Employer pursuant to Section 9(a)(ii)(B) or by Employee pursuant to Section 9(a)(ii)(B), the date specified in the Notice of Termination; or (iv) if Employee’s employment is terminated during the Employment Period other than pursuant to Section 9(a), the date on which Notice of Termination is given.
“Good Reason” means the occurrence of any of the following without Employee’s prior written consent: (i) a reduction in Employee’s Base Salary of ten percent (10%) or more (other than an across-the-board reduction, in whatever amount or percentage, approved by the Employer that applies on similar terms to other Employees of similar management level); or (ii) a materially adverse change in Employee’s authority, duties, or responsibilities (other than an across-the-board change, in whatever form, approved by the Employer that applies on similar terms to other Employees of similar management-level); or (iii) Employee is required by Employer to conduct themselves in violation of applicable law, Company policies or procedures, or any ethical or professional standards applicable to Employee’s performance of their duties. Notwithstanding the foregoing, in order to resign for Good Reason, Employee must (1) provide written notice to the Employer within thirty (30) days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Employee’s resignation, (2) allow the Employer at least thirty (30) days, or in the case of item (iii) no later than the next applicable SEC deadline for disclosure or filing, from receipt of such written notice to cure such event or, if applicable, provide Employee with written evidence or documentation that the acts or events claimed to constitute Good Reason did not occur or otherwise do not constitute Good Reason as described in this Agreement, and (3) if such event is not reasonably cured within such period, resign not later than seven (7) days after the expiration of the cure period by a written notice which shall state that Employee is exercising the right to terminate for Good Reason.
“Pro Rata Bonus” means an amount equal to the product of (i) the Annual Bonus that would have been earned by Employee for the calendar year that includes the Date of Termination if his employment had not terminated and (ii) a fraction the numerator of which is the number of days that have elapsed as of the Date of Termination during the calendar year that includes the Date of Termination and the denominator of which is 365.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have caused this Agreement to be duly executed and delivered on their behalf, with all Parties knowingly, voluntarily entering this Agreement with the specific intent to be bound by the same.
LEGATO MERGER CORP. II | ||
By: | /s/ Gregory Monahan | |
Name: | Gregory Monahan | |
Title: | Chief Executive Officer | |
EMPLOYEE | ||
By: | /s/ Cody Gallarda | |
Name: | Cody Gallarda |
[Signature Page to Employment Agreement]
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Exhibit 10.8
Indemnification Agreement
This Indemnification Agreement (this “Agreement”), dated as of [●], is entered into by and between Southland Holdings, Inc., a Delaware corporation (the “Company”), and [●] (the “Indemnitee”).
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;
WHEREAS, the board of directors of the Company (the “Board”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and
WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s service as a director and/or officer of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “Constituent Documents”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and for the coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.
NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to provide services to the Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Beneficial Owner” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(b) “Change in Control” means the occurrence after the date of this Agreement of any of the following events:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the Company’s then outstanding Voting Securities unless the change in 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;
(ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
(iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors 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 either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
(c) “Claim” means:
(i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
(ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.
(d) “Delaware Court” shall have the meaning ascribed to it in Section 9(e) below.
(e) “Disinterested Director” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
(f) “Expenses” means any and all expenses, including attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
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(g) “Expense Advance” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.
(h) “Indemnifiable Event” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “Enterprise”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
(i) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim 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.
(j) “Losses” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
(k) “Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.
(l) “Standard of Conduct Determination” shall have the meaning ascribed to it in Section 9(b) below.
(m) “Voting Securities” means any securities of the Company that vote generally in the election of directors.
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2. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and Indemnitee. Indemnitee specifically acknowledges that his or her service to the Company or any of its subsidiaries or Enterprise is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Delaware law. This Agreement shall continue in force after Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 12 hereof.
3. Indemnification. Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties and Claims in which the Indemnitee is solely a witness.
4. Advancement of Expenses. Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within ten days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Execution and delivery to the Company of this Agreement by Indemnitee constitutes an undertaking by the Indemnitee to repay any amounts paid, advanced or reimbursed by the Company pursuant to this Section 4 in respect of Expenses relating to, arising out of or resulting from any Claim in respect of which it shall be determined, pursuant to Section 9, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. No other form of undertaking shall be required other than the execution of this Agreement. Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.
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5. Indemnification for Expenses in Enforcing Rights. To the fullest extent allowable under applicable law, the Company shall also indemnify against and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.
6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
7. Notification and Defense of Claims.
(a) Notification of Claims. Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure.
(b) Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided, however, that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
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8. Procedure upon Application for Indemnification. In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 9 below.
9. Determination of Right to Indemnification.
(a) Mandatory Indemnification; Indemnification as a Witness.
(i) To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law.
(ii) To the extent that Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law.
(b) Standard of Conduct. To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “Standard of Conduct Determination”) shall be made as follows:
(i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and
(ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.
The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within ten days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.
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(c) Making the Standard of Conduct Determination. The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “Notification Date”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.
(d) Payment of Indemnification. If, in regard to any Losses:
(i) Indemnitee shall be entitled to indemnification pursuant to Section 9(a);
(ii) no Standard Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or
(iii) Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination,
then the Company shall pay to Indemnitee, within five days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.
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(e) Selection of Independent Counsel for Standard of Conduct Determination. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(ii), the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other 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 satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware (“Delaware Court”) to resolve any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).
(f) Presumptions and Defenses.
(i) Indemnitee’s Entitlement to Indemnification. In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.
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(ii) Reliance as a Safe Harbor. For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have 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 if Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.
(iii) No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
(iv) Defense to Indemnification and Burden of Proof. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
10. Exclusions from Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:
(a) indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
(i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or
(ii) where the Company has joined in or the Board has consented to the initiation of such proceedings.
(b) indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law.
(c) indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.
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11. Settlement of Claims. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
12. Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
13. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, “Other Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder.
14. Liability Insurance. For the duration of Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director, or of the Company’s officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
15. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
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16. Subrogation. In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
17. Amendments. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
18. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (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), assigns, spouses, heirs and personal and legal representatives. 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 substances 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.
19. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law.
20. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:
(a) if to Indemnitee, to the address set forth on the signature page hereto.
(b) if to the Company, to:
Southland Holdings, Inc.
1100 Kubota Drive
Grapevine, Texas 76051
Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.
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21. Governing Law and Forum. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. 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, (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 and (c) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
22. Headings. The headings of the sections and 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 or interpretation thereof.
23. 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
COMPANY: | ||
Southland Holdings, Inc., | ||
By: | ||
Name: | ||
Title: | ||
INDEMNITEE: | ||
[●] | ||
Address: | ||
[Signature Page to Indemnification Agreement]
13
Exhibit 10.9
PROMISSORY NOTE
$[●] | February 14, 2023 |
FOR VALUE RECEIVED, Southland Holdings, Inc., a Delaware corporation (the “Borrower”), hereby unconditionally promises to pay to the order of [●] (the “Noteholder”) the principal amount of $[●] (the “Loan”), together with all accrued interest thereon, as provided in this Promissory Note (this “Note”).
1. Payment Dates.
(a) Payment Date. The aggregate unpaid principal amount of the Loan, all accrued and unpaid interest, and all other amounts payable under this Note shall be due and payable on February 14, 2028.
(b) Prepayment. The Borrower may prepay the Loan in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.
2. Interest.
(a) Interest Rate. Except as provided in Section 2(b), the principal amount outstanding under this Note from time to time shall bear interest at a rate per annum (the “Interest Rate”) equal to seven percent (7%).
(b) Default Interest. If any amount payable hereunder is not paid when due (without regard to any applicable grace period), whether at stated maturity, by acceleration, or otherwise, such overdue amount shall bear interest at the Interest Rate plus two percent (2%) (the “Default Rate”).
(c) Computation of Interest. All computations of interest hereunder shall be made on the basis of a year of 365/366 days, as the case may be, and the actual number of days elapsed. Interest shall begin to accrue on the Loan on the date of this Note. For any portion of the Loan that is repaid, interest shall not accrue on the date on which such payment is made.
(d) Interest Rate Limitation. If at any time the Interest Rate payable on the Loan shall exceed the maximum rate of interest permitted under applicable law, such Interest Rate shall be reduced automatically to the maximum rate permitted.
3. Payment Mechanics.
(a) Manner of Payment. All payments of principal and interest shall be made in US dollars no later than 12:00 PM on the date on which such payment is due. Such payments shall be made by wire transfer of immediately available funds to the Noteholder’s account at a bank specified by the Noteholder in writing to the Borrower from time to time.
(b) Application of Payments. All payments shall be applied, first, to fees or charges outstanding under this Note, second, to accrued interest, and, third, to principal outstanding under this Note.
(c) Business Day. Whenever any payment hereunder is due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and interest shall be calculated to include such extension. “Business Day” means a day other than Saturday, Sunday, or other day on which commercial banks in New York, NY are authorized or required by law to close.
4. Representations and Warranties. The Borrower represents and warrants to the Noteholder as follows:
(a) Existence. The Borrower is a corporation duly incorporated, validly existing, and in good standing under the laws of the state of its organization. The Borrower has the requisite power and authority to own, lease, and operate its property, and to carry on its business.
(b) Compliance with Law. The Borrower is in compliance with all laws, statutes, ordinances, rules, and regulations applicable to or binding on the Borrower, its property, and business.
(c) Power and Authority. The Borrower has the requisite power and authority to execute, deliver, and perform its obligations under this Note.
(d) Authorization; Execution and Delivery. The execution and delivery of this Note by the Borrower and the performance of its obligations hereunder have been duly authorized by all necessary corporate action in accordance with applicable law. The Borrower has duly executed and delivered this Note.
5. Events of Default. The occurrence and continuance of any of the following shall constitute an “Event of Default” hereunder:
(a) Failure to Pay. The Borrower fails to pay (i) any principal amount of the Loan when due; (ii) any interest on the Loan within five (5) days after the date such amount is due; or (iii) any other amount due hereunder within ten (10) days after such amount is due.
(b) Breach of Representations and Warranties. Any representation or warranty made by the Borrower to the Noteholder herein contains an untrue or misleading statement of a material fact as of the date made; provided, however, no Event of Default shall be deemed to have occurred pursuant to this Section 5(b) if, within thirty (30) days of the date on which the Borrower receives notice (from any source) of such untrue or misleading statement, Borrower shall have addressed the adverse effects of such untrue or misleading statement to the reasonable satisfaction of the Noteholder.
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(c) Bankruptcy; Insolvency.
(i) The Borrower institutes a voluntary case seeking relief under any law relating to bankruptcy, insolvency, reorganization, or other relief for debtors.
(ii) An involuntary case is commenced seeking the liquidation or reorganization of the Borrower under any law relating to bankruptcy or insolvency, and such case is not dismissed or vacated within sixty (60) days of its filing.
(iii) The Borrower makes a general assignment for the benefit of its creditors.
(iv) The Borrower is unable, or admits in writing its inability, to pay its debts as they become due.
(v) A case is commenced against the Borrower or its assets seeking attachment, execution, or similar process against all or a substantial part of its assets, and such case is not dismissed or vacated within sixty (60) days of its filing.
(d) Failure to Give Notice. The Borrower fails to give the notice of Event of Default specified in 6.
6. Notice of Event of Default. As soon as possible after it becomes aware that an Event of Default has occurred, and in any event within two (2) Business Days, the Borrower shall notify the Noteholder in writing of the nature and extent of such Event of Default and the action, if any, it has taken or proposes to take with respect to such Event of Default.
7. Remedies. Upon the occurrence and during the continuance of an Event of Default, the Noteholder may, at its option, by written notice to the Borrower declare the outstanding principal amount of the Loan, accrued and unpaid interest thereon, and all other amounts payable hereunder immediately due and payable; provided, however, if an Event of Default described in Sections 5(c)(i), 5(c)(iii), or 5(c)(iv) shall occur, the outstanding principal amount, accrued and unpaid interest, and all other amounts payable hereunder shall become immediately due and payable without notice, declaration, or other act on the part of the Noteholder.
8. Expenses. The Borrower shall reimburse the Noteholder on demand for all reasonable and documented out-of-pocket costs, expenses, and fees, including the reasonable fees and expenses of counsel, incurred by the Noteholder in connection with the enforcement of the Noteholder’s rights hereunder.
9. Notices. All notices and other communications relating to this Note shall be in writing and shall be deemed given upon the first to occur of (x) deposit with the United States Postal Service or overnight courier service, properly addressed and postage prepaid; (y) transmittal by facsimile or e-mail properly addressed (with written acknowledgment from the intended recipient such as “return receipt requested” function, return e-mail, or other written acknowledgment); or (z) actual receipt by an employee or agent of the other party. Notices hereunder shall be sent to the following addresses, or to such other address as such party shall specify in writing:
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(a) If to the Borrower:
Southland
Holdings, Inc.
Attention: Mr. Cody Gallarda, Chief Financial Officer
1100 Kubota Drive
Grapevine, Texas 76051
(b) If to the Noteholder:
[●]
Attention: [●]
[●]
10. Governing Law. This Note and any claim, controversy, dispute, or cause of action (whether in contract, tort, or otherwise) based on, arising out of, or relating to this Note and the transactions contemplated hereby shall be governed by and construed in accordance with the laws of the State of New York.
11. Waiver of Jury Trial. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY.
12. Successors and Assigns. This Note may not be assigned or transferred by the Noteholder without the prior written consent of the Borrower.
13. Integration. This Note constitutes the entire contract between the Borrower and the Noteholder with respect to the subject matter hereof and supersedes all previous agreements and understandings, oral or written, with respect thereto.
14. Amendments and Waivers. No term of this Note may be waived, modified, or amended, except by an instrument in writing signed by the Borrower and the Noteholder. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.
15. No Waiver; Cumulative Remedies. No failure by the Noteholder to exercise and no delay in exercising any right, remedy, or power hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, or power. The rights, remedies, and powers herein provided are cumulative and not exclusive of any other rights, remedies, or powers provided by law.
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16. Severability. If any term or provision of this Note is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Note or render such term or provision invalid or unenforceable in any other jurisdiction.
17. Counterparts. This Note and any amendments, waivers, consents, or supplements hereto may be executed in counterparts, each of which shall constitute an original, but all of which taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Note by facsimile or in electronic (“pdf” or “tif”) format shall be as effective as delivery of a manually executed counterpart of this Note.
18. Electronic Execution. The words “execution,” “signed,” “signature,” and words of similar import in this Note shall be deemed to include electronic and digital signatures and the keeping of records in electronic form, each of which shall be of the same effect, validity, and enforceability as manually executed signatures and paper-based recordkeeping systems, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 U.S.C. § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), and any other similar state laws based on the Uniform Electronic Transactions Act.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the Borrower has executed this Note as of February 14, 2023.
SOUTHLAND HOLDINGS, INC. | ||
By: | ||
Name: | Gregory Monahan | |
Title: | Chief Executive Officer |
ACKNOWLEDGED AND ACCEPTED BY | ||
[●] | ||
By: | ||
Name: | [●] | |
Title: | [●] |
[Signature Page to Promissory Note]
6
Exhibit 10.10
As of February 14, 2023
Reference is made to that certain Agreement and Plan of Merger, dated as of May 25, 2022 (the “Merger Agreement”), between Legato Merger Corp. II, a Delaware corporation (“Legato”), Legato Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Legato II (“Merger Sub”), and Southland Holdings LLC, a Texas limited liability company (“Southland”). In order to induce the parties to consummate the transactions contemplated by the Merger Agreement (the “Transactions”), the undersigned are agreeing to the terms set forth in this letter agreement (“Agreement”).
The stockholders of Legato set forth on Schedule A attached hereto (collectively, the “Legato Insiders”) agree that, upon consummation of the Transactions, they will transfer to recipients as set forth on Schedule B attached hereto (the “Recipients”) an aggregate of 765,544 shares of common stock (“Shares”), par value $0.0001 per share, of Legato owned by the Legato Insiders in the amounts set forth on Schedule B. The Shares are currently held in escrow pursuant to an Escrow Agreement entered into in connection with Legato’s initial public offering (“Escrow Agreement”) with American Stock Transfer & Trust Company LLC and shall remain in escrow pursuant to the Escrow Agreement in accordance with its terms and each of the Recipients shall execute any necessary joinder agreement to become a party to such Escrow Agreement. The Shares shall be re-issued in the name of the Recipients either in physical certificate form or electronically using Depository Trust Company’s DWAC (Deposit Withdrawal at Custodian) System, as directed by the applicable Recipient. In consideration of the foregoing, the Recipients agree, in both their capacities as members of Southland and as officers and/or managers of Southland, to use the their best efforts to cause Southland to close the Transactions as promptly as possible, hereby acknowledging that all conditions to closing set forth in the Merger Agreement by all parties to the Merger Agreement have been satisfied or otherwise waived.
Each of the Recipients represents and warrants that:
(a) In making the decision to receive the Shares from the Legato Insiders, it has not relied upon any oral or written representations or assurances from the Legato Insiders or any of Legato’s officers, directors, partners or employees or any other representatives or agents. Each Recipient further understands that no federal or state agency has passed upon or made any recommendation or endorsement of the acquisition of the Shares;
(b) This Agreement has been validly authorized, executed and delivered by the Recipient, as applicable, and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Recipient, as applicable, does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Recipient is a party which would prevent the Recipient from performing their obligations hereunder or (ii) any law, statute, rule or regulation to which the Recipient is subject;
(c) The Recipient acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors;
(d) The Recipient is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and acknowledges that the transfer of Shares contemplated hereby is being made in reliance, among other things, on a private placement exemption to “accredited investors” under the Securities Act and similar exemptions under state law;
(e) The Recipient is acquiring the Shares solely for investment purposes, for such person’s own account (and/or for the account or benefit of its members or affiliates, as permitted), and not with a view to the distribution thereof in violation of the Securities Act and the Recipient has no present arrangement to sell the Shares to or through any person or entity except as may be permitted hereunder;
(f) The Recipient is sophisticated in financial matters and able to evaluate the risks and benefits of the investment in the Shares. The Recipient is aware that an investment in the Shares is highly speculative and subject to substantial risks. The Recipient is cognizant of and understands the risks related to the acquisition of the Shares, including those restrictions described or provided for in this Agreement pertaining to transferability. The Recipient is able to bear the economic risk of its investment in the Shares for an indefinite period of time and able to sustain a complete loss of such investment;
(g) No broker, finder or intermediary has been paid or is entitled to a fee or commission from or by the Recipient in connection with the acquisition of the Shares; and
(h) The Recipient understands that the Shares are being offered and sold in reliance on exemptions from the registration requirements under the Securities Act, and analogous provisions in the laws and regulations of various states, and that the Legato Insiders are relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Recipient set forth in this Agreement in order to determine the applicability of such provisions.
Each Legato Insider hereby represents and warrants to the Recipients that:
(a) This Agreement has been validly authorized, executed and delivered by it and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Legato Insider does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Legato Insider is a party which would prevent the Legato Insider from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which the Insider is subject; and
(b) The Legato Insider (or its designees) is the beneficial owner of the Shares and will transfer them to the Recipients immediately after the consummation of the Transactions free and clear of any liens, claims, security interests, options charges or any other encumbrance whatsoever, except for restrictions imposed by federal and state securities laws and the transfer restrictions contained pursuant to the Escrow Agreement.
This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and may be amended or modified only by written instrument signed by all parties. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.
This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, including the conflicts of law provisions and interpretations thereof.
This Agreement may be executed in one or more counterparts, and by the different parties hereto 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. Delivery of an executed signature page by facsimile or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.
[Signature Page Follows]
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Very truly yours, | ||
Eric Rosenfeld | ||
Eric S Rosenfeld 2017 Trust No. 1 | ||
By: | ||
Name: | David Sgro | |
Title: | Trustee | |
Eric S Rosenfeld 2017 Trust No. 2 | ||
By: | ||
Name: | David Sgro | |
Title: | Trustee | |
Gregory Monahan | ||
David D Sgro | ||
Adam Jaffe | ||
Shahrez Nadeem | ||
Brian Pratt |
[Signature Page to Transfer Letter Agreement]
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Accepted and Agreed: | |
RECIPIENTS | |
Frankie S. Renda | |
Rudolph V. Renda | |
Walter Timmothy Winn |
[Signature Page to Transfer Letter Agreement]
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Schedule A
Legato Insiders
Name | Number of Shares to be Transferred | ||
Eric Rosenfeld | 403,414 | ||
Eric S Rosenfeld 2017 Trust No. 1 | 71,851 | ||
Eric S Rosenfeld 2017 Trust No. 2 | 23,950 | ||
David Sgro | 73,693 | ||
Gregory Monahan | 147,386 | ||
Adam Jaffe | 14,739 | ||
Shahrez Nadeem | 1,897 | ||
Brian Pratt | 28,614 | ||
Total | 765,544 | Shares |
Schedule B
Recipients
Name | Number of Shares to be Received | ||
Frankie Renda | 489,948 | ||
Rudy V. Renda | 137,798 | ||
Walter Tim Winn | 137,798 | ||
Total | 765,544 |
[Schedule A to Transfer Letter Agreement]
5
Exhibit 10.11
TO BE EXECUTED AT CLOSING OF BUSINESS COMBINATION
PROMISSORY NOTE
$[●] | [●] |
Southland Holdings, Inc. and its successors and assigns (the “Maker”) promises to pay to the order of [●] (the “Payee”) the principal sum of [●] ($[●]) in lawful money of the United States of America, together with interest on the unpaid principal balance of this Note, on the terms and conditions described below.
1. Payment. The principal balance of this Note, together with all interest accrued thereon, shall be repayable on [●] (the “Maturity Date”); provided however that Maker agrees to make mandatory prepayments on this Note (which shall first be applied to accrued interest and then to principal) from time to time in amounts equal to fifteen percent (15%) of the gross proceeds received by the Maker from any equity lines, forward purchase agreements or other equity financings consummated by Maker prior to the Maturity Date. Such prepayments shall be made directly to Payee at the closing of any such financing. Maker may make partial or whole prepayments at any time prior to the Maturity Date.
2. Interest. Interest shall compound and accrue on the unpaid principal balance of this Note at an annual rate equal to eight percent (8%) until the principal amount of, and all accrued interest on, this Note has been paid in full. If this Note is not repaid on the Maturity Date or such earlier date as to which the repayment obligation may be accelerated pursuant to Section 6, the rate of interest applicable to the unpaid principal amount shall be adjusted to fifteen percent (15%) per annum from the Maturity Date (or such earlier date if the obligation to repay this Note is accelerated) until the date of repayment; provided, that in no event shall the interest rate exceed the Maximum Rate (defined below). If it is determined that, under the laws relating to usury applicable to Maker or the indebtedness evidenced by this Note (“Applicable Usury Laws”), the interest charges and fees payable by Maker in connection herewith or in connection with any other document or instrument executed and delivered in connection herewith cause the effective interest rate applicable to the indebtedness evidenced by this Note to exceed the maximum rate allowed by law (the “Maximum Rate”), then such interest rate shall be lowered to the Maximum Rate.
3. Conversion. On the Maturity Date, the Payee may, in its sole and absolute discretion, convert all or part of the outstanding principal and/or accrued interest of this Note into shares of common stock of the Maker (the “Conversion Shares”) at a per share conversion price equal to 90% of the volume weighted average price of a share of common stock of the Maker for the five trading days immediately prior to the Maturity Date (the “Conversion Price”); provided, however, that Maker shall not be required to issue, and the Payee may not elect to convert the principal and/or accrued interest of this Note into, an aggregate number of Conversion Shares that would exceed the maximum number of shares of common stock permitted to be issued without a vote of Maker’s stockholders under applicable listing rules, unless the Maker’s stockholders have approved such issuance in accordance with the applicable listing rules. The Payee shall provide the Maker with a written notice of the amount of the principal and/or accrued interest of this Note it wants to convert at least two business days prior to the Maturity Date (with any remaining principal and accrued interest to be paid in lawful money of the United States, by wire transfer, to the account of Payee as designed by Payee in the written notice of conversion). This Note does not entitle the Payee to any voting rights or other rights as a stockholder of the Maker except upon conversion of this Note (if at all). The Payee hereby represents and warrants that the Payee is, and at the time of conversion of this Note into Conversion Shares (if at all), the Payee will be an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended.
4. Collection Costs; Application of Payments. In the event this Note is turned over to an attorney for collection, the Maker agrees to pay all reasonable costs of collection, including reasonable attorney’s fees and expenses and all out-of-pocket expenses incurred by the Payee in connection with such collection efforts. All payments shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation) reasonable attorneys’ fees, then to the payment in full of any accrued, unpaid interest and finally to the reduction of the unpaid principal balance of this Note.
5. Events of Default. The following shall constitute Events of Default:
5.1 Failure to Make Required Payments. Failure by Maker to pay the principal of or accrued interest on this Note within five (5) business days following the date when due (either at the Maturity Date or the date of any mandatory prepayment).
5.2 Bankruptcy, Etc. The filing, as to the Maker, (i) of an involuntary petition which is not dismissed within sixty (60) consecutive days; or (ii) of a voluntary petition under the provisions of the Federal Bankruptcy Code or any state statute for the relief of debtors or the Maker shall make a general assignment for the benefit of creditors.
5.3 Change of Control. The consummation of any transaction as a result of which the current equity holders of Maker own less than fifty percent (50%) of the equity interests of Maker after the transaction.
5.4 Sale of Assets. The consummation of a transaction resulting in the sale of all or substantially all of the assets of Maker or by any Maker’s primary operating subsidiaries.
6. Remedies. Upon the occurrence of an Event of Default specified in Section 5, the unpaid principal balance of, all accrued, unpaid interest thereon, and all other sums payable with regard to, this Note shall automatically and immediately become due and payable, in all cases without any action on the part of Payee.
7. Waivers. Maker waives presentment for payment, demand, notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment.
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8. Notices. Any notice called for hereunder shall be deemed properly given if (i) sent by certified mail, return receipt requested, (ii) personally delivered, (iii) dispatched by any form of private or governmental express mail or delivery service providing receipted delivery, or (iv) sent by e-mail, to the following addresses or to such other address as either party may designate by notice in accordance with this Section:
If to Maker:
Southland Holdings, Inc.
[●]
Attention: [●]
Email: [●]
If to Payee:
[●]
[●]
Attention: [●]
Email: [●]
Notice shall be deemed given on the earlier of (i) actual receipt by the receiving party, (ii) the date on which an e-mail transmission was received by the receiving party’s on-line access provider (iii) the date reflected on a signed delivery receipt, or (vi) two (2) business days following tender of delivery or dispatch by express mail or delivery service.
9. Governing Law. This Note will be deemed to have been made and delivered in New York City and will be governed as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York without regard to the principles of conflict of laws. The Maker hereby (i) agrees that any legal suit, action or proceeding arising out of or relating to this shall be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding and the right to assert that such forum is not a convenient forum for such suit, action or proceeding, (iii) waives trial by jury and (iv) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The Maker further agrees to accept and acknowledge service or any and all process that may be served in any such suit, action or proceeding in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York.
10. Severability. Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
11. Benefit. This Note shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.
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IN WITNESS WHEREOF, the Maker hereby executes this Note on the day and year first above written.
Southland Holdings, Inc. | ||
By: | ||
Name: | [●] | |
Title: | [●] |
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Exhibit 10.12
SHARE TRANSFER AGREEMENT
This Share Transfer Agreement (“Agreement”), dated February __, 2023, between ________ (the “Holder”) and _____ and ______ (collectively, the “Insiders”).
RECITALS:
A. Legato Merger Corp. II, a Delaware corporation (the “Company” or “SPAC”), will hold an annual meeting of its stockholders (the “Meeting”) to consider and act upon, among other matters, approval of a proposed initial business combination between the Company and Southland Holdings LLC (“Business Combination”).
B. The Holder is willing to not to seek redemption, or reverse any previously submitted redemption demand, of shares issued in SPAC’s initial public offering (“Public Shares”) at the Meeting upon the terms set forth herein.
IT IS AGREED:
1. Non-Redemption. The Holder hereby agrees to either not request redemption or to reverse any previously submitted redemption demand with respect to an aggregate of ______ Public Shares (“Non-Redeemed Shares”) it holds at the Meeting; provided that in no event will Holder be required to hold a number of Public Shares representing in excess of 9.9% of the total number of shares of \common stock of the Company following the consummation of the Business Combination. The Holder shall have no obligation to hold any Public Shares following the consummation of the Business Combination.
2. Insider Stock Transfers.
(a) In consideration of the agreement set forth in Section 1 hereof, the Insiders (or their designees) will, immediately after the closing of a Business Combination (“Closing”), transfer to the Holder an aggregate of _____ shares of the Company’s common stock (“Founder Shares”) beneficially owned by them (or their designees) if such Non-Redeemed Shares are not redeemed at the Meeting. The Founder Shares shall be re-issued in the name of the Holder either in physical certificate form or electronically using Depository Trust Company’s DWAC (Deposit Withdrawal at Custodian) System, as directed by the Holder.
(b) The Insiders hereby assign to the Holder their registration rights pursuant to that certain Registration Rights Agreement, dated as of November 22, 2021, with respect to the Founder Shares being transferred to the Holder hereunder.
(c) The Holder agrees that the Founder Shares to be received hereby shall be held in escrow in accordance with the terms of that certain Escrow Agreement, dated as of November 22, 2021 (“Escrow Agreement”). Except for the transfer restrictions set forth in the Escrow Agreement, the Insiders acknowledge and agree that the Founder Shares being transferred hereby shall not be subject to any earn-outs, forfeitures, transfer restrictions, amendments or arrangements and the terms and conditions applicable to the Founder Shares being transferred to the Holder hereunder shall not be changed as a result of any such earn-outs, forfeitures, transfer restrictions, amendments or arrangements.
(d) If at any time prior to the Meeting the number of outstanding shares of common stock of the Company is increased or decreased by a consolidation, combination, split or reclassification of the common stock or other similar event, then, as of the effective date of such consolidation, combination, split, reclassification or similar event, all share numbers referenced in this Agreement shall be adjusted in proportion to such increase or decrease in outstanding common stock of the Company.
3. Representations of Holder. Holder hereby represents and warrants to the Insiders that:
(a) Holder, in making the decision to receive the Founder Shares from the Insiders, has not relied upon any oral or written representations or assurances from the Insiders or any of SPAC’s officers, directors, partners or employees or any other representatives or agents. Holder further understands that no federal or state agency has passed upon or made any recommendation or endorsement of the acquisition of the Founder Shares.
(b) This Agreement has been validly authorized, executed and delivered by the Holder and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Holder does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Holder is a party which would prevent the Holder from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which the Holder is subject.
(c) The Holder acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with the Holder’s own legal counsel and investment and tax advisors.
(d) Holder is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and acknowledges that the transfer of Founder Shares contemplated hereby is being made in reliance, among other things, on a private placement exemption to “accredited investors” under the Securities Act and similar exemptions under state law.
(e) Holder is acquiring the Founder Shares solely for investment purposes, for such Holder’s own account (and/or for the account or benefit of its members or affiliates, as permitted), and not with a view to the distribution thereof in violation of the Securities Act and Holder has no present arrangement to sell the Founder Shares to or through any person or entity except as may be permitted hereunder.
(f) Holder is sophisticated in financial matters and able to evaluate the risks and benefits of the investment in the Founder Shares. Holder is aware that an investment in the Founder Shares is highly speculative and subject to substantial risks. Holder is cognizant of and understands the risks related to the acquisition of the Founder Shares, including those restrictions described or provided for in this Agreement pertaining to transferability. Holder is able to bear the economic risk of its investment in the Holder for an indefinite period of time and able to sustain a complete loss of such investment.
(g) No broker, finder or intermediary has been paid or is entitled to a fee or commission from or by Holder in connection with the acquisition of the Founder Shares.
(h) Holder understands that the Founder Shares are being offered and sold to Holder in reliance on exemptions from the registration requirements under the Securities Act, and analogous provisions in the laws and regulations of various states, and that the Insiders are relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth in this Agreement in order to determine the applicability of such provisions.
4. Insider Representations. Each of the Insiders hereby represents and warrants to the Holder that:
(a) This Agreement has been validly authorized, executed and delivered by it and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Insider does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Insider is a party which would prevent the Insider from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which the Insider is subject.
(b) The Insider (or its designees) is the beneficial owner of the Founder Shares and will transfer them to the Holders immediately after the Closing free and clear of any liens, claims, security interests, options charges or any other encumbrance whatsoever, except for restrictions imposed by federal and state securities laws and the transfer restrictions referred to in Section 2(c) hereof.
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(c) Neither the Insiders nor the Company have disclosed to the Holder any material non-public information with respect to the Company.
5. Disclosure; Exchange Act Filings. As soon as practicable after execution of this Agreement, the Company will file a Current Report on Form 8-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), reporting the execution of this Agreement. The parties to this Agreement shall cooperate with one another to assure that such disclosure is accurate. The Insiders agree that the name of the Holder shall not be included in any public disclosures related to this Agreement unless required by applicable law, regulation or stock exchange rule.
6. Entire Agreement; Amendment. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and may be amended or modified only by written instrument signed by all parties. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, including the conflicts of law provisions and interpretations thereof.
8. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto 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. Delivery of an executed signature page by facsimile or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
9. Termination. This Agreement shall become null and void and of no force and effect if any of the Non-Redeemed Shares held by the Holder are submitted to SPAC’s transfer agent with valid instructions to redeem such Public Shares at the Meeting and such instructions are not withdrawn by the date of the Meeting other than as provided for in Section 1. Notwithstanding any provision in this Agreement to the contrary, the Insiders’ obligation to transfer the Founder Shares to the Holder shall be conditioned on the Closing occurring.
10. Remedies. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement.
11. Acknowledgement; Waiver. Holder (i) acknowledges that the Insider may possess or have access to material non-public information which has not been communicated to the Holder; (ii) hereby waives any and all claims, whether at law, in equity or otherwise, that he, she, or it may now have or may hereafter acquire, whether presently known or unknown, against the Insiders or any of the SPAC’s officers, directors, employees, agents, affiliates, subsidiaries, successors or assigns relating to any failure to disclose any non-public information in connection with the transaction contemplated by this Agreement, including without limitation, any claims arising under Rule 10-b(5) of the Securities and Exchange Act of 1934; and (iii) is aware that the Insider is relying on the truth of the representations set forth in Section 3 of this Agreement and the foregoing acknowledgement and waiver in clauses (i) and (ii) above, respectively, in connection with the transactions contemplated by this Agreement.
12. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.
[Signature Page Follows]
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INSIDERS | |||
By: | |||
Name: | |||
Title: | |||
HOLDER | |||
By: | |||
Name: | |||
Title: |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial information is provided to aid you in your analysis of the financial aspect of the Merger, including the following:
● | the consummation of the Merger; and |
● | the issuance of Legato II Common Stock. |
The unaudited pro forma condensed combined financial information presents the combination of the financial information of Southland and Legato II, adjusted to give effect to the Merger. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The unaudited pro-forma condensed combined balance sheet as of September 30, 2022, gives effect to the Merger as if it had been consummated on September 30, 2022, and unaudited pro-forma condensed combined statement of operations for the year and nine months ended December 31, 2021 and September 30, 2022, respectively, gives effect to the Merger as if it had occurred on January 1, 2021. The pro forma information reflects information prior to the reversal of certain redemption requests. Updated pro forma financial information will be provided once the information relating to such reversals are finalized.
The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with:
● | the related notes to the unaudited pro forma condensed combined financial statements; |
● | the historical unaudited condensed financial statements of Southland as of and for the nine months ended September 30, 2022, and the related notes, included in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023; |
● | the historical audited financial statements of Southland as of and for the year ended December 31, 2021, and the related notes, included in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023; |
● | the historical unaudited condensed financial statements of Legato II as of and for the nine months ended September 30, 2022, and the related notes, included in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023; |
● | the historical audited financial statements of Legato II as of and for the year ended December 31, 2021, and the related notes, included in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023; and |
● | the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information relating to Southland and Legato II included in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023. |
The pro forma information reflects information prior to the reversal of certain redemption requests. Updated pro forma financial information will be provided once the information relating to such reversals are finalized.
The Merger is a capital transaction in substance and not a business combination under ASC 805. As a result, Southland will be treated as the accounting acquirer and Legato II will be treated as the acquired company for financial reporting purposes per ASC 805. Accordingly, for accounting purposes, the Merger will be treated similar to an equity contribution in exchange for the issuance of Legato II Common Stock and a certain amount of cash, as disclosed in the amended proxy statement/prospectus filed with the Commission on Form S-4/A on January 27th, 2023. The net assets of Legato II, which are primarily comprised of cash, will be stated at historical cost with no goodwill or other intangible assets recorded. This determination was primarily based on the following:
● | Southland’s pre-Merger equityholders considered in the aggregate are expected to have approximately 77.8% of the outstanding common stock of Legato II. If Southland’s pre-Merger equityholders considered in the aggregate attain any of the additional earnout targets they will have a larger percentage of the outstanding common stock of Legato II; |
● | Southland’s senior management will continue to compose the senior management of New Southland. No current employees of Legato II will become employees of New Southland; |
● | the relative revenue, asset base, and general operational size of Southland compared to Legato II; |
● | Southland’s operations will comprise all of New Southland’s operations after the Merger; and |
● | Southland will nominate five of the seven members of New Southland’s board of directors. |
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Accordingly, for accounting purposes, the financials statements of New Southland will represent a continuation of the financial statements of Southland, and the net assets of New Southland will be stated at historical cost, with no goodwill or other intangible assets recorded.
On May 25, 2022, Legato entered into the Merger Agreement with Merger Sub and Southland. Pursuant to the Merger Agreement, Merger Sub will merge with and into Southland, with Southland surviving the merger as a wholly-owned subsidiary of Legato.
Pursuant to the Merger Agreement, at the Effective Time, one hundred percent of the outstanding equity interests in Southland will be converted into Legato II Common Stock. One percent of the equity interests in Southland converts into 337,931.0345 shares of Legato II Common Stock.
Pursuant to the Merger Agreement, at the Effective Time, the Southland Members will have a right to receive $50 million or, in lieu thereof, at or prior to the Effective Time, Southland may distribute such amount to the Southland Members, on a pro rata basis. If there are not enough funds to satisfy paying such amount, such amount will be carried as a liability on the balance sheet of New Southland to be satisfied at a later date.
Proceeds from the Merger will be used to fund New Southland’s organic growth plans, working capital requirements, and needs of New Southland.
Upon consummation of the Merger, Southland will become a wholly-owned subsidiary of Legato II, and Legato II will have a name change to Southland Holdings, Inc. The former equityholders and stockholders, as applicable, of Southland and Legato II will become securityholders of New Southland. The post-Merger ownership of New Southland Common Stock is expected as follows.
Share Ownership of New Southland | |||||||||
Number of Shares |
% Ownership |
||||||||
Equityholders of Southland prior to the Merger | 33,793,111 | 77.8 | % | ||||||
Legato II public stockholders | 1,332,600 | 3.1 | % | ||||||
Shares held by Legato II Initial Stockholders and other advisors to Legato II | 8,311,000 | 19.1 | % | ||||||
Total | 43,436,711 | 100.0 | % |
(1) | Excludes the potentially dilutive impact of the Legato II Warrants |
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Immediately following the closing of the Merger, 13,800,000 Legato II Public Warrants and 585,500 Legato II Private Placement Warrants will be issued and outstanding. If all of these warrants were to be exercised, the post-Merger ownership of New Southland Common Stock by the Legato II stockholders would be as follows.
Share Ownership of New Southland | |||||||||
Number of Shares |
% Ownership |
||||||||
Equityholders of Southland prior to the Merger | 33,793,103 | 58.4 | % | ||||||
Legato II public stockholders | 15,132,600 | 26.2 | % | ||||||
Shares held by Legato II Initial Stockholders and other advisors to Legato II | 8,896,500 | 15.4 | % | ||||||
Total | 57,822,203 | 100.0 | % |
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The unaudited condensed combined pro forma adjustments reflecting the consummation of the Merger are based on certain estimates and assumptions. These estimates and assumptions are based on information available as of the dates of these unaudited pro forma condensed combined financial statements and may be revised as additional information becomes available. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Merger. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined entity will experience.
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UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2022
(in thousands, except per share data)
Transaction | Pro | ||||||||||||||||
Southland | Legato II | Accounting | Forma | ||||||||||||||
(Historical) | (Historical) | Adjustments | Combined | ||||||||||||||
Cash and cash equivalents | $ | 43,306 | $ | 422 | $ | 281,507 | 2 | b | $ | 47,380 | |||||||
(270,292 | ) | 2 | d | ||||||||||||||
2,497 | 2 | i | |||||||||||||||
(9,660 | ) | 2 | a | ||||||||||||||
(400 | ) | 2 | g | ||||||||||||||
Restricted cash | 14,218 | - | - | 14,218 | |||||||||||||
Accounts receivable, net | 148,125 | - | - | 148,125 | |||||||||||||
Retainage receivables | 116,122 | - | - | 116,122 | |||||||||||||
Contract assets | 447,549 | - | - | 447,549 | |||||||||||||
Prepaid expenses | - | 246 | - | 246 | |||||||||||||
Other current assets | 23,976 | - | - | 23,976 | |||||||||||||
Total current assets | 793,296 | 668 | 3,652 | 797,616 | |||||||||||||
Investments held in trust account | - | 281,507 | (281,507 | ) | 2 | b | - | ||||||||||
2,497 | 2 | i | |||||||||||||||
(2,497 | ) | 2 | i | ||||||||||||||
Property and equipment, net | 126,893 | - | - | 126,893 | |||||||||||||
Right-of-use assets | 14,636 | - | - | 14,636 | |||||||||||||
Investments – unconsolidated entities | 110,395 | - | - | 110,395 | |||||||||||||
Investments – limited liability companies | 2,590 | - | - | 2,590 | |||||||||||||
Investments – private equity | 3,345 | - | - | 3,345 | |||||||||||||
Goodwill | 1,528 | - | - | 1,528 | |||||||||||||
Intangible assets, net | 2,470 | - | - | 2,470 | |||||||||||||
Other noncurrent assets | 3,626 | - | - | 3,626 | |||||||||||||
Total noncurrent assets | 265,483 | 281,507 | (281,507 | ) | 265,483 | ||||||||||||
Total assets | 1,058,779 | 282,175 | (277,855 | ) | 1,063,099 | ||||||||||||
Accounts payable | $ | 132,806 | $ | 33 | $ | - | $ | 132,839 | |||||||||
Retainage payable | 34,533 | - | - | 34,533 | |||||||||||||
Franchise tax payable | - | 103 | - | 103 | |||||||||||||
Income taxes payable | - | 25 | - | 25 | |||||||||||||
Accrued liabilities | 124,371 | - | - | 124,371 | |||||||||||||
Current portion of long-term debt | 44,678 | - | - | 44,678 | |||||||||||||
Short-term lease liabilities | 16,444 | - | - | 16,444 | |||||||||||||
Contract liabilities | 81,930 | - | - | 81,930 | |||||||||||||
Total current liabilities | 434,762 | 161 | - | 434,923 | |||||||||||||
Long-term debt | 219,713 | - | 24,400 | 2 | c | 244,113 | |||||||||||
Deferred underwriting commissions | - | 9,660 | (9,660 | ) | 2 | a | - | ||||||||||
Long-term lease liabilities | 9,750 | - | - | 9,750 | |||||||||||||
Deferred tax liabilities | 5,601 | - | - | 5,601 | |||||||||||||
Other noncurrent liabilities | 48,579 | - | 50,000 | 2 | f | 154,268 | |||||||||||
55,689 | 2 | h | |||||||||||||||
Total long-term liabilities | 283,643 | 9,660 | 120,429 | 413,732 | |||||||||||||
Total liabilities | 718,405 | 9,821 | 120,429 | 848,655 |
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UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET — (Continued)
AS OF SEPTEMBER 30, 2022
(in thousands, except per share data)
Transaction | Transaction Pro | |||||||||||||||||
Southland | Legato II | Accounting | Forma | |||||||||||||||
(Historical) | (Historical) | Adjustments | Combined | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||
Common stock subject to possible redemption, $0.0001 par value; 50,000,000 shares authorized, 27,600,000 shares at redemption value at $10.20 as of September 30, 2022 | - | 281,383 | (281,383 | ) | 2 | d | - | |||||||||||
2,497 | 2 | i | ||||||||||||||||
(2,497 | ) | 2 | i | |||||||||||||||
Noncontrolling interest | 10,155 | - | - | 10,155 | ||||||||||||||
Members’ capital | 308,422 | - | (308,422 | ) | 2 | e | - | |||||||||||
Preferred stock | 24,400 | - | (24,400 | ) | 2 | c | - | |||||||||||
Common stock, $0.0001 par value; 50,000,000 shares authorized, 8,311,000 non-redeemable shares issued and outstanding (excluding 27,600,000 shares subject to possible redemptions) | - | 1 | (1 | ) | 2 | d | - | |||||||||||
Additional paid-in capital | - | - | 281,383 | 2 | d | 272,011 | ||||||||||||
(270,291 | ) | 2 | d | |||||||||||||||
2,497 | 2 | i | ||||||||||||||||
308,422 | 2 | e | ||||||||||||||||
(50,000 | ) | 2 | f | |||||||||||||||
Retained earnings | - | (9,030 | ) | (400 | ) | 2 | g | (65,119 | ) | |||||||||
(55,689 | ) | 2 | h | |||||||||||||||
Accumulated other comprehensive income | (2,603 | ) | - | - | (2,603 | ) | ||||||||||||
Total equity | 340,374 | (9,029 | ) | (116,901 | ) | 214,444 | ||||||||||||
Total liabilities and equity | $ | 1,058,779 | $ | 282,175 | $ | (277,855 | ) | $ | 1,063,099 | |||||||||
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UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
(in thousands, except per share data)
(Amounts in thousands) | Southland (Historical) |
Legato II (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
||||||||||||||
Revenue | $ | 866,627 | $ | - | $ | - | $ | 866,627 | ||||||||||
Cost of construction | 761,549 | - | - | 761,549 | ||||||||||||||
Gross profit | 105,078 | - | - | 105,078 | ||||||||||||||
Selling, general, and administrative expenses | 43,395 | 1,026 | - | 44,421 | ||||||||||||||
Operating income (loss) | 61,683 | (1,026 | ) | - | 60,657 | |||||||||||||
Gain on investments, net | 79 | - | - | 79 | ||||||||||||||
Other income, net | (936 | ) | - | - | (936 | ) | ||||||||||||
Interest expense | 6,317 | - | - | 6,317 | ||||||||||||||
Investment income from investments in trust account | - | (1,786 | ) | 1 | a | 1,786 | 1 | a | - | |||||||||
Non-recurring transaction closing costs | - | - | 400 | 1 | b | 400 | ||||||||||||
Earnings (loss) before income taxes | 56,223 | 760 | (2,186 | ) | 54,797 | |||||||||||||
Income tax expense (benefit) | 13,745 | 344 | - | 14,089 | ||||||||||||||
Net income | 42,478 | 416 | (2,186 | ) | 40,708 | |||||||||||||
Net income (loss) attributable to noncontrolling interests | 1,474 | - | - | 1,474 | ||||||||||||||
Net income attributable to Southland Holdings | $ | 41,004 | $ | 416 | $ | (2,186 | ) | $ | 39,234 | |||||||||
Weighted average shares outstanding – basic and diluted(a) | 43,437 | 43,437 | ||||||||||||||||
Income (loss) per share attributable to common shareholders – basic and diluted | $ | 0.90 |
(a) | Diluted weighted average shares outstanding excludes the effect of the Earnout Consideration Shares which are contingent upon future events occurring. |
For 2022, if New Southland has Adjusted EBITDA equal to or greater than $125.0 million, 3,448,276 Earnout Consideration Shares will be allocated among the holders of Southland membership interests. If New Southland has Adjusted EBITDA equal to or greater than $145.0 million, the number of Earnout Consideration Shares allocated among the holders of Southland membership interests will be increased to 5,172,414. If New Southland does not reach $125.0 million in 2022 Adjusted EBITDA, no Earnout Consideration Shares will be earned.
For 2023, if New Southland has Adjusted EBITDA equal to or greater than $145.0 million, 3,448,276 Earnout Consideration Shares will be allocated among the holders of Southland membership interests. If New Southland has Adjusted EBITDA equal to or greater than $165.0 million, the number of Earnout Consideration Shares allocated among the holders of Southland membership interests will be increased to 5,172,414. If New Southland does not reach $145.0 million in 2023 Adjusted EBITDA, no Earnout Consideration Shares will be earned.
6
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(in thousands, except per share data)
Transaction | Pro | |||||||||||||||
Southland | Legato II | Accounting | Forma | |||||||||||||
(Amounts in thousands) | (Historical) | (Historical) | Adjustments | Combined | ||||||||||||
Revenue | $ | 1,279,186 | $ | — | $ | — | $ | 1,279,186 | ||||||||
Cost of construction | 1,164,998 | — | — | 1,164,998 | ||||||||||||
Gross profit | 114,188 | — | — | 114,188 | ||||||||||||
Selling, general, and administrative expenses | 58,136 | 163 | — | 58,299 | ||||||||||||
Operating income (loss) | 56,052 | (163 | ) | — | 55,889 | |||||||||||
Gain on investments, net | (898 | ) | — | — | (898 | ) | ||||||||||
Other income, net | (2,780 | ) | — | — | (2,780 | ) | ||||||||||
Interest expense | 7,255 | — | — | 7,255 | ||||||||||||
Investment income from investments in trust account | — | (24 | ) | 24 | 1 | a | — | |||||||||
Non-recurring transaction closing costs | - | - | 400 | 1 | b | 400 | ||||||||||
Earnings (loss) before income taxes | 52,475 | (139 | ) | (424 | ) | 51,912 | ||||||||||
Income tax expense | 10,945 | - | - | 10,945 | ||||||||||||
Net income | 41,530 | (139 | ) | (424 | ) | 40,967 | ||||||||||
Net income (loss) attributable to noncontrolling interests | 2,810 | — | — | 2,810 | ||||||||||||
Net income attributable to Southland Holdings | $ | 38,720 | $ | (139 | ) | $ | (424 | ) | $ | 38,157 | ||||||
Weighted average shares outstanding – basic and diluted (a) | 43,437 | 43,437 | ||||||||||||||
Income (loss) per share attributable to common shareholders- basic and diluted | $ | 0.88 |
(a) | Diluted weighted average shares outstanding excludes the effect of the Earnout Consideration Shares which are contingent upon future events occurring. |
For 2022, if New Southland has Adjusted EBITDA equal to or greater than $125.0 million, 3,448,276 Earnout Consideration Shares will be allocated among the holders of Southland membership interests. If New Southland has Adjusted EBITDA equal to or greater than $145.0 million, the number of Earnout Consideration Shares allocated among the holders of Southland membership interests will be increased to 5,172,414. If New Southland does not reach $125.0 million in 2022 Adjusted EBITDA, no Earnout Consideration Shares will be earned.
For 2023, if New Southland has Adjusted EBITDA equal to or greater than $145.0 million, 3,448,276 Earnout Consideration Shares will be allocated among the holders of Southland membership interests. If New Southland has Adjusted EBITDA equal to or greater than $165.0 million, the number of Earnout Consideration Shares allocated among the holders of Southland membership interests will be increased to 5,172,414. If New Southland does not reach $145.0 million in 2023 Adjusted EBITDA, no Earnout Consideration Shares will be earned.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1. Basis of Presentation
The Business Combination will be accounted for as a capital transaction in substance and not as a business combination under ASC 805 for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of Southland, and the net assets of Southland will be stated at historical cost, with no goodwill or other intangible assets recorded.
The unaudited pro forma condensed combined balance sheet as of September 30, 2022 assumes that the Merger and related transactions occurred on September 30, 2022. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021, give pro forma effect of the Merger as if it had occurred on January 1, 2021.
The unaudited pro forma condensed combined balance sheet and statements of operations are based on the assumption that there are no adjustments for the outstanding Legato II Warrants as such securities are not exercisable until 60 days after the closing of the Merger.
If actual facts differ from these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different.
The unaudited condensed combined pro forma adjustments reflecting the consummation of the Merger are based on certain estimates and assumptions. These estimates and assumptions are based on information available as of the dates of these unaudited pro forma condensed combined financial statements and may be revised as additional information becomes available. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Merger.
8
Note 2. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The unaudited condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X to depict the accounting for the Merger. The information has been prepared to illustrate the effect of the Merger and is for informational purposes only.
Adjustments to the Unaudited Condensed Combined Statements of Operations
(1) | Represents pro forma adjustments to the condensed combined statement of operations |
a. | Represents the pro forma adjustment to eliminate investment income to the investment held in the Trust Account. |
b. | Included within this amount is approximately $0.4 million of legal, financial advisory and other professional fees related to the Business Combination expected to be incurred upon the closing of the Merger transaction. |
Adjustments to the Unaudited Condensed Combined Balance Sheet
(2) | Represents pro forma adjustments to the condensed combined balance sheet: |
a. | Reflects the deferred underwriting commissions costs of $9.6 million incurred in consummating the Business Combination by Legato II.. |
b. | Reflects the reclassification of cash and investments held in the trust account that becomes available following the business combination. |
c. | As part of the transaction, $24.4 million in Southland’s preferred stock is being converted to long-term debt. |
d. | Reflects a pro forma adjustment for the reorganization of the equity section and actual redemptions of common stock shares. |
e. | Reflects the equity reorganization from Members’ capital to additional paid-in capital. |
f. | Reflects the $50.0 million due to Southland Members per the Merger agreement.. |
g. | Included within this amount is approximately $0.4 million of legal, financial advisory and other professional fees related to the Business Combination expected to be incurred upon the closing of the Merger transaction.. |
h. |
To record the financial liability related to the Earnout Shares granted to the Southland Members in the amount of $55.7 million pursuant to the 2022 Base Target, 2022 Bonus Target, 2023 Base Target, and 2023 Bonus Target. We believe that the probability of reaching each target is as follows:
2022 Base Target – 90% 2022 Bonus Target – 0% 2023 Base Target – 70% 2023 Bonus Target – 10%.
Our probability of reaching specific targets is based on forecasted future results.
The fair value of the financial liability has been estimated using the fair value of the shares expected to be issued, discounted at the weighted-average cost of capital of Southland as of September 30, 2022.
The Earnout Shares represent contingent consideration paid to the Southland Members. The Earnout Shares are subject to accounting under the guidance of ASC 815-40. As such, subsequent changes in fair value will impact earnings in future periods as the Earnout Shares are either earned or forfeited. |
i. | Reflects necessary adjustments to the trust account balance in presenting the amount of cash redeemed out of trust and available to New Southland. |
9
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