Document:

Document

Exhibit 10.33

                                          

Date=Grant Date    

TO:        <@Name@>

FROM:    

SUBJECT:    [YEAR] Performance-Based Restricted Stock Unit Award

You have been selected to receive a performance-based restricted stock unit award to be paid if (i) the Company’s Return on Capital Employed meets performance requirements or (ii) the Company’s Available Funds from Operations per share meets performance requirements, both as established by the Committee, over the Performance Period.  In addition, any earned award can be increased or decreased by up to 25% based on our three-year total shareholder return performance in relation to our comparator group of companies.  This award is subject to the terms and conditions of The Williams Companies, Inc. 2007 Incentive Plan, as amended and restated from time to time, and the [YEAR] Performance-Based Restricted Stock Unit Agreement (the “Agreement”).

This award is granted to you in recognition of your role as an employee whose responsibilities and performance are critical to the attainment of long-term goals.  This award and similar awards are made on a selective basis and are, therefore, to be kept confidential.  

Subject to all of the terms of the Agreement, you will generally become entitled to payment of the award if you are an active employee of the Company on [DATE] and if performance measures set forth in the Agreement are certified for the three-year Performance Period beginning [DATE].  The adjustment and termination provisions associated with this award are included in the Agreement.

If you have any questions about this award, you may contact a dedicated Fidelity Stock Plan Representative at 1-800-544-9354.

        

Exhibit 10.33

[YEAR] PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

THIS [YEAR] PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”), which contains the terms and conditions for the restricted stock units (“Restricted Stock Units” or “RSUs”) referred to in the [YEAR] Performance-Based Restricted Stock Unit Award Letter delivered in hard copy or electronically to the Participant (“[YEAR] Award Letter”), is by and between THE WILLIAMS COMPANIES, INC., a Delaware corporation (the “Company”), and the individual identified on the last page hereof (the “Participant”).

1.    Grant of RSUs. Subject to the terms and conditions of The Williams Companies, Inc. 2007 Incentive Plan, as amended and restated from time to time (the “Plan”), this Agreement, and the [YEAR] Award Letter, the Company hereby grants to the Participant an award (the “Award) of <@Num+C @> RSUs (“Target Number of Shares”) effective <@GrDt+C@> (the “Effective Date”). The Award, which is subject to adjustment under the terms of this Agreement, gives the Participant the opportunity to earn the right to receive the number of shares of the Common Stock of the Company equal to 0% to 200% of the Target Number of Shares based on the formula established by the Committee for calculating the number of Shares that will be paid based on the Company’s Return on Capital Employed and Available Funds from Operations per share over the Performance Period, as adjusted based on the Company’s three-year Relative Total Shareholder Return (“TSR”) as compared to the Company’s comparator group as established by the Committee (the “Comparator Group”).  These shares, together with any other shares that are payable under this Agreement, are referred to in the Agreement as “Shares.”  Until the Participant both becomes vested in the RSUs under the terms of Paragraph 5 and is paid such Shares under the terms of Paragraph 6, the Participant shall have no rights as a stockholder of the Company with respect to the Shares; provided, however, that the Participant shall have the right to earn Dividend Equivalents with respect to the RSUs awarded under this Agreement in accordance with Subparagraph 5(i) below.

2.    Incorporation of Plan and Acceptance of Documents. The Plan is hereby incorporated herein by reference, and all capitalized terms used herein which are not defined in this Agreement shall have the meaning set forth in the Plan. By accepting this Award, the Participant acknowledges that he or she has received a copy of, or has online access to, the Plan, and hereby automatically accepts the RSUs subject to all the terms and provisions of the Plan and this Agreement.  The Participant hereby further agrees that he or she has received a copy of, or has online access to, the Plan prospectus, as updated from time to time, and hereby acknowledges his or her automatic acceptance and receipt of such prospectus electronically.

3.    Committee Decisions and Interpretations; Committee Discretion. The Participant hereby agrees to accept as binding, conclusive and final all actions, decisions and/or interpretations of the Committee, its delegates, or agents, upon any questions or other matters arising under the Plan or this Agreement.  

4.    Performance Measures; Number of Shares Payable to the Participant.  

(a)    Performance measures established by the Committee shall be based on Return on Capital Employed and Available Funds from Operations per share, each weighted at 50%.  The Committee has established a formula for calculating the designated number of 
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Exhibit 10.33

Shares that will be paid based on based on the Company’s Return on Capital Employed and Available Funds from Operations per share over the Performance Period, as adjusted based on the Company’s three-year Relative TSR as compared to the Company’s Comparator Group, all as more fully described in Subparagraphs 4(b) through 4(c) below.  

(b)    The RSUs awarded to Participant and subject to this Agreement as reflected in Paragraph 1 above represent Participant’s opportunity to earn the right to payment of between 0% and 200% of the Target Number of Shares upon (i) certification by the Committee Return on Capital Employed, Available Funds from Operations per share, and the Company’s annualized Relative TSR as compared to the Company’s Comparator Group over the Performance Period, based on the formula established by the Committee and (ii) satisfaction of all the other conditions set forth in Paragraph 5 below.  

(c)    Subject to the Committee’s discretion as set forth in Subparagraph 4(d) below and to satisfaction of all other conditions set forth in Paragraph 5 below, the actual number of Shares earned by and payable to Participant will be determined based upon certification of the Return on Capital Employed, Available Funds from Operations per share, and Relative TSR results and satisfaction of all other conditions set forth in Paragraph 5 below.  For the portion of the Award attributable to Return on Capital Employed, the award percentage will be 0% if the Return on Capital Employed certified by the Committee is less than the Threshold established by the Committee.  If Return on Capital Employed is at or above the Threshold established by the Committee, such portion will be determined on a continuum ranging from 50% to 200%, depending on the level of Return on Capital Employed certified by the Committee at the end of the Performance Period.  The award percentage between these points will be determined by utilizing the Company’s placement along the continuum and calculating the resulting award percentage using the formula established by the Committee. For the portion of the Award attributable to Available Funds from Operations per share, the award percentage will be 0% if the Available Funds from Operations per share certified by the Committee is less than the Threshold established by the Committee.  If the Available Funds from Operations per share is at or above the Threshold established by the Committee, such portion will be determined on a continuum ranging from 50% to 200%, depending on the Available Funds from Operations per share certified by the Committee at the end of the Performance Period.  The award percentage between these points will be determined by utilizing the Company’s placement along the continuum and calculating the resulting award percentage using the formula established by the Committee. Notwithstanding the foregoing, the number of Shares earned and payable may be adjusted based on the Company’s relative TSR as compared to the Comparator Group.  If the Company’s TSR is in the top one-third of the Comparator Group, the number of Shares will be increased by 25%, not to exceed 200% of Target Number of Shares.  If the Company’s TSR is in the bottom one-third of the Comparator Group, the number of Shares will be decreased by 25%.  If the Company’s TSR is in the middle one-third of the Comparator Group, the number of Shares will not be adjusted.  

(d)    Notwithstanding (i) any other provision of this Agreement or the Plan or (ii) certification by the Committee that Return on Capital Employed or the Available Funds from Operations per share exceeds the threshold the Committee established, the Committee may in its sole and absolute discretion reduce, but not below zero (0), the number of Shares payable to the Participant based on such factors as it deems appropriate, including but not limited to the Company’s performance.  Accordingly, any reference in this Agreement to Shares that (i) become payable, (ii) may be received by a 
3

Exhibit 10.33

Participant or (iii) are earned by a Participant, and any similar reference, shall be understood to mean the number of Shares that are received, payable or earned after any such reduction is made.

5.     Vesting; Legally Binding Rights.

(a)    Notwithstanding any other provision of this Agreement, (i) a Participant shall not be entitled to any payment of Shares under this Agreement unless and until such Participant obtains a legally binding right to such Shares and satisfies applicable vesting conditions for such payment and (ii) a Participant shall not be entitled to payment of any Dividend Equivalents unless and until and to the extent such Participant obtains a legally binding right to, and satisfies applicable vesting conditions for payment of, the underlying Shares on which such Dividend Equivalents are payable.

(b)    Except as otherwise provided in Subparagraphs 5(c) – 5(h) below and subject to the provisions of Subparagraph 4(d) above, the Participant shall vest in Shares under this Agreement only if and at the time that both of the following conditions are fully satisfied:

(i)    The Participant remains an active employee of the Company or any of its Affiliates on [DATE]  (the “Maturity Date”); and

(ii)    The Committee certifies that the either the Company’s annualized Total Shareholder Return exceeded the annualized Total Shareholder Return of one or more members of the Company’s Comparator Group or the Company’s Return on Capital Employed exceeded thresholds established by the Committee over the performance period beginning [DATE] and ending [DATE] (the “Performance Period”).  Certification, if any, by the Committee for the Performance Period shall be made by the Maturity Date or as soon thereafter as is administratively practicable.  

(c)    If a Participant dies, becomes Disabled (as defined below) or qualifies for Retirement (as defined below) prior to the Maturity Date while an active employee of the Company or any of its Affiliates, at but not prior to the Maturity Date, and only to the extent and at the time that the Committee certifies that the performance measures for the Performance Period are satisfied under Subparagraph 5(b)(ii) above, upon such certification, the Participant shall vest in that number of Shares the Participant might otherwise have received for the Performance Period in accordance with Subparagraphs 4(a) through 4(d) above prorated to reflect that portion of the Performance Period prior to such Participant’s ceasing to be an active employee of the Company and its Affiliates.  The pro rata number of Shares in which the Participant may become vested in such case shall equal that number determined by multiplying (i) the number of Shares the Participant might otherwise have received for the Performance Period in accordance with Subparagraphs 4(a) to 4(d) above times (ii) a fraction, the numerator of which is the number of full and partial months in the period that begins the month following the month that contains the Effective Date and ends on (and includes) the date the Participant ceases being an active employee of the Company and its Affiliates, and the denominator of which is the total number of full and partial months in the period that begins the month following the month that contains the Effective Date and ends on (and includes) the Maturity Date.

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Exhibit 10.33

(d)    As used in this Agreement, the terms “Disabled,” “qualify for Retirement,” “Separation from Service” and “Affiliate” shall have the following respective meanings:

(i)    A Participant shall be considered Disabled if such Participant (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (B) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant’s employer.  Notwithstanding the forgoing, all determinations of whether a Participant is Disabled shall be made in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and guidance thereunder.  

(ii)    A Participant “qualifies for Retirement” only if such Participant experiences a Separation from Service (as defined in (iii) below) after attaining age fifty-five (55) and completing at least three (3) years of service with the Company or any of its Affiliates.

(iii)     “Separation from Service” means a Participant’s termination or deemed termination from employment with the Company and its Affiliates (as defined in (iv) below).  For purposes of determining whether a Separation from Service has occurred, the employment relationship is treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with his or her employer under an applicable statute or by contract.  For this purpose, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for his or her employer.  If the period of leave exceeds six (6) months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship will be deemed to terminate on the first date immediately following such six (6) month period.  Notwithstanding the foregoing, if a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, and such impairment causes the Participant to be unable to perform the duties of the Participant’s position of employment or any substantially similar position of employment, a twenty-nine (29) month period of absence shall be substituted for such six (6) month period.  For purposes of this Agreement, a Separation from Service occurs at the date as of which the facts and circumstances indicate either that, after such date: (A) the Participant and the Company reasonably anticipate the Participant will perform no further services for the Company and its Affiliates (whether as an employee or an independent contractor) or (B) that the level of bona fide services the Participant will perform for the Company and its Affiliates (whether as an employee or independent contractor) will permanently decrease to no more than twenty (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period or, if the Participant has been providing services to the Company and its Affiliates for less than thirty-six (36) months, the full period 
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Exhibit 10.33

over which the Participant has rendered services, whether as an employee or independent contractor.  The determination of whether a Separation from Service has occurred shall be governed by the provisions of Treasury Regulation § 1.409A-1, as amended, taking into account the objective facts and circumstances with respect to the level of bona fide services performed by the Participant after a certain date. 

 (e)    If a Participant experiences a Separation from Service prior to the Maturity Date and within two years following a Change in Control, either voluntarily for Good Reason or involuntarily (other than due to Cause), the Participant shall vest in that number of Shares equal to the Target Number of Shares.  

(f)    If the Participant experiences an involuntary Separation from Service prior to the Maturity Date and the Participant either receives cash severance benefits under a severance pay plan or program maintained by the Company or receives benefits under a separation agreement with the Company, at but not prior to the Maturity Date and only to the extent the Committee certifies that the performance measures for the Performance Period are satisfied under Subparagraph 5(b)(ii) above, the Participant shall, on the date of such certification, become vested in that number of Shares the Participant might otherwise have received for the Performance Period in accordance with Paragraph 4 above pro-rated to reflect that portion of the Performance Period prior to the Participant’s ceasing to be an active employee of the Company and its Affiliates. The pro rata number of Shares which may be payable to the Participant on but not prior to the Maturity Date in such case shall equal that number determined by multiplying (i) the number of Shares the Participant might otherwise have received for the Performance Period in accordance with Paragraph 4 above times (ii) a fraction, the numerator of which is the number of full and partial months in the period that begins the month following the month that includes the Effective Date and ends on (and includes) the date the Participant ceases being an active employee of the Company and its Affiliates, and the denominator of which is the number of full and partial months in the period that begins the month following the month that contains the Effective Date and ends on (and includes) the Maturity Date.

(g)    If (i) the Participant experiences an involuntary Separation from Service prior to the Maturity Date due to a sale of a business or the outsourcing of any portion of a business, and (ii) the Company or any of its Affiliates fails to make an offer of comparable employment, as defined in a severance plan or program maintained by the Company, to the Participant, then at the time and to the extent the Committee certifies that the performance measures for the Performance Period are satisfied under Subparagraph 5(b)(ii) above, upon such certification, the Participant shall become vested in that number of Shares the Participant might otherwise have received for the Performance Period in accordance with Paragraph 4 above pro-rated to reflect that portion of the Performance Period prior to the Participant’s ceasing to be an active employee of the Company and its Affiliates.  The pro rata number of Shares in which the Participant may become vested on, but not prior to, the Maturity Date in such case shall equal that number of Shares determined by multiplying (i) the number of Shares the Participant might otherwise have received for the Performance Period in accordance with Paragraph 4 above times (ii) a fraction, the numerator of which is the number of full and partial months in the period that begins the month following the month that contains the Effective Date and ends on (and includes) the date the Participant ceases being an active employee of the Company and its Affiliates, and the denominator of which is the total number of full and partial months in the period that begins the month following the 
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Exhibit 10.33

month that contains the Effective Date and ends on (and includes) the Maturity Date.  For purposes of this Subparagraph 5(g), a Termination of Affiliation shall constitute an involuntary Separation from Service.

(h)    If in the event of a Change in Control, the acquiring or surviving company does not assume or continue this Award or does not provide equivalent awards of substantially the same value, the Participant shall, immediately prior to the Change in Control, vest in that number of Shares equal to the Target Number of Shares.  

(i)    If the Participant becomes entitled to payment of any Shares under this Agreement, the Participant shall also be entitled to receipt of Dividend Equivalents with respect to such Shares in an amount equal to the amount of dividends, if any, that would have been payable on such Shares if such Shares had been issued and outstanding from the date of this Agreement through the payment date of the Shares.  Dividend Equivalents shall remain assets of the Company until paid hereunder and may, in the discretion of the Committee be paid in either cash or Shares.  If Dividend Equivalents are paid in Shares, the number of Shares so payable will equal the total amount of Dividend Equivalents payable, if any, divided by the Fair Market Value of a Share on the payment date.  No fractional Shares shall be issued.

6.    Payment of Shares and Dividend Equivalents.  

 (a)     (i)    The payment date for all Shares in which a Participant becomes vested pursuant to Subparagraph 5(e) above, and related Dividend Equivalents in which the Participant becomes vested pursuant to Subparagraph 5(i), shall be no more than thirty (30) days after such Participant’s Separation from Service. If such 30-day period spans two calendar years, then payment will be made in the later calendar year.  However, if the Participant was a “key employee” within the meaning of Section 409A(a)(B)(i) of the Code immediately prior to his or her Separation from Service, payment shall not be made sooner than the earlier to occur of the following: (i) six (6) months following the date of such Separation from Service; and (ii) the Participant’s death.  

(ii)    For purposes of this Subparagraph 6(a), “key employee” means an employee designated on an annual basis by the Company as of December 31 (the “Key Employee Designation Date”) as an employee meeting the requirements of Section 416(i) of the Code utilizing the definition of compensation under Treasury Regulation § 1.415(c)-2(d)(2).  A Participant designated as a “key employee” shall be a “key employee” for the entire twelve (12) month period beginning on April 1 following the Key Employee Designation Date.

(b)    The payment date for all Shares in which the Participant becomes vested pursuant to Paragraph 5 above, other than Subparagraph 5(e) (as to which the payment date is determined in accordance with Subparagraph 6(a) above), and related Dividend Equivalents in which the Participant becomes vested pursuant to Subparagraph 5(i), shall be the calendar year containing the Maturity Date.

(c)    Upon conversion of RSUs into Shares under this Agreement, such RSUs shall be cancelled.  Shares that become payable under this Agreement will be paid by the Company by the delivery to the Participant, or the Participant’s beneficiary or legal representative, of one or more certificates (or other indicia of ownership) representing 
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Exhibit 10.33

Shares of Williams Common Stock equal in number to the number of Shares and if to be paid in Shares, related Dividend Equivalents, otherwise payable under this Agreement less the number of Shares having a Fair Market Value, as of the date the withholding tax obligation arises, equal to a withholding amount approved by the Committee in advance.  Notwithstanding the foregoing, to the extent permitted by Section 409A of the Code and the guidance thereunder, if federal employment taxes become due upon the Participant’s becoming entitled to payment of Shares, the number of Shares necessary to cover such taxes may be used to satisfy such taxes upon such entitlement. 

7.    Other Provisions.

(a)    The Participant understands and agrees that payments under this Agreement shall not be used for, or in the determination of, any other payment or benefit under any continuing agreement, plan, policy, practice or arrangement providing for the making of any payment or the provision of any benefits to or for the Participant or the Participant’s beneficiaries or representatives, including, without limitation, any employment agreement, any change of control severance protection plan or any employee benefit plan as defined in Section 3(3) of ERISA, including, but not limited to qualified and non-qualified retirement plans.

(b)    The Participant agrees and understands that, subject to the limit expressed in clause (iii) of the following sentence, upon payment of Shares and Dividend Equivalents under this Agreement, stock certificates (or other indicia of ownership) issued may be held as collateral for monies he/she owes to Company or any of its Affiliates, including but not limited to personal loan(s), Company credit card debt, relocation repayment obligations or benefits from any plan that provides for pre-paid educational assistance.  In addition, the Company may accelerate the time or schedule of a payment of vested Shares and Dividend Equivalents and/or deduct from any payment of Shares and Dividend Equivalents to the Participant under this Agreement, or to his or her beneficiaries in the case of the Participant’s death, that number of Shares having a Fair Market Value at the date of such deduction equal to the amount of such debt as satisfaction of any such debt, provided that (i) such debt is incurred in the ordinary course of the employment relationship between the Company or any of its Affiliates and the Participant, (ii) the aggregate amount of any such debt-related collateral held or deduction made in any taxable year of the Company with respect to the Participant does not exceed $5,000, and (iii) the deduction of Shares is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.

(c)    Except as provided in Subparagraphs 5(c) through 5(h) above, in the event that the Participant’s employment with the Company or any of its Affiliates terminates prior to the Maturity Date, RSUs subject to this Agreement and any right to Shares and Dividend Equivalents issuable hereunder shall be forfeited.

(d)    The Participant acknowledges that this Award and similar awards are made on a selective basis and are, therefore, to be kept confidential.

(e)    RSUs, Shares, Dividend Equivalents, and the Participant’s interest in RSUs, Shares, and Dividend Equivalents, may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered at any time prior to both (i) the Participant’s becoming vested in Shares and Dividend Equivalents and (ii) payment of Shares and Dividend Equivalents under this Agreement.
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Exhibit 10.33

(f)    If the Participant at any time forfeits any or all of the RSUs pursuant to this Agreement, the Participant agrees that all of the Participant’s rights to and interest in such RSUs and in Shares and Dividend Equivalents issuable thereunder or relating thereto shall terminate upon forfeiture without payment of consideration.

(g)    The Committee shall determine whether an event has occurred resulting in the forfeiture of the RSUs and any Shares and Dividend Equivalents issuable thereunder in accordance with this Agreement and all determinations of the Committee shall be final and conclusive.

(h)    With respect to the right to receive payment of Shares and Dividend Equivalents under this Agreement, nothing contained herein shall give the Participant any rights that are greater than those of a general creditor of the Company. 

(i)    The obligations of the Company under this Agreement are unfunded and unsecured.  Each Participant shall have the status of a general creditor of the Company with respect to amounts due, if any, under this Agreement.

(j)    The parties to this Agreement intend that this Agreement meet the requirements of Section 409A of the Code and recognize that it may be necessary to modify this Agreement and/or the Plan to reflect guidance under Section 409A of the Code issued by the Internal Revenue Service.  Participant agrees that the Committee shall have sole discretion in determining (i) whether any such modification is desirable or appropriate and (ii) the terms of any such modification. 

(k)    The Participant hereby automatically becomes a party to this Agreement whether or not he or she accepts the Award electronically or in writing in accordance with procedures of the Committee, its delegates or agents.

(l)    Nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time, nor confer upon the Participant the right to continue in the employ of the Company and/or Affiliate.
(m)    The Participant hereby acknowledges that nothing in this Agreement shall be construed as requiring the Committee to allow a Domestic Relations Order with respect to this Award.
8.    Notices. All notices to the Company required hereunder shall be in writing and delivered by hand or by mail, addressed to The Williams Companies, Inc., One Williams Center, Tulsa, Oklahoma 74172, Attention: Stock Administration Department. Notices shall become effective upon their receipt by the Company if delivered in the foregoing manner.  To direct the sale of any Shares issued under this Agreement, contact Fidelity at http://netbenefits.fidelity.com or by telephone at 800-544-9354.

9.    Forfeiture and Clawback. Notwithstanding any other provision of the Plan or this Agreement to the contrary, by accepting the Award represented by this Agreement, the Participant acknowledges that any incentive-based compensation paid to the Participant hereunder may be subject to recovery by the Company under any clawback policy that the Company may adopt from time to time, including without limitation any policy that the 
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Exhibit 10.33

Company may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the U.S. Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Shares may be listed. The Participant further agrees to promptly return any such incentive-based compensation which the Company determines it is required to recover from you under any such clawback policy.

10.    Tax Consultation. The Participant understands he or she will incur tax consequences as a result of acquisition or disposition of the Shares and Dividend Equivalents.  The Participant agrees to consult with any tax consultants he or she thinks advisable in connection with the acquisition of the Shares and Dividend Equivalents and acknowledges that he or she is not relying, and will not rely, on the Company for any tax advice.

    THE WILLIAMS COMPANIES, INC.

Participant:  <@Name>                           
SSN:    <@SSN   @>
10Exhibit 4.29

 

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE 

SECURITIES EXCHANGE ACT OF 1934 

 

B. Riley
Financial, Inc. has ten classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”): 

 

	(1)	our common stock, par value $0.0001 per share (“Common Stock”);
	(2)	our depositary shares (each representing a 1/1000th interest in a 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share) (the “Series A Depositary Shares”);
	(3)	our depositary shares (each representing a 1/1000th interest in a 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share) (the “Series B Depositary Shares”);
	(4)	our 6.75% Senior Notes due 2024 (the “2024 Notes”);
	(5)	our 6.375% Senior Notes due 2025 (the “2025 Notes”);
	(6)	our 6.50% Senior Notes due 2026 (the “6.50% 2026 Notes”);
	(7)	our 5.50% Senior Notes due 2026 (the “5.50% 2026 Notes”);
	(8)	our 5.00% Senior Notes due 2026 (the “5.00% 2026 Notes”);
	(9)	our 6.00% Senior Notes due 2028 (the “6.00% 2028 Notes”); and
	(10)	our 5.25% Senior Notes due 2028 (the “5.25% 2028 Notes,” and together with the 2024 Notes, 2025 Notes, 6.50% 2026 Notes, 5.50% 2026 Notes, 5.00% 2026 Notes and 6.00% 2028 Notes, the “Notes”);

 

This description
does not purport to be complete and is qualified in its entirety by reference to the full text of our (i) Amended and Restated Certificate
of Incorporation, as amended (“Certificate of Incorporation”); (ii) Amended and Restated Bylaws, as amended
(“Bylaws”); (iii) Certificate of Designation designating the 6.875% Series A Cumulative Perpetual Preferred
Stock (“Series A Certificate of Designation”); (iv) Certificate of Designation designating the 7.375% Series
B Cumulative Perpetual Preferred Stock (“Series B Certificate of Designation”); (v) Series A Deposit Agreement
(as defined below); (vi) Series B Deposit Agreement (as defined below); and (vii) 2019 Indenture (as defined below) (clauses (i) –
(vii) together, the “Documents”). We encourage you to read the Documents and the applicable provisions of the
Delaware General Corporation Law for additional information. 

 

References
herein to “the Company,” “we,” “us” or “our” refer to B. Riley Financial, Inc. and not
to any of its subsidiaries

 

Description
of Common Stock

 

	Authorized	 	Our Certificate of Incorporation provides that we are authorized to issue 101,000,000 shares of capital stock. Our authorized capital stock is comprised of 100,000,000 shares of Common Stock.
	 	 	 
	Ranking	 	Our Common Stock ranks junior to any future issuances of preferred stock and the Notes and any future senior securities that we may establish and issue from time to time, with respect to the payments of distributions and amounts, and rights to payment upon liquidation, dissolution and winding up. 
	 	 	 
	Dividends	 	Subject to preferences that may apply to any then outstanding shares of preferred stock, the holders of outstanding shares of our Common Stock are entitled to receive dividends out of assets legally available for distribution at the times and in the amounts, if any, that our board of directors (the “Board”) may determine from time to time.
	 	 	 
	Liquidation	 	In the event of our liquidation, dissolution or winding up, subject to the rights of each series of our preferred stock, which may, from time to time come into existence, holders of our Common Stock are entitled to share ratably in all of our assets remaining after we pay our liabilities.

 

	Voting Rights	 	The holders of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Except as otherwise provided by law, our Certificate of Incorporation, our Bylaws or the rules and regulations of any stock exchange applicable to us or pursuant to any other regulation applicable to us or our stockholders, at each meeting of stockholders at which a quorum is present, all corporate actions to be taken by vote of the stockholders shall be authorized by the affirmative vote of the holders of a majority in voting power of the stock present in person or represented by proxy and entitled to vote on the subject matter, and where a separate vote by class or series is required, if a quorum of such class or series is present, such act shall be authorized by the affirmative vote of the holders of a majority in voting power of the stock of such class or series present in person or represented by proxy and entitled to vote on the subject matter.

 

     

     

    

 

	 	 	Nominee for director shall be elected to the Board if a majority of the votes cast are in favor of such nominee’s election; provided, however, that, if the number of nominees for director exceeds the number of directors to be elected, directors shall be elected by a plurality of the votes of the shares represented in person or by proxy at any meeting of stockholders held to elect directors and entitled to vote on such election of directors. For purposes of this bylaw, a majority of votes cast shall mean that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election (with “abstentions” and “broker nonvotes” not counted as a vote cast either “for” or “against” that director’s election). In the event that a director nominee fails to receive an affirmative majority of the votes cast in an election where the number of nominees is less than or equal to the number of directors to be elected, the Board, within its powers, may take any appropriate action, including decreasing the number of directors or filling a vacancy. 
	 	 	 
	Listing	 	Our Common Stock is listed on the Nasdaq Global Market (“Nasdaq”) under the symbol “RILY.”
	 	 	 
	Transfer Agent	 	The transfer agent, registrar and dividend disbursing agent for our Common Stock is Continental Stock Transfer and Trust Company.

 

Description of the Series A Depositary Shares
and Series A Preferred Stock

 

The following is a summary of the material
terms and provisions of the Series A Preferred Stock and the Series A Depositary Shares. The statements below describing our Series A
Preferred Stock are in all respects subject to and qualified in their entirety by reference to the applicable provisions of our Certificate
of Incorporation, Certificate of Designation, Bylaws and our Deposit Agreement, dated October 7, 2019, among the Company, Continental
Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts (the “Series A Deposit Agreement”).

 

	Ranking	 	The 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”) underlying the Series A Depositary Shares will rank, as to dividend rights and rights upon our liquidation, dissolution or winding up:
	 	 	 
	 	 	(1)     Senior to all classes or series of our Common Stock and to all other equity securities issued by us other than any equity securities issued by us with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Stock;

 

	 	 	(2)      Junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and
	 	 	 
	 	 	(3)      Effectively junior to all our existing and future indebtedness (including indebtedness convertible into our Common Stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing or future subsidiaries.
	 	 	 
	Dividends	 	We will pay cumulative cash dividends on the Series A Preferred Stock, when and as declared by our Board, at the rate of 6.875% of the $25,000.00 liquidation preference ($25.00 per depositary share) per year (equivalent to $1,718.75 or $1.71875 per depositary share).
	 	 	 
	 	 	Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October; provided that if any dividend payment date is not a business day, then the dividend which would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day, and no interest, additional dividends or other sums will accumulate. Dividends will accumulate and be cumulative from, and including, the date of original issuance. Dividends on the Series A Preferred Stock underlying the Series A Depositary Shares will continue to accumulate whether or not (i) any of our agreements prohibit the current payment of dividends, (ii) we have earnings or funds legally available to pay the dividends, or (iii) our Board does not declare the payment of the dividends.

 

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	Liquidation Preference	 	The liquidation preference of each share of Series A Preferred Stock is $25,000.00 ($25.00 per depositary share). Upon liquidation, Series A preferred shareholders will be entitled to receive the liquidation preference with respect to their shares of Series A Preferred Stock plus an amount equal to accumulated but unpaid dividends with respect to such shares. 
	 	 	 
	Optional Redemption	 	
    We may not redeem the Series A Preferred Stock
    underlying the Series A Depositary Shares prior to October 7, 2024, except as described below under “Special Optional Redemption.”
    At any time on or after October 7, 2024, we may, at our option, redeem the Series A Preferred Stock, in whole or from time to time in
    part, by paying $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not
    including, the date of redemption, and the depositary will redeem a proportional number of Series A Depositary Shares representing the
    shares redeemed. We refer to this redemption as an “optional redemption.”

     

	Special Optional Redemption	 	Upon the occurrence of a Delisting Event (as defined below), we may, at our option, redeem the Series A preferred stock, in whole or in part, within 90 days after the first date on which such Delisting Event occurred, for cash, at a redemption price of $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accrued and unpaid dividends to, but not including, the date of redemption, and the depositary will redeem a proportional number of Series A Depositary Shares representing the shares redeemed.
	 	 	 
	 	 	A “Delisting Event” occurs when, after the original issuance of Series A Preferred Stock, both (i) the shares of Series A Preferred Stock (or the Series A Depositary Shares) are no longer listed on the New York Stock Exchange (the “NYSE”), the NYSE American LLC (“NYSE AMER”) or the Nasdaq Stock Market LLC (“Nasdaq Exchange”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE AMER or Nasdaq Exchange, and (ii) we are not subject to the reporting requirements of the Exchange Act, but any Series A Preferred Stock is still outstanding.

 

	 	 	Upon the occurrence of a Change of Control (as defined below), we may, at our option, redeem the Series A Preferred Stock underlying the Series A Depositary Shares, in whole or in part within 120 days after the first date on which such Change of Control occurred, for cash, at a redemption price of $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accrued and unpaid dividends to, but not including, the date of redemption, and the depositary will redeem a proportional number of Series A Depositary Shares representing the shares redeemed.
	 	 	 
	 	 	A “Change of Control” occurs when, after the original issuance of the Series A Preferred Stock, the following have occurred and are continuing:
	 	 	 
	 	 	●     the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of our company entitling that person to exercise more than 50% of the total voting power of all shares of our company entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
	 	 	 
	 	 	●     following the closing of any transaction referred to in the bullet point above, neither we nor any acquiring or surviving entity (or if, in connection with such transaction shares of our Common Stock are converted into or exchanged for (in whole or in part) common equity securities of another entity), has a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE AMER or Nasdaq Exchange, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE AMER or Nasdaq Exchange.

 

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	 	 	We refer to redemption following a Delisting Event or Change of Control as a “special optional redemption.” If, prior to the Delisting Event Conversion Date or the Change of Control Conversion Date, as applicable, we have provided or provide notice of exercise of any of our redemption rights relating to the Series A Preferred Stock (whether our optional redemption right or our special optional redemption right), the holders of Series A Depositary Shares representing interests in the Series A Preferred Stock will not have the conversion right described below.

 

	Conversion Rights	 	Upon the occurrence of a Delisting Event or a Change of Control, as applicable, each holder of Series A Depositary Shares representing interests in the Series A Preferred Stock will have the right (unless, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we have provided or provide notice of our election to redeem the Series A Preferred Stock) to direct the depositary, on such holder’s behalf, to convert some or all of the Series A Preferred Stock underlying the Series A Depositary Shares held by such holder on the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable into a number of shares of our Common Stock (or equivalent value of alternative consideration) per depositary share equal to the lesser of:
	 	 	 
	 	 	●     the quotient obtained by dividing (1) the sum of the $25.00 per depositary share liquidation preference plus the amount of any accumulated and unpaid dividends to, but not including, the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable (unless the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accumulated and unpaid dividend will be included in this sum) by (2) the Common Stock Price (as defined herein); and
	 	 	 
	 	 	●     2.176 (i.e., the Series A Share Cap), subject to certain adjustments;
	 	 	 
	 	 	and subject, in each case, to certain conditions, including, under specified circumstances, an aggregate cap on the total number of shares of our Common Stock issuable upon conversion and to provisions for the receipt of alternative consideration.
	 	 	 
	 	 	If, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we have provided or provide a redemption notice, whether pursuant to our special optional redemption right or our optional redemption right, holders of Series A Depositary Shares representing interests in the Series A Preferred Stock will not have any right to direct the depositary to convert the Series A Preferred Stock, and any Series A Preferred Stock subsequently selected for redemption that has been tendered for conversion will be redeemed on the related date of redemption instead of converted on the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable.
	 	 	 
	 	 	Because each depositary share represents a 1/1000th interest in a share of the Series A Preferred Stock, the number of shares of Common Stock ultimately received for each depositary share will be equal to the number of shares of Common Stock received upon conversion of each share of Series A Preferred Stock divided by 1000. In the event that the conversion would result in the issuance of fractional shares of Common Stock, we will pay the holder of Series A Depositary Shares cash in lieu of such fractional shares.
	 	 	 
	 	 	Except as provided above in connection with a Delisting Event or Change of Control, shares of the Series A Preferred Stock are not convertible into or exchangeable for any other securities or property.
	 	 	 
	No Maturity, Sinking Fund or Mandatory Redemption	 	The Series A Preferred Stock underlying the Series A Depositary Shares does not have any stated maturity date and is not subject to mandatory redemption at the option of the holder or any sinking fund. We are not required to set aside funds to redeem the Series A Preferred Stock. Accordingly, the Series A Preferred Stock and Series A Depositary Shares will remain outstanding indefinitely unless we decide to redeem them pursuant to our optional redemption or special optional redemption rights, or they are converted in connection with a Delisting Event or Change of Control.

 

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	Limited Voting Rights	 	Holders of the Series A Depositary Shares representing interests in the Series A Preferred Stock generally will have no voting rights. However, if we do not pay dividends on any outstanding shares of Series A Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of Series A Depositary Shares representing interests in the Series A Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect two additional directors to our Board to serve until all unpaid dividends have been fully paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of the Series A Preferred Stock cannot be made without the affirmative vote of holders of at least 66 2/3% of the outstanding shares of Series A Preferred Stock, voting as a separate class. In any matter in which the Series A Preferred Stock may vote, each share of Series A Preferred Stock shall be entitled to one vote. As a result, each depositary share will be entitled to 1/1000th of a vote.
	 	 	 
	Listing	 	Our Series A Depositary Shares are listed on Nasdaq under the symbol “RILYP.”
	 	 	 
	Form	 	The Series A Depositary Shares will be issued and maintained in book-entry form registered in the name of the nominee of The Depository Trust Company, except under limited circumstances.
	 	 	 
	Depositary	 	Continental Stock Transfer and Trust Company.

 

	
    Description of the Series B Depositary Shares
    and Series B Preferred Stock

     

    The following is a summary of the material
    terms and provisions of the Series B Preferred Stock and the Series B Depositary Shares. The statements below describing our Series B
    Preferred Stock are in all respects subject to and qualified in their entirety by reference to the applicable provisions of our Certificate
    of Incorporation, Certificate of Designation, Bylaws and our Deposit Agreement, dated September 4, 2020, among the Company, Continental
    Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts (the “Series B Deposit Agreement”).

	 	 
	Ranking	The 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share (“Series B Preferred Stock”) underlying the Series B Depositary Shares will rank, as to dividend rights and rights upon our liquidation, dissolution or winding up:
	 	 
	 	(1)    Senior to all classes or series of our common stock and to all other equity securities issued by us expressly designated as ranking junior to the Series B Preferred Stock;
	 	 
	 	(2)    On parity with our Series A Preferred Stock;
	 	 
	 	(2)    Junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and
	 	 
	 	(3)    Effectively junior to all our existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing or future subsidiaries.

 

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	Dividends	We will pay cumulative cash dividends on the Series B Preferred Stock, when and as declared by our Board of Directors, at the rate of 7.375% of the $25,000.00 liquidation preference ($25.00 per depositary share) per year (equivalent to $1,843.75 or $1.84375 per depositary share).
	 	 
	 	Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October; provided that if any dividend payment date is not a business day, then the dividend which would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day, and no interest, additional dividends or other sums will accumulate. Dividends will accumulate and be cumulative from, and including, the date of original issuance. Dividends on the Series B Preferred Stock underlying the Series B Depositary Shares will continue to accumulate whether or not (i) any of our agreements prohibit the current payment of dividends, (ii) we have earnings or funds legally available to pay the dividends, or (iii) our Board of Directors does not declare the payment of the dividends.
	 	 
	Liquidation Preference	The liquidation preference of each share of Series B Preferred Stock is $25,000.00 ($25.00 per depositary share). Upon liquidation, Series B preferred shareholders will be entitled to receive the liquidation preference with respect to their shares of Series B Preferred Stock plus an amount equal to accumulated but unpaid dividends with respect to such shares. 
	 	 
	Optional Redemption	We may not redeem the Series B Preferred Stock underlying the Series B Depositary Shares prior to September 4, 2025, except as described below under “Special Optional Redemption.” At any time on or after September 4, 2025, we may, at our option, redeem the Series B Preferred Stock, in whole or from time to time in part, by paying $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the date of redemption, and the depositary will redeem a proportional number of Series B Depositary Shares representing the shares redeemed. We refer to this redemption as an “optional redemption.”
	 	 
	Special Optional Redemption	Upon the occurrence of a Delisting Event (as defined below), we may, at our option, redeem the Series B preferred stock, in whole or in part, within 90 days after the first date on which such Delisting Event occurred, for cash, at a redemption price of $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accrued and unpaid dividends to, but not including, the date of redemption, and the depositary will redeem a proportional number of Series B Depositary Shares representing the shares redeemed.
	 	 
	 	A “Delisting Event” occurs when, after the original issuance of Series B Preferred Stock, both (i) the shares of Series B Preferred Stock (or the Series B Depositary Shares) are no longer listed on the NYSE, the NYSE AMER or the Nasdaq Exchange, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE AMER or Nasdaq Exchange, and (ii) we are not subject to the reporting requirements of the Exchange Act, but any Series B Preferred Stock is still outstanding.
	 	 
	 	Upon the occurrence of a Change of Control (as defined below), we may, at our option, redeem the Series B Preferred Stock underlying the Series B Depositary Shares, in whole or in part within 120 days after the first date on which such Change of Control occurred, for cash, at a redemption price of $25,000.00 per share (equivalent to $25.00 per depositary share), plus any accrued and unpaid dividends to, but not including, the date of redemption, and the depositary will redeem a proportional number of Series B Depositary Shares representing the shares redeemed.

 

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	 	A “Change of Control” occurs when, after the original issuance of the Series B Preferred Stock, the following have occurred and are continuing:
	 	 
	 	●     the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of our company entitling that person to exercise more than 50% of the total voting power of all shares of our company entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
	 	 
	 	●     following the closing of any transaction referred to in the bullet point above, neither we nor any acquiring or surviving entity (or if, in connection with such transaction shares of our common stock are converted into or exchanged for (in whole or in part) common equity securities of another entity), has a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE AMER or Nasdaq Exchange, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE AMER or Nasdaq Exchange.
	 	 
	 	We refer to redemption following a Delisting Event or Change of Control as a “special optional redemption.” If, prior to the Delisting Event Conversion Date or the Change of Control Conversion Date, as applicable, we have provided or provide notice of exercise of any of our redemption rights relating to the Series B Preferred Stock (whether our optional redemption right or our special optional redemption right), the holders of Series B Depositary Shares representing interests in the Series B Preferred Stock will not have the conversion right described below.
	 	 
	Conversion Rights	Upon the occurrence of a Delisting Event or a Change of Control, as applicable, each holder of Series B Depositary Shares representing interests in the Series B Preferred Stock will have the right (unless, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we have provided or provide notice of our election to redeem the Series B Preferred Stock) to direct the depositary, on such holder’s behalf, to convert some or all of the Series B Preferred Stock underlying the Series B Depositary Shares held by such holder on the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable into a number of shares of our common stock (or equivalent value of alternative consideration) per depositary share equal to the lesser of:
	 	 
	 	●     the quotient obtained by dividing (1) the sum of the $25.00 per depositary share liquidation preference plus the amount of any accumulated and unpaid dividends to, but not including, the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable (unless the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable is after a record date for a Series B Preferred Stock dividend payment and prior to the corresponding Series B Preferred Stock dividend payment date, in which case no additional amount for such accumulated and unpaid dividend will be included in this sum) by (2) the Common Stock Price (as defined herein); and
	 	 
	 	●     1.8671 (i.e., the Series B Share Cap), subject to certain adjustments;
	 	 
	 	and subject, in each case, to the conditions described in this prospectus supplement and the accompanying prospectus, including, under specified circumstances, an aggregate cap on the total number of shares of our common stock issuable upon conversion and to provisions for the receipt of alternative consideration.
	 	 
	 	If, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we have provided or provide a redemption notice, whether pursuant to our special optional redemption right or our optional redemption right, holders of Series B Depositary Shares representing interests in the Series B Preferred Stock will not have any right to direct the depositary to convert the Series B Preferred Stock, and any Series B Preferred Stock subsequently selected for redemption that has been tendered for conversion will be redeemed on the related date of redemption instead of converted on the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable.
	 	 
	 	Because each depositary share represents a 1/1000th interest in a share of the Series B Preferred Stock, the number of shares of common stock ultimately received for each depositary share will be equal to the number of shares of common stock received upon conversion of each share of Series B Preferred Stock divided by 1000. In the event that the conversion would result in the issuance of fractional shares of common stock, we will pay the holder of Series B Depositary Shares cash in lieu of such fractional shares.
	 	 
	 	Except as provided above in connection with a Delisting Event or Change of Control, shares of the Series B Preferred Stock are not convertible into or exchangeable for any other securities or property.

 

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	No Maturity, Sinking Fund or Mandatory Redemption	The Series B Preferred Stock underlying the Series B Depositary Shares does not have any stated maturity date and is not subject to mandatory redemption at the option of the holder or any sinking fund. We are not required to set aside funds to redeem the Series B Preferred Stock. Accordingly, the Series B Preferred Stock and Series B Depositary Shares will remain outstanding indefinitely unless we decide to redeem them pursuant to our optional redemption or special optional redemption rights, or they are converted in connection with a Delisting Event or Change of Control. 
	 	 
	Limited Voting Rights	Holders of the Series B Depositary Shares representing interests in the Series B Preferred Stock generally will have no voting rights. However, if we do not pay dividends on any outstanding shares of Series B Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of shares of the Series B Preferred Stock and the holders of preferred stock of all other classes and series ranking on parity with the Series B Preferred Stock with respect to payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, and upon which like voting rights have been conferred, including our Series A Preferred Stock, and are exercisable, which we refer to as our parity preferred stock, and with which the holders of Series B Preferred Stock and all classes and series of parity preferred stock are entitled to vote together as a single class, voting together as a single class will be entitled to elect two additional directors to our Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment. In addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series B Preferred Stock and any other class or series of parity preferred stock with which the holders of Series B Preferred Stock are entitled to vote together as a single class, including our Series A Preferred Stock, is required for us to create, authorize or issue any class or series of stock ranking senior to the Series B Preferred Stock or to amend any provision of our charter so as to materially and adversely affect the terms of the Series B Preferred Stock. If the proposed charter amendments would materially and adversely affect the rights, preferences, privileges or voting powers of the Series B Preferred Stock disproportionately relative to any other class or series of parity preferred stock, the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series B Preferred Stock, voting as a separate class, is also required. In any matter in which the Series B Preferred Stock may vote, each share of Series B Preferred Stock shall be entitled to one vote. As a result, each depositary share will be entitled to 1/1000th of a vote.
	 	 
	Listing	The Series B Depositary Shares are listed on Nasdaq under the symbol “RILYL.”
	 	 
	Form	The Series B Depositary Shares will be issued and maintained in book-entry form registered in the name of the nominee of The Depository Trust Company, except under limited circumstances.
	 	 
	Depositary	Continental Stock Transfer and Trust Company.

 

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Description of the Notes

 

The following
is a summary of the material terms and provisions of the Notes. The description
of the Notes are subject to and qualified in their entirety by reference to our Indenture dated as of May 7, 2019, as supplemented by
the First Supplemental Indenture dated May 7, 2019, the Second Supplemental Indenture dated as of September 23, 2019, the Third Supplemental
Indenture dated as of February 12, 2020, the Fourth Supplemental Indenture dated as of January 25, 2021, the Fifth Supplemental Indenture
dated as of March 29, 2021, the Sixth Supplemental Indenture dated as of August 6, 2021 and the Seventh Supplemental Indenture dated as
of December 3, 2021, which we refer to collectively as the “2019 Indenture,” between the Company and The Bank of New
York Mellon Trust Company, N.A., trustee. 

 

We use the term “trustee” to refer
to The Bank of New York Mellon Trust Company, N.A., as trustee, under the 2019 Indenture. 

 

	Maturity	 	The 2024 Notes will mature on May 31, 2024, the 2025 Notes will mature on February 28, 2025, the 6.50% 2026 Notes will mature on September 30, 2026, the 5.50% 2026 Notes will mature on March 31, 2026, the 5.00% 2026 Notes will mature on December 31, 2026, the 6.00% 2028 Notes will mature on January 31, 2028 and the 5.25% 2028 Notes will mature on August 31, 2028, each unless redeemed prior to maturity.
	 	 	 
	Interest Rate and Payment Dates	 	6.75% interest per annum on the principal amount of the 2024 Notes, 6.375% interest per annum on the principal amount of the 2025 Notes, 6.50% interest per annum on the principal amount of the 6.50% 2026 Notes, 5.50% interest per annum on the principal amount of the 5.50% 2026 Notes, 5.00% interest per annum on the principal amount of the 5.00% 2026 Notes, 6.00% interest per annum on the principal amount of the 6.00% 2028 Notes and 5.25% interest per annum on the principal amount of the 5.25% 2028 Notes will accrue from the most recent interest payment date immediately preceding the date of issuance of the 2024 Notes, 2025 Notes, 6.50% 2026 Notes, 5.50% 2026 Notes, 5.00% 2026 Notes, 6.00% 2028 Notes and 5.25% 2028 Notes, respectively, except that Notes purchased after the record dates noted below, but prior to the interest payment date immediately following such record date (or if settlement of a purchase of Notes otherwise occurs after such record date but prior to the interest payment date immediately following such record date), such Notes will not begin to accrue interest until the interest payment date immediately following such record date. Interest will be paid quarterly in arrears on January 31, April 30, July 31 and October 31 of each year. The interest payable on each interest payment date will be paid only to holders of record of the Notes at the close of business on January 15, April 15, July 15 and October 15 of each year, as the case may be, immediately preceding the applicable interest payment date. As a general matter, holders of the Notes will not be entitled to receive any payments of principal on the Notes prior to the stated maturity date. 

 

	Guarantors	 	None.
	 	 	 
	Ranking	 	The Notes will be our senior unsecured obligations and will rank equal in right of payment with all of our existing and future senior unsecured and unsubordinated indebtedness. The Notes will be effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. The Notes will be structurally subordinated to all existing and future indebtedness (including trade payables) of our subsidiaries.
	 	 	 
	 	 	The 2019 Indenture governing the Notes does not limit the amount of indebtedness that we or our subsidiaries may incur or whether any such indebtedness can be secured by our assets.
	 	 	 
	Optional Redemption 	 	We may redeem the 2024 Notes for cash in whole or in part at any time at our option (i) on or after May 31, 2021 and prior to May 31, 2022, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after May 31, 2022 and prior to May 31, 2023, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after May 31, 2023 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. 

 

	 	 	We may redeem the 2025 Notes for cash in whole or in part at any time at our option (i) on or after February 28, 2021 and prior to February 28, 2022, at a price equal to $25.75 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after February 28, 2022 and prior to February 28, 2023, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after February 28, 2023 and prior to February 29, 2024, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iv) on or after February 29, 2024 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

 

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    We may redeem
    the 6.50% 2026 Notes for cash in whole or in part at any time at our option (i) on or after September 30, 2022 and prior to September
    30, 2023, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or
    after September 30, 2023 and prior to September 30, 2024, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but
    excluding, the date of redemption, and (iii) on or after September 30, 2024 and prior to maturity, at a price equal to 100% of their principal
    amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

     

    Prior to January 1, 2026 (the “5.50%
    2026 Notes Par Call Date”), we may, at our option, redeem the 5.50% 2026 Notes, for cash in whole or in part at any time,
    at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus the 5.50% 2026 Notes Make-Whole Amount,
    if any, plus accrued and unpaid interest to, but excluding, the date of redemption. On or after January 1, 2026 and prior to maturity,
    we may, at our option, redeem the 5.50% 2026 Notes, for cash in whole or in part at any time at a redemption price equal to 100% of their
    principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

     

    Prior to October 2, 2026 (the “5.00%
    2026 Notes Par Call Date”), we may, at our option, redeem the 5.00% 2026 Notes, for cash in whole or in part at any time,
    at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus the 5.00% 2026 Notes Make-Whole Amount,
    if any, plus accrued and unpaid interest to, but excluding, the date of redemption. On or after October 2, 2026 and prior to maturity,
    we may, at our option, redeem the 5.00% 2026 Notes for cash in whole or in part at any time at a redemption price equal to 100% of their
    principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

     

    We may redeem the 6.00% 2028 Notes for cash in
    whole or in part at any time at our option (i) on or after January 31, 2022 and prior to January 31, 2023, at a price equal to $25.75
    per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after January 31, 2023 and prior
    to January 31, 2024, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption,
    (iii) on or after January 31, 2024 and prior to January 31, 2025, at a price equal to $25.25 per note, plus accrued and unpaid interest
    to, but excluding, the date of redemption, and (iv) on or after January 31, 2025 and prior to maturity, at a price equal to 100%
    of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

     

    At any time prior to August 31, 2023, we may redeem
    the 5.25% 2028 Notes for cash in whole or in part at any time at our option at a redemption price equal to 100.0% of the principal amount
    thereof plus the 5.25% 2028 Notes Make-Whole Amount as of, and accrued and unpaid interest to, but excluding, the date of redemption.
    In addition, we may redeem the 5.25% 2028 Notes for cash in whole or in part at any time at our option (i) on or after August 31,
    2023 and prior to August 31, 2024, at a price equal to $25.75 per note, plus accrued and unpaid interest to, but excluding, the date of
    redemption, (ii) on or after August 31, 2024 and prior to August 31, 2025, at a price equal to $25.50 per note, plus accrued and
    unpaid interest to, but excluding, the date of redemption, (iii) on or after August 31, 2025 and prior to August 31, 2026, at a price
    equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iv) on or after August
    31, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding,
    the date of redemption.

     

    As used herein:

     

    “5.50% 2026 Make-Whole Amount”
    means, in connection with any optional redemption of any 5.50% 2026 Note, the excess, if any, of (i) the sum of the present values, as
    of the date of such redemption, of the remaining scheduled payments of principal of, and interest (exclusive of interest accrued to, but
    excluding, the date of redemption) on, such 5.50% 2026 Note, assuming such 5.50% 2026 Note matured on, and that accrued and unpaid interest
    on such 5.50% 2026 Note was payable through, the 5.50% 2026 Notes Par Call Date, determined by discounting, on a semi-annual basis (assuming
    a 360-day year consisting of twelve 30-day months), such principal and interest at the Reinvestment Rate (as defined below) (determined
    on the third business day preceding the date of redemption) over (ii) the aggregate principal amount of such 5.50% 2026 Notes being redeemed.

 

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    “5.00% 2026 Make-Whole Amount”
    means, in connection with any optional redemption of any 5.00% 2026 Note, the excess, if any, of (i) the sum of the present values, as
    of the date of such redemption, of the remaining scheduled payments of principal of, and interest (exclusive of interest accrued to, but
    excluding, the date of redemption) on, such 5.00% 2026 Note, assuming such 5.00% 2026 Note matured on, and that accrued and unpaid interest
    on such 5.00% 2026 Note was payable through, the 5.00% 2026 Notes Par Call Date, determined by discounting, on a semi-annual basis (assuming
    a 360-day year consisting of twelve 30-day months), such principal and interest at the Reinvestment Rate (as defined below) (determined
    on the third business day preceding the date of redemption) over (ii) the aggregate principal amount of such 5.00% 2026 Notes being redeemed.

     

    “5.25% 2028 Make-Whole Amount”
    means, in connection with any optional redemption of any 5.25% 2028 Note, the excess, if any, of (i) the sum of the present values, as
    of the date of redemption, of the remaining scheduled payments of principal (including the applicable redemption price of such 5.25% 2028
    Note at August 31, 2023) of, and interest (exclusive of interest accrued to, but excluding, the date of redemption) on, such 5.25% 2028
    Note, assuming such 5.25% 2028 Note matured on, and that accrued and unpaid interest on such 5.25% 2028 Note was payable through, August
    31, 2023, determined by discounting, on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), such principal
    and interest at the Reinvestment Rate (determined on the third business day preceding the date of redemption) over (ii) the aggregate
    principal amount of such 5.25% 2028 Notes being redeemed.

     

    “Reinvestment Rate”
    means, 0.500%, or 50 basis points, plus the arithmetic mean (rounded to the nearest one-hundredth of one percent) of the yields displayed
    for each day in the preceding calendar week published in the most recent Statistical Release under the caption “Treasury constant
    maturities” for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity of the 5.50% 2026 Notes,
    5.00% 2026 Notes or 5.25% 2028 Notes, as applicable (assuming that the 5.50% 2026 Notes matured on the 5.50% 2026 Notes Par Call Date
    or assuming that the 5.00% 2026 Notes matured on the 5.00% 2026 Notes Par Call Date or assuming that the 5.25% 2028 Notes matured on August
    31, 2023, as applicable) as of the date of redemption. If no maturity exactly corresponds to such remaining life to maturity, yields for
    the two published maturities most closely corresponding to such remaining life to maturity shall be calculated pursuant to the immediately
    preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding
    in each of such relevant periods to the nearest month. For the purpose of calculating the Reinvestment Rate, the most recent Statistical
    Release published prior to the date of determination of the Reinvestment Rate shall be used.

     

    “Statistical Release”
    means that statistical release designated “H.15” or any successor publication that is published daily by the Federal Reserve
    System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturities, or, if such statistical
    release (or a successor publication) is not published at the time of any determination under the Indenture, then such other reasonably
    comparable index that shall be designated by us.

     

 

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	Sinking Fund	 	The Notes will not be subject to any sinking fund (i.e., no amounts will be set aside by us to ensure repayment of the Notes at maturity).
	 	 	 
	Events of Default	 	Events of default generally will include failure to pay principal, failure to pay interest, failure to observe or perform any other covenant or warranty in the Notes or in the 2019 Indenture, and certain events of bankruptcy, insolvency or reorganization. 
	 	 	 
	Certain Covenants	 	The 2019 Indenture that governs the Notes contains certain covenants, including, but not limited to, restrictions on our ability to merge or consolidate with or into any other entity. 
	 	 	 
	No Financial Covenants	 	The 2019 Indenture relating to the Notes does not contain financial covenants.
	 	 	 
	Modification  or Waiver	 	The holders of not less than a majority of the outstanding principal amount of the applicable series of Notes, may on behalf of the holders of all the Notes waive any past default with respect to such Notes, other than (i) a default in the payment of principal or interest on such series of Notes, when such payments are due and payable (other than by acceleration), or (ii) in respect of a covenant that cannot be modified or amended without the consent of each holder of such series of Notes.
	 	 	 
	 	 	Certain changes to the Notes require the specific approval of each holder of the Notes, including changing the stated maturity, reducing the principal amount or rate of interest, changing the place of payment, impairing the right to institute suit for the enforcement of any payment, reducing the percentage in principal amount of holders of the Notes whose consent is needed to modify or amend the 2019 Indenture and reducing the percentage in principal amount of holders of the Notes whose consent is needed to waive compliance with certain provisions of the 2019 Indenture or to waive certain defaults. 

  

	Additional Notes	 	We may create and issue additional notes ranking equally and ratably with the 2024 Notes, 2025 Notes, 6.50% 2026 Notes, 5.50% 2026 Notes, 5.00% 2026 Notes, 6.00% 2028 Notes and 5.25% 2028 Notes, in all respects, so that such additional notes will constitute and form a single series with the 2024 Notes, 2025 Notes, 6.50% 2026 Notes, 5.50% 2026 Notes, 5.00% 2026 Notes, 6.00% 2028 Notes and 5.25% 2028 Notes, as applicable, and will have the same terms as to status, redemption or otherwise (except the price to public, the issue date and, if applicable, the initial interest payment date) as such Notes. We will not issue any such additional notes unless such issuance would constitute a “qualified reopening” for U.S. federal income tax purposes.
	 	 	 
	Listing	 	The 2024 Notes, 2025 Notes, 6.50% 2026 Notes, 5.50% 2026 Notes, 5.00% 2026 Notes, 6.00% 2028 Notes and 5.25% 2028 Notes, when issued, are or will be quoted on Nasdaq under the symbols “RILYO,” “RILYM,” “RILYN,” “RILYK,” “RILYG,” “RILYT” and “RILYZ,” respectively.
	 	 	 
	Form and Denomination	 	The Notes are issued in book-entry form in minimum denominations of $25 and integral multiples in excess thereof. The Notes will be represented by a permanent global certificate deposited with the trustee as custodian for The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC. Beneficial interests in any of the Notes will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated securities, except in limited circumstances.
	 	 	 
	Trustee 	 	The Bank of New York Mellon Trust Company, N.A. under the 2019 Indenture relating to the Notes.

 

 

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