CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Policies and Procedures for Approval of Related Party Transactions
We have adopted a written policy with respect to the review, approval and ratification of related party transactions. Under the policy, our Audit Committee is responsible for reviewing and approving related party transactions. In the course of its review and approval of related party transactions, our Audit Committee considers the relevant facts and circumstances to decide whether to approve such transactions. In particular, our policy requires our Audit Committee to consider, among other factors it deems appropriate:
whether the transaction was undertaken in the ordinary course of business;
whether the transaction was initiated by the Company or the Related Party;
the availability of other sources of comparable products or services;
whether the transaction is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party;
the purpose of, and the potential benefits to the Company;
the approximate dollar value of the amount involved in the transaction, particularly as it relates to the related party;
the related party’s interest in the transaction; and
any other information regarding the transaction or the related party that would be material to investors in light of the circumstances of the particular transaction.
The Audit Committee may only approve those transactions that are in our best interests and those of our shareholders, as the Audit Committee determines in good faith.
In addition, under our Code of Ethics our employees, directors and executive officers must disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
Related Party Transactions
History2023 Secondary Common Stock Offering
On March 10, 2023, certain affiliates of the Company and Partnership with Oaktree and Dean Solon
Dean Solon, the Founder, foundedCompany’s founder completed a public offering of 24,501,650 shares of Class A common stock (the “Selling Stockholders”). The offering was made pursuant to the businessCompany’s automatic shelf registration statement on Form S-3 (File No. 333-268610) that became effective under the Securities Act when filed with the SEC on November 30, 2022, and a related prospectus supplement dated March 7, 2023. The Company did not receive any of the Company in 1996. On May 25, 2017, Oaktree Power Opportunities Fund IV (Delaware) Holdings, L.P. (“Oaktree”) purchased a majorityproceeds from the sale of the ownership of Shoals Parent from Dean Solon, who continued to be a significant shareholder of the Company until recently. Following our IPO and a follow-on offering, Oaktree sold all of itsClass A common stock inby the Company.Selling Stockholders. However, pursuant to a Registration Rights Agreement that provided the Selling Stockholders and others with customary long form and short form demand registration and other rights, we bore the costs associated with the sale of shares of Class A common stock by the Selling Stockholders, other than underwriting discounts and commissions, which were approximately $1.2 million.
Shoals Parent LLC AgreementInterests - Redemptions and Conversions
In connection with the IPO, Shoals, the FounderCompany’s founder and certain executive officers, employees and their respective permitted transferees (collectively, the “Continuing Equity Owners,” which, for the avoidance of doubt, does not include Oaktree)Oaktree Power Opportunities Fund IV (Delaware) Holdings, L.P.) entered into the third amended and restated limited liability company agreement of Shoals Parent.Parent LLC (a former subsidiary of the Company). Certain of our former directors, executive officers, and beneficial owners of more than 5% of any class of our capital stock were Continuing Equity Owners and thus were parties to the Shoals Parent LLC Agreement. The Shoals Parent LLC Agreement was most recently amended on December 6, 2022.
As a result of certain organizational transactions in connection with our IPO, including the entry into the Shoals Parent LLC Agreement, we hold LLC Interests and are the sole manager of Shoals Parent. Accordingly, we operate and control all of the business and affairslimited liability agreement of Shoals Parent and, through Shoals Parent and its operating subsidiaries, conduct our business.LLC.
Shoals is a holding company and its principal asset is a controlling equity interest in Shoals Parent. As such, Shoals has no independent means of generating revenue. Shoals Parent is treated as a partnership and is not subject to federal income tax; rather, Shoals Parent’s taxable income is passed through to its members, including Shoals, and subject to federal income tax at the member level. Accordingly, Shoals will incur income taxes on its allocable share of any net taxable income of Shoals Parent and will also incur expenses related to its operations. Pursuant to the Shoals Parent LLC Agreement, Shoals Parent will make cash distributions to the owners of LLC