arcee-ai/sec-data-full · Datasets at Hugging Face

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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. 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; 12 ● 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
to change their names to remove any reference to the term “1847” or any reference to trademarks licensed to them by our manager.
In this respect, our right to use the term “1847” and related intellectual property is subject to licensing provisions between
our manager, on the one hand, and our company, on the other hand. Except with respect to the termination fee payable
to our manager due to a termination of the management services agreement based solely on a vote of our board of directors and our shareholders,
no other termination fee is payable upon termination of the management services agreement for any other reason. See “ —Our
Manager as a Service Provider—Termination Fee ” for more information about the termination fee payable upon termination
of the management services agreement. While termination of the management services
agreement will not affect any terms and conditions, including those relating to any payment obligations, that exist under any offsetting
management services agreements or transaction services agreements, such agreements will be terminable by our businesses upon 60 days
prior written notice and there will be no termination or other similar fees due upon such termination. Notwithstanding termination of
the management services agreement, our manager will maintain its rights with respect to the allocation shares it then owns, including
its rights under the supplemental put provision of our operating agreement. See “ —Our Manager as an Equity Holder—Supplemental
Put Provision ” for more information on our manager’s put right with respect to the allocation shares. 13 Our Relationship with Our Manager, Manager
Fees and Manager Profit Allocation Our relationship with our manager is based on
our manager having two distinct rol first, as a service provider to us and, second, as an equity holder of the allocation shares. As a service provider, our manager performs a
variety of services for us, which entitles it to receive a management fee. As holder of our allocation shares, our manager has the right
to a preferred distribution in the form of a profit allocation upon the occurrence of certain events. Our manager paid $1,000 for the
allocation shares. In addition, our manager will have the right to cause us to purchase the allocation shares then owned by our manager
upon termination of the management services agreement. These relationships with our manager are governed
principally by the following agreements: ● the
management services agreements relating to the services our manager performs for us and our
businesses; and ● our operating agreement relating to our manager’s rights with respect to the allocation shares it
owns and which contains the supplemental put provision relating to our manager’s right to cause us to purchase the allocation shares
it owns. We also expect that our manager will enter into
offsetting management services agreements and transaction services agreements with our businesses directly. These agreements, and some
of the material terms relating thereto, are discussed in more detail below. The management fee, profit allocation and put price under
the supplemental put provision will be our payment obligations and, as a result, will be paid, along with other company obligations, prior
to the payment of distributions to common shareholders. The following table provides a simplified description
of the fees and profit allocation rights held by our manager. Further detail is provided in the following subsections. Description Fee Calculation Payment Term Management Fees Determined by management services agreement 0.5% of adjusted net assets (2.0% annually) Quarterly Determined by offsetting management services agreement Payment of fees by our subsidiary businesses that result in a dollar for dollar reduction of manager fees paid by us to our manager such that our manager cannot receive duplicate fees from both us and our subsidiary Quarterly Termination fee – determined by management services agreement Accumulated management fee paid in the preceding 4 fiscal quarters multiplied by 2. Paid only upon termination by our board and a majority in interest of our shareholders Determined by management services agreement Reimbursement of manager’s costs and expenses in providing services to us, but not includin (1) costs of overhead; (2) due diligence and other costs for potential acquisitions our board of directors does not approve pursuing or that are required by acquisition target to be reimbursed under a transaction services agreement; and (3) certain seconded officers and employees Ongoing Transaction Services Fees Acquisition services of target businesses or disposition of subsidiaries – fees determined by transaction services agreements 2.0% of aggregate purchase price up to $50 million; plus 1.5% of aggregate purchase price in excess of $50 million and up to and equal to $100 million; plus 1.0% of aggregate purchase price in excess of $100 million Per transaction Manager profit allocation determined by our operating agreement 20% of certain profits and gains on a sale
of subsidiary after clearance of the 8% annual hurdle rate 8% hurdle rate determined for any subsidiary by multiplying the subsidiary’s
average quarterly share of our assets by an 8% annualized rate Sale of a material amount of capital stock
or assets of one of our businesses or subsidiaries. Holding even at the option of our manager,
for the 30 day period following the 5th anniversary of an acquired business (but only based on historical profits of the business) 14 Our Manager as a Service Provider Management Fee We will pay our manager a quarterly management
fee equal to 0.5% (2.0% annualized) of its adjusted net assets, as discussed in more detail below (which we refer to as the parent management
fee). Subject to any adjustments discussed below, for
performing management services under the management services agreement during any fiscal quarter, we will pay our manager a management
fee with respect to such fiscal quarter. The management fee to be paid with respect to any fiscal quarter will be calculated as of the
last day of such fiscal quarter, which we refer to as the calculation date. The management fee will be calculated by an administrator,
which will be our manager so long as the management services agreement is in effect. The amount of any management fee payable by us as
of any calculation date with respect to any fiscal quarter will be (i) reduced by the aggregate amount of any offsetting management fees,
if any, received by our manager from any of our businesses with respect to such fiscal quarter, (ii) reduced (or increased) by the amount
of any over-paid (or under-paid) management fees received by (or owed to) our manager as of such calculation date, and (iii) increased
by the amount of any outstanding accrued and unpaid management fees. The management fee will be paid prior to the payment
of distributions to our common shareholders. If we do not have sufficient liquid assets to pay the management fee when due, we may be
required to liquidate assets or incur debt in order to pay the management fee. Offsetting Management Services Agreements Pursuant to the management services agreement,
we have agreed that our manager may, at any time, enter into offsetting management services agreements with our businesses pursuant to
which our manager may perform services that may or may not be similar to management services. Any fees to be paid by one of our businesses
pursuant to such agreements are referred to as offsetting management fees and will offset, on a dollar-for-dollar basis, the management
fee otherwise due and payable by us under the management services agreement with respect to a fiscal quarter. The management services
agreement provides that the aggregate amount of offsetting management fees to be paid to our manager with respect to any fiscal quarter
shall not exceed the management fee to be paid to our manager with respect to such fiscal quarter. Our manager entered into offsetting management
services agreements with 1847 Neese, 1847 Goedeker, 1847 Asien, 1847 Cabinet and 1847 Wolo. See Item 7 “ Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Management Fees ” for a description of these agreements.
Our manager may also enter into offsetting management services agreements with our future subsidiaries, which agreements would be in
the form prescribed by our management services agreement. The offsetting management fee paid to our manager for providing management
services to a future subsidiary will vary. The services that our manager provides under
the offsetting management services agreements inclu conducting general and administrative supervision and oversight of the subsidiary’s
day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and
personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing

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. 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; 12 ● 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

to change their names to remove any reference to the term “1847” or any reference to trademarks licensed to them by our manager.

In this respect, our right to use the term “1847” and related intellectual property is subject to licensing provisions between

our manager, on the one hand, and our company, on the other hand. Except with respect to the termination fee payable

to our manager due to a termination of the management services agreement based solely on a vote of our board of directors and our shareholders,

no other termination fee is payable upon termination of the management services agreement for any other reason. See “ —Our

Manager as a Service Provider—Termination Fee ” for more information about the termination fee payable upon termination

of the management services agreement. While termination of the management services

agreement will not affect any terms and conditions, including those relating to any payment obligations, that exist under any offsetting

management services agreements or transaction services agreements, such agreements will be terminable by our businesses upon 60 days

prior written notice and there will be no termination or other similar fees due upon such termination. Notwithstanding termination of

the management services agreement, our manager will maintain its rights with respect to the allocation shares it then owns, including

its rights under the supplemental put provision of our operating agreement. See “ —Our Manager as an Equity Holder—Supplemental

Put Provision ” for more information on our manager’s put right with respect to the allocation shares. 13 Our Relationship with Our Manager, Manager

Fees and Manager Profit Allocation Our relationship with our manager is based on

our manager having two distinct rol first, as a service provider to us and, second, as an equity holder of the allocation shares. As a service provider, our manager performs a

variety of services for us, which entitles it to receive a management fee. As holder of our allocation shares, our manager has the right

to a preferred distribution in the form of a profit allocation upon the occurrence of certain events. Our manager paid $1,000 for the

allocation shares. In addition, our manager will have the right to cause us to purchase the allocation shares then owned by our manager

upon termination of the management services agreement. These relationships with our manager are governed

principally by the following agreements: ● the

management services agreements relating to the services our manager performs for us and our

businesses; and ● our operating agreement relating to our manager’s rights with respect to the allocation shares it

owns and which contains the supplemental put provision relating to our manager’s right to cause us to purchase the allocation shares

it owns. We also expect that our manager will enter into

offsetting management services agreements and transaction services agreements with our businesses directly. These agreements, and some

of the material terms relating thereto, are discussed in more detail below. The management fee, profit allocation and put price under

the supplemental put provision will be our payment obligations and, as a result, will be paid, along with other company obligations, prior

to the payment of distributions to common shareholders. The following table provides a simplified description

of the fees and profit allocation rights held by our manager. Further detail is provided in the following subsections. Description Fee Calculation Payment Term Management Fees Determined by management services agreement 0.5% of adjusted net assets (2.0% annually) Quarterly Determined by offsetting management services agreement Payment of fees by our subsidiary businesses that result in a dollar for dollar reduction of manager fees paid by us to our manager such that our manager cannot receive duplicate fees from both us and our subsidiary Quarterly Termination fee – determined by management services agreement Accumulated management fee paid in the preceding 4 fiscal quarters multiplied by 2. Paid only upon termination by our board and a majority in interest of our shareholders Determined by management services agreement Reimbursement of manager’s costs and expenses in providing services to us, but not includin (1) costs of overhead; (2) due diligence and other costs for potential acquisitions our board of directors does not approve pursuing or that are required by acquisition target to be reimbursed under a transaction services agreement; and (3) certain seconded officers and employees Ongoing Transaction Services Fees Acquisition services of target businesses or disposition of subsidiaries – fees determined by transaction services agreements 2.0% of aggregate purchase price up to $50 million; plus 1.5% of aggregate purchase price in excess of $50 million and up to and equal to $100 million; plus 1.0% of aggregate purchase price in excess of $100 million Per transaction Manager profit allocation determined by our operating agreement 20% of certain profits and gains on a sale

of subsidiary after clearance of the 8% annual hurdle rate 8% hurdle rate determined for any subsidiary by multiplying the subsidiary’s

average quarterly share of our assets by an 8% annualized rate Sale of a material amount of capital stock

or assets of one of our businesses or subsidiaries. Holding even at the option of our manager,

for the 30 day period following the 5th anniversary of an acquired business (but only based on historical profits of the business) 14 Our Manager as a Service Provider Management Fee We will pay our manager a quarterly management

fee equal to 0.5% (2.0% annualized) of its adjusted net assets, as discussed in more detail below (which we refer to as the parent management

fee). Subject to any adjustments discussed below, for

performing management services under the management services agreement during any fiscal quarter, we will pay our manager a management

fee with respect to such fiscal quarter. The management fee to be paid with respect to any fiscal quarter will be calculated as of the

last day of such fiscal quarter, which we refer to as the calculation date. The management fee will be calculated by an administrator,

which will be our manager so long as the management services agreement is in effect. The amount of any management fee payable by us as

of any calculation date with respect to any fiscal quarter will be (i) reduced by the aggregate amount of any offsetting management fees,

if any, received by our manager from any of our businesses with respect to such fiscal quarter, (ii) reduced (or increased) by the amount

of any over-paid (or under-paid) management fees received by (or owed to) our manager as of such calculation date, and (iii) increased

by the amount of any outstanding accrued and unpaid management fees. The management fee will be paid prior to the payment

of distributions to our common shareholders. If we do not have sufficient liquid assets to pay the management fee when due, we may be

required to liquidate assets or incur debt in order to pay the management fee. Offsetting Management Services Agreements Pursuant to the management services agreement,

we have agreed that our manager may, at any time, enter into offsetting management services agreements with our businesses pursuant to

which our manager may perform services that may or may not be similar to management services. Any fees to be paid by one of our businesses

pursuant to such agreements are referred to as offsetting management fees and will offset, on a dollar-for-dollar basis, the management

fee otherwise due and payable by us under the management services agreement with respect to a fiscal quarter. The management services

agreement provides that the aggregate amount of offsetting management fees to be paid to our manager with respect to any fiscal quarter

shall not exceed the management fee to be paid to our manager with respect to such fiscal quarter. Our manager entered into offsetting management

services agreements with 1847 Neese, 1847 Goedeker, 1847 Asien, 1847 Cabinet and 1847 Wolo. See Item 7 “ Management’s Discussion

and Analysis of Financial Condition and Results of Operations—Management Fees ” for a description of these agreements.

Our manager may also enter into offsetting management services agreements with our future subsidiaries, which agreements would be in

the form prescribed by our management services agreement. The offsetting management fee paid to our manager for providing management

services to a future subsidiary will vary. The services that our manager provides under

the offsetting management services agreements inclu conducting general and administrative supervision and oversight of the subsidiary’s

day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and

personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing