Galaxy Digital Inc 8-K, filed May 13, 2025
Galaxy Digital Inc. (GLXY)
8-K
2025-05-13
For: 2025-05-07
View Original
Added on
April 11, 2026
About this 8-K
Galaxy Digital Inc filed this 8-K on May 13, 2025, reporting on events of May 7, 2025.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.03: Change to shareholders' rights
- Item 5.01: Change in control
- Item 5.02: Director or officer change, or executive pay
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 7, 2025
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(212 ) 390-9216
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 1.01 Entry into a Material Definitive Agreement.
On May 13, 2025 (the “Closing Date”), Galaxy Digital Inc. (the “Company”) and certain of its affiliates consummated a series of reorganization transactions (the “Reorganization Transactions”), as described in more detail in Item 2.01 below and in the Company’s registration statement on Form S-4 (File No. 333-262378), as amended (the “Registration Statement”).
In connection therewith, the Company entered into the following agreements, the forms of which were previously filed as exhibits to the Registration Statement:
•a Seventh Amended and Restated Limited Partnership Agreement of Galaxy Digital Holdings LP (“GDH LP”), dated as of May 13, 2025, by and among the Company, GDH LP and Galaxy Digital Holdings Inc., a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference;
•an Amended and Restated Tax Receivable Agreement, dated as of May 13, 2025, by and among the Company, GDH LP and the other persons party thereto, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference; and
•a Director Nomination Agreement, dated as of May 13, 2025, between Galaxy Group Investments LLC and the Company, a copy of which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.
The terms of these agreements are substantially the same as the terms set forth in the forms of such agreements filed as exhibits to the Registration Statement and as described therein, which descriptions are incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On the Closing Date, the Company and its affiliates completed the previously announced Reorganization Transactions, pursuant to which, among other things, (i) the memorandum and articles of association of Galaxy Digital Holdings Ltd., a Cayman corporation (“GDHL”), were amended to authorize the issuance of up to 500 million Class B ordinary shares of GDHL, (ii) the jurisdictions of incorporation of GDHL and GDH LP were transferred by way of continuation from the Cayman Islands to the State of Delaware (the “Domestication”) (GDHL after the Domestication, “GDHI”), (iii) all of the issued and outstanding Class A ordinary shares of GDHL were converted, automatically and by operation of law, into an equivalent number of shares of Class A common stock of GDHI, par value $0.001 per share (“GDHI Class A Common Stock”), (iv) GDHI, pursuant to its post-Domestication certificate of incorporation, was authorized to issue up to 500 million shares of its Class B common stock, par value $0.0000000001 per share (“GDHI Class B Common Stock”), and issued, for nominal consideration, shares of GDHI Class B Common Stock to certain limited partners of GDH LP in an amount equal to the number of limited partnership units of GDH LP held by such limited partner immediately following the Domestication and (v) GDHI merged with and into the Company, with the Company continuing as the surviving public company entity (the “Reorganization Merger”).
As a result of the Reorganization Merger, each issued and outstanding share of GDHI Class A Common Stock and GDHI Class B Common Stock was exchanged, automatically and by operation of law, on a one-to-one basis, into one share of the Company’s Class A common stock, par value $0.001 per share (“GDI Class A Common Stock”), and Class B common stock, par value $0.0000000001 per share (“GDI Class B Common Stock”), respectively.
A detailed description of the Reorganization Transactions is included in the Registration Statement under “Proposed Organizational Structure—The Reorganization and the Reorganization Merger” and is incorporated herein by reference.
Item 3.03 Material Modification to Rights of Security Holders.
The information provided in Item 5.03 below is incorporated herein by reference.
Item 5.01 Changes in Control of Registrant.
The applicable information described in the Registration Statement under “Proposed Organizational Structure” and the information contained in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
Prior to the Reorganization Merger, the Company was a wholly owned subsidiary of GDHL. Immediately after giving effect to the Reorganization Merger, former holders of GDHL ordinary shares and the pre-Domestication holders of limited partnership units in GDH LP held approximately 37.2% and 62.8% of voting power in the Company, respectively.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 7, 2025, Michael Daffey, Bill Koutsouras, Jane Dietze, Rhonda Adams-Medina and Richard Tavoso (the “New Directors”) were appointed to the board of directors (the “Board”) of the Company. The Board has determined that each of Mr. Koutsouras, Ms. Dietze, Ms. Adams-Medina and Mr. Tavoso are independent in accordance with the applicable Nasdaq Global Select Market rules. As a result of the payment of compensation for non-Board services by Galaxy, the Board has determined that Mr. Daffey is not independent under the Nasdaq Global Select Market rules. Accordingly, Mr. Daffey has not been appointed to any of the Board’s three committees.
The Board has appointed (i) Mr. Koutsouras, Ms. Dietze and Mr. Tavoso to serve as members of the Audit Committee of the Board, (ii) Ms. Dietze and Mr. Tavoso to serve as members of the Compensation Committee of the Board and (iii) Mr. Koutsouras and Ms. Adams-Medina to serve as members of the Nominating and Corporate Governance Committee of the Board. Additionally, the Board appointed Mr. Daffey as Chairperson of the Board and Mr. Koutsouras as Lead Director of the Board.
The Company's founder and Chief Executive Officer, Michael Novogratz, was re-appointed as a director of the Board (together with the New Directors, the “Directors”).
On May 7, the Board appointed Michael Novogratz, Christopher Ferraro, Anthony Paquette, Erin Brown and Andrew Siegel (together, the “Executive Officers”) as Chief Executive Officer, President and Chief Investment Officer, Chief Financial Officer, Chief Operating Officer and General Counsel and Chief Compliance Officer of the Company, respectively. Additionally, the Board designated Robert Rico, the Group Controller, as the principal accounting officer of the Company (Mr. Rico together with the Executive Officers, the “Officers”).
The Directors and Executive Officers have entered into the Company’s standard indemnification agreement for directors and executive officers, which was previously filed by the Company as Exhibit 10.2 to the Registration Statement.
Additional information relating to the Company’s Directors and Executive Officers is included in the Registration Statement under “Management—Directors and Executive Officers of Galaxy,” “Executive Compensation” and “Certain Relationships and Related Party Transactions” and is incorporated herein by reference.
Except as otherwise disclosed in such portions of the Registration Statement, there are no arrangements or understandings between the Directors or Officers, and any other person pursuant to which the Directors or Officers were selected, nor are there any other transactions to which the Company or any of its subsidiaries is a party and in which the Directors or Officers have any direct or indirect material interest subject to disclosure under Item 404(a) of Regulation S-K.
Item 5.03 Amendments to Certificate of Incorporation or Bylaws; Change in Fiscal Year.
Amended and Restated Certificate of Incorporation
On May 13, 2025, in connection with the Reorganization Merger, the Company amended and restated its certificate of incorporation (as amended and restated, the “Certificate of Incorporation”), filed with the Secretary of State of the State of Delaware. A description of the Certificate of Incorporation is included in the Registration Statement under “Description of PubCo Capital Stock—Certain certificate of incorporation, bylaws and statutory provisions” and is incorporated herein by reference. A copy of the Certificate of Incorporation is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Amended and Restated By-laws
On May 13, 2025, in connection with the Reorganization Merger, the Company amended and restated its By-laws (as amended and restated, the “By-laws”). A description of the By-laws is included in the Registration Statement under “Description of PubCo Capital Stock—Certain certificate of incorporation, bylaws and statutory provisions” and is
incorporated herein by reference. A copy of the By-laws is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 8.01 Other Events.
GDHL Shareholder Meeting
On May 9, 2025, holders of ordinary shares of GDHL held a special meeting (the “Meeting”) at which they were asked to consider and vote on three proposals.
Proposal #1: Redomicile and Reorganization Resolution
At the Meeting, shareholders voted to approve the reorganization and domestication of GDHL, by special resolution, as follows:
| For | % | Against | % | Withheld | % | ||||||||||||
| 50,205,790 | 99.643% | 73,817 | 0.147% | 105,948 | 0.210% | ||||||||||||
Proposal #2: Share Issuance Resolution
At the Meeting, shareholders voted to approve the issuance of GDHI Class B Common Stock in the capital of the post-reorganization and domestication entity to the current holders of Class B limited partnership units of GDH LP by:
(i) ordinary resolution, as follows:
| For | % | Against | % | Withheld | % | ||||||||||||
| 49,788,537 | 98.815% | 350,121 | 0.695% | 246,897 | 0.490% | ||||||||||||
(ii) a simple majority of shareholders excluding persons required to be excluded for the purpose of a “majority of the minority” vote under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, as follows:
| For | % | Against | % | Withheld | % | ||||||||||||
| 46,944,775 | 98.744% | 350,121 | 0.736% | 246,897 | 0.519% | ||||||||||||
Proposal #3: Adjournment Resolution
The redomicile and reorganization resolution and share issuance resolution having passed by the requisite number of votes in favor, the ordinary resolution to approve the adjournment of the Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies was not formally put to the Meeting.
Board Service
In connection with the Reorganization Transactions, Dominic Docherty and Damien Vanderwilt, who served as board members of GDHL, ceased to be directors of Galaxy. The Company thanks Mr. Docherty and Mr. Vanderwilt for their service and contribution and wishes them well in future endeavors.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information
Certain unaudited pro forma condensed combined financial information regarding the Company to reflect the consummation of the Reorganization Transactions appears in Exhibit 99.1 and is incorporated herein by reference.
(d)Exhibits
Exhibit No. | Description | |||||||
| 3.1* | Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8 filed with the SEC on May 13, 2025 (File No. 333-287205)). | |||||||
| 3.2* | Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-8 filed with the SEC on May 13, 2025 (File No. 333-287205)). | |||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
__________________
* Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GALAXY DIGITAL INC. | ||||||||
Date: May 13, 2025 | By: | /s/ Michael Novogratz | ||||||
| Michael Novogratz | ||||||||
| Chief Executive Officer | ||||||||
Exhibit 10.1
SEVENTH AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
of
GALAXY DIGITAL HOLDINGS LP
Dated as of May 13, 2025
THE LIMITED PARTNERSHIP UNITS (THE “UNITS”) OF GALAXY DIGITAL HOLDINGS LP (THE “PARTNERSHIP”) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY U.S. STATE OR THE APPLICABLE SECURITIES LAWS OF CANADA OR ANY OTHER JURISDICTION. THE UNITS MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS OR COMPLIANCE WITH THE REQUIREMENTS OF AN EXEMPTION FROM REGISTRATION, AND THEN ONLY IN COMPLIANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THIS SEVENTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT. ANY PURPORTED TRANSFER OF ANY UNITS OR OTHER TRANSACTION IN VIOLATION OF THE PREVIOUS SENTENCE IS NULL AND VOID AB INITIO.
THE PARTNERSHIP IS REQUIRED BY THIS SEVENTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT TO REFUSE TO REGISTER ANY TRANSFER OF THE UNITS NOT MADE PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS OR IN COMPLIANCE WITH THE REQUIREMENTS OF AN EXEMPTION FROM REGISTRATION. IN ADDITION, ANY HEDGING TRANSACTIONS INVOLVING THE UNITS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS.
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions and Usage
Section 1.01. Definitions 2
Section 1.02. Other Definitional and Interpretative Provisions 15
ARTICLE 2
The Partnership
The Partnership
Section 2.01. Domestication; Certificate of Limited Partnership and Other Documents 16
Section 2.02. Name 16
Section 2.03. Term 16
Section 2.04. Registered Agent and Registered Office 16
Section 2.05. Purposes 17
Section 2.06. Powers of the Partnership 17
Section 2.07. Partnership Tax Status 17
Section 2.08. Regulation of Internal Affairs 17
Section 2.09. Ownership of Property; Limited Liability 17
Section 2.10. Subsidiaries 17
Section 2.11. Qualification in Other Jurisdictions 17
ARTICLE 3
Units; Partners; Books and Records; Reports
Units; Partners; Books and Records; Reports
Section 3.01. Units; Partner Schedule; Admission of Partners 18
Section 3.02. Substitute Partners and Additional Partners 20
Section 3.03. Certain Accounting, Financial Reporting and Tax Matters 21
Section 3.04. Books and Records 23
ARTICLE 4
Pubco Ownership; Restrictions On Pubco Stock
Pubco Ownership; Restrictions On Pubco Stock
Section 4.01. Pubco Ownership 23
Section 4.02. Restrictions on Pubco Common Stock 24
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ARTICLE 5
Capital Contributions; Capital Accounts;Distributions; Allocations
Capital Contributions; Capital Accounts;Distributions; Allocations
Section 5.01. Capital Contributions 27
Section 5.02. Capital Accounts 27
Section 5.03. Amounts and Priority of Distributions 29
Section 5.04. Allocations 32
Section 5.05. Other Allocation Rules 34
Section 5.06. Tax Withholding; Withholding Advances 35
ARTICLE 6
Certain Tax Matters
Certain Tax Matters
Section 6.01. Tax Matters Representative 37
Section 6.02. Section 754 Elections 37
Section 6.03. Debt Allocation 37
ARTICLE 7
Management of the Partnership; Expenses of Pubco Partners and the General Partner
Management of the Partnership; Expenses of Pubco Partners and the General Partner
Section 7.01. Management by the General Partner 37
Section 7.02. Removal, Replacement and Withdrawal of the General Partner 38
Section 7.03. Decisions by the Partners 38
Section 7.04. Duties 39
Section 7.05. Officers 39
Section 7.06. Expenses of Pubco Partners and the General Partner 40
ARTICLE 8
Transfers of Interests
Transfers of Interests
Section 8.01. Restrictions on Transfers 40
Section 8.02. Certain Permitted Transfers 42
Section 8.03. Distributions 43
ARTICLE 9
Certain Other Agreements
Certain Other Agreements
Section 9.01. Partnership Call Right 43
Section 9.02. Preemptive Rights 44
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ARTICLE 10
Redemption and Exchange Rights
Redemption and Exchange Rights
Section 10.01. Redemption Right of a Partner 44
Section 10.02. Election and Contribution of Pubco 47
Section 10.03. Exchange Right of Pubco 47
Section 10.04. Tender Offers and Other Events with Respect to Pubco 47
Section 10.05. Reservation of Shares of Class A Common Stock; Certificate of Incorporation of Pubco 49
Section 10.06. Effect of Redemption or Direct Exchange 49
Section 10.07. Tax Treatment 49
Section 10.08. Withholding 49
Section 10.09. Exchange of Award Units Upon Termination of Employment, Death or Disability 50
Section 10.10. Additional Restrictions and Requirements 50
ARTICLE 11
Limitation on Liability, Exculpation and Indemnification
Limitation on Liability, Exculpation and Indemnification
Section 11.01. Limitation on Liability 50
Section 11.02. Exculpation and Indemnification; Elimination of Fiduciary Duties 51
ARTICLE 12
Dissolution and Termination
Dissolution and Termination
Section 12.01. Dissolution 54
Section 12.02. Winding Up of the Partnership 54
Section 12.03. Termination 55
Section 12.04. Survival 55
ARTICLE 13
Miscellaneous
Miscellaneous
Section 13.01. Expenses 55
Section 13.02. Further Assurances 56
Section 13.03. Notices 56
Section 13.04. Binding Effect; Benefit; Assignment 57
Section 13.05. Jurisdiction 57
Section 13.06. WAIVER OF JURY TRIAL 58
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Section 13.07. Counterparts 58
Section 13.08. Entire Agreement 58
Section 13.09. Severability 58
Section 13.10. Amendment 58
Section 13.11. Confidentiality 59
Section 13.12. Non-Disparagement 61
Section 13.13. Governing Law 61
ARTICLE 14
Representations of Partners
Representations of Partners
Section 14.01. Representations of Partners 61
SCHEDULES
Schedule A Partner Schedule
EXHIBITS
Exhibit A Form of Redemption Notice
iv
SEVENTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) of GALAXY DIGITAL HOLDINGS LP, a Delaware limited partnership (the “Partnership”), dated as of May 13, 2025, is adopted and executed and agreed to by and among the Partnership, Galaxy Digital Inc., a Delaware corporation (formerly known as Galaxy Digital Pubco Inc.) (“Pubco”), Galaxy Digital Holdings Inc., a Delaware corporation (the “GP Entity”), and the other Persons listed on the signature pages hereto.
W I T N E S S E T H:
WHEREAS, the Partnership has been heretofore formed and registered as an exempted limited partnership under the laws of the Cayman Islands pursuant to a statement filed with the Registrar of Companies of the Cayman Islands on May 10, 2018;
WHEREAS, Galaxy Digital Holdings GP LLC, Galaxy Digital Holdings Ltd., GDH Intermediate LLC and certain other Persons party thereto have heretofore entered into, and the Partnership has heretofore been subject to, the Fifth Amended and Restated Limited Partnership Agreement of the Partnership, dated as of November 24, 2022 (the “Prior LPA”);
WHEREAS, on May 13, 2025 (the “Domestication Date”), the Partnership domesticated as a Delaware limited partnership and, in connection with such domestication, the Prior LPA was amended and restated in its entirety to provide as set forth in the Sixth Amended and Restated Limited Partnership Agreement of the Partnership, dated as of the Domestication Date (the “Interim LPA”);
WHEREAS, the Persons that are listed on Schedule A hereto (including any such Persons that may have executed the signature pages hereto) represent all of the holders of limited partnership interests in the Partnership as of the date hereof (the “Partners”); and
WHEREAS, the parties hereto have agreed to enter into this Agreement to amend and restate the Interim LPA, effective as of the Effective Time, in its entirety as set forth herein and, for the avoidance of doubt, following the execution hereof, this Agreement shall replace and supersede the Prior LPA and the Interim LPA.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the Interim LPA is hereby amended and restated, effective as of the Effective Time, in its entirety as follows:
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ARTICLE I
DEFINITIONS AND USAGE
Section 1.01.Definitions.
(a)The following terms shall have the following meanings for the purposes of this Agreement:
“Additional Partner” means any Person admitted as a Partner of the Partnership pursuant to Section 3.02 in connection with the new issuance of Units to such Person.
“Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:
(i)Credit to such Capital Account any amounts that such Partner is deemed to be obligated to restore pursuant to the penultimate sentence in Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii)Debit to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that no Partner nor any Affiliate of any Partner shall be deemed to be an Affiliate of any other Partner or any of its Affiliates solely by virtue of such Partners’ Units.
“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person or its assets, as amended unless expressly specified otherwise.
“Business” means the business conducted by the Partnership, Pubco, the General Partner and their respective controlled Affiliates as of the time of determination.
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“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.
“Capital Account” means the capital account established and maintained for each Partner pursuant to Section 5.02.
“Capital Contribution” means, with respect to any Partner, the amount of money and the initial Carrying Value of any Property (other than money) contributed to the Partnership.
“Carrying Value” means with respect to any Property (other than money), such Property’s adjusted basis for federal income tax purposes, except as follows:
(i)The initial Carrying Value of any such Property contributed by a Partner to the Partnership shall be the gross fair market value of such Property, as reasonably determined by the General Partner;
(ii)The Carrying Values of all such Properties shall be adjusted to equal their respective gross fair market values (taking Section 7701(g) of the Code into account), as reasonably determined by the General Partner, at the time of any Revaluation pursuant to Section 5.02(c);
(iii)The Carrying Value of any item of such Properties distributed to any Partner shall be adjusted to equal the gross fair market value (taking Section 7701(g) of the Code into account) of such Property on the date of distribution as reasonably determined by the General Partner; and
(iv)The Carrying Values of such Properties shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such Properties pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Net Income” and “Net Loss” or Section 5.04(b)(vi); provided, however, that Carrying Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv). If the Carrying Value of such Property has been determined or adjusted pursuant to subparagraph (i), (ii) or (iv), such Carrying Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Net Income and Net Loss.
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“Class A Common Stock” means Class A common stock, $0.001 par value per share, of Pubco.
“Class B Common Stock” means Class B common stock, $0.0000000001 par value per share, of Pubco.
“Code” means the Internal Revenue Code of 1986.
“Control” (including the terms “controlling” and “controlled”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of such subject Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
“Covered Person” means (i) each Partner or an Affiliate thereof, in each case, in such capacity, (ii) each officer, director, shareholder, member, partner, employee, representative, agent or trustee of a Partner or an Affiliate thereof, in all cases, in such capacity, and (iii) each officer, director, shareholder (other than any public shareholder of Pubco that is not a Partner), member, partner, employee, representative, agent or trustee of the GP Entity, Pubco, the Partnership or an Affiliate controlled by any of the foregoing, in all cases, in such capacity.
“Delaware Act” means the Delaware Revised Uniform Limited Partnership Act, Title 6, Delaware Code, §§ 17-101, et seq.
“Depreciation” means, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount that bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.
“Effective Time” means the time of execution hereof.
“Effective Time Capital Account Balance” means, with respect to any Partner, the positive Capital Account balance of such Partner as of the Effective Time, the amount or deemed value of which is set forth on the Partner Schedule.
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“Equity Securities” means, with respect to any Person, any (i) partnership or membership interests or shares of capital stock, (ii) equity, ownership, voting, profit or participation interests or (iii) similar rights or securities in such Person or any of its Subsidiaries, or any rights or securities convertible into or exchangeable for, options or other rights to acquire from such Person or any of its Subsidiaries, or obligation on the part of such Person or any of its Subsidiaries to issue, any of the foregoing.
“Fiscal Year” means the Partnership’s fiscal year, which shall initially be the calendar year and which may be changed from time to time as determined by the General Partner.
“General Partner” means (i) the GP Entity so long as the GP Entity has not withdrawn as the General Partner pursuant to Section 7.02 and (ii) any successor thereof appointed as General Partner in accordance with Section 7.02.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency, entity or official, including any political subdivision thereof.
“Indebtedness” means (a) all indebtedness for borrowed money (including capitalized lease obligations, sale-leaseback transactions or other similar transactions, however evidenced), (b) any other indebtedness that is evidenced by a note, bond, debenture, draft or similar instrument, (c) notes payable and (d) lines of credit and any other agreements relating to the borrowing of money or extension of credit.
“Involuntary Transfer” means any Transfer of Units by a Partner resulting from (i) any seizure under levy of attachment or execution, (ii) any bankruptcy (whether voluntary or involuntary), (iii) any Transfer to a state or to a public officer or agency pursuant to any statute pertaining to escheat or abandoned property, (iv) any divorce or separation agreement or a final decree of a court in a divorce action or (v) death or permanent disability.
“IRS” means the Internal Revenue Service of the United States.
“Liens” means any pledge, encumbrance, security interest, purchase option, conditional sale agreement, call or similar right.
“LP Unit” means a limited partnership interest in the Partnership.
“Net Income” and “Net Loss” mean, for each Fiscal Year or other period, an amount equal to the Partnership’s taxable income or loss for such Fiscal Year or period,
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respectively, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments (without duplication):
(i) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of “Net Income” and “Net Loss” shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income and Net Loss pursuant to this definition of “Net Income” and “Net Loss,” shall be treated as deductible items;
(iii) In the event the Carrying Value of any Partnership asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of “Carrying Value,” the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Carrying Value of the asset) or an item of loss (if the adjustment decreases the Carrying Value of the asset) from the disposition of such asset and shall be taken into account, immediately prior to the event giving rise to such adjustment, for purposes of computing Net Income and/or Net Loss;
(iv) Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Carrying Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Carrying Value;
(v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year, computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation
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of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Net Income or Net Loss; and
(vii) Notwithstanding any other provision of this definition, any items that are specially allocated pursuant to Section 5.04(b), Section 5.04(c) and Section 5.04(d) shall not be taken into account in computing Net Income and Net Loss.
The amounts of the items of Partnership income, gain, loss, or deduction available to be specially allocated pursuant to Section 5.04(b), Section 5.04(c) and Section 5.04(d) shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (vi) above.
“Non-Pubco Partner” means any Partner that is not a Pubco Partner.
“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
“Original Units” means the Class A Units (including Class A-1 Subunits and Class A-2 Subunits) and Class B Units of the Partnership outstanding immediately prior to the effectiveness of this Agreement.
“Partner” means any Person named as a Partner of the Partnership on the Partner Schedule and the books and records of the Partnership, as the same may be amended from time to time to reflect any Person admitted as an Additional Partner or a Substitute Partner, for so long as such Person continues to be a Partner of the Partnership.
“Partner Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in Treasury Regulations Section 1.704-2(b)(4).
“Partner Nonrecourse Debt Minimum Gain” means an amount with respect to each “partner nonrecourse debt” (as defined in Treasury Regulation Section 1.704-2(b)(4)) equal to the Partnership Minimum Gain that would result if such partner nonrecourse debt were treated as a nonrecourse liability (as defined in Treasury Regulation Section 1.752-1(a)(2)) determined in accordance with Treasury Regulation Section 1.704-2(i)(3).
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“Partner Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).
“Partnership Minimum Gain” means “partnership minimum gain,” as defined in Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
“Percentage Interest” means, with respect to any Partner, a fractional amount, expressed as a percentage: (i) the numerator of which is the aggregate number of LP Units owned of record thereby and (ii) the denominator of which is the aggregate number of LP Units issued and outstanding. The sum of the outstanding Percentage Interests of all Partners shall at all times equal 100%.
“Permitted Transferee” means, other than with respect to any Pubco Partner, (1) any Person that is an Affiliate of such transferring Partner, (2) in the case of any transferring Partner that is a natural person, (a) any Person to whom LP Units are Transferred from such transferring Partner (x) by will or the laws of descent and distribution or (y) who is the child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, descendant (including adoptive relationships with regards to the foregoing), heir, executor, administrator, testamentary trustee, legatee or beneficiary of such transferring Partner, or (b) a trust, partnership, limited liability company or similar vehicle established and maintained solely for the benefit of (or the sole members or partners of which are) such transferring Partner and/or its Permitted Transferees under the foregoing clause (a) (provided that no “benefit plan investor” within the meaning of Section 3(42) of ERISA may be a Permitted Transferee), (3) any institution qualified as tax-exempt under Section 501(c)(3) of the Code or (4) a donor-advised fund or account that is maintained and operated by a sponsoring organization that is an institution qualified as tax-exempt under Section 501(c)(3) of the Code, where the transferring Partner retains advisory privileges with respect to the distribution of funds and the investment of assets in the fund or account.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Prime Rate” means the rate of interest from time to time identified by an independent financial institution selected by the General Partner as being its “prime” or “reference” rate.
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“Property” means an interest of any kind in any real, personal or intellectual (or mixed) property, including cash, and any improvements thereto, and shall include both tangible and intangible property.
“Pubco Common Stock” means all classes and series of common stock of Pubco, including the Class A Common Stock and Class B Common Stock.
“Pubco Partner” means, collectively, (i) Pubco and (ii) any Subsidiary of Pubco (other than the Partnership and its Subsidiaries) that is or becomes a Partner (including, for the avoidance of doubt, the GP Entity).
“Redeemed Units Equivalent Amount” means the product of (a) the Share Settlement, multiplied by (b) the Unit Redemption Price.
“Reimbursable Expenses” means all out-of-pocket expenses reasonably incurred by the Pubco Partner or the General Partner in the conduct of their business, including fees and costs relating to professional advisors, periodic and current reporting, financial reporting, financial printers, Governmental Authorities or self-regulatory bodies having jurisdiction over such Persons, required or advisable licenses and filings, exchanges, issuances, transfers and other administration of the capital stock of such Persons, meetings of holders of Pubco Common Stock, meetings and compensation of directors and officers of such Persons, accounts payable to vendors or providers and satisfaction of contractual indemnities or other contractual obligations to Persons and any taxes imposed with respect to any of the foregoing (but not including any income taxes).
“Relative Percentage Interest” means, with respect to any Partner relative to another Partner or Partners, a fractional amount, expressed as a percentage, the numerator of which is the Percentage Interest of such Partner; and the denominator of which is (x) the Percentage Interest of such Partner plus (y) the aggregate Percentage Interest of such other Partner or Partners.
“SEC” means the United States Securities and Exchange Commission.
“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of Equity Securities or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.
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“Substitute Partner” means any Person admitted as a Partner of the Partnership pursuant to Section 3.02 in connection with the Transfer of then-existing Units to such Person.
“Tax Distribution” means a distribution made by the Partnership pursuant to Section 5.03(e)(i) or Section 5.03(e)(iii) or a distribution made by the Partnership pursuant to another provision of Section 5.03 but designated as a Tax Distribution pursuant to Section 5.03(e)(ii).
“Tax Distribution Amount” means, with respect to a Partner’s Units, whichever of the following applies with respect to the applicable Tax Distribution, in each case in an amount not less than zero:
(i) With respect to a Tax Distribution pursuant to Section 5.03(e)(i), the excess, if any, of (A) such Partner’s required annualized income installment for such estimated payment date under Section 6655(e) of the Code, assuming that (v) such Partner is a corporation (which assumption, for the avoidance of doubt, shall not affect the determination of the Tax Rate), (w) Section 6655(e)(2)(C)(ii) is in effect, (x) such Partner’s only income is from the Partnership and (y) the Tax Rate applies, which amount shall be calculated based on the projections believed by the General Partner in good faith to be, reasonable projections of the net taxable income to be allocated to such Units pursuant to this Agreement and without regard to any adjustments pursuant to Section 734, 743, or 754 of the Code over (B) the aggregate amount of Tax Distributions designated by the Partnership pursuant to Section 5.03(e)(ii) with respect to such Units since the date of the previous Tax Distribution pursuant to Section 5.03(e)(i) (or if no such Tax Distribution was required to be made, the date such Tax Distribution would have been made pursuant to Section 5.03(e)(i)).
(ii) With respect to the designation of an amount as a Tax Distribution pursuant to Section 5.03(e)(ii), the product of (x) the net taxable income, determined without regard to any adjustments pursuant to Section 734, 743, or 754 of the Code projected in the good faith belief of the General Partner, to be allocated to such Units pursuant to this Agreement during the period since the date of the previous Tax Distribution (or, if more recent, the date that the previous Tax Distribution pursuant to Section 5.03(e)(i) would have been made or, in the case of the first distribution pursuant to Section 5.03(e)(i), the date of this Agreement), and (y) the Tax Rate.
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(iii) With respect to an entire Fiscal Year to be calculated for purposes of Section 5.03(e)(iii), the excess, if any, of (A) the product of (x) the net taxable income, determined without regard to any adjustments pursuant to Section 734, 743, or 754 of the Code, allocated to such Units pursuant to this Agreement for the relevant Fiscal Year and (y) the Tax Rate, over (B) the aggregate amount of Tax Distributions (other than Tax Distributions with respect to a prior Fiscal Year) with respect to such Units made with respect to such Fiscal Year.
For purposes of this Agreement, in determining the Tax Distribution Amount of a Partner, the Tax Distribution Amount with regard to a Partner shall be increased without duplication by the amount of any liability (calculated using the assumptions in this definition) attributable to a taxable year arising from an election by the Partnership or any of its Subsidiaries pursuant to Section 6226 of the Code or any analogous election under state or local tax Laws.
“Tax Rate” means the highest marginal tax rates for an individual (or corporation, if higher) that is resident in New York, New York applicable to ordinary income, qualified dividend income or capital gains, as appropriate, taking into account the holding period of the assets disposed of and the year in which the taxable net income is recognized by the Partnership and taking into account the maximum limitations on deductions, including under Section 162 through Section 164 of the Code and Section 67 and Section 68 of the Code, and adjusted to the extent necessary to calculate federal, state and local tax liability separately so as to take into account such limitations and the calculation under the applicable state and local tax Laws of taxable income and taxable losses (and the extent to which such losses may offset such income); provided, that the General Partner shall be permitted to use a lower rate in the event that it determines it is in the best interest of the Partnership so long as in its reasonable good faith determination, such lower rate shall not be adverse to the Partners. For the avoidance of doubt, the Tax Rate shall be the same for all Partners.
“Tax Receivables Agreement” means the Amended and Restated Tax Receivables Agreements, dated as of the date hereof, by and among Pubco, the Partnership and certain other parties thereto.
“Trading Day” means a day on which the principal U.S. securities exchange on which the Class A Common Stock is listed or admitted to trading (or, if no such listing exists, the Toronto Stock Exchange, for so long as the listing of the Class A Common Stock thereon continues to be active) is open for the transaction of business (unless such trading shall have been suspended for the entire day).
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“Transfer” means any direct or indirect issuance, sale, gift, bequest, assignment, devise, exchange, mortgage, charge, pledge, encumbrance, grant of a security interest or other transfer or disposition of ownership (or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another), or any agreement to effect any of the foregoing, whether voluntary or involuntary, whether or not for value and whether by merger or other operation of law, as well as any other event or transaction (including the making of, or entering into, any contract including, any proxy or nominee agreement) that results or would result in beneficial ownership by a Person that did not possess such rights prior to such event or transaction. Without limitation as to the foregoing, the term “Transfer” shall include any of the following that results or would result in a change in ownership: (A) a change in the capital structure of the Partnership, (B) a change in the relationship between two or more Persons, (C) the making of, or entering into, any contract, including, without limitation, any proxy or nominee agreement, (D) any exercise or disposition of any option or warrant, or any event that causes any option or warrant not theretofore exercisable to become exercisable, (E) any disposition of any securities or rights convertible into or exercisable or exchangeable for such Units or any exercise of any such conversion, exercise or exchange right, and (F) Transfers of interests in other entities. Notwithstanding the foregoing, the granting of a revocable proxy to an officer or director of the Partnership at the request of the General Partner in connection with actions to be taken at any meeting of Partners or any other action of the Partners permitted by this Agreement shall not be considered a Transfer. The terms “Transferred”, “Transferring”, “Transferor”, “Transferee” and “Transferable” have meanings correlative to the foregoing.
“Treasury Regulations” mean the regulations promulgated under the Code.
“Units” means LP Units or any other class of limited partnership interests in the Partnership designated by the Partnership after the date hereof in accordance with this Agreement; provided that any type, class or series of Units shall have the designations, preferences and/or special rights set forth or referenced in this Agreement, and the partnership interests of the Partnership represented by such type, class or series of Units shall be determined in accordance with such designations, preferences and/or special rights.
“Unit Redemption Price” means the arithmetic average of the volume weighted average prices for a share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation system on which the Class A Common Stock trades (or, in the absence of such a price, the U.S. dollar equivalent of the average prices for a share of Class A Common Stock on the Toronto Stock Exchange, for so long as such listing continues to be active), as reported by The Wall Street Journal or its
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successor, for each of the three consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the date of Redemption (or the date of the Call Notice, as applicable), subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock; provided that, notwithstanding the foregoing or anything to the contrary, the Unit Redemption Price applicable to any Call Units that are subject to Section 9.01 as a result of a Transfer of Units or shares of Class B Common Stock that would result in (or has resulted in) a Violation (as defined in Pubco’s certificate of incorporation), as determined by Pubco’s board in accordance with Pubco’s certificate of incorporation, shall be $0 for purposes of Section 9.01. If the Class A Common Stock no longer trades on a securities exchange or automated or electronic quotation system, then the Unit Redemption Price shall be determined in good faith by a committee of the board of directors of Pubco composed of a majority of the directors of Pubco that do not have an interest in the LP Units being redeemed.
(b)Each of the following terms is defined in the Section set forth opposite such term:
Term | Section | ||||
“Agreement” | Preamble | ||||
“Award Letter” | 3.01(c) | ||||
“Award Unit” | 3.01(c) | ||||
“Call Notice” | 9.01 | ||||
“Call Partner” | 9.01 | ||||
“Call Units” | 9.01 | ||||
“Cash Settlement” | 10.01(b) | ||||
“Confidential Information” | 13.11(b) | ||||
“Contribution Notice” | 10.01(b) | ||||
“Controlled Entities” | 11.02(e) | ||||
“Direct Exchange” | 10.03(a) | ||||
“Dissolution Event” | 12.01(c) | ||||
“Domestication Date” | Recitals | ||||
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“e-mail” | 13.03 | ||||
“Economic Pubco Security” | 4.01(a) | ||||
“ERISA” | 8.01(c)(iii) | ||||
“Exchange Election Notice” | 10.03(b) | ||||
“Expenses” | 11.02(e) | ||||
“GAAP” | 3.03(b) | ||||
“GP Entity” | Preamble | ||||
“Indemnification Sources” | 11.02(e) | ||||
“Indemnitee-Related Entities” | 11.02(e)(i) | ||||
“Interim LPA” | Recitals | ||||
“Jointly Indemnifiable Claims” | 11.02(e)(ii) | ||||
“Officers” | 7.05(a) | ||||
“Partner Parties” | 13.11(a) | ||||
“Partner Schedule” | 3.01(b) | ||||
“Partners” | Recitals | ||||
“Partnership” | Preamble | ||||
“Prior LPA” | Recitals | ||||
“Process Agent” | 13.05(b) | ||||
“Pubco” | Preamble | ||||
“Pubco Offer” | 10.04(a) | ||||
“Redeemed Units” | 10.01(a) | ||||
“Redeeming Partner” | 10.01(a) | ||||
“Redemption” | 10.01(a) | ||||
“Redemption Date” | 10.01(a) | ||||
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“Redemption Notice” | 10.01(a) | ||||
“Redemption Right” | 10.01(a) | ||||
“Regulatory Allocations” | 5.04(c) | ||||
“Retraction Notice” | 10.01(b) | ||||
“Revaluation” | 5.02(c) | ||||
“Service Partner” | 3.01(c) | ||||
“Share Settlement” | 10.01(b) | ||||
“Specified Unvested Units” | 3.01(c) | ||||
“Tax Matters Representative” | 6.01 | ||||
“Transferor Partner” | 5.02(b) | ||||
“Unvested Unit” | 3.01(c) | ||||
“Vested Unit” | 3.01(c) | ||||
“Withholding Advances” | 5.06(b) | ||||
Section 1.02.Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Schedules and Exhibits are to Articles, Sections, Schedules and Exhibits of this Agreement unless otherwise specified. All Schedules and Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law. As used in this Agreement, all references to “majority in interest” and phrases of similar import shall be deemed to refer to such percentage or fraction of interest based on the Relative
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Percentage Interests of the Partners subject to such determination. Unless otherwise expressly provided herein, when any approval, consent or other matter requires any action or approval of any group of Partners, including any holders of any class of Units, such approval, consent or other matter shall require the approval of a majority in interest of such group of Partners. Except to the extent otherwise expressly provided herein, all references to any Partner shall be deemed to refer solely to such Person in its capacity as such Partner and not in any other capacity.
ARTICLE 2
THE PARTNERSHIP
Section 2.01. Domestication; Certificate of Limited Partnership and Other Documents. (a) On the Domestication Date, the Partnership domesticated as a Delaware limited partnership by the execution and filing of a certificate of domestication and certificate of limited partnership under and pursuant to the Delaware Act.
(b)The General Partner or any other authorized officer or representative of the Partnership, as an “authorized person” within the meaning of the Delaware Act, shall file and record any amendments and/or restatements to the certificate of limited partnership of the Partnership and such other certificates and documents (and any amendments or restatements thereof) as may be required under the laws of the State of Delaware and of any other jurisdiction in which the Partnership may conduct business. The General Partner or any other authorized officer or representative of the Partnership shall, upon any Partner’s written request, provide such Partner with copies of each such document as filed and recorded.
(c)The Partners hereby agree that the Partnership and its Subsidiaries, as applicable, shall be governed by the terms and conditions of this Agreement and, except as provided herein, the Delaware Act.
Section 2.02. Name. The name of the Partnership shall be Galaxy Digital Holdings LP; provided that the General Partner may change the name of the Partnership to such other name as the General Partner may determine in its sole and absolute discretion, and shall have the authority to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by Applicable Law or as, in the reasonable judgment of the General Partner, may be necessary or advisable to effect such change.
Section 2.03. Term. The Partnership shall have perpetual existence unless sooner dissolved and its affairs wound up as provided in Article 12.
Section 2.04. Registered Agent and Registered Office. The name of the registered agent of the Partnership for service of process on the Partnership in the State of Delaware shall be The Corporation Trust Company, and the address of such registered agent and the address of the registered office of the Partnership in the State of Delaware shall be 1209 Orange Street in the City of Wilmington, County of New Castle, Delaware 19801. Such office and such agent may be changed to such place within the State of Delaware
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and any successor registered agent, respectively, as may be determined from time to time by the General Partner in accordance with the Delaware Act.
Section 2.05. Purposes. The Partnership has been formed and shall continue for the object and purpose of, and the nature of the business to be conducted and promoted by the Partnership is to engage in, the Business and carrying on any other lawful act or activities for which limited partnerships may be organized under the Delaware Act.
Section 2.06. Powers of the Partnership. Subject to the terms and conditions of this Agreement, the Partnership shall have the power and authority to take any and all actions necessary, appropriate or advisable to or for the furtherance of the purposes set forth in Section 2.05.
Section 2.07. Partnership Tax Status. The Partners intend that the Partnership shall be treated as a partnership (or, if the Partnership has only one regarded owner, an entity that is disregarded as separate from such regarded owner) for federal, state and local income tax purposes to the extent such treatment is available. The Partners shall (a) take such actions as may be necessary to receive and maintain such treatment and (b) refrain from taking any actions inconsistent therewith.
Section 2.08. Regulation of Internal Affairs. The internal affairs of the Partnership and the conduct of its business shall be regulated by this Agreement, and to the extent not provided for herein, shall be determined by the General Partner in accordance with the Delaware Act.
Section 2.09. Ownership of Property; Limited Liability. (a) Legal title to all Property conveyed to or held by the Partnership or its Subsidiaries shall reside in the Partnership or its applicable Subsidiaries and shall be conveyed only in the name of the Partnership or its applicable Subsidiaries and no Partner or any other Person, individually, shall have any ownership of such Property.
(b) To the fullest extent permitted by law, the Partners (other than the General Partner in its capacity as such) are limited partners of the Partnership within the meaning of the Delaware Act. The Partners will not have any liability for the obligations or liabilities of the Partnership except to the extent provided in the Delaware Act or in this Agreement. To the fullest extent permitted by law, each Partner must look solely to the assets of the Partnership for the return of its capital (if any), and if the assets of the Partnership remaining after payment of the debts and liabilities of the Partnership are insufficient, there will be no recourse against any other Partner.
Section 2.10. Subsidiaries. The Partnership shall cause the business and affairs of each of the Subsidiaries of the Partnership to be managed by the General Partner in accordance with and in a manner consistent with this Agreement.
Section 2.11. Qualification in Other Jurisdictions. The General Partner shall execute, deliver and file certificates (and any amendments and/or restatements thereof)
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necessary under Applicable Law for the Partnership to qualify to do business in the jurisdictions in which the Partnership may wish to conduct business. In those jurisdictions in which the Partnership may wish to conduct business in which qualification or registration under assumed or fictitious names is required or desirable, the General Partner shall cause the Partnership to be so qualified or registered in compliance with Applicable Law.
ARTICLE 3
UNITS; PARTNERS; BOOKS AND RECORDS; REPORTS
Section 3.01. Units; Partner Schedule; Admission of Partners. (a) Each Partner’s interest in the Partnership, including such Partner’s interest, if any, in the capital, income, gain, loss, deduction and expense of the Partnership and the right to vote, if any, on certain Partnership matters as provided in this Agreement, shall be represented by Units. The ownership by a Partner of Units shall entitle such Partner to allocations of profits and losses and other items and distributions of cash and other property as is set forth in Article 5. Units shall be in non-certificated form; provided that the General Partner may in its sole and absolute discretion cause Units to be represented by certificates from time to time.
(b)Effective as of the Effective Time, (i) the GP Entity has been admitted to the Partnership as the General Partner (and, for the avoidance of doubt, any Person that may have previously been a general partner of the Partnership shall (A) cease to be a general partner of the Partnership and (B) have no authority to act as the General Partner from and after the Effective Time) and (ii) the Partnership has hereby reclassified all of the Original Units outstanding as of immediately prior to the Effective Time as set forth opposite the name of each of the Persons listed on Schedule A hereto (the “Partner Schedule”) in the columns titled “Class of Original Units” and “Number of Original Units (Prior to Reclassification)” into and issued, respectively, the number of LP Units set forth opposite the name of each of the Persons listed on the Partner Schedule in the column titled “LP Units (After Reclassification).” After giving effect to the reclassification and issuances described in clause (ii) of the immediately preceding sentence, such LP Units are issued and outstanding as of the Effective Time and the holders of such LP Units shall hereby continue as Partners for so long as they hold any such LP Units and in accordance with the terms of this Agreement. Immediately following the Effective Time, no fractional LP Unit will remain outstanding and any fractional LP Unit held by a Partner shall be redeemed by the Partnership, as promptly as practicable following the Effective Time, for cash consideration equal to the product of (x) the fractional LP Unit held by such Partner and (y) the price of a share of Class A Common Stock on the last Trading Day preceding the date hereof, which cash consideration shall be paid, at the option of the Partnership by way of check, cash or wire transfer of funds, to such Partner within 30 Business Days of the date hereof. The whole number of LP Units held by each of the Partners after redemption of any fractional LP Units is set forth opposite the name of the respective Partner on Schedule A in the column titled “LP Units (After Fractional Redemptions).”
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(c)A compensatory Unit issued to an employee of, or a Person who provides services to or on behalf of, the Partnership or an Affiliate of the Partnership (a “Service Partner”) including, for the avoidance of doubt, any Unit resulting from the reclassification of an Original Unit that was issued to a Service Partner, is referred to as an “Award Unit.” Each Award Unit shall be subject to the terms of the agreement between the Partnership and the Service Partner that provides for the issuance and terms of such Award Unit (or its predecessor Original Unit) (the “Award Letter”). An Award Unit may be issued subject to vesting. As of any particular date, an Award Unit that is unvested by the terms of the governing Award Letter is an “Unvested Unit” for purposes of this Agreement. A previously Unvested Unit that has vested by the terms of the governing Award Letter is a “Vested Unit” and is no longer an Unvested Unit. Subject to any other terms or conditions set forth herein or that may be set forth in an Award Letter, Vested Units are identical to each other and to other Units. Any granting of an Award Unit will be subject to compliance with any applicable requirements of any stock exchange or marketplace on which the Class A Common Stock is then listed and any other requirements under Applicable Law. For purposes of this Agreement, Award Units that are Unvested Units (other than any such Unvested Unit the predecessor Original Unit of which was designated as a profits interests on original issuance (collectively, the “Specified Unvested Units”)) will not be considered in determining the total number of outstanding Units, except to the extent otherwise determined by the General Partner.
(d)The Partner Schedule shall be maintained by the General Partner on behalf of the Partnership in accordance with this Agreement. Any reference in this Agreement to the Partner Schedule shall be deemed a reference to the Partner Schedule as in effect from time to time. Subject to the terms and conditions of this Agreement, the General Partner may take any action authorized under this Agreement in respect of the Partner Schedule without any need to obtain the consent of any other Partner and no action of any other Partner will be required to amend or update the Partner Schedule in accordance with this Agreement.
(e)Notwithstanding anything to the contrary contained herein or in the Delaware Act, neither the General Partner nor the Partnership nor any other Person shall be required to disclose to any Non-Pubco Partner an unredacted Partner Schedule or any other information showing the identity of the other Non-Pubco Partners or the number of LP Units or shares of Class B Common Stock owned by any Non-Pubco Partner. Upon a Non-Pubco Partner’s written request, the Partnership shall provide to such Partner a redacted copy of the Partner Schedule revealing only such Partner’s LP Units, the total issued and outstanding LP Units and such Partner’s Percentage Interest.
(f)When any Units or other Equity Securities of the Partnership are issued, repurchased, redeemed, converted or Transferred in accordance with this Agreement, the Partner Schedule shall be amended by the General Partner to reflect such issuance, repurchase, redemption or Transfer, the admission of additional or substitute Partners and the resulting Percentage Interest of each Partner.
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(g)The General Partner may cause the Partnership to authorize and issue from time to time such other Units or other Equity Securities of any type, class or series and having the designations, preferences and/or special rights as may be determined by the General Partner in its sole and absolute discretion. Such Units or other Equity Securities may be issued pursuant to such agreements as the General Partner shall approve, including with respect to Persons employed by or otherwise performing services for the Partnership or any of its Subsidiaries, other equity compensation agreements, options or warrants. When any such other Units or other Equity Securities are authorized and issued, the Partner Schedule and this Agreement shall be amended by the General Partner to reflect such additional issuances and any resulting dilution, which shall be borne by all Partners in proportion to their respective Percentage Interests as of immediately prior to the issuance of any such other Units or other Equity Securities.
(h)Following the date hereof, no Person shall be admitted as a Partner and no additional Units shall be issued except as expressly provided in, or otherwise not prohibited by, this Agreement.
Section 3.02. Substitute Partners and Additional Partners. (a) No Transferee of any Units or Person to whom any Units are issued in accordance with this Agreement shall be admitted as a Partner under this Agreement or acquire any rights under this Agreement, including any voting rights or the right to receive distributions and allocations in respect of the Transferred or issued Units, as applicable, unless (i) such Units are Transferred or issued in compliance with the provisions of this Agreement (including Article 8), (ii) such Transferee or recipient shall have executed and delivered to the Partnership such instruments as the General Partner deems necessary or desirable, in its sole and absolute discretion, to effectuate the admission of such Transferee or recipient as a Partner and to confirm the agreement of such Transferee or recipient to be bound by all the terms and provisions of this Agreement, (iii) the General Partner shall have received the opinion of counsel, if any, required by Section 3.02(b) in connection with such Transfer or issuance and (iv) all necessary instruments reflecting such Transfer and/or issuance shall have been filed in each jurisdiction in which such filling is necessary under Applicable Law in order to qualify the Partnership to continue to conduct the Business or to preserve the limited liability of the Partners. Upon complying with the immediately preceding sentence, without the need for any further action of any Person, a Transferee or recipient of Units shall be deemed admitted to the Partnership as a Partner. A Substitute Partner shall enjoy the same rights, and be subject to the same obligations, as the applicable Transferor; provided that such Transferor shall not be relieved of any obligation or liability under this Agreement arising prior to the consummation of a Transfer of Units but shall be relieved of all obligations with respect to the Units so Transferred arising after consummation of such Transfer. As promptly as practicable after the admission of any Person as a Partner, the books and records of the Partnership, including the Partner Schedule, shall be changed to reflect such admission of a Substitute Partner or Additional Partner. In the event of any admission of a Substitute Partner or Additional Partner pursuant to this Section 3.02(a), this Agreement shall be deemed to be amended to reflect such admission, and any formal amendment of this Agreement
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(including the Partner Schedule) in connection therewith shall only require execution by the Partnership, the General Partner and such Substitute Partner or Additional Partner, as applicable, to be effective.
(b)As a further condition to any Transfer of all or any part of a Partner’s Units, the General Partner may, in its sole and absolute discretion, require a written opinion of counsel to the transferring Partner reasonably satisfactory to the General Partner, obtained at the sole expense of the transferring Partner, reasonably satisfactory in form and substance to the General Partner, as to such matters as are customary and appropriate in transactions of such type, including, without limitation (or, in the case of any Transfer made to a Permitted Transferee, limited to an opinion) to the effect that such Transfer will not result in a violation of the registration or other requirements of the Securities Act or any other federal or state securities laws. No such opinion, however, shall be required in connection with a Transfer made pursuant to Article 10.
(c)If a Partner shall Transfer all (but not less than all) of its Units and other Equity Securities of the Partnership (if any), the Partner shall thereupon cease to be a Partner of the Partnership.
(d)All reasonable costs and expenses incurred by the General Partner and the Partnership in connection with any Transfer of a Partner’s Units, including any filing and recording costs and the reasonable fees and disbursements of counsel for the Partnership, shall be paid by the transferring Partner. In addition, the transferring Partner shall indemnify the General Partner and the Partnership against any losses, claims, damages or liabilities to which the General Partner, the Partnership or any of their Affiliates may become subject arising out of or based upon any representation or warranty made by, or breach or failure to comply with any covenant or agreement of, such transferring Partner or such transferee in connection with such Transfer.
(e)In connection with any Transfer of any portion of a Partner’s Units pursuant to Article 10, the General Partner shall cause the Partnership to take any action as may be required under Article 10 or requested by the Transferring Partner thereto to effect such Transfer promptly.
Section 3.03. Certain Accounting, Financial Reporting and Tax Matters. (a) Accounting Decisions and Reliance on Others. All decisions as to accounting matters of the Partnership, except as otherwise specifically set forth herein, shall be made by the General Partner in accordance with Applicable Law and with accounting methods followed by the Partnership for federal income tax purposes. In making such decisions, the General Partner may rely upon the advice of the independent accountants of the Partnership.
(b) Books and Records and GAAP Accounting. The books and records of the Partnership shall be kept, and the financial position and the results of its operations recorded, in all material respects in accordance with United States generally accepted accounting principles as in effect from time to time (“GAAP”).
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(c) Fiscal Year. The Fiscal Year of the Partnership shall be used for financial reporting and for federal income tax purposes.
(d) Financial Reports.
(i)The books and records of the Partnership shall be audited as of the end of each Fiscal Year by the same accounting firm that audits the books and records of Pubco (or, if such firm declines to perform such audit, by an accounting firm selected by the General Partner).
(ii)In the event neither Pubco nor the Partnership is required to file an annual report on Form 10-K or quarterly report on Form 10-Q, the Partnership shall deliver, or cause to be delivered, the following to each of the Partners:
(A)not later than 120 days after the end of each Fiscal Year of the Partnership, a copy of the audited consolidated balance sheet of the Partnership and its Subsidiaries as of the end of such Fiscal Year and the related statements of operations and cash flows for such Fiscal Year, setting forth, in each case, in comparative form the applicable figures for the previous Fiscal Year, all in reasonable detail; and
(B)not later than 60 days after the end of each of the first three fiscal quarters of each Fiscal Year, the unaudited consolidated balance sheet of the Partnership and its Subsidiaries as of the end of each such fiscal quarter and the related statements of operations and cash flows for such fiscal quarter and for the period commencing on the first day of the Fiscal Year and ending on the last day of such fiscal quarter.
(e) Tax Returns.
(i)The Partnership shall (A) timely prepare or cause to be prepared by an accounting firm selected by the General Partner all federal, state, local and foreign tax returns (including information returns) of the Partnership and its Subsidiaries which may be required by a jurisdiction in which the Partnership or any of its Subsidiaries operates or conducts business for each year or period for which such returns are required to be filed and (B) cause such tax returns to be timely filed. Upon reasonable written request of any Partner, the Partnership shall furnish to such Partner a copy of any such tax return.
(ii)The Partnership shall furnish to each Partner (A) as soon as reasonably practical after the end of each Fiscal Year and in any event by August 31 of the following fiscal year, all information concerning the Partnership and its Subsidiaries required for the preparation of tax returns of such Partner (or any beneficial owner(s) of such Partner), including a report (including Schedule K-1), indicating such Partner’s share of the Partnership’s taxable income, gain, credits, losses and deductions for such year, in sufficient detail to enable such Partner to
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prepare its federal, state and other tax returns; provided that estimates of such information believed by the General Partner in good faith to be reasonable shall be provided by March 31, (B) as soon as reasonably practicable after the close of the relevant fiscal period, but in no event later than 10 days prior to the date an estimated tax payment is due, such information concerning the Partnership as is required to enable such Partner (or any beneficial owner(s) of such Partner) to pay estimated taxes and (C) as soon as reasonably practicable after a request by such Partner, such other information concerning the Partnership and its Subsidiaries that is reasonably requested by such Partner for compliance with its tax obligations (or the tax obligations of any beneficial owner(s) of such Partner) or for tax planning purposes.
(f) Inconsistent Positions. No Partner shall take a position on its income tax return with respect to any item of Partnership income, gain, deduction, loss or credit that is different from the position taken on the Partnership’s income tax return with respect to such item unless (i) such Partner first notifies the Partnership of the different position such Partner desires to take in writing and (ii) the Partnership’s regular tax advisors (which shall be, for the avoidance of doubt, selected by the General Partner in its sole and absolute discretion), after consulting with such Partner and, if requested by such Partner, its tax advisors, are unable to provide an opinion that (after taking into account all of the relevant facts and circumstances) the arguments in favor of the Partnership’s position outweigh the arguments in favor of such Partner’s position.
Section 3.04. Books and Records. The Partnership shall keep full and accurate books of account and other records of the Partnership at its principal place of business. Subject to the terms and conditions of this Agreement, each Non-Pubco Partner shall have a reasonable right to inspect the books and records of Pubco, the Partnership or any of their Subsidiaries; provided that (a) such inspection shall be at reasonable times and upon reasonable prior written notice to the Partnership, but not more frequently than once per calendar quarter and (b) neither Pubco, the Partnership nor any of their Subsidiaries shall be required to disclose (x) any information the General Partner determines in its sole and absolute discretion to be competitively sensitive, (y) any privileged information of Pubco, the Partnership or any of their Subsidiaries so long as the Partnership has used commercially reasonable efforts to enter into an arrangement pursuant to which it may provide such information to the Non-Pubco Partners, as the case may be, without the loss of any such privilege, or (z) an unredacted Partner Schedule or related information described in Section 3.01(b).
ARTICLE 4
PUBCO OWNERSHIP; RESTRICTIONS ON PUBCO STOCK
Section 4.01. Pubco Ownership. (a) Except as otherwise determined by Pubco, if at any time Pubco issues a share of Class A Common Stock or any other Equity Security of Pubco entitled to any economic rights with respect to Pubco (such share of Class A Common Stock or other Equity Security, an “Economic Pubco Security”) (other than
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shares of Class B Common Stock or other Equity Securities of Pubco not entitled to any economic rights with respect to Pubco), (i) the Partnership shall issue to a Pubco Partner one LP Unit (if Pubco issues a share of Class A Common Stock) or such other Equity Security of the Partnership (if Pubco issues an Economic Pubco Security other than (A) a share of Class A Common Stock or (B) an option to acquire shares of Class A Common Stock outstanding as of the Effective Time) corresponding to the Economic Pubco Security and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Economic Pubco Security and (ii) the net proceeds received by Pubco with respect to the corresponding Economic Pubco Security, if any, shall be concurrently contributed by Pubco (or another Pubco Partner, as applicable) to the Partnership; provided that if Pubco issues any Economic Pubco Securities, some or all of the net proceeds of which are to be used to fund expenses or other obligations of Pubco for which Pubco would be permitted a distribution pursuant to Section 5.03(c), then Pubco shall not be required to transfer such net proceeds to the Partnership which are used or will be used to fund such expenses or obligations and provided, further, that if Pubco issues any shares of Class A Common Stock in order to purchase or fund the purchase from a Non-Pubco Partner of a number of LP Units (and shares of Class B Common Stock) or to purchase or fund the purchase of shares of Class A Common Stock, in each case equal to the number of shares of Class A Common Stock issued, then the Partnership shall not issue any new LP Units in connection therewith and Pubco shall not be required to transfer such net proceeds to the Partnership (it being understood that such net proceeds shall instead be transferred to such Non-Pubco Partner or transferor of Class A Common Stock, as applicable, as consideration for such purchase).
(b)For the avoidance of doubt, this Article 4 shall apply to the issuance and distribution to holders of shares of Pubco Common Stock of rights to purchase Equity Securities of Pubco under a “poison pill” or similar shareholders rights plan (it also being understood that upon redemption or exchange of LP Units (including any such right to purchase LP Units) for shares of Class A Common Stock, such shares of Class A Common Stock will be issued together with a corresponding right to purchase Equity Securities of Pubco).
(c)If at any time Pubco issues one or more shares of Class A Common Stock in connection with an equity incentive program or other compensatory plan or program, whether such share or shares are issued upon exercise of an option (including with respect to the options outstanding at the Effective Time) or equity appreciation right, settlement of a restricted stock unit, as restricted stock or otherwise, the Partnership shall issue to Pubco a corresponding number of LP Units; provided that Pubco shall be required to concurrently contribute the net proceeds (if any) received by Pubco from or otherwise in connection with such corresponding issuance of one or more shares of Class A Common Stock, including the exercise price of any option or equity appreciation right exercised, to the Partnership. If any such shares of Class A Common Stock so issued by Pubco in connection with an equity incentive program are subject to vesting or forfeiture provisions, then the LP Units that are issued by the Partnership to Pubco in connection
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therewith in accordance with the preceding provisions of this Section 4.01(c) shall be subject to vesting or forfeiture on the same basis; if any of such shares of Class A Common Stock vest or are forfeited, then a corresponding number of the LP Units issued by the Partnership in accordance with the preceding provisions of this Section 4.01(c) shall automatically and concurrently vest or be forfeited. Any cash or property held by either Pubco or the Partnership or on either such Person’s behalf in respect of dividends paid on restricted Class A Common Stock that fails to vest or is forfeited shall be returned to the Partnership upon the forfeiture of such restricted Class A Common Stock.
Section 4.02. Restrictions on Pubco Common Stock. (a) Except as otherwise determined by the General Partner in accordance with Section 4.02(d), (i) the Partnership may not issue any additional LP Units to Pubco or any of its Subsidiaries unless substantially simultaneously therewith Pubco or such Subsidiary issues or sells an equal number of shares of Class A Common Stock to another Person, (ii) the Partnership may not issue any additional LP Units to any Person (other than Pubco or any of its Subsidiaries) unless simultaneously therewith Pubco issues or sells an equal number of shares of Class B Common Stock to such Person and (iii) the Partnership may not issue any other Equity Securities of the Partnership to Pubco or any of its Subsidiaries unless substantially simultaneously therewith, Pubco or such Subsidiary issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of Pubco or such Subsidiary with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Partnership.
(b)Except as otherwise determined by the General Partner in accordance with Section 4.02(d), (i) Pubco and its Subsidiaries may not redeem, repurchase or otherwise acquire any shares of Class A Common Stock unless substantially simultaneously therewith the Partnership redeems, repurchases or otherwise acquires from Pubco or any of its Subsidiaries an equal number of LP Units for the same price per security (or, if Pubco uses funds received from distributions from the Partnership or the net proceeds from an issuance of Class A Common Stock to fund such redemption, repurchase or acquisition, then the Partnership shall cancel an equal number of LP Units for no consideration) and (ii) Pubco and its Subsidiaries may not redeem or repurchase any other Equity Securities of Pubco unless substantially simultaneously therewith the Partnership redeems or repurchases from Pubco or any of its Subsidiaries an equal number of Equity Securities of the Partnership of a corresponding class or series with substantially the same rights to dividends and distributions (including distributions upon liquidation) or other economic rights as those of such Equity Securities of Pubco for the same price per security (or, if Pubco uses funds received from distributions from the Partnership or the net proceeds from an issuance of Equity Securities other than Class A Common Stock to fund such redemption, repurchase or acquisition, then the Partnership shall cancel an equal number of its corresponding Equity Securities for no consideration). Except as otherwise determined by the General Partner in accordance with Section 4.02(d), (iii) the Partnership may not redeem, repurchase or otherwise acquire LP Units from Pubco or any of its Subsidiaries unless substantially simultaneously Pubco or such Subsidiary
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redeems, repurchases or otherwise acquires an equal number of Class A Common Stock for the same price per security from holders thereof (except that if the Partnership cancels LP Units for no consideration as described in Section 4.02(b)(i), then the price per security need not be the same) and (iv) the Partnership may not redeem, repurchase or otherwise acquire any other Equity Securities of the Partnership from Pubco or any of its Subsidiaries unless substantially simultaneously Pubco or such Subsidiary redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of Pubco of a corresponding class or series with substantially the same rights to dividends and distributions (including dividends and distributions upon liquidation) and other economic rights as those of such Equity Securities of Pubco (except that if the Partnership cancels Equity Securities for no consideration as described in Section 4.02(b)(ii), then the price per security need not be the same). Notwithstanding the immediately preceding sentence, to the extent that any consideration payable to Pubco in connection with the redemption or repurchase of any shares or other Equity Securities of Pubco or any of its Subsidiaries consists (in whole or in part) of shares or such other Equity Securities (including, for the avoidance of doubt, in connection with the cashless exercise of an option or warrant), then redemption or repurchase of the corresponding LP Units or other Equity Securities of the Partnership shall be effectuated in an equivalent manner (except if the Partnership cancels LP Units or other Equity Securities for no consideration as described in this Section 4.02(b)).
(c)The Partnership shall not in any manner effect any subdivision (by any stock or unit split, stock or unit dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock or unit split, reclassification, reorganization, recapitalization or otherwise) of the outstanding LP Units unless accompanied by a substantively identical subdivision or combination, as applicable, of the outstanding Pubco Common Stock, with corresponding changes made with respect to any other exchangeable or convertible securities. Pubco shall not in any manner effect any subdivision (by any stock or unit split, stock or unit dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock or unit split, reclassification, reorganization, recapitalization or otherwise) of the outstanding Pubco Common Stock unless accompanied by a substantively identical subdivision or combination, as applicable, of the outstanding LP Units, with corresponding changes made with respect to any other exchangeable or convertible securities.
(d)Notwithstanding anything to the contrary in this Article 4:
(i)if any issuance or Transfer shares of Class A Common Stock or other Equity Securities of Pubco or any of its Subsidiaries or any Units or other Equity Securities of the Partnership would result in (or has resulted in) a Violation (as defined in Pubco’s certificate of incorporation), as determined by Pubco’s board in accordance with Pubco’s certificate of incorporation, then the General Partner may in good faith implement an economically equivalent alternative arrangement that would not result in a Violation (which alternative arrangement
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shall be subject to any requisite consent of the Toronto Stock Exchange (for so long as the listing of the Class A Common Stock thereon continues to be active));
(ii)if at any time the General Partner shall determine that any debt instrument of Pubco, the Partnership or any of their Subsidiaries shall not permit Pubco or the Partnership to comply with the provisions of Section 4.02(a) or Section 4.02(b) in connection with the issuance, redemption or repurchase of any shares of Class A Common Stock or other Equity Securities of Pubco or any of its Subsidiaries or any Units or other Equity Securities of the Partnership, then the General Partner may in good faith implement an economically equivalent alternative arrangement without complying with such provisions (which alternative arrangement shall be subject to any requisite consent of the Toronto Stock Exchange (for so long as the listing of the Class A Common Stock thereon continues to be active));
(iii)if (x) Pubco incurs any indebtedness and desires to transfer the proceeds of such indebtedness to the Partnership and (y) Pubco is unable to lend the proceeds of such indebtedness to the Partnership on an equivalent basis because of restrictions in any debt instrument of Pubco, the Partnership or its Subsidiaries, then notwithstanding Section 4.02(a) or Section 4.02(b), the General Partner may in good faith implement an economically equivalent alternative arrangement in connection with the transfer of proceeds to the Partnership using non-participating preferred Equity Securities of the Partnership without complying with such provisions (which alternative arrangement shall be subject to any requisite consent of the Toronto Stock Exchange (for so long as the listing of the Class A Common Stock thereon continues to be active)); and
(iv)if the Pubco Partner receives a distribution pursuant to Section 5.03 and the Pubco Partner subsequently contributes any of the amounts received in such distribution back to the Partnership, the General Partner, acting reasonably, may take any action it deems to be necessary or advisable to properly reflect the changes in the Partners’ economic interests in the Partnership including by making appropriate pro rata adjustments to the number of LP Units held by the Partners other than the Pubco Partner in order to proportionally reduce the respective Percentage Interests held by the Partners other than the Pubco Partner.
(e)In the event any adjustment pursuant to this Agreement in the number of LP Units held by a Partner results (x) in a decrease in the number of LP Units held by a Partner relative to the number of shares of Class B Common Stock then held by such Partner, concurrently with such decrease, such Partner shall surrender to Pubco the number of shares of Class B Common Stock as is necessary to preserve the ratio of the number of LP Units held by such Partner relative to the number of shares of Class B Common Stock held by such Partner as such ratio existed prior to such adjustment or (y) in an increase in the number of LP Units held by a Partner relative to the number of shares of Class B Common Stock then held by such Partner, concurrently with such
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increase, Pubco shall issue to such Partner the number of shares of Class B Common Stock as is necessary to preserve the ratio of the number of LP Units held by such Partner relative to the number of shares of Class B Common Stock held by such Partner as such ratio existed prior to such adjustment.
ARTICLE 5
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS ALLOCATIONS
Section 5.01. Capital Contributions. (a) From and after the date hereof, no Partner shall have any obligation to the Partnership, to any other Partner or to any creditor of the Partnership to make any further Capital Contribution, except as expressly provided in Section 4.01(a), Section 4.01(c) or Section 10.02.
(b)Except as expressly provided herein, no Partner, in its capacity as a Partner, shall have the right to receive any cash or any other property of the Partnership.
Section 5.02. Capital Accounts.
(a)Maintenance of Capital Accounts. The Partnership shall maintain a Capital Account for each Partner on the books of the Partnership in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv) and, to the extent consistent with such provisions, the following provisions:
(i)Each Partner listed on the Partner Schedule shall be credited with the Effective Time Capital Account Balance set forth on the Partner Schedule. The Partner Schedule shall be amended by the General Partner after the Effective Time and from time to time to reflect adjustments to the Partners’ Capital Accounts made in accordance with Sections 5.02(a)(ii), 5.02(a)(iii), 5.02(a)(iv), 5.02(c) or otherwise.
(ii)To each Partner’s Capital Account there shall be credited: (A) such Partner’s Capital Contributions, (B) such Partner’s distributive share of Net Income and any item in the nature of income or gain that is allocated pursuant to Section 5.04 and (C) the amount of any Partnership liabilities assumed by such Partner or that are secured by any Property distributed to such Partner.
(iii)To each Partner’s Capital Account there shall be debited: (A) the amount of money and the Carrying Value of any Property distributed to such Partner pursuant to any provision of this Agreement, (B) such Partner’s distributive share of Net Loss and any items in the nature of expenses or losses that are allocated to such Partner pursuant to Section 5.04 and (C) the amount of any liabilities of such Partner assumed by the Partnership or that are secured by any Property contributed by such Partner to the Partnership.
(iv)In determining the amount of any liability for purposes of Sections 5.02(a)(ii) and 5.02(a)(iii) above, there shall be taken into account Section 752(c)
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of the Code and any other applicable provisions of the Code and the Treasury Regulations.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event that the General Partner shall determine in its sole and absolute discretion that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto are maintained (including debits or credits relating to liabilities that are secured by contributed or distributed Property or that are assumed by the Partnership or the Partners), the General Partner may make such modification so long as such modification will not have any effect on the amounts distributed to any Person pursuant to Article 12 upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between Capital Accounts of the Partners and the amount of capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).
(b)Succession to Capital Accounts. In the event any Person becomes a Substitute Partner in accordance with the terms and conditions of this Agreement, such Substitute Partner shall succeed to the Capital Account of the former Partner (in such capacity, the “Transferor Partner”) to the extent such Capital Account relates to the Transferred Units.
(c)Adjustments of Capital Accounts. The Partnership shall revalue the Capital Accounts of the Partners in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) (a “Revaluation”) at the following times: (i) immediately prior to the contribution of more than a de minimis amount of money or other property to the Partnership by a new or existing Partner as consideration for one or more Units; (ii) upon the distribution by the Partnership to a Partner of more than a de minimis amount of property in respect of one or more Units; (iii) upon the issuance by the Partnership of more than a de minimis amount of Units as consideration for the provision of services to or for the benefit of the Partnership (as described in Treasury Regulations Section 1.704-1(b)(2)(iv)(f)(5)(iii)); and (iv) upon the liquidation of the Partnership within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided that adjustments pursuant to the immediately preceding clauses (i), (ii) and (iii) shall be made only if the General Partner determines in its sole and absolute discretion that such adjustments are necessary or appropriate to reflect the relative economic interest of the Partners.
(d)No Partner shall be entitled to withdraw capital or receive distributions except as specifically provided herein. A Partner shall have no obligation to the Partnership, to any other Partner or to any creditor of the Partnership to restore any negative balance in the Capital Account of such Partner. Except as expressly provided
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elsewhere herein, no interest shall be paid on the balance in any Partner’s Capital Account.
(e)Whenever it is necessary for purposes of this Agreement to determine a Partner’s Capital Account on a per Unit basis, such amount shall be determined by dividing the Capital Account of such Partner attributable to the applicable class of Units held of record by such Partner by the number of Units of such class held of record by such Partner.
Section 5.03. Amounts and Priority of Distributions. (a) Distributions Generally. Except as otherwise provided in Section 12.02, distributions shall be made to the Partners as set forth in this Section 5.03, at such times and in such amounts as the General Partner, in its sole and absolute discretion, shall determine. No Partner (other than the General Partner) shall have any right to cause distributions or make withdrawals from the Partnership.
(b)Distributions to the Partners. Subject to Sections 5.03(e), 5.03(f), 5.03(g) and 5.03(h), distributions shall be made to the Partners in proportion to their respective Percentage Interests at such times and in such amounts as the General Partner, in its sole and absolute discretion, shall determine.
(c)Pubco Distributions. Notwithstanding the provisions of Section 5.03(b), the General Partner, in its sole and absolute discretion, may authorize that cash be paid to Pubco or any of its Subsidiaries (which payment shall be made without pro rata distributions to the other Partners) in exchange for the redemption, repurchase or other acquisition of Units held by Pubco or any of its Subsidiaries to the extent that such cash payment is used to redeem, repurchase or otherwise acquire an equal number of shares of Class A Common Stock in accordance with Section 4.02(b); provided that no distribution (except a distribution relating to redemptions in respect of compensatory equity) shall be made pursuant to this Section 5.03(c) to the extent that, in the General Partner’s reasonable determination, such distribution would reduce distributions under Section 5.03(e).
(d)Distributions in Kind. Any distributions in kind shall be made at such times and in such amounts as the General Partner, in its sole and absolute discretion, shall determine based on the fair market value of such in kind distributions as determined by the General Partner in its sole and absolute discretion in the same proportions as if distributed in accordance with Section 5.03(b), with all Partners participating in proportion to their respective Percentage Interests. If cash and property are to be distributed in kind simultaneously, the Partnership shall distribute such cash and property in kind in the same proportion to each Partner.
(e)Tax Distributions.
(i)Notwithstanding any other provision of this Section 5.03 to the contrary, to the extent permitted by Applicable Law and consistent with the
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Partnership’s obligations to its creditors as reasonably determined by the General Partner, the Partnership shall make cash distributions by wire transfer of immediately available funds pursuant to this Section 5.03(e)(i) to each Partner with respect to its Units at least two Business Days prior to the date on which any U.S. federal corporate estimated tax payments are due, in an amount equal to such Partner’s Tax Distribution Amount, if any; provided that the General Partner shall have no liability to any Partner in connection with any underpayment of estimated taxes, so long as cash distributions are made in accordance with this Section 5.03(e)(i) and the Tax Distribution Amounts are determined as provided in paragraph (i) of the definition of Tax Distribution Amount.
(ii)On any date that the Partnership makes a distribution to the Partners with respect to their Units under a provision of Section 5.03 other than Section 5.03(c) or this Section 5.03(e), if the Tax Distribution Amount is greater than zero, the Partnership shall designate all or a portion of such distribution as a Tax Distribution with respect to a Partner’s Units to the extent of the Tax Distribution Amount with respect to such Partner’s Units as of such date (but not to exceed the amount of such distribution). For the avoidance of doubt, such designation shall be performed with respect to all Partners with respect to which there is a Tax Distribution Amount as of such date.
(iii)Notwithstanding any other provision of this Section 5.03 to the contrary, if the Tax Distribution Amount for a Fiscal Year is greater than zero, to the extent permitted by Applicable Law and consistent with the Partnership’s obligations to its creditors as reasonably determined by the General Partner, the Partnership shall make additional distributions under this Section 5.03(e)(iii) to the extent of such Tax Distribution Amount for such Fiscal Year as soon as reasonably practicable after the end of such Fiscal Year (or as soon as reasonably practicable after any event that subsequently adjusts the taxable income of such Fiscal Year).
(iv)Under no circumstances shall Tax Distributions reduce the amount otherwise distributable to any Partner pursuant to this Section 5.03 (other than this Section 5.03(e)) after taking into account the effect of Tax Distributions on the amount of cash or other assets available for distribution by the Partnership.
(v)Notwithstanding any other provision of this Section 5.03 to the contrary, Tax Distributions shall be made to all Partners on a pro rata basis in accordance with their Percentage Interests, notwithstanding the differing amount of tax liabilities of such Partners, such that each Partner receives at least its Tax Distribution Amount with respect to such Partner’s Units as of the date the Tax Distribution is made. If on the date on which a Tax Distribution is to be made there are not sufficient available funds in the Partnership (or any of its Subsidiaries that are disregarded entities or partnerships for U.S. federal income tax purposes) to distribute the full amount of the relevant Tax Distributions
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otherwise to be made or any credit agreements or other debt documents to which the Partnership (or any of its Subsidiaries) is a party do not permit the Partnership to receive from its Subsidiaries or distribute to each Partner the full amount of the Tax Distributions otherwise to be made to each such Partner, distributions pursuant to this Section 5.03(e) shall be made to all Partners on a pro rata basis in accordance with their Percentage Interests as of such date to the extent of the available funds.
(f)Distributions on Account of Unvested Units. Notwithstanding anything to the contrary in this Section 5.03, no distributions shall be made pursuant to Section 5.03(b) on account of any Unvested Unit that is not a Specified Unvested Unit (other than to the extent such distributions are in respect of a Tax Distribution); provided that any distributions in respect of an Unvested Unit (other than a Specified Unvested Unit, which shall be made without regard to this Section 5.03(f)) shall be payable at the same time as such Unvested Unit becomes a Vested Unit, and if such Unvested Unit is forfeited, the former holder of such Unit shall have no right to receive such distributions.
(g)Distributions Resulting in Violation of Law or Default. Notwithstanding any provision to the contrary contained in this Agreement, the Partnership shall not make, or cause to be made, any distribution to any Partner (and the Partnership shall not make any distribution to Pubco) on account of any Unit if such distribution would violate any applicable Law or the terms of any financing agreement of the Pubco, the Partnership or any of its Subsidiaries or result in a default (or an event that, with notice or the lapse of time or both, would constitute a default) thereunder.
(h)Assignment. Each Partner and its Permitted Transferees shall have the right to assign to any Transferee of Units, pursuant to a Transfer made in compliance with this Agreement, the right to receive any portion of the amounts distributable or otherwise payable to such Partner pursuant to Section 5.03(b).
Section 5.04. Allocations. (a) Net Income and Net Loss. Except as otherwise provided in this Agreement, and after giving effect to the special allocations set forth in Section 5.04(b), Section 5.04(c) and Section 5.04(d), Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss, deduction or credit) of the Partnership shall be allocated among the Partners in a manner such that the Capital Account of each Partner, immediately after making such allocation, is, as nearly as possible, equal to (i) the distributions that would be made to such Partner pursuant to Section 5.03(b) if the Partnership were dissolved, its affairs wound up and its assets sold for cash equal to their Carrying Value, all Partnership liabilities were satisfied (limited with respect to each nonrecourse liability to the Carrying Value of the assets securing such liability), and the net assets of the Partnership were distributed, in accordance with Section 5.03(b), to the Partners immediately after making such allocation, minus (ii) such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.
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(b)Special Allocations. The following special allocations shall be made in the following order:
(i)Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of this Article 5, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). Allocations pursuant to the immediately preceding sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2). This Section 5.04(b)(i) is intended to comply with the minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii)Partner Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this Article 5, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Partner’s share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.04(b)(ii) is intended to comply with the minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii)Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of the Partner as promptly as possible; provided that an allocation pursuant to this Section 5.04(b)(iii) shall be made only if and to the extent that the Partner would have an Adjusted Capital Account Deficit after all other allocations provided for
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in this Article 5 have been tentatively made as if this Section 5.04(b)(iii) were not in this Agreement.
(iv)Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Partners in a manner determined by the General Partner consistent with Treasury Regulations Sections 1.704-2(b) and 1.704-2(c).
(v)Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(j)(1).
(vi)Section 754 Adjustments. (A) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Sections 734(b) or 743(b) of the Code is required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership or as a result of a Transfer of a Partner’s interest in the Partnership, as the case may be, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of such asset) or loss (if the adjustment decreases the basis of such asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income and Net Loss. (B) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Sections 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Partner in complete liquidation of such Partner’s interest in the Partnership, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to such Partners in accordance with their interests in the Partnership in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(c)Curative Allocations. The allocations set forth in Section 5.04(b)(i) through Section 5.04(b)(vi) and Section 5.04(d) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction pursuant to this Section 5.04(c). Therefore, notwithstanding any other provision of this Article 5 (other than the Regulatory
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Allocations), the General Partner shall make such offsetting special allocations of Partnership income, gain, loss, or deduction in whatever manner it determines in its sole and absolute discretion appropriate so that, after such offsetting allocations are made, each Partner’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Section 5.04.
(d)Loss Limitation. Net Loss (or individual items of loss or deduction) allocated pursuant to Section 5.04 hereof shall not exceed the maximum amount of Net Loss (or individual items of loss or deduction) that can be allocated without causing any Partner to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some but not all of the Partners would have Adjusted Capital Account Deficits as a consequence of an allocation of Net Loss (or individual items of loss or deduction) pursuant to Section 5.04 hereof, the limitation set forth in this Section 5.04(d) shall be applied on a Partner by Partner basis and Net Loss (or individual items of loss or deduction) not allocable to any Partner as a result of such limitation shall be allocated to the other Partners in accordance with the positive balances in such Partner’s Capital Accounts so as to allocate the maximum permissible Net Loss to each Partner under Treasury Regulations Section 1.704-1(b)(2)(ii)(d). Any reallocation of Net Loss pursuant to this (d) shall be subject to chargeback pursuant to the curative allocation provision of Section 5.04(c).
Section 5.05. Other Allocation Rules. (a) Interim Allocations Due to Percentage Adjustment. If a Percentage Interest is the subject of a Transfer or the Partners’ interests in the Partnership change pursuant to the terms of this Agreement during any Fiscal Year, the amount of Net Income and Net Loss (or items thereof) to be allocated to the Partners for such entire Fiscal Year shall be allocated to the portion of such Fiscal Year which precedes the date of such Transfer or change (and if there shall have been a prior Transfer or change in such Fiscal Year, which commences on the date of such prior Transfer or change) and to the portion of such Fiscal Year which occurs on and after the date of such Transfer or change (and if there shall be a subsequent Transfer or change in such Fiscal Year, which precedes the date of such subsequent Transfer or change), in accordance with an interim closing of the books, and the amounts of the items so allocated to each such portion shall be credited or charged to the Partners in accordance with Section 5.04 as in effect during each such portion of the Fiscal Year in question. Such allocation shall be in accordance with Section 706 of the Code and the regulations thereunder and made without regard to the date, amount or receipt of any distributions that may have been made with respect to the transferred Percentage Interest to the extent consistent with Section 706 of the Code and the regulations thereunder. As of the date of such Transfer, the Transferee Partner shall succeed to the Capital Account of the Transferor Partner with respect to the transferred Units.
(b)Tax Allocations: Code Section 704(c). In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any Property contributed to the capital of the Partnership and with respect
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to reverse Code Section 704(c) allocations described in Treasury Regulations 1.704-3(a)(6) shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such Property to the Partnership for federal income tax purposes and its initial Carrying Value or its Carrying Value determined pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(f) (computed in accordance with the definition of Carrying Value) using the traditional allocation method without curative allocations under Treasury Regulation 1.704-3(b) or such other allocation method with respect to existing Code Section 704(c) allocation methods or reverse Code Section 704(c) allocation methods that are already applicable with respect to the Partnership. Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 5.05(b), Section 704(c) of the Code (and the principles thereof), and Treasury Regulation 1.704-1(b)(4)(i) are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of Net Income, Net Loss, other items, or distributions pursuant to any provision of this Agreement (except for, in the case of reverse Code Section 704(c) allocations, Tax Distributions).
Section 5.06. Tax Withholding; Withholding Advances. (a) Tax Withholding.
(i)If requested by the General Partner, each Partner shall, if able to do so, deliver to the General Partner: (A) an affidavit in form satisfactory to the Partnership that the applicable Partner (or its partners, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other law; (B) any certificate that the Partnership may reasonably request with respect to any such laws; and/or (C) any other form or instrument reasonably requested by the Partnership relating to any Partner’s status under such law. In the event that a Partner fails or is unable to deliver to the Partnership an affidavit described in (A) of the immediately preceding sentence, the Partnership may withhold amounts from such Partner in accordance with Section 5.06(b).
(ii)After receipt of a written request of any Partner, the Partnership shall use commercially reasonable efforts to provide such information to such Partner and to take such other action as may be reasonably necessary to assist such Partner in making any necessary filings, applications or elections to obtain any available exemption from, or any available refund of, any withholding imposed by any foreign taxing authority with respect to amounts distributable or items of income allocable to such Partner hereunder to the extent not adverse to the Partnership or any Partner. In addition, the Partnership shall, at the reasonable request of any Partner, make or cause to be made (or cause the Partnership to make) any such filings, applications or elections; provided that any such requesting Partner shall use commercially reasonable efforts to cooperate with the Partnership, with respect to any such filing, application or election to the extent reasonably determined by the Partnership and that any filing fees, taxes or other out-of-pocket expenses reasonably incurred and related thereto shall be paid and
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borne by such requesting Partner or, if there is more than one requesting Partner, by such requesting Partners in accordance with their Relative Percentage Interests.
(b)Withholding Advances. To the extent the Partnership is required by Applicable Law to withhold or to make tax payments on behalf of or with respect to any Partner (including backup withholding and any tax payment made by the Partnership pursuant to Section 6225 of the Code that is attributable to such Partner) (“Withholding Advances”), the Partnership may withhold such amounts and make such tax payments as so required.
(c)Repayment of Withholding Advances. All Withholding Advances made on behalf of a Partner, plus interest thereon at a rate equal to the Prime Rate as of the date of such Withholding Advances plus 2.0% per annum, shall (i) be paid on demand by the Partner on whose behalf such Withholding Advances were made (it being understood that no such payment shall increase such Partner’s Capital Account except to the extent that the Withholding Advances previously reduced such Partner’s Capital Account) or (ii) with the consent of the General Partner and the affected Partner, be repaid by reducing the amount of the current or next succeeding distribution or distributions that would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Partner. Whenever repayment of a Withholding Advance by a Partner is made as described in clause (ii) of the immediately preceding sentence, for all other purposes of this Agreement, such Partner shall be treated as having received all distributions (whether before or upon any Dissolution Event) unreduced by the amount of such Withholding Advance and interest thereon.
(d)Reimbursement of Liabilities with Respect to Withholding Advances. Each Partner hereby agrees to reimburse the Partnership for any liability with respect to Withholding Advances (including interest thereon) required or made on behalf of or with respect to such Partner (including penalties imposed with respect thereto). The obligation of a Partner to reimburse the Partnership for taxes pursuant to this Section 5.06(d) shall survive and continue after such Partner Transfers its Units with respect to all payments or allocations to such Partner that were made prior to the date of such Transfer.
ARTICLE 6
CERTAIN TAX MATTERS
Section 6.01. Tax Matters Representative. The General Partner is hereby appointed the “tax matters partner” or the “partnership representative,” as the case may be (in each case, the “Tax Matters Representative”), of the Partnership under Section 6231 of the Code prior to the enactment of U.S. Public Law 114-74 or Section 6223 of the Code, as applicable, and any similar provision of state, local and non-U.S. law. The Partnership shall not be obligated to pay any fees or other compensation to the Tax Matters Representative in its capacity as such, but the Partnership shall reimburse the Tax Matters Representative for all reasonable out-of-pocket costs and expenses (including attorneys’ and other professional fees) incurred by it in its capacity as the Tax Matters
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Representative. The Partnership shall defend, indemnify, and hold harmless the Tax Matters Representative against any and all liabilities sustained or incurred as a result of any act or decision concerning Partnership tax matters and within the scope of such Partner’s responsibilities as the Tax Matters Representative, so long as such act or decision was done or made in good faith and does not constitute gross negligence or willful misconduct. The Partners acknowledge that the Partnership may make the election described in Section 6226 of the Code and any analogous election under state, local or non-U.S. law to the extent such election is available under Applicable Law.
Section 6.02. Section 754 Elections. To the extent that the Partnership or any Subsidiary of the Partnership that is treated as a partnership for U.S. federal income tax purposes has not previously made a valid election under Section 754 of the Code (and a corresponding election under state and local law), the Partnership shall make, and shall cause any such Subsidiary of the Partnership to make, such election effective starting with the taxable year that includes the Effective Time, and the General Partner shall not take any action to revoke such elections.
Section 6.03. Debt Allocation. Indebtedness of the Partnership treated as “excess nonrecourse liabilities” (as defined in Treasury Regulation Section 1.752-3(a)(3)) shall be allocated among the Partners based on their Percentage Interests; provided that the Partnership may use an alternative method under the applicable Treasury Regulations to allocate such excess nonrecourse liabilities if such method would not reasonably be expected to be adverse to any Partner.
ARTICLE 7
MANAGEMENT OF THE PARTNERSHIP; EXPENSES OF PUBCO PARTNERS AND THE GENERAL PARTNER
Section 7.01. Management by the General Partner. Except as otherwise specifically set forth in this Agreement, the General Partner shall be deemed to be the “general partner” of the Partnership within the meaning of the Delaware Act. Except as expressly provided in this Agreement or the Delaware Act, the day-to-day business and affairs of the Partnership and its Subsidiaries shall be managed, operated and controlled by the General Partner in accordance with the terms of this Agreement and no other Partners, in their capacities as Partners, individually or collectively, shall have any management authority or rights over the day-to-day business and affairs of the Partnership and its Subsidiaries. The General Partner is, to the extent of its rights and powers set forth in this Agreement, an agent of the Partnership for the purpose of the Partnership’s and its Subsidiaries’ business, and the actions of the General Partner taken in accordance with such rights and powers, shall bind the Partnership (and no other Partners, individually or collectively, shall have such right). Except as expressly provided in this Agreement, the General Partner shall have all necessary powers to carry out the purposes, business and objectives of the Partnership and its Subsidiaries. The General Partner shall have the power and authority to delegate to one or more other Persons the General Partner’s rights and powers to manage and control the business and affairs of the Partnership, including to delegate to agents and employees of a Partner or the Partnership
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(including any officer or Subsidiary of a Partner or the Partnership), and to delegate by a management agreement or another agreement with, or otherwise to, other Persons. The General Partner may authorize any Person (including any Partner or officer or Subsidiary of the Partnership) to enter into and perform any document on behalf of the Partnership or any Subsidiary. The General Partner shall not (a) engage in any non-Business activity or (b) own any material assets other than Units and/or any cash or other property or assets distributed by, or otherwise received from, the Partnership, without the prior written consent of the Partners, unless the General Partner determines in good faith that such actions or ownership are in the best interest of the Partnership.
Section 7.02. Removal, Replacement and Withdrawal of the General Partner. (a) Subject to Section 7.02(b), only the GP Entity (and, for the avoidance of doubt, no other Partner) may remove the General Partner from its capacity as such or otherwise replace or designate any Person as an additional or replacement General Partner.
(b)The General Partner may withdraw as the General Partner and appoint as its successor, at any time upon written notice to the Partnership, (i) Pubco or any wholly-owned Subsidiary of Pubco, (ii) any Person of which Pubco is a wholly-owned Subsidiary, (iii) any Person into which Pubco is merged or with which Pubco is consolidated or (iv) any transferee of all or substantially all of the assets of Pubco, which withdrawal and replacement shall be effective upon the delivery of such notice.
Section 7.03. Decisions by the Partners. (a) Other than the General Partner, the Partners shall take no part in the management or control of the Partnership or its business and shall transact no business for the Partnership and shall have no power to act for or to bind the Partnership or to assume any obligation or responsibility on behalf of the Partnership or any other Partner; provided that the Partnership may engage any Partner or principal, partner, equityholder or other interest holder thereof as an employee, independent contractor or consultant to the Partnership, in which event the duties and liabilities of such individual or firm with respect to the Partnership as an employee, independent contractor, consultant or other agent, as applicable, shall be governed by the terms of such engagement with the Partnership.
(b)Except as otherwise expressly provided in this Agreement, the Partners shall not have the power or authority to vote, approve or consent to any matter or action taken by the Partnership. Except as otherwise expressly provided in this Agreement, any proposed matter or action that is subject to the vote, approval or consent of the Partners shall require the approval of a majority in interest of the Partners or such class of Partners, as the case may be (by (x) resolution at a duly convened meeting of the Partners or (y) written consent of the Partners). Except as otherwise expressly provided in this Agreement, all Partners shall vote together as a single class on any matter that is subject to the vote, approval or consent of the Partners. In the case of any such approval, a majority in interest of the Partners may call a meeting of the Partners at such time and place or by means of telephone or other communications facility that permits all persons participating in such meeting to hear and speak to each other for the purpose of a vote
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thereon. Notice of any such meeting shall be required, which notice shall include a brief description of the action or actions to be considered by the Partners. Unless waived by any such Partner in writing, notice of any such meeting shall be given to each Partner at least four days prior thereto. Attendance or participation of a Partner at a meeting shall constitute a waiver of notice of such meeting, except when such Partner attends or participates in the meeting for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not properly called or convened. Any action required or permitted to be taken at any meeting of the Partners may be taken without a meeting, if a consent in writing, setting forth the actions so taken, shall be signed by Partners sufficient to approve such action pursuant to this Section 7.03(b). A copy of any such consent in writing shall be provided to the Partners promptly after its execution.
(c)For the avoidance of doubt, the Partnership shall not be required to hold an annual meeting of the Partners.
Section 7.04. Duties. The parties acknowledge that the General Partner will take action through Pubco’s board of directors and officers, and that the members of Pubco’s board of directors and officers will owe fiduciary duties to the stockholders of Pubco. The General Partner will use all commercially reasonable and appropriate efforts and means, as determined in good faith by the General Partner, to minimize any conflict of interest between the Partners, on the one hand, and the stockholders of Pubco, on the other hand, and to effectuate any transaction that involves or affects any of the Partnership, the General Partner, the Partners and/or the stockholders of Pubco in a manner that does not (i) advantage or disadvantage the Partners or their interests relative to the stockholders of Pubco, (ii) advantage or disadvantage the stockholders of Pubco relative to the Partners or (iii) treats the Partners and the stockholders of Pubco differently; provided that in the event of a conflict between the interests of the stockholders of Pubco and the interests of the Non-Pubco Partners, the General Partner shall discharge its fiduciary duties to such Non-Pubco Partners by acting in the best interests of Pubco’s stockholders.
Section 7.05. Officers. (a) Appointment of Officers. The General Partner may from time to time appoint individuals as officers (“Officers”) of the Partnership, which may include such officers as the General Partner determines in its sole and absolute discretion are necessary and appropriate. No Officer need be a Partner. An individual may be appointed to more than one office of the Partnership. If an Officer is also an officer of the General Partner or Pubco, then Section 7.04 shall apply to such Officer in the same manner as it applies to the General Partner.
(b)Authority of Officers. The Officers shall have the duties, rights, powers and authority as may be prescribed or otherwise delegated by the General Partner in its sole and absolute discretion from time to time.
(c)Removal, Resignation and Filling of Vacancy of Officers. The General Partner may in its sole and absolute discretion remove any Officer, for any reason or for no reason, at any time. Any Officer may resign at any time by giving written notice to the
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Partnership and such resignation shall take effect at the date of the receipt of such notice or any later time specified in that notice; provided that, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any such resignation shall be without prejudice to the rights, if any, of the Partnership or such Officer under this Agreement. A vacancy in any office of the Partnership because of death, resignation, removal or otherwise may be filled by the General Partner in its sole and absolute discretion.
Section 7.06. Expenses of Pubco Partners and the General Partner. (a) The General Partner agrees that all Reimbursable Expenses will be capitalized into the Partnership and paid by the Partnership (or promptly reimbursed or advanced to the Pubco Partner or the General Partner, as applicable). Without limiting the foregoing, the General Partner will establish procedures for periodic or more frequent reimbursement or advancement of Reimbursable Expenses in accordance with this Section 7.06(a) that are reasonably acceptable to the Pubco Partner and acceptable to the Partnership’s and the Pubco Partner’s independent auditors.
(b)The Partners intend that, to the fullest extent reasonably practicable and consistent with all Applicable Laws, including with respect to tax, any amounts reimbursed or advanced in accordance with Section 7.06(a) (i) be treated as an expense of the Partnership, to be borne by the Partners in proportion to their Percentage Interests, subject to the other terms and conditions of this Agreement and (ii) not be treated as a distribution to the Pubco Partner or the General Partner under Article 5 and not be taken into account in determining the amounts of any such distributions.
ARTICLE 8
TRANSFER OF INTERESTS
Section 8.01. Restrictions on Transfers. (a) Except as expressly permitted by Section 8.02, and subject to Section 8.01(b), Section 8.01(c), Section 8.01(d), Section 8.01(e) and/or any other agreement between such Partner and the Partnership, Pubco or any of their controlled Affiliates, without the prior written approval of the General Partner, no Partner shall directly or indirectly Transfer all or any part of its Units or any right or economic interest pertaining thereto, including the right to vote or consent on any matter or to receive or have any economic interest in distributions or advances from the Partnership pursuant thereto, to any Person that is not a Permitted Transferee of such Partner. Any such Transfer of Units by a Partner which is not in compliance with the provisions of this Agreement shall be deemed a Transfer of Units by such Partner in violation of this Agreement (and a breach of this Agreement by such Partner) and shall be null and void ab initio. Notwithstanding anything to the contrary in this Article 8, (i) Section 10.03 shall govern the exchange of Units for shares of Class A Common Stock, and an exchange pursuant to, and in accordance with, Section 10.03 shall not be considered a “Transfer” of Units for purposes of this Agreement and (ii) any Transfer of shares of Class A Common Stock shall not be considered a “Transfer” for purposes of this Agreement.
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(b)Notwithstanding anything to the contrary in this Agreement, no Partner shall directly or indirectly Transfer all or any part of its Units or any right or economic interest pertaining thereto, including the right to vote or consent on any matter or to receive or have any economic interest in distributions or advances from the Partnership pursuant thereto, to any Person unless such Partner concurrently Transfers a corresponding number of shares of Class B Common Stock to the same person in accordance with the provisions of Pubco’s certificate of incorporation, as it may be amended from time to time in accordance with the terms thereof. In the event that any Unit ceases to be held directly or indirectly by a holder of shares of Class B Common Stock as set forth in the books and records of Pubco, such Unit, if not Transferred to another holder of shares of Class B Common Stock in a manner that would result in such other holder holding a number of shares of Class B Common Stock equivalent to the number of Units held by such other holder, shall automatically and without further action on the part of the Partnership, the General Partner or such holder be transferred to the Partnership for no consideration and thereupon shall be retired.
(c)Except as otherwise expressly provided in this Agreement, it shall be a condition precedent to any Transfer otherwise permitted or approved pursuant to this Article 8 that:
(i)the Transferor shall have provided to the Partnership prior written notice of such Transfer;
(ii)the Transfer shall comply with all Applicable Laws and the General Partner shall be satisfied that such Transfer will not result in a violation of the Securities Act or any other Applicable Law;
(iii)the Transfer shall not result in the Partnership (A) not being exempt from registration as an “investment company” under the Investment Company Act of 1940, as amended, (B) being required to register interests with the SEC under the Securities Exchange Act of 1934, as amended, (C) the termination of the Partnership or a Subsidiary of the Partnership under the Code, (D) all or any portion of the assets of the Partnership or the actions of the General Partner becoming or being subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Code (or any federal, state, local or non-U.S. law that is substantially similar to Title I of ERISA or Section 4975 of the Code);
(iv)the Transfer shall not result in Units being held by any Person, as determined by the General Partner in its sole and absolute discretion, to whom a sale or Transfer of Units, or in relation to whom the holding of Units: (A) would or could be in breach of the laws or requirements of any jurisdiction or Governmental Authority or in circumstances (whether directly or indirectly affecting such Person, and whether taken alone or in conjunction with other Persons, connected or not, or any other circumstances) appearing to the General Partner to be relevant or (B) might result in the Partnership, the General Partner or
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Pubco incurring a liability with respect to taxation or suffering a pecuniary, fiscal, legal, administrative or regulatory disadvantage; and
(v)Notwithstanding any other provision of this Agreement to the contrary, it shall be a condition precedent to any Transfer otherwise permitted or approved pursuant to this Article 8 that the Transfer would not require that the Transferee make an offer to holders of shares of Class A Common Stock to acquire shares of Class A Common Stock on the same terms and conditions under applicable securities laws, if Units that are the subject of such Transfer were redeemed for shares of Class A Common Stock pursuant to Article 10.
(d)Notwithstanding any other provision of this Agreement to the contrary, no Partner shall directly or indirectly Transfer all or any part of its Units or any right or economic interest pertaining thereto, including the right to vote or consent on any matter or to receive or have any economic interest in distributions or advances from the Partnership pursuant thereto, if such Transfer (i) would result or does result in the Partnership having more than 95 partners, within the meaning of U.S. Treasury Regulations Section 1.7704-1(h)(1) (determined taking into account the rules of Treasury Regulations Section 1.7704-1(h)(3)) or (ii) in the sole and absolute discretion of the General Partner, could cause the Partnership to be classified, currently or in the future, as a “publicly traded partnership” as that term is defined in Section 7704 of the Code and Regulations promulgated thereunder or otherwise as an association taxable as a corporation for U.S. federal income tax purposes.
(e)Any Transfer of Units pursuant to this Agreement, including this Article 8, shall be subject to the provisions of Section 3.01 and Section 3.02.
Section 8.02. Certain Permitted Transfers. Notwithstanding anything to the contrary in this Agreement, but subject to Section 8.01(b), Section 8.01(c), Section 8.01(d), Section 8.01(e) and/or any other agreement between a Transferring Partner and the Partnership, the following Transfers shall be permitted:
(a)any Transfer by any Partner of its Units pursuant to a Disposition Event (as such term is defined in the certificate of incorporation of Pubco, as it may be amended from time to time in accordance with the terms thereof);
(b)any Transfer by any Partner of Units to any Transferee approved in writing by the General Partner in its sole and absolute discretion; and
(c)any Transfer of all or any portion of a Partner’s Units to a Permitted Transferee of such Partner.
Section 8.03. Distributions. Notwithstanding anything in this Article 8 or elsewhere in this Agreement to the contrary, if a Partner Transfers all or any portion of its Units after the designation of a record date and declaration of a distribution pursuant to Article 5 and before the payment date of such distribution, the Transferring Partner (and not the Person acquiring all or any portion of such Units) shall be entitled to receive such
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distribution in respect of such Transferred Units and the Person acquiring all or any portion of such Units shall take all actions necessary, appropriate or advisable to or for the furtherance of the purposes set forth in this Section 8.03.
ARTICLE 9
CERTAIN OTHER AGREEMENTS
Section 9.01. Partnership Call Right. In connection with (i) any Involuntary Transfer by any Non-Pubco Partner or (ii) any Transfer of Units that would result in (or has resulted in) a Violation (as defined in Pubco’s certificate of incorporation), as determined by Pubco’s board in accordance with Pubco’s certificate of incorporation, the Partnership or the General Partner may, in the General Partner’s sole and absolute discretion, elect to purchase from such Non-Pubco Partner and/or the Transferee(s) in any such Transfer described in the foregoing clause (i) or (ii) (each, a “Call Partner”) any or all of the Units so Transferred or so held by such Call Partner (or such Call Partner’s Permitted Transferees), as applicable (“Call Units”), at any time by delivery of a written notice (a “Call Notice”) to such Call Partner; provided that the General Partner shall exercise the call right provided for in this Section 9.01 upon Pubco’s redemption of any shares of Class B Common Stock in connection with any Transfer of shares of Class B Common Stock that would result in (or has resulted in) a Violation (as defined in Pubco’s certificate of incorporation), as determined by Pubco’s board in accordance with Pubco’s certificate of incorporation, and the number of Call Units subject to such call right shall be equivalent to the number of shares of Class B Common Stock subject to such redemption. The Call Notice shall set forth the Unit Redemption Price and the proposed closing date of such purchase of such Call Units; provided that such closing date shall be within 90 days following the date of such Call Notice. At the closing of any such purchase, in exchange for the payment by the Partnership or the General Partner to a Call Partner of the Unit Redemption Price in cash (if applicable), (i) such Call Partner shall deliver its Call Units, duly endorsed, or accompanied by written instruments of transfer in form satisfactory to the Partnership or the General Partner, as applicable, duly executed by such Call Partner and accompanied by all requisite transfer taxes, if any, (ii) such Call Units shall be free and clear of any Liens and (iii) such Call Partner shall so represent and warrant and further represent and warrant that it is the sole beneficial and record owner of such Call Units. Following such closing, such Call Partner shall no longer be entitled to any rights in respect of its Call Units, including any distributions of the Partnership or Pubco thereupon (other than the right to the payment of the Unit Redemption Price at such closing), and, to the extent any such Call Partner does not hold any Units from and after such closing, such Call Partner shall thereupon cease to be a Partner of the Partnership and, to the extent any such Call Partner does not hold any shares of Pubco Common Stock from and after such closing, shall thereupon cease to be a stockholder of Pubco.
Section 9.02. Preemptive Rights. No Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions, (ii) issuances or sales by the Partnership of any class or series of Units or other Equity
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Securities of the Partnership, whether currently existing and unissued or hereafter created, (iii) issuances of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any Units or other Equity Securities of the Partnership, (iv) issuances of any right of subscription to or right to receive, or any warrant or option for the purchase of, any Units or other Equity Securities of the Partnership or (v) issuances or sales of any other securities that may be issued or sold by the Partnership.
ARTICLE 10
REDEMPTION AND EXCHANGE RATES
Section 10.01. Redemption Right of a Partner.
(a)Notwithstanding any provision to the contrary in this Agreement and without the need for approval by the General Partner or consent by any other Partners, each Non-Pubco Partner shall be entitled to cause the Partnership to redeem (a “Redemption”) all or any portion of its Units (the “Redemption Right”) at any time on the terms and conditions set forth in this Article 10; provided that the General Partner may force a Non-Pubco Partner to exercise its Redemption Right at any time at which such Non-Pubco Partner holds fewer than 60,000 Units. A Non-Pubco Partner desiring to exercise its Redemption Right (the “Redeeming Partner”) shall exercise such right by giving written notice in the form attached hereto as Exhibit A (the “Redemption Notice”) to the Partnership (with a copy to Pubco). The Redemption Notice shall specify the number of Units (the “Redeemed Units”) that the Redeeming Partner intends to have the Partnership redeem; provided that a Redemption Notice may be conditioned by the Redeeming Partner on the closing of an underwritten distribution of the shares of Class A Common Stock that may be issued in connection with such proposed Redemption; provided, further, that an Award Unit may not be redeemed unless it is a Vested Unit. The Partnership shall use commercially reasonable efforts to effect the such redemption and cause it to be completed and effective on the earliest date practicable following delivery of the Redemption Notice (the “Redemption Date”); provided that the Redemption Date shall be (i) a Business Day and (ii) not less than five Business Days from the date of delivery of such Redemption Notice (unless and to the extent the General Partner in it is sole and absolute discretion agrees in writing to waive such time period); provided, further, that the Partnership, Pubco and the Redeeming Partner may change the number of Redeemed Units and/or the Redemption Date to another number and/or date by mutual agreement signed in writing by each of them. Unless the Redeeming Partner has timely delivered a Retraction Notice as provided in Section 10.01(b) or has revoked or delayed a Redemption as provided in Section 10.01(c), on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (A) the Redeeming Partner shall transfer and surrender the Redeemed Units to the Partnership, free and clear of all Liens and (B) the Partnership shall (x) cancel the Redeemed Units, (y) transfer to the Redeeming Partner the consideration to which the Redeeming Partner is entitled under Section 10.01(b) and (z) if the Units are certificated, issue to the
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Redeeming Partner a certificate for a number of Units equal to the difference (if any) between the number of Units evidenced by the certificate surrendered by the Redeeming Partner pursuant to the immediately preceding clause (A) and the Redeemed Units.
(b)In exercising its Redemption Right, a Redeeming Partner shall be entitled to receive the number of shares of Class A Common Stock equal to the number of Redeemed Units (the “Share Settlement”) or the immediately available funds in U.S. dollars in an amount equal to the Redeemed Units Equivalent Amount (the “Cash Settlement”); provided that Pubco shall have the sole and exclusive right and option as provided in Section 10.02 and subject to Section 10.01(d) to select whether the redemption payment is made by means of a Share Settlement or a Cash Settlement; provided, further, that if the Redeeming Partner is an Affiliate of the Partnership or Pubco, the decision by Pubco to effect the redemption payment as a Share Settlement or a Cash Settlement must be approved by the audit committee of Pubco (or the chair of such committee). Within two Business Days of delivery of the Redemption Notice, Pubco shall give written notice (the “Contribution Notice”) to the Partnership (with a copy to the Redeeming Partner) of its intended settlement method with respect to the applicable redemption, but if Pubco does not timely deliver a Contribution Notice, Pubco shall be deemed to have elected the Share Settlement method with respect to such redemption. If Pubco elects the Cash Settlement method, the Redeeming Partner may retract and revoke its Redemption Notice by giving written notice (the “Retraction Notice”) to the Partnership (with a copy to Pubco) within one Business Days of delivery of the Contribution Notice. The timely delivery of a Retraction Notice shall terminate all of the Redeeming Partner’s, the Partnership’s and Pubco’s rights and obligations under this Section 10.01 arising from the Redemption Notice that has been retracted pursuant to such Retraction Notice.
(c)In the event that Pubco elects a Share Settlement in connection with a Redemption, a Redeeming Partner shall be entitled to retract and revoke its Redemption Notice or delay the consummation of a Redemption if any of the following conditions exists: (i) any registration statement pursuant to which the resale of the Class A Common Stock to be registered for such Redeeming Partner at or immediately following the consummation of the Redemption shall have ceased to be effective pursuant to any action or inaction by the SEC or no such resale registration statement has yet become effective; (ii) Pubco shall have failed to cause any related prospectus to be supplemented by any required prospectus supplement necessary to effect such Redemption; (iii) Pubco shall have exercised its right to defer, delay or suspend the filing or effectiveness of a registration statement and such deferral, delay or suspension shall affect the ability of such Redeeming Partner to have its Class A Common Stock registered at or immediately following the consummation of the Redemption; (iv) Pubco shall have disclosed to such Redeeming Partner any material non-public information concerning Pubco, the receipt of which results in such Redeeming Partner being prohibited or restricted from selling Class A Common Stock at or immediately following the Redemption without disclosure of such information (and Pubco does not permit such disclosure); (v) any stop order relating to the registration statement pursuant to which the Class A Common Stock was to be
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registered by such Redeeming Partner at or immediately following the Redemption shall have been issued by the SEC; (vi) there shall have occurred a material and adverse disruption in the securities markets generally or in the market or markets in which the Class A Common Stock is then traded; (vii) there shall be in effect an injunction, a restraining order or a decree of any nature of any Governmental Authority that restrains or prohibits the Redemption; or (viii) the Redemption Date would occur three Business Days or less prior to, or during, any “black-out” or similar period under Pubco’s policies covering trading in the Pubco’s securities to which the applicable Redeeming Partner is subject, which period restricts the ability of such Redeeming Partner to immediately resell shares of Class A Common Stock to be delivered to such Redeeming Partner in connection with a Share Settlement; provided that in no event shall the Redeeming Partner seeking to revoke its Redemption Notice or delay the consummation of such Redemption and relying on any of the matters contemplated in the immediately preceding clauses (i) through (viii) above have controlled or intentionally materially influenced any facts, circumstances or Persons in connection therewith (except, if applicable, in the good faith performance of his or her duties as an officer or director of Pubco) in order to provide such Redeeming Partner with a basis for such delay or revocation. If a Redeeming Partner delays the consummation of a Redemption pursuant to this Section 10.01(c), the Redemption Date shall occur on the fifth Business Day following the date on which the conditions giving rise to such delay cease to exist (or such earlier day as Pubco, the Partnership and such Redeeming Partner may agree in writing).
(d)The number of shares of Class A Common Stock or the Redeemed Units Equivalent Amount that a Redeeming Partner is entitled to receive under Section 10.01(b) (whether through a Share Settlement or Cash Settlement, as determined by Pubco under, and in accordance with, Section 10.01(b)) shall not be adjusted on account of any distributions previously made with respect to the Redeemed Units or dividends previously paid with respect to Class A Common Stock; provided that if a Redeeming Partner causes the Partnership to redeem Redeemed Units and the Redemption Date occurs subsequent to the record date for any distribution with respect to the Redeemed Units but prior to payment of such distribution, the Redeeming Partner shall be entitled to receive such distribution with respect to the Redeemed Units on the date that it is made notwithstanding that the Redeeming Partner transferred and surrendered the Redeemed Units to the Partnership prior to such date (but, in each case, only if Pubco has declared a corresponding dividend of all amounts receivable by Pubco in such distribution with a record date for such dividend that is no later than the record date for such distribution).
(e)In the event of a reclassification or other similar transaction as a result of which the shares of Class A Common Stock are converted into another security, then in exercising its Redemption Right a Redeeming Partner shall be entitled to receive the amount of such security that the Redeeming Partner would have received if such Redemption Right had been exercised and the Redemption Date had occurred immediately prior to the record date of such reclassification or other similar transaction.
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Section 10.02. Election and Contribution of Pubco. In connection with the exercise of a Redeeming Partner’s Redemption Rights under Section 10.01(a), Pubco shall contribute to the Partnership the consideration the Redeeming Partner is entitled to receive under Section 10.01(b). Unless the Redeeming Partner has timely delivered a Retraction Notice as provided in Section 10.01(b) or has revoked or delayed a Redemption as provided in Section 10.01(c), on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (a) Pubco shall make its Capital Contribution to the Partnership (in the form of the Share Settlement or the Cash Settlement) required under this Section 10.02 and (b) the Partnership shall issue to Pubco a number of Units equal to the number of Redeemed Units surrendered by the Redeeming Partner. Notwithstanding any other provisions of this Agreement to the contrary, in the event that Pubco elects a Cash Settlement, Pubco shall only be obligated to contribute to the Partnership an amount in respect of such Cash Settlement equal to the net proceeds (after deduction of any underwriters’ discounts or commissions and brokers’ fees or commissions) from the sale by Pubco of a number of shares of Class A Common Stock equal to the number of Redeemed Units to be redeemed with respect to such Cash Settlement; provided that Pubco’s Capital Account shall be increased by an amount equal to any discount relating to such sale of shares of Class A Common Stock. The timely delivery of a Retraction Notice shall terminate all of the Partnership’s and Pubco’s rights and obligations under this Section 10.01(e) arising from the Redemption Notice.
Section 10.03. Exchange Right of Pubco.
(a)Notwithstanding anything to the contrary in this Article 10, Pubco may, in its sole and absolute discretion, elect to effect on the Redemption Date the exchange of Redeemed Units for the Share Settlement or Cash Settlement, as the case may be, through a direct exchange of such Redeemed Units and such consideration between the Redeeming Partner and Pubco (a “Direct Exchange”). Upon such Direct Exchange pursuant to this Section 10.03, Pubco shall acquire the Redeemed Units and shall be treated for all purposes of this Agreement as the owner of such Units.
(b)Pubco may, at any time prior to a Redemption Date, deliver written notice (an “Exchange Election Notice”) to the Partnership and the Redeeming Partner setting forth its election to exercise its right to consummate a Direct Exchange; provided that such election does not prejudice the ability of the parties to consummate a Redemption or Direct Exchange on the Redemption Date. An Exchange Election Notice may be revoked by Pubco at any time; provided that any such revocation does not prejudice the ability of the parties to consummate a Redemption or Direct Exchange on the Redemption Date. The right to consummate a Direct Exchange in all events shall be exercisable for all the Redeemed Units that would have otherwise been subject to a Redemption. Except as otherwise provided by this Section 10.03, a Direct Exchange shall be consummated pursuant to the same timeframe and in the same manner as the relevant Redemption would have been consummated if Pubco had not delivered an Exchange Election Notice.
Section 10.04. Tender Offers and Other Events with Respect to Pubco.
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(a)In the event that a tender offer, share exchange offer, issuer bid, take-over bid, recapitalization or similar transaction with respect to Class A Common Stock (a “Pubco Offer”) is proposed by Pubco or is proposed to Pubco or its stockholders and approved by the board of directors of Pubco or is otherwise effected or to be effected with the consent or approval of the board of directors of Pubco, the holders of Units (other than Units held by a Pubco Partner and any Units that have not vested) shall be permitted to participate in such Pubco Offer by delivery of a notice of exchange (which notice of exchange shall be effective immediately prior to the consummation of such Pubco Offer (and, for the avoidance of doubt, shall be contingent upon such Pubco Offer and not be effective if such Pubco Offer is not consummated)). In the case of a Pubco Offer proposed by Pubco, Pubco will use its reasonable efforts expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit the holders of Units (other than Units held by a Pubco Partner and any Units that have not vested) to participate in such Pubco Offer to the same extent or on an economically equivalent basis as the holders of shares of Class A Common Stock without discrimination; provided that, without limiting the generality of this sentence, Pubco will use its reasonable efforts expeditiously and in good faith to ensure that such holders may participate in each such Pubco Offer without being required to exchange Units to the extent such participation is practicable. For the avoidance of doubt (but subject to Section 10.04(c)), in no event shall the holders of Units be entitled to receive in such Pubco Offer aggregate consideration (other than pursuant to the Tax Receivables Agreement) for each Unit that is greater than the consideration payable in respect of each share of Class A Common Stock in connection with a Pubco Offer.
(b)Notwithstanding any other provision of this Agreement, if a Disposition Event (as such term is defined in the Pubco certificate of incorporation, as it may be amended from time to time in accordance with the terms thereof) is approved by the board of directors of Pubco and consummated in accordance with Applicable Law, at the request of the Partnership (or following such Disposition Event, its successor) or Pubco (or following such Disposition Event, its successor), each of the holders of Units (other than any Units that have not vested) shall be required to exchange with Pubco, at any time and from time to time after, or simultaneously with, the consummation of such Disposition Event, all of such holder’s Units for aggregate consideration for each LP Unit that is equivalent to the consideration payable in respect of each share of Class A Common Stock in connection with the Disposition Event; provided that in the event of a Disposition Event intended to qualify as a reorganization within the meaning of Section 368(a) of the Code or as a transfer described in Section 351(a) or Section 721 of the Code, a holder shall not be required to exchange LP Units pursuant to this Section 10.04(b) unless, as a part of such transaction, the holders are permitted to exchange their LP Units for securities in a transaction that is expected to permit such exchange without current recognition of gain or loss, for U.S. and non-U.S. tax purposes, for the direct and indirect holders of LP Units (except to the extent that property other than securities is received in such exchange), based on a “should” or “will” level opinion from independent tax counsel of recognized standing and expertise.
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(c)Notwithstanding any other provision of this Agreement, in a Disposition Event, payments under or in respect of the Tax Receivables Agreement shall not be considered part of the consideration payable in respect of any Unit or share of Class A Common Stock in connection with such Disposition Event for the purposes of Section 10.04(a) and Section 10.04(b).
Section 10.05. Reservation of Shares of Class A Common Stock; Certificate of Incorporation of Pubco. At all times, Pubco shall reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon a Redemption or a Direct Exchange, such number of shares of Class A Common Stock as shall be issuable upon any such Redemption or Direct Exchange pursuant to Share Settlements; provided that nothing contained herein shall be construed to preclude Pubco from satisfying its obligations in respect of any such Redemption or Direct Exchange by delivery of purchased Class A Common Stock (which may or may not be held in the treasury of Pubco) or the delivery of cash pursuant to a Cash Settlement. Pubco shall deliver Class A Common Stock that has been registered under the Securities Act with respect to any Redemption or Direct Exchange to the extent a registration statement is effective and available for such shares. Pubco covenants that all Class A Common Stock issued upon a Redemption or Direct Exchange will, upon issuance, be validly issued, fully paid and non-assessable. The provisions of this Article 10 shall be interpreted and applied in a manner consistent with the corresponding provisions of Pubco’s certificate of incorporation, as it may be amended from time to time in accordance with the terms thereof.
Section 10.06. Effect of Redemption or Direct Exchange. This Agreement shall continue notwithstanding the consummation of a Redemption or Direct Exchange and all governance or other rights set forth herein shall be exercised by the remaining Partners and the Redeeming Partner (to the extent of such Redeeming Partner’s remaining interest in the Partnership following such Redemption or Direct Exchange). No Redemption or Direct Exchange shall relieve a Redeeming Partner of any prior breach of this Agreement.
Section 10.07. Tax Treatment. Unless otherwise required by applicable Law, the parties hereto acknowledge and agree a Redemption or a Direct Exchange, as the case may be, shall be treated as a direct exchange between Pubco and the Redeeming Partner for U.S. federal and applicable state and local income tax purposes.
Section 10.08. Withholding. Without limiting Section 5.06(b), Pubco and the General Partner, in its own capacity and on behalf of the Partnership, will be entitled to deduct and withhold from any consideration otherwise payable to any Person under Article 10 any amounts Pubco, the General Partner or the Partnership, respectively, is required or permitted to deduct and withhold with respect to such payment under by Applicable Law, or would be permitted to withhold if an equal amount were remitted to the appropriate taxing authority. To the extent that amounts are so withheld, the withheld amounts will be treated for all purposes as having been paid to the Person in respect of
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which such deduction and withholding was made. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Person exceeds the cash portion of the consideration otherwise payable to the Person under Article 10, Pubco and the General Partner, on behalf of the Partnership, are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to Pubco or the Partnership, as the case may be, to enable it to comply with the deduction or withholding requirement (or make such permitted deduction) and Pubco or the General Partner, on behalf of the Partnership, will notify the Person and remit to the Person any unapplied balance of the net proceeds of such sale.
Section 10.09. Exchange of Award Units Upon Termination of Employment, Death or Disability. Upon the termination of the employment of a Partner with any Pubco Partner, the General Partner or the Partnership (or any controlled Affiliate of any of the foregoing), all Award Units held by such Partner and not forfeited, if any, will automatically be subject to, at Pubco’s option, a Redemption or a Direct Exchange subject to, and in accordance with, Article 10; provided that any such Redemption or Direct Exchange pursuant to this Section 10.09 will be effective immediately prior to the termination of employment of such Partner.
Section 10.10. Additional Restrictions and Requirements. Notwithstanding anything to the contrary herein:
(a)Redemption shall be permitted (and, if attempted, shall be null and void ab initio) unless the Redemption will not cause the Partnership to be treated as a “publicly traded partnership” under Section 7704 of the Code (or any successor or similar provision) or otherwise cause the Partnership to cease to be classified as a partnership for tax purposes, in each case, as determined by the General Partner in its sole and absolute discretion after consultation with outside legal counsel and tax advisors.
(b)Pubco shall bear all of its own expenses in connection with the consummation of any Redemption, whether or not any such Redemption is ultimately consummated, including any transfer taxes, stamp taxes or duties or other similar taxes in connection with, or arising by reason of, any Redemption (but not, in any case, any income taxes or other similar taxes); provided that if any portion of a Share Settlement is to be delivered in a name other than that of the Redeeming Partner that requested the Redemption, then such Redeeming Partner and/or the Person in whose name such shares are to be delivered shall pay to Pubco the amount of any transfer taxes, stamp taxes or duties or other similar taxes in connection with, or arising by reason of, such Redemption or shall establish to the reasonable satisfaction of Pubco that such tax has been paid or is not payable. Except as otherwise may separately be agreed by the Partnership, the Redeeming Partner shall bear all of its own expenses in connection with the consummation of any Redemption (including, for the avoidance of doubt, expenses incurred by such Redeeming Partner in connection with any Redemption that are invoiced to the Partnership).
ARTICLE 11
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LIMITATION ON LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 11.01. Limitation on Liability. The debts, obligations and liabilities of the Partnership, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Partnership, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Partnership; provided that the foregoing shall not alter a Partner’s obligation to return funds wrongfully distributed to it.
Section 11.02. Exculpation and Indemnification; Elimination of Fiduciary Duties. (a) Subject to the duties of the General Partner and Officers set forth in this Agreement, neither the General Partner nor any other Covered Person shall be liable, including under any legal or equitable theory of fiduciary duty or other theory of liability, to the Partnership or to any other Covered Person for any losses, claims, damages or liabilities incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Partnership. There shall be, and each Covered Person shall be entitled to, a presumption that such Covered Person acted in good faith. None of the Partners shall have any fiduciary duties to any other Partner, the Partnership or any other Person, and any duties or implied duties (including fiduciary duties) of any Partner to any other Partner or the Partnership that would otherwise apply at law (common or statutory) or in equity are hereby eliminated to the fullest extent permitted under any Applicable Law.
(b)A Covered Person shall be fully protected in relying in good faith upon the records of the Partnership and upon such information, opinions, reports or statements presented to the Partnership by any Person as to matters the Covered Person reasonably believes are within such Person’s professional or expert competence.
(c)The Partnership shall indemnify, defend and hold harmless each Covered Person against any losses, claims, damages, liabilities, expenses (including all reasonable out-of-pocket fees and expenses of counsel and other advisors), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, in which such Covered Person may be involved or become subject to, in connection with any matter arising out of or in connection with the Partnership’s business or affairs, or this Agreement or any related document, unless such loss, claim, damage, liability, expense, judgment, fine, settlement or other amount (i) is a result of a Covered Person not acting in good faith on behalf of the Partnership or arose as a result of the willful commission by such Covered Person of any act that is dishonest and materially injurious to the Partnership, (ii) results from the breach by such Covered Person of Section 9.01 or (iii) results from the breach by any Partner (in such capacity) of its contractual obligations under this Agreement. If any Covered Person becomes involved in any capacity in any action, suit, proceeding or investigation in connection with any matter arising out of or in connection with the Partnership’s business or affairs, or this Agreement or any related document, other than (x) by reason of any act or omission performed or omitted by such Covered Person that was not in good faith on behalf of the Partnership or constituted a willful commission by such Covered Person of an act that is
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dishonest and materially injurious to the Partnership or (y) as a result of any breach by such Covered Person of Section 9.01, the Partnership shall reimburse such Covered Person for its reasonable legal and other reasonable out-of-pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that such Covered Person shall promptly repay to the Partnership the amount of any such reimbursed expenses paid to it if it shall be finally judicially determined that such Covered Person was not entitled to indemnification by, or contribution from, the Partnership in connection with such action, suit, proceeding or investigation. If for any reason (other than the bad faith of a Covered Person or the willful commission by such Covered Person of an act that is dishonest and materially injurious to the Partnership) the foregoing indemnification is unavailable to such Covered Person, or insufficient to hold it harmless, then the Partnership shall contribute to the amount paid or payable by such Covered Person as a result of such loss, claim, damage, liability, expense, judgment, fine, settlement or other amount in such proportion as is appropriate to reflect any relevant equitable considerations. There shall be, and each Covered Person shall be entitled to, a rebuttable presumption that such Covered Person acted in good faith.
(d)The obligations of the Partnership under Section 11.02(c) shall be satisfied solely out of and to the extent of the Partnership’s assets, and no Covered Person shall have any personal liability on account thereof.
(e)Given that certain Jointly Indemnifiable Claims may arise by reason of the service of a Covered Person to the Partnership and/or as a director, trustee, officer, partner, Partner, manager, employee, consultant, fiduciary or agent of other corporations, limited liability companies, partnerships, joint ventures, trusts, employee benefit plans or other enterprises controlled by the Partnership (collectively, the “Controlled Entities”), or by reason of any action alleged to have been taken or omitted in any such capacity, the Partnership acknowledges and agrees that the Partnership shall, and to the extent applicable shall cause the Controlled Entities to, be fully and primarily responsible for the payment to the Covered Person in respect of indemnification or advancement of all out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements) in each case, actually and reasonably incurred by or on behalf of a Covered Person in connection with either the investigation, defense or appeal of a claim, demand, action, suit or proceeding or establishing or enforcing a right to indemnification under this Agreement or otherwise incurred in connection with a claim that is indemnifiable hereunder (collectively, “Expenses”) in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with (as applicable) the terms of (i) the Delaware Act, (ii) this Agreement, (iii) any other agreement between the Partnership or any Controlled Entity and the Covered Person pursuant to which the Covered Person is indemnified, (iv) the laws of the jurisdiction of incorporation or organization of any Controlled Entity and/or (v) the certificate of incorporation, certificate of organization, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership, certificate of qualification or other organizational or governing documents of any Controlled Entity (the sources set forth in the foregoing clauses (i) through (v), collectively, the “Indemnification
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Sources”), irrespective of any right of recovery the Covered Person may have from the Indemnitee-Related Entities. Under no circumstance shall the Partnership or any Controlled Entity be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of advancement or recovery the Covered Person may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Covered Person or the obligations of the Partnership or any Controlled Entity under the Indemnification Sources. In the event that any of the Indemnitee-Related Entities shall make any payment to the Covered Person in respect of indemnification or advancement of Expenses with respect to any Jointly Indemnifiable Claim, (A) the Partnership shall, and to the extent applicable shall cause the Controlled Entities to, reimburse the Indemnitee-Related Entity making such payment to the extent of such payment promptly upon written demand from such Indemnitee-Related Entity, (B) to the extent not previously and fully reimbursed by the Partnership and/or any Controlled Entity pursuant to clause (A), the Indemnitee-Related Entity making such payment shall be subrogated to the extent of the outstanding balance of such payment to all of the rights of recovery of the Covered Person against the Partnership and/or any Controlled Entity, as applicable, and (C) the Covered Person shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights. The Partnership and the Covered Person agree that each of the Indemnitee-Related Entities shall be third-party beneficiaries with respect to this Section 11.02(e), entitled to enforce this Section 11.02(e) as though each such Indemnitee-Related Entity were a party to this Agreement. The Partnership shall cause each of the Controlled Entities to perform the terms and obligations of this Section 11.02(e) as though each such Controlled Entity was the “Partnership” under this Agreement. For purposes of this Section 11.02(e), the following terms shall have the following meanings:
(i)The term “Indemnitee-Related Entities” means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Partnership, any Controlled Entity or the insurer under and pursuant to an insurance policy of the Partnership or any Controlled Entity) from whom a Covered Person may be entitled to indemnification or advancement of Expenses with respect to which, in whole or in part, the Partnership or any Controlled Entity may also have an indemnification or advancement obligation.
(ii)The term “Jointly Indemnifiable Claims” shall be broadly construed and shall include, without limitation, any claim, demand, action, suit or proceeding for which the Covered Person shall be entitled to indemnification or advancement of Expenses from both (A) the Partnership and/or any Controlled Entity pursuant to the Indemnification Sources, on the one hand, and (B) any Indemnitee-Related Entity pursuant to any other agreement between any Indemnitee-Related Entity and the Covered Person pursuant to which the Covered Person is indemnified, the laws of the jurisdiction of incorporation or organization
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of any Indemnitee-Related Entity and/or the certificate of incorporation, certificate of organization, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or other organizational or governing documents of any Indemnitee-Related Entity, on the other hand.
(f)The rights conferred on any Covered Person by this Section 11.02 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of this Agreement, agreement, vote of Partners, by determination of the General Partner or otherwise. Further, the Partnership shall have the power and authority to provide indemnification, advancement of expenses and other similar rights to other Persons (including by agreements with Partners of the board of directors of Pubco) as is approved by the General Partner.
SECTION 12
DISSOLUTION AND TERMINATION
Section 12.01. Dissolution. (a) The Partnership shall not be dissolved by the admission of Additional Partners or Substitute Partners pursuant to Section 3.02.
(b)No Partner shall (i) resign from the Partnership prior to the dissolution and winding up of the Partnership except in connection with a Transfer of Units pursuant to the terms of this Agreement or (ii) take any action to dissolve, terminate or liquidate the Partnership or to require apportionment, appraisal or partition of the Partnership or any of its assets, or to file a bill for an accounting, except as specifically provided in this Agreement, and each Partner, to the fullest extent permitted by Applicable Law, hereby waives any rights to take any such actions under Applicable Law, including any right to petition a court for judicial dissolution under Section 17-802 of the Delaware Act.
(c)The Partnership shall be dissolved and its business wound up only upon the earliest to occur of any one of the following events (each a “Dissolution Event”):
(i)The expiration of 45 days after the sale or other disposition of all or substantially all the assets of the Partnership;
(ii)upon the approval of the General Partner;
(iii)the entry of a decree of dissolution of the Partnership under Section 17-802 of the Delaware Act; or
(iv)at any time there are no Partners of the Partnership, unless the Partnership is continued in accordance with the Delaware Act.
(d)The death, retirement, resignation, expulsion, bankruptcy, insolvency or dissolution of a Partner or the occurrence of any other event that terminates the continued existence of a Partner shall not in and of itself cause dissolution of the Partnership.
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Section 12.02. Winding Up of the Partnership. (a) The General Partner shall promptly notify the other Partners of any Dissolution Event. Upon dissolution, the Partnership’s business shall be liquidated in an orderly manner. The General Partner shall appoint a liquidating trustee to wind up the affairs of the Partnership pursuant to this Agreement. In performing its duties, the liquidating trustee is authorized to sell, distribute, exchange or otherwise dispose of the assets of the Partnership in accordance with the Delaware Act and in any reasonable manner that the liquidating trustee shall determine to be in the best interest of the Partners.
(b)The proceeds of the liquidation of the Partnership shall be distributed in the following order and priority:
(i)first, to the creditors (including any Partners or their respective Affiliates that are creditors) of the Partnership in satisfaction of all of the Partnership’s liabilities (whether by payment or by making reasonable provision for payment thereof, including the setting up of any reserves which are, in the judgment of the liquidating trustee, reasonably necessary therefor); and
(ii)second, to the Partners in the same manner as distributions under Section 5.03(b).
(c)Distribution of Property. In the event it becomes necessary in connection with the liquidation of the Partnership to make a distribution of Property in-kind, subject to the priority set forth in Section 12.02(b), the liquidating trustee shall have the right to compel each Partner to accept a distribution of any Property in-kind (with such Property, as a percentage of the total liquidating distributions to such Partner, corresponding as nearly as possible to such Partner’s Percentage Interest), with such distribution being based upon the amount of cash that would be distributed to such Partners if such Property were sold for an amount of cash equal to the fair market value of such Property, as determined by the liquidating trustee in good faith, subject to the last sentence of Section 5.03(d).
(d)In the event of a dissolution pursuant to Section 12.01(c), the relative economic rights of each class of Units immediately prior to such dissolution shall be preserved to the greatest extent practicable with respect to distributions made to Partners pursuant to Section 10.01(b) in connection with such dissolution, taking into consideration tax and other legal constraints that may adversely affect one or more parties to such dissolution and subject to compliance with Applicable Laws.
Section 12.03. Termination. The Partnership shall terminate when all of the assets of the Partnership, after payment of or reasonable provision for the payment of all debts and liabilities of the Partnership, shall have been distributed to the Partners in the manner provided for in this Article 12, and the certificate of formation of the Partnership shall have been cancelled in the manner required by the Delaware Act.
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Section 12.04. Survival. Termination, dissolution, liquidation or winding up of the Partnership for any reason shall not release any party from any liability which at the time of such termination, dissolution, liquidation or winding up already had accrued to any other party or which thereafter may accrue in respect to any act or omission prior to such termination, dissolution, liquidation or winding up.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Expenses. Other than as provided for in the Tax Receivables Agreement, the Partnership shall (a) pay, or cause to be paid, all costs, fees, operating expenses, administrative expenses and other expenses of the Partnership (including the costs, fees and expenses of attorneys, accountants or other professionals and the compensation of all personnel providing services to the Partnership) incurred in pursuing and conducting, or otherwise related to, the business of the Partnership and (b) in the sole and absolute discretion of the General Partner, reimburse the General Partner for any out-of-pocket costs, fees and expenses incurred by it or its Subsidiaries in connection therewith. To the extent that the General Partner reasonably determines in good faith that its expenses are related to the business conducted by the Partnership and/or its Subsidiaries, then the General Partner may cause the Partnership to pay or bear all such expenses of the General Partner or its Subsidiaries, including (i) costs of any securities offerings (including any underwriters discounts and commissions), investment or acquisition transaction (whether or not successful) not borne directly by Partners, (ii) compensation and meeting costs of its board of directors, (iii) cost of periodic reports to its stockholders, (iv) any judgments, settlements, penalties, fines or other costs and expenses in respect of any claims against, or any litigation or proceedings involving, Pubco, (v) accounting and legal costs, (vi) franchise taxes (which are not based on, or measured by, income), (vii) payments in respect of Indebtedness and preferred stock, to the extent the proceeds are used or will be used by Pubco or its Subsidiaries to pay expenses or other obligations described in this Section 13.01 (in either case only to the extent economically equivalent Indebtedness or Equity Securities of the Partnership were not issued to Pubco or its Subsidiaries) and (viii) other fees and expenses in connection with the maintenance of the existence of Pubco and its Subsidiaries (including any costs or expenses associated with being a public company listed on a national securities exchange); provided that the Partnership shall not pay or bear any income tax obligations of the General Partner or its Subsidiaries pursuant to this provision. Payments under this Section 13.01 are intended to constitute reasonable compensation for past or present services and are not “distributions” within the meaning of Section 5.03 or §17-607 of the Delaware Act.
Section 13.02. Further Assurances. Each Partner agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by Applicable Law or as, in the reasonable judgment of the General Partner, may be necessary or advisable to carry out the intent and purposes of this Agreement.
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Section 13.03. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic mail transmission of attachments to such electronic mail in portable document format (“e-mail”), so long as a receipt of such e-mail is requested and received) and shall be given to such party at the address or e-mail address specified for such party on the Partner Schedule hereto, or to such other address as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt. All such notices, requests and other communications to any party hereunder shall be given to such party as follows:
If to Pubco or the Partnership:
300 Vesey St., 13th Floor
New York, NY 10282
Attention: Mr. Andrew Siegel
E-mail:
With copies (which shall not constitute actual notice) to:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: Evan Rosen
E-mail:
Section 13.04. Binding Effect; Benefit; Assignment. (a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
(b)Except as provided in Article 8, no Partner may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the General Partner.
Section 13.05. Jurisdiction. (a) The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such
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courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 13.03 shall be deemed effective service of process on such party.
(b)EACH OF THE PARTNERSHIP AND THE PARTNERS HEREBY IRREVOCABLY DESIGNATES THE CORPORATION TRUST COMPANY (IN SUCH CAPACITY, THE “PROCESS AGENT”), WITH AN OFFICE AT 1209 ORANGE STREET IN THE CITY OF WILMINGTON, COUNTY OF NEW CASTLE, DELAWARE 19801, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT; PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO EACH OTHER SUCH PARTY IN THE MANNER PROVIDED IN Section 13.03 AND, TO THE EXTENT A PARTNER IS NOT ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE, AS REQUIRED BY THE LAW OF THE JURISDICTION OF ORGANIZATION OF SUCH PARTNER. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW.
Section 13.06. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 13.07. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).
Section 13.08. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. Nothing in this Agreement shall create any third-party beneficiary rights in favor of any Person or other party, except to the extent provided herein with respect to Indemnitee Related Entities, each of whom are intended third-party beneficiaries of those provisions that specifically related to them with the right to enforce such provisions as if they were a party hereto.
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Section 13.09. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.
Section 13.10. Amendment. (a) This Agreement can be amended at any time and from time to time by written instrument signed by (i) each of the Partners (or any number of them) who together own a majority in interest of the Units then outstanding and (ii) the General Partner; provided that no amendment to this Agreement may adversely modify in any material respect the Units (or the rights, preferences or privileges of the Units) then held by any Partners in any materially disproportionate manner to those then held by any other Partners without the prior written consent of a majority in interest of such disproportionately affected Partner or Partners.
(b)For the avoidance of doubt: (i) the General Partner, acting alone, may amend this Agreement, including the Partner Schedule, to (A) reflect the admission of new Partners or Transfers of Units, each as provided by and in accordance with, the terms of this Agreement, (B) effect any subdivisions or combinations of Units made in compliance with Section 4.02(c), (C) issue additional LP Units or any new class of Units (whether or not pari passu with the LP Units) in accordance with the terms of this Agreement and to provide that the Partners being issued such new Units be entitled to the rights provided to Partners, (D) fix de minimis incorrect information, correct typos or the like, (E) change to, amend or add any provision, or to cure any ambiguity or to correct or supplement any provisions contained in this Agreement that may be defective, (6) give effect to the terms of this Agreement, (F) as may be necessary or advisable to comply with any Applicable Law (including any anti-money laundering or anti-terrorist laws, rules, regulations, directives or special measures), (G) as may be necessary to address, prevent or cure a Violation (as defined in Pubco’s certificate of incorporation), as determined by Pubco’s board in accordance with Pubco’s certificate of incorporation, and/or (H) make any other change that the General Partner determines to be advisable to reflect changes in law or otherwise to address legal, regulatory, tax or cross jurisdictional considerations; and (ii) any merger, consolidation or other business combination that constitutes a Disposition Event (as such term is defined in the certificate of incorporation of Pubco, as it may be amended from time to time in accordance with the terms thereof) in which the Non-Pubco Partners are required to exchange all of their LP Units pursuant to Section 10.04(b) and receive consideration in such Disposition Event in accordance with the terms of this Agreement and Section 10.04(b) shall not be deemed an amendment hereof; provided that such amendment is only effective upon consummation of such Disposition Event.
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(c)No waiver of any provision or default under, nor consent to any exception to, the terms of this Agreement or any agreement contemplated hereby shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided.
Section 13.11. Confidentiality. (a) Each Partner shall, and shall direct those of its Affiliates and their respective directors, officers, Partners, stockholders, partners, employees, attorneys, accountants, consultants, trustees and other advisors (the “Partner Parties”) who have access to Confidential Information to, keep confidential and not disclose any Confidential Information to any Person other than a Partner Party who agrees to keep such Confidential Information confidential in accordance with this Section 13.11, in each case without the express consent, in the case of Confidential Information acquired from the Partnership, of the General Partner or, in the case of Confidential Information acquired from another Partner, such other Partner, unless:
(i)such disclosure shall be required by Applicable Law;
(ii)such disclosure is reasonably required in connection with any tax audit involving the Partnership or any Partner or its Affiliates;
(iii)such disclosure is reasonably required in connection with any litigation against or involving the Partnership or any Partner;
(iv)such disclosure is reasonably required in connection with any proposed Transfer of all or any part of such Partner’s Units in the Partnership; provided that with respect to any such use of any Confidential Information referred to in this clause (iv), advance notice must be given to the General Partner so that it may require any proposed Transferee that is not a Partner to enter into a confidentiality agreement with terms substantially similar to the terms of this Section 13.11 (excluding this clause (iv)) prior to the disclosure of such Confidential Information; or
(v)such disclosure is of financial and other information of the type typically disclosed to limited partners and limited liability company members (and prospective transferees or investors thereof) and is made to the partners or members of, and/or prospective investors in, Affiliates of the Partners and such partner, Partner or prospective investor is bound by the confidentiality provisions of a customary non-disclosure agreement entered into with the disclosing party that covers the Confidential Information so disclosed.
(b)“Confidential Information” means any information related to the activities of the Partnership, the Partners and their respective Affiliates that a Partner may acquire from the Partnership or the Partners, other than information that (i) is already available through publicly available sources of information (other than as a result of disclosure by such Partner), (ii) was available to a Partner on a non-confidential basis prior to its disclosure to such Partner by the Partnership, or (iii) becomes available to a
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Partner on a non-confidential basis from a third party, provided such third party is not known by such Partner, after reasonable inquiry, to be bound by this Agreement or another confidentiality agreement with the Partnership. Such Confidential Information may include information that pertains or relates to the business and affairs of any other Partner or any other Partnership matters. Confidential Information may be used by a Partner and its Partner Parties only in connection with Partnership matters and in connection with the maintenance of its interest in the Partnership.
(c)Subject to Section 13.11(d), in the event that any Partner or any Partner Parties of such Partner is required to disclose any of the Confidential Information, such Partner shall use reasonable efforts to provide the Partnership with prompt written notice so that the Partnership may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement, and such Partner shall use reasonable efforts to cooperate with the Partnership in any effort any such Person undertakes to obtain a protective order or other remedy. In the event that such protective order or other remedy is not obtained, or that the Partnership waives compliance with the provisions of this Section 13.11, such Partner and its Partner Parties shall furnish only that portion of the Confidential Information that is legally required and shall exercise all reasonable efforts to obtain reasonably reliable assurance that the Confidential Information shall be accorded confidential treatment.
(d)Notwithstanding anything in this Agreement to the contrary, (i) each Partner may disclose to any persons the U.S. federal income tax treatment and tax structure of the Partnership, (ii) nothing in this Agreement limits, restricts or in any other way affects any Partner’s communication with any Governmental Authority, or communication with any official or staff person of a Governmental Authority, concerning matters relevant to the Governmental Authority that do not constitute attorney-client privileged information of the Partnership or its Affiliates and (iii) no Partner can be held cannot be held criminally or civilly liable under any federal or state trade secret law for disclosing a trade secret (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigation a suspected violation of law or (y) in a complaint or other document filed under seal in a lawsuit or other proceeding. For purpose of the foregoing clause (i), “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the Partnership and does not include information relating to the identity of the Partnership or any Partner.
Section 13.12. Non-Disparagement. Each Partner shall not make any public statement that would defame or disparage the Partnership, the General Partner, Pubco, any of their respective Affiliates or any of their respective past or present directors, managers, officers, employees or agents. For this purpose, no truthful statement required by law, permitted under whistleblower provisions of U.S. federal securities laws or similar provisions under other laws, provided confidentially to any regulator having appropriate jurisdiction or made in any motion, pleading or testimony with or before any court, arbitrator or mediator will be deemed defamatory or disparaging.
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Section 13.13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
ARTICLE 14
REPRESENTATIONS OF PARTNERS
Section 14.01. Representations of Partners. Each Partner (unless otherwise noted) to which a Unit is issued as of the date of this Agreement represents and warrants to the Partnership as follows:
(a)Such Partner acknowledges and agrees that the Units (i) have not been and will not be registered under the Securities Act, the securities laws of any U.S. state or the applicable securities laws of Canada or any other jurisdiction and (ii) may not be offered, sold or otherwise transferred without registration under the Securities Act or other applicable securities laws or compliance with the requirements of an exemption from registration, and then only in compliance with the terms and conditions set forth in this Agreement.
(b)The Units issued to such Partner, if any, are being acquired for investment for such Partner’s own account, not as a nominee or agent, and not with a view to or for sale in connection with the distribution thereof.
(c)Such Partner has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Partner’s investment in the Units; such Partner has the ability to bear the economic risks of such investment; such Partner has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement; and such Partner has had an opportunity to ask questions and to obtain such financial and other information regarding the Partnership as such Partner deems necessary or appropriate in connection with evaluating the merits of the investment in the Units. Such Partner acknowledges that the Units have not been and will not be registered under the Securities Act or under any state securities act and may not be transferred except in compliance with the Securities Act and all applicable state laws.
(d)Each Partner qualifies as an Accredited Investor within the meaning of Regulation D promulgated under the Securities Act or the acquisition of its interest otherwise qualifies under an applicable exemption from registration under the Securities Act.
[Signature page(s) follow(s).]
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IN WITNESS WHEREOF, the parties hereto have caused this Seventh Amended and Restated Limited Partnership Agreement to be duly executed as of the day and year first written above.
GALAXY DIGITAL HOLDINGS LP By: Galaxy Digital Inc., the General Partner | |||||
By: | /s/ Francesca Don Angelo | ||||
Name: Francesca Don Angelo | |||||
Title: Authorized Signatory | |||||
| GALAXY DIGITAL INC. | ||||||||
By: | /s/ Francesca Don Angelo | |||||||
| Name: | Francesca Don Angelo | |||||||
| Title: | Authorized Signatory | |||||||
| GALAXY DIGITAL HOLDINGS INC. | ||||||||
By: | /s/ Michael Novogratz | |||||||
| Name: | Michael Novogratz | |||||||
| Title: | Chief Executive Officer | |||||||
| GALAXY GROUP INVESTMENTS LLC | ||||||||
By: | /s/ Michael Novogratz | |||||||
| Name: | Michael Novogratz | |||||||
| Title: | Authorized Signatory | |||||||
Schedule A – Partner Schedule
Exhibit A
Form of Redemption Notice
GALAXY DIGITAL HOLDINGS LP
REDEMPTION NOTICE
| Name of Partner: | ______________________________________________ | ||||
| Number of Redeemed Units: | ______________________________________________ | ||||
| Date for Redemption to be completed and effective: | ______________________________________________ | ||||
Capitalized Terms used herein and otherwise defined have the meaning ascribed thereto in the Seventh Amended and Restated Limited Partnership Agreement of Galaxy Digital Holdings LP (as it may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “LPA”).
By executing this Redemption Notice, the Partner named above (the “Redeeming Partner”):
a.covenants, represents and warrants that such Partner’s Redemption Right (and the Redemption requested in this Redemption Notice) will comply with the terms and restrictions set forth in Article 10 of the LPA;
b.directs that the shares of Class A Common Stock resulting from the Redemption requested in this Redemption Notice, if applicable, be registered and delivered in accordance with the instructions on Schedule A to this Redemption Notice;
c.acknowledges, covenants and agrees that any shares of Class A Common Stock received by such Partner in connection with the Redemption requested in this Redemption Notice, if applicable, will be represented by “legended” physical certificates that will be subject to transfer restrictions; and
d.covenants and agrees to furnish to Pubco, the General Partner or the Partnership (or any Subsidiary thereof) with any information, representations and forms as shall reasonably be requested by Pubco, the General Partner or the Partnership (or any subsidiary thereof) from time to time to assist Pubco, the General Partner or the Partnership (or any subsidiary thereof) (as applicable) in complying with any Applicable Law or tax or other
requirement or in determining the extent of, and in fulfilling, its reporting, withholding and other obligations.
[Signature page(s) follow(s).]
IN WITNESS WHEREOF, the undersigned Partner has executed this Redemption Notice on the date written below.
If such Partner is an individual: Name: Signature: Date: | If such Partner is an entity: Name: By: Title: Date: | ||||
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Schedule A to Redemption Notice
| REGISTRATION INSTRUCTIONS: | ||
____________________________________________________________________________ Registration Name (please print) | ||
____________________________________________________________________________ Registration Address, including city, province/state, country and postal/zip code | ||
____________________________________________________________________________ Account # (applicable only if registering and depositing the securities into a brokerage or corporate account – not if registering in own name) | ||
DELIVERY INSTRUCTIONS (if different from registration instructions above): _________________________________________________________________ Name of Contact ____________________________________________________________________________ Delivery Address including city, province/state, country and postal/zip code ____________________________________________________________________________ Contact’s Telephone Number ____________________________________________________________________________ Contact’s E-mail Address | ||
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Exhibit 10.2
AMENDED AND RESTATED
TAX RECEIVABLES AGREEMENT
among
GALAXY DIGITAL INC.,
GALAXY DIGITAL HOLDINGS LP
and
THE PERSONS NAMED HEREIN
Dated as of May 13, 2025
AMENDED AND RESTATED TAX RECEIVABLES AGREEMENT
This AMENDED AND RESTATED TAX RECEIVABLES AGREEMENT (“Agreement”), dated as of May 13, 2025 (the “Effective Date”), is hereby entered into between Galaxy Digital Holdings Inc., a Delaware corporation (“GDHI” and, prior to the Merger (defined below), “HoldCo”), Galaxy Digital Holdings LP, a Delaware limited partnership (“GDH LP”), through its general partner, GDHI, and each holder of nonvoting limited partnership interests in GDH LP, other than HoldCo, or other Person who is or becomes a party hereto in accordance with the terms hereof (each such holder, a “TRA Limited Partner”).
RECITALS
WHEREAS, Galaxy Digital Holdings Ltd., an exempted company limited by shares under the Companies Law (2016 Revision) of the Cayman Islands (“Old GDHI”), GDH Intermediate LLC, a Delaware limited liability company, Galaxy Digital Holdings GP LLC, as general partner of Galaxy Digital Holdings LP, an exempted limited partnership formed under the laws of the Cayman Islands (“Old GDH LP”), and certain of the TRA Limited Partners entered into a Tax Receivable Agreement dated as of July 31, 2018 (the “Original TRA”);
WHEREAS, pursuant to a series of transactions occurring on or about the date hereof, (i) Old GDHI domesticated to Delaware and became GDHI, (ii) Old GDH LP domesticated to Delaware and became GDH LP, (iii) GDHI issued shares of its Class B voting stock to holders of Class B limited partnership interests in GDH LP, (iv) GDHI will merge (the “Merger”) with and into Galaxy Digital Inc., a Delaware corporation (“GDI” and, after the Merger, “HoldCo”), with GDI surviving and the shareholders of GDHI receiving Class A common stock (the “Shares”) and Class B voting stock of GDI in the same quantities and having the same terms as the Class A common stock and Class B voting stock of GDHI outstanding immediately prior to the Merger, (v) the Class A and Class B limited partnership interests in GDH LP will be reclassified as limited partnership interests in GDH LP (“LP Units”), and (vi) GDH Intermediate LLC, a Delaware limited liability company and currently a wholly-owned subsidiary of GDHI (“GDH Intermediate”), will merge with and into GDI, with GDI surviving (the “Intermediate Merger”) (collectively, the “Restructuring Transactions”);
WHEREAS, prior to the Restructuring Transactions, certain TRA Limited Partners exchanged Class B Units (as defined in the Original TRA) for Shares (as defined in the Original TRA) (such exchanges, the “Prior Exchanges”);
WHEREAS, GDH LP is classified as a partnership for U.S. federal income tax purposes and the LP Units will be interests in the partnership for U.S. federal income tax purposes;
WHEREAS, after the Merger, each TRA Limited Partner may, subject to the terms and conditions of the Partnership Agreement (as defined below), require GDH LP to redeem (a “Redemption”) all or a portion of such TRA Limited Partner’s LP Units for cash or Shares (at the election of HoldCo), provided that pursuant to Section 10.03(a) of the Partnership Agreement and at the election of HoldCo, HoldCo may effect a direct exchange of such cash or Shares for such LP Units (a “Direct Exchange” and each Direct Exchange, Redemption or Prior Exchange, an “Exchange”);
WHEREAS, GDH LP and each of its direct and indirect subsidiaries treated as a partnership for U.S. federal income tax purposes has had and will have in effect an election under Section 754 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), including for future Taxable Years in which acquisitions of LP Units by GDH LP or HoldCo occur, including as part of an Exchange.
WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of HoldCo and its Corporate Subsidiaries (as defined below) may be affected by the Basis Adjustments (as defined below) and the Imputed Interest (as defined below);
WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments and Imputed Interest on the liability for Taxes of HoldCo;
WHEREAS, the parties to this Agreement wish to amend and restate the Original TRA to take into account the effects of the Restructuring Transactions;
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1.Definitions and Interpretive Rules.
1.1.Definitions. As used in this Agreement, the terms set forth in this Article I will have the following meanings.
“Actual Tax Liability” means with respect to any Taxable Year and without duplication, the actual liability for U.S. federal, state and local income or franchise Taxes of (i) HoldCo, (ii) any Corporate Subsidiary and (iii) GDH LP, but in the case of this clause (iii), only with respect to Taxes imposed on GDH LP and allocable to HoldCo or any Corporate Subsidiary for such Taxable Year.
“Additional Amount” has the meaning set forth in Section 3.1(b) of this Agreement.
“Advisory Firm” means any accounting firm or any law firm that, in either case, is nationally recognized in the United States as being expert in tax matters.
“Advisory Firm Letter” means a letter from the Advisory Firm stating that the relevant schedule, notice or other information to be provided by HoldCo to the TRA Limited Partner and all supporting schedules and work papers were prepared in a manner consistent with the terms of this Agreement or, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedule, notice or other information is delivered to the TRA Limited Partner.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.
“Agreed Rate” means a per annum rate of SOFR plus 100 basis points.
“Agreement” is defined in the Preamble of this Agreement.
“Amended Schedule” is defined in Section 2.3(b) of this Agreement.
“Applicable Law” shall have the meaning ascribed to such term in the Partnership Agreement.
“Applicable TRA Limited Partner” means any TRA Limited Partner to whom any portion of a Tax Benefit Payment is Attributable hereunder.
“Attributable” means, with respect to any Applicable TRA Limited Partner, the portion of any Realized Tax Benefit (or Realized Tax Detriment) of HoldCo that is derived from (i) Basis Adjustments and Imputed Interest that are attributable to Exchanges with such Applicable TRA Limited Partner (for this purpose, Basis Adjustments attributable to an Exchange with such Applicable TRA Limited Partner shall include the portion of any Section 734(b) Basis Adjustment available to HoldCo attributable to (x) any Section 734(b) Exchange with or with respect to such Applicable TRA Limited Partner or (y) any other Exchange with such Applicable TRA Limited Partner, but only to the extent such Exchange results in a portion of a Section 734(b) Basis Adjustment being available to HoldCo immediately after the Exchange, in each of cases (x) and (y), determined immediately after such Section 734(b) Exchange or other Exchange, as applicable), and (ii) a proportionate share of each portion of each Section 734(b) Basis Adjustment, other than the portion of each Section 734(b) Basis Adjustment
described in clause (i), that is available to HoldCo, based on the proportion of any Realized Tax Benefit (or Realized Tax Detriment) of HoldCo that is otherwise Attributable to such Applicable TRA Limited Partner determined without regard to this clause (ii), and Imputed Interest with respect thereto.
“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 755 and 1012 of the Code and the Treasury Regulations promulgated thereunder (in situations where, as a result of one or more Exchanges, GDH LP becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes) or under Sections 734(b), 743(b) and 755 of the Code and the Treasury Regulations promulgated thereunder (in situations where, following an Exchange, GDH LP remains in existence as an entity for U.S. federal income tax purposes) and, in each case, comparable sections of state or local tax laws, as a result of (i) an Exchange; (ii) any (x) actual distribution to any TRA Limited Partner (including a Section 734(b) Exchange) or (y) deemed distribution to any TRA Limited Partner as a result of any repayment or reallocation of debt of GDH LP or any of its Subsidiaries (a Basis Adjustment resulting from such actual or deemed distribution, a “Section 734(b) Basis Adjustment”); or (iii) the payments made to TRA Limited Partners pursuant to this Agreement. For the avoidance of doubt, the amount of any Basis Adjustment resulting from an Exchange of one or more LP Units will be determined without regard to any Pre-Exchange Transfers of such LP Units and as if any such Pre-Exchange Transfers had not occurred.
“Beneficial Owner” means, with respect to a security, a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (i) voting power, which includes the power to vote, or to direct the voting of, such security, and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security.
“Board” means the Board of Directors of HoldCo.
“Business Day” shall have the meaning ascribed to such term in the Partnership Agreement.
“Change of Control” means the occurrence of any of the following events:
(i) any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto (excluding (x) a corporation or
other entity owned, directly or indirectly, by the stockholders of HoldCo in substantially the same proportions as their ownership of stock in HoldCo and (y) any Permitted Person (or any of its Affiliates)) who is or becomes the Beneficial Owner, directly or indirectly, of securities of HoldCo representing more than 50% of the combined voting power of HoldCo’s then outstanding voting securities; or
(ii) the following individuals cease to constitute a majority of the number of directors of HoldCo then serving: individuals who, on the Effective Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by HoldCo’s shareholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or
(iii) there is consummated a merger or consolidation of HoldCo with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of HoldCo immediately prior to such merger or consolidation do not continue to represent or are not converted into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or
(iv) the shareholders of HoldCo approve a plan of complete liquidation or dissolution of HoldCo or there is consummated an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by HoldCo of all or substantially all of HoldCo’s assets (for the avoidance of doubt, which shall include a sale or other disposition, directly or indirectly, by the Partnership of all or substantially all of the Partnership’s assets), other than such sale or other disposition by HoldCo of all or substantially all of HoldCo’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of HoldCo in substantially the same proportions as their ownership of HoldCo immediately prior to such sale or other disposition.
Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by
virtue of the consummation of the Restructuring Transactions or of any transaction or series of integrated transactions immediately following which the record holders of the shares of HoldCo immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns all or substantially all of the assets of HoldCo immediately following such transaction or series of transactions.
“Code” is defined in the Recitals of this Agreement.
“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Corporate Subsidiary” means each Subsidiary of HoldCo that is not treated as a partnership or disregarded entity for U.S. federal income tax purposes; provided, however, that for so long as GDH LP continues to be treated as a partnership for U.S. federal income tax purposes, no Subsidiary of GDH LP shall be considered as a Corporate Subsidiary.
“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of HoldCo, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year will be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination; provided that the computation of the Cumulative Net Realized Tax Benefit shall be adjusted to reflect any applicable Determination with respect to Realized Tax Benefits and/or Realized Tax Detriments.
“Default Rate” means SOFR plus 300 basis points.
“Determination” has the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state or local tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax, and shall include the acquiescence of HoldCo to the amount of any assessed liability for Tax.
“Direct Exchange” is defined in the Recitals of this Agreement.
“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.
“Early Termination Effective Date” is defined in Section 4.2 of this Agreement.
“Early Termination Notice” is defined in Section 4.2 of this Agreement.
“Early Termination Schedule” is defined in Section 4.2 of this Agreement.
“Early Termination Payment” is defined in Section 4.3(b) of this Agreement.
“Early Termination Rate” means the lesser of (i) 4.5% per annum, compounded annually, and (ii) SOFR plus 100 basis points.
“Effective Date” is defined in the Preamble of this Agreement.
“Exchange” is defined in the Recitals of this Agreement.
“Exchange Basis Schedule” is defined in Section 2.1 of this Agreement.
“Exchange Date” means the date of any Exchange.
“GDH Intermediate” is defined in the Recitals of this Agreement.
“GDH LP” is defined in the Preamble of this Agreement.
“GDHI” is defined in the Preamble of this Agreement.
“GDH Intermediate” is defined in the Recitals of this Agreement.
“GDI” is defined in the Recitals of this Agreement.
“HoldCo” is defined in the Preamble and Recitals of this Agreement.
“HoldCo Return” means the federal, state, and/or local Tax Return, as applicable, of HoldCo filed (and/or any Corporate Subsidiary, as applicable) with respect to Taxes of any Taxable Year.
“Hypothetical Tax Liability” means, with respect to any Taxable Year and without duplication, an amount, not less than zero, equal to the hypothetical liability for U.S. federal, state and local income or franchise Taxes of (i) HoldCo, (ii) any Corporate Subsidiary and (iii) GDH LP, but in the case of this clause (iii), only with respect to Taxes imposed on GDH LP and allocable to HoldCo or any
Corporate Subsidiary for such Taxable Year, in each case using the same methods, elections, conventions and similar practices used on the relevant HoldCo Return but (i) calculating depreciation, amortization or similar deductions and income, gain or loss using the Non-Stepped Up Tax Basis as reflected on the Exchange Basis Schedule, including amendments thereto, for the Taxable Year, (ii) excluding any deduction attributable to Imputed Interest for the Taxable Year. For the avoidance of doubt, the Hypothetical Tax Liability will be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to any Basis Adjustment or Imputed Interest, as applicable.
“Imputed Interest” in respect of a TRA Limited Partner means any interest imputed under Sections 1272, 1274 or 483 or any other provision of the Code and any similar provision of state or local tax law with respect to HoldCo’s payment obligations in respect of such TRA Limited Partner under this Agreement.
“Intermediate Merger” is defined in the Recitals of this Agreement.
“IRS” means the U.S. Internal Revenue Service.
“Market Price” shall mean the closing price of the Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Shares are then trade or listed, as reported by the Wall Street Journal; provided that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Price shall mean the closing price of the Shares on the Business Day immediately preceding the Exchange Date on the national securities exchange or interdealer quotation system on which such Shares are then traded or listed, as reported by the Wall Street Journal; provided further that if the Shares are not then listed on a national securities exchange or interdealer quotation system, the Market Price shall mean the cash consideration paid for the Shares, or the fair market value of the other property delivered for the Shares, as determined by the Board in good faith.
“Material Objection Notice” has the meaning set forth in Section 4.2 of this Agreement.
“Merger” is defined in the Recitals of this Agreement.
“Net Tax Benefit” has the meaning set forth in Section 3.1(b) of this Agreement.
“Non-Stepped Up Tax Basis” means, with respect to any Reference Asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made.
“Objection Notice” has the meaning set forth in Section 2.3(a) of this Agreement.
“Partnership Agreement” means the Limited Partnership Agreement of GDH LP, as amended from time to time.
“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.
“Permitted Person” means (a) (i) Michael Novogratz, (ii) the spouse and lineal descendants and spouses of lineal descendants of Michael Novogratz, (iii) the estates or legal representatives of any person named in clauses (i) or (ii), (iv) trusts established for the benefit of any person named in clauses (i) or (ii) and (v) any entity solely owned and controlled, directly or indirectly, by one or more of the foregoing and (b) Galaxy Group Investments LLC, a Delaware limited liability company, and any of its Affiliates; provided that Galaxy Group Investments LLC or any of its Affiliates shall be a Permitted Person only so long as any, including in the aggregate any combination, of the Persons described in clause (a) of this definition of “Permitted Person” holds or has the ability to control or direct (directly or indirectly, whether through the ownership of voting securities, by contract or otherwise) a majority of the voting power of Galaxy Group Investments LLC or any of its Affiliates, as applicable.
“Person” means any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division or any government, governmental department or agency or political subdivision thereof.
“Pre-Exchange Transfer” means any transfer (including upon death of a TRA Limited Partner) in respect of one or more LP Units (i) that occurs prior to an Exchange of such LP Units and (ii) to which Section 743(b) of the Code applies.
“Prior Exchange” is defined in the Recitals of this Agreement.
“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability. If all or a portion of the Actual Tax Liability for the Taxable Year arises as a result of an audit or similar proceeding by a Taxing Authority of any Taxable Year, such liability will not be
included in determining the Realized Tax Benefit unless and until there has been a Determination with respect to such Actual Tax Liability.
“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability for such Taxable Year. If all or a portion of the Actual Tax Liability for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability will not be included in determining the Realized Tax Detriment unless and until there has been a Determination with respect to such Actual Tax Liability.
“Redemption” is defined in the Recitals of this Agreement.
“Reference Asset” means an asset that is held by GDH LP, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity (but only if such indirect Subsidiaries are held only through Subsidiaries treated as partnerships or disregarded entities) for purposes of the applicable Tax, at the time of an Exchange. A Reference Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code and any similar provision of state or local tax law with respect to a Reference Asset.
“Schedule” means any of the following: (i) an Exchange Basis Schedule; (ii) a Tax Benefit Schedule; and (iii) the Early Termination Schedule, and, in each case, any amendments thereto.
“Section 734(b) Exchange” means any Exchange giving rise to a Basis Adjustment under Section 734(b) of the Code.
“Senior Obligations” is defined in Section 5.1 of this Agreement.
“Shares” is defined in the Recitals of this Agreement.
“SOFR” means for each month (or portion thereof), the forward looking term rate based on the secured overnight financing rate administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) for a one-month period, on the date two U.S. Government Securities Business Days prior to the first day of such month, as published by CME Group Benchmark Administration Limited (CBA) (or a successor administrator selected by the HoldCo in its reasonable discretion); provided that if (i) adequate and reasonable means do not exist for ascertaining SOFR and such circumstances are unlikely to be temporary or (ii) the supervisor for the administrator of SOFR or a governmental authority having jurisdiction over
HoldCo has made a public statement identifying a specific date after which SOFR shall no longer be used for determining interest rates for loans, then the HoldCo shall endeavor to establish an alternate rate of interest to SOFR that gives due consideration to the then prevailing market convention for determining a comparable rate of interest in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable; provided, further, that if SOFR as so determined would be less than zero, SOFR shall be deemed to be zero.
“Subsidiary” has the meaning ascribed to such term in the Partnership Agreement.
“Subsidiary Stock” means any stock or other equity interest in any Subsidiary of GDH LP that is treated as a corporation for U.S. federal income tax purposes.
“Tax Benefit Payment” is defined in Section 3.1(b) of this Agreement.
“Tax Benefit Schedule” is defined in Section 2.2(a) of this Agreement.
“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, any information return, claim for refund, amended return and declaration of estimated Tax.
“Taxable Year” means a taxable year of HoldCo as defined in Section 441(b) of the Code or any comparable section of state or local tax law, as applicable, which may include a period of less than 12 months for which a Tax Return is made.
“Taxes” means any and all taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.
“Taxing Authority” means any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.
“TRA Limited Partner” is defined in the Preamble of this Agreement.
“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.
“U.S. Government Securities Business Day” means any day except for a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
“Valuation Assumptions” means, as of an Early Termination Date, the assumptions that in each Taxable Year ending on or after such Early Termination Date: (i) HoldCo will have taxable income sufficient to fully use the deductions arising from the Basis Adjustments and the Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available; (ii) the U.S. federal income tax rates and state and local income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, except to the extent any change to such Tax rates for such Taxable Year have already been enacted into law; (iii) any loss carryovers generated by any Basis Adjustment or Imputed Interest and available as of the date of the Early Termination Schedule will be used by HoldCo on a pro rata basis from the date of the Early Termination Schedule through the scheduled expiration date of such loss carryovers (or, if there is no such scheduled expiration date, through the end of the twentieth Taxable Year following the Taxable Year from which such loss could first be carried over); (iv) any non-amortizable or non-depreciable assets (other than Subsidiary Stock) will be disposed of for an amount sufficient to fully utilize the Basis Adjustment with respect to such asset on the 15th anniversary of the applicable Basis Adjustment, except that any cryptocurrency, digital assets, or other similar assets will be disposed of on the first anniversary of the Early Termination Date; provided that, in the event of a Change of Control, such non-amortizable assets will be deemed disposed of at the time of sale of the relevant asset (if earlier than the applicable anniversary); (v) any Subsidiary Stock will be deemed never to be disposed of; (vi) if, on the Early Termination Date, a TRA Limited Partner has LP Units that have not been Exchanged, then each such LP Unit will be deemed to be Exchanged with HoldCo for the Market Price of the Shares on the Early Termination Date, and (vii) any payment obligations pursuant to this Agreement will be satisfied on the date that any Tax Return to which such payment obligation relates is required to be filed excluding any extensions.
1.2.Interpretive Rules. In addition:
(a)The words “hereof,” “herein,” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b)The captions and various headings in this Agreement are for convenience of reference only and do not describe or limit any provision of this Agreement.
(c)References to Sections are to Sections of this Agreement unless otherwise specified.
(d)Unless the context requires otherwise, words describing the singular number include the plural and vice versa, and words denoting any gender include all genders.
(e)The words “include,” “includes” and “including” are deemed to be followed by the words “without limitation.”
(f)References to any statute shall be deemed to refer to such statute as amended from time to time and any rules or regulations promulgated thereunder.
(g)References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
(h)It is each party’s intention that this Agreement not be construed more strictly with respect to any party.
2.Determination of Realized Tax Benefit.
2.1.Basis Adjustment. HoldCo will, within ninety (90) calendar days after the filing of HoldCo’s U.S. federal income Tax Return for each Taxable Year in which any Exchange has been effected, deliver to each TRA Limited Partner who effected an Exchange in such Taxable Year a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement: (i) the Non-Stepped Up Tax Basis of the Reference Assets as of each applicable Exchange Date with respect to such TRA Limited Partner; (ii) the Basis Adjustment with respect to the Reference Assets as a result of the Exchange(s) effected in such Taxable Year by such TRA Limited Partner (in the case of a Basis Adjustment under Section 734(b) of the Code, calculated solely with respect to the amount that is available to HoldCo in such Taxable Year); (iii) the period (or periods) over which the Reference Assets are amortizable and/or depreciable; and (iv) the period (or periods) over which each Basis Adjustment is amortizable and/or depreciable. For the avoidance of doubt, payments made under this Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.
2.2.Tax Benefit Schedule.
(a)Tax Benefit Schedule. HoldCo will, within ninety (90) calendar days after the filing of its U.S. federal income Tax Return for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, provide to each Applicable TRA Limited Partner a schedule showing, in
reasonable detail the calculation of the Realized Tax Benefit or Realized Tax Detriment, and the portion thereof Attributable to such Applicable TRA Limited Partner, for such Taxable Year (a “Tax Benefit Schedule”). The Tax Benefit Schedule will become final as provided in Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the procedures set forth in Section 2.3(b)).
(b)Applicable Principles. The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the Actual Tax Liability of HoldCo for such Taxable Year attributable to the Basis Adjustments and the Imputed Interest, determined using a “with and without” methodology, and for the avoidance of doubt, is not intended to take into account, and shall be interpreted in a manner that avoids taking into account, any Basis Adjustment or Imputed Interest more than once. For the avoidance of doubt, the Actual Tax Liability will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under applicable tax law based upon the characterization of Tax Benefit Payments as additional consideration payable by HoldCo for the LP Units acquired in an Exchange. Carryovers or carrybacks of any Tax item attributable to any Basis Adjustment or Imputed Interest will be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax item includes a portion that is attributable to a Basis Adjustment or Imputed Interest and another portion that is not, such portions will be considered to be used in accordance with the “with and without” methodology. The parties agree that: (i) all Tax Benefit Payments attributable to the Basis Adjustments (other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase price adjustments in respect of the relevant Exchange that give rise to further Basis Adjustments to Reference Assets for HoldCo, and (B) have the effect of creating additional Basis Adjustments to Reference Assets for HoldCo, in each case in the year of payment; and (ii) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.
(c)Notwithstanding any provisions to the contrary in this Agreement, the foregoing treatment set out in the final sentence of Section 2.2(b) shall not be required to apply to payments hereunder to a TRA Limited Partner in respect of a Section 734(b) Exchange by such TRA Limited Partner. For the avoidance of doubt, the parties intend that (A) a TRA Limited Partner that has made a Section 734(b) Exchange shall, with respect to the Basis Adjustment resulting from such Section 734(b) Exchange or any payments hereunder in respect of such Section 734(b) Exchange, be entitled to Tax Benefit Payments attributable to such Basis Adjustment only to the extent such Basis Adjustment is allocable to HoldCo immediately following such Section 734(b) Exchange (without taking into account any concurrent or subsequent Exchanges) and (B) if, as a result of a subsequent Exchange, an increased portion of the Basis Adjustments resulting from such Section 734(b) Exchange or any payments hereunder in respect of such Section 734(b) Exchange becomes allocable to HoldCo, then the TRA
Limited Partner that makes such subsequent Exchange shall be entitled to a Tax Benefit Payment calculated in respect of such increased portion.
2.3.Procedures, Amendments.
(a)Procedure. Every time HoldCo delivers to a TRA Limited Partner an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.3(b) of this Agreement, but excluding any Early Termination Schedule or amended Early Termination Schedule, HoldCo will also: (x) deliver to such TRA Limited Partner schedules and work papers, as determined by HoldCo or requested by the TRA Limited Partner, providing reasonable detail regarding the preparation of the Schedule; (y) use its reasonable best efforts to deliver an Advisory Firm Letter supporting such Schedule; and (z) allow the TRA Limited Partner reasonable access, at no cost, to the appropriate representatives, as determined by HoldCo or as reasonably requested by the TRA Limited Partner, at HoldCo and the Advisory Firm in connection with a review of such Schedule. Without limiting the application of the preceding sentence, each time HoldCo delivers to a TRA Limited Partner a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, HoldCo will deliver to such TRA Limited Partner the relevant HoldCo Return, the reasonably detailed calculation by HoldCo of the Hypothetical Tax Liability, and the reasonably detailed calculation by HoldCo of the Actual Tax Liability, as well as any other work papers as determined by HoldCo or reasonably requested by the TRA Limited Partner; provided that HoldCo shall be entitled to redact any information that it reasonably believes is unnecessary for purposes of determining the items in the applicable Schedule or amendment thereto. An applicable Schedule or amendment thereto will become final and binding on the applicable TRA Limited Partner and HoldCo thirty (30) calendar days from the first date on which the TRA Limited Partner received the applicable Schedule or amendment thereto unless the TRA Limited Partner (i) within thirty (30) calendar days after receiving the applicable Schedule or amendment thereto, provides HoldCo with notice of a material objection to such Schedule made in good faith and setting forth in reasonable detail the TRA Limited Partner’s material objection (an “Objection Notice”), or (ii) provides a written waiver of such right to object within the period described in clause (i) above, in which case such Schedule or amendment thereto shall become binding on the date the waiver is received by HoldCo. If the applicable TRA Limited Partner and HoldCo, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within thirty (30) calendar days after receipt by HoldCo of an Objection Notice, HoldCo and the applicable TRA Limited Partner shall employ the reconciliation procedures as described in Section 7.9 (the “Reconciliation Procedures”).
(b)Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by HoldCo: (i) in connection with a Determination affecting such Schedule; (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the applicable TRA Limited Partner; (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such
Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year; (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year; or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an “Amended Schedule”). HoldCo shall provide an Amended Schedule to each relevant TRA Limited Partner within thirty (30) calendar day of the occurrence of an event referenced in clause (i) through (vi) of the preceding sentence.
3.Tax Benefit Payments.
3.1.Payments.
(a)Payments. Within five (5) Business Days after the Tax Benefit Schedule with respect to the Taxable Year delivered to any TRA Limited Partner pursuant to this Agreement becomes final in accordance with Section 2.3(a), HoldCo shall pay to such TRA Limited Partner for such Taxable Year the Tax Benefit Payment in the amount determined pursuant to Section 3.1(b). Each such Tax Benefit Payment to an Applicable TRA Party shall be made by transfer of immediately available funds to the bank account previously designated by the Applicable TRA Limited Partner to HoldCo or as otherwise agreed by HoldCo and the Applicable TRA Limited Partner. For the avoidance of doubt, no Tax Benefit Payment will be made in respect of estimated Tax payments, including U.S. federal estimated income Tax payments. Notwithstanding anything herein to the contrary, in no event will the aggregate gross Tax Benefit Payments in respect of any Exchange (other than amounts accounted for as interest under the Code) exceed 150% of the amount equal to the Market Price (as of the date of such Exchange) of the Shares, or cash, as applicable, received by the Applicable TRA Limited Partner for the LP Units Exchanged.
(b)A “Tax Benefit Payment” means, with respect to an Applicable TRA Limited Partner, an amount, not less than zero, equal to the sum of the Net Tax Benefit Attributable to such Applicable TRA Limited Partner and the related Additional Amount. Subject to Section 3.3(a), the “Net Tax Benefit” for a Taxable Year will be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the sum of the total amount of Tax Benefit Payments previously made under this Section 3.1 of this Agreement (excluding payments attributable to Additional Amounts); provided that, for the avoidance of doubt, a TRA Limited Partner will not be required to return any portion of any previously made Tax Benefit Payment. The “Additional Amount” shall equal an amount determined like interest on the amount of the Net Tax Benefit Attributable to such Applicable TRA Limited Partner calculated at the Agreed Rate from the due date (without extensions) for filing the HoldCo Tax Return for such Taxable Year until the Payment Date of the applicable Tax Benefit Payment. For the avoidance of doubt, for Tax purposes, the Additional Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of LP Units in an Exchange, unless otherwise required by Applicable Law. Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid
with respect to the LP Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, will be calculated by using Valuation Assumptions (i), (iii) and (iv), substituting in each case the terms “the closing date of a Change of Control” for an “Early Termination Date”.
3.2.No Duplicative Payments. It is intended that the provisions of this Agreement not result in a duplicative payment of any amount (including interest) required under this Agreement. The provisions of this Agreement will be construed in the appropriate manner to ensure such intentions are realized.
3.3.Pro Rata Payments.
(a)Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate Tax benefit of HoldCo’s reduction in Tax liability as a result of Basis Adjustments and Imputed Interest under this Agreement is limited in a particular Taxable Year because HoldCo does not have sufficient taxable income to fully utilize available deductions and other attributes, the limitation on the Tax benefit for HoldCo will be allocated among the Applicable TRA Limited Partners in proportion to the respective amounts of Tax Benefit Payments that would have been determined under this Agreement if HoldCo had had sufficient taxable income so that there were no such limitation; provided that for purposes of allocation among the Applicable TRA Limited Partners the aggregate Tax Benefit Payments under this Agreement with respect to any Taxable Year, the operation of this Section 3.3(a) with respect to any prior Taxable Year shall be taken into account, it being the intention of HoldCo and that TRA Limited Partners for each TRA Limited Partner to receive, in the aggregate, Tax Benefit Payments in proportion to the aggregate Net Tax Benefits Attributable to such TRA Limited Partner had this Section 3.3(a) never operated.
(b)After taking into account Section 3.3(a), if for any reason HoldCo does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year, then HoldCo and the Applicable TRA Limited Partners agree that (i) HoldCo shall pay the same proportion of each Tax Benefit Payment due under this Agreement in respect of such Taxable Year, without favoring one obligation over the other, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.
(c)To the extent HoldCo makes a payment to a TRA Limited Partner in respect of a particular Taxable Year under Section 3.1(a) (taking into account Section 3.3(a) and (b), but excluding payments attributable to Additional Amounts) in excess of the amount of such payment that should have been made to such TRA Limited Partner in respect of such Taxable Year, then (i) such TRA Limited Partner shall not receive further payments under Section 3.1(a) until such TRA Limited Partner has foregone an amount of payments equal to such excess, and (ii) HoldCo shall pay the amount of such TRA Limited Partner’s foregone payments to the other TRA Limited Partners in a manner such that each of the other TRA Limited Partners, to the maximum extent possible, shall have received aggregate payments under Section 3.1(a) (excluding payments
attributable to Additional Amounts) in the amount it would have received if there had been no excess payment to such TRA Limited Partner.
4.Termination.
4.1.Early Termination and Breach of Agreement.
(a)Unless terminated earlier pursuant to Section 4.1(b) or Section 4.1(c), this Agreement will terminate when there is no further potential for a Tax Benefit Payment pursuant to this Agreement. Tax Benefit Payments under this Agreement are not conditioned on any TRA Limited Partner retaining an interest in HoldCo or GDH LP (or any successor thereto).
(b)With the written approval of a majority of the Independent Directors, HoldCo may terminate this Agreement with respect to some or all amounts payable to some or all of the TRA Limited Partners and with respect to some or all LP Units held (or previously held and Exchanged) by some or all of the TRA Limited Partners at any time by paying to such TRA Limited Partner or TRA Limited Partners the Early Termination Payment in respect of such TRA Limited Partner or TRA Limited Partners; provided, however, that this Agreement shall terminate with respect to any such TRA Limited Partner or TRA Limited Partners pursuant to this Section 4.1(b) only upon the receipt of the Early Termination Payment by such TRA Limited Partner or TRA Limited Partners, and provided, further, that Holdco may withdraw any notice to execute its termination rights under this Section 4.1(b) prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payment by HoldCo to a TRA Limited Partner, as between HoldCo and such TRA Limited Partner neither the TRA Limited Partner nor HoldCo shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by HoldCo and the TRA Limited Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the calculation of the Early Termination Payment). If an Exchange occurs with respect to LP Units with respect to which HoldCo has made an Early Termination Payment pursuant to this Section 4.1(b), Holdco shall have no obligations under this Agreement with respect to such Exchange.
(c)In the event that HoldCo breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the U.S. Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to: (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of such breach; (2) any Tax Benefit Payment agreed to by HoldCo and any TRA Limited Partner as due and payable but unpaid as of the date of such breach; and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of such breach;
provided that procedures similar to the procedures of Section 4.02 shall apply with respect to the determination of the amount payable by HoldCo pursuant to this sentence. Notwithstanding the foregoing, in the event that HoldCo breaches any of its material obligations under this Agreement, each TRA Limited Partner shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within three (3) months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three (3) months of the date such payment is due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if HoldCo fails to make any Tax Benefit Payment when due to the extent that HoldCo has insufficient funds to make such payment; provided that the interest provisions of Section 5.2 of this Agreement shall apply to such late payment (unless HoldCo does not have sufficient cash to make such payment as a result of limitations imposed by debt agreements to which HoldCo or any of its Subsidiaries is a party, in which case Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate); provided, further, that HoldCo shall promptly (and in any event, within three (3) Business Days), pay all such unpaid payments, together with accrued and unpaid interest thereon, immediately following such time that HoldCo has, and to the extent HoldCo has, sufficient funds to make such payment, and the failure of HoldCo to do so shall constitute a breach of this Agreement. For the avoidance of doubt, all cash and cash equivalents used or to be used to pay dividends by, or repurchase equity securities of, HoldCo shall be deemed to be funds sufficient and available to pay such unpaid payments, together with any accrued and unpaid interest thereon.
4.2.Early Termination Notice. If HoldCo chooses to exercise its right of early termination under Section 4.1 of this Agreement, HoldCo shall deliver to the relevant TRA Limited Partner notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying HoldCo’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment for such TRA Limited Partner. The Early Termination Schedule will become final and binding on such TRA Limited Partner thirty (30) calendar days from the first date on which such TRA Limited Partner received such Early Termination Schedule unless such TRA Limited Partner within thirty (30) calendar days after receiving the Early Termination Schedule, provides HoldCo with (i) notice of a material objection to such Early Termination Schedule made in good faith and setting forth in reasonable detail the TRA Limited Partner’s material objection (a “Material Objection Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule shall become binding on the date the waiver is received by HoldCo (such thirty (30) calendar day date as modified, it at all, by clauses (i) or (ii), the “Early Termination Effective Date”). If HoldCo and such TRA Limited Partner, for any reason, are unable to successfully resolve the issues raised in a Material Objection Notice within thirty (30) calendar days after receipt by HoldCo of the Material Objection Notice, Holdco and such TRA Limited Partner shall employ the Reconciliation Procedures.
4.3 Payment upon Early Termination.
(a)Within three (3) Business Days after the Early Termination Effective Date, HoldCo will pay to the TRA Limited Partner an amount equal to the Early Termination Payment in respect of such TRA Limited Partner. Such payment will be made by transfer of immediately available funds to an account designated by such TRA Limited Partner or as otherwise agreed by HoldCo and such TRA Limited Partner.
(b)“Early Termination Payment” shall equal the present value, discounted at the Early Termination Rate as of the Early Termination Effective Date, of all Tax Benefit Payments that would be required to be paid by HoldCo to the applicable TRA Limited Partner beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.
5.Subordination And Late Payments.
5.1.Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by HoldCo to a TRA Limited Partner under this Agreement will rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of HoldCo and its Subsidiaries (“Senior Obligations”) and will rank pari passu with all current or future secured or unsecured obligations of HoldCo that are not Senior Obligations.
5.2.Late Payments. The amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to a TRA Limited Partner when due under the terms of this Agreement will be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment or Early Termination Payment was due and payable, subject to Section 4.1(c).
6.No Disputes; Consistency; Cooperation.
6.1.Participation in Tax Matters. Except as otherwise provided herein, HoldCo shall have full responsibility for, and sole discretion over, all Tax matters concerning HoldCo, GDH LP and their respective Subsidiaries, including the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, HoldCo shall notify a TRA Limited Partner of, and keep such TRA Limited Partner reasonably informed with respect to, the portion of any audit of HoldCo and GDH LP by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of such TRA Limited Partner under this Agreement, and shall provide to such TRA Limited Partner reasonable opportunity to provide information and other input (at such TRA Limited Partner’s own expense) to HoldCo, GDH LP and their respective advisors concerning the conduct of (but, for the avoidance of doubt such TRA Limited Partner may not control) any such portion of such audit; provided, however, that HoldCo and GDH LP shall not be required to take any action that is inconsistent with any provision of the Partnership Agreement.
6.2.Consistency. HoldCo and the TRA Limited Partners agree to report and cause to be reported for all purposes, including federal, state and local Tax purposes, all Tax-related items (including the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with any Schedule required to be provided by or on behalf of HoldCo under this Agreement unless otherwise required by Applicable Law. Any dispute as to required Tax or financial reporting shall be subject to Section 7.9.
6.3.Cooperation. Each of Holdco and each TRA Limited Partner shall: (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority; (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the other party or its representatives may reasonably request in connection with any of the matters described in clause (a) above; and (c) reasonably cooperate in connection with any such matter. HoldCo will reimburse the applicable TRA Limited Partner for any reasonable third-party costs and expenses incurred pursuant to this Section 6.3.
7.Miscellaneous.
7.1.Notices. All notices, requests, consents and other communications hereunder will be in writing and will be given (and will be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax, by electronic mail (delivery receipt requested) or by certified or registered mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as will be as specified in a notice given in accordance with this Section 7.1). All notices hereunder will be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
If to HoldCo, to:
300 Vesey St., 13th Floor
New York, New York 10282
Attention: Mr. Andrew Siegel
E-mail:
New York, New York 10282
Attention: Mr. Andrew Siegel
E-mail:
If to any TRA Limited Partner, to the address and other contact information set forth in the records of HoldCo from time to time.
Any party may change its address, electronic mail or fax number by giving the other party written notice of its new address or fax number in the manner set forth above.
All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
7.2.Binding Effect; Benefit; Assignment.
(a)The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns. HoldCo shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of HoldCo, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that HoldCo would be required to perform if no such succession had taken place.
(b)A TRA Limited Partner may assign any of its rights under this Agreement to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form of Exhibit A, agreeing to become a “TRA Limited Partner” for all purposes of this Agreement, except as otherwise provided in such joinder; provided, that a TRA Limited Partner’s rights under this Agreement shall be assignable by such TRA Limited Partner under the procedure in this Section 7.2(b) regardless of whether such TRA Limited Partner continues to hold any interests in GDH LP or HoldCo or has fully transferred any such interests. For the avoidance of doubt, any Person that was a party to the Original TRA, including any Person which was the assignee of rights under the Original TRA, and which becomes a party to this Agreement shall be considered a “TRA Limited Partner” for all purposes of this Agreement.
(c)GDH LP shall have the power and authority (but not the obligation) to permit any Person who becomes a partner in GDH LP to execute and deliver a joinder to this Agreement promptly upon acquisition of LP Units by such Person, and such Person shall be treated as a “TRA Limited Partner” for all purposes of this Agreement.
7.3.Resolution of Disputes.
(a)Except for Reconciliation Disputes subject to Section 7.9, any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in Delaware in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the Dispute fail to agree on the selection of an arbitrator within ten (10) days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of Delaware and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.
(b)Notwithstanding the provisions of Section 7.3(a), HoldCo may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each TRA Limited Partner (i) expressly consents to the application of paragraph (c) of this Section 7.3 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate and (iii) irrevocably appoints HoldCo as agent of such TRA Limited Partner for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such TRA Limited Partner of any such service of process, shall be deemed in every respect effective service of process upon such TRA Limited Partner in any such action or proceeding.
(c)EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE CHANCERY COURT OF THE STATE OF DELAWARE OR, IF SUCH COURT DECLINES JURISDICTION, THE COURTS OF THE STATE OF DELAWARE SITTING IN WILMINGTON, DELAWARE, AND OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE SITTING IN WILMINGTON, DELAWARE, AND ANY APPELLATE COURT FROM ANY THEREOF, FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.3, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.
(d)The parties hereby waive, to the fullest extent permitted by Applicable Law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.3 and such parties agree not to plead or claim the same.
7.4.Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective with respect to a TRA Limited Partner when one or more counterparts have been signed by each of HoldCo, GDH LP and such TRA Limited Partner and delivered to each of HoldCo, GDH LP and such TRA Limited Partner, as applicable, it being understood that all such parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission or otherwise (including an electronically executed signature page) shall be as effective as delivery of a manually signed counterpart of this Agreement.
7.5.Entire Agreement. This Agreement and the Partnership Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. Nothing in this Agreement shall create any third-party beneficiary rights in favor of any Person or other party hereto.
7.6.Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.
7.7.Amendment. No provision of this Agreement may be amended unless such amendment is approved in writing by HoldCo and by Persons who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Persons entitled to Early Termination Payments under this Agreement if HoldCo had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Persons pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain Persons will or may receive under this Agreement unless all such Persons disproportionately affected consent in writing to such amendment. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective. Notwithstanding anything in this Section 7.7 to the contrary, HoldCo may, without the consent or approval of any TRA Limited Partner, amend this Agreement to (i) fix de minimis incorrect information, correct typos or the like, (ii) change, amend or add any provision to cure any ambiguity or correct or supplement any provisions contained in this Agreement that may be defective, (iii) give effect to the terms of this Agreement, (iv) as may be necessary or advisable to comply with any Applicable Law (including any anti-money laundering or anti-terrorist laws, rules, regulations, directives or special measures) and/or (v) make any other change that HoldCo determines to be advisable to reflect changes in law or otherwise to address legal, regulatory, tax or cross jurisdictional considerations.
7.8.Governing Law. This Agreement and all actions arising out of or relating to this Agreement (whether in contract, tort or otherwise) shall be governed by and construed in accordance with the laws of the State of Delaware (including the procedural laws and the laws relating to the statute of limitations), without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
7.9.Reconciliation. In the event that HoldCo and a TRA Limited Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 3.1(b), 4.2 and 6.2 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for
determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless HoldCo and such TRA Limited Partner agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with HoldCo or such TRA Limited Partner or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax Return may be filed as prepared by HoldCo, subject to adjustment or amendment upon resolution. The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by HoldCo, except as provided in the next sentence. HoldCo and such TRA Limited Partner shall bear their own costs and expenses of such proceeding, unless (i) the Expert substantially adopts such TRA Limited Partner’s position, in which case HoldCo shall reimburse such TRA Limited Partner for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert substantially adopts HoldCo’s position, in which case such TRA Limited Partner shall reimburse HoldCo for any reasonable out-of-pocket costs and expenses in such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on HoldCo and such TRA Limited Partner and may be entered and enforced in any court having jurisdiction.
7.10.Withholding. HoldCo shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as HoldCo is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by HoldCo, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the TRA Limited Partner in respect of whom such withholding was made. To the extent that any payment to a TRA Limited Partner pursuant to this Agreement is not reduced by such deductions or withholdings, such TRA Limited Partner shall indemnify the applicable withholding agent for any amounts imposed by any Taxing Authority together with any costs and expenses related thereto. Each TRA Limited Partner shall promptly provide HoldCo, GDH LP or any other applicable withholding agent with any applicable Tax forms and certifications (including IRS Form W-9 or the applicable version of IRS Form W-8) reasonably requested, in connection with determining whether any such deductions and withholdings are required under the Code or any provision of state, local or non-U.S. tax law.
7.11.Consolidated Groups; Transfers of Corporate Assets.
(a)The parties acknowledge and agree that (i) HoldCo may be a member of a U.S. federal income tax consolidated group, (ii) the provisions of this Agreement shall be applied with respect to such group and any other affiliated or consolidated group of corporations of which HoldCo is or becomes a part and that files a consolidated income Tax Return pursuant to Sections 1501 et seq. of the Code or any corresponding provision of state or local law, and (iii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.
(b)If HoldCo or any member of a group described in Section 7.11(a) transfers one or more assets to a corporation (or a Person classified as a corporation for U.S. federal income tax purposes) with which HoldCo does not file a consolidated Tax Return pursuant to Section 1501 of the Code (other than, for the avoidance of doubt, in the Merger), such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such transfer. The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset. For purposes of this Section 7.11, a transfer of a partnership interest shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership. Notwithstanding anything to the contrary herein, if HoldCo or any member of a group described in Section 7.11(a) transfers its assets pursuant to a transaction that qualifies as a “reorganization” (within the meaning of Section 368(a) of the Code) in which such entity does not survive or pursuant to any other transaction to which Section 381(a) of the Code applies (other than any such reorganization or any such other transaction, in each case, pursuant to which such entity transfers assets to a corporation with which HoldCo or any member of the group described in Section 7.11(a) (other than any such member being transferred in such reorganization or other transaction) does not file a consolidated Tax Return pursuant to Section 1501 of the Code), the transfer will not cause such entity to be treated as having transferred any assets to a corporation (or a Person classified as a corporation for U.S. federal income tax purposes) pursuant to this Section 7.11(b) so long as the relevant successor is bound by the provisions of this Agreement.
7.12.Further Assurances. Each party will take, or cause to be taken, all appropriate actions, do or cause to be done all things necessary, proper or advisable under Applicable Law, and execute and deliver such other certificates, agreements, documents, instruments, conveyances and assurances as HoldCo may reasonably determine to be required to carry out the provisions of this Agreement.
7.13.Waivers. Waiver by any Partner of any breach or default with respect to any of the terms of this Agreement will not operate as a waiver of any other breach or default.
7.14.Severability. If any provision of this Agreement is found by any court of competent jurisdiction or legally empowered agency to be illegal, invalid or unenforceable for any reason, the provision will be amended automatically to the minimum extent necessary to cure the illegality or invalidity and permit enforcement, and the remainder of this Agreement will not be affected.
7.15.Electronic Signatures. Any signature to be delivered with respect to any written consent, certificate, resolutions or other document under this Agreement may be delivered via an electronic reproduction of an original manual signature, such as may be delivered via facsimile, PDF file or a similar method.
7.16.Time Periods. For purposes of this Agreement, time periods within or following which an act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends if that day is a Business Day, or the next Business Day if the last day of the period does not fall on a Business Day.
7.17.Confidentiality. Each TRA Limited Partner and each of their assignees acknowledge and agree that the information of HoldCo and its Affiliates is confidential and, except in the course of performing any duties as necessary for HoldCo and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person will keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of HoldCo and its Affiliates and successors, learned by the TRA Limited Partner heretofore or hereafter. This Section 7.17 will not apply to (i) any information that has been made publicly available by HoldCo or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Limited Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the TRA Limited Partner to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such Tax Returns. Notwithstanding anything to the contrary herein, the TRA Limited Partners and each of their assignees (and each employee, representative or other agent of the TRA Limited Partners or their assignees, as applicable) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of Holdco and GDH LP, the TRA Limited Partner, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the TRA Limited Partner relating to such tax treatment and tax structure. If the TRA Limited Partner or an assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.17, HoldCo will have the right and remedy to have the provisions of this Section 7.17 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to HoldCo or any of its Affiliates and the accounts and funds managed by HoldCo and that money damages alone will not provide an adequate remedy to such Persons. Such rights and remedies will be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
7.18.Change in Law. Notwithstanding anything herein to the contrary, if, in connection with an actual change in law, a TRA Limited Partner reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such TRA Limited Partner (or direct or indirect equity holders in such TRA Limited Partner) upon any Exchange to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or would have other material adverse tax consequences to the TRA Limited Partner or any direct or indirect owner of the TRA Limited Partner, then at the election of the TRA Limited Partner and to the extent specified by the TRA Limited Partner,
this Agreement (i) shall cease to have further effect, (ii) shall not apply to an Exchange occurring after a date specified by the TRA Limited Partner, or (iii) may be amended, solely with respect to such TRA Limited Partner, in a manner determined by such TRA Limited Partner, provided that such amendment will not result in an increase in payments under this Agreement to such TRA Limited Partner at any time as compared to the amounts and times of payments that would have been due in the absence of such amendment (but giving effect to any actual change in laws).
7.19.Independent Nature of TRA Limited Partners’ Rights and Obligations. The rights and obligations of each TRA Limited Partner hereunder are several and not joint with the rights and obligations of any other TRA Limited Partner hereunder. No TRA Limited Partner will be responsible in any way for the performance of the obligations of any other TRA Limited Partner hereunder, nor will any TRA Limited Partner have the right to enforce the rights or obligations of any other TRA Limited Partner hereunder. The obligations of each TRA Limited Partner hereunder are solely for the benefit of, and will be enforceable solely by, HoldCo. The decision of each TRA Limited Partner to enter into this Agreement has been made by such TRA Limited Partner independently of any other TRA Limited Partner. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any TRA Limited Partner pursuant hereto or thereto, will be deemed to constitute the TRA Limited Partners as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the TRA Limited Partners are in any way acting in concert or as a group with respect to such rights or obligations or the transactions contemplated hereby, and HoldCo acknowledges that the TRA Limited Partners are not acting in concert or as a group and will not assert any such claim with respect to such rights or obligations or the transactions contemplated hereby.
7.20.Prior Exchanges. With respect to any Prior Exchanges, the provisions of this Agreement, to the extent that such provisions refer to Exchanges of LP Units or amounts payable by HoldCo in respect of any such Exchanges or include similar references, shall apply to such Prior Exchanges mutatis mutandis.
7.21.No Change of Control Under Original TRA. HoldCo, GDH LP and each TRA Limited Partner agree that none of the Restructuring Transactions and any transactions related thereto, individually or taken together, constituted a Change of Control (as defined under the Original TRA).
IN WITNESS WHEREOF, GDHI, GDH LP, and each TRA Limited Partner set forth below have duly executed this Agreement as of the date first written above.
GALAXY DIGITAL HOLDINGS INC.
By: /s/ Michael Novogratz
Name: Michael Novogratz
Title: Chief Executive Officer
Name: Michael Novogratz
Title: Chief Executive Officer
GALAXY DIGITAL HOLDINGS LP
By: /s/ Francesca Don Angelo
Name: Francesca Don Angelo
Title: Authorized Signatory
Name: Francesca Don Angelo
Title: Authorized Signatory
[Signature Page to Tax Receivables Agreement]
IN WITNESS WHEREOF, GDHI, GDH LP, and each TRA Limited Partner set forth below have duly executed this Agreement as of the date first written above.
TRA LIMITED PARTNER
Name
[Signature Page to Tax Receivables Agreement]
Exhibit A
Joinder
This JOINDER (this “Joinder”) to the Tax Receivables Agreement (as defined below), dated as of ____________, is by and among [Galaxy Digital Inc.], a Delaware corporation (“HoldCo”), _____________________ (“Transferor”) and ______________ (“Permitted Transferee”).
WHEREAS, on ____________, Permitted Transferee acquired from Transferor (the “Acquisition”) the right to receive any and all payments that may become due and payable under the Tax Receivable Agreement with respect to __________ LP Units (or other partnership interests) that were previously, or may in the future be, Exchanged; and
WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.2(b) of the Tax Receivables Agreement, dated as of May 13, 2025, by and among HoldCo, Galaxy Digital Holdings LP, a Delaware limited partnership, and each TRA Limited Partner (the “Tax Receivables Agreement”).
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1.01 Definitions. To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivables Agreement.
Section 1.02 Joinder. Permitted Transferee hereby acknowledges and agrees to become a “TRA Limited Partner” (as defined in the Tax Receivables Agreement) for all purposes of the Tax Receivables Agreement. Permitted Transferee hereby acknowledges the terms of Section 7.2(b) of the Tax Receivables Agreement and agrees to be bound by Section 7.17 (Confidentiality) of the Tax Receivables Agreement.
Section 1.03 Notice. Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.1 of the Tax Receivables Agreement.
Section 1.04 Governing Law. This Joinder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.
IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.
[PERMITTED TRANSFEREE]
By: _____________________________
Name:
Title:
Name:
Title:
Address for notices:
Exhibit 10.3
GALAXY DIGITAL INC.
DIRECTOR NOMINATION AGREEMENT
AGREEMENT, dated as of May 13, 2025 (“Agreement”) between Galaxy Group Investments LLC, a Delaware limited liability company (the “Holder”), and Galaxy Digital Inc., a Delaware corporation (“Pubco”).
WHEREAS, Pubco, Galaxy Digital Holdings Ltd., a Cayman Islands exempted company (“GDHL”), Galaxy Digital Holdings LP, a Cayman Islands limited partnership (the “GDH LP”) and certain other parties intend to consummate a series of transactions pursuant to which, among other things, (i) GDHL will re-domicile as a Delaware corporation and change its name to “Galaxy Digital Holdings Inc.” (“GDHI”), (ii) GDH LP will migrate out of the Cayman Islands and continue as a Delaware limited partnership, (iii) GDHI will become a wholly-owned subsidiary of Pubco, with the existing holders of Ordinary Shares of GDHL receiving an equivalent number of shares of Class A Common Stock, par value $0.001 per share, of Pubco (“Class A Common Stock”), and (iv) GDHI will become the general partner of GDH LP (collectively, the “Transactions”);
WHEREAS, in connection with the Transactions, the Holder and certain other existing holders of limited partnership units of GDH LP will receive new units (the “LP Units”) in GDH LP, and with the exception of Pubco and/or any of its wholly-owned subsidiaries (including GDHI), will subscribe for an equivalent number of shares of Class B Common Stock, par value $0.001 per share, of Pubco (the “Class B Common Stock,” and together with the Class A Common Stock, the “Common Stock”); and
WHEREAS, Pubco and the Holder desire to effect an agreement that the Holder will have certain designation rights with respect to nominees to the Board of Directors (as defined below) as set forth herein, from and after the Effective Time (as defined below).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DIRECTOR NOMINATION RIGHTS
Section 1.01. Composition of the Board. (a) On and after the last date on which the Transactions are consummated (the “Effective Time”), the Holder shall have certain rights with respect to the nomination of directors to serve on the
Board of Directors. Any director so nominated by the Holder shall be referred to as a “Founder Director.” Such nomination rights shall be as follows: (i) so long as the Aggregate Founder Ownership (as defined below) continues to be at least 25% of the total number of issued and outstanding shares of Common Stock as of the date of such calculation, the Holder shall be entitled to nominate one director to the Board of Directors (which, for the avoidance of doubt, could include himself); and (ii) Pubco hereby agrees (A) take all actions within its power to include any Founder Director nominated pursuant to this Section 1.01(a) as a nominee to the Board of Directors on each slate of nominees for election of the Board of Directors included in Pubco’s annual meeting proxy statement (or consent solicitation or similar document), (B) to recommend the election of any such nominee to the stockholders of Pubco and (C) without limiting the foregoing, to otherwise use its reasonable best efforts to cause any such nominee to be elected to the Board of Directors, including providing at least as high a level of support for the election of such nominee as it provides to any other individual standing for election as a director. With respect to any person that will be nominated to be a director for the first time at an annual meeting (each person, a “First-Time Director Nominee”) by the Holder, the Holder shall nominate its First-Time Director Nominee by (A) delivering to Pubco its written statement at least 90 days prior to the one-year anniversary of the preceding annual meeting nominating such First-Time Director Nominee and (B) setting forth such First-Time Director Nominee’s business address, telephone number, facsimile number and e-mail address; provided, however, that if the Holder shall fail to deliver such written notice, the Holder shall be deemed to have nominated the Founder Director previously nominated by the Holder who is currently serving on the Board of Directors.
(b) Term. Any Founder Director shall serve until the next annual meeting of stockholders or until his or her successor is duly elected and qualified, or his or her earlier death, disqualification, resignation or removal.
(c) Vacancies. If any Founder Director previously nominated by the Holder dies or is unwilling or unable to serve as such or is otherwise removed or resigns from office, then the Holder shall have the exclusive right to promptly nominate a successor to such director and Pubco agrees to take all actions within its power to recommend the election of any such nominee (to the extent required to be elected) and otherwise use its reasonable best efforts to cause any such nominee to be elected or to fill such vacancy, in accordance with this Section 1.01; provided, however, that if the Holder is not entitled to fill such vacant director position at such time, then such vacant director position shall be filled by the Board of Directors.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE HOLDER
Section 2.01. Corporation Authorization. The Holder represents and warrants to Pubco that the Holder is validly organized and existing under the laws of its state of organization and has all requisite power and authority to execute and deliver this Agreement, to perform fully its obligations hereunder and to
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consummate the transactions contemplated hereby, and that this Agreement constitutes the valid and binding agreement of the Holder.
Section 2.02. Non-Contravention. The Holder represents and warrants to Pubco that the execution, delivery and performance by the Holder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with, or constitute a violation of, any articles or certificate of incorporation or formation, bylaws, operating agreement, or comparable organizational documents of the Holder; (ii) contravene or conflict with, or constitute a violation of, any material applicable law or any material agreement, or order binding on the Holder; or (iii) result in the imposition of any Lien (as defined below) on any asset of the Holder.
Section 2.03. Ownership of Shares of Common Stock. The Holder represents and warrants to Pubco that, except as has been (or prior to the Effective Time is) disclosed by the Holder to Pubco in writing: (i) the Holder (or one or more of its Affiliates) (A) is the record and beneficial owner of all of the shares of Common Stock owned by it on the date hereof and (B) as of the Effective Time will be the record and beneficial owner of all of the shares of Common Stock then owned by it; (ii) the shares of Common Stock owned by it on the date hereof are, and as of the Effective Time will be, owned free of any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever (collectively, “Liens”) and any other limitation or restriction (including any restriction on the right to vote or otherwise dispose of the shares of Common Stock), other than transfer restrictions under applicable securities laws, Pubco’s Amended and Restated Certificate of Incorporation or Pubco’s Amended and Restated Bylaws and (iii) none of the shares of Common Stock is referred to in clause (i) is, or as of the Effective Time will be, subject to any voting trust or other agreement or arrangement with respect to the voting of such shares of Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PUBCO
Pubco represents and warrants to the Holder that:
Section 3.01. Corporation Authorization. Pubco is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to execute and deliver this Agreement, to perform fully its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly authorized by all necessary corporate and other action by Pubco and constitutes a legal, valid and binding obligation and agreement of Pubco.
Section 3.02. Non-Contravention. The execution, delivery and performance by Pubco of this Agreement and the consummation of the
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transactions contemplated hereby do not and will not (i) contravene or conflict with, or constitute a violation of, any provision of the Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, or any other organizational documents of Pubco; (ii) contravene or conflict with, or constitute a violation of, any material applicable law or any material agreement or order binding on Pubco; or (iii) result in the imposition of any Lien on any asset of Pubco.
ARTICLE 4
MISCELLANEOUS
Section 4.01. Other Definitional and Interpretative Provisions. Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person (as defined below) include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.
Section 4.02. Additional Definitions.
(a)“Aggregate Founder Ownership” means the total number of shares of Common Stock beneficially owned, in the aggregate and without duplication, by the Holder, together with its Affiliates, and any of their respective Permitted Transferees, collectively, as of the date of such calculation.
(b)“Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof.
(c)“Board of Directors” means the Board of Directors of Pubco.
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(d)“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
(e)“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
(f)“Law” means any statute, law, regulation, ordinance, rule, injunction, order, decree, governmental approval, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority.
(g)“Organization” means any corporation, partnership, joint venture or enterprise, limited liability company, unincorporated association, trust, estate, governmental entity or other entity or organization, and shall include the successor (by merger or otherwise) of any entity or organization.
(h)“Permitted Transferee” has the meaning assigned to such term in the Amended and Restated Certificate of Incorporation of Pubco,
(i)“Person” means any natural person or Organization.
Section 4.03. Further Assurances. Each party to this Agreement, at any time and from time to time upon the reasonable request of another party to this Agreement, shall promptly execute and deliver, or cause to be executed and delivered, all such further instruments and take all such further actions as may be reasonably necessary or appropriate to confirm or carry out the purposes and intent of this Agreement.
Section 4.04. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.
Section 4.05. Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, other than (i) a transfer by the Holder to any Permitted Transferee or (ii) an assignment of this Agreement by either Pubco to a parent holding company (a “Parent Entity”) in a transaction (whether by operation of law or in connection with a merger, amalgamation, consolidation, recapitalization or otherwise) pursuant to which (A) such Parent Entity becomes the holder, directly or indirectly, of 100% of the equity and voting interests of Pubco and (B) the Holder (or one or more Permitted Transferees) becomes the holder, directly or indirectly, of equity and voting interests of such Parent Entity in equal proportions to the equity and voting interests of Pubco it holds, directly or indirectly, immediately prior to such transaction.
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Section 4.06. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state.
Section 4.07. Consent to Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Delaware Chancery Court, or, in the event, but only in the event, that the Court of Chancery of the State of Delaware does not have subject matter jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Division) or, if subject matter jurisdiction over the action or Proceeding is vested exclusively in the federal courts of the United States of America, the United States District Court for the District of Delaware, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.
Section 4.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.09. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
Section 4.10. Counterparts. This Agreement may be executed (including by facsimile transmission or other electronic signature of this Agreement signed by such party (via PDF, TIFF, JPEG or the like)) with counterpart pages or in one or more counterparts, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that both parties need not sign the same counterpart.
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Section 4.11. Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes all prior and contemporaneous agreements and understanding, both oral and written, among the parties hereto with respect to the subject matter hereof.
Section 4.12. Amendments; Waiver. Any provision of this Agreement may be amended (whether by operation of law or in connection with a merger, amalgamation, consolidation, recapitalization or otherwise) or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective.
Section 4.13. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement is not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedy to which they are entitled at law or in equity. Accordingly, it also is agreed that each of Pubco and the Holder shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.
Section 4.14. Closing of the Transactions; Termination. This Agreement will automatically terminate and be of no force and effect following the date on which the Aggregate Founder Ownership is less than 25%.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
PUBCO: GALAXY DIGITAL INC. | ||||||||
| By: | /s/ Francesca Don Angelo | |||||||
| Name: | Francesca Don Angelo | |||||||
| Title: | Authorized Signatory | |||||||
HOLDER: GALAXY GROUP INVESTMENTS LLC | |||||||||||
| By: | /s/ Michael Novogratz | ||||||||||
| Name: | Michael Novogratz | ||||||||||
| Title: | Authorized Signatory | ||||||||||
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statement of financial position as of March 31, 2025 and the unaudited pro forma combined statements of operations for the three months ended March 31, 2025 and year ended December 31, 2024, present our as reported financial statements adjusted for the pro forma effects of the merger of GDI and GDH LP (the “Reorganization Transactions”).
The unaudited pro forma combined statement of financial position as of March 31, 2025 assumes that the Reorganization Transactions were completed on March 31, 2025. The unaudited pro forma combined statements of operations for the three months ended March 31, 2025 and year ended December 31, 2024 give pro forma effect to the Reorganization Transactions as if they had occurred on January 1, 2025 and January 1, 2024, respectively.
The pro forma adjustments are based upon available information and certain assumptions and estimates that we believe are reasonable. The unaudited pro forma combined financial statements are for illustrative and informational purposes only and do not purport to represent what our financial position or results of operations would have been if the Reorganization Transactions had actually occurred as of the dates indicated, nor does it project our financial position at any future date or our results of operations or cash flows for any future period.
The unaudited pro forma combined financial statements have been prepared in accordance with Article 11 of Regulation S-X, as amended. The adjustments in the unaudited pro forma combined financial information have been identified and presented to provide relevant information necessary for an illustrative understanding of Galaxy upon consummation of the Reorganization Transactions. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma combined financial information are described in the accompanying notes.
The Reorganization Transactions are reflected in the pro forma combined financial statements under Accounting Standards Codification (“ASC”) 805-50, Business Combinations—Related Issues, as a reverse acquisition. The pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited combined pro forma financial information. Differences between these preliminary conclusions and estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying unaudited combined pro forma financial information and Galaxy’s future results of operations and financial position.
Unaudited Pro Forma Combined Statement of Operations
for the Three Months Ended March 31, 2025
(In Thousands, Except Share and Per Share Data)
As reported GDH LP | Reorganization Transactions Pro Forma Adjustments | NOTE | Pro Forma GDI | ||||||||||||||||||||
| Revenues | $ | 12,976,206 | $ | — | $ | 12,976,206 | |||||||||||||||||
| Net gain / (loss) on digital assets | (18,223) | — | (18,223) | ||||||||||||||||||||
| Net gain / (loss) on investments | (133,167) | — | (133,167) | ||||||||||||||||||||
| Net gain / (loss) on derivatives trading | 31,059 | — | 31,059 | ||||||||||||||||||||
| Revenues and gains / (losses) from operations | 12,855,875 | — | 12,855,875 | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Transaction expenses | 13,059,439 | — | 13,059,439 | ||||||||||||||||||||
| Compensation and benefits | 56,953 | — | 56,953 | ||||||||||||||||||||
| General and administrative | 86,575 | — | 86,575 | ||||||||||||||||||||
| Technology | 9,887 | — | 9,887 | ||||||||||||||||||||
| Professional fees | 20,772 | — | 20,772 | ||||||||||||||||||||
| Notes interest expense | 14,071 | — | 14,071 | ||||||||||||||||||||
| Total operating expenses | 13,247,697 | — | 13,247,697 | ||||||||||||||||||||
Other income / (expense): | |||||||||||||||||||||||
| Unrealized gain / (loss) on notes payable - derivative | 89,606 | (89,606) | 2(e) | — | |||||||||||||||||||
| Other income / (expense), net | 672 | — | 3(a) | 672 | |||||||||||||||||||
| Total other income / (expense) | 90,278 | (89,606) | 672 | ||||||||||||||||||||
Net income / (loss) before taxes | $ | (301,544) | $ | (89,606) | $ | (391,150) | |||||||||||||||||
| Income taxes expense / (benefit) | (6,112) | (31,994) | 3(a) | (38,106) | |||||||||||||||||||
| Net income | $ | (295,432) | $ | (57,612) | $ | (353,044) | |||||||||||||||||
Net income attributed to: | |||||||||||||||||||||||
| Unit Holders of the Company | $ | (295,432) | $ | 295,432 | 3(b) | $ | — | ||||||||||||||||
| Common shareholders | — | (131,420) | 3(a), 3(b) | (131,420) | |||||||||||||||||||
| Noncontrolling interests | — | (221,624) | 3(b) | (221,624) | |||||||||||||||||||
| $ | (295,432) | $ | (57,612) | $ | (353,044) | ||||||||||||||||||
Net income attributable to common shareholders per Class A common share: | |||||||||||||||||||||||
| Basic | 4 | $ | (1.02) | ||||||||||||||||||||
| Diluted | 4 | $ | (1.02) | ||||||||||||||||||||
Pro forma weighted average shares of Class A common stock outstanding: | |||||||||||||||||||||||
| Basic | 4 | 129,371,458 | |||||||||||||||||||||
| Diluted | 4 | 345,233,801 | |||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Fiscal Year Ended December 31, 2024
(In Thousands, Except Share and Per Share Data)
| Historical GDH LP | Reorganization and Reorganization Merger Pro Forma Adjustments | NOTE | Pro Forma GDI | ||||||||||||||||||||
| Revenues | $ | 42,596,673 | $ | — | $ | 42,596,673 | |||||||||||||||||
| Net gain / (loss) on digital assets | 634,557 | — | 634,557 | ||||||||||||||||||||
| Net gain / (loss) on investments | 258,791 | — | 258,791 | ||||||||||||||||||||
| Net gain / (loss) on derivatives trading | 267,769 | — | 267,769 | ||||||||||||||||||||
| Revenues and gains / (losses) from operations | 43,757,790 | — | 43,757,790 | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Transaction expenses | 42,741,776 | 42,741,776 | |||||||||||||||||||||
| Compensation and benefits | 265,591 | — | 265,591 | ||||||||||||||||||||
| General and administrative | 279,297 | — | 279,297 | ||||||||||||||||||||
| Technology | 30,510 | — | 30,510 | ||||||||||||||||||||
| Professional fees | 51,076 | — | 51,076 | ||||||||||||||||||||
| Notes interest expense | 30,804 | — | 30,804 | ||||||||||||||||||||
Total operating expenses | 43,399,054 | — | 43,399,054 | ||||||||||||||||||||
| Other income / (expense): | |||||||||||||||||||||||
| Unrealized gain / (loss) on notes payable - derivative | (31,727) | 31,727 | 2(e) | — | |||||||||||||||||||
| Other income / (expense), net | 2,774 | (874) | 2(b) | 1,900 | |||||||||||||||||||
| Total other income / (expense) | (28,953) | 30,853 | 1,900 | ||||||||||||||||||||
| Net income / (loss) before taxes | $ | 329,783 | $ | 30,853 | $ | 360,636 | |||||||||||||||||
| Income taxes expense / (benefit) | (16,939) | 9,883 | 3(a) | (7,056) | |||||||||||||||||||
| Net income / (loss) | $ | 346,722 | $ | 20,970 | $ | 367,692 | |||||||||||||||||
| Net income / (loss) attributed to: | |||||||||||||||||||||||
| Unit holders of the Company | $ | 346,722 | $ | (346,722) | 3(b) | — | |||||||||||||||||
| Common shareholders | — | 136,587 | 3(b) | 136,587 | |||||||||||||||||||
| Noncontrolling interest | — | 231,105 | 3(b) | 231,105 | |||||||||||||||||||
| $ | 346,722 | $ | 20,970 | $ | 367,692 | ||||||||||||||||||
Net income attributable to common shareholders per Class A common share: | |||||||||||||||||||||||
| Basic | 4 | $ | 1.13 | ||||||||||||||||||||
| Diluted | 4 | $ | 1.04 | ||||||||||||||||||||
Pro forma weighted average shares of Class A common stock outstanding: | |||||||||||||||||||||||
| Basic | 4 | 120,847,366 | |||||||||||||||||||||
| Diluted | 4 | 355,056,803 | |||||||||||||||||||||
Unaudited Pro Forma Combined Statement of Financial Position
as of March 31, 2025
(In Thousands, Except Share and Per Share Data)
As reported GDH LP | Reorganization Transactions Pro Forma Adjustments 2(a) | NOTE | Pro Forma GDI | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 509,438 | $ | 1 | $ | 509,439 | |||||||||||||||||
| Digital intangible assets | 2,123,860 | — | 2,123,860 | ||||||||||||||||||||
| Digital financial assets | 514,479 | — | 514,479 | ||||||||||||||||||||
| Digital assets loan receivable, net of allowance | 280,095 | — | 280,095 | ||||||||||||||||||||
| Investments | 506,634 | — | 506,634 | ||||||||||||||||||||
| Assets posted as collateral | 545,754 | — | 545,754 | ||||||||||||||||||||
| Derivative assets | 128,353 | 128,353 | |||||||||||||||||||||
| Accounts receivable (includes $4.5 and $4.2 million due from related parties) | 28,864 | — | 28,864 | ||||||||||||||||||||
| Digital assets receivable | 17,674 | — | 17,674 | ||||||||||||||||||||
| Loans receivable | 407,966 | — | 407,966 | ||||||||||||||||||||
| Prepaid expenses and other assets | 29,884 | — | 29,884 | ||||||||||||||||||||
| Total current assets | 5,093,001 | 1 | 5,093,002 | ||||||||||||||||||||
| Non-current assets | |||||||||||||||||||||||
| Digital assets receivable | 1,996 | — | 1,996 | ||||||||||||||||||||
| Investments (includes $669.6 and $745.5 million measured at fair value) | 736,060 | — | 736,060 | ||||||||||||||||||||
| Digital intangible assets | 15,030 | — | 15,030 | ||||||||||||||||||||
| Loans receivable, non-current | 56,800 | — | 56,800 | ||||||||||||||||||||
| Property and equipment, net | 262,216 | 262,216 | |||||||||||||||||||||
| Other non-current assets | 113,052 | 110,739 | 2(b) | 223,791 | |||||||||||||||||||
| Goodwill | 58,037 | — | 58,037 | ||||||||||||||||||||
| Total non-current assets | 1,243,191 | 110,739 | 1,353,930 | ||||||||||||||||||||
Total assets | $ | 6,336,192 | $ | 110,740 | $ | 6,446,932 | |||||||||||||||||
| Liabilities and Equity | |||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||
| Derivative liabilities | 89,702 | $ | — | $ | 89,702 | ||||||||||||||||||
| Accounts payable and accrued liabilities (includes $111.0 and $96.9 million due to related parties) | 270,468 | (107,804) | 2(d) | 162,664 | |||||||||||||||||||
| Digital assets borrowed | 1,760,455 | — | 1,760,455 | ||||||||||||||||||||
| Payable to customers | 19,288 | — | 19,288 | ||||||||||||||||||||
| Loans payable | 345,249 | — | 345,249 | ||||||||||||||||||||
| Collateral payable | 943,513 | — | 345,249 | ||||||||||||||||||||
| Other current liabilities | 73,358 | 124 | 2(b) | 943,637 | |||||||||||||||||||
| Total current liabilities | 3,502,033 | (107,680) | 3,394,353 | ||||||||||||||||||||
| Non-current liabilities | |||||||||||||||||||||||
As reported GDH LP | Reorganization Transactions Pro Forma Adjustments 2(a) | NOTE | Pro Forma GDI | ||||||||||||||||||||
| Notes payable | 763,798 | (46,586) | 2(e) | 717,212 | |||||||||||||||||||
| Digital assets borrowed, non-current | 6,603 | ||||||||||||||||||||||
| Other non-current liabilities | 162,114 | 81,425 | 2(b) | 243,539 | |||||||||||||||||||
| Total non-current liabilities | 932,515 | 34,839 | 967,354 | ||||||||||||||||||||
Total liabilities | $ | 4,434,548 | $ | (72,841) | $ | 4,361,707 | |||||||||||||||||
| Equity | |||||||||||||||||||||||
| Unit holders’ capital | $ | 1,901,644 | $ | (1,901,644) | 2(c) | — | |||||||||||||||||
| Class A Common Stock | — | 128 | 2(c) | 128 | |||||||||||||||||||
| Class B Common Stock | — | 216 | 2(c) | 216 | |||||||||||||||||||
| Additional paid-in capital | — | 840,840 | 2(c),2(e) | 840,840 | |||||||||||||||||||
| Retained earnings | — | (17,396) | 2(b) | (17,396) | |||||||||||||||||||
| Noncontrolling interests | — | 1,261,437 | 2(b), 2(d) | 1,261,437 | |||||||||||||||||||
Total equity | 1,901,644 | 183,581 | 2,085,225 | ||||||||||||||||||||
Total liabilities and equity | $ | 6,336,192 | $ | 110,740 | $ | 6,446,932 | |||||||||||||||||
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
As discussed and described in further detail herein, the Company completed the Reorganization Transactions on May 13, 2025. The unaudited combined pro forma financial information and related notes were prepared in accordance with Article 11 of Regulation S-X and are based upon GDH LP’s fiscal year end reporting, for the year ended December 31, 2024, and interim reporting, as of and for the three months ended March 31, 2025.
The unaudited combined pro forma financial statements have been prepared to reflect the continuing operations of the Company after giving effect to the Reorganization Transactions and are not necessarily indicative of our future results of operations.
2. Unaudited Pro Forma Combined Statement of Financial Position Adjustments Related to The Reorganization Transactions
a.GDI does not meet the definition of a business under U.S. GAAP and did not have any material assets or liabilities prior to the Reorganization Transactions. As such, the transaction with GDH LP is accounted for as a reverse acquisition. This results in no step up in basis of GDH LP’s assets and liabilities as it is the accounting acquirer.
b.Following the Reorganization Transactions, we became subject to U.S. federal income taxes, in addition to state, local and foreign taxes. As a result, the pro forma statement of financial position reflects an adjustment to our current and non-current tax obligations payable and deferred taxes assuming the highest statutory rates apportioned to each state, local and foreign jurisdiction. Additionally, GDI became party to an amended and restated Tax Receivable Agreement (“TRA”) after giving effect to the Reorganization Transactions. As such, the related TRA liability and deferred tax asset are included within this adjustment as well. The offset to this adjustment is reflected within retained earnings and noncontrolling interests in accordance with the percentages of economic ownership identified in Note 3(b).
c.Reflects the reclassification of GDH LP’s as reported Unit holders’ capital equity to (1) Class A common stock and Class B common stock of GDI and (2) additional paid-in capital as a result of the Reorganization Transactions.
d.Upon completion of the Reorganization Transactions, GDI (via its 100% ownership of the outstanding equity interest in GDH Delaware) would have indirectly owned approximately 37.2% of the economic interest in GDH LP (on the basis of as reported shares outstanding as of March 31, 2025), but would have held 100% of the voting power and control the management of GDH LP. Additionally, immediately following the Reorganization Transactions, the remaining economic interest in GDH LP held by the noncontrolling interests holders would have been approximately 62.8% (on the basis of as reported shares outstanding as of March 31, 2025). The pro forma adjustment to noncontrolling interests was calculated as follows:
As of March 31, 2025 | |||||
As reported GDH LP Unit holders’ capital | $ | 1,901,644 | |||
| Add: conversion of intercompany balance with GDHL | 107,804 | ||||
| Total GDH LP Unit holders’ capital | 2,009,448 | ||||
Post Reorganization Transactions non-controlling interest holdings | 62.8 | % | |||
Pro forma adjustment to allocate As Reported GDH LP Unit holders’ capital and pro forma adjustment 2(d) to noncontrolling interests | $ | 1,261,437 | |||
e.Upon completion of the Reorganization Transactions, GDI consolidates GDH LP and assumed the liability to issue additional equity upon conversion of the Exchangeable Notes. As the Exchangeable Notes conversion features require the issuance of shares of GDI’s Class A common stock, the embedded
derivatives meet the indexed to entity’s own stock exemption and are no longer bifurcated. The adjustment reclassifies the embedded derivative liabilities to shareholders’ equity.
3. Unaudited Pro Forma Combined Statement of Operations Adjustments Related to The Reorganization Transactions
(a)Following the Reorganization Transactions, GDI became subject to U.S. federal income taxes, in addition to state, local and foreign taxes, as described in Note 2(b). As a result, the pro forma combined statements of operations reflect an adjustment to our provision for corporate income taxes to reflect an estimated statutory tax rate of 22.4%, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and foreign jurisdiction. Further, as described in Note 2(b), this adjustment includes the impact of the amended and restated TRA on the tax provision following the completion of the Reorganization Transactions.
The amounts related to the impact of recording pro forma income tax provisions at the statutory rate on the combined statements of operations are as follows:
(in thousands) | For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||||
Income tax expense / (benefit) | $ | (31,994) | $ | 9,695 | ||||||||||
The amounts related to the impact of recording the pro forma impact of the TRA to the combined statements of operations are as follows:
(in thousands) | For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||||
Other income / (expense), net | $ | — | $ | (874) | ||||||||||
Income tax expense / (benefit) | — | 188 | ||||||||||||
The amounts related to the impact of recording pro forma income tax provisions at the statutory rate on the combined statement of financial position are as follows:
| (in thousands) | As of March 31, 2025 | |||||||
| Other non-current assets | $ | 102,522 | ||||||
| Other current liabilities | 124 | |||||||
| Other non-current liabilities | 44,474 | |||||||
Retained earnings / (Accumulated deficit) | 57,924 | |||||||
The amounts related to the impact of recording the pro forma impact of the Tax Receivable Agreement the combined statement of financial position are as follows:
| As of March 31, 2025 | ||||||||
| Other non-current assets | $ | 8,217 | ||||||
| Other non-current liabilities | 36,951 | |||||||
Retained earnings / (Accumulated deficit) | (28,734) | |||||||
(b)Upon completion of the Reorganization Transactions, GDI became the sole general partner of GDH LP, and as a result, GDI (via its 100% ownership of the outstanding equity interest in GDH LP) would have initially indirectly owned approximately 37.2% of the economic interest in GDH LP (on the basis of as reported shares outstanding as of March 31, 2025), but would have had 100% of the voting power and
control the management of GDH LP. Additionally immediately following the Reorganization Transactions, the remaining economic interest in GDH LP held by the non-controlling interest holders would have been approximately 62.8% (on the basis of as reported shares outstanding as of March 31, 2025), as discussed in Note 2(d). The pro forma adjustment to Net income/(loss) attributable to noncontrolling interests was calculated as follows:
For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||
| As Reported GDH LP Net income / (loss) | $ | (295,432) | $ | 346,722 | |||||||
| Net income impact from adjustments 2(e) and 3(a) | (57,612) | 20,970 | |||||||||
Total GDH LP balance to allocate between Net income / (loss) attributed to Common shareholders and non-controlling interests | $ | (353,044) | $ | 367,692 | |||||||
Post Reorganization Transactions noncontrolling interest holdings | 62.8 | % | 62.8 | % | |||||||
Pro forma adjustment to allocate As Reported GDH LP Net income / (loss) attributed to Common shareholders and pro forma Income tax expense to Net income / (loss) attributed to non-controlling interests | $ | (221,624) | $ | 231,105 | |||||||
Pro forma adjustment to attribute remaining As Reported GDH LP Net income /(loss) to Common shareholders | $ | (131,420) | $ | 136,587 | |||||||
4. Net Income / (Loss) Per Share
The pro forma net income / (loss) per share is calculated using the treasury stock method, using only the shares of Class A common stock, with consideration given to the potentially dilutive effect of (1) economic ownership units in GDH LP (“LP Units”) that are exchangeable, along with GDI’s Class B share of common stock, into shares of GDI’s Class A common stock, (2) Galaxy compensatory awards, and (3) the Exchangeable Notes for shares of GDI’s Class A common stock. All potentially dilutive awards were excluded from the computation of pro forma diluted net income / (loss) per share for all periods presented because including them would have had an antidilutive effect. GDI’s shares of Class B common stock do not share in earnings of GDI and have no rights to dividends or distributions, whether in cash or stock, and therefore are not participating securities requiring separate earnings per share presentation.
| (in thousands except share and per share data) | For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||||||||||
| Net income / (loss) per share – Basic: | ||||||||||||||||||||
Numerator | ||||||||||||||||||||
Net income / (loss) attributable to common shareholders – Basic | $ | (131,420) | $ | 136,587 | ||||||||||||||||
Denominator | ||||||||||||||||||||
As reported weighted average number of common shares outstanding – Basic | 129,371,458 | 120,847,366 | ||||||||||||||||||
Net income / (loss) per share – Basic | $ | (1.02) | $ | 1.13 | ||||||||||||||||
| (in thousands except share and per share data) | For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||||||||||
| Net income per share – Diluted: | ||||||||||||||||||||
Numerator | ||||||||||||||||||||
Net income / (loss) attributable to common shareholders – Basic | $ | (131,420) | $ | 136,587 | ||||||||||||||||
Add: Net income / (loss) attributable to redeemable noncontrolling interests | (221,624) | — | ||||||||||||||||||
Net income attributable to common shareholders – Diluted | $ | (353,044) | $ | 136,587 | ||||||||||||||||
Denominator | ||||||||||||||||||||
As reported weighted average number of common shares outstanding – Basic | 129,371,458 | 120,847,366 | ||||||||||||||||||
Class B units convertible to Class A units | 215,862,343 | — | ||||||||||||||||||
| Exchangeable Class B common stock | — | 11,792 | ||||||||||||||||||
| Compensatory awards | — | 18,314,117 | ||||||||||||||||||
Total weighted average number of common shares outstanding – Diluted | 345,233,801 | 139,173,275 | ||||||||||||||||||
Net income / (loss) per share – Diluted | $ | (1.02) | $ | 0.98 | ||||||||||||||||
The as reported basic and diluted weighted average number of common shares for the three months ended March 31, 2025 include the existing ordinary shares of GDHL that became shares of Class A common stock of GDI as a result of the Reorganization Transactions.
The following potentially dilutive shares were excluded from the dilutive loss per share calculation because including them would have had an antidilutive effect.
For the three months ended March 31, 2025 | For the year ended December 31, 2024 | ||||||||||||||||
| Class B units convertible to Class A units | — | 215,883,528 | |||||||||||||||
| Compensatory awards | 19,216,220 | — | |||||||||||||||
| Exchangeable Notes | 30,247,946 | 15,013,792 | |||||||||||||||
Total | 49,464,166 | 230,897,320 | |||||||||||||||