Investor Presentaiton
Arena Investors -
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Deal Structure Aligns Arena Management and Westaim
▲WESTAIM
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Arena Investors was founded by Dan Zwirn and Westaim in August 2015 under an arrangement designed to align Arena Investors' senior management interests very
tightly with those of Westaim and its shareholders. The principal elements of the arrangement include:
•
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Funding: Westaim would fund the start-up expenses and operating losses of Arena Investors until profitability in order to build out an institutional quality, front and
back office platform that was positioned to scale as the business grows. In 2021, the build out of the platform is largely complete, with an outstanding loan payable
from Arena Investors to Westaim at Q4 2021 of $24.0 million. This loan is to be repaid before the distribution of earnings of Arena Investors to its members (i.e.
Westaim and BP LLC, a holding company owned by members of Arena Investors' senior management team).
Ownership and Profit Participation: A structure was developed by which BP LLC would effectively "Earn-In" to its ownership of Arena Investors over time as the
business reached thresholds of: (i) Assets under Management; and (ii) Trailing Twelve Month EBITDA margin. A Profit Participation would entitle the party to
participate in cash distributions from Arena Investors, while Ownership would entitle the party to actual ownership of the enterprise. The following table details
possible future changes to profit participation and ownership interest agreed between Westaim and BP LLC(1):
Trailing Twelve Month
BP LLC
Westaim
Revenue (TTM) to
EBITDA Margin
AUM
Threshold
Profit Percentage
Equity Ownership
Profit Percentage
Equity
Ownership
(i)
<35%
< $1 billion
49.0%
51.0%
100.0%
(ii)
>35%
>$1 billion
49.0%
49.0%
51.0%
51.0%
(iii)
>50%
>$2 billion
54.5%
54.5%
45.5%
45.5%
(iv)
>55%
>$3 billion
60.0%
60.0%
40.0%
40.0%
(v)
>60%
>$4 billion
67.5%
67.5%
32.5%
32.5%
(vi)
>60%
>$5 billion
75.0%
75.0%
25.0%
25.0%
•
BP LLC Investment in Westaim Shares: As a further alignment of interests, BP LLC committed to invest 25% of the first $100 million of pre-tax distributions
received from Arena Investors, and 12.5% thereafter to acquire Westaim common shares in the public market at the time, up to a 19.9% ownership of the
outstanding Westaim common shares. Distributions are expected to commence once the outstanding loan to Westaim is repaid.
(1) As at December 31, 2021, Arena Investors' TTM Revenue to EBITDA Margin was less than 35% and AUM threshold was more than $2 billion. As a result, BP LLC's profit percentage was 49.0% and equity ownership was 0% and Westaim's profit percentage was 51.0% and equity
ownership was 100.0%. Refer to Section 3.02 Second Amended and Restated Limited Liability Agreement of Arena Investors.
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