exv10w4






Exhibit 10.4




FORM OF


TAX RECEIVABLE AGREEMENT


dated as of




                      , 2012




 









 





Table of Contents




	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	ARTICLE I	 	 
	 
	 	DEFINITIONS	 	 
	 
	 	 	 	 
	Section 1.01.
	 	Definitions	 	2
	 
	 	 	 	 
	 
	 	ARTICLE II	 	 
	 
	 	DETERMINATION OF REALIZED TAX BENEFIT	 	 
	 
	 	 	 	 
	Section 2.01.
	 	Basis Adjustment Principles	 	8
	Section 2.02.
	 	Exchange Basis Schedule	 	9
	Section 2.03.
	 	Tax Benefit Schedule	 	9
	Section 2.04.
	 	Procedures, Amendments	 	9
	 
	 	 	 	 
	 
	 	ARTICLE III	 	 
	 
	 	TAX BENEFIT PAYMENTS	 	 
	 
	 	 	 	 
	Section 3.01.
	 	Payments	 	10
	Section 3.02.
	 	No Duplicative Payments	 	11
	Section 3.03.
	 	Pro Rata Payments; Coordination of Benefits	 	11
	 
	 	 	 	 
	 
	 	ARTICLE IV	 	 
	 
	 	TERMINATION	 	 
	 
	 	 	 	 
	Section 4.01.
	 	Early Termination and Breach of Agreement	 	12
	Section 4.02.
	 	Early Termination Notice	 	13
	Section 4.03.
	 	Payment upon Early Termination	 	13
	 
	 	 	 	 
	 
	 	ARTICLE V	 	 
	 
	 	SUBORDINATION AND LATE PAYMENTS	 	 
	 
	 	 	 	 
	Section 5.01.
	 	Subordination.	 	14
	Section 5.02.
	 	Late Payments by a Corporate Holdco	 	14
	 
	 	 	 	 
	 
	 	ARTICLE VI	 	 
	 
	 	NO DISPUTES; CONSISTENCY; COOPERATION	 	 
	 
	 	 	 	 
	Section 6.01.
	 	Limited Partner Representative Participation in Corporate Holdcos’ and Carlyle Holdings Partnerships’ Tax Matters	 	14
	Section 6.02.
	 	Consistency	 	15
	Section 6.03.
	 	Cooperation	 	15









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	 	 	 	 	Page
	 
	 	ARTICLE VII	 	 
	 
	 	MISCELLANEOUS	 	 
	Section 7.01.
	 	Notices	 	15
	Section 7.02.
	 	Counterparts	 	16
	Section 7.03.
	 	Entire Agreement; No Third Party Beneficiaries	 	16
	Section 7.04.
	 	Governing Law	 	17
	Section 7.05.
	 	Severability	 	17
	Section 7.06.
	 	Successors; Assignment; Amendments; Waivers	 	17
	Section 7.07.
	 	Titles and Subtitles	 	18
	Section 7.08.
	 	Dispute Resolution	 	18
	Section 7.09.
	 	 	 	18
	Section 7.09.
	 	Reconciliation	 	19
	Section 7.10.
	 	Withholding	 	20
	Section 7.11.
	 	Affiliated Corporations of Parent; Addition of Corporate Holdcos; Admission of a Corporate Holdco into a Consolidated Group; Transfers of Corporate Assets	 	20
	Section 7.12.
	 	Confidentiality	 	21
	Section 7.13.
	 	Carlyle Holdings Partnership Agreements	 	22
	Section 7.14.
	 	Carlyle Holdings Partnerships	 	22
	Section 7.15.
	 	Termination Election	 	22
	Section 7.16.
	 	Independent Nature of the Limited Partners	 	22
	 
	 	Rights and Obligations	 	22






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          This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated
as of _______, 2012, is hereby entered into by and among Carlyle Holdings I GP Inc., a Delaware
corporation (together with any successors thereto, the “Corporate Taxpayer”), Carlyle
Holdings I L.P., a Delaware limited partnership (together with any successors thereto “Carlyle
Holdings I”), The Carlyle Group L.P., a Delaware limited partnership (together with any
successors thereto, the “Parent”), each of the undersigned parties hereto identified as
“Limited Partners”, all other Persons (as defined herein) who execute and deliver a joinder
contemplated in Section 7.11.




RECITALS




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




          WHEREAS, the Corporate Taxpayer wholly owns (directly or indirectly) the general partner of
Carlyle Holdings I;




          WHEREAS, pursuant to and subject to the provisions of the Exchange Agreement (as defined
below), the Limited Partners are entitled to surrender Carlyle Holdings Partnership Units to the
Carlyle Holdings Partnerships in exchange for the delivery by the Carlyle Holdings Partnerships of
Common Units (the “Common Units”) in the Parent, cash or other consideration and the
general partners of the Carlyle Holdings Partnerships have a superseding right to acquire such
Carlyle Holdings Partnership Units for Common Units;




          WHEREAS, Carlyle Holdings I and each of its direct and indirect subsidiaries that are treated
as partnerships for United States federal income tax purposes, will 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 Carlyle Holdings Partnership Units for Common Units or any
other acquisition of Carlyle Holdings Partnership Units for cash or other consideration
(collectively, an “Exchange”) occurs, which elections are intended generally to result in
an adjustment to the tax basis of the assets owned by the Carlyle Holdings Partnerships (with
respect to the Corporate Holdcos (as defined below)) at the time of 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 Carlyle Holdings
Partnerships solely 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 recitals 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 Sections 732 and 1012 of the Code (in situations where, as a result of one or more Exchanges,
a Carlyle Holdings Partnership becomes an entity that is disregarded as separate from its owner for
tax purposes), or Sections 743(b) and 754 of the Code, where applicable, (in situations where,
following an Exchange, a Carlyle Holdings 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 Carlyle Holdings Partnership Units
shall be determined without regard to any Pre-Exchange Transfer of such Carlyle Holdings
Partnership Units and as if any such Pre-Exchange Transfer had not occurred.




          “Bankruptcy Code” means The Bankruptcy Reform Act of 1978, as heretofore and hereafter
amended, and codified as 11 U.S.C. Section 101 et seq.




          “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.




          “CalPERS” means the California Public Employees’ Retirement System.




          “Carlyle Holdings I” is defined in the preamble of this Agreement.




          “Carlyle Holdings II” means Carlyle Holdings II L.P., a Québec société en commandite,
and any successor thereto.




          “Carlyle Holdings III” means Carlyle Holdings II L.P., a Québec société en commandite,
and any successor thereto.





 









 








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




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




          “Carlyle Holdings Partnership Units” is defined in the recitals of this Agreement.




          “Change of Control” means (i) the occurrence of any Person, other than a Person
approved by the General Partner, becoming the general partner of the Parent or (ii) during any
period of two consecutive years, Continuing Directors cease for any reason to constitute a majority
of the directors serving on the General Partner’s board of directors. For purposes of this
definition, “Continuing Director” means any director of the General Partner (a) serving on the
General Partner’s board of directors at the beginning of the relevant period of two consecutive
years referred to in the immediately preceding sentence, (b) appointed or elected to the General
Partner’s board of directors by the members of the General Partner or (c) whose appointment or
election to the General Partner’s board of directors by such board, or nomination for election to
the General Partner’s board of directors by the limited partners of the Parent, was approved by a
majority of the directors of the General Partner then still serving at the time of such approval
who were so serving at the beginning of the relevant period of two consecutive years, were so
appointed or elected by the members of the General Partner or whose appointment or election or
nomination for election was so approved.




          “Code” is defined in the recitals of this Agreement.




          “Common Units” 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 Holdco Return” means the federal, state, 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” means any direct or indirect subsidiary of Parent (other than any
Carlyle Holding Partnership and any direct or indirect subsidiary of a Carlyle Holdings
Partnership) that is at any time treated as a domestic corporation for United States federal income
tax purposes, including, but not limited to, the Corporate Taxpayer, or Parent, if it is at any
time treated as a corporation for United States federal income tax purposes.




          “Corporate Taxpayer” is defined in the preamble of this Agreement.







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          “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.




          “Dispute” is defined in Section 7.08(a) of this Agreement.




          “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 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 Corporate Taxpayer, the Carlyle Holdings Partnerships and certain affiliates
thereof, as it may be amended, supplemented or restated from time to time.




          “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 Carlyle Holdings Partnerships
on an Exchange Date and allocable to the interests in the Carlyle Holdings 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 of this Agreement.




          “Exchanged Initial Basis Adjustments” means, with respect to any Exchange or deemed
Exchange, the portion of the adjustments to the tax basis with respect to the Initial Carlyle
Parent Entities under Section 743(b) of the Code to which the Mubadala Investors became entitled as
a result of the acquisition by the Mubadala Investors of the Existing Units and the New Units (as
such terms are defined in the Note and Unit Subscription Agreement, dated as of December 16, 2010,
by and among the Initial Carlyle Parent Entities, the Mubadala Investors and the other parties
thereto) that remains unamortized as of the date of such Exchange and that is attributable to the
Carlyle Holdings Partnership Units subject to such Exchange or deemed Exchange.




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







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          “General Partner” means Carlyle Group Management L.L.C., a Delaware limited liability
company, and any successor thereto.




          “Imputed Interest” means 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.




          “Initial Carlyle Parent Entities” means, collectively, TC Group, L.L.C., a Delaware
limited liability company, TC Group Cayman, L.P., a Cayman Islands exempted limited partnership, TC
Group Investment Holdings, L.P., a Delaware limited partnership, TC Group Cayman Investment
Holdings, L.P., a Cayman Islands exempted limited partnership.




          “Interest Amount” is defined in Section 3.01(b) of this Agreement.




          “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 (i) the parties hereto (other than the Corporate Taxpayer,
Carlyle Holdings I or Parent) and (ii) each other Person (other than a Corporate Holdco or Carlyle
Holdings Partnership) who from time to time executes a joinder agreement to this Agreement.




          “Limited Partner Representative” means, (i) in the case of each Limited Partner (other
than CalPERS and the Mubadala Investors), initially, TCG Carlyle Global Partners L.L.C., a Delaware
limited liability company, and thereafter, that Limited Partner or committee of Limited Partners
determined from time to time by a plurality vote of the Limited Partners (other than CalPERS and
the Mubadala Investors) ratably in accordance with their right to receive Early Termination
Payments hereunder if all Limited Partners had fully Exchanged their Carlyle Holdings Partnership
Units for Common Units and each Corporate Holdco had exercised its right of early termination on
the date of the most recent Exchange; (ii) in the case of CalPERS, CalPERS; and (iii) in the case
of the Mubadala Investors, initially, Five Overseas Investment L.L.C., a United Arab Emirates
limited liability company registered in the Emirate of Abu Dhabi, and thereafter, that Limited
Partner or committee of Limited Partners determined from time to time by a plurality vote of the
Mubadala Investors ratably in accordance with their right to receive Early Termination Payments
hereunder if all Limited Partners had fully Exchanged their Carlyle Holdings Partnership Units for
Common Units and each Corporate Holdco had exercised its right of early termination on the date of
the most recent Exchange.




          “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


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




          “Material Objection Notice” is defined in Section 4.02 of this Agreement.




          “Mubadala Investors” means, collectively, each of MDC/TCP Investments (Cayman) I,
Ltd., a Cayman Islands exempted company, MDC/TCP Investments (Cayman) II, Ltd., a Cayman Islands
exempted company, MDC/TCP Investments (Cayman) III, Ltd., a Cayman Islands exempted company,
MDC/TCP Investments (Cayman) IV, Ltd., a Cayman Islands exempted company, MDC/TCP Investments
(Cayman) V, Ltd., a Cayman Islands exempted company, MDC/TCP Investments (Cayman) VI, Ltd., a
Cayman Islands exempted company, and Five Overseas Investment L.L.C., a United Arab Emirates
limited liability company registered in the Emirate of Abu Dhabi, and their successors and assigns.




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




          “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 (i) each of the Corporate Holdcos and (ii) without duplication, any Carlyle Holdings
Partnership in which each of the Corporate Holdcos own an interest, but only with respect to Taxes
imposed on such Carlyle Holdings Partnership and allocable to the Corporate Holdco (including all
members of their consolidated groups), in each case using the same methods, elections, conventions
and similar practices used on the relevant Corporate Holdco Return, but (i) using the Non-Stepped
Up Tax Basis as reflected on the Exchange Basis Schedule, including any amendments thereto, instead
of the tax basis of the Exchange Date Assets and (ii) excluding any deduction attributable to the
Imputed Interest.




          “Objection Notice” is defined in Section 2.04(a) of this Agreement.




          “Parent” is defined in 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 Carlyle Holdings Partnership Units (i) that occurs prior to an


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Exchange of such Carlyle Holdings 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 (i) each of the Corporate
Holdcos and (ii) without duplication, any Carlyle Holdings Partnership in which each Corporate
Holdco owns an interest, but only with respect to Taxes imposed on such Carlyle Holdings
Partnership and allocable to such Corporate Holdco (including all members of its consolidated
group) for such Taxable Year. 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 (i) each of the Corporate Holdcos and (ii) without duplication, any Carlyle
Holdings Partnership in which each Corporate Holdco owns an interest but only with respect to Taxes
imposed on such Carlyle Holdings Partnership and allocable to such Corporate Holdco (including all
members of its consolidated group) for such Taxable Year over the Non-Stepped Up Tax Liability for
such Taxable Year. 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.




          “Reconciliation Dispute” is defined in Section 7.09 of this Agreement.




          “Reconciliation Procedures” is defined in Section 2.04(a) of this Agreement.




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




          “Senior Obligations” is defined in Section 5.01 of this Agreement.




          “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


7









 







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 (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), (2) each Tax Benefit Payment in
respect of each Taxable Year ending on or after such Early Termination Date is made 90 calendar
days after the latest due date (taking into account available extensions under the law as in effect
on the Early Termination Date) for the filing of the U.S. federal income tax return of each of the
Corporate Holdcos for such Taxable Year, (3) 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,
(4) any loss carryovers 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, (5) any non-amortizable assets are deemed to be disposed of for cash
at their fair market value (A) with respect to short-term or liquid non-amortizable assets, after
12 months, (B) with respect to non-amortizable assets not described in clause (A) that are related
to funds with a specified number of years remaining under the original fund agreement until
expected liquidation, pro-rata over the number of years so remaining and (C) with respect to all
other non-amortizable assets, on the fifteenth anniversary of the earlier of the applicable Basis
Adjustment and the Early Termination Date and (6) if as of an Early Termination Date, there are
Carlyle Holdings Partnership Units that have not been Exchanged, then each such Carlyle Holdings
Partnership Unit shall be deemed to be Exchanged for the Market Value of the Common Units that
would be transferred if the Exchange occurred on the Early Termination Date.







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ARTICLE II


DETERMINATION OF REALIZED TAX BENEFIT




          Section 2.01. Basis Adjustment Principles. The Realized Tax Benefit or Realized Tax
Detriment for each Taxable Year is intended to measure the decrease or increase in the actual
liability for Taxes of the Corporate Holdcos for such Taxable Year attributable to the Basis
Adjustments and Imputed Interest, determined using a “with and without” methodology. For the
avoidance of doubt, the actual liability for Taxes will take into account the deduction of the
portion of the Tax Benefit Payment that must be accounted for as interest under the Code based upon
the characterization of Tax Benefit Payments as additional consideration payable for the Carlyle
Holdings Partnership Units acquired in an Exchange. Carryovers or carrybacks of any Tax item
attributable to the Basis Adjustment and Imputed Interest shall 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 foreign 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 the Basis Adjustment or Imputed Interest and another portion that
is not, such portions shall 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 that give rise to further Basis Adjustments to
Exchange Date Assets for the Corporate Holdcos and (B) have the effect of creating additional Basis
Adjustments to Exchange Date Assets for the Corporate Holdcos in the year of payment, and (ii) as a
result, such additional Basis Adjustments will be incorporated into the current year Tax Benefit
Payment calculation and into future year Tax Benefit Payment calculations, as appropriate.




          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 Holdcos for each Taxable Year in which
any Exchange has been effected (but in no event later than 120 calendar days after the due date of
such tax return taking into account available extensions), 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). The
Corporate Holdcos shall engage a nationally recognized accounting or law firm to review each
Exchange Basis Schedule prior to delivery.




          Section 2.03. Tax Benefit Schedule. Within 90 calendar days after the filing of the
U.S. federal income tax return 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 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


9









 







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)). The Corporate
Holdcos shall engage a nationally recognized accounting or law firm to review each Tax Benefit
Schedule prior to delivery.




          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 a Limited Partner unless the applicable
Limited Partner Representative of such Limited Partner, within 30 calendar days after receiving an
Exchange Basis Schedule or amendment thereto or within 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; provided, for the sake
of clarity, only a Limited Partner Representative shall have the right to object to any Schedule or
Amended Schedule pursuant to this Section 2.04. 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 objecting Limited Partner Representative(s) 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 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”).




ARTICLE III


TAX BENEFIT PAYMENTS




          Section 3.01. Payments.







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          (a) Payments. Within five calendar days of a Tax Benefit Schedule delivered to an
applicable Limited Partner becoming final in accordance with Section 2.04(a), 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 cash or wire transfer of immediately available funds or direct deposit 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. Notwithstanding
anything herein to the contrary, in no event shall the aggregate Tax Benefit Payments (other than
amounts accounted for as interest under the Code) in respect of any Exchange exceed 50% of the
purchase price for the Carlyle Holdings Partnership Units Exchanged.




          (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 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 the 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 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
Carlyle Holdings 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), (4), and (5), 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
the 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.







11









 








          Section 3.03. Pro Rata Payments; Coordination of Benefits.




          (a) Notwithstanding anything in Section 3.01 to the contrary, to the extent that the aggregate
net tax benefit of a Corporate Holdco’s deduction with respect to Basis Adjustments or Imputed
Interest in respect of all Limited Partners under this Agreement is limited in a particular Taxable
Year because the Corporate Holdco does not have sufficient taxable income, the limitation on the
tax benefit for the applicable Corporate Holdco shall be allocated among the Limited Partners in
proportion to the respective amounts of Realized Tax Benefits that would have been determined under
this Agreement in respect of each Limited Partner if the applicable Corporate Holdco had sufficient
taxable income so that there were no such limitation.




          (b) If for any reason a Corporate 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 such Corporate Holdco and the Limited Partners agree that (i) such Corporate 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) Each of the Mubadala Investors and the other parties hereto hereby agrees that all Tax
Benefit Payments and/or Early Termination Payments payable in respect of an Exchange or deemed
Exchange by a Mubadala Investor or its transferee shall be payable to the persons listed under the
caption “Seller” on Schedule I hereto ratably in accordance with the percentages set forth opposite
the names of such persons under the caption “Percentage” on Schedule I hereto, except to the extent
such Tax Benefit Payments and/or Early Termination Payments are attributable to Basis Adjustments
that exceed the Exchanged Initial Basis Adjustments.




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
Carlyle Holdings 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 the 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


12









 







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), the
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 a 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 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 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 months of the date such payment is due.




          (c) The parties hereto 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 a Limited Partner unless the applicable Limited Partner Representative of such 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”); provided, for the sake of clarity, only a Limited Partner
Representative shall have the right to object to any Schedule or Amendment pursuant to this Section
4.02. 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, the Corporate Taxpayer and the applicable objecting Limited Partner Representative(s) shall
employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.




          Section 4.03. Payment upon Early Termination.







13









 








          (a) Within five calendar days after agreement between the consenting Limited Partner
Representative(s) and a Corporate Holdco of the Early Termination Schedule, such Corporate Holdco
shall pay to the respective Limited Partner(s) represented by such Limited Partner
Representative(s) an amount equal to the Early Termination Payment. Such payment shall be made by
cash or wire transfer of immediately available funds or direct deposit to a bank account designated
by the applicable Limited Partner or as otherwise agreed by such 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 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.




          Section 5.02. Late Payments by a Corporate Holdco. The amount of all or any portion
of any Exchange 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. Limited Partner Representative Participation in Corporate Holdcos’ and
Carlyle Holdings Partnerships’ Tax Matters. Except as otherwise provided herein, each of the
Corporate Holdcos and the Carlyle Holdings Partnerships shall have full responsibility for, and
sole discretion over, all Tax matters concerning each of the Corporate Holdcos and the Carlyle
Holdings 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 each of the Limited
Partner Representatives of, and keep each of the Limited Partner Representatives reasonably
informed with respect to the portion of any audit of such Corporate Holdco and the Carlyle Holdings
Partnerships by a Taxing Authority the outcome of which is


14









 







reasonably expected to affect such Limited Partner Representative’s rights and obligations
under this Agreement, and shall provide to each Limited Partner Representative reasonable
opportunity to provide information and other input to such Corporate Holdco, the Carlyle Holdings
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 Carlyle
Holdings Partnerships shall not be required to take any action that is inconsistent with any
provision of any of the Carlyle Holdings Partnership Agreements.




          Section 6.02. Consistency. Each of the Corporate Holdcos and each 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 and Early Termination 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 to such Limited Partner under this
Agreement.




          Section 6.03. Cooperation. Each Limited Partner shall (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, and which is reasonably available to such Limited Partner,
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 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 such Corporate Holdco shall reimburse the applicable Limited Partner for
any reasonable third-party costs and expenses incurred pursuant to this Section.




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, by email or facsimile upon confirmation of transmission
by the sender’s server or 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, to:


          The Carlyle Group L.P.

          1001 Pennsylvania Avenue, NW



15









 





          Washington, DC 20004

          (T) (202) 729-5626

          (F) (202) 729-5325

          Attention: General Counsel

          Email: list_taxreceivablenotice@carlyle.com

          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: Joshua Ford Bonnie, Esq.

          Email: jbonnie@stblaw.com

          If to any Corporate Holdco or any Carlyle Holdings Partnership, to:

          c/o The Carlyle Group L.P.

          1001 Pennsylvania Avenue, NW

          Washington, DC 20004

          (T) (202) 729-5626

          (F) (202) 729-5325

          Attention: General Counsel

          Email: list_taxreceivablenotice@carlyle.com

          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: Joshua Ford Bonnie, Esq.

          jbonnie@stblaw.com

          If to the applicable Limited Partner, to:




          The address, electronic mail address and facsimile number set forth in the records of the
applicable Carlyle Holdings Partnership.




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







16







 








          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 electronic mail or facsimile
transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.




          Section 7.03. Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and understandings, both
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 and 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 Delaware, without regard to the conflicts of laws
principles thereof that would mandate the application of the laws of another jurisdiction.




          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) Each Limited Partner may assign any of its rights under this Agreement to any Person in
accordance with applicable law, as long as any such transferee has executed and delivered, or, in
connection with such transfer, executes and delivers, a joinder to this Agreement, in form and
substance, reasonably satisfactory to the Corporate Taxpayer, agreeing to become a Limited Partner,
as applicable, for all purposes of this Agreement, except as otherwise provided in such joinder.




          (b) No provision of this Agreement may be amended unless such amendment is approved in writing
by the Parent, each of the Corporate Holdcos, Carlyle Holdings I, any other Carlyle Holdings
Partnership that is a party hereto at the time of such amendment and by the Limited Partners who
would be entitled to receive at least two-thirds of the Early Termination Payments payable to all
Limited Partners hereunder if the Corporate Taxpayer 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 Limited Partner 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


17









 







payments certain Limited Partners will or may receive under this Agreement unless two-thirds
of all such Limited Partners so 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.




          (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 such 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. Dispute Resolution. Each party hereto other than CalPERS and each of the Mubadala Investors (i) irrevocably
agrees that any and all disputes, except for those governed by Section 7.09, 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) (a “Dispute”) shall be finally settled by arbitration conducted by three
arbitrators (or, in the event the amount of quantified claims and/or estimated monetary value of
other claims contained in the applicable request for arbitration is less than $3.0 million, by a
sole arbitrator) in Wilmington, Delaware in accordance with the Rules of Arbitration of the
International Chamber of Commerce (including the rules relating to costs and fees) existing on the
date of this Agreement except to the extent those rules are inconsistent with the terms of this
Section 7.08, and that such arbitration shall be the exclusive manner pursuant to which any Dispute
shall be resolved; (ii) agrees that this Agreement involves commerce and is governed by the Federal
Arbitration Act, 9 U.S.C. Section 1, et seq., and any applicable treaties governing the recognition
and enforcement of international arbitration agreements and awards; (iii) agrees to take all steps
necessary or advisable, including the execution of documents to be filed with the International
Court of Arbitration or the International Centre for ADR in order to properly submit any Dispute
for arbitration pursuant to this Section 7.08; (iv) irrevocably waives, to the fullest extent
permitted by law, any objection it may have or hereafter have to the submission of any Dispute for
arbitration pursuant to this Section 7.08 and any right to lay claim to jurisdiction in any venue;
(v) agrees that (A) the arbitrator(s) shall be U.S. lawyers, U.S. law professors and/or retired
U.S. judges and all arbitrators, including the president of the arbitral tribunal, may be U.S.
nationals and (B) the arbitrator(s) shall conduct the proceedings in the English language; (vi)
agrees that except as required by law or as may be reasonably required in connection with ancillary
judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in
aid of arbitration, or to confirm or challenge an arbitration award, the arbitration proceedings,
including any hearings, shall be confidential, and the parties shall not disclose any
awards, any materials in the proceedings created for the purpose


18









 







of the arbitration, or any
documents produced by another party in the proceedings not otherwise in the public domain; and
(vii) agrees that performance under this Agreement shall continue if reasonably possible during any
arbitration proceedings.




          (b) Notwithstanding the provisions of paragraph (a), each party hereto may bring an action or
special proceeding for the purpose of compelling a party to arbitrate, seeking temporary or
preliminary relief in aid of an arbitration hereunder, or enforcing an arbitration award and, for
the purposes of this paragraph (b), each party hereto (i) irrevocably agrees that any such action
or special proceeding shall be exclusively brought in the Court of Chancery of the State of
Delaware or, if such court does not have subject matter jurisdiction thereof, any other court
located in the State of Delaware with subject matter jurisdiction; (ii) irrevocably submits to the
exclusive jurisdiction of such courts in connection with any such action or special proceeding;
(iii) irrevocably agrees not to, and waives any right to, assert in any such action or special
proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other
court to which proceedings in such courts may be appealed, (B) such action or special proceeding is
brought in an inconvenient forum, or (C) the venue of such action or special proceeding is
improper; (iv) expressly waives any requirement for the posting of a bond by a party bringing such
action or special proceeding; (v) consents to process being served in any such action or special
proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at
the address in effect for notices hereunder, and agrees that such service shall constitute good and
sufficient service of process and notice thereof; provided that nothing in clause (v) hereof shall
affect or limit any right to serve process in any other manner permitted by law; (vi) irrevocably
waives any and all right to trial by jury in any such claim, suit, action or proceeding; and (vii)
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.




          (c) If the arbitrator(s) shall determine that any Dispute is not subject to arbitration, or
the arbitrator(s) or any court or tribunal of competent jurisdiction shall refuse to enforce
Section 7.08(a) or shall determine that any Dispute is not subject to arbitration as contemplated
thereby, then, and only then, shall the alternative provisions of this Section 7.08(c) be
applicable. Each party hereto, to the fullest extent permitted by law, (i) irrevocably agrees that
any Dispute shall be exclusively brought in the Court of Chancery of the State of Delaware or, if
such court does not have subject matter jurisdiction thereof, any other court located in the State
of Delaware with subject matter jurisdiction; (ii) irrevocably submits to the exclusive
jurisdiction of such courts in connection with any such claim, suit, action or proceeding; (iii)
irrevocably agrees not to, and waives any right to, assert in any such claim, suit, action or
proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other
court to which proceedings in such courts may be appealed, (B) such claim, suit, action or
proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or
proceeding is improper; (iv) expressly waives any requirement for the posting of a bond by a party
bringing such claim, suit, action or proceeding; (v) consents to process being served in any such
claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy
thereof to such party at the address in effect for notices hereunder, and agrees that such service
shall constitute good and sufficient service of process and notice thereof; provided that nothing
in clause (v) hereof shall
affect or limit any right to serve process in any other manner permitted by law; and (vi)


19









 







irrevocably waives any and all right to trial by jury in any such claim, suit, action or
proceeding; and (vii) 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. 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.




          Section 7.09. Reconciliation. In the event that a Corporate Holdco and a Limited
Partner Representative 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 or principal in a nationally
recognized accounting or law firm, and, unless the applicable Limited Partner Representative(s)
agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any
material relationship with such Corporate Holdco or the applicable Limited Partner
Representative(s) or other actual or potential conflict of interest. If the parties are unable to
agree on an Expert within 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 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 such
Corporate Holdco, except as provided in the next sentence. Each of the Corporate Holdcos and the
applicable Limited Partner Representative(s) shall bear its own costs and expenses of such
proceeding, unless any applicable Limited Partner Representative has a prevailing position that is
more than 10% of the payment at issue, in which case the applicable Corporate Holdco shall
reimburse such Limited Partner Representative 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 applicable Corporate Holdco, the applicable Limited Partner Representative(s) and
each Limited Partner and may be entered and enforced in any court having jurisdiction.




          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,


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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; Addition of Corporate Holdcos;
Admission of a Corporate Holdco into a Consolidated Group; Transfers of Corporate Assets.




          (a) The Parent 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 Carlyle Holdings Partnership Units that are part of an Exchange.




          (b) If any Carlyle Holdings Partnership Unit was acquired, directly or indirectly, 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 (or a Person classified as a corporation for U.S. income tax purposes)
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. 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.




          Section 7.12. Confidentiality. Each Limited Partner and assignee acknowledges and
agrees that the information of each Corporate Holdco is confidential and, except as required by law
or legal process or to enforce the terms of this Agreement or in the course of performing


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any duties as necessary for such Corporate Holdco and its Affiliates, 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 any Corporate Holdco or any of their
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, each 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
each Corporate Holdco or any of their Subsidiaries or the other Limited Partners and the accounts
and funds managed by each 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. Carlyle Holdings Partnership Agreements. This Agreement shall be
treated as part of the partnership agreement of each Carlyle Holdings 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. Carlyle Holdings Partnerships. Each Corporate Holdco hereby agrees
that, to the extent it directly or indirectly through one or more wholly-owned subsidiaries
acquires a limited partnership interest, a general partner interest, managing member interest or
similar interest in any Person other than a direct or indirect subsidiary after the date hereof, it


22









 








shall cause such Person to execute and deliver a joinder to this Agreement and become a
“Carlyle Holdings Partnership” for all purposes of this Agreement.




          Section 7.15. Termination Election. Notwithstanding anything herein to the
contrary, at the election of each Limited Partner and to the extent specified by such Limited
Partner, this Agreement (i) shall cease to have further effect or (ii) shall not apply to an
Exchange occurring after a date specified by such Limited Partner.




          Section 7.16. Independent Nature of the Limited Partners’ Rights and Obligations.
The obligations of each Limited Partner hereunder are several and not joint with the obligations of
any other Limited Partner, and no Limited Partner shall be responsible in any way for the
performance of the obligations of any other Limited Partner hereunder. The decision of each Limited
Partner to enter into this Agreement has been made by such Limited Partner independently of any
other Limited Partner. Nothing contained herein, and no action taken by any Limited Partner
pursuant hereto, shall be deemed to constitute the Limited Partners as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Limited
Partners are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby and the Corporate Taxpayer, Carlyle Holdings I and Parent
acknowledge that the Limited Partners are not acting in concert or as a group, and none of the
Corporate Taxpayer, Carlyle Holdings I or Parent will assert any such claim with respect to such
obligations or the transactions contemplated hereby.


[Remainder of Page Intentionally Left Blank]






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          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.




	 	 	 	 	 
	 	CARLYLE HOLDINGS I GP INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	CARLYLE HOLDINGS I L.P.

 	 
	 	By: Carlyle Holding I GP Sub L.L.C, its general partner	 	 
	 	 	 	 
	 	By: Carlyle Holdings I GP Inc., its sole member


	 	
By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	THE CARLYLE GROUP L.P.

 	 
	 	By: Carlyle Group Management L.L.C., its general partner 	 
	 	
By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	LIMITED PARTNERS

 	 
	 	 	  	 	 
	 	 	 	Name:  	 	 
	 	 	  	 	 
	 	 	 	Name:  	 	 
	 	 	  	 	 
	 	 	 	Name:  	 	 
	 	 	  	 	 
	 	 	 	Name:  	 	 




















[Tax Receivable Agreement]