Exhibit 10.4




 





 


FORM OF


 


TAX RECEIVABLE
AGREEMENT


 


dated as of


 


              ,
2008




 





 

















 


Table of Contents


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  2

  
	
   

  	
   

  
	
  Section
  1.01   Definitions

  	
  2

  
	
   

  	
   

  
	
  ARTICLE II DETERMINATION OF REALIZED TAX BENEFIT

  	
  7

  
	
   

  	
   

  
	
  Section
  2.01   Basis Adjustment

  	
  7

  
	
  Section
  2.02   Exchange Basis Schedule

  	
  7

  
	
  Section
  2.03   Tax Benefit Schedule

  	
  7

  
	
  Section
  2.04   Procedures, Amendments

  	
  8

  
	
   

  	
   

  
	
  ARTICLE III TAX BENEFIT PAYMENTS

  	
  8

  
	
   

  	
   

  
	
  Section
  3.01   Payments

  	
  8

  
	
  Section
  3.02   No Duplicative Payments

  	
  9

  
	
  Section
  3.03   Pro Rata Payments

  	
  9

  
	
   

  	
   

  
	
  ARTICLE IV TERMINATION

  	
  10

  
	
   

  	
   

  
	
  Section
  4.01   Early Termination and Breach of Agreement

  	
  10

  
	
  Section
  4.02   Early Termination Notice

  	
  11

  
	
  Section
  4.03   Payment upon Early Termination

  	
  11

  
	
   

  	
   

  
	
  ARTICLE V SUBORDINATION AND LATE PAYMENTS

  	
  11

  
	
   

  	
   

  
	
  Section
  5.01   Subordination

  	
  11

  
	
  Section
  5.02   Late Payments by Corporate Holdco

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VI NO DISPUTES; CONSISTENCY; COOPERATION

  	
  12

  
	
   

  	
   

  
	
  Section
  6.01   KKR Holdings Participation in Corporate Holdco’s and Group
  Partnerships’ Tax Matters

  	
  12

  
	
  Section
  6.02   Consistency

  	
  12

  
	
  Section
  6.03   Cooperation

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
  13

  
	
   

  	
   

  
	
  Section
  7.01   Notices

  	
  13

  
	
  Section
  7.02   Counterparts

  	
  14

  
	
  Section
  7.03   Entire Agreement; Third Party Beneficiaries

  	
  14

  
	
  Section
  7.04   Governing Law

  	
  15

  
	
  Section
  7.05   Severability

  	
  15

  
	
  Section
  7.06   Successors; Assignment; Amendments; Waivers

  	
  15

  
	
  Section
  7.07   Titles and Subtitles

  	
  16

  
	
  Section
  7.08   Resolution of Disputes

  	
  16

  
	
  Section
  7.09   Reconciliation

  	
  17

  
	
  Section
  7.10   Withholding

  	
  18

  



 


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  Section
  7.11   Affiliated Corporations of Parent; Admission of Corporate
  Holdco into a Consolidated Group; Transfers of Corporate Assets

  	
  18

  
	
  Section
  7.12   Confidentiality

  	
  19

  
	
  Section
  7.13   Group Partnership Agreement

  	
  19

  
	
  Section
  7.14   Group Partnerships

  	
  19

  
	
  Section
  7.15   Headings

  	
  20

  



 


Exhibit A —
Form of Joinder Agreement


 


ii





















 


This TAX RECEIVABLE AGREEMENT (as amended
from time to time, this “Agreement”), dated as of               ,
2008, is hereby entered into by and among KKR Holdings L.P., a Cayman limited
partnership (“KKR Holdings”), KKR Management Holdings Corp., a Delaware
corporation (“Management Holdings”), KKR & Co. L.P., a Delaware
limited partnership (“Parent”), KKR Management Holdings, L.P., a
Delaware limited partnership (“Group Partnership I”), and together with
all other Persons (as defined herein) who execute and deliver a joinder
contemplated in Section 7.14.


 


RECITALS


 


WHEREAS, the Limited Partners (as defined
herein) will hold limited partner interests (“Group Partnership Units”)
in each of Group Partnerships (as defined herein);


 


WHEREAS, Management Holdings is the general
partner of Group Partnership I;


 


WHEREAS, KKR Holdings or a KKR Holdings Affiliated Person (as defined
herein) shall be entitled to surrender
Group Partnership Units held by KKR Holdings or a KKR Holdings
Affiliated Person to the Group
Partnerships in exchange for the delivery by the Group Partnerships of Common
Units of Parent (the “Common Units”) pursuant to the provisions of the
Exchange Agreement (as defined herein);


 


WHEREAS, the Group Partnerships, and each of
its direct and indirect subsidiaries, may have in effect an election under
Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”),
for each Taxable Year in which an exchange of Group Partnership Units for
Common Units of Parent (the “Common Units”) occurs pursuant to the
provisions of the Exchange Agreement (as defined herein), which elections are
intended generally to result in an adjustment to the tax basis of the assets
owned by the Group Partnerships (with respect to the Corporate Holdcos) at the
time of an exchange of Group Partnership Units for Common Units or any other
acquisition of Group Partnership Units for cash or other consideration
(collectively, an “Exchange”) (any such time, an “Exchange Date”)
by reason of such Exchange and the receipt of payments under this Agreement;


 


WHEREAS, the income, gain, loss, expense and
other Tax items of (i) the Group Partnerships with respect to each Corporate
Holdco may be affected by the Basis Adjustment (defined below) and (ii) the
Corporate Holdcos may be affected by 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 Adjustment
and Imputed Interest on the actual liability for Taxes of the Corporate
Holdcos;


 


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:


 





















 


ARTICLE I



DEFINITIONS


 


Section 1.01   Definitions. As used
in this Agreement, the terms set forth in this Article I shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined).


 


“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 first Person.


 


“Agreed Rate” means LIBOR plus 100
basis points.


 


“Agreement” is defined in the Preamble
of this Agreement.


 


“Amended Schedule” is defined in
Section 2.04(b) of this Agreement.


 


“Basis Adjustment” means the adjustment
to the tax basis of an Exchange Date Asset under Section 732 of the Code (in
situations where, as a result of one or more Exchanges, a Group Partnership
becomes an entity that is disregarded as separate from its owner for tax
purposes), Section 1012 of the Code, or Sections 743(b) and 754 of the Code,
where applicable, (in situations where, following an Exchange, a Group
Partnership remains in existence as an entity for tax purposes) and, in each
case, comparable sections of state, local and foreign tax laws (as calculated
under Section 2.01 of this Agreement) as a result of an Exchange and the
payments made pursuant to this Agreement. Notwithstanding any other provision
of this Agreement, the amount of any Basis Adjustment resulting from an Exchange
of one or more Group Partnership Units shall be determined without regard to
any Pre-Exchange Transfer of such Group Partnership Units and as if any such
Pre-Exchange Transfer had not occurred.


 


 “Business
Day” means Monday through Friday of each week, except that a legal holiday
recognized as such by the government of the United States of America or the
State of New York shall not be regarded as a Business Day.


 


“Change of Control” means the
occurrence of any Person, other than a Person approved by the current Managing
Partner (as defined below), becoming the general partner of the Parent.


 


“Common Units” is defined in the
Recitals of this Agreement.


 


“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.


 


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“Corporate Holdco Return” means the federal
Tax Return and/or state and/or local and/or foreign Tax Return, as applicable,
of each of the Corporate Holdcos filed with respect to Taxes of any Taxable
Year.


 


“Corporate Holdcos” mean Parent or any
direct or indirect subsidiary thereof that is at any time treated as a domestic
corporation for United States federal income tax purposes, including, but not
limited to, Management Holdings.


 


“Default Rate” means LIBOR plus 500
basis points.


 


“Determination” shall have the meaning
ascribed to such term in Section 1313(a) of the Code or similar provision of
state, local and foreign tax law, as applicable, or any other event (including
the execution of a Form 870-AD) that finally and conclusively establishes the
amount of any liability for Tax.


 


“Early Termination Date” means the
date of an Early Termination Notice for purposes of determining the Early
Termination Payment.


 


“Early Termination Notice” is defined
in Section 4.02 of this Agreement.


 


“Early Termination Schedule” is
defined in Section 4.02 of this Agreement.


 


“Early Termination Payment” is defined
in Section 4.03(b) of this Agreement.


 


“Early Termination Rate” means the
lesser of (i) 6.5% and (ii) LIBOR plus 100 basis points.


 


“Exchange” is defined in the Recitals
of this Agreement.


 


“Exchange Agreement” means the
Exchange Agreement, dated as of the date hereof, among the Parent, the Group
Partnerships and KKR Holdings.


 


“Exchange Basis Schedule” is defined
in Section 2.02 of this Agreement.


 


“Exchange Date” is defined in the
Recitals of this Agreement.


 


“Exchange Date Assets” means (i) any
assets owned by the Group Partnerships on an Exchange Date and allocable to the
interests in the Group Partnerships that are Exchanged, and (ii) any asset
whose tax basis is determined, in whole or in part, by reference to the
adjusted basis of any asset referred to in clause (i).


 


“Exchange Payment” is defined in
Section 5.01.


 


“Expert” is defined in Section 7.09 of
this Agreement.


 


“Group Partnership I” is defined in
the Preamble of this Agreement.


 


“Group Partnership II” means KKR Fund
Holdings L.P., a Cayman limited partnership.


 


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“Group
Partnership Agreements” means, collectively, the Amended and Restated
Limited Group Partnership Agreement of Group Partnership I and the Amended and
Restated Limited Group Partnership Agreement of Group Partnership II (and the
partnership agreement then in effect of any future partnership designated as a
Group Partnership), as they may each be amended, supplemented or restated from
time to time.


 


“Group Partnership Units” means
limited partner interests in the Group Partnerships.


 


 “Group
Partnerships” means, collectively, Group Partnership I and Group
Partnership II (and any future partnership designated as a Group Partnership hereunder).


 


 “Imputed
Interest” shall mean any interest imputed under Section 1272, 1274 or 483
or other provision of the Code and any similar provision of state, local and
foreign tax law with respect to a Corporate Holdco’s payment obligations under
this Agreement.


 


“KKR Holdings” is defined in the
Preamble of this Agreement.


 


“KKR Holdings Affiliated Person” means
each Person that is as of the date of this Agreement or becomes from time to
time (i) a general partner or a limited partner of KKR Holdings or (ii) a
general partner or limited partner of any Person included in clause (i) above.


 


“LIBOR” means for each month (or
portion thereof) during any period, an interest rate per annum equal to the
rate per annum reported, on the date two days prior to the first day of such
month, on the Telerate Page 3750 (or if such screen shall cease to be publicly
available, as reported on Reuters Screen page “LIBO” or by any other publicly
available source of such market rate) for London interbank offered rates for U.S.
dollar deposits for such month (or portion thereof).


 


“Limited Partner” means each Person
that is as of the date of this Agreement or becomes from time to time a limited
partner of each of the Group Partnerships pursuant to the terms of the Group
Partnership Agreements including, for the avoidance of doubt, any person to
whom KKR Holdings distributes Group Partnership Units.


 


“Management Holdings” is defined in
the Preamble of this Agreement.


 


“Managing Partner” means KKR
Management LLC, a Delaware limited liability company and the general partner of
the Parent.


 


“Market Value” shall mean the closing
price of the Common Units on the applicable Exchange Date on the national
securities exchange or interdealer quotation system on which such Common Units
are then traded 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 Value shall mean the closing price of
the Common Units on the Business Day immediately preceding such Exchange Date
on the national securities exchange or interdealer quotation system on which
such Common Units are then traded or listed, as reported by the Wall Street
Journal; provided further, that if the Common Units are not then listed on a
national securities exchange or interdealer quotation system, “Market Value”
shall mean the cash 


 


4





















 


consideration
paid for Common Units, or the fair market value of the other property delivered
for Common Units, as determined by the board of directors of the Managing
Partner in good faith.


 


“Material Objection Notice” has the
meaning set forth in Section 4.02.


 


“Non-Stepped Up Tax Basis” means, with
respect to any asset at any time, the tax basis that such asset would have had
at such time if no Basis Adjustment had been made.


 


“Non-Stepped Up Tax Liability” means,
with respect to any Taxable Year, the liability for Taxes of each of the
Corporate Holdcos or any Group Partnership in which each of the Corporate
Holdcos own an interest, but only with respect to Taxes imposed on such Group
Partnership and allocable to the Corporate Holdco using the same methods,
elections, conventions and similar practices used on the relevant Corporate Holdco
Return, but using the Non-Stepped Up Tax Basis instead of the tax basis of the
Exchange Date Assets and excluding any deduction attributable to the Imputed
Interest.


 


“Objection Notice” has the meaning set
forth in Section 2.04(a).


 


“Parent” is defined in the Preamble of
this Agreement.


 


“Payment Date” means any date on which
a payment is required to be made pursuant to this Agreement.


 


“Person” means any individual,
corporation, firm, partnership, joint venture, limited liability company,
estate, trust, business association, organization, governmental entity or other
entity.


 


 “Pre-Exchange
Transfer” means any transfer (including upon the death of a Limited
Partner) of one or more Group Partnership Units (i) that occurs prior to an
Exchange of such Group Partnership Units, and (ii) to which Section 743(b) of
the Code applies.


 


 “Realized
Tax Benefit” means, for a Taxable Year, the excess, if any, of the
Non-Stepped Up Tax Liability over the actual liability for Taxes of each of the
Corporate Holdcos or any Group Partnership in which such Corporate Holdco owns
an interest, but only with respect to Taxes imposed on such Group Partnership
and allocable to such Corporate Holdco for such Taxable Year using the “with or
without” methodology. If all or a portion of the actual tax liability for Taxes
for the Taxable Year arises as a result of an audit by a Taxing Authority of
any Taxable Year, such liability shall not be included in determining the
Realized Tax Benefit unless and until there has been a Determination.


 


“Realized Tax Detriment” means, for a
Taxable Year, the excess, if any, of the actual liability for Taxes of each of
the Corporate Holdcos or any Group Partnership in which such Corporate Holdco
owns an interest, but only with respect to Taxes imposed on such Group
Partnership and allocable to such Corporate Holdco over the Non-Stepped Up Tax
Liability for such Taxable Year using the “with or without” methodology. If all
or a portion of the actual tax liability for Taxes for the Taxable Year arises
as a result of an audit by a Taxing Authority of any Taxable Year, such
liability shall not be included in determining the Realized Tax Detriment
unless and until there has been a Determination.


 


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“Reconciliation Dispute” has the
meaning set forth in Section 7.09.


 


“Reconciliation Procedures” shall mean
those procedures set forth in Section 7.09 of this Agreement.


 


“Schedule” means any Exchange Basis
Schedule, Tax Benefit Schedule and the Early Termination Schedule.


 


“Subsidiaries” means, with respect to
any Person, as of any date of determination, any other Person as to which such
Person owns, directly or indirectly, or otherwise controls more than 50% of the
voting power or other similar interests or the sole general partner interest or
managing member or similar interest of such Person.


 


“Tax Benefit Payment” is defined in
Section 3.01(b) of this Agreement.


 


“Tax Benefit Schedule” is defined in
Section 2.03 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, without limitation, any
information return, claim for refund, amended return and declaration of
estimated Tax.


 


“Taxable Year” means a taxable year as
defined in Section 441(b) of the Code or comparable section of state, local or
foreign tax law, as applicable, (and, therefore, for the avoidance of doubt,
may include a period of less than 12 months for which a Tax Return is made)
ending on or after an Exchange Date in which there is a Basis Adjustment due to
an Exchange.


 


“Taxes” means any and all U.S.
federal, state, local and foreign taxes, assessments or similar charges
measured with respect to net income or profits and any interest related to such
Tax.


 


“Taxing Authority” shall mean any
domestic, foreign, 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.


 


“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.


 


“Valuation Assumptions” shall mean, as
of an Early Termination Date, the assumptions that (1) in each Taxable Year
ending on or after such Early Termination Date, each of the Corporate Holdcos
will have taxable income sufficient to fully utilize the deductions arising
from the basis Adjustment and the Imputed Interest during such Taxable Year,
(2) the federal income tax rates and state, local and foreign 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, (3) any loss carryovers or carryback 


 


6





















 


generated by
the Basis Adjustment or the Imputed Interest and available as of the date of
the Early Termination Schedule will be utilized by each of the Corporate
Holdcos on a pro rata basis from the date of the Early Termination Schedule
through the scheduled expiration date of such loss carryovers or carrybacks,
(4) any non-amortizable assets are deemed to be disposed of (A) with respect to
private equity fund related assets, pro-rata over the number of years remaining
under the original fund agreement until expected liquidation (without
extensions) of the applicable fund under the terms of the applicable fund
agreement (or, if such expected liquidation date has passed, on the Early
Termination Date) and (B) with respect to all other assets, on the fifteenth
anniversary of the earlier of the Basis Adjustment and the Early Termination
Date and (5) if an Early Termination is effected prior to an Exchange of Group
Partnership Units, clause (i) of Section 2.01 shall be read to include the
Market Value of the Common Units and cash that would be transferred if the
Exchange occurred on the Early Termination Date.


 


ARTICLE II



DETERMINATION OF REALIZED TAX BENEFIT


 


Section 2.01   Basis Adjustment. Each
of the Corporate Holdcos and the Group Partnerships, on the one hand, and KKR
Holdings, on the other hand, acknowledge that, as a result of an Exchange, each
of the Corporate Holdcos’ basis in the applicable Exchange Date Assets shall be
increased by the excess, if any, of (i) the sum of (x) the Market Value of the
Common Units, cash or other consideration transferred to the applicable Limited
Partner pursuant to the Exchange as payment for the exchanged Group Partnership
Units, plus (y) the amount of payments made pursuant to this Agreement with
respect to such Exchange plus (z) the amount of debt allocated to the Group
Partnership Units acquired pursuant to such Exchange over (ii) each of the
Corporate Holdcos’ share of the basis of the Exchange Date Assets immediately
after the Exchange attributable to the Group Partnership Units exchanged, determined
as if (x) each Group Partnership remains in existence as an entity for tax
purposes, and (y) no Group Partnership made the election provided by Section
754 of the Code. 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.


 


Section 2.02   Exchange Basis Schedule.
Within 90 calendar days after the filing of the U.S. federal income tax return
of each of the Corporate Holdco for each Taxable Year in which any Exchange has
been effected, each of the Corporate Holdcos shall deliver to the applicable
Limited Partner a schedule (the “Exchange Basis Schedule”) that shows
for purposes of Taxes, (i) the actual unadjusted tax basis of the Exchange Date
Assets as of each applicable Exchange Date, (ii) the Basis Adjustment with
respect to the Exchange Date Assets as a result of the Exchanges effected in
such Taxable Year, calculated in the aggregate, (iii) the period or periods, if
any, over which the Exchange Date Assets are amortizable and/or depreciable and
(iv) the period or periods, if any, over which each Basis Adjustment is
amortizable and/or depreciable (which, for non-amortizable assets shall be
based on the Valuation Assumptions).


 


Section 2.03   Tax Benefit Schedule. Within
90 calendar days after the filing of the U.S. federal income tax return of the
of each of the Corporate Holdcos for any Taxable Year in which there is a
Realized Tax Benefit or Realized Tax Detriment, each of the Corporate 


 


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Holdcos shall provide to the applicable Limited
Partner a schedule showing the calculation of the aggregate Realized Tax
Benefit or Realized Tax Detriment for such Taxable Year and the portion thereof
allocable to the applicable Limited Partner (a “Tax Benefit Schedule”). The
Schedule will become final as provided in Section 2.04(a) and may be amended as
provided in Section 2.04(b) (subject to the procedures set forth in Section
2.04(b)).


 


Section 2.04   Procedures, Amendments.


 


(a)                                  Procedure.
Every time each of the Corporate Holdcos delivers to the applicable Limited
Partner an applicable Schedule under this Agreement, including any Amended
Schedule delivered pursuant to Section 2.04(b), but excluding any Early
Termination Schedule or amended Early Termination Schedule, each of the
Corporate Holdcos shall also (x) deliver to the applicable Limited Partner
schedules and work papers providing reasonable detail regarding the preparation
of the Schedule and (y) allow such Limited Partner reasonable access at no cost
to the appropriate representatives at each of the Corporate Holdcos in
connection with a review of such Schedule. The applicable Schedule shall become
final and binding on all parties unless the Limited Partner, within 30 calendar
days after receiving an Exchange Basis Schedule or amendment thereto or 30
calendar days after receiving a Tax Benefit Schedule or amendment thereto,
provides such Corporate Holdco with notice of a material objection to such
Schedule (“Objection Notice”) made in good faith. If the parties, for
any reason, are unable to successfully resolve the issues raised in such notice
within 30 calendar days of receipt by such Corporate Holdco of an Objection
Notice, if with respect to an Exchange Basis Schedule, or 30 calendar days of
receipt by such Corporate Holdco of an Objection Notice, if with respect to a
Tax Benefit Schedule, after such Schedule was delivered to the applicable
Limited Partner, such Corporate Holdco and the applicable Limited Partner shall
employ the reconciliation procedures as described in Section 7.09 of this
Agreement (the “Reconciliation Procedures”).


 


(b)                                 Amended
Schedule. The applicable Schedule for any Taxable Year may be amended from
time to time by each of the Corporate Holdcos (i) in connection with a
Determination affecting such Schedule, (ii) to correct material 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 Limited Partner, (iii) to comply with the Expert’s
determination under the Reconciliation Procedures, (iv) to reflect a material
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 material 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 (such
Schedule, an “Amended Schedule”).


 


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ARTICLE III



TAX BENEFIT PAYMENTS


 


Section 3.01   Payments.


 


(a)                                  Payments.
Within five (5) calendar days of a Tax Benefit Schedule delivered to an
applicable Limited Partner becoming final in accordance with Section 2.04(a),
each of the Corporate Holdcos shall pay to the applicable Limited Partner for
such Taxable Year the portion of the Tax Benefit Payment determined pursuant to
Section 3.01(b) that is allocable to such Limited Partner. Each such payment
shall be made by wire transfer of immediately available funds to a bank account
of the applicable Limited Partner previously designated by such Limited Partner
to each of the Corporate Holdcos or as otherwise agreed by the Corporate Holdco
and the applicable Limited Partner. For the avoidance of doubt, no Tax Benefit
Payment shall be made in respect of estimated tax payments, including, without
limitation, federal income tax payments.


 


(b)                                 A
“Tax Benefit Payment” means an amount, not less than zero, equal to 85%
of the sum of the Net Tax Benefit and the Interest Amount. The “Net Tax
Benefit” shall equal: (1) the Corporate Holdco’s Realized Tax Benefit, if
any, for a Taxable Year plus (2) the amount of the excess Realized Tax Benefit
reflected on an Amended Tax Benefit Schedule for a previous Taxable Year over
the Realized Tax Benefit (or Realized Tax Detriment (expressed as a negative
number)) reflected on the Tax Benefit Schedule for such previous Taxable Year,
minus (3) an amount equal to each of the Corporate Holdco’s Realized Tax
Detriment (if any) for the current or any previous Taxable Year, minus (4) the
amount of the excess Realized Tax Benefit reflected on a Tax Benefit Schedule
for a previous Taxable Year over the Realized Tax Benefit (or Realized Tax
Detriment (expressed as a negative number)) reflected on the Amended Tax
Benefit Schedule for such previous Taxable Year; provided, however,
that to the extent of the amounts described in 3.01(b)(2), (3) and (4) were
taken into account in determining any Tax Benefit Payment in a preceding
Taxable Year, such amounts shall not be taken into account in determining a Tax
Benefit Payment attributable to any other Taxable Year; provided, further,
for the avoidance of doubt, no applicable Limited Partner shall be required to
return any portion of any previously made Tax Benefit Payment. The “Interest
Amount” shall equal the interest on the Net Tax Benefit calculated at the
Agreed Rate from the due date (without extensions) for filing the Corporate
Holdco Return with respect to Taxes for such Taxable Year until the Payment
Date. 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 Group Partnership 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,
shall be calculated by utilizing Valuation Assumptions (1), (3), and (4),
substituting in each case the terms “the closing date of a Change of Control”
for an “Early Termination Date”.


 


Section 3.02   No Duplicative Payments.
It is intended that the above provisions of this Agreement will not result in
duplicative payment of any amount (including interest) required under this
Agreement. It is also intended that the provisions of this Agreement provide
that 85% of each of the Corporate Holdcos’ Realized Tax Benefit and Interest
Amount is paid to the Limited Partners pursuant to this Agreement. The
provisions of this Agreement shall be construed in the appropriate manner as
such intentions are realized.


 


Section 3.03   Pro Rata Payments. For
the avoidance of doubt, to the extent each of the Corporate Holdcos’ deduction
with respect to the Basis Adjustment is limited in a particular Taxable Year or
such Corporate Holdco lacks sufficient funds to satisfy its obligations to make
all Tax Benefit Payments due in a particular taxable year, the limitation on
the 


 


9





















 


deduction, or the Tax Benefit Payments that may be
made, as the case may be, shall be taken into account or made for each applicable
Limited Partner on a pro rata basis based upon the amount of deductions for
such Taxable Year arising out of the Basis Adjustment attributable to the
Exchange by such applicable Limited Partner relative to the total amount of
deductions for such Taxable Year arising out of the aggregate Basis Adjustments
attributable to Exchanges by all of the applicable Limited Partners.


 


ARTICLE IV



TERMINATION


 


Section 4.01   Early Termination and
Breach of Agreement.


 


(a)                                  Each
of the Corporate Holdcos may terminate this Agreement with respect to all of
the Group Partnership Units held (or previously held and exchanged) by all
Limited Partners at any time by paying to all of the applicable Limited
Partners the Early Termination Payment; provided, however, that this
Agreement shall terminate only upon the receipt of the Early Termination
Payment by all Limited Partners, and provided, further, that each
of the Corporate Holdcos may withdraw any notice to execute its termination
rights under this Section 4.01(a) prior to the time at which any Early
Termination Payment has been paid. Upon payment of the Early Termination
Payments by a Corporate Holdco, neither the applicable Limited Partners nor the
Corporate Holdco shall have any further payment obligations under this
Agreement in respect of such Limited Partners, other than for any (a) Tax
Benefit Payment agreed to by such Corporate Holdco and the applicable 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 Early Termination Payment). If an
Exchange occurs after such Corporate Holdco exercises its termination rights
under this Section 4.01(a), such Corporate Holdco shall have no obligations
under this Agreement with respect to such Exchange.


 


(b)                                 In
the event that a Corporate 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 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 a breach,
(2) any Tax Benefit Payment agreed to by such Corporate Holdco and any Limited
Partners as due and payable but unpaid as of the date of a breach, and (3) any
Tax Benefit Payment due for the Taxable Year ending with or including the date
of a breach. Notwithstanding the foregoing, in the event that a Corporate
Holdco breaches this Agreement, the Limited Partners shall be entitled to elect
to receive the amounts set forth in (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 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 


 


10





















 


considered to be a breach of a material
obligation under this Agreement to make a payment due pursuant to this
Agreement within three months of the date such payment is due.


 


(c)                                  The
undersigned parties agree that the aggregate value of the Tax Benefit Payments
cannot be ascertained with any reasonable certainty for U.S. federal income tax
purposes.


 


Section 4.02   Early Termination Notice.
If a Corporate Holdco chooses to exercise its right of early termination under
Section 4.01 above, such Corporate Holdco shall deliver to the applicable
Limited Partners notice of such intention to exercise such right (“Early
Termination Notice”) and a schedule (the “Early Termination Schedule”)
specifying such Corporate Holdco’s intention to exercise such right and showing
in reasonable detail the calculation of the Early Termination Payment. The
applicable Early Termination Schedule shall become final and binding on all
parties unless the Limited Partner, within 30 calendar days after receiving the
Early Termination Schedule thereto provides such Corporate Holdco with notice
of a material objection to such Schedule made in good faith (“Material
Objection Notice”). If the parties, for any reason, are unable to
successfully resolve the issues raised in such notice within 30 calendar days
after receipt by such Corporate Holdco of the Material Objection Notice, such
Corporate Holdco and the Limited Partner shall employ the Reconciliation
Procedures as described in Section 7.09 of this Agreement.


 


Section 4.03   Payment upon Early
Termination. (a)  Within three
calendar days after agreement between the applicable Limited Partner and a
Corporate Holdco of the Early Termination Schedule, such Corporate Holdco shall
pay to the applicable Limited Partner an amount equal to the Early Termination
Payment. Such payment shall be made by wire transfer of immediately available
funds to a bank account designated by the applicable Limited Partner or as
otherwise agreed by the Corporate Holdco and the applicable Limited Partner.


 


(b)                                 The
“Early Termination Payment” as of the date of the delivery of an Early
Termination Schedule shall equal with respect to the applicable Limited Partner
the present value, discounted at the Early Termination Rate as of such date, of
all Tax Benefit Payments that would be required to be paid by a Corporate
Holdco to the applicable Limited Partner beginning from the Early Termination
Date assuming the Valuation Assumptions are applied.


 


ARTICLE V



SUBORDINATION AND LATE PAYMENTS


 


Section 5.01   Subordination. Notwithstanding
any other provision of this Agreement to the contrary, any Tax Benefit Payment
or Early Termination Payment required to be made by a Corporate Holdco to the
applicable Limited Partner under this Agreement (an “Exchange Payment”)
shall rank subordinate and junior in right of payment to any principal,
interest or other amounts due and payable in respect of any current or future
obligations in respect of indebtedness for borrowed money of such Corporate
Holdco and its Subsidiaries (“Senior Obligations”) and shall rank pari
passu with all current or future unsecured obligations of such Corporate Holdco
that are not Senior Obligations.


 


11





















 


Section 5.02   Late Payments by Corporate
Holdco. The amount of all or any portion of any Tax Benefit Payment not
made to the applicable Limited Partner when due under the terms of this
Agreement shall be payable together with any interest thereon, computed at the
Default Rate and commencing from the date on which such Exchange Payment was
due and payable.


 


ARTICLE VI



NO DISPUTES; CONSISTENCY; COOPERATION


 


Section 6.01   KKR Holdings Participation
in Corporate Holdco’s and Group Partnerships’ Tax Matters. Except as
otherwise provided herein, each of the Corporate Holdcos and the Group
Partnerships shall have full responsibility for, and sole discretion over, all
Tax matters concerning each of the Corporate Holdcos and the Group
Partnerships, respectively, including without limitation the preparation,
filing or amending of any Tax Return and defending, contesting or settling any
issue pertaining to Taxes. Notwithstanding the foregoing, each of the Corporate
Holdcos shall notify KKR Holdings of, and keep KKR Holdings reasonably informed
with respect to the portion of any audit of such Corporate Holdco and the Group
Partnerships by a Taxing Authority the outcome of which is reasonably expected
to KKR Holdings’ rights and obligations under this Agreement, and shall provide
to KKR Holdings reasonable opportunity to provide information and other input
to such Corporate Holdco, the Group Partnerships and their respective advisors
concerning the conduct of any such portion of such audit; provided, however,
that each of the Corporate Holdcos and the Group Partnerships shall not be
required to take any action that is inconsistent with any provision of any of
the Group Partnership Agreements.


 


Section 6.02   Consistency. Each of
the Corporate Holdcos and the applicable Limited Partner agree to report and
cause to be reported for all purposes, including federal, state, local and
foreign Tax purposes and financial reporting purposes, all Tax-related items
(including without limitation the Basis Adjustment and each Tax Benefit
Payment) in a manner consistent with that specified by each of the Corporate
Holdcos in any Schedule required to be provided by or on behalf of each of the
Corporate Holdcos under this Agreement.


 


Section 6.03   Cooperation. Each
Limited Partner will (a) furnish to each of the Corporate Holdcos in a timely
manner such information, documents and other materials as each such Corporate
Holdco 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 each of the Corporate
Holdcos and its representatives to provide explanations of documents and
materials and such other information as each of the Corporate Holdcos 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, and each of the Corporate Holdcos shall reimburse the
applicable Limited Partner for any reasonable third-party costs and expenses
incurred pursuant to this Section.


 


12


















 


ARTICLE VII



MISCELLANEOUS


 


Section 7.01   Notices. All notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be deemed duly given and received (a) on the date of delivery
if delivered personally, or by facsimile upon confirmation of transmission by
the sender’s fax machine if sent on a Business Day (or otherwise on the next
Business Day) or (b) on the first Business Day following the date of dispatch
if delivered by a recognized next-day courier service. All notices hereunder
shall 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 the Parent:


 


KKR & Co.
L.P.

9 West 57th Street, Suite 4200

New York, NY 10019

Attention: Chief Financial Officer

Fax: 212-750-0003

Phone: 212-750-8300


 


with a copy
to:


 


Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(T) (212) 455-2000

(F) (212) 735-2502

Attention: Joseph H. Kaufman, Esq.


 


If to a Corporate Holdco or either Group
Partnership, to:


 


c/o KKR &
Co. L.P.

9 West 57th Street, Suite 4200

New York, NY 10019

Attention: Chief Financial Officer

Fax: 212-750-0003

Phone: 212-750-8300


 


with a copy
to:


 


Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(T) (212) 455-2000

(F) (212) 735-2502

Attention: Joseph H. Kaufman, Esq.


 


13

















 


If to KKR Holdings:


 


KKR Holdings
L.P.

9 West 57th Street, Suite 4200

New York, NY 10019

Attention: Chief Financial Officer

Fax: 212-750-0003

Phone: 212-750-8300


 


with a copy
to:


 


Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(T) (212) 455-2000

(F) (212) 735-2502

Attention: Joseph H. Kaufman, Esq.


 


If to any Limited Partner, to the attention
of such Limited Partner at:


 


c/o KKR
Holdings L.P.

9 West 57th Street, Suite 4200

New York, NY 10019

Attention: Chief Financial Officer

Fax: 212-750-0003

Phone: 212-750-8300


 


with a copy
to:


 


Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(T) (212) 455-2000

(F) (212) 735-2502

Attention: Joseph H. Kaufman, Esq.


 


Any party may change its address or fax
number by giving the other party written notice of its new address or fax
number in the manner set forth above.


 


Section 7.02   Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.


 


Section 7.03   Entire Agreement; Third
Party Beneficiaries. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both 


 


14

















 


written and oral, among the parties with respect to
the subject matter hereof. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
permitted assigns, except that each Limited Partner shall be entitled to receive
the benefits of this Agreement and shall be bound by the terms and provisions
of this Agreement by reason of such Limited Partner’s election to participate
in any Exchange. Except as provided in this Section 7.03,  nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.


 


Section 7.04   Governing Law. This
Agreement shall be governed by, and construed in accordance with, the law of
the State of New York.


 


Section 7.05   Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any law or public policy, all other terms and provisions of
this Agreement shall nevertheless remain in full force and effect 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 determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto 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 greatest extent possible.


 


Section 7.06   Successors; Assignment;
Amendments; Waivers.


 


(a)                                  Neither
KKR Holdings nor any Limited Partner may assign this Agreement to any person
without the prior written consent of each of the Corporate Holdcos; provided,
however, (i) that, to the extent Group Partnership Units are effectively
transferred in accordance with the terms of the Group Partnership Agreements or
any other agreement the applicable Limited Partner may have entered into with
the Parent or are transferred to a KKR Affiliate, the Managing Partner, the
Corporate Holdco and/or either of the Group Partnerships, the transferring
Limited Partner or KKR Holdings shall assign to the transferee of such Group
Partnership Units the transferring Limited Partner’s or KKR Holdings’ rights
under this Agreement with respect to such transferred Group Partnership Units
and (ii) that, once an Exchange has occurred, any and all payments that may
become payable to a Limited Partner pursuant to this Agreement with respect to
such Exchange may be assigned to any Person or Persons, as long as any such
Person has executed and delivered, or, in connection with such assignment,
executes and delivers, a joinder to this Agreement, in form and substance
reasonably satisfactory to each Corporate Holdco, agreeing to be bound by
Section 7.12 and acknowledging specifically the last sentence of the next
paragraph. For the avoidance of doubt: (A) to the extent KKR Holdings transfers
Group Partnership Units to a KKR Holdings Affiliate pursuant to the relevant
Group Partnership Agreements, the KKR Holdings Affiliate receiving such Group
Partnership Units shall have all rights under this Agreement with respect to
such transferred Group Partnership Units as KKR Holdings has, under this
Agreement, with respect to the other Group Partnership Units held by him; and
(B) the requirement to execute and deliver a joinder pursuant to this Section
7.06(a) shall not be construed as requiring such execution and delivery prior
to an assignment becoming effective.


 


15

















 


(b)                                 No
provision of this Agreement may be amended unless such amendment is approved in
writing by each of the Corporate Holdcos, on behalf of themselves and the
respective Group Partnerships they Control, and by KKR Holdings. 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.


 


(c)                                  All
of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the parties hereto, each
Limited Partner and their respective successors, assigns, heirs, executors,
administrators and legal representatives. Each of the Corporate Holdcos 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 such Corporate Holdco, by written agreement, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that each Corporate Holdco would be required to perform if no such succession
had taken place.


 


Section 7.07   Titles and Subtitles. The
titles of the sections and subsections of this Agreement are for convenience of
reference only and are not to be considered in construing this Agreement.


 


Section 7.08   Resolution of Disputes.


 


(a)                                  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) shall be finally settled by
arbitration conducted by a single arbitrator in New York 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
thirty (30) days of the receipt of the request for arbitration, the
International Chamber of Commerce shall make the appointment. The arbitrator
shall be a lawyer 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 paragraph (a), each of the Corporate Holdcos 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 Limited Partner shall
be deemed to (i) expressly consent to the application of paragraph (c) of this
Section 7.08 to any such action or proceeding, (ii) agree 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 appoint each of the Corporate Holdcos as such
Limited Partner’s agent 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 Limited Partner of any such service of process,
shall be deemed in every respect effective service of process upon the Limited
Partner in any such action or proceeding.


 


16

















 


(c)                                  (i)  EACH LIMITED PARTNER IS HEREBY DEEMED TO
IRREVOCABLY SUBMIT TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK
FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE
PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.08, 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 paragraph (c) (i) of this Section 7.08 and such
parties agree not to plead or claim the same.


 


Section 7.09   Reconciliation. In the
event that a Corporate Holdco and KKR Holdings are unable to resolve a
disagreement with respect to the matters governed by Sections 2.04, 4.02 and
6.02 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 in a nationally recognized accounting firm or a law firm, and the
Expert shall not, and the firm that employs the Expert shall not, have any
material relationship with such Corporate Holdco or Limited Partner or other
actual or potential conflict of interest. If the parties are unable to agree on
an Expert within fifteen (15) 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 30
calendar days and shall resolve any matter relating to a Tax Benefit Schedule
or an amendment thereto within 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 is due or
any Tax Return reflecting the subject of a disagreement is due, such payment
shall be made on the date prescribed by this Agreement and such Tax Return may
be filed as prepared by such Corporate 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 the Corporate Holdco;
except as provided in the next sentence. Each of the Corporate Holdcos and each
applicable Limited Partner shall bear their own costs and expenses of such
proceeding, unless the Limited Partner has a prevailing position that is more
than 10% of the payment at issue, in which case the Corporate Holdco shall
reimburse such Limited Partner 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 7.09 shall be decided
by the Expert. The Expert shall finally determine any Reconciliation Dispute
and the determinations of the Expert pursuant to this Section 7.09 shall be
binding on the Corporate Holdco and the applicable Limited Partner and may be
entered and enforced in any court having jurisdiction.


 


17

















 


Section 7.10   Withholding. Each
Corporate Holdco shall be entitled to deduct and withhold from any payment
payable pursuant to this Agreement such amounts as such Corporate 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 such Corporate Holdco, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the applicable Limited
Partner.


 


Section 7.11   Affiliated Corporations of
Parent; Admission of Corporate Holdco into a Consolidated Group; Transfers of
Corporate Assets.


 


(a)                                  The
Parent Group Partnership shall cause each entity that is a Corporate Holdco and
that is not already a party to this Agreement to execute and deliver a joinder
to this Agreement providing that all provisions of this Agreement shall
correspondingly apply to such Corporate Holdco, including the payment of Tax
Benefit Payments by such Corporate Holdco with respect to any Realized Tax
Benefit attributable to Group Partnership interests that are part of an Exchange.


 


(b)                                 If
any Group Partnership Interest was acquired in an Exchange by an entity prior
to such entity becoming a Corporate Holdco, such Exchange shall be treated for
purposes of this Agreement as having occurred immediately after such entity
became a Corporate Holdco at the Fair Market Value in existence at the time of
such prior Exchange, and the entity that is now a Corporate Holdco shall be
required to make the same Tax Benefit Payments pursuant to the terms of this
Agreement that it would have been required to make had it been treated as a
Corporate Holdco on the date of such Exchange; provided, however, that such Tax
Benefit Payments shall be payable only with respect to (i) Exchange Date Assets
that are still owned at the time such entity becomes a Corporate Holdco, and
(ii) taxable years of such entity ending on or after it becomes a Corporate
Holdco.


 


(c)                                  If
a Corporate Holdco becomes a member of an affiliated or consolidated group of
corporations that files a consolidated income tax return pursuant to Sections
1501 et seq. of the Code or any corresponding provisions of state, local or
foreign law, then: (i) the provisions of this Agreement shall be applied with
respect to the group as a whole; and (ii) Tax Benefit Payments shall be
computed with reference to the consolidated taxable income and consolidated tax
liability of the group as a whole.


 


(d)                                 If
any entity that is obligated to make an Exchange Payment hereunder transfers
one or more assets to a corporation with which such entity does not file a
consolidated tax return pursuant to Section 1501 of the Code, such entity, for
purposes of calculating the amount of any Exchange 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 contribution. The consideration
deemed to be received by such entity shall be equal to the Fair Market Value of
the contributed asset, plus (i) the amount of debt to which such asset is
subject, in the case of a contribution of an encumbered asset or (ii) the
amount of debt allocated to such asset, in the case of a contribution of a
partner interest.


 


18

















 


Section 7.12   Confidentiality. Each
Limited Partner and assignee shall be deemed to acknowledge and agree that the
information of each Corporate Holdco is confidential and, except in the course
of performing any duties as necessary for such Corporate Holdco and its
Affiliates, as required by law or legal process or to enforce the terms of this
Agreement, it shall keep and retain in the strictest confidence and not to
disclose to any Person all confidential matters, acquired pursuant to this
Agreement, of such Corporate Holdco or any Person included within the Parent
and their respective Affiliates and successors and the other Limited Partners,
including, without limitation, the identity of the beneficial holders of
interests in any fund or account managed by the Parent or any of its
Subsidiaries, confidential information concerning the Parent, any Person
included within the Parent and their respective Affiliates and successors, the
other Limited Partners and any fund, account or investment managed by any
Person included within the Parent, including marketing, investment, performance
data, fund management, credit and financial information, and other business
affairs of such Corporate Holdco, any Person included within the Parent and
their respective Affiliates and successors, the other Limited Partners and any
fund, account or investment managed directly or indirectly by any Person
included within such Corporate Holdco learned by the Limited Partner heretofore
or hereafter. This clause 7.12 shall not apply to (i) any information that has
been made publicly available by such Corporate Holdco or any of its Affiliates,
becomes public knowledge (except as a result of an act of such 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 a Limited
Partner to prepare and file his or her 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 returns.
Notwithstanding anything to the contrary herein, each Limited Partner (and each
employee, representative or other agent of such Limited Partner) may disclose
to any and all Persons, without limitation of any kind, the tax treatment and
tax structure of (x) each Corporate Holdco and (y) any of its transactions, and
all materials of any kind (including opinions or other tax analyses) that are
provided to the Limited Partners relating to such tax treatment and tax
structure.


 


If a Limited Partner or assignee commits a
breach, or threatens to commit a breach, of any of the provisions of this
Section 7.12, the Corporate Holdco shall have the right and remedy to have the
provisions of this Section 7.12 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 shall cause irreparable injury to such Corporate Holdco or
any of its Subsidiaries or the other Limited Partners and the accounts and
funds managed by such Corporate Holdco and that money damages alone shall not
provide an adequate remedy to such Persons. Such rights and remedies shall be
in addition to, and not in lieu of, any other rights and remedies available at
law or in equity.


 


Section 7.13   Group Partnership
Agreement. This Agreement shall be treated as part of the partnership
agreement of each Group Partnership as described in Section 761(c) of the Code,
and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.


 


Section 7.14   Group Partnerships. Management
Holdings hereby agrees that, to the extent it acquires a general partner
interest, managing member interest or similar interest in 


 


19

















 


any Person after the date hereof, it shall cause such
Person to execute and deliver a joinder to this Agreement and become a “Group
Partnership” for all purposes of this Agreement.


 


Section 7.15   Headings. The headings
in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.


 


[Signatures on
following pages]


 


20

















 


IN WITNESS WHEREOF, Management Holdings and
each Limited Partner have duly executed this Agreement as of the date first
written above.


 


	
   

  	
  KKR HOLDINGS L.P.

  
	
   

  	
   

  
	
   

  	
  By: KKR Holdings GP Limited, its general
  partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR MANAGEMENT HOLDINGS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR & CO. L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: KKR Management LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR MANAGEMENT HOLDINGS L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: KKR Management Holdings Corp., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: