Document:

Exhibit 10.6

 

CONFIDENTIAL

 

[AMENDED AND RESTATED]1 SUBORDINATED PROMISSORY NOTE

 

[·], 2015

 

Section 1.                               FUNDAMENTAL PROVISIONS.

 

Terms not otherwise defined herein shall have the meaning provided in Annex I hereto. The following terms will be used as defined terms in this Subordinated Promissory Note (as it may be amended, modified, extended and renewed from time to time, this “Note”):

 

	
Issuer:
    	
Houlihan   Lokey, Inc., a Delaware corporation (“Issuer”).
    
	
 
    	
 
    
	
Holder:
    	
[HLHZ   Holding Company, LLC, a Delaware limited liability company] [ORIX USA   Corporation, a Delaware corporation.]2
    
	
 
    	
 
    
	
Principal   Amount:
    	
USD   $45,000,000.00 (“Principal Amount”).
    

 

                                                

 

Section 2.                               PROMISE TO PAY.

 

The Issuer promises to pay to the order of Holder, in accordance with the payment procedure set forth herein, the outstanding Principal Amount, together with accrued interest from the date of disbursement on the unpaid principal balance at the applicable Interest Rate.

 

Section 3.                               INTEREST; PAYMENTS.

 

(a)                               Subject to the terms and conditions of Section 12 and except as otherwise set forth herein, the Note shall bear interest on the unpaid principal amount hereof from the date made through repayment hereof (whether by acceleration or otherwise) at the Interest Rate.  Interest on the Note shall accrue on a daily basis.  Interest will be calculated daily on the basis of a 360-day year comprised of twelve 30 day months.  In computing interest on the Note, the date of the issuance of the Note shall be excluded and the date of repayment of the Note (including the repayment of any portion of the Note) shall be included.  On (i) each Interest Payment Date prior to the Maturity Date and (ii) the Maturity Date, the Issuer shall pay and discharge in cash the interest accrued on the outstanding Principal Amount.

 

(b)                              The Principal Amount of the Note will be payable in installments of USD $7,500,000.00 payable on each Payment Date, commencing on June 30, 2016; provided that in the event of any optional prepayment, the amount of such payments shall be reduced in accordance with Section 4.

 

(c)                               If any payment of principal and interest or any other amount payable hereunder is not paid when due, whether on an Interest Payment Date, a Payment Date, the 

 

 

1                   NTD:  The initial note will be payable to HLHZ Holding Company, and after certain transactions, the ultimate holder of that note will be ORIX USA Corporation.  The parties currently intend that when ORIX USA Corporation becomes the holder of the initial note, it will be replaced with an amended and restatement note.

 

2                   NTD:  For the initial note, HLHZ Holding Company will be listed as the Holder.  For the amended and restated note, ORIX USA Corporation will be listed as the Holder.

 

 

Maturity Date or any earlier date as a result of acceleration of this Note after Default, then the amount then due and unpaid shall thereafter bear interest until paid at a rate (“Default Interest Rate”) per annum (based on a 360-day year, comprised of twelve 30 day months) equal to the applicable Interest Rate plus two percent (2%) per annum, and such accrued interest at the Default Interest Rate shall, subject to the terms and conditions of Section 12, be due and payable by the Issuer on demand by Holder.

 

(d)          The Issuer shall make payment of all unpaid principal, interest, and any other amounts due hereunder on the Maturity Date, in immediately available funds, not later than 12:00 noon (New York time) (or such later time as Holder shall agree). If any payment of principal and interest to be made by the Issuer hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing the interest in such payment.

 

(e)                               Except as specifically hereinafter set forth, all payments made by the Issuer under this Note shall be made by wire transfer to the account listed below for Holder, or at such other place as Holder designates to the Issuer, in immediately available funds not later than 12:00 noon, New York time (or such later time as Holder shall agree) on the date such payment is required to be made.

 

To Holder:

 

The Bank of Tokyo-Mitsubishi UFJ Trust Company
 ABA No. 0260-0968-7
 Account Number 310 062 381
 For the account of ORIX USA Corporation

 

Section 4.                               OPTIONAL PREPAYMENT.

 

Subject to the terms and conditions of Section 12, the Issuer may optionally prepay the Note in whole or in part (in integral multiples of $100,000 or such lesser amount as Holder shall agree), without premium or penalty, at any time and from time to time by providing Holder notice of optional prepayment. Any such prepayment shall be applied to reduce scheduled installments of principal in inverse order of maturity.

 

Section 5.                               LAWFUL MONEY.

 

Principal and interest are payable in lawful money of the United States of America.

 

Section 6.                               APPLICATION OF PAYMENTS.

 

Absent the occurrence of an Event of Default hereunder, any payments received by Holder pursuant to the terms hereof shall be applied first to sums, other than principal and interest due Holder hereunder, second to the accrued and unpaid interest due hereunder and the balance, if any, to the payment of principal. Any payments received by the Holder hereof during the continuation of an Event of Default shall be applied to the amounts specified in this Section 6 in such order as Holder may, in its sole discretion, elect.

 

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Section 7.                               RESERVED.

 

Section 8.                               REPRESENTATIONS AND WARRANTIES.

 

Issuer represents and warrants to Holder that:

 

(a)                               Due Organization.  It is duly formed and validly existing, and is in good standing under the laws of its jurisdiction of organization.

 

(b)                              Authority.  It has the power and authority to execute and deliver the Note and to perform its obligations hereunder.  The execution, delivery and performance of the Note and the consummation of the transactions contemplated hereby have been duly authorized by all of its necessary corporate or similar action, and no other action or proceeding on its part or on the part of its members is necessary to authorize the execution or delivery the Note and consummation of the transactions contemplated hereby.  The Note has been duly and validly executed and delivered by the Issuer.

 

(c)                               Binding Effect.  The Note constitutes a valid and binding obligation, enforceable against it in accordance with the terms hereof subject to applicable bankruptcy, insolvency, fraudulent transfer and similar laws affecting creditors’ rights generally and to general principles of equity.

 

(d)                             No Conflicts or Default.  Its execution, delivery and performance of the Note do not and will not result in a breach or violation of, or constitute a default under, any of the terms and provisions of its organizational documents, any material law applicable to the Issuer or, except as could not reasonably be expected to result in a Material Adverse Effect on the Issuer or on its ability to perform its obligations under the Note, any agreement to which the Issuer is a party.

 

(e)                               Compliance with Laws and Agreements.  The Issuer is in compliance with (a) all applicable laws and all judgments, decrees and orders of any governmental authority and (b) all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on the Issuer or on its ability to perform its obligations under the Note.

 

Section 9.                               COVENANTS.

 

(a)                               Payment and Performance of Note Obligations. The Issuer covenants and agrees that, from the date hereof until the Discharge of Obligations with respect to the Note, it shall pay and perform all Note Obligations arising under, and in accordance with, the terms of the Note.

 

(b)                              Tax Matters.

 

(i)                                  If the Issuer shall be required by law to deduct any Covered Taxes from or in respect of any sum payable hereunder such sum shall be increased as 

 

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may be necessary so that, after making all such deductions, Holder receive an amount equal to the sum it would have received had no such deduction for Covered Taxes been made.  If the Issuer shall be required by law to deduct or withhold any taxes other than Covered Taxes from or in respect of any sum payable hereunder, Holder shall be treated for all purposes of this Note as having received any such amounts so deducted or withheld.

 

(ii)          If Holder is entitled to an exemption from or reduction of withholding tax with respect to payments made under this Note, Holder shall deliver to the Issuer, at the time or times reasonably requested by the Issuer, such properly completed and executed documentation reasonably requested by the Issuer as will permit such payments to be made without withholding or at a reduced rate of withholding or to determine whether or not Holder is subject to backup withholding or information reporting requirements, including, without limitation, an Internal Revenue Service Form W-9 or applicable Internal Revenue Service Form W-8.

 

(iii)         If a payment made to Holder under this Note would be subject to U.S. federal withholding tax imposed by FATCA if Holder were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Holder shall deliver to the Issuer at the time or times prescribed by law and at such time or times reasonably requested by the Issuer such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Issuer as may be necessary for the Issuer to comply with its obligations under FATCA and to determine that Holder has complied with Holder’s obligations under FATCA or to determine the amount to deduct and withholding from such payment.

 

(c)                               Continuation of Business and Maintenance of Corporate Existence and Licenses. The Issuer covenants and agrees that, from the date hereof until the Discharge of Obligations with respect to the Note, it shall preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, their existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

(d)                             Dividends and Other Payments in Respect of Equity Interests. The Issuer covenants and agrees that, from the date hereof until the Discharge of Obligations with respect to the Note, (i) during the continuance of an Event of Default, or (ii) if any payments required to have been made pursuant to Section 3(b) have not been made, in each case it shall not (a) declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests or any warrants, rights or options to acquire such Equity Interests, now or hereafter outstanding, return any equity to its stockholders as such, make any distribution of 

 

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assets, capital stock, warrants, rights, options, Obligations or securities to its equity holders as such, or (b) permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests of the Issuer or any warrants, rights or options to acquire such equity interests.  [This section 9(d) shall not restrict the payment of the IPO Dividend.]3

 

Section 10.                       EVENTS OF DEFAULT.  The occurrence of any of the following events shall constitute an “Event of Default”.

 

(a)                               Payment under Note. The Issuer shall fail to make payment of any principal or interest or fee when due under this Note, or a default shall be made in the payment of any other portion of the Note Obligations as and when the same shall be due and payable, and such failure or default shall continue for three (3) days after notice to the Issuer from Holder (it being understood that the failure of the Issuer to make any such payment as a result of a prohibition thereon under Section 12 shall not constitute an Event of Default).

 

(b)                              Observance of Terms under Note. A default in the due observance or performance of any term, covenant, condition or agreement on the part of the Issuer to be observed or performed pursuant to the terms of this Note, if such default (other than a default with respect to the payment of any amount due to Holder) shall have occurred and continued for fifteen (15) days after notice to the Issuer from Holder.

 

(c)                               Voluntary Actions. The Issuer or any Significant Subsidiary of the Issuer shall: (i) apply for or consent to the appointment of a receiver, trustee or liquidator for itself or any of its properties or assets; (ii) admit in writing the inability to pay its debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) suffer an order for relief to be entered against it or be declared to be insolvent; or (v) file a voluntary petition in bankruptcy, or a petition seeking reorganization or take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or if action shall be taken by the Issuer or any Significant Subsidiary of the Issuer for the purpose of effecting any of the foregoing.

 

(d)                             Involuntary Actions. The expiration of sixty (60) days after the filing of any involuntary petition against the Issuer or any Significant Subsidiary of the Issuer seeking relief under the Bankruptcy Code, without the petition being dismissed prior to that time, or an order, judgment or decree shall be entered, without the application, approval or consent of the Issuer or Significant Subsidiary of the Issuer by any court of competent jurisdiction approving a petition seeking a reorganization of the Issuer or any Significant Subsidiary or of all or a substantial part of the properties or assets of the Issuer or any Significant Subsidiary of the Issuer or appointing a receiver, trustee or liquidator of the Issuer or any 

 

 

3                   NTD: Bracketed language to be included only in the initial note.

 

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Significant Subsidiary of the Issuer and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days or more.

 

(e)                               Cross Acceleration. (i) The Issuer shall fail to pay any principal of, premium or interest on or any other amount payable in respect of the Senior Debt Obligations at the maturity thereof, and such failure shall continue after the applicable grace period, if any, specified in the Senior Debt Documents; or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to the Senior Debt Obligations and shall continue after the applicable grace period, if any, specified in the Senior Debt Documents, if the effect of such event or condition is to accelerate the maturity of the Senior Debt Obligations or otherwise to cause the Senior Debt Obligations to mature; or the Senior Debt Obligations shall be declared to be due and payable or required to be prepaid or redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease the Senior Debt Obligations shall be required to be made, in each case under this clause (ii) prior to the stated maturity thereof, in each case other than by a regularly scheduled required prepayment, mandatory prepayment or redemption of all or any portion of the Senior Debt Obligations.

 

Section 11.                       REMEDIES.

 

(a)                               If an Event of Default specified in Section 10(c) or 10(d) of this Note occurs, then, subject to the terms and conditions set forth in Section 12, the entire balance of principal together with all accrued interest thereon, and all other Note Obligations payable by the Issuer hereunder shall become immediately due and payable, both as to principal and interest.

 

(b)                              If any Event of Default other than the Events of Default referred to in Section 10(a) of this Note occurs, then, subject to the terms and conditions set forth in Section 12, at any time thereafter during the continuance of such Event of Default, at the option of the Holder hereof, Holder may, by written notice to the Issuer, declare immediately due and payable the entire balance of principal together with all accrued interest thereon, and all other Note Obligations payable by the Issuer under the Note.

 

Section 12.                       SUBORDINATION.

 

(a)                               Restriction on Payments.  Prior to the Final Discharge Date, the Issuer shall not, and the Issuer shall procure that none of its Subsidiaries will, make any payment of any Note Obligation hereunder at any time unless the making or receipt of that payment is permitted under Section 12(b).

 

(b)                              Permitted Payments.

 

(i)                                  Subject to Section 12(b)(ii) and to the extent permitted by all applicable Senior Debt Documents, the Issuer may make payments in respect of the Note Obligations (whether principal, interest or otherwise) from time to 

 

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time when due, and Holder may accept or agree to accept such payments at any time.

 

(ii)          Notwithstanding the foregoing, no payment in respect of the Note Obligations described in Section 12(b)(i) above may be made if (i) such payment would result in a breach of any Senior Debt Document or (ii) an event of default under any Senior Debt Document has occurred and is continuing (for the avoidance of doubt, after the expiration of all applicable cure or grace periods), unless, solely in the case of clause (ii) above, (x) the prior consent of each applicable Senior Agent is obtained or (y) such payment occurs in connection with the payment of any Senior Debt Obligations on the Final Discharge Date.

 

(c)                               Payment Obligations Continue.  The Issuer shall not be released from the liability to make any payment (including of Default Interest, which shall continue to accrue) in relation to any Note Obligations by the operation of Section 12(a) and Section 12(b) even if the Issuer’s obligation to make that payment is restricted at any time by the terms of either of those Sections (it being understood that the failure of the Issuer to make any such payment as a result of a prohibition thereon under Section 12 shall not constitute an Event of Default).

 

(d)                             Restriction on Enforcement.  Holder hereby agrees that until the Final Discharge             Date:

 

(i)           It shall not, without the prior written consent of the Senior Agents, commence, or join or participate in, any Enforcement Action.

 

(ii)          In the event (i) any event of default under any Senior Debt Document then exists or would result from such payment on the Note Obligations, or (ii) Holder receives any payment or prepayment of principal, interest or any other amount, in whole or in part, of (or with respect to) the Note Obligations in violation of the terms of the Senior Debt Documents, then, and in any such event, any payment or distribution of any kind or character, whether in cash, property or securities, which shall be payable or deliverable with respect to any or all of the Note Obligations or which has been received by Holder shall be held in trust by Holder for the benefit of the Senior Debt Parties and shall forthwith be paid or delivered directly to the applicable Senior Agents for application to the payment of the Senior Debt Obligations (after giving effect to the relative payment priorities of such Senior Debt Obligations), to the extent necessary to make payment in full in cash of all sums due under the Senior Debt Obligations remaining unpaid and not cash collateralized after giving effect to any concurrent payment or distribution to the Senior Agents or the Senior Debt Parties. In any such event, the Senior Agents may, but shall not be obligated to, demand, claim and collect any such payment or distribution that would, but for these subordination provisions, be payable or deliverable with respect to the Note Obligations. Notwithstanding the 

 

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foregoing, if one or more events of default shall exist under the Senior Debt Documents, the Senior Agents may agree in writing that payments may be made with respect to the Note Obligations which would otherwise be prohibited pursuant to this Agreement.

 

(iii)         If Holder shall acquire by grant, indemnification, subrogation or otherwise, any lien or other interest in any of the assets or properties of the Issuer or any subsidiary thereof, such lien or other interest shall be subordinate in right of payment to the Senior Debt Obligations and any liens in respect of the Senior Debt Obligations as provided herein, and Holder hereby waives any and all rights it may acquire by subrogation or otherwise to any lien in respect of the Senior Debt Obligations or any portion thereof until such time as the Final Discharge Date shall have occurred.  In the event that a lien described in this subsection (iii) exists, until the Final Discharge Date, the Senior Agents are granted a power of attorney to execute any and all documentation necessary to release such lien and any filings perfecting such lien.

 

(iv)         If, at any time, all or part of any payment with respect to Senior Debt Obligations theretofore made (whether by the Issuer, any affiliate or subsidiary thereof or any other person or enforcement of any right of setoff or otherwise) is rescinded or must otherwise be returned by the holders of Senior Debt Obligations for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Issuer or such other persons), the subordination provisions set forth herein shall continue to be effective or be reinstated, as the case may be, all as though such payment had not been made.

 

(v)          Holder waives any marshalling rights with respect to the Senior Debt Parties in any Insolvency or Liquidation Proceeding.

 

(e)                               Guarantees and Security.  Any payments made to, or received by, Holder in respect of any guaranty or security in support of the Note Obligations shall be subject to the terms of this Agreement and applied on the same basis as payments made directly by the obligor under the Note Obligations. To the extent that the Issuer or any of its subsidiaries provides a guaranty or any security in support of any Note Obligations, Holder will cause each such person to become a party hereto (if such person is not already a party hereto) promptly after the date of the execution and delivery of the respective guarantee or security documentation, provided that any failure to comply with the foregoing requirements of this Section 12(e) will have no effect whatsoever on the subordination provisions contained herein (which shall apply to all payments received with respect to any guarantee or security for any Note Obligations, whether or not the person furnishing such guarantee or security is a party hereto).

 

(f)                                Prohibited Payments.  Holder hereby acknowledges and agrees that no payments will be accepted by it in respect of the Note Obligations (unless promptly turned

 

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over to the Senior Agents as contemplated by Section 12(d) above), to the extent such payments would be prohibited under any Senior Debt Obligations (or the Senior Debt Documents).

 

(g)                              Subordination.

 

(i)           Anything to the contrary notwithstanding, all Note Obligations shall be subordinate and junior in right of payment, to the extent and in the manner herein set forth, to the prior payment in full, in cash, and performance of all Senior Debt Obligations. The foregoing shall apply notwithstanding the availability of collateral to the Senior Debt Parties or the holders of Note Obligations or the actual date and time of execution, delivery, recordation, filing or perfection of any liens granted with respect to the Senior Debt Obligations, or the lien or priority of payment thereof, and in any instance wherein the Senior Debt Obligations or any claim for the Senior Debt Obligations is subordinated, avoided or disallowed, in whole or in part, under any debtor relief law. In the event of an Insolvency or Liquidation Proceeding with respect to the Issuer, (i) the lenders or holders of any Senior Debt Obligations shall be entitled to the Discharge of Obligations with respect to the Senior Debt Obligations before Holder is entitled to receive any payment on account of any Note Obligations, (ii) the lenders or holders of any Senior Debt Obligations shall be entitled to receive any payment or distribution of any kind or character, whether in cash, property or securities or by set-off or otherwise, which may be payable or deliverable in any Insolvency or Liquidation Proceeding in respect of any Note Obligations, (iii) until the Final Discharge Date, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to which Holder would be entitled, except for payments permitted under Section 12(b), shall be paid or delivered by Holder directly to the Senior Agents for application in accordance with the Senior Debt Documents, (iv) Holder shall execute, verify, deliver and file any proofs of claim in respect of the Note Obligations requested by any Senior Agent in connection with any such Insolvency or Liquidation Proceeding and hereby irrevocably authorizes, empowers and appoints each Senior Agent as its agent and attorney-in-fact (and to the extent required by applicable law, grant a power of attorney to the Senior Agents on such terms as the Senior Agents may reasonably require) to execute, verify, deliver and file such proofs of claim upon the failure of Holder to do so prior to 15 days before the expiration of the time to file any such proof of claim; provided that (x) no Senior Agent shall have an obligation to execute, verify, deliver, file and vote any such proof of claim and (y) if a Senior Agent is not entitled to execute, verify, deliver, file or vote any such proof of claim and a Senior Agent requests Holder or Issuer to take that action, Holder or Issuer shall take that action itself in accordance with the instructions of such Senior Agent.  In the event that a Senior Agent votes any claim in accordance with the authority granted hereby, Holder shall not be entitled to change or withdraw such vote.

 

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(ii)          In any Insolvency or Liquidation Proceeding relating to the Issuer, Holder agrees that the lenders or holders of Senior Debt Obligations shall be entitled to the Discharge of Obligations with respect to the Senior Debt Obligations (including interest accrued on or accruing after the commencement of any Insolvency or Liquidation Proceeding, regardless of whether allowed or allowable in such proceeding and any premium stated to be payable) before Holder receives payment of any amount in respect of the Note Obligations.  No right of the Senior Agents to enforce the subordination of the Issuer’s obligations hereunder may be impaired by any act or failure to act by the Issuer or Holder or by the failure of the Issuer or the Holder to comply with the terms of this Note.  No failure or delay on the part of any party hereto or any holder of Senior Debt Obligations in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  If the Issuer or Holder violates any of the terms of this Section 12, in addition to any remedies in law, equity or otherwise, each Senior Agent may restrain such violation in any court of law and may interpose this Note as a defense in any action by Holder.  Holder hereto acknowledges that to the extent that no adequate remedy at law exists for breach of its obligations under this Note, in the event Holder fails to comply with its obligations hereunder, the Senior Agents shall have the right to obtain specific performance of the obligations of Holder, injunctive relief or such other equitable relief as may be available. Holder hereby acknowledges that the Senior Agents and the holders of the Senior Debt Obligations are intended third party beneficiaries of this Section 12 and shall be entitled to enforce the same against Holder, the Issuer or any guarantor of the Note Obligations.

 

(iii)         If payment hereunder is accelerated because of an Event of Default, Holder will promptly notify the Senior Agents of the acceleration.  The provisions of this Section 12, the interest rate for the Note Obligations and the repayment terms of this Note may not be amended or modified without the written consent of the Senior Agents; provided that without such consent of the Senior Agents, the interest rate may be reduced and the payment terms of the Note Obligations may be modified to reduce or extend any amortization or otherwise relax the terms, conditions and covenants set forth in the Note.  Until the Final Discharge Date, without the written consent of the Senior Agents, the Note may not be modified to add any covenants or obligations or to amend the covenants and obligations of the Issuer in a manner which is more restrictive to the Issuer than as set forth in the Note as of the date hereof.

 

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Section 13.                       WAIVER.

 

The Issuer, endorsers, guarantors and sureties of this Note hereby waive diligence, demand for payment, presentment for payment, protest, notice of nonpayment, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, and notice of nonpayment, and all other notices or demands of any kind (except notices specifically provided for herein) and expressly agree that, without in any way affecting the liability of the Issuer, endorsers, guarantors or sureties, the Holder hereof may extend any maturity date or the time for payment of any installment due hereunder, otherwise modify this Note, accept additional security, release any Person liable, and release any security or guaranty. The Issuer, endorsers, guarantors and sureties waive, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense.

 

Section 14.                       RESERVED.

 

Section 15.                       ATTORNEYS’ FEES.

 

If this Note is not paid when due or if any Event of Default occurs, the Issuer promises to pay all costs of enforcement and collection and preparation therefor, including but not limited to, reasonable attorneys’ fees, whether or not any action or proceeding is brought to enforce the provisions hereof (including without limitation, all such costs incurred in connection with any bankruptcy, receivership or other court proceedings, whether at the trial or appellate level).

 

Section 16.                       SEVERABILITY.

 

If any provision of this Note is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect.

 

Section 17.                       NUMBER AND GENDER.

 

In this Note the singular shall include the plural and the masculine shall include the feminine and neuter gender, and vice versa.

 

Section 18.                       HEADINGS.

 

Headings at the beginning of each numbered section of this Note are intended solely for convenience and are not part of this Note.

 

Section 19.                       NOTICES.

 

(a)          Any notice or other communication required or permitted to be given or made under this Note (i) shall be in writing, (ii) shall refer specifically to this Note, (iii) may be delivered by (A) hand delivery, (B) First Class U.S. Mail (regular, certified, registered or expedited delivery), (C) Federal Express or UPS Overnight, or other nationally recognized delivery service, (D) fax, or (E) e-mail or other electronic transmission, and (iv) shall be delivered or transmitted to the appropriate address as set forth in clause (b) below.

 

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(b)          Each notice or other communication shall be delivered or addressed to a party at its address set forth below. A party’s address for notice may be changed from time-to-time only by notice given to the other party.

 

If to Holder:

 

ORIX USA Corporation
 1717 Main Street, Suite 900
 Dallas, Texas 75201
 Attention: Treasury
 Fax Number: Fax (214) 237-2018
 Email Address: treasury@orix.com

 

If to the Issuer:

 

Houlihan Lokey, Inc.

1930 Century Park West

Los Angeles, CA 90067

Attention: [  ] 

Fax Number: [  ] 

Email Address: [  ]

 

Section 20.                       APPLICABLE LAW.

 

This Note and the transactions contemplated thereby are being executed and delivered and are intended to be performed in the State of New York, and shall be construed in accordance with and governed by the local laws of the State of New York, and enforceable in the federal and state courts in the State of New York.  EACH PARTY HERETO WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE OR ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

 

Section 21.                       NON WAIVER.

 

Neither any failure nor any delay on the part of Holder in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege, nor shall any course of dealing between the Issuer and Holder operate as a waiver of any right or rights of Holder.

 

Section 22.                       MODIFICATION, AMENDMENT, ETC.

 

No modification, amendment or waiver of any provision of this Note, nor consent to any departure by the Issuer, shall in any event be effective unless the same shall be in writing and signed by Holder and then such waiver or consent shall be effective only in the

 

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specific instance and for the specific purpose for which given. No notice or demand on the Issuer in any case shall entitle the Issuer to any other or further notice or demand in the same, similar or other circumstance.

 

Section 23.                       COUNTERPARTS.

 

This Note may be executed in two or more counterparts, each of which shall constitute but one agreement. This Note shall be effective when counterparts which, when taken together, bear the signature (including execution by facsimile) of all parties hereto, shall have been delivered to and received by Holder and the Issuer.

 

Section 24.                       INTEGRATION.

 

This Note contains the complete understanding and agreement of the Holder hereof and the Issuer and supersedes all prior representations, warranties, agreements, arrangements, understandings and negotiations.

 

Section 25.                       BINDING EFFECT; ASSIGNMENTS.

 

This Note will be binding upon, and inure the benefit of, the Holder hereof, the Issuer, and their respective successors and assigns. The Issuer may not delegate its obligations under this Note.  Holder may not assign or otherwise transfer any of its rights or obligations hereunder without the written consent of the Issuer.  [The Issuer hereby consents to the transfer of this Note, first to Fram and then to ORIX USA and/or its Affiliates, in each case in order to effect the IPO Dividend.]4

 

Section 26.                       SURVIVAL.

 

The representations, warranties and covenants of the Issuer in this Note shall survive the execution and delivery of this Note.

 

Section 27.                       RIGHT TO DEFEND.

 

Holder shall have the right, at the sole cost and expense of the Issuer, to appear in or defend any action or proceeding in which named or joined or otherwise purporting to affect the rights or duties of the parties hereunder and in connection therewith recover from the Issuer all necessary costs and expenses (including reasonable attorneys’ fees), with counsel reasonably satisfactory to Holder.

 

Section 28.                       INDEMNIFICATION.

 

The Issuer hereby protects, indemnifies, defends and holds harmless Holder from and against any and all liability, expense or damage of any kind or nature from any suits, claims or demands, including reasonable attorneys’ fees and expenses, on account of any matter or thing, whether in suit or not, arising out of this Note and the transactions contemplated hereby, other than taxes (which shall be governed exclusively by Section

 

 

4      NTD: Bracketed language to be included only in the initial note.

 

13

 

9(b) hereof). The parties hereto recognize that no indemnity is intended to indemnify a Person’s gross negligence, unexcused failure to perform or unlawful acts.

 

Section 29.                       INTEREST RATE LIMITATION.

 

The Issuer hereby agrees to pay an effective rate of interest that is the sum of the interest rate provided for herein, together with any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the Note, including, without limitation, any fees to be paid by the Issuer pursuant to the provisions of the Note. Holder and the Issuer agree that none of the terms and provisions contained herein shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of New York. In such event, if Holder shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate of this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of New York, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of the Holder, be credited to the payment of other amounts payable under the Note or returned to the Issuer. All agreements between the Issuer and Holder, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any indebtedness governed hereby or otherwise, shall the interest contracted for, charged or received by Holder exceed the maximum amount permitted under law. If, from any circumstances whatsoever, interest would otherwise be payable to Holder in excess of the maximum lawful amount, the interest payable to Holder shall be reduced to the maximum amount permitted under applicable law; and, if from any circumstance Holder shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal of the Note and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of the Loan such excess shall be refunded to the Issuer. All interest paid or agreed to be paid to Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period until payment in full of the principal of the Note (including the period of any renewal or extension thereof) so that interest thereon for such full period shall not exceed the maximum amount permitted by applicable law.

 

(Signature Page Follows)

 

14

 

	
 
    	
Holder:
    
	
 
    	
 
    
	
 
    	
[HLHZ   HOLDING COMPANY, LLC, a
   Delaware limited liability company] [ORIX USA
   CORPORATION, a Delaware corporation]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
Name:  
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ISSUER:
    
	
 
    	
 
    
	
 
    	
HOULIHAN   LOKEY, INC., a Delaware
   corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
Name:  
    
	
 
    	
 
    	
Title:
    

 

 

ANNEX A

 

GLOSSARY OF DEFINED TERMS

 

In addition to the other terms defined elsewhere in this Agreement, for the purposes of same, the following words and terms shall have the meaning set forth below (such meanings being equally applicable to both the singular and plural form of the terms defined):

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person.  For purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting interests, by contract or otherwise.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

 

“Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors, conservatorship, bankruptcy, general assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and any similar federal, state or foreign law for the relief of debtors affecting the rights of creditors generally.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

 

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, common stock, preferred stock, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Covered Taxes” means any tax of any kind, but excluding (a) franchise taxes, branch profits and taxes imposed on or measured by the net income or receipts of Holder under the law of any jurisdiction, (b) any such withholding tax that is in effect and would apply to a payment to Holder at the time Holder becomes a party to this Agreement, (c) taxes attributable to Holder’s failure to comply with Section 9(b)(ii) or Section 9(b)(iii) and (d) any withholding taxes imposed under FATCA.

 

“Default” means any of the events or circumstances specified in Section 10 hereof, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

 

“Default Interest Rate” is defined in Section 3(c).

 

A-1

 

“Discharge of Obligations” means, with respect to any Obligations (other than contingent or indemnification obligations not yet due and payable and for which no claim has been made or asserted), (a) the full cash payment thereof, including any interest, fees, premium and other charges accruing during an insolvency proceeding (whether or not allowed in the proceeding) and (b) the termination or expiration of all commitments, in each case, in accordance with the applicable debt documents.

 

“Enforcement Action” means in relation to the Note Obligations:

 

(a)                               the acceleration of any Note Obligations or the making of any declaration that any Note Obligations are prematurely due and payable;

 

(b)                              the making of any declaration that any Note Obligations are payable on demand;

 

(c)                               the making of a demand in relation to a Note Obligation that is payable on demand (other than a demand made by Holder in relation to any Note Obligations which are on-demand Note Obligations to the extent that any resulting payment would be permitted under Section 12(b));

 

(d)                             the exercise of any right to require the Issuer or any affiliate or subsidiary thereof to acquire any Note Obligations (including exercising any put or call option against any such affiliate or subsidiary for the redemption or purchase of any such Note Obligations);

 

(e)                               the exercise of any right of set-off or recoupment, bankers’ lien, account combination or payment netting against the Issuer or any affiliate or subsidiary thereof in respect of any Note Obligations other than the exercise of any such right which is otherwise expressly permitted under or not prohibited by the Senior Debt Documents to the extent that the exercise of that right gives effect to a payment permitted under Section 12(b);

 

(f)                                the suing for, commencing or joining of any legal or arbitration proceedings against the Issuer or any affiliate or subsidiary thereof to recover any Note Obligations; and

 

(g)                              any foreclosure proceeding, the exercise of any power of sale, the obtaining of a receiver, the seeking of default interest, the suing on, or otherwise taking any action to enforce the obligation of the Issuer or any affiliate or subsidiary thereof to pay any amounts relating to any Note Obligations or the taking of any other enforcement action against any asset or property of the Issuer or any such affiliate or subsidiary.

 

“Equity Interests” means, with respect to any Person, shares in (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares in (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares in (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person 

 

A-2

 

of such shares (or such other interests), and other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting.

 

“Event of Default” means any of the events or circumstances specified in Section 10 hereof, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Note (or any successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement between a non-U.S. jurisdiction and the United States of America with respect to the foregoing and any law, regulation or practice adopted pursuant to any such intergovernmental agreement.

 

“Final Discharge Date” means the date on which the Discharge of Obligations with respect to the Senior Debt Obligations shall have occurred.

 

“Fram” means Fram Holdings, Inc., a Delaware corporation.

 

“FRAM Notes” means the promissory notes issued pursuant to the Third Amended and Restated Stockholders Agreement dated as of February 17, 2009, by and among Fram, ORIX USA Corporation, and the Holders identified therein.

 

“HLHZ” means HLHZ Holding Company, LLC, a Delaware limited liability company.

 

“Holder” means [ORIX USA Corporation], a Delaware corporation, together with its successors and assigns.

 

[“IPO Dividend” means the dividends and distributions payable, on the date hereof, (a) by the Issuer to HLHZ, (b) by HLHZ to Fram and (c) by Fram to the holders of record of Fram’s common stock as of the “open of business” on the day prior to the day of pricing of the Issuer’s initial public offering and any dividends, distributions or other transfers of this Note that occur on the date hereof in connection therewith.]5

 

“Insolvency or Liquidation Proceeding” means (a) any voluntary or involuntary case or proceeding under any debtor relief law with respect to the Issuer or any Significant Subsidiary of the Issuer, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, administration, administrative receivership, liquidation, reorganization, dissolution or other similar case or proceeding or declaration of a moratorium in any applicable jurisdiction with respect to the Issuer or any Significant Subsidiary of the Issuer or with respect to any of its assets or (c) any liquidation, dissolution, reorganization or winding up of the Issuer or any Significant Subsidiary of the Issuer whether voluntary or involuntary and whether or not involving insolvency or bankruptcy and including the passing of a resolution or making of an order for any of the foregoing. Notwithstanding the foregoing, any liquidation, dissolution, reorganization, consolidation or other transaction that is permitted by a Senior Debt Document shall not be deemed to be an “Insolvency or Liquidation Proceeding.”

 

 

5      NTD: Bracketed language to be included only in the initial note.

 

A-3

 

“Interest Payment Date” means each June 30, September 30, December 31, and March 31, commencing September 30, 2015, and continuing until the payment in full of all Note Obligations.

 

“Interest Period” means (a) initially, the period commencing on the date hereof and ending on September 30, 2015; and (b) thereafter, each period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the third calendar month thereafter; provided that, in each of the case of clauses (a) and (b), (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, and (iii) no Interest Period shall extend beyond the date on which the Note Obligations hereunder is repaid in full.

 

“Interest Rate” means a rate per annum equal to the London Interbank Offer Rate (rounded upwards, if necessary, to the nearest 1/100th) appearing on Reuters Screen LIBOR01 Page (or any successor or substitute page of such service) as the London interbank offered rate for deposits in Dollars for a three month term at approximately 11:00 a.m. on the date which is two (2) Business Days prior to the commencement of the applicable Interest Period, plus 165 basis points.

 

“Issuer” is defined in Section 1.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, financial condition, operations, assets or liabilities of the Issuer and its Subsidiaries, taken as a whole; (b) the rights and remedies of the Holder under the Note or (c) the ability of the Issuer to perform its Note Obligations.

 

“Maturity Date” means the date that is the second anniversary of the date hereof.

 

“Note” is defined in Section 1.

 

“Note Obligations” means all Obligations of every nature of the Issuer now or hereafter existing under or arising out of or in connection with this Note, together with all extensions or renewals thereof, whether for principal, interest, any fees, any costs, expenses, damages, indemnities, taxes, payments otherwise contemplated, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Holder as a preference, fraudulent transfer, transfer at under value or otherwise (including interest that, but for the filing of a petition in bankruptcy or insolvency with respect to the Issuer, would accrue on such obligations, whether or not a claim is allowed against the Issuer for such amounts in the related bankruptcy or insolvency proceeding).

 

A-4

 

“Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding under Bankruptcy Law.

 

“Payment Date” means each June 30, September 30, December 31, and March 31, commencing June 30, 2016, and continuing until the payment in full of all Note Obligations.

 

“Person” means an individual, a partnership, a company, a limited liability company, a corporation, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, a governmental authority or any other entity.

 

“Principal Amount” is defined in Section 1.

 

“Senior Agent” means the administrative agent, trustee or collateral agent appointed under any Senior Debt Document and shall specifically include Bank of America, N.A. in its capacity as the Lender under the Senior Credit Agreement.

 

“Senior Credit Agreement” means the $75,000,000 senior credit facility to be entered into in connection with the Issuer’s public offering, by and among Houlihan Lokey, Inc., as borrower, and Bank of America, N.A., as the lender thereunder, as it may be amended, amended and restated, replaced or refinanced from time to time.

 

“Senior Debt Documents” shall mean any documents governing the terms of Senior Debt Obligations.

 

“Senior Debt Obligations” means the Issuer’s Obligations under the Senior Credit Agreement and any other indenture, agreement or instrument evidencing indebtedness for borrowed money, unless the indenture, agreement or instrument under which such indebtedness is incurred provides that it is (a) on parity with or subordinated in right of payment to this Note, or (b) subordinated in right of payment to the obligations under the Senior Credit Agreement, provided that in no case shall the FRAM Notes constitute Senior Debt Obligations.

 

“Senior Debt Parties” means each Person party to the Senior Debt Documents as a lender, and shall include, without limitation, the lender parties to the Senior Credit Agreement.

 

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as it may be amended from time to time.

 

“Subsidiary” means, with respect to any specified Person: (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving 

 

A-5

 

effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); or (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

 

A-6Exhibit 10.9

 

HOULIHAN LOKEY, INC.

 

AMENDED AND RESTATED

 

2006 INCENTIVE COMPENSATION PLAN

 

 

HOULIHAN LOKEY, INC.

 

SECOND AMENDED AND RESTATED

 

2006 INCENTIVE COMPENSATION PLAN

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1. DEFINITIONS AND   CONSTRUCTION
    	
1
    
	
 
    	
 
    	
 
    
	
1.1
    	
“Affiliate”
    	
2
    
	
1.2
    	
“Award”
    	
2
    
	
1.3
    	
“Award   Agreement”
    	
2
    
	
1.4
    	
“Board”
    	
2
    
	
1.5
    	
“Capital   Stock”
    	
2
    
	
1.6
    	
“Cash   Bonus Award”
    	
2
    
	
1.7
    	
“Code”
    	
2
    
	
1.8
    	
“Committee”
    	
2
    
	
1.9
    	
“Company   Subsidiary”
    	
2
    
	
1.10
    	
“Company   Service Provider”
    	
2
    
	
1.11
    	
“Eligible   Individual”
    	
2
    
	
1.12
    	
“Encumbrance”
    	
2
    
	
1.13
    	
“Employee”
    	
2
    
	
1.14
    	
“Fair   Market Value”
    	
3
    
	
1.15
    	
“Lock-Up   Agreement”
    	
3
    
	
1.16
    	
“ORIX”
    	
3
    
	
1.17
    	
“ORIX   LP”
    	
3
    
	
1.18
    	
“Participant”
    	
3
    
	
1.19
    	
“Person”
    	
3
    
	
1.20
    	
“Restricted   Stock”
    	
3
    
	
1.21
    	
“Securities   Act”
    	
3
    
	
1.22
    	
“Stock”
    	
3
    
	
1.23
    	
“Subsidiary”
    	
3
    
	
1.24
    	
“Transfer”
    	
3
    
	
1.25
    	
“Voting   Trust Agreement”
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 2. ELIGIBILITY AND   PARTICIPATION
    	
4
    
	
 
    	
 
    	
 
    
	
2.1
    	
Eligibility
    	
4
    
	
2.2
    	
Participation
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 3. [INTENTIONALLY   OMITTED]
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 4. CASH AWARDS
    	
4
    

 

i

 

	
4.1
    	
Cash   Bonus Awards
    	
4
    
	
4.2
    	
Form of   Payment
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 5. RESTRICTED   STOCK AWARDS
    	
4
    
	
 
    	
 
    	
 
    
	
5.1
    	
Number   of Shares
    	
4
    
	
5.2
    	
Stock   Distributed
    	
5
    
	
5.3
    	
Limitation   on Number of Shares Subject to Awards
    	
5
    
	
5.4
    	
[Reserved]
    	
5
    
	
5.5
    	
Other   Incentive Shares
    	
5
    
	
5.6
    	
Grant   of Restricted Stock
    	
5
    
	
5.7
    	
Purchase   Price
    	
5
    
	
5.8
    	
Issuance   and Restrictions
    	
5
    
	
5.9
    	
Forfeiture
    	
6
    
	
5.10
    	
Conditions   to Issuance of Stock
    	
6
    
	
5.11
    	
Uncertificated   Shares
    	
7
    
	
5.12
    	
Investment   Intent
    	
7
    
	
5.13
    	
Rights   as Stockholders
    	
7
    
	
5.14
    	
Section 83(b) Election
    	
7
    
	
5.15
    	
Award   Agreement
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE 6. PROVISIONS   APPLICABLE TO AWARDS
    	
8
    
	
 
    	
 
    	
 
    
	
6.1
    	
Stand-Alone   and Tandem Awards
    	
8
    
	
6.2
    	
Limits   on Transfer
    	
8
    
	
6.3
    	
Arbitration
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE 7. CHANGES IN   CAPITAL STRUCTURE
    	
9
    
	
 
    	
 
    
	
7.1
    	
Adjustments
    	
9
    
	
7.2
    	
No   Other Rights
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE 8. ADMINISTRATION
    	
11
    
	
 
    	
 
    
	
8.1
    	
Committee
    	
11
    
	
8.2
    	
Action   by the Committee
    	
11
    
	
8.3
    	
Authority   of Committee
    	
11
    
	
8.4
    	
Decisions   Binding
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE 9. EFFECTIVE AND   EXPIRATION DATE
    	
12
    
	
 
    	
 
    
	
9.1
    	
Effective   Date
    	
12
    
	
9.2
    	
Expiration   Date
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE 10. AMENDMENT,   MODIFICATION, AND TERMINATION
    	
12
    
	
 
    	
 
    
	
10.1
    	
Amendment,   Modification, and Termination
    	
12
    

 

ii

 

	
10.2
    	
Awards   Previously Granted
    	
12
    
	
10.3
    	
Code   Section 409A
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE 11. GENERAL   PROVISIONS
    	
13
    
	
 
    	
 
    	
 
    
	
11.1
    	
No   Rights to Awards
    	
13
    
	
11.2
    	
No   Stockholders Rights
    	
13
    
	
11.3
    	
Withholding
    	
13
    
	
11.4
    	
No   Right to Employment or Services
    	
13
    
	
11.5
    	
Unfunded   Status of Awards
    	
13
    
	
11.6
    	
Relationship   to other Benefits
    	
14
    
	
11.7
    	
Expenses
    	
14
    
	
11.8
    	
Titles   and Headings
    	
14
    
	
11.9
    	
Government   and Other Regulations
    	
14
    
	
11.10
    	
Governing   Law
    	
14
    

 

iii

 

HOULIHAN LOKEY, INC.
 AMENDED AND RESTATED
 2006 INCENTIVE COMPENSATION PLAN

 

The purpose of the Houlihan Lokey, Inc. Amended and Restated 2006 Incentive Compensation Plan (the “Plan”) is to promote the success and enhance the value of Houlihan Lokey, Inc. (the “Company”) by providing Eligible Individuals with a long-term performance incentive in order to generate superior returns for the Company’s stockholders and to further motivate and retain such individuals.  The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of key service providers upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

 

RECITALS

 

WHEREAS, Fram Holdings, Inc. (“Fram”) previously adopted the Fram Holdings, Inc. Second Amended and Restated 2006 Incentive Compensation Plan, as amended  (the “Original Plan”);

 

WHEREAS, in connection with the initial public offering of the shares of common stock of the Company (the “IPO”), Fram, ORIX (as defined herein) and the Company shall effect a corporate reorganization (the “Corporate Reorganization”), pursuant to which each holder of the Capital Stock of Fram (“Fram Stock”) shall receive Capital Stock of the Company having equivalent aggregate value to the Fram Stock previously held by such holder;

 

WHEREAS, in connection with the Corporate Reorganization, the Company assumed the Original Plan and, in connection therewith, the Company desires to amend and restate the Original Plan to effect the amendments described herein; and

 

WHEREAS, in connection with the initial public offering of the Company’s Class A common stock, the Company is adopting the Company 2016 Incentive Plan (the “2016 Plan”) and, upon the effectiveness of the 2016 Plan, no additional Awards shall be granted hereunder.

 

NOW, THEREFORE, in consideration of the foregoing, the Original Plan is amended and restated, effective as of the date on which the Corporate Reorganization occurs, as set forth herein:

 

ARTICLE 1.

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise.  The singular pronoun shall include the plural where the context so indicates.

 

 

1.1                            “Affiliate” means, with respect to a specified Person, any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person.

 

1.2                            “Award” means a Restricted Stock award or a Cash Bonus Award granted to a Participant pursuant to the Plan.

 

1.3                            “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award, including any amendments, notices or addenda thereto (whether or not unilateral), in each case through electronic medium.

 

1.4                            “Board” means the Board of Directors of the Company.

 

1.5                            “Capital Stock” means:  (a) in the case of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

1.6                            “Cash Bonus Award” has the meaning set forth in Section 4.1.

 

1.7                            “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

1.8                            “Committee” means the Compensation Committee of the Board.

 

1.9                            “Company Subsidiary” means any Subsidiary of the Company.

 

1.10                    “Company Service Provider” means any director, officer, employee, leased employee, independent contractor or consultant of the Company or any of the Company Subsidiaries.

 

1.11                    “Eligible Individual” means any person who is eligible to receive a Restricted Stock award or a Cash Bonus Award, as set forth in Section 2.1.

 

1.12                    “Encumbrance” means a security interest, lien, charge, claim, community or other marital property interest, pledge, alienation, mortgage, option, hypothecation, encumbrance or similar collateral assignment by any other means, whether for value or no value and whether voluntary or involuntary (including, without limitation, by operation of law or by judgment, levy, attachment, garnishment, bankruptcy or other legal or equitable proceedings) or any other restriction on use, voting (including any proxy), transfer (including any right of first refusal or similar right), receipt of income or exercise of any other attribute of ownership.

 

1.13                    “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, any Company Subsidiary, or ORIX LP.

 

2

 

1.14                    “Fair Market Value” means the value that a willing buyer would pay a willing seller, based on all of the relevant facts and circumstances, including factors such as discounts for non-marketability, minority interests, liquidation preferences, preferred distributions, restrictions on transferability and any additional discounts that are applicable due to the rights, powers and other traits or characteristics of the Stock.

 

1.15                    “Lock-Up Agreement” means a lock-up agreement containing restrictions on transfer, entered into by and between the Company and the Participant.

 

1.16                    “ORIX” means ORIX USA Corporation, a Delaware corporation.

 

1.17                    “ORIX LP” means ORIX USA, LP, a Delaware limited partnership.

 

1.18                    “Participant” means any Eligible Individual who has been granted an Award pursuant to the Plan.

 

1.19                    “Person” means and includes an individual, a general or limited partnership, a limited liability company, a joint venture, a corporation (including, without limitation, any nonprofit corporation), an estate, a trust, an unincorporated organization, an association, a government or any department or agency thereof or any entity similar to any of the foregoing.

 

1.20                    “Restricted Stock” means Stock awarded to a Participant pursuant to Article 5 that is subject to certain restrictions and may be subject to risk of forfeiture.

 

1.21                    “Securities Act” means the Securities Act of 1933, as amended from time to time.

 

1.22                    “Stock” means the Class B common stock, or any other class of shares of Company common stock to be issued for incentive purposes as determined by the Board from time to time and such other securities of the Company that may be substituted for Stock pursuant to Article 7.

 

1.23                    “Subsidiary” means, with respect to any specified Person:  (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); or (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

 

1.24                    “Transfer” means a sale, transfer, assignment, gift, bequest or disposition by any other means, whether for value or no value and whether voluntary or involuntary (including, without limitation, by realization upon any Encumbrance or by operation of law or by judgment, levy, attachment, garnishment, bankruptcy or other legal or equitable proceedings).

 

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1.25                    “Voting Trust Agreement” means that certain Voting Trust Agreement dated as of [_______], 2015 by and among the Company and certain undersigned holders of shares of Class B common stock of the Company, Scott Beiser, Irwin Gold and Robert Holtz, as amended from time to time.

 

ARTICLE 2.

 

ELIGIBILITY AND PARTICIPATION

 

2.1                            Eligibility.

 

(a)                               Restricted Stock awards may be granted to Employees of the Company,  any Company Subsidiaries or ORIX LP (but only if the Employee of ORIX LP provides services primarily to the Company or one of its Subsidiaries), who are officers of any such entity.

 

(b)                              Cash Bonus Awards may be granted to Company Service Providers or other officers, directors, employees, leased employees or consultants of the Company or any of its Subsidiaries.

 

2.2                            Participation.  Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award.  No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.

 

ARTICLE 3.

 

[INTENTIONALLY OMITTED]

 

ARTICLE 4.

 

CASH AWARDS

 

4.1                            Cash Bonus Awards.  Any Eligible Individual selected by the Committee may be granted one or more cash bonuses (each, a “Cash Bonus Award”) payable on a specified date or dates determined by the Committee.

 

4.2                            Form of Payment.  Payments with respect to any Cash Bonus Awards granted under this Article 4 shall be made in cash.

 

ARTICLE 5.

 

RESTRICTED STOCK AWARDS

 

5.1                            Number of Shares.

 

(a)                               Subject to Article 7, the maximum aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan is the sum of (i)

 

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25,892,500 shares and (ii) a number of shares equal to the quotient obtained by dividing $43,244,000 by the per share price of the Company’s Class A common stock in the IPO.  Notwithstanding the foregoing or anything else herein to the contrary, upon the effectiveness of the 2016 Plan, no additional Awards shall be granted under this Plan.

 

(b)                              The shares of Stock reserved for issuance or transfer pursuant to the Plan shall only be available for grant on one occasion and shall not return to the Plan and become available for subsequent grants (whether or not such shares of Stock are forfeited by the Participant or repurchased by the Company).

 

5.2                            Stock Distributed.  Any Stock distributed pursuant to a Restricted Stock award may consist, in whole or in part, of authorized and unissued Stock or treasury Stock.  Any Stock so distributed shall be duly and validly issued, fully paid and nonassessable.

 

5.3                            Limitation on Number of Shares Subject to Awards.  Except as provided otherwise by the Committee, the maximum aggregate number of shares of Stock subject to all Awards granted to all Persons in any fiscal year shall not exceed 150,000, subject to adjustment pursuant to Article 7.

 

5.4                            [Reserved].

 

5.5                            Other Incentive Shares.  The Board may authorize and issue shares of Stock with rights, powers and privileges completely different from the shares of Stock, and in the Committee’s sole discretion, the Stock subject to any Award may be shares of such new class of Stock.  The Board will not be required to adopt or apply to the new series or class of shares of Stock any of the terms, conditions, rights or privileges applicable to the shares of Stock.

 

5.6                            Grant of Restricted Stock.  The Committee is authorized to make awards of Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as the Committee may determine to be appropriate, consistent with the terms of the Plan.

 

5.7                            Purchase Price.  The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of the Stock to be purchased, unless otherwise permitted by applicable state law.  In all cases, legal consideration shall be required for each issuance of Restricted Stock.

 

5.8                            Issuance and Restrictions.  Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Board may impose (including, without limitation, limitations on the right to receive dividends on the Restricted Stock).  The Board may delegate all or any of the authority to provide for such restrictions to the Committee in its sole discretion other than with respect to the restrictions of the type included in the Voting Trust Agreement or an applicable Lock-Up Agreement or Award Agreement, which restrictions shall remain within the Board’s authority and cannot be delegated to any committee.  These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments,

 

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or otherwise, as the Board or the Committee, as applicable, determines at the time of the grant of the Award or thereafter.

 

5.9                            Forfeiture.  Upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to forfeiture restrictions shall be forfeited; provided, however, that, the Committee may (a) provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) at the time of grant or at any time thereafter, waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

 

5.10                    Conditions to Issuance of Stock.  The Company shall not be required to issue any shares of Stock issuable pursuant to an Award prior to fulfillment of all of the following conditions:

 

(a)                               The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee shall, in its discretion, deem necessary or advisable, or the receipt of such further representations as to the Participant’s investment intent (including, without limitation, any investment representation letter required pursuant to Section 5.11) or completion of other actions necessary to perfect exemptions from such registration or qualification requirements as the Committee may, in its discretion, deem necessary or advisable;

 

(b)                              The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its discretion, determine to be necessary or advisable;

 

(c)                               The Participant’s execution of such documentation (if any) as the Committee may deem necessary or advisable to evidence the Participant’s agreement to be bound by the terms of an applicable Lock-Up Agreement or the Voting Trust Agreement (or, in each case, a similar agreement approved by the Board specifically for holders of the Stock) and other agreements containing the provisions that the Board determines are necessary or advisable as a condition to grants, awards or issuances of such Stock;

 

(d)                             The lapse of such reasonable period of time (as may be established by the Committee from time to time for reasons of administrative convenience) following execution of an Award Agreement and such other documentation as the Committee may require consistent with the terms of the Plan (including, without limitation, any investment representation letter required pursuant to Section 5.12);

 

(e)                               The receipt by the Company of full payment for such shares (which may be in the form of past services or other lawful consideration), including payment of any applicable withholding tax; and

 

(f)                                The admission of such shares to listing on all stock exchanges on which such class of stock is then listed (if any).

 

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5.11     Uncertificated Shares.  The shares of Stock shall not be represented by stock certificates.  No Participant will have any right to request from the Company a certificate representing the number of his or her shares of Stock registered in certificate form.  The Company shall have the right to update its books and records at any time and from time to time to reflect any change in the number of shares of Stock held by any Participant.

 

5.12     Investment Intent.  In addition to such other documentation as the Committee may require consistent with the terms of the Plan, the Committee may require a Participant to give written assurances satisfactory to the Committee as to (i) the Participant’s knowledge and experience in financial and business matters, (ii) the Participant’s capability of evaluating, alone or together with a professional advisor employed by the Participant, the merits and risks of acquiring such Stock, and (iii) the Participant’s investment intent (i.e., that the Participant is acquiring the Stock for the Participant’s own account and not with any present intention of selling or otherwise distributing the stock).  The Committee may in its sole discretion waive the requirements of this Section 5.12 if, as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The provisions of this Section 5.12 shall be inapplicable if the shares to be issued have been registered under a then currently effective registration statement under the Securities Act.

 

5.13     Rights as Stockholders.  Subject to Sections 5.8 and 5.9, upon issuance of the shares of Restricted Stock to the Participant, the Participant shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions, if any, in his or her Award Agreement or, as applicable, the Voting Trust Agreement, a Lock-Up Agreement or as may be determined by the Board or the Committee in its sole discretion, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Stock shall be subject to the restrictions imposed pursuant to Sections 5.8 and 5.9.

 

5.14     Section 83(b) Election.  If a Participant makes an election under Section 83(b) of the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service.

 

5.15     Award Agreement.  Restricted Stock awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each such Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

 

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ARTICLE 6.

 

PROVISIONS APPLICABLE TO AWARDS

 

6.1       Stand-Alone and Tandem Awards.  Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan.  Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

 

6.2       Limits on Transfer.  To the fullest extent permitted by law, no Participant may Transfer or create an Encumbrance with respect to any Award (or beneficial interest therein) or any shares of Stock underlying any Award (or beneficial interest therein), except as may be permitted by the terms of the Voting Trust Agreement, an applicable Lock-Up Agreement or Award Agreement, or as may be determined by the Board or the Committee in its sole discretion.

 

6.3       Arbitration.  Any and all claims, grievances, demands, controversies, causes of action or disputes of any nature whatsoever (collectively, “Claims”), arising out of, in connection with, or in relation to any Award or the arbitrability of any Claims with respect to an Award under the Plan, will be resolved by final and binding arbitration administered by the Los Angeles, California offices of JAMS/Endispute in accordance with the then-existing JAMS/Endispute Arbitration Rules applicable to employment agreements.  The Participant and the Company will select a mutually acceptable neutral arbitrator from the panel of arbitrators serving with any of JAMS/Endispute’s offices, but in the event the parties cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an arbitrator from such panel (the arbitrator so selected or appointed, the “Arbitrator”).  The Arbitrator may provide all appropriate remedies (at law and equity) or judgments that could be awarded by a court of law in Delaware, and that, upon good cause shown, the Arbitrator will afford the parties adequate discovery, including deposition discovery.  Except as provided herein, the Federal Arbitration Act will govern the interpretation, enforcement and all actions pursuant to this Section 6.3.  The Arbitrator will be bound by and will strictly enforce the terms of this Section 6.3 and may not limit, expand or otherwise modify its terms.  The Arbitrator will make a good faith effort to apply the substantive law (and the law of remedies, if applicable) of the state of Delaware, or federal law, or both, as applicable, without reference to its conflicts of laws provisions.  The Arbitrator is without jurisdiction to apply any different substantive law.  The Arbitrator will be bound to honor claims of privilege or work-product doctrine recognized at law, but the Arbitrator will have the discretion to determine whether any such claim of privilege or work product doctrine applies.  The Arbitrator will render an award and a written, reasoned opinion in support thereof.  The Arbitrator will have power and authority to award any appropriate remedy (in law or equity) or judgment that could be awarded by a court of law in Delaware, which may include reasonable attorneys’ fees to the prevailing party.  The award rendered by arbitration will be final and binding upon the parties to arbitration, and judgment upon the award may be entered in any court having jurisdiction thereof.  Neither a party nor the Arbitrator will disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.  Adherence to this dispute resolution process will not limit the parties’ right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of

 

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competent jurisdiction as may be necessary to protect their rights and interests.  Notwithstanding the foregoing sentence, this dispute resolution procedure is intended to be the exclusive method of resolving any Claims arising out of or relating to Awards and the Plan.  Subject to the Arbitrator’s award, the Company will pay fees and expenses with respect to this dispute resolution process and any action related thereto.

 

ARTICLE 7.

 

CHANGES IN CAPITAL STRUCTURE

 

7.1       Adjustments.

 

(a)        In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, reorganization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock, the Committee will make such proportionate adjustments, if any, as the Committee in its discretion deems appropriate to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, without limitation, adjustments of the limitations in Sections 5.1 and 5.3); and (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto).

 

(b)        In the event of any transaction or event described in Section 7.1(a) or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee, in its discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(i)         To provide for the replacement of such Award with other rights or property selected by the Committee, provided that such other rights or property shall have a value (as determined by the Committee in its sole discretion) as of the date of replacement that is substantially equivalent to the value of the Award replaced (as determined by the Committee in its sole discretion and without regard to any appreciation in value of the Award that may occur after the replacement date);

 

(ii)        To provide that such Restricted Stock Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar rights or awards covering the stock or other interests of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares or other interests and prices;

 

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(iii)       To provide that the Company’s obligations with respect to any such Cash Bonus Award shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof;

 

(iv)       To replace with other interests or to make adjustments in the number and type of shares of outstanding Restricted Stock and/or in the terms and conditions of (including, without limitation, the grant or purchase price), and the criteria included in, outstanding awards and awards which may be granted in the future;

 

(v)        To provide that any repurchase rights (or forfeiture restrictions) in favor of the Company with respect to the Restricted Stock are assigned to the successor or survivor corporation, or a parent or subsidiary thereof, or otherwise continued in effect;

 

(vi)       To provide that any repurchase rights (or forfeiture restrictions) applicable to one or more shares of Restricted Stock subject to a Restricted Stock award shall lapse immediately prior to the consummation of such event, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement;

 

(vii)      To provide that such Award shall be payable, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement;

 

(viii)     To provide that the Award cannot vest or become payable after such event; and

 

(ix)       To make such other adjustments to the shares of Stock and related agreements as the Committee deems appropriate.

 

(c)        Notwithstanding anything to the contrary in Section 7.1(a) or (b), in no event shall the Committee make any adjustment to a Cash Bonus Award pursuant to Section 7.1(a) or (b)(i), (ii), (iv), (v), (vi), (viii) or (ix), unless the amount or timing of any payment to be made pursuant to such Cash Bonus Awards is to be determined based in whole or in part upon the achievement of one or more performance targets or other criteria (other than the mere performance of services over a specified period of time).

 

7.2       No Other Rights.  Except as expressly provided in the Plan or an Award Agreement, neither the Plan nor any Award Agreement shall give the Participant any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.  Except as expressly provided in the Plan or an Award Agreement, or pursuant to any action of the Committee under the Plan, neither the Plan nor any Award Agreement, nor any action of the Committee under the Plan, shall give the Participant any rights by reason of an issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, and no adjustment by reason thereof shall be made with respect to the number of shares of Stock subject to an Award or the grant or purchase price of any Award.

 

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ARTICLE 8.

 

ADMINISTRATION

 

8.1       Committee.  The Plan shall be administered by the Committee.  Appointment of Committee members shall be effective upon acceptance of appointment.  In its discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan.

 

8.2       Action by the Committee.  Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Company Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

 

8.3       Authority of Committee.  The Committee has the exclusive power, authority and discretion to:

 

(a)        Designate Eligible Individuals to receive Awards;

 

(b)        Determine the type or types of Awards to be granted to each Participant;

 

(c)        Determine the class of shares of Stock to be granted to each Participant;

 

(d)       Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

 

(e)        Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its discretion determines;

 

(f)        Determine whether, to what extent, and pursuant to what circumstances the purchase price for shares of Stock subject to an Award may be paid in cash, Stock, or other property, or an Award may be canceled, forfeited, or surrendered;

 

(g)        Prescribe the form of each Award Agreement, which need not be identical for each Participant;

 

(h)        Decide all other matters that must be determined in connection with an Award;

 

(i)         Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(j)         Interpret the terms of, and any matter arising pursuant to, the Plan or any Award; and

 

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(k)        Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

 

8.4       Decisions Binding.  The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, and any Award Agreement, and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties.

 

ARTICLE 9.

 

EFFECTIVE AND EXPIRATION DATE

 

9.1       Effective Date.  The Plan (as amended and restated) is effective as of the effectiveness of the Corporate Reorganization.

 

9.2       Expiration Date.  The Plan will expire on, and no Award may be granted pursuant to the Plan after, the Expiration Date.  The “Expiration Date” means the date on which the Company’s registration statement relating to its initial public offering becomes effective.

 

ARTICLE 10.

 

AMENDMENT, MODIFICATION, AND TERMINATION

 

10.1     Amendment, Modification, and Termination.  The Committee or the Board may amend, modify or terminate the Plan at any time and from time to time by the affirmative vote of a majority of the members present at any meeting at which a quorum is present or by the unanimous written approval of the members of the Committee or the Board in lieu of a meeting; provided, however, that, except as may otherwise be required to comply with any applicable law (including, without limitation, any applicable labor law, tax law or securities law); and provided further that, with respect to a meeting of the Committee, the members of the Committee have been provided with forty-eight hours’ notice of any such meeting, and to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.

 

10.2     Awards Previously Granted.  No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

 

10.3     Code Section 409A.  To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code.  To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date.  Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury

 

12

 

guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

 

ARTICLE 11.

 

GENERAL PROVISIONS

 

11.1     No Rights to Awards.  No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.

 

11.2     No Stockholders Rights.  Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record or beneficial owner of such shares of Stock.

 

11.3     Withholding.  The Company or any Company Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including, without limitation, the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan.  The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld.  Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were vested by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting or payment of the Award shall be limited to the number of shares which have an aggregate Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

 

11.4     No Right to Employment or Services.  Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Company Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Company Subsidiary.

 

11.5     Unfunded Status of Awards.  The Plan is intended to be an “unfunded” plan for incentive compensation.  With respect to any payments not yet made to a Participant pursuant to

 

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an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Company Subsidiary.

 

11.6     Relationship to other Benefits.  No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Company Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

11.7     Expenses.  The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

 

11.8     Titles and Headings.  The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

11.9     Government and Other Regulations.  The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required.  The Company shall be under no obligation to register pursuant to the Securities Act any of the shares of Stock awarded pursuant to the Plan.  If the shares awarded pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, then the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.

 

11.10   Governing Law.  The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware without regard to otherwise governing principles of conflicts of law.

 

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* * * * *

 

I hereby certify that the foregoing Houlihan Lokey, Inc. Amended and Restated 2006 Incentive Compensation Plan was duly adopted by the Board of Directors on [_____], 2015.

 

Executed on this [___] day of [______] 2015.

 

	
 
    	
 
    	
[________]
    
	
 
    	
 
    	
Corporate Secretary

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