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a wholly-owned subsidiary in the State of Delaware to manage our benefit plans. The following chart depicts our current organizational structu See “ —Our Manager ” for |
more details regarding the ownership of our manager. 9 OUR MANAGER Overview of Our Manager Our manager, 1847 Partners LLC, is a Delaware |
limited liability company. It has two classes of limited liability interests known as Class A interests and Class B interests. The Class |
A interests, which give the holder the right to the profit allocation received by our manager as a result of holding our allocation shares, |
are owned in their entirety by 1847 Partners Class A Member LLC; and the Class B interests, which give the holder the right to all other |
profits or losses of our manager, including the management fee payable to our manager by us, are owned in their entirety by 1847 Partners |
Class B Member LLC. 1847 Partners Class A Member LLC is owned 52% by Ellery W. Roberts, our Chief Executive Officer, 38% by 1847 Founders |
Capital LLC, which is owned by Edward J. Tobin, and approximately 9% by Louis A. Bevilacqua, the managing member of Bevilacqua PLLC, our |
outside counsel, with the balance being owned by a former contractor to such law firm. 1847 Partners Class B Member LLC is owned 54% by |
Ellery W. Roberts, 36% by 1847 Founders Capital LLC and 10% by Louis A. Bevilacqua. Mr. Roberts is also the sole manager of both entities. |
In the future, Mr. Roberts may cause 1847 Partners Class A Member LLC or 1847 Partners Class B Member LLC to issue units to employees |
of our manager to incentivize those employees by providing them with the ability to participate in our manager’s incentive allocation |
and management fee. Key Personnel of Our Manager The key personnel of our manager are Ellery W. |
Roberts, our Chief Executive Officer, and Edward J. Tobin. Each of these individuals will be compensated entirely by our manager from |
the management fees it receives. As employees of our manager, these individuals devote a substantial majority of their time to the affairs |
of our company. Collectively, the management team of our manager |
has more than 60 years of combined experience in acquiring and managing small businesses and has overseen the acquisitions and financing |
of over 50 businesses. Acquisition and Disposition Opportunities Our manager has exclusive responsibility for reviewing |
and making recommendations to our board of directors with respect to acquisition and disposition opportunities. If our manager does not |
originate an opportunity, our board of directors will seek a recommendation from our manager prior to making a decision concerning such |
opportunity. In the case of any acquisition or disposition opportunity that involves an affiliate of our manager or us, our nominating |
and corporate governance committee, or, if we do not have such a committee, the independent members of our board of directors, will be |
required to authorize and approve such transaction. Our manager will review each acquisition or disposition |
opportunity presented to our manager to determine if such opportunity satisfies the acquisition and disposition criteria established by |
our board of directors. The acquisition and disposition criteria provide that our manager will review each acquisition opportunity presented |
to it to determine if such opportunity satisfies our acquisition and disposition criteria, and if it is determined, in our manager’s |
sole discretion, that an opportunity satisfies the criteria, our manager will refer the opportunity to our board of directors for its |
authorization and approval prior to the consummation of any such opportunity. 10 Our investment criteria include the followin ● Revenue of at least $5.0 million ● Current year EBITDA/Pre-tax Income of at least $1.5 million with a history of positive cash flow ● Clearly identifiable “blueprint” for growth with the potential for break-out returns ● Well-positioned companies within our core industry categories (consumer-driven, business-to-business, |
light manufacturing and specialty finance) with strong returns on capital ● Opportunities wherein building management team, infrastructure and access to capital are the primary drivers |
of creating value ● Headquartered in North America We believe we will be able to acquire small businesses |
for multiples ranging from three to six times EBITDA. With respect to investment opportunities that do not fall within the criteria set |
forth above, our manager must first present such opportunities to our board of directors. Our board of directors and our manager will |
review these criteria from time to time and our board of directors may make changes and modifications to such criteria as we make additional |
acquisitions and dispositions. If an acquisition opportunity is referred to our |
board of directors by our manager and our board of directors determines not to timely pursue such opportunity in whole or in part, any |
part of such opportunity that we do not promptly pursue may be pursued by our manager or may be referred by our manager to any person, |
including affiliates of our manager. In this case, our manager is likely to devote a portion of its time to the oversight of this opportunity, |
including the management of a business that we do not own. If there is a disposition, our manager must use |
its commercially reasonable efforts to manage a process through which the value of such disposition can be maximized, taking into consideration |
non-financial factors such as those relating to competition, strategic partnerships, potential favorable or adverse effects on us, our |
businesses, or our investments or any similar factors that may reasonably perceived as having a short- or long-term impact on our business, |
results of operations and financial condition. Management Services Agreement The management services agreement sets forth the |
services performed by our manager. Our manager performs such services subject to the oversight and supervision of our board of directors. In general, our manager performs those services |
for us that would be typically performed by the executive officers of a company. Specifically, our manager performs the following services, |
which we refer to as the management services, pursuant to the management services agreemen ● manage our day-to-day business and operations, including our liquidity and capital resources and compliance |
with applicable law; 11 ● identify, evaluate, manage, perform due diligence on, negotiate and oversee acquisitions of target businesses |
and any other investments; ● evaluate and oversee the financial and operational performance of our businesses, including monitoring |
the business and operations of such businesses, and the financial performance of any other investments that we make; ● provide, on our behalf, managerial assistance to our businesses; ● evaluate, manage, negotiate and oversee dispositions of all or any part of any of our property, assets |
or investments, including disposition of all or any part of our businesses; ● provide or second, as necessary, employees of our manager to serve as our executive officers or other |
employees or as members of our board of directors; and ● perform any other services that would be customarily performed by executive officers and employees of |
a publicly listed or quoted company. We and our manager have the right at any time |
during the term of the management services agreement to change the services provided by our manager. In performing management services, |
our manager has all necessary power and authority to perform, or cause to be performed, such services on our behalf, and, in this respect, |
our manager is the only provider of management services to us. Nonetheless, our manager is required to obtain authorization and approval |
of our board of directors in all circumstances where executive officers of a corporation typically would be required to obtain authorization |
and approval of a corporation’s board of directors, including, for example, with respect to the consummation of an acquisition of |
a target business, the issuance of securities or the entry into credit arrangements. While our Chief Executive Officer, Mr. Ellery |
W. Roberts, intends to devote substantially all of his time to the affairs of our company, neither Mr. Roberts, nor our manager, is expressly |
prohibited from investing in or managing other entities. In this regard, the management services agreement does not require our manager |
and its affiliates to provide management services to us exclusively. Secondment of Our Executive Officers In accordance with the terms of the management |
services agreement, our manager may second to us our executive officers, which means that these individuals will be assigned by our manager |
to work for us during the term of the management services agreement. Our board of directors has appointed Mr. Roberts as an executive |
officer of our company. Although Mr. Roberts is an employee of our manager, he will report directly, and be subject, to our board of directors. |
In this respect, our board of directors may, after due consultation with our manager, at any time request that our manager replace any |
individual seconded to us and our manager will, as promptly as practicable, replace any such individual; however, our Chief Executive |
Officer, Mr. Roberts, controls our manager, which may make it difficult for our board of directors to completely sever ties with Mr. Roberts. |
Our manager and our board of directors may agree from time to time that our manager will second to us one or more additional individuals |
to serve on our behalf, upon such terms as our manager and our board of directors may mutually agree. Indemnification by our Company We have agreed to indemnify and hold harmless |
our manager and its employees and representatives, including any individuals seconded to us, from and against all losses, claims and liabilities |
incurred by our manager in connection with, relating to or arising out of the performance of any management services. However, we will |
not be obligated to indemnify or hold harmless our manager for any losses, claims and liabilities incurred by our manager in connection |
with, relating to or arising out of (i) a breach by our manager or its employees or its representatives of the management services agreement, |
(ii) the gross negligence, willful misconduct, bad faith or reckless disregard of our manager or its employees or representatives in the |
performance of any of its obligations under the management services agreement, or (iii) fraudulent or dishonest acts of our manager or |
its employees or representatives with respect to our company or any of its businesses. 12 Termination of Management Services Agreement Our board of directors may terminate the management |
services agreement and our manager’s appointment if, at any time: ● a majority of our board of directors vote to terminate the management services agreement, and the holders |
of at least a majority of the outstanding shares (other than shares beneficially owned by our manager) then entitled to vote also vote |
to terminate the management services agreement; ● neither Mr. Roberts nor his designated successor controls our manager, which change of control occurs |
without the prior written consent of our board of directors; ● there is a finding by a court of competent jurisdiction in a final, non-appealable order that (i) our |
manager materially breached the terms of the management services agreement and such breach continued unremedied for 60 days after our |
manager receives written notice from us setting forth the terms of such breach, or (ii) our manager (x) acted with gross negligence, willful |
misconduct, bad faith or reckless disregard in performing its duties and obligations under the management services agreement, or (y) engaged |
in fraudulent or dishonest acts in connection with our business or operations; ● our manager has been convicted of a felony under federal or state law, our board of directors finds that |
our manager is demonstrably and materially incapable of performing its duties and obligations under the management services agreement, |
and the holders of at least 66 2/3% of the then outstanding shares, other than shares beneficially owned by our manager, vote to terminate |
the management services agreement; or ● there is a finding by a court of competent jurisdiction that our manager has (i) engaged in fraudulent |
or dishonest acts in connection with our business or operations or (ii) acted with gross negligence, willful misconduct, bad faith or |
reckless disregard in performing its duties and obligations under the management services agreement, and the holders of at least 66 2/3% |
of the then outstanding shares (other than shares beneficially owned by our manager) vote to terminate the management services agreement. In addition, our manager may resign and terminate |
the management services agreement at any time upon 120 days prior written notice to us, and this right is not contingent upon the finding |
of a replacement manager. However, if our manager resigns, until the date on which the resignation becomes effective, it will, upon request |
of our board of directors, use reasonable efforts to assist our board of directors to find a replacement manager at no cost and expense |
to us. Upon the termination of the management services |
agreement, seconded officers, employees, representatives and delegates of our manager and its affiliates who are performing the services |
that are the subject of the management services agreement will resign their respective position with us and cease to work at the date |
of such termination or at any other time as determined by our manager. Any director appointed by our manager may continue serving on our |
board of directors, subject to the terms of the operating agreement. If we terminate the management services agreement, |
we have agreed to cease using the term “1847”, including any trademarks based on the name of our company that may be licensed |
to them by our manager, under the licensing provisions of the management services agreement, entirely in our business and operations within |
180 days of such termination. Such licensing provisions of the management services agreement would require our company and its businesses |
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