A forfeiture clause is a provision in a contract that stipulates the loss or surrender of rights, property, or money if one party fails to fulfill predetermined conditions or obligations. It serves as a penalty or consequence for non-compliance, ensuring that parties adhere to the contract's terms.
Forfeiture Escrow Shares. On the Closing Date, the Company shall issue to the Escrow Agent those shares identified on the spreadsheet set forth on Exhibit A hereto on the basis that they are to be held subject to the terms and conditions of this Agreement. It is hereby acknowledged that: (a) the Forfeiture Escrow Shares shall constitute 25% of the Aggregate Base Shares of which as follows: (x) 5.7% are the Sponsor’s Founder Shares (as defined in the Sponsor Support Agreement) that are not Earn-Out Shares (as defined in the Sponsor Support Agreement), which shall be issued to the Escrow Agent on the basis that they are to be treated as set aside in one escrow account (the “Sponsor Escrow Account”), and (y) 94.3% shall be Merger Consideration Shares receivable by the Company Shareholders (excluding holders of Series X Preference Shares) in accordance with section 2.2(g)(i) of the Merger Agreement (escrowed in accordance with the ratio among such Company Shareholders set forth in the Payment Spreadsheet (the “Internal Company Shareholder Ratio”; the ratio of shares owned by Sponsor to the shares owned by such Company Shareholders, the “Sponsor to CS Ratio”, and together with the Internal Company Shareholder Ratio, the “Forfeiture Ratios”)), which shall be treated as set aside in separate escrow accounts for each such Company Shareholder (the “Company Shareholder Escrow Accounts”, and together with the Sponsor Escrow Account, the “Forfeiture Escrow Accounts”); and (b) the Class A Ordinary Shares of US$0.0001 par value each of the Company (“PubCo Class A Ordinary Shares”) and the Class B Ordinary Shares of US$0.0001 par value each of the Company (“PubCo Class B Ordinary Shares” and together with the PubCo Class A Ordinary Shares, the “PubCo Ordinary Shares”) to be issued to the Escrow Agent hereunder and treated as being subject to such respective Forfeiture Escrow Accounts, together with any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted, in each case, as long as they remain in the applicable Forfeiture Escrow Account, shall be referred to as the “Forfeiture Escrow Shares”, and shall be treated by the Escrow Agent as held in escrow for the duration of the Adjustment Period and disbursed in accordance with the terms of the Merger Agreement and this Agreement.
Share Certificates Legends. The share certificates, to the extent share certificates are issued, representing the Forfeiture Escrow Shares shall contain a legend relating to transfer restrictions imposed by section 2.10 of the Merger Agreement and this Agreement and the risk of forfeiture associated therewith (or with respect to book entry shares, the Company’s transfer agent shall make a notation in its records that the shares are subject to such legend and forfeiture).
Restrictions on Transfer of Forfeiture Escrow Shares. For so long as Forfeiture Escrow Shares are held by the Escrow Agent under the terms of this Agreement, there shall be no transfers of the Forfeiture Escrow Shares except as provided by Sections 3.4 and 3.6.
Calculation of Aggregate Forfeiture Shares. For purposes hereof, if a Forfeiture Event occurs, the number of Aggregate Forfeiture Shares shall be calculated by multiplying (i) the Aggregate Base Shares by (ii) a fraction, (A) the numerator of which is the remainder of $10.00 minus the Adjustment Period VWAP, and (B) the denominator of which is the Adjustment Period VWAP, provided that in the event the Adjustment Period VWAP is less than $8.00, the Adjustment Period VWAP for purposes of this calculation shall be deemed to be $8.00 (i.e., in no event shall the Aggregate Forfeiture Shares exceed 25% of the Aggregate Base Shares).
Forfeiture by Founder Holders. (a) On the date on which the Company Transaction Expenses are finally determined in accordance with Section 2.3 of the Combination Agreement, up to one million two hundred five thousand nine hundred thirty-seven (1,205,937) shares of Buyer Class A Common Stock held by, or beneficially owned by, the Founder Holders, consisting of two hundred fifty-four thousand three hundred sixty-one (254,361) Founder Holders Earnout Shares and nine hundred fifty-one thousand five hundred seventy-six (951,576) shares of Buyer Class A Common Stock that are not Founder Holders Earnout Shares (collectively, the “Founder Holders Forfeiture Shares” and each Founder Holder’s portion of the Founder Holders Forfeiture Shares (determined on a Pro Rata Basis), the “Applicable Founder Holder’s Forfeiture Shares”), shall be automatically forfeited by the Founder Holders to the Buyer for no consideration and automatically cancelled in accordance with Section 1(b) and Section 2.
Participant’s Forfeiture Pool Units: In accordance with the terms of the Merger Agreement, Shares underlying all individuals’ Earn-Out RSUs that are forfeited as a result of the individual’s failure to satisfy the Service Requirement will accumulate in the “Forfeiture Pool”. Upon the last day of any calendar year (or on an Accelerated Vesting Date), all Shares that (i) are accumulated in the Forfeiture Pool as of such date and (ii) would have been issued pursuant to the Merger Agreement as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earn-Out RSUs, will be issued to the Company Stockholders (other than holders of Dissenting Shares) and the holders of Earn-Out RSUs that have not been forfeited, in accordance with their pro rata portions (as described below).
Vesting of Forfeiture Pool Units Upon and After Forfeiture Pool Vesting Date. (i) On a Forfeiture Pool Vesting Date. If Participant remains in continuing Service as of a Forfeiture Pool Vesting Date, then Participant’s Forfeiture Pool Units that are Service Vested as of such Forfeiture Pool Vesting Date will vest on such Forfeiture Pool Vesting Date. (ii) After a Forfeiture Pool Vesting Date. None of the Forfeiture Pool Units that are Service Unvested on a Forfeiture Pool Vesting Date will vest on such Forfeiture Pool Vesting Date. Instead, if a Participant remains in continuous Service as of a Forfeiture Pool Vesting Date, then Participant’s Forfeiture Pool Units that are Service Unvested as such Forfeiture Pool Vesting Date will vest after such Forfeiture Pool Vesting Date on the Subsequent Vesting Events only to the extent the Service Requirement is satisfied as provided in clause (a)(i) at the time of such Subsequent Vesting Events.
Transfer. Prior to the final determination of the number of Founder Holders Forfeiture Shares to be forfeited in accordance with this Agreement (if any), the Founder Holders shall not, directly or indirectly, transfer or otherwise dispose of any shares of dMY Class B Common Stock, other than as may be expressly permitted by the dMY A&R Certificate of Incorporation.
For so long as any Sponsor Forfeiture Shares remain subject to vesting and forfeiture, if SPAC pays or makes any dividends or distributions to the holders of SPAC New Common Shares, the holders of the Sponsor Forfeiture Shares shall not receive any such dividends or distributions but instead shall receive a Dividend Equivalent for each Sponsor Forfeiture Share held thereby; provided, however, that the unvested Sponsor Forfeiture Shares shall not entitle the holder thereof to consideration in connection with any sale or other transaction (other than pursuant to Section 4) or be subject to execution, attachment or similar process, and shall bear a customary legend with respect to such vesting and forfeiture provisions. For purposes hereof, “Dividend Equivalent” means, in connection with SPAC’s payment or making of a distribution or dividend, the right to receive from SPAC, upon the vesting of the Sponsor Forfeiture Share for which such right is issued, the dividend or distribution paid or made in respect of each SPAC New Common Share.
Mr. Cobb’s holdings include 7,500 restricted shares under the 2015 Director Restricted Stock Plan, which are subject to forfeiture in one-third increments before July 30, 2022, 2023, and 2024, in the event of cessation of service as a director.
Forfeiture Restrictions. Subject to the provisions of Section 2.3 below, in the event of Participant’s Termination of Service for any reason, all of the Shares which, from time to time, have not yet been released from the Forfeiture Restriction (other than any Shares that may be Excess Shares, which shall be subject to forfeiture under Section 2.2 below), shall thereupon be forfeited immediately and without any further action by the Company (the “Forfeiture Restriction”). Upon the occurrence of such forfeiture, the Company shall become the legal and beneficial owner of the Unreleased Shares (as defined below) so forfeited, and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unreleased Shares being forfeited by Participant.
Forfeiture of Sponsor Class B Shares. Effective immediately prior to (and contingent upon) the Closing, the Sponsor agrees to forfeit a certain number of the Sponsor Class B Shares, calculated as follows: (a) In the event that Parent Stockholder Redemptions reduce the aggregate amount of funds held in the Trust Account, the Sponsor agrees to forfeit a number of the Sponsor Class B Shares equal to the product of: (i) one-third (1/3) of the Sponsor Class B Shares; multiplied by (ii) the Forfeiture Percentage. Such product, rounded down to the nearest whole number of Sponsor Class B Shares, the “Forfeited Sponsor Class B Shares,” and the forfeiture thereof, the “Share Forfeiture.” For the avoidance of doubt, in no event shall the number of Forfeited Class B Shares be less than zero or greater than one-third (1/3) of the Sponsor Class B Shares. Notwithstanding the foregoing, no Share Forfeiture will be required if the Forfeiture Percentage is less than 3%.
Forfeiture is a legal concept where an individual loses rights or property as a penalty for breaching legal obligations or regulations. It commonly occurs in contractual agreements, criminal law, and property law. Forfeiture aims to discourage illegal or unethical behavior by imposing a financial or material consequence.
Forfeiture is typically used in situations where parties need assurance that contractual obligations will be honored. It serves as a deterrent against non-compliance and ensures accountability. Some scenarios include:
When drafting a forfeiture clause, clarity and specificity are essential. Here’s a guideline on structuring such a clause:
Example:
In the event of a breach of contract by Party B, Party A shall have the right to terminate this agreement and Party B will forfeit any deposits paid without further obligation from Party A.
Forfeiture clauses are prevalent in several types of contracts, including:
These clauses protect parties by adding a layer of security to contractual engagements, ensuring that breaches are met with appropriate penalties.
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