Document:

ex_232712.htm

 

Exhibit 4.1

 

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

The following summary of the securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 of Energy 11, L.P. (the “Partnership”) is based on and qualified by the Partnership’s First Amended and Restated Limited Partnership Agreement (“Partnership Agreement”). The following summary does not purport to be complete and is subject to and qualified in its entirety by reference to the Partnership Agreement, which is incorporated by reference as Exhibit 3.2 to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part. The Partnership encourages you to read the Partnership Agreement and the applicable provisions of the Delaware Revised Uniform Limited Partnership Act (“Delaware Act”) for additional information.

 

General

 

The Partnership Agreement provided for the offering and sale of up to 100,263,158 common units. The Partnership Agreement also provided for the issuance of up to 100,000 Class B units. On August 19, 2015, the Incentive Distribution Rights were issued to the Partnership’s general partner. The Partnership Agreement authorizes the Partnership’s general partner, without approval of common unit holders, to amend certain parts of the Partnership Agreement, in whole or in part, within the limits set forth in the Partnership Agreement and under Delaware law.

 

David Lerner Associates, Inc. (the “Dealer Manager”) was the dealer manager for the offering of the Partnership’s common units. Under the agreement with the Dealer Manager, the Dealer Manager received a total of 6% in selling commissions and a marketing expense allowance based on gross proceeds of the common units sold. The Dealer Manager may also be paid a contingent incentive fee (after Payout, discussed below), which is a cash payment of up to an amount equal to 4% of gross proceeds of the common units sold based on the performance of the Partnership. Based on the common units sold through the best-efforts offering, the total contingent fee is a maximum of approximately $15.0 million.

 

Common units 

 

Units issued and outstanding – 18,973,474 common units.

 

Voting – see “Voting Rights” below for more information.

 

Distributions – holders of the common units are entitled to receive proportionately any dividends if, and when, such dividends are declared by the Partnership.

 

Other rights – the common units do not have a sinking fund or redemption provisions or preemptive, conversion or exchange rights.

 

Class B units

 

Units issued and outstanding – 62,500

 

Voting – subject to the provisions of Partnership Agreement, a holder of Class B units does not have the right to vote on Partnership matters, except with respect for amendments to the Partnership Agreement that would adversely affect such Class B unit interests, in which case a holder of Class B units will have a right to vote thereon as a separate class.

 

Distributions – the Partnership will not make any distributions with respect to the Class B units until Payout occurs. See below for the distribution rights of holders of the Class B units after Payout.

 

Incentive Distribution Rights (IDRs)

 

Voting – subject to the provisions of Partnership Agreement, a holder of IDRs does not have the right to vote on Partnership matters, except with respect for amendments to the Partnership Agreement that would adversely affect such IDR interests, in which case a holder of IDRs will have a right to vote thereon as a separate class.

 

1

 

 

Distributions – the Partnership will not make any distributions with respect to the IDRs until Payout occurs. See below for the distribution rights of holders of IDRs after Payout. 

 

Rights at Payout

 

The Partnership Agreement provides that Payout occurs on the day when the aggregate amount distributed with respect to each of the common units equals $20.00 plus the Payout Accrual. The Partnership Agreement defines “Payout Accrual” as 7% per annum simple interest accrued monthly until paid on the Net Investment Amount outstanding from time to time. The Partnership Agreement defines Net Investment Amount initially as $20.00 per unit, regardless of the amount paid for the unit. If at any time the Partnership distributes to holders of common units more than the Payout Accrual, the amount the Partnership distributes in excess of the Payout Accrual will reduce the Net Investment Amount.

 

All distributions made by the Partnership after Payout, which may include all or a portion of the proceeds of the sale of all or substantially all of the Partnership’s assets, will be made as follows:

 

	 	
			●

				
			First, (i) to the holders of the IDRs, 35%; (ii) to the holders of the outstanding Class B units, pro rata based on the number of Class B units owned, 35% multiplied by a fraction, the numerator of which is the number of Class B units outstanding and the denominator of which is 100,000 (currently, there are 62,500 Class B units outstanding; therefore, Class B units could receive 21.875%); (iii) to the Dealer Manager, as the Dealer Manager contingent incentive fee paid under the Dealer Manager Agreement, 30%, and (iv) the remaining amount, if any (currently 13.125%), to the holders of outstanding common units, pro rata based on their percentage interest until such time as the Dealer Manager receives the full amount of the Dealer Manager contingent incentive fee under the Dealer Manager Agreement;

			

 

	 	
			●

				
			Thereafter, (i) to the holders of the IDRs, 35%; (ii) to the holders of the outstanding Class B units, pro rata based on the number of Class B units owned, 35% multiplied by a fraction, the numerator of which is the number of Class B units outstanding and the denominator of which is 100,000 (currently, there are 62,500 Class B units outstanding; therefore, Class B units could receive 21.875%); (iii) the remaining amount to the holders of outstanding common units, pro rata based on their percentage interest (currently 43.125%).

			

 

The information below further summarizes certain sections of the Partnership Agreement to address the rights of the holders of the common units.

 

Purpose

 

The purpose under the Partnership Agreement is limited to any business activity that is approved by the general partner and that lawfully may be conducted by a limited partnership organized under Delaware law; provided, that the general partner shall not cause the Partnership to engage, directly or indirectly, in any business activity that the general partner determines would cause the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes.

 

Power of Attorney

 

Each limited partner, and each person who acquires a common unit from a common unitholder, by accepting the common unit, automatically grants to the general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for the Partnership’s qualification, continuance or dissolution. The power of attorney also grants the general partner the authority to amend, and to make consents and waivers under, the Partnership Agreement.

 

Capital Contributions

 

Common unitholders are not obligated to make additional capital contributions, except as described below under “— Limited Liability”. The general partner will make only a nominal capital contribution to the Partnership. No cash capital contributions will be made with respect to the IDRs or Class B units.

 

2

 

 

Voting Rights

 

The following is a summary of the voting rights of the holders of common units. A common unit majority is a vote or consent by the holders of a majority of the common units then outstanding.

 

	
			Amendment of the Partnership Agreement

				
			Certain amendments may be made by the general partner without the approval of the common unitholders. Other amendments generally require the approval of the holders of a majority of the common units (including common units held by the general partner and its affiliates) which the Partnership refers to as a “common unit majority.”

			
	 	 
	
			Merger of the Partnership or the sale of all or substantially all of its assets

				
			Common unit majority and the holder of a majority of the IDRs or Class B units in certain circumstances.

			
	 	 
	
			Dissolution of the Partnership

				
			Common unit majority

			
	 	 
	
			Continuation of the Partnership’s business upon dissolution

				
			Common unit majority

			
	 	 
	
			Withdrawal of the general partner

				
			The general partner does not have the right to withdraw as the general partner without the consent of the holders of a majority of the common units other than common units owned by the general partner and its affiliates.

			
	 	 
	
			Removal of the general partner

				
			Holders of the common units do not have the right to remove the general partner.

			
	 	 
	
			Transfer of the general partner interest

				
			The general partner may transfer all, but not less than all, of its general partner interest in the Partnership without a vote of the common unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval of a majority of the common units, excluding common units held by the general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest to a third party.

			
	 	 
	
			Transfer of incentive distribution rights

				
			The general partner has agreed not to transfer the incentive distribution rights prior to April 24, 2020.

			
	 	 
	
			Transfer of ownership interests in the general partner

				
			The general partner has agreed that it will not permit a change of control of the general partner to occur.

			

 

Limited Liability

 

Assuming that a limited partner does not participate in the control of the Partnership’s business within the meaning of the Delaware Act and that he otherwise acts in conformity with the provisions of the Partnership Agreement, his liability under the Delaware Act will be limited, subject to possible exceptions, to the amount of capital he is obligated to contribute to the Partnership for his common units plus his share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right, by the limited partners as a group:

 

	 	
			●

				
			to approve some amendments to the Partnership Agreement; or

			

 

	 	
			●

				
			to take other action under the Partnership Agreement;

			

 

constituted “participation in the control” of the Partnership’s business for the purposes of the Delaware Act, then the limited partners could be held personally liable for the Partnership’s obligations under the laws of Delaware, to the same extent as the general partner. This liability would extend to persons who transact business with the Partnership who reasonably believe that the limited partner is a general partner. Neither the Partnership Agreement nor the Delaware Act specifically provides for legal recourse against the general partner if a limited partner were to lose limited liability through any fault of the general partner. While this does not mean that a limited partner could not seek legal recourse, the Partnership knows of no precedent for this type of a claim in Delaware case law.

 

3

 

 

Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations of his assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the Partnership Agreement.

 

The Partnership’s subsidiaries conduct business in states other than Delaware. Maintenance of the Partnership’s limited liability as an owner of its subsidiaries may require compliance with legal requirements in the jurisdictions in which the subsidiaries conduct business, including qualifying the Partnership’s subsidiaries to do business there.

 

Limitations on the liability of limited partners for the obligations of a limited partner have not been clearly established in many jurisdictions. If, by virtue of the Partnership’s interest in its subsidiaries or otherwise, it were determined that the Partnership were conducting business in any state without compliance with the applicable limited partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to approve some amendments to the Partnership Agreement, or to take other action under the Partnership Agreement constituted “participation in the control” of the Partnership’s business for purposes of the statutes of any relevant jurisdiction, then the limited partners could be held personally liable for the Partnership’s obligations under the law of that jurisdiction to the same extent as the general partner under the circumstances. The Partnership will operate in a manner that the general partner considers reasonable and necessary or appropriate to preserve the limited liability of the limited partners.

 

Amendment of the Partnership Agreement

 

General

 

Amendments to the Partnership Agreement may be proposed only by or with the consent of the general partner. However, the general partner will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or the limited partners, including any duty to act in good faith or in the best interests of the Partnership or the limited partners. In order to adopt a proposed amendment, other than the amendments discussed below, the general partner is required to seek written approval of the holders of the number of common units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a common unit majority.

 

Prohibited Amendments

 

No amendment may be made that would:

 

	 	
			●

				
			enlarge the obligations of any limited partner without its consent; or

			

 

	 	
			●

				
			enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by the Partnership to the general partner or any of its affiliates without the consent of the general partner, which consent may be given or withheld at its option; or

			

 

	 	
			●

				
			materially adversely affect the rights of the holders of IDRs or Class B units without the consent of the holders of a majority of IDRs or Class B units, as applicable; provided that if such amendment to the Partnership Agreement is made in connection with a Liquidity Event, such consent by the holders of IDRs or Class B units may not be unreasonably withheld.

			

 

4

 

 

No Common Unitholder Approval

 

The general partner may generally make amendments to the Partnership Agreement without the approval of any limited partner or assignee to reflect:

 

	 	
			●

				
			a change in the Partnership’s name, the location of its principal place of its business, its registered agent or its registered office;

			

 

	 	
			●

				
			the admission, substitution, withdrawal or removal of partners in accordance with the Partnership Agreement;

			

 

	 	
			●

				
			a change that the general partner determines to be necessary or appropriate to qualify or continue the Partnership’s qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither the Partnership nor its wholly-owned operating subsidiary will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes;

			

 

	 	
			●

				
			an amendment that is necessary, in the opinion of the Partnership’s counsel, to prevent the Partnership or the general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA;

			
	 	 	 
	 	
			●

				
			any amendment expressly permitted in the Partnership Agreement to be made by the general partner acting alone;

			

 

	 	
			●

				
			an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of the Partnership Agreement;

			

 

	 	
			●

				
			any amendment that the general partner determines to be necessary or appropriate for the formation by Partnership of, or its investment in, any corporation, partnership or other entity, as otherwise permitted by the Partnership Agreement;

			

 

	 	
			●

				
			a change in the Partnership’s fiscal year or taxable year and related changes;

			

 

	 	
			●

				
			conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or

			

 

	 	
			●

				
			any other amendments substantially similar to any of the matters described in the clauses above.

			

 

In addition, the general partner may make amendments to the Partnership Agreement without the approval of any limited partner if the general partner determines that those amendments:

 

	 	
			●

				
			do not adversely affect the limited partners in any material respect;

			

 

	 	
			●

				
			are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;

			

 

	 	
			●

				
			are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;

			

 

	 	
			●

				
			are necessary or appropriate for any action taken by the general partner relating to splits or combinations of common units under the provisions of the Partnership Agreement; or

			

 

	 	
			●

				
			are required to effect the intent expressed in the prospectus describing the public offering of common units or the intent of the provisions of the Partnership Agreement or are otherwise contemplated by the Partnership Agreement.

			

 

5

 

 

Opinion of Counsel and Common Unitholder Approval.

 

The general partner will not be required to obtain an opinion of counsel that an amendment proposed by the general partner will not result in a loss of limited liability to the limited partners or result in the Partnership being treated as an entity for federal income tax purposes in connection with any of the amendments. No other amendments to the Partnership Agreement will become effective without the approval of holders of at least 90% of the outstanding common units voting as a single class unless the Partnership first obtains an opinion of counsel to the effect that the amendment will not affect the limited liability under applicable law of any of the Partnership’s limited partners.

 

Any amendment that reduces the voting percentage required to take any action is required to be approved by the affirmative vote of limited partners whose aggregate outstanding common units constitute not less than the voting requirement sought to be reduced.

 

Merger, Consolidation, Conversion, Sale or Other Disposition of Assets

 

A merger, consolidation or conversion of the Partnership requires the prior consent of the general partner. However, the general partner will have no duty or obligation to consent to any merger, consolidation or conversion and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or the limited partners, including any duty to act in good faith or in the best interest of us or the limited partners.

 

In addition, the Partnership Agreement generally prohibits the general partner without the prior approval of the holders of a common unit majority from causing the Partnership to, among other things, sell, exchange or otherwise dispose of all or substantially all of the Partnership’s assets in a single transaction or a series of related transactions, including by way of merger, consolidation or other combination, or approving on its behalf the sale, exchange or other disposition of all or substantially all of the assets of the Partnership’s subsidiaries. In addition, if the sale of assets or merger, consolidation or other combination would result in an amendment to the Partnership Agreement that is materially adverse to the holders of IDRs or Class B units, the sale of assets, merger, consolidation or other combination will require approval of the holders of a majority of IDRs or Class B units, as the case may be, which approval may not be unreasonably withheld. The general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the Partnership’s assets without that approval. The general partner may also sell all or substantially all of the Partnership’s assets under a foreclosure or other realization upon those encumbrances without that approval.

 

If the conditions specified in the Partnership Agreement are satisfied, the general partner may convert the Partnership or any of its subsidiaries into a new limited liability entity or merge it or any of its subsidiaries into, or convey all of the Partnership’s assets to, a newly formed entity if the sole purpose of that conversion, merger or conveyance is to effect a mere change in its legal form into another limited liability entity, the general partner has received an opinion of counsel regarding limited liability and tax matters, and the governing instruments of the new entity provide the limited partners and the general partner with the same rights and obligations as contained in the Partnership Agreement. The common unitholders are not entitled to dissenters’ rights of appraisal under the Partnership Agreement or applicable Delaware law in the event of a conversion, merger or consolidation, a sale of substantially all of the Partnership’s assets or any other similar transaction or event.

 

Termination and Dissolution

 

The Partnership will continue as a limited partnership until terminated under the Partnership Agreement. The Partnership will dissolve upon:

 

	 	
			●

				
			the election of the general partner to dissolve the Partnership, if approved by the holders of common units representing a common unit majority;

			

 

	 	
			●

				
			there being no limited partners, unless the Partnership is continued without dissolution in accordance with applicable Delaware law;

			

 

	 	
			●

				
			at any time after 90% of the net proceeds from the sale of common units (after deduction of sales commissions, marketing fees and offering and organization expenses) have been invested, the election of the general partner to cause the Partnership to dissolve at any time that the present value of its after tax cash flows, discounted at 10%, from estimated net proved reserves at the end of any year falls below 20% of the net proceeds from our sale of common units;

			

 

6

 

 

	 	
			●

				
			the entry of a decree of judicial dissolution of this partnership; or

			

 

	 	
			●

				
			the withdrawal or removal of the general partner or any other event that results in its ceasing to be the general partner other than by reason of a transfer of its general partner interest in accordance with the Partnership Agreement or withdrawal or removal following approval and admission of a successor.

			

 

Upon a dissolution under the last clause above, the holders of a common unit majority may also elect, within specific time limitations, to continue the Partnership’s business on the same terms and conditions described in the Partnership Agreement by appointing as a successor general partner an entity approved by the holders of common units representing a common unit majority, subject to the Partnership’s receipt of an opinion of counsel to the effect that:

 

	 	
			●

				
			the action would not result in the loss of limited liability of any limited partner; and

			

 

	 	
			●

				
			neither the Partnership, nor its wholly-owned operating subsidiary would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue.

			

 

Liquidation and Distribution of Proceeds

 

Upon the Partnership’s dissolution, unless the Partnership is continued as a new limited partnership, the liquidator authorized to wind up the Partnership’s affairs will, acting with all of the powers of the general partner, take such actions that are necessary or appropriate to liquidate the Partnership’s assets and apply the proceeds of the liquidation in the same manner that the Partnership distributes cash at the end of each quarter. The liquidator may defer liquidation or distribution of the Partnership’s assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to its partners.

 

Withdrawal or Removal of the General Partner

 

The general partner may not withdraw as general partner without the consent of holders of a majority of the common units, other than common units held by the general partner and its affiliates.

 

Upon withdrawal of the general partner under any circumstances, other than as a result of a transfer by the general partner of all or a part of its general partner interest in the Partnership, the holders of a common unit majority may select a successor to the withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, the Partnership will be dissolved, wound up and liquidated, unless within a specified period after that withdrawal, the holders of a common unit majority agree in writing to continue the Partnership’s business and to appoint a successor general partner.

 

The general partner may not be removed by the holders of common units.

 

Transfer of General Partner Interest

 

Except for transfer by the general partner of all, but not less than all, of its general partner interest to:

 

	 	
			●

				
			an affiliate of the general partner (other than an individual); or

			

 

	 	
			●

				
			another entity as part of the merger or consolidation of the general partner with or into another entity or the transfer by the general partner of all or substantially all of its assets to another entity,

			

 

the general partner may not transfer its general partner interest in the Partnership without the consent of a common unit majority. As a condition of this transfer, the transferee must assume, among other things, the rights and duties of the general partner, agree to be bound by the provisions of the Partnership Agreement, and furnish an opinion of counsel regarding limited liability and tax matters.

 

7

 

 

The general partner and its affiliates may at any time, transfer common units to one or more persons, without common unitholder approval.

 

Transfer of Ownership Interests in the General Partner

 

The general partner has agreed not to undergo a change of control. A change of control is defined as any person or group of persons, other than “qualifying owners”, acquiring beneficial ownership of 50% or more of the outstanding membership interests in the general partner. A qualifying owner is generally defined as the current beneficial owners of the general partner and any conservator, guardian or similar person of such existing beneficial owner, and any trust, foundation or similar organization the beneficiaries of which include the existing beneficial owner.

 

Transfer of Incentive Distribution Rights and Class B Units

 

The general partner or its affiliates or a subsequent holder may transfer its IDRs to an affiliate of the holder or another entity as part of the merger or consolidation of such holder with or into another entity, the sale of all of the ownership interest in the holder or the sale of all or substantially all of its assets to, that entity without the prior approval of the holders of a majority of the common units.

 

The holders of Class B units may transfer its class B units to an affiliate of the holder or another entity as part of the merger or consolidation of such holder with or into another entity, the sale of all of the ownership interest in the holder or the sale of all or substantially all of its assets to, that entity without the prior approval of the holders of a majority of the common units.

 

Meetings; Voting

 

Record holders of common units on the record date will be entitled to notice of, and to vote at, meetings of the limited partners and to act upon matters for which approvals may be solicited.

 

The general partner does not anticipate that any meeting of common unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by the common unitholders may be taken either at a meeting of the common unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the number of common units necessary to authorize or take that action at a meeting. Meetings of the common unitholders may be called by the general partner or by common unitholders owning at least 20% of the outstanding common units. Common unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding common units of the class or classes for which a meeting has been called represented in person or by proxy will constitute a quorum unless any action by the common unitholders requires approval by holders of a greater percentage of the common units, in which case the quorum will be the greater percentage.

 

Each record holder of a common unit has one vote. Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.

 

Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under the Partnership Agreement will be delivered to the record holder by us or by the transfer agent.

 

Status as Limited Partner

 

By transfer of common units in accordance with the Partnership Agreement, each transferee of common units shall be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in the Partnership’s books and records. Except as described under “— Limited Liability” , the common units will be fully paid, and common unitholders will not be required to make additional contributions.

 

8

 

 

Non-Citizen Assignees; Redemption

 

If the Partnership is or becomes subject to federal, state or local laws or regulations that, in the reasonable determination of the general partner, create a substantial risk of cancellation or forfeiture of any property that the Partnership has an interest in because of the nationality, citizenship or other related status of any limited partner, the Partnership may redeem the common units held by the limited partner at their current market price. In order to avoid any cancellation or forfeiture, the general partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days after a request for the information or the general partner determines after receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen assignee, is entitled to an interest equivalent to that of a limited partner for the right to share in allocations and distributions from the Partnership, including liquidating distributions. A non-citizen assignee does not have the right to direct the voting of his common units and may not receive distributions in-kind upon our liquidation.

 

Indemnification

 

The Partnership will indemnify the following persons under the Partnership Agreement:

 

	 	
			●

				
			The general partner,

			

 

	 	
			●

				
			Any former general partner, and

			

 

	 	
			●

				
			Any director, officer, member, partner, fiduciary or trustee of any of the foregoing entities.

			

 

Any indemnification under these provisions will only be out of the Partnership’s assets. Unless it otherwise agrees, the general partner will not be personally liable for, or have any obligation to contribute or lend funds or assets to the Partnership to enable it to effectuate, indemnification. The Partnership may purchase insurance against liabilities asserted against and expenses incurred by persons for its activities, regardless of whether it would have the power to indemnify the person against liabilities under the Partnership Agreement.

 

Governing Law, Venue and Jurisdiction

 

The Partnership Agreement is governed by the laws of the State of Delaware without regard to the principles of conflicts of law. Under the terms of the Partnership Agreement, each partner and each person holding any beneficial interest in the Partnership agree that any claims arising under the Partnership Agreement or related to the Partnership shall be exclusively brought in the Court of Chancery of the State of Delaware, provided, however that any claims over which the Court of Chancery of the State of Delaware does not have jurisdiction shall be brought in any other court in the State of Delaware having jurisdiction. The terms of the Partnership Agreement also provide that each partner irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware in connection with any claims pursuant to the Partnership Agreement.

 

Lack of Liquidity in Investment in Common Units

 

The common units will not be listed for trading or quotation on any securities exchange or other market, and you may have difficulty selling your common units. The common units are an illiquid investment, and purchasers should be able to hold their common units indefinitely.

 

Conditions to Becoming a Substitute Partner

 

An assignee of a common unit will not be entitled to any of the rights granted to a partner under the Partnership Agreement, other than the right to receive all or part of the share of the profits, losses, income, gain, credits and cash distributions or returns of capital to which his assignor would otherwise be entitled, unless the assignee becomes a substituted partner. In general, an assignee of a common unit will become a substitute limited partner upon acquisition of a common unit.

 

A substitute partner is entitled to all of the rights of full ownership of the assigned common units, including the right to vote.

 

 

 

9Exhibit 4.1

 

DESCRIPTION OF SECURITIES

 

As of December 31, 2020, Palmer Square
Capital BDC Inc., a Maryland corporation (“we,” “our,” “us” or the “Company”),
had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”): our common stock, par value $0.001 per share.

 

The following description of our capital
stock is based on relevant portions of the Maryland General Corporation Law (“MGCL”) and on the Company’s Articles
of Amendment and Restatement (as amended or supplemented from time to time, the “Articles of Incorporation”) and the
Company’s bylaws (the “Bylaws”). This summary is not necessarily complete, and we refer you to the MGCL and our
Articles of Incorporation and Bylaws, forms of which are incorporated by reference as an exhibit to our Annual Report on Form 10-K,
for a more detailed description of the provisions summarized below.

 

General

 

Under the terms of our Articles of Incorporation,
our authorized stock consists of 450,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred
stock, par value $0.001 per share. There is currently no market for our common stock, and we can offer no assurances that a market
for our shares of common stock will develop in the future. There are no outstanding options or warrants to purchase our stock.
No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, our stockholders generally are
not personally liable for our debts or obligations.

 

Under our Articles of Incorporation our
board of directors (the “Board”) is authorized to classify and reclassify any unissued shares of stock into other classes
or series of stock without obtaining stockholder approval. As permitted by the MGCL, our Articles of Incorporation also provide
that the Board, without any action by our stockholders, may amend the Articles of Incorporation from time to time to increase or
decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority
to issue.

 

Common Stock

 

All shares of our common stock have equal
rights as to earnings, assets, dividends and voting and, when they are issued, will be duly authorized, validly issued, fully paid
and non-assessable. Distributions may be paid to the holders of our common stock if, as and when authorized by our Board and declared
by us out of funds legally available therefor. Shares of our common stock have no preemptive, exchange, conversion or redemption
rights and are freely transferable, except when their transfer is restricted by the Articles of Incorporation, federal and state
securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share of our common stock would
be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other
liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at
such time. Each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including
the election of directors. Except as provided with respect to any other class or series of stock, the holders of our common stock
will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a
majority of the outstanding shares of common stock can elect all of our directors, and holders of less than a majority of such
shares will not be able to elect any directors.

 

Preferred Stock

 

Our Articles of Incorporation authorize
our Board to classify and reclassify any unissued shares of capital stock into classes or series of preferred stock. Prior to issuance
of shares of each class or series, the Board is required by Maryland law and by our Articles of Incorporation, to set the preferences,
conversion and other rights, voting powers (including exclusive voting rights), restrictions, limitations as to dividends or other
distributions, qualifications, and terms and conditions of redemption thereof, for each class or series. Thus, the Board could
authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying, deferring
or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise
be in their best interest. However, any issuance of preferred stock will be required to comply with the requirements of the Investment
Company Act of 1940, as amended (the “1940 Act”). The 1940 Act requires that (1) immediately after issuance and before
any dividend or other distribution is made with respect to our common stock and before any purchase of common stock is made, such
preferred stock together with all other senior securities must not exceed an amount equal to 66.7% of our total assets after deducting
the amount of such dividend, distribution or purchase price, as the case may be, and (2) the holders of shares of preferred
stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors
if dividends on such preferred stock are in arrears by two years or more. Some matters under the 1940 Act require the separate
vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would be entitled to
vote separately from the holders of common stock on a proposal to cease operations as a business development company (“BDC”).
We believe that the availability for issuance of preferred stock will provide us with increased flexibility in structuring future
financings and acquisitions. The Company does not currently intend to issue preferred stock.

 

     

     

    

 

Transferability of Common Stock

 

We have sold and continue to offer shares
of our common stock in a private offering in the United States under the exemption provided by Section 4(a)(2) of the Securities
Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder. Investors who acquire shares
of our common stock in such private offerings are required to complete, execute and deliver a subscription agreement and related
documentation, which includes customary representations and warranties, certain covenants and restrictions and indemnification
provisions.

 

Prior to a Liquidity Event (as defined
below), no transfer of capital commitment of investors in the private placement or all or any portion of our investors’ shares
of common stock may be made without (a) registration of the transfer on our books and (b) our prior written consent. In any event,
our consent may be withheld (i) if the creditworthiness of the proposed transferee, as determined by us in our sole discretion,
is not sufficient to satisfy all obligations under the applicable subscription agreement or (ii) unless, in the opinion of counsel
(who may be counsel for the Company) satisfactory in form and substance to us such transfer would not violate the Securities Act
or any state (or other jurisdiction) securities or “blue sky” laws applicable to us or the shares to be transferred.

 

A “Liquidity Event” means,
at the discretion of the Board: (a) (1) the listing of the Company’s common stock on a national securities exchange or (2)
an initial public offering of the Company’s common stock that results in an unaffiliated public float of at least the lower
of (i) $75 million and (ii) 15% of the aggregate capital commitments received prior to the date of such initial public offering
(a “Qualified IPO”), or (b) with the requisite approval of our stockholders as required by applicable law, a corporate
control transaction, which may include a strategic sale of the Company or all or substantially all of our assets to, or a merger
with, another entity, or another type of corporate control event (which may include a transaction with an affiliated entity, including
an affiliated 1940 Act fund) for consideration in cash or publicly listed securities of such entity or a combination of cash and
such publicly listed securities.

 

In addition, prior to a Liquidity Event
that is sufficient to cause us to treat our shares of common stock as a “publicly-offered security” for purposes of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), initial or additional investments by “benefit
plan investors,” as defined in Section 3(42) ERISA and applicable regulations of the Department of Labor thereunder (“Benefit
Plan Investors”) may be restricted. Specifically, subscriptions for shares of common stock by, or transfers of shares of
common stock to, Benefit Plan Investors may be rejected, and existing Benefit Plan Investors may be required to redeem all or a
portion of their shares of common stock. Any such restrictions or mandatory redemptions will be effected in such manner as we determine,
in our sole discretion, to be appropriate under the circumstances if such transfer could (1) result in our assets being considered
to be “plan assets” for purposes of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”)
or (2) constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code or a non-exempt violation
of any laws similar to ERISA or Section 4975 of the Code.

 

Any person that acquires all or any portion
of the capital commitment of an investor in a transfer permitted under a subscription agreement shall be obligated to pay to us
the appropriate portion of any amounts thereafter becoming due in respect of such capital commitment committed to be made by its
predecessor in interest. Notwithstanding the transfer of all or any fraction of its capital commitment, as between an investor
and us, the investor will remain liable for its capital commitment prior to the time, if any, when the purchaser, assignee or transferee
of such capital commitment, or fraction thereof, executes and delivers to us documentation evidencing such person’s obligations
to fund such capital commitment.

 

    2

     

    

 

Furthermore, should there be a Qualified
IPO, our stockholders will be subject to a lock-up restriction pursuant to which they will be prohibited from selling or otherwise
transferring shares of our common stock for a certain period after the date of such event. The specific terms of such restriction
and any other limitations on the sale of shares of our common stock in connection with or following a Qualified IPO will be agreed
in advance between our Board and our investment adviser, acting on behalf of our stockholders, and the institutions acting as the
underwriters or market makers, acting on our behalf, in connection with such Qualified IPO. There can be no assurance that shares
of our common stock will be listed on a national securities exchange or offered in an initial public offering.

 

Provisions of the MGCL and Our Articles
of Incorporation and Bylaws

 

Maryland Anti-takeover Law

 

The MGCL and our Articles of Incorporation
and Bylaws contain provisions that could make it more difficult for a potential acquirer to acquire us by means of a tender offer,
proxy contest or otherwise, the material ones of which are discussed below. These provisions are expected to discourage certain
coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate
first with our Board. We expect the benefits of these provisions to outweigh the potential disadvantages of discouraging any such
acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.

 

Classified Board of Directors

 

Our Articles of Incorporation provide that
we have a classified board of directors consisting of three classes of directors serving staggered three-year terms, with the term
of office of only one of the three classes expiring each year. A classified board may render a change in control of us or removal
of our incumbent management more difficult. We believe, however, that the longer time required to elect a majority of a classified
board of directors will help to ensure the continuity and stability of our management and policies.

 

Election of Directors

 

Our Bylaws, as authorized by our Articles
of Incorporation, provide that the affirmative vote of the holders of a plurality of all votes cast at a meeting of stockholders
duly called, and at which a quorum is present, will be required to elect a director. Under our Articles of Incorporation, our Board
may amend the Bylaws to alter the vote required to elect directors.

 

Number of Directors; Vacancies; Removal

 

Our Articles of Incorporation provide that
the number of directors is set only by the Board in accordance with our Bylaws and our Articles of Incorporation. Our Bylaws provide
that a majority of our entire Board may at any time increase or decrease the number of directors. However, unless our Bylaws are
amended, the number of directors may never be less than the minimum number required by the MGCL nor more than eight. Our Articles
of Incorporation provide that, at such time as we have at least three directors that are not “interested persons” as
defined in Section 2(a)(19) of the 1940 Act and our common stock is registered under the Exchange Act, we elect to be subject to
the provision of Subtitle 8 of Title 3 of the MGCL regarding the filling of vacancies on the Board. Accordingly, at such time,
except as may be provided by the Board in setting the terms of any class or series of preferred stock, any and all vacancies on
the Board may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining
directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term
of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements
of the 1940 Act.

 

Our Articles of Incorporation provide that
a director, or the entire Board, may be removed only for cause, as defined in our Articles of Incorporation, and then only by the
affirmative vote of at least two-thirds of the votes entitled to be cast in the election of directors. The limitations on the ability
of our stockholders to remove directors and fill vacancies could make it more difficult for a third party to acquire, or discourage
a third party from seeking to acquire, control of us.

 

    3

     

    

 

Action by Stockholders

 

Under the MGCL, stockholder action can
be taken only at an annual or special meeting of stockholders or (unless the articles of incorporation provide for stockholder
action by less than unanimous written consent, which our Articles of Incorporation do not) by unanimous written consent in lieu
of a meeting. These provisions, combined with the requirements of our Bylaws regarding the calling of a stockholder-requested special
meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next
annual meeting.

 

Advance Notice Provisions for Stockholder
Nominations and Stockholder Proposals

 

Our Bylaws provide that with respect to
an annual meeting of stockholders, nominations of persons for election to the Board and the proposal of business to be considered
by stockholders may be made only (1) by or at the direction of the Board, (2) pursuant to our notice of meeting or (3) by a stockholder
of the Company who is a stockholder of record both at the time of giving of notice provided for in our Bylaws and at the time of
the annual meeting, who is entitled to vote at the meeting and who has complied with the advance notice provisions of the Bylaws.
With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before
the meeting. Nominations of persons for election to the Board at a special meeting may be made only (1) by or at the direction
of the Board or (2) provided that the Board has determined that directors will be elected at the meeting, by a stockholder of the
Company who is a stockholder of record both at the time of giving of notice provided for in our Bylaws, at the record date set
by our Board for the purpose of determining stockholders entitled to vote at the annual meeting, and at the time of the special
meeting, who is entitled to vote at the meeting and who has complied with the advance notice provisions of the Bylaws.

 

The purpose of requiring stockholders to
give us advance notice of nominations and other business is to afford our Board a meaningful opportunity to consider the qualifications
of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by
our Board, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more
orderly procedure for conducting meetings of stockholders. Although our Bylaws do not give our Board any power to disapprove stockholder
nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a contest
for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging
or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own
proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.

 

Calling of Special Meetings of Stockholders

 

Our Bylaws provide that special meetings
of stockholders may be called by our Board and certain of our officers. Additionally, our Bylaws provide that, subject to the satisfaction
of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders
will be called by the secretary of the corporation upon the written request of stockholders entitled to cast not less than a majority
of all the votes entitled to be cast at such meeting.

 

Approval of Extraordinary Corporate
Action; Amendment of Articles of Incorporation and Bylaws

 

Under the MGCL, a Maryland corporation
generally cannot dissolve, amend its articles of incorporation, merge, consolidate, convert into another form of business entity,
sell all or substantially all of its assets or engage in a statutory share exchange unless declared advisable by the corporation’s
board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled
to be cast on the matter. A Maryland corporation may provide in its Articles of Incorporation for approval of these matters by
a lesser or greater percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Subject to
certain exceptions discussed below, our Articles of Incorporation provides for approval of these actions by the affirmative vote
of stockholders entitled to cast a majority of the votes entitled to be cast on the matter. Notwithstanding the foregoing, the
affirmative vote of at least 80% of the votes entitled to be cast thereon, with the holders of each class or series of our stock
voting as a separate class, will be necessary to effect any of the following actions:

 

		●	Any
amendment to the Articles of Incorporation to make the shares of common stock “redeemable securities” and any other
proposal to convert the Company from a “closed-end company” to an “open-end company” (as defined in the
1940 Act);

 

    4

     

    

 

		●	The
liquidation or dissolution of the Company and any amendment to the Articles of Incorporation to effect such liquidation or dissolution;

 

		●	Any
merger, consolidation, conversion, share exchange or sale or exchange of all or substantially all of the assets of the Company
that the MGCL requires be approved by the stockholders; and

 

		●	Any
transaction between (A) the Company and (B) a person, or group of persons acting together (including, without limitation, a “group”
for purposes of Section 13(d) of the Exchange Act, or any successor provision), that is entitled to exercise or direct the exercise,
or acquire the right to exercise or direct the exercise, directly or indirectly, other than solely by virtue of a revocable proxy,
of one-tenth or more of the voting power in the election of directors generally, or any person controlling, controlled by or under
common control with, or employed by or acting as an agent of, any such person or member of such group; and

 

		●	Any
amendment to, or any amendment inconsistent with, the certain provisions of the Articles of Incorporation including, but not limited
to, those provisions related to the composition and classification of the Board, the removal and replacement of directors, provisions
relating to the amendment of the Bylaws and the requirements listed in this paragraph pertaining to certain extraordinary actions
requiring the approval of at least 80% of the votes entitled to be cast on certain matters.

 

However, if such amendment or proposal
is approved by a majority of our continuing directors (in addition to approval by our Board), such amendment or proposal may be
approved by a majority of the votes entitled to be cast on such a matter. The “continuing directors” are defined in
our Articles of Incorporation as (1) our current directors, (2) those directors whose nomination for election by the stockholders
or whose election by the directors to fill vacancies is approved by a majority of our current directors then on the Board or (3)
any successor directors whose nomination for election by the stockholders or whose election by the directors to fill vacancies
is approved by a majority of continuing directors or the successor continuing directors then in office.

 

Our Articles of Incorporation and Bylaws
provide that the Board will have the exclusive power to make, alter, amend or repeal any provision of our Bylaws.

 

No Appraisal Rights

 

Except with respect to appraisal rights
arising in connection with the Control Share Act discussed below, as permitted by the MGCL, our Articles of Incorporation provide
that stockholders will not be entitled to exercise appraisal rights unless a majority of the Board determines such rights apply.

 

Control Share Acquisitions

 

Subtitle 7 of Title 3 of the MGCL (the
“Control Share Act”) provides that, once a corporation has at least 100 beneficial owners of its capital stock and
subject to certain limited exceptions not applicable to the Company, control shares of a Maryland corporation acquired in a control
share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast
on the matter. Shares owned by the acquirer, by officers or by directors who are employees of the corporation are excluded from
shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of
stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of
the following ranges of voting power:

 

		●	one-tenth
or more but less than one-third;

 

    5

     

    

 

		●	one-third
or more but less than a majority; or

 

		●	a
majority or more of all voting power.

 

The requisite stockholder approval must
be obtained each time an acquirer crosses one of the thresholds of voting power set forth above. Control shares do not include
shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control
share acquisition means the acquisition of control shares, subject to certain exceptions.

 

A person who has made or proposes to make
a control share acquisition may compel the Board of the corporation to call a special meeting of stockholders to be held within
10 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject
to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. Such meeting must be held
within 50 days after the day on which the corporation has received the request and the undertaking. If no request for a meeting
is made, the corporation may itself present the question at any stockholders meeting.

 

If voting rights are not approved at the
meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation
may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved.
The right of the corporation to redeem control shares is subject to certain conditions and limitations, including, as provided
in our Bylaws compliance with the 1940 Act. Fair value is determined, without regard to the absence of voting rights for the control
shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting
rights of the shares are considered and not approved, and without regard to the absence of voting rights of the control shares.
If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority
of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined
for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

 

The Control Share Act does not apply (a)
to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions
approved or exempted by the articles of incorporation or bylaws of the corporation. Our Bylaws contain a provision exempting from
the Control Share Act any and all acquisitions by any person of our shares of stock. There can be no assurance that such provision
will not be amended or eliminated at any time in the future. However, we will amend our Bylaws to be subject to the Control Share
Act only if the Board determines that it would be in our best interests and if the Securities and Exchange Commission (the “SEC”)
staff does not object to our determination that our being subject to the Control Share Act does not conflict with the 1940 Act.
Currently, the SEC staff takes the position that if a BDC fails to opt out of the Control Share Act, its actions are inconsistent
with Section 18(i) of the 1940 Act.

 

Business Combinations

 

Under Subtitle 6 of Title 3 of the MGCL
(the “Business Combination Act”), once a corporation has at least 100 beneficial owners of its capital stock and subject
to certain limited exceptions not applicable to the Company, “business combinations” between a Maryland corporation
and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent
date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation,
share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities.
An interested stockholder is defined as:

 

		●	any
person who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock; or

 

    6

     

    

 

		●	an
affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation.

 

A person is not an interested stockholder
under this statute if the Board approved in advance the transaction by which the stockholder otherwise would have become an interested
stockholder. However, in approving a transaction, the Board may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by the Board.

 

After the five-year prohibition, any business
combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors
of the corporation and approved by the affirmative vote of at least:

 

		●	80%
of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

 

		●	two-thirds
of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder
with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested
stockholder.

 

These super-majority vote requirements
do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares
in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

 

The statute permits various exemptions
from its provisions, including business combinations that are exempted by the Board before the time that the interested stockholder
becomes an interested stockholder. Our Board has adopted a resolution that any business combination between us and any other person
is exempted from the provisions of the Business Combination Act, provided that the business combination is first approved by the
Board, including a majority of the directors who are not “interested persons” as defined in the 1940 Act. This resolution
may be altered or repealed in whole or in part at any time; however, our Board will adopt resolutions so as to make us subject
to the provisions of the Business Combination Act only if the Board determines that it would be in our best interests and if the
SEC staff does not object to our determination that our being subject to the Business Combination Act does not conflict with the
1940 Act. If this resolution is repealed, or the Board does not otherwise approve a business combination, the statute may discourage
others from trying to acquire control of us and increase the difficulty of consummating any offer.

 

Conflicts with 1940 Act

 

Our Articles of Incorporation and Bylaws
provide that any provision of the MGCL, including the Control Share Act (if we amend our Bylaws to be subject to such Act) and
the Business Combination Act, or any provision of our Articles of Incorporation or Bylaws will be subject to the requirements and
limitations of the 1940 Act.

 

Exclusive Forum

 

Our Articles of Incorporation provide that,
unless we consent in writing to the selection of a different forum, and except for any claims made under the federal U.S. securities
laws, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District
Court for the District of Maryland, Baltimore Division, shall be the sole and exclusive forum for (a) any derivative action or
proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of any duty owed by a director or officer
or other employee of the Company to the Company or to the stockholders of the Company or asserting a claim of breach of any standard
of conduct set forth in the MGCL, (c) any action asserting a claim against the Company or any director or officer or other employee
of the Company arising pursuant to any provision of the MGCL, the Articles of Incorporation or our Bylaws, or (d) any action asserting
a claim against the Company or any director or officer or other employee of the Company that is governed by the internal affairs
doctrine. With respect to any proceeding described in the foregoing sentence that is in the Circuit Court for Baltimore City, Maryland,
the Company and its stockholders consent, pursuant to the terms of the Articles of Incorporation, to the assignment of the proceeding
to the Business and Technology Case Management Program pursuant to Maryland Rule 16-205 or any successor thereof. Any person or
entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company will be deemed, to the fullest
extent permitted by law, to have notice of and consented to these exclusive forum provisions and to have irrevocably submitted
to, and waived any objection to, the exclusive jurisdiction of such courts in connection with any such action or proceeding and
consented to process being served in any such action or proceeding, without limitation, by United States mail addressed to the
stockholder at the stockholder’s address as it appears on the records of the Company, with postage thereon prepaid.

 

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00323-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00323-of-00352.parquet"}]]