Exhibit 10.5
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the “Agreement”) is made as of June 6, 2023, by and among Beneficient Company Holding, L.P., a Delaware limited partnership (“BCH”), The Beneficient Company Group, L. P., a Delaware limited partnership and the general partner of BCH (“BCG”), and Beneficient Holdings, Inc. (the “Holder”). BCH, BCG and Holder are each referred to as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein have the meanings set forth in the Seventh Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P. (as amended, the “BCH LPA”).
RECITALS
WHEREAS, Holder owns Preferred Series A Subclass 1 Unit Accounts in BCH;
WHEREAS, BCG, Ben Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of BCG, Ben Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of BCG and Avalon Acquisition, Inc., a Delaware corporation (“Avalon”) have entered into that certain Business Combination Agreement dated September 21, 2022 (the “BCA”) which provides, among other thing, that prior to the closing of the transactions contemplated by the BCA, BCG will be recapitalized, including, among other things: (i) the Third Amended and Restated Limited Partnership Agreement of The Beneficient Company Group, L.P. (the “BCG LPA”) will be amended to create a new subclass of BCG common units referred to as Class B Common Units (the “BCG Class B Common Units”), and the existing common units of BCG will be renamed as Class A Common Units (the “BCG Class A Common Units”); (ii) Holder, together with certain other holders of the Preferred Series A Subclass 1 Unit Accounts of BCH will convert certain Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units of BCH; and (iii) such Class S Ordinary Units will be contributed to BCG in exchange for BCG Class A Common Units or BCG Class B Common Units, as applicable; and
WHEREAS, Holder desires to convert a portion of Holder’s Preferred Series A Subclass 1 Unit Accounts to Class S Ordinary Units and to contribute such Class S Ordinary Units to BCG in exchange for BCG Class B Common Units in accordance with the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the Parties hereby agree as follows:
| | (a) | Effective as of the date of this Agreement, Holder, pursuant to Section 7.08 of the BCH LPA, without any limitation, including, among other things, any applicable Preferred Series A Subclass 1 Unit Conversion Amount, converts $177,194,830 of Holder’s Sub-Capital Account balance of Holder’s Preferred Series A Subclass 1 Unit Accounts (the “Applicable Conversion Amount”) into Class S Ordinary Units at the following conversion rate: (i) the Applicable Conversion Amount divided by (ii) $12.50. |
| | (b) | In connection with such conversion, the Sub-Capital Account balance and the Hypothetical Preferred Opening Capital Account Balance associated with such Preferred Series A Subclass 1 Unit Accounts shall be reduced by the Applicable Conversion Amount and the Capital Account balance of the newly issued Class S Ordinary Units issued to Holder shall be credited with the Applicable Conversion Amount. |
| | (c) | The Parties acknowledge that such newly issued Class S Ordinary Units may be contemporaneously exchanged into Common Units in accordance with Section 7.06 of the BCH LPA. |
| | (d) | BCG, in its capacity as the General Partner of BCH, hereby (i) agrees to the conversion of such Preferred Series A Subclass 1 Unit Accounts into the Class S Ordinary Units, and (ii) waives any limitation on such conversion, including, the provisions of Section 7.08 of the BCH LPA. |
