Exhibit 10.5

 

Execution Version

 

BOARD RIGHTS AGREEMENT

 

This BOARD RIGHTS AGREEMENT (as amended, supplemented or otherwise modified from
time to time, this “Agreement”), dated as of July 28, 2017, is entered into by
and among (a) Emergent Capital, Inc., a Florida corporation (“Emergent”),
(b) PJC Investments, LLC, a Texas limited liability company (on behalf of itself
and InvestCo 1, LLC, a Delaware limited liability company) (“PJC”) and
(c) JSARCo, LLC, a Delaware limited liability company (“JSARCo”) (PJC and JSARCo
are jointly referred to as the “Investor”).  Each of Emergent, PJC and JSARCo
may also be referred to herein as a “Party” and collectively as the “Parties”.

 

WHEREAS, PJC and Emergent are parties to certain Master Transaction Agreements,
dated as of March 15, 2017 and May 12, 2017, as amended, supplemented or
otherwise modified from time to time (collectively, the “Master Transaction
Agreement”), by and among Emergent, PJC and the Consenting Convertible Note
Holders party(ies) thereto;

 

WHEREAS, pursuant to the Master Transaction Agreement (i) PJC and Triax Capital
Advisors LLC (“Triax”) may designate JSARCo to be party to the Board Documents
and (ii) upon such designation, the Investor may designate three (3) directors
to the board of directors of Emergent (the “Board”); and

 

WHEREAS, PJC and Triax have agreed with Opal Sheppard Opportunities Fund I LP
(“Opal Sheppard”) that of such director designees, one (1) such designation is
to be made by Opal Sheppard pursuant to a Designation Agreement between Opal
Sheppard and Emergent dated as of the date hereof (the “Opal Sheppard
Agreement”) while the Opal Sheppard Agreement is in effect. Capitalized terms
used in this Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Master Transaction Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as follows:

 

SECTION 1.                            PROCEDURAL MATTERS.

 

1.1                               Pursuant to the Master Transaction Agreement,
PJC hereby designates JSARCo as an “Investor” as defined in the Master
Transaction Agreement.

 

1.2                               On the Closing Date and in connection with the
Closing, Emergent shall cause the following members of the Board to resign
therefrom: James Chadwick, Michael A. Crow, Phillip Goldstein, Gerald Hellerman
and Gilbert Nathan.

 

1.3                               At any meeting of stockholders at which
Designated Directors (as defined below) are to be elected, Emergent shall
nominate no more nominees than the number of seats to be filled.

 

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SECTION 2.                            DESIGNATION OF DIRECTORS.

 

2.1                               On the Closing Date, the two (2) individuals
nominated by Investor and set forth on Schedule A attached hereto (each such
individual, a “Designated Director”) shall be added to the Board to fill
vacancies on the Board created on such date. To the extent that any Designated
Director is not appointed to the Board on the Closing Date, the Board shall
promptly thereafter (and in any event within five (5) Business Days of the
Closing Date) fill the existing vacancy or vacancies on the Board with such
Designated Director(s) and if no such vacancy exists, the Board shall be
expanded to create one (1) or more vacancies, as necessary, and fill such newly
created vacancies with such Designated Director(s).

 

2.2                               If any Designated Director (or any successor
Designated Director) shall at any time cease to be affiliated with the Investor
or any Affiliates thereof, or shall cease to be able to serve on the Board by
reason of his resignation, death, incapacity, disability, disqualification or
removal, or as a result of a conflict of interest, but not as a result of the
Designated Director’s failure to be re-elected by the stockholders of Emergent,
then the Investor shall be entitled to nominate a new individual to serve as a
member of the Board and the Board shall fill the vacancy created by such
departed Designated Director with such nominated individual, provided that such
nominated individual satisfies the requirements set forth in Section 2.4.  Any
such nominated individual shall be deemed to be the Designated Director
hereunder.  As of the date of the Closing, the Investor shall have the right to
designate three (3) Designated Directors to the Board, one of which shall be
designated pursuant to the Opal Sheppard Agreement, and thereafter, three
(3) Designated Directors, one of which shall be designated pursuant to the Opal
Sheppard Agreement so long as the Opal Sheppard Agreement is in effect; provided
that for so long as the Investor and/or any Affiliates thereof, in the
aggregate, beneficially own (without duplication): (a) at least 20% but less
than 30% of the issued and outstanding shares of common stock of Emergent (the
“Common Stock”), the Investor shall have the right to designate two
(2) Designated Directors to serve until the next annual or other meeting of
stockholders at which directors are to be elected; (b) at least 10% but less
than 20% of the issued and outstanding shares of Common Stock, the Investor
shall have the right to designate one (1) Designated Director to serve until the
next annual or other meeting of stockholders at which directors are to be
elected; in each case as provided in the first sentence of this Section 2.2, and
the Board shall, subject to Section 2.4 below, recommend at each meeting of
stockholders at which Designated Director(s) are to be elected to include such
number of Designated Directors as the Board’s nominees for election to the Board
or to fill a vacancy left by one or more departed Designated Director(s), in
each case in order to have such Designated Director(s) on the Board.  The Board
shall not take any action which is inconsistent with making such
recommendation.  In the event that the stockholders do not elect one or more
Designated Directors at a meeting of stockholders at which such Designated
Director(s) are nominated for election, then, promptly after such meeting of
stockholders (and in any event within ten (10) Business Days of such meeting of
stockholders), the Investor shall have the right to designate one or more new
Designated Director(s) to fill the vacancy created by such event as provided in
the first sentence of this Section 2.2; provided, that if (a) the nominated
Designated Director is not elected at such meeting of stockholders and (b) there
is no vacancy on the Board following the election of directors at such meeting
of stockholders, then the Board shall be expanded by one (1) director and
Investor shall have the right to designate a new Designated Director to fill the
vacancy created by such Board expansion as provided in the first sentence of
this Section 2.2.

 

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2.3                               If the Investor and/or any Affiliates thereof,
in the aggregate, beneficially own (without duplication) less than 10% of the
issued and outstanding shares of Common Stock (the “Minimum Percentage”), the
Investor’s right to designate one or more Designated Directors shall terminate
and the Designated Director(s) shall, and the Investor shall cause the
Designated Director(s) to, promptly upon request of Emergent, submit his or her
resignation to the Board.

 

2.4                               Notwithstanding anything to the contrary
herein, it shall be a condition precedent to any Designated Director’s service
on the Board, whether in order to fill a vacancy on the Board or following an
election to the Board, that such Designated Director shall, in the reasonable
judgment of the Board, (a) have the requisite skill and experience to serve as a
director of a publicly traded company, (b) not be prohibited or disqualified
from serving as a director of Emergent pursuant to (i) any applicable rule or
regulation of the SEC, (ii) any applicable rule or regulation imposed by any
exchange on which Emergent’s common stock is traded or (iii) any applicable law,
and (c) qualify as an independent director under any applicable SEC and exchange
requirements, rules and interpretations.  The Board will adopt standards of
skill and experience desired of potential candidates for nomination to the
Board, which will be reflected in a charter of a committee of the Board or other
similar document.  The Parties agree that the individuals set forth on Schedule
A hereto shall be deemed to satisfy the standards of skill and experience
desired of potential candidates for nomination to the Board.  The Investor
agrees to timely provide Emergent with accurate and complete information
relating to a prospective Designated Director that may be required to be
considered by the Board or disclosed by Emergent under applicable exchange
listing requirements or the Securities Act of 1933, as amended, the Securities
and Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.  In addition, at Emergent’s request, the Investor shall cause its
Designated Directors to complete and execute Emergent’s standard Director and
Officer Questionnaire prior to being admitted to the Board or standing for
reelection at an annual meeting of stockholders or at such other time as may be
reasonably requested by Emergent.  Nothing in this Agreement will prevent or
prohibit the Board from removing a Designated Director from the Board in
accordance with Emergent’s Bylaws (as then in effect).  If a Designated Director
is removed from the Board in accordance with the immediately preceding sentence,
the Investor shall have the right to designate a new Designated Director to fill
the vacancy created by such Board removal as provided in the first sentence of
Section 2.2.

 

2.5                               As compensation for their service on the
Board, each Designated Director shall receive compensation from Emergent that is
consistent with the compensation of other similarly situated members of the
Board.

 

2.6                               Emergent shall provide customary director and
officer indemnity insurance on the same terms as provided to other directors and
officers of Emergent in effect from time to time and subject to the conditions
and terms thereof, and Emergent further agrees that it shall enter into a
customary indemnification agreement with any Designated Director.  Emergent
hereby acknowledges that any director, officer or other indemnified person
covered by such policy (any such persons, an “Indemnitee”) may have certain
rights to indemnification, advancement of expenses and/or insurance provided by
the Investor, PJC or one or more of its Affiliates (the “Indemnitors”). To the
extent permitted under Applicable Law, Emergent hereby (i) agrees that Emergent
or any subsidiary of Emergent that provides indemnity shall be the

 

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indemnitor of first resort (i.e., its or their obligations to an Indemnitee
shall be primary and any obligation of any Indemnitor to advance expenses or to
provide indemnification for the same expenses or liabilities incurred by an
Indemnitee shall be secondary), (ii) agrees that it shall be required to advance
the full amount of expenses incurred by an Indemnitee and shall be liable for
the full amount of all expenses, judgments, penalties, fines and amounts paid in
settlement to the extent legally permitted and as required by the terms of this
agreement or any other agreement between Emergent and the Indemnitee, without
regard to any rights an Indemnitee may have against the Indemnitors or their
insurers, and (iii) irrevocably waives, relinquishes and releases the
Indemnitors from any and all claims against the Indemnitors for contribution,
subrogation or any other recovery of any kind in respect thereof. To the extent
permitted under Applicable Law, Emergent further agrees that no advancement or
payment by the Indemnitors on behalf of an Indemnitee with respect to any claim
for which an Indemnitee has sought indemnification from Emergent, as the case
may be, shall affect the foregoing and the Indemnitors shall have a right of
contribution or be subrogated to the extent of such advancement or payment to
all of the rights of recovery of such Indemnitee against Emergent.

 

2.7                               Each Designated Director shall use reasonable
efforts to obtain any necessary approvals from the State of Florida Office of
Insurance Regulation in connection with such Designated Director’s service on
the Board.  If a Designated Director does not obtain any such necessary
approvals from the State of Florida Office of Insurance Regulation within one
hundred (100) days of the commencement of such Designated Director’s service on
the Board, the Investor shall cause such Designated Director to, promptly upon
the request of Emergent, submit his or her resignation to the Board.  If a
Designated Director resigns from the Board pursuant to this Section 2.7, the
Investor shall have the right to designate a new Designated Director to fill the
vacancy created by such Board removal as provided in the first sentence of
Section 2.2.  Emergent shall reimburse the Designated Director for all
reasonable costs and expenses of the Designated Director incurred in connection
with obtaining any necessary approvals from the State of Florida Office of
Insurance Regulation pursuant to this Agreement.

 

SECTION 3.                            TERMINATION.

 

This Agreement shall terminate upon the earlier to occur of (a) the date that
the Parties mutually agree to terminate this Agreement and (b) the date on which
the Investor and/or any Affiliates thereof, in the aggregate, beneficially own
(without duplication) less than the Minimum Percentage of the issued and
outstanding shares of Common Stock.  The Investor shall promptly (and in any
event within three (3) Business Days) provide written notice to Emergent if at
any time the Investor and/or Affiliates thereof, in the aggregate, fail to
beneficially own (without duplication) less than 20% or the Minimum Percentage
of the issued and outstanding shares of Common Stock.

 

SECTION 4.                            MISCELLANEOUS.

 

4.1                               Entire Agreement. This Agreement, together
with the Master Transaction Agreement and Opal Sheppard Agreement, constitutes
the entire agreement among the Parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
among the Parties with respect to the subject matter hereof.

 

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4.2                               Parties in Interest.  Subject to the
immediately following sentence, this Agreement shall be binding upon, inure
solely to the benefit of, and be enforceable by, the Parties and their
successors and permitted assigns.  No Party may assign, delegate or otherwise
transfer either this Agreement or any of its rights, interests, duties or
obligations hereunder without the prior written approval of the other Party;
provided, however, that Investor may assign any or all of its rights and
interests hereunder to one or more of its Affiliates so long as such Affiliate
(x) is a holder of shares of Common Stock at the time of the assignment, and
(y) executes and delivers a joinder agreement to this Agreement that is in form
and substance reasonably satisfactory to Emergent.  There shall be no
third-party beneficiaries to this Agreement except for the Indemnitors under
Section 2.6, and other than such Section 2.6, nothing in this Agreement, express
or implied, is intended to or shall confer upon any other Person not a party
hereto any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.

 

4.3                               Amendment.  This Agreement may not be amended
except by an instrument in writing signed by all of the Parties.

 

4.4                               Severability.  If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of this Agreement is not affected in any manner
materially adverse to any Party.  Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.

 

4.5                               Governing Law.  This Agreement shall be
governed in all respects by, and construed in accordance with, the laws of the
State of New York (without giving effect to its principles of conflicts of laws,
to the extent such principles would require or permit the application of the
laws of a jurisdiction other than the State of New York).

 

4.6                               Headings.  The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.

 

4.7                               Counterparts.  This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different Parties in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

 

4.8                               Specific Performance.  The Parties agree that,
in the event any provision of this Agreement is not performed in accordance with
the terms hereof, (a) the non-breaching Party will sustain irreparable damages
for which there is not an adequate remedy at law for money damages and (b) the
non-breaching Party shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or in equity.

 

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4.9                               Notices.  All notices, requests, waivers and
other communications made pursuant to this Agreement shall be in writing and
shall be deemed to have been effectively given, sent, provided, delivered or
received (a) when personally delivered to the Party to be notified, or (b) when
sent by confirmed facsimile or by electronic transmission (“e mail”) to the
Party to be notified, in either case to such Party at its address, facsimile
number or e-mail address set forth on Schedule B.  A Party may change its
address, facsimile number or e-mail address for purposes of notice hereunder by
giving notice of such change to each other Party in the manner provided in this
Section 4.9.

 

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed and delivered as of the date first written above.

 

 

EMERGENT CAPITAL, INC.

 

 

 

 

 

 

By:

/s/ Antony Mitchell

 

 

Name:

Antony Mitchell

 

 

Title:

Chief Executive Officer

 

 

 

 

 

PJC INVESTMENTS, LLC

 

 

 

 

 

 

 

By:

/s/ Patrick J. Curry

 

 

Name: Patrick J. Curry

 

 

Title: Manager

 

 

 

 

 

JSARCo, LLC

 

 

 

 

By:

TOPCO 1, LLC, its Managing Member

 

 

 

 

By:

/s/ Joseph E. Sarachek

 

 

Name: Joseph E. Sarachek 

 

 

Title: Manager

 

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Schedule A

 

1. Patrick J. Curry

 

2. Joseph E. Sarachek

 

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Schedule B

 

PJC Investments, LLC

 

PJC Investments, LLC

1404 New Road

Waco, TX 76711

E-mail:   pcurry@pjcinvestments.com

Attention: Pat Curry

 

JSARCo, LLC

 

c/o Kelley Drye & Warren LLP

101 Park Ave

New York, NY 11109

Attention: Jack J. Miles, Esq.

E-mail:   jsarachek@triaxadvisors.com

 

Emergent Capital, Inc.

 

5355 Town Center Road, Suite 701

Boca Raton, Florida 33486

Fax No.: (561) 995 - 4201

E-mail:   coreilly@emergentcapital.com

Attention:  Office of the General Counsel

 

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