Document:

Exhibit 10.8

 

FORM OF EXCHANGE AGREEMENT

 

EXCHANGE AGREEMENT (the “Agreement”), dated as of [•], 2014 (the “Effective Date”), among Ares Domestic Holdings Inc., Ares Domestic Holdings L.P., Ares Holdings Inc., Ares Holdings L.P., Ares Investments L.P., Ares Management, L.P., Ares Management GP LLC, Ares Offshore Holdings L.P., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings L.P., Ares Real Estate Holdings LLC and each Ares Operating Group Limited Partner (as defined below) from time to time a party to this Agreement.

 

WHEREAS, the parties to this Agreement desire to provide for the exchange of certain Ares Operating Group Units (as defined below) for Common Units (as defined below), on the terms and subject to the conditions set forth in this Agreement; and

 

WHEREAS, the right to exchange Ares Operating Group Units set forth in Section 2.1 below, once exercised, represents a several, and not a joint and several, obligation of the Ares Operating Group Entities (on a pro rata basis), and no Ares Operating Group Entity shall have any obligation or right to acquire Ares Operating Group Units issued by another Ares Operating Group Entity.

 

NOW, THEREFORE, the parties to this Agreement hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                               Definitions.  The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

“Agreement” has the meaning set forth in the preamble of this Agreement.

 

“Alleghany” means Alleghany Insurance Holdings LLC, a Delaware limited liability company.

 

“Ares Domestic” means Ares Domestic Holdings L.P., a Delaware limited partnership.

 

“Ares Domestic LP Agreement” means the limited partnership agreement of Ares Domestic, dated on or about the Effective Date.

 

“Ares Domestic Parent” means Ares Domestic Holdings Inc., a Delaware corporation.

 

“Ares Domestic Units” means the units of limited partnership interest of Ares Domestic issued under the Ares Domestic LP Agreement.

 

“Ares Entity Parties” means, collectively, the Issuer, the Issuer General Partner, Ares Domestic Parent, Ares Holdings Parent, Ares Offshore Parent, Ares Real Estate Parent and each of the Ares Operating Group Entities.

 

“Ares Holdings” means Ares Holdings L.P., a Delaware limited partnership.

 

“Ares Holdings LP Agreement” means the limited partnership agreement of Ares Holdings, dated on or about the Effective Date.

 

“Ares Holdings Parent” means Ares Holdings Inc., a Delaware corporation.

 

 

“Ares Holdings Units” means the units of limited partnership interest of Ares Holdings issued under the Ares Holdings LP Agreement.

 

“Ares Investments” means Ares Investments L.P., a Delaware limited partnership.

 

“Ares Investments LP Agreement” means the limited partnership agreement of Ares Investments, dated on or about the Effective Date.

 

“Ares Investments Units” means the units of limited partnership interest of Ares Investments issued under the Ares Investments LP Agreement.

 

“Ares Offshore” means Ares Offshore Holdings L.P., a Cayman Islands exempted limited partnership.

 

“Ares Offshore LP Agreement” means the limited partnership agreement of Ares Offshore, dated on or about the Effective Date.

 

“Ares Offshore Parent” means Ares Offshore Holdings, Ltd., a Cayman Islands limited company.

 

“Ares Offshore Units” means the units of limited partnership interest of Ares Offshore issued under the Ares Offshore LP Agreement.

 

“Ares Operating Group Entities” means, collectively, Ares Domestic, Ares Holdings, Ares Investments, Ares Offshore and Ares Real Estate.

 

“Ares Operating Group Limited Partner” means each of Ares Owners, Alleghany and each other Person that becomes a limited partner of the Ares Operating Group Entities.

 

“Ares Operating Group Partnership Agreements” means, collectively, the Ares Domestic LP Agreement, the Ares Holdings LP Agreement, the Ares Investments LP Agreement, the Ares Offshore LP Agreement and the Ares Real Estate LP Agreement.

 

“Ares Operating Group Unit” means, collectively, one Ares Domestic Unit, one Ares Holdings Unit, one Ares Investments Unit, one Ares Offshore Unit and one Ares Real Estate Unit.

 

“Ares Owners” means Ares Owners Holdings L.P., a Delaware limited partnership.

 

“Ares Owners Partnership Agreement” means the Agreement of Limited Partnership of Ares Owners, dated on or about the Effective Date.

 

“Ares Real Estate” means Ares Real Estate Holdings L.P., a Delaware limited partnership.

 

“Ares Real Estate LP Agreement” means the limited partnership agreement of Ares Real Estate, dated on or about the Effective Date.

 

“Ares Real Estate Parent” means Ares Real Estate Holdings LLC, a Delaware limited liability company.

 

“Ares Real Estate Units” means the units of limited partnership interest of Ares Real Estate issued under the Ares Real Estate LP Agreement.

 

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“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close.

 

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

 

“Charity” means any organization that is organized and operated for a purpose described in Section 170(c) of the Code (determined without reference to Section 170(c)(2)(A) of the Code) and described in Sections 2055(a) and 2522 of the Code.

 

“Code” means the Internal Revenue Code of 1986.

 

“Co-Founder” means each of Michael Arougheti, David Kaplan, John Kissick, Antony Ressler and Bennett Rosenthal.

 

“Common Unit” means a limited partner interest in the Issuer representing a fractional part of the limited partner interests in the Issuer having the rights and obligations specified with respect to Common Units in the Issuer Partnership Agreement.

 

“Current Market Price” has the meaning set forth in the Issuer Partnership Agreement.

 

“Exchange” means a PTP Exchange or an OG Exchange.

 

“Exchange Counterparty” means (a) in the case of an PTP Exchange, the Issuer and (b) in the case of an OG Exchange, the Ares Operating Group Entities, collectively.

 

“Exchange Rate” means the number of Common Units for which an Ares Operating Group Unit is entitled to be exchanged. On the date of this Agreement, the Exchange Rate shall be 1 for 1, which Exchange Rate shall be subject to modification only as provided in Section 2.4.

 

“IPO” means the initial public offering and sale of Common Units, as contemplated by the Issuer’s Registration Statement on Form S-1 (File No. 333-194919).

 

“Issuer” means Ares Management, L.P., a Delaware limited partnership.

 

“Issuer General Partner” means Ares Management GP LLC, a Delaware limited liability company and the general partner of the Issuer, or any successor general partner of the Issuer.

 

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“Issuer Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of the Issuer to be dated substantially concurrently with the consummation of the IPO.

 

“Liens” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.

 

“OG Exchange” has the meaning set forth in Section 2.1(a)(ii) of this Agreement.

 

“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization, association (including any group, organization, co-tenancy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).

 

“Permitted Transferee” has the meaning set forth in Section 3.1 of this Agreement.

 

“PTP Exchange” has the meaning set forth in Section 2.1(a)(i) of this Agreement.

 

“Quarter” means, unless the context requires otherwise, a fiscal quarter of the Issuer.

 

“Quarterly Exchange Date” means, for each Quarter, unless the Issuer cancels such Quarterly Exchange Date pursuant to Section 2.7 hereof, the date that is the latest to occur of: (i) the second Business Day after the date on which the Issuer makes a public news release of its quarterly earnings for the prior Quarter, (ii) the first day of such Quarter on which directors and executive officers of the Issuer General Partner are permitted to trade under the applicable polices of the Issuer relating to trading by directors and executive officers or (iii) such other date as the Issuer shall determine in its sole discretion; provided that (1) with respect to clause (iii), the Issuer shall provide the Ares Operating Group Limited Partners with reasonable notice of such date and (2) unless the Issuer determines otherwise, there shall be no Quarterly Exchange Date for (A) any Ares Operating Group Limited Partner (other than Alleghany) prior to the second anniversary of the closing of the IPO and (B) Alleghany prior to the first anniversary of the closing of the IPO (or, in the case of each of clauses (A) and (B), if later, the date of the initial filing by the Issuer of a registration statement with the U.S. Securities and Exchange Commission to cover delivery of Common Units to the Ares Operating Group Limited Partners upon an Exchange).  At least 75 days prior to each Quarterly Exchange Date, the Issuer will provide notice thereof to each Ares Operating Group Limited Partner eligible to Exchange Ares Operating Group Units for Common Units on such Quarterly Exchange Date.

 

“Sale Transaction” has the meaning set forth in Section 2.7 of this Agreement.

 

“Securities Act” has the meaning set forth in Section 2.3(a) of this Agreement.

 

“Transfer Agent” means such bank, trust company or other Person as shall be appointed from time to time by the Issuer pursuant to the Issuer Partnership Agreement to act as registrar and transfer agent for the Common Units.

 

1.2                               Interpretation.

 

(a)                                 Unless a clear contrary intention appears: (i) the defined terms in this Agreement shall apply equally to both the singular and plural forms of such terms; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are

 

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not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) any pronoun shall include the corresponding masculine, feminine and neuter forms; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (v) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) “hereunder,” “hereof,” “hereto,”  and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (vii) numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement; (viii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (ix) “or” is used in the inclusive sense of “and/or”; (x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; and (xi) reference to dollars or $ shall be deemed to refer to U.S. dollars.

 

(b)                                 All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

 

ARTICLE II

 

EXCHANGE OF ARES OPERATING GROUP UNITS

 

2.1                               Exchange of Ares Operating Group Units.

 

(a)                                 Subject to adjustment as provided in this Article II and to the provisions of the Ares Operating Group Partnership Agreements, the Issuer Partnership Agreement and the Ares Owners Partnership Agreement, each Ares Operating Group Limited Partner shall be entitled, on any Quarterly Exchange Date, to Exchange Ares Operating Group Units held by such Ares Operating Group Limited Partner as follows:

 

(i)                                     For the purpose of making a gratuitous transfer to any Charity or otherwise with the consent of the Issuer, an Ares Operating Group Limited Partner may surrender Ares Operating Group Units to the Issuer in exchange for the delivery by the Issuer of a number of Common Units equal to the product of the number of Ares Operating Group Units surrendered multiplied by the Exchange Rate (such exchange, a “PTP Exchange”); or

 

(ii)                                  An Ares Operating Group Limited Partner may surrender Ares Operating Group Units to the Ares Operating Group Entities in exchange for the delivery by such Ares Operating Group Entities of a number of Common Units, in the aggregate, equal to the product of such number of Ares Operating Group Units surrendered multiplied by the Exchange Rate (such exchange, an “OG Exchange”).

 

Notwithstanding anything to the contrary in this Agreement, in lieu of delivering Common Units with respect to any Ares Operating Group Units subject to an Exchange, the Exchange Counterparty may, in its sole discretion, elect to deliver cash equal to the Current Market Price of the Common Units that would otherwise be delivered in such Exchange.

 

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(b)                                 Subject to adjustment as provided in this Article II and to the provisions of the Ares Operating Group Partnership Agreements and the Issuer Partnership Agreement, Alleghany shall be entitled at any time (i) from and after the first anniversary, and prior to the second anniversary, of the closing of the IPO to Exchange up to 50% of the Ares Operating Group Units it owned immediately after consummation of the IPO for Common Units and (ii) after the second anniversary of the closing of the IPO to Exchange all or any of its Ares Operating Group Units for Common Units.

 

(c)                                  Notwithstanding anything to the contrary herein, upon the occurrence of a Dissolution Event (as defined in the Ares Operating Group Partnership Agreements) with respect to any Ares Operating Group Entity, each Ares Operating Group Limited Partner shall be entitled, upon the terms and subject to the conditions hereof, to elect to Exchange Ares Operating Group Units for Common Units; provided, that any such Exchange pursuant to this sentence shall be effective immediately prior to the effectiveness of the applicable dissolution of such Ares Operating Group Entity (and, for the avoidance of doubt, shall not be effective if such dissolution is not effective).

 

(d)                                 Upon surrender of Ares Operating Group Units for Exchange, all rights of the exchanging Ares Operating Group Limited Partner as holder of such Ares Operating Group Units shall cease, and, unless the Exchange Counterparty elects to deliver cash to such exchanging Ares Operating Group Limited Partner in lieu of consummating an Exchange, such exchanging Ares Operating Group Limited Partner (or designated Charity) shall be treated for all purposes as having become the Record Holder (as defined in the Issuer Partnership Agreement) of such Common Units and shall be admitted as a Limited Partner (as defined in the Issuer Partnership Agreement) of the Issuer in accordance and upon compliance with Section 10.2 of the Issuer Partnership Agreement.  If the Exchange Counterparty elects to deliver cash to such exchanging Ares Operating Group Limited Partner in lieu of consummating an Exchange, such Ares Operating Group Limited Partner shall continue to own all Ares Operating Group Units subject to the Exchange, and shall still be treated as an Ares Operating Group Limited Partner with respect to such Ares Operating Group Units for all purposes under the relevant Ares Operating Group Partnership Agreements, until the Exchange Counterparty delivers such amount of cash to such Ares Operating Group Limited Partner.

 

(e)                                  Where an Ares Operating Group Limited Partner has exercised its right to effect an OG Exchange, Ares Holdings Parent (with respect to Ares Holdings Units), Ares Domestic Parent (with respect to Ares Domestic Units), Ares Offshore Parent (with respect to Ares Offshore Units), Ares Real Estate Parent (with respect to Ares Real Estate Units) and the Issuer (with respect to Ares Investments Units) shall have a superseding right to acquire such interests for an amount of Common Units equal to the amount of Common Units that would be received pursuant to such Exchange.

 

(f)                                   The number of PTP Units (or the amount of cash in lieu thereof) delivered to each exchanging Ares Operating Group Limited Partner in an OG Exchange by each of the Ares Operating Group Entities shall be determined based on the relative fair market values of each of the Ares Operating Group Entities.

 

2.2                               Exchange Procedures.

 

(a)                                 An Ares Operating Group Limited Partner may exercise the right to exchange Ares Operating Group Units by providing a written notice of exchange at least 60 days prior to the applicable Quarterly Exchange Date to the Exchanging Counterparty substantially in the form of Exhibit A or Exhibit B hereto, as applicable, duly executed by such holder or such holder’s duly authorized attorney in respect of the Ares Operating Group Units to be exchanged, in each case, delivered during normal business hours at the principal executive offices of the Exchange Counterparty; provided that Ares

 

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Owners may exercise such right, and deliver such written notice, with respect to Ares Operating Group Units to be transferred to one or more partners of Ares Owners.

 

(b)                                 As promptly as practicable following the surrender for exchange of the Ares Operating Group Units in the manner provided in this Article II, unless the Exchange Counterparty elects to deliver cash to such exchanging Ares Operating Group Limited Partner in lieu of consummating an Exchange, the Exchange Counterparty shall deliver or cause to be delivered at the offices of the then-acting Transfer Agent or, if there is no then-acting Transfer Agent, at the principal executive offices of the Issuer, the number of Common Units issuable upon such Exchange, registered in the name of such exchanging Ares Operating Group Limited Partner, or its nominee. If the Common Units are settled through the facilities of The Depository Trust Company, the Exchange Counterparty will, subject to Section 2.2(c) below, upon the written instruction of the exchanging Ares Operating Group Limited Partner deliver the Common Units deliverable to such exchanging Ares Operating Group Limited Partner, through the facilities of The Depository Trust Company, to the account of the participant of The Depository Trust Company designated by such exchanging Ares Operating Group Limited Partner. The Issuer General Partner and the Issuer shall take such actions as may be required to ensure the performance by the Ares Operating Group Entities of their respective obligations under this Article II, including causing the issuance and sale of Common Units to or for the account of the Ares Operating Group Entities in exchange for the delivery to the Issuer of a number of Ares Operating Group Units that is equal to the number of Ares Operating Group Units surrendered by an exchanging Ares Operating Group Limited Partner.

 

(c)                                  The Ares Operating Group Entities, on the one hand, and each exchanging Ares Operating Group Limited Partner, on the other hand, shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated, except that the Ares Operating Group Entities shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any such Exchange; provided that if any Common Units are to be delivered in a name other than that of the exchanging Ares Operating Group Limited Partner that requested such Exchange (other than in the name of The Depository Trust Company or its nominee), then such Ares Operating Group Limited Partner or the Person in whose name such Common Units are to be delivered shall pay to the Ares Operating Group Entities the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Ares Operating Group Entities that such tax has been paid or is not payable.

 

(d)                                 The Ares Operating Group Entities may adopt reasonable procedures for the implementation of the exchange provisions set forth in this Article II, including procedures for the giving of notice of an election for exchange. An Ares Operating Group Limited Partner may not revoke a notice of exchange delivered pursuant to Section 2.2(a) above without the consent of the Exchange Counterparty which consent may be provided or withheld, or made subject to such conditions, limitations or restrictions, as determined by the Exchange Counterparty in its sole discretion.  Nothing in this Agreement shall obligate the Exchange Counterparty to treat any Ares Operating Group Limited Partners alike, whether or not such Ares Operating Group Limited Partners are similarly situated, and the exercise of any power or discretion by the Exchange Counterparty in the case of any Ares Operating Group Limited Partner shall not create any obligation on the part of the Issuer or the Issuer General Partner to take any similar action in the case of any other Ares Operating Group Limited Partner, it being understood that any power or discretion conferred upon the Exchange Counterparty shall be treated as having been so conferred as to each Ares Operating Group Limited Partner separately.

 

2.3                               Limitations on Exchanges. Notwithstanding anything to the contrary, an Ares Operating Group Limited Partner shall not be entitled to Exchange Ares Operating Group Units and the Exchange

 

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Counterparty shall have the right to refuse to honor any request for Exchange of Ares Operating Group Units, at any time or during any period if the Exchange Counterparty shall reasonably and in good faith determine that such Exchange:

 

(a)                                 would be prohibited by law or regulation (including the unavailability of any requisite registration statement filed under the Securities Act of 1933 (the “Securities Act”) or any exemption from the registration requirements thereunder),

 

(b)                                 would cause the Issuer to violate Section 4.7 of the Issuer Limited Partnership Agreement, or

 

(c)                                  would otherwise not be permitted under any other agreements with the Issuer, any of its subsidiaries or Ares Owners to which such exchanging Ares Operating Group Limited Partner may be party (including the Ares Operating Group Partnership Agreements, the Ares Owners Partnership Agreement and any applicable registration rights agreements) or any written policies of the Issuer related to unlawful or inappropriate trading applicable to its directors, board observers, officers or other personnel.

 

2.4                               Splits, Distributions and Reclassifications. The Exchange Rate shall be adjusted accordingly if there is: (a) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Ares Operating Group Units that is not accompanied by an identical subdivision or combination of the Common Units; or (b) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Common Units that is not accompanied by an identical subdivision or combination of the Ares Operating Group Units. If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Common Units are converted or changed into another security, securities or other property, then upon any Exchange, an exchanging Ares Operating Group Limited Partner shall be entitled to receive the amount of such security, securities or other property that such exchanging Ares Operating Group Limited Partner would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. Except as may be required in the immediately preceding sentence, no adjustments in respect of distributions shall be made upon the Exchange of any Ares Operating Group Unit.

 

2.5                               Common Units to be Issued.

 

(a)                                 The Issuer and the Ares Operating Group Entities covenant that all Common Units issued upon an Exchange will be validly issued and shall be transferred free and clear of any Liens, other than restrictions provided in the Issuer Partnership Agreement or pursuant to the Securities Act or any applicable state securities laws. Nothing contained in this Agreement shall be construed to preclude the Issuer or Ares Operating Group Entities from satisfying their obligations in respect of the exchange of the Ares Operating Group Units by delivery of Common Units which are held in the treasury of the Issuer or the Ares Operating Group Entities or any of their respective subsidiaries.

 

(b)                                 The Issuer and the Ares Operating Group Entities covenant and agree that, if a registration statement under the Securities Act is effective and available for Common Units to be

 

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delivered with respect to any Exchange, Common Units that have been registered under the Securities Act shall be delivered in respect of such Exchange. If any Exchange in accordance with this Agreement is to be effected at a time when any required registration has not become effective or otherwise is unavailable, upon the request and with the reasonable cooperation of the exchanging Ares Operating Group Limited Partners requesting such Exchange, the Issuer and the Ares Operating Group Entities shall use commercially reasonable efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements. The Issuer shall use commercially reasonable efforts to list the Common Units required to be delivered upon Exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the outstanding Common Units may be listed or traded at the time of such delivery.

 

(c)                                  Common Units issued upon an Exchange may contain such legends regarding restrictions under the Securities Act or any applicable state securities laws as the Issuer General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.

 

2.6                               Acquisition and Disposition of Common Units. An Ares Operating Group Limited Partner (other than Alleghany) requesting an Exchange under this Agreement covenants (a) to use reasonable best efforts to sell or otherwise dispose of any Common Units received in such an Exchange within 10 days of the receipt thereof or any other specified period as the Issuer General Partner may determine from time to time, and (b) that no other Common Units are held by such Ares Operating Group Limited Partner, such Ares Operating Group Limited Partner’s spouse, or any entity disregarded as an entity separate from such Ares Operating Group Limited Partner or such Ares Operating Group Limited Partner’s spouse for U.S. federal income tax purposes, at the time such Ares Operating Group Limited Partner gives notice of such Exchange pursuant to this Agreement or will be acquired by any such Person from such time through the sale or disposition described in clause (a). Any Ares Operating Group Limited Partner (other than Alleghany) still holding any Common Units on the last day of such period shall cause all such Common Units to be transferred immediately to a partnership, trust or other entity (other than an entity disregarded as an entity separate from its parent for U.S. federal income tax purposes).  The Issuer acknowledges that one or more events, such as an underwriter cutback, the unavailability of a registration, the possession of material non-public information, or general market dislocation, may affect the timing of a proposed sale or disposition following an exchange.

 

2.7                               Subsequent Offerings. The Issuer may from time to time cancel any Quarterly Exchange Date in a fiscal year and in lieu thereof, and in connection with one or more offerings of Common Units, provide the opportunity for Ares Operating Group Limited Partners to sell their Ares Operating Group Units to the Issuer, the Ares Operating Group Entities or any of their respective subsidiaries in the same fiscal year (a “Sale Transaction”) for a cash amount per Ares Operating Group Unit equal to the net cash proceeds per Common Unit, as reasonably determined by the Issuer, received pursuant to any such offerings of Common Units.  An Ares Operating Group Limited Partner selling Ares Operating Group Units in connection with a Sale Transaction must provide notice to the Issuer at least 30 days prior to the cash settlement of such Sale Transaction in respect of the Ares Operating Group Units to be sold, in each case delivered during normal business hours at the principal executive offices of the Issuer. For the avoidance of doubt, the total aggregate number of Quarterly Exchange Dates and Sale Transactions occurring during any fiscal year of the Issuer shall not exceed four.

 

2.8                               Waiting Period.  The consummation of any Exchange pursuant to this Agreement shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

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ARTICLE III

 

GENERAL PROVISIONS

 

3.1                               Additional Ares Operating Group Limited Partners. If an Ares Operating Group Limited Partner validly transfers any or all of such holder’s Ares Operating Group Units to another Person in a transaction in accordance with, and not in contravention of, the Ares Operating Group Partnership Agreements or any other agreement or agreements with the Issuer or any of its subsidiaries to which a transferring Ares Operating Group Limited Partner may be party, then such transferee (each, a “Permitted Transferee”) shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit C hereto, whereupon such Permitted Transferee shall become an Ares Operating Group Limited Partner hereunder. If the Ares Operating Group Entities issue Ares Operating Group Units in the future, the Ares Operating Group Entities shall be entitled, in their sole discretion, to make any holder of such Ares Operating Group Units an Ares Operating Group Limited Partner hereunder through such holder’s execution and delivery of a joinder to this Agreement, substantially in the form of Exhibit C hereto.

 

3.2                               Amendment.

 

(a)                                 The provisions of this Agreement may be amended by the affirmative vote or written consent of the Ares Operating Group Entities and the Issuer and, after a Change of Control, the holders of at least a majority of the Percentage Interests (as such term as defined in the Ares Operating Group Partnership Agreements) of the Ares Operating Group Units (excluding Ares Operating Group Units held by the Issuer or any direct or indirect wholly owned subsidiary thereof); provided that any amendment of this Agreement that is materially adverse to Alleghany, Ares Owners or any Co-Founder (or its affiliates) shall not be effective with respect to Alleghany, Ares Owners or such Co-Founder (or its affiliates), as the case may be, unless the prior written consent of Alleghany, Ares Owners or such Co-Founder (or its affiliates), as the case may be, has been obtained.

 

(b)                                 Each Ares Operating Group Limited Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or written consent of less than all of the Ares Operating Group Limited Partners, such action may be so taken upon the concurrence of less than all of the Ares Operating Group Limited Partners and each Ares Operating Group Limited Partner shall be bound by the results of such action.

 

3.3                               Addresses and Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax, by electronic mail (delivery receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 3.3):

 

(a)                                 If to any Ares Entity Party, to:

 

2000 Avenue of the Stars
 12th Floor
 Los Angeles, CA 90067 
 Attention:              General Counsel, with a copy to
                                                                       Global Head of Tax
 Fax: (310) 201-4141
 Electronic Mail: list_exchangenotice@aresmgmt.com

 

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(b)                                 If to any Ares Operating Group Limited Partner, to:

 

2000 Avenue of the Stars
 12th Floor
 Los Angeles, CA 90067 
 Attention:              General Counsel, with a copy to
                                                                       Global Head of Tax
 Fax: (310) 201-4141
 Electronic Mail: list_exchangenotice@aresmgmt.com

 

The Issuer General Partner shall forward any such communication to the applicable Ares Operating Group Limited Partner’s address, email address or facsimile number as shown in the books and records of the Ares Operating Group Entities.

 

3.4                               Further Action. The parties shall execute and deliver all documents (including tax forms), provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, in each case, as may be requested by the Issuer or any Ares Operating Group Entity.

 

3.5                               Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs and personal representatives, and any estate, trust, partnership or limited liability company or other similar entity of which any such Person is a trustee, partner, member or similar party which is or becomes a party hereto.

 

3.6                               Governing Law; Separability.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict-of-law principles.  If, nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this Agreement shall be invalid or unenforceable under applicable law, such invalidity or unenforceability shall not invalidate the entire Agreement.  In that case, this Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of any applicable law, and, in the event such term or provision cannot be so limited, this Agreement shall be construed to omit such invalid or unenforceable provisions.

 

3.7                               Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements and understandings between the parties with respect to such subject matter.  There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein.  Each party hereto agrees, represents, and warrants that (a) each such party hereto and such party’s independent counsel have reviewed this Agreement; and (b) any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement.

 

3.8                               Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.  Nothing in this Agreement shall obligate the Issuer or any Ares Operating Group Entity to treat any Ares Operating Group Limited Partners alike, whether or not such Ares Operating Group Limited Partners are similarly situated, and the exercise of any power or discretion by the Issuer or any Ares Operating Group Entity in the case of any one Ares Operating Group Limited Partner shall not create any obligation on the part of the Issuer or any Ares Operating Group Entity to take any similar action in the case of any other Ares Operating Group Limited Partner, it being understood that any power

 

11

 

or discretion conferred upon the Issuer or any Ares Operating Group Entity shall be treated as having been so conferred as to each Ares Operating Group Limited Partner separately.

 

3.9                               Dispute Resolution.

 

(a)                                 The exclusive remedy for determining any and all disputes, claims or causes of action, in law or equity, arising out of or related to this Agreement, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, will, to the fullest extent permitted by law, be determined by final, binding and confidential arbitration in Los Angeles, California, before one arbitrator, conducted by the Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its successor.  Disputes shall be resolved in accordance with the Federal Arbitration Act, 9 U.S.C. §§1—16, and JAMS’ Comprehensive Arbitration Rules and Procedures then in effect.  The arbitrator will have the same, but no greater, remedial authority than would a court of law and shall issue a written decision including the arbitrator’s essential findings and conclusions and a statement of the award.  Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.  The prevailing party in any such arbitration proceeding, as determined by the arbitrator, or in any proceeding to enforce the arbitration award, will be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses and attorneys’ fees.  If no party entirely prevails in such arbitration or proceeding, the arbitrator or court shall apportion an award of such fees based on the relative success of each party.  In the event of a conflict between this provision and any provision in the applicable rules of JAMS, the provisions of this Agreement will prevail.

 

(b)                                 The parties agree that (i) irreparable damage may occur if any provision of this Agreement were not performed in accordance with the terms hereof, (ii) the provisions of Section 3.9(a) shall not preclude any party from obtaining provisional relief, including injunctive relief, from a court of appropriate jurisdiction to protect its rights under this Agreement, and (iii) the parties shall be entitled to seek an injunction to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions thereof in accordance with the provisions of this Section 3.9(b), in addition to any other remedy to which they are entitled at law or in equity.  No party seeking relief under this Section 3.9(b) shall be required to post a bond or prove special damages. Each party agrees and consents to personal jurisdiction, service of process and venue in any federal or state court within the State of California, County of Los Angeles, in connection with any action brought in connection with a request for any such provisional or injunctive relief, and in connection with any action to enforce this arbitration clause or an award in arbitration and agrees not to assert, by way of motion, as a defense or otherwise, that any action brought in any such court should be dismissed on grounds of forum non conveniens.  Each party to this Agreement consents to mailing of process or other papers in connection with any such arbitration or action by certified mail.

 

3.10                        Counterparts. This Agreement may be executed and delivered in any number of counterparts (including by facsimile or electronic transmission), each of which shall be an original and all of which together shall constitute a single instrument.

 

3.11                        Tax Treatment.  If this Agreement imposes obligations upon a particular Ares Operating Group Entity, this Agreement shall be treated as part of the relevant Ares Operating Group Partnership Agreement 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.  The parties shall report for U.S. federal and applicable state income tax purposes any PTP Exchange consummated hereunder as a tax-free transfer of Ares Operating Group Units to the Issuer pursuant to Section 721 of the Code.  The parties shall report for U.S. federal and applicable state income tax purposes any OG Exchange consummated hereunder, in the case of (a) Ares

 

12

 

Domestic, as a taxable transfer under Section 1001 of the Code of Ares Domestic Units by an Ares Operating Group Limited Partner to Ares Domestic Parent, (b) Ares Holdings, as a taxable transfer under Section 1001 of the Code of Ares Holdings Units by an Ares Operating Group Limited Partner to Ares Holdings Parent, (c) Ares Offshore, as a taxable transfer under Section 1001 of the Code of Ares Offshore Units by an Ares Operating Group Limited Partner to Ares Offshore Parent, (d) Ares Real Estate, as a taxable transfer under Section 1001 of the Code of Ares Real Estate Units by an Ares Operating Group Limited Partner to Ares Real Estate Parent, and (e) Ares Investments, as a tax-free transfer of Ares Investments Units, if Section 721 of the Code applies.  No party shall take a contrary position with respect to the tax treatment described in this Section 3.11 on any income tax return, amendment thereof or communication with a taxing authority.

 

3.12                        Independent Nature of Holdings Unitholders’ Rights and Obligations. The obligations of each Ares Operating Group Limited Partner hereunder are several and not joint with the obligations of any other Ares Operating Group Limited Partner, and no Ares Operating Group Limited Partner shall be responsible in any way for the performance of the obligations of any other Ares Operating Group Limited Partner hereunder. The decision of each Ares Operating Group Limited Partner to enter into to this Agreement has been made by such Ares Operating Group Limited Partner independently of any other Ares Operating Group Limited Partner. Nothing contained herein, and no action taken by any Ares Operating Group Limited Partner pursuant hereto, shall be deemed to constitute the Ares Operating Group Limited Partners as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Ares Operating Group 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 Issuer acknowledges that the Ares Operating Group Limited Partners are not acting in concert or as a group, and the Issuer will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.

 

[Remainder of Page Intentionally Left Blank]

 

13

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed and delivered as of the date first set forth above.

 

	
 
    	
ARES   DOMESTIC HOLDINGS INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   DOMESTIC HOLDINGS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Domestic Holdings Inc.,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   HOLDINGS INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   HOLDINGS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Holdings Inc.,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
					

 

[Signature Page to Exchange Agreement]

 

 

	
 
    	
ARES   INVESTMENTS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Management, L.P.,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
By:   Ares Management GP LLC,
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   MANAGEMENT, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Management GP LLC,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
ARES   OFFSHORE HOLDINGS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Offshore Holdings, Ltd.,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   OFFSHORE HOLDINGS, LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
							

 

[Signature Page to Exchange Agreement]

 

 

	
 
    	
ARES   REAL ESTATE HOLDINGS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Real Estate Holdings LLC,
    
	
 
    	
its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   REAL ESTATE HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   OWNERS HOLDINGS L.P.
    
	
 
    	
 
    
	
 
    	
By:   Ares Partners Holdco LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
					

 

[Signature Page to Exchange Agreement]

 

 

	
 
    	
ALLEGHANY   INSURANCE HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Exchange Agreement]

 

 

EXHIBIT A

 

[FORM OF]

 

NOTICE OF PTP EXCHANGE

 

Ares Management, L.P.

 

2000 Avenue of the Stars
 12th Floor
 Los Angeles, CA 90067 
 Attention: General Counsel
 Fax: (310) 201-4141
 Electronic Mail: list_exchangenotice@aresmgmt.com

 

Reference is hereby made to the Exchange Agreement, dated as of [·], 2014 (the “Exchange Agreement”), among Ares Domestic Holdings Inc., Ares Domestic Holdings L.P., Ares Holdings Inc., Ares Holdings L.P., Ares Investments L.P., Ares Management, L.P., Ares Management GP LLC, Ares Offshore Holdings L.P., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings L.P., Ares Real Estate Holdings LLC and each Ares Operating Group Limited Partner (as defined in the Exchange Agreement) from time to time party to the Exchange Agreement, as amended from time to time. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

The undersigned Ares Operating Group Limited Partner desires to exchange the number of Ares Operating Group Units set forth below in the form of a PTP Exchange to be issued as set forth below.

 

Legal Name of Ares Operating Group Limited Partner:

 

Address:

 

Number of Ares Operating Group Units to be exchanged:

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Notice of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Notice of Exchange has been duly executed and delivered by the undersigned; (iii) the Ares Operating Group Units subject to this Notice of Exchange will be transferred to the Issuer free and clear of any Liens, other than restrictions provided in the Ares Operating Group Partnership Agreement or pursuant to the Securities Act or any applicable state securities laws; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Ares Operating Group Units subject to this Notice of Exchange is required to be obtained by the undersigned for the transfer of such Ares Operating Group Units to the Issuer.

 

The undersigned hereby irrevocably constitutes and appoints any officer of each Ares Entity Party as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to exchange the Ares Operating Group Units subject to this Notice of Exchange on the books of the Ares Operating Group Entities for Common Units on the books of the Issuer.

 

[Remainder of Page Intentionally Left Blank]

 

A-1

 

IN WITNESS WHEREOF, the undersigned has caused this Notice of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney as of                                                                 .

 

 

	
 
    	
 
    
	
 
    	
Name:
    

 

A-2

 

EXHIBIT B

 

[FORM OF]

 

NOTICE OF OG EXCHANGE

 

Ares Management, L.P.
 Ares Domestic Holdings L.P.
 Ares Holdings L.P.
 Ares Investments L.P.
 Ares Real Estate Holdings L.P.

 

2000 Avenue of the Stars
 12th Floor
 Los Angeles, CA 90067 
 Attention: General Counsel
 Fax: (310) 201-4141
 Electronic Mail: list_exchangenotice@aresmgmt.com

 

Reference is hereby made to the Exchange Agreement, dated as of [·], 2014 (the “Exchange Agreement”), among Ares Domestic Holdings Inc., Ares Domestic Holdings L.P., Ares Holdings Inc., Ares Holdings L.P., Ares Investments L.P., Ares Management, L.P., Ares Management GP LLC, Ares Offshore Holdings L.P., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings L.P., Ares Real Estate Holdings LLC and each Ares Operating Group Limited Partner (as defined in the Exchange Agreement) from time to time party to the Exchange Agreement, as amended from time to time. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

The undersigned Ares Operating Group Limited Partner desires to exchange the number of Ares Operating Group Units set forth below in the form of an OG Exchange to be issued in its name as set forth below.

 

Legal Name of Ares Operating Group Limited Partner:

 

Address:

 

Number of Ares Operating Group Units to be exchanged:

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Notice of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Notice of Exchange has been duly executed and delivered by the undersigned; (iii) the Ares Operating Group Units subject to this Notice of Exchange will be transferred to the Ares Operating Group Entities free and clear of any Liens, other than restrictions provided in the Ares Operating Group Partnership Agreement or pursuant to the Securities Act or any applicable state securities laws; (iv) in the case of an Ares Operating Group Limited Partner (other than Alleghany), none of the undersigned, the undersigned’s spouse or any entity disregarded as an entity separate from the undersigned or the undersigned’s spouse for U.S. federal income tax purposes holds any Common Units or will acquire any Common Units from the date hereof through the sale or disposition of the Common Units acquired in the Exchange in accordance with the Exchange Agreement; and (v) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Ares Operating Group Units subject to this Notice of

 

B-1

 

Exchange is required to be obtained by the undersigned for the transfer of such Ares Operating Group Units to the Ares Operating Group Entities.

 

The undersigned hereby irrevocably constitutes and appoints any officer of each Ares Entity Party as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to exchange the Ares Operating Group Units subject to this Notice of Exchange on the books of the Ares Operating Group Entities for Common Units on the books of the Issuer.

 

[Remainder of Page Intentionally Left Blank]

 

B-2

 

IN WITNESS WHEREOF, the undersigned has caused this Notice of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney as of                                                                 .

 

 

	
 
    	
 
    
	
 
    	
Name:
    

 

B-3

 

EXHIBIT C

 

[FORM OF]

 

JOINDER AGREEMENT

 

This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of [·], 2014 (the “Agreement”), among Ares Domestic Holdings Inc., Ares Domestic Holdings L.P., Ares Holdings Inc., Ares Holdings L.P., Ares Investments L.P., Ares Management, L.P., Ares Management GP LLC, Ares Offshore Holdings L.P., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings L.P., Ares Real Estate Holdings LLC and each Ares Operating Group Limited Partner from time to time party to the Agreement, as amended from time to time. Capitalized terms used but not defined herein shall have the meanings given to them in the Agreement. This Joinder Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to its conflict-of-law principles. If there is a conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control.

 

The undersigned hereby joins and enters into the Agreement having acquired Ares Operating Group Units in the Ares Operating Group Entities. By signing and returning this Joinder Agreement to the Issuer and the Ares Operating Group Entities, the undersigned accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of an Ares Operating Group Limited Partner contained in the Agreement, with all attendant rights, duties and obligations of an Ares Operating Group Limited Partner thereunder. The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by the Issuer and by the Ares Operating Group Entities, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement.

 

	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Address for Notices:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Attention:
    	
 
    	
 
    
				

 

[Remainder of Page Intentionally Left Blank]

 

C-1

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be executed as of                                                                 .

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    

 

C-2Exhibit 10.9

 

FORM OF TAX RECEIVABLE AGREEMENT

 

This TAX RECEIVABLE AGREEMENT (the “Agreement”), dated as of [·], 2014, is entered into by and among Ares Holdings Inc., a Delaware corporation (“Holdings Inc.”), Ares Domestic Holdings Inc., a Delaware corporation (“Domestic Holdings Inc.”), (each a “Corporation” and collectively, the “Corporations”), Ares Holdings L.P., a Delaware limited partnership (“Ares Holdings”), Ares Domestic Holdings L.P., a Delaware limited partnership (“Ares Domestic” and together with Ares Holdings and all other Persons (as defined herein) in which the Corporations acquire a partnership interest or similar interest after the date hereof and who execute and deliver a joinder contemplated in Section 7.12, the “Partnerships”), Ares Management, L.P., a Delaware limited Partnership (the “Parent”), Ares Owners Holdings L.P., a Delaware limited partnership (“AOH”), Alleghany Insurance Holdings LLC, a Delaware limited liability company (“Alleghany”) and each of the parties set forth on Schedule A hereto (the “Limited Partners” and together with AOH and Alleghany, the “TRA Holders”).

 

RECITALS

 

WHEREAS, AOH, Alleghany and the Limited Partners, directly or indirectly, hold limited partnership interests in each of the Partnerships (“Partnership Units”), and each of the Partnerships is classified as a partnership for U.S. federal income tax purposes;

 

WHEREAS, as of the date hereof, each Corporation is the general partner of the Partnership in which such Corporation owns an interest;

 

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

 

WHEREAS, each of the Partnerships, and each of their direct and indirect subsidiaries that are treated as partnerships for U.S. federal income tax purposes, will have in effect an election under Section 754 of the Code, for each Taxable Year in which a taxable exchange of Partnership Units for Common Units, cash or other consideration occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Partnerships at the time of such an exchange of Partnership Units for Common Units, cash or other consideration (collectively, an “Exchange”, the date of such Exchange, the “Exchange Date”, and such assets and any asset whose tax basis is determined, in whole or in part, by reference to the adjusted basis of any such asset, the “Reference Assets”) 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 Partnerships solely with respect to the Corporations may be affected by the Basis Adjustment (defined below) and (ii) the Corporations 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 Corporations;

 

NOW, THEREFORE, 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.

 

“Advisory Firm” means Proskauer Rose LLP, other advisors as indicated by the General Partner or any other accounting firm or law firm that is nationally recognized as being expert in Tax matters and that is designated as such by the Board.

 

“Advisory Firm Letter” means a letter from the Advisory Firm stating that the relevant schedule, notice or other information to be provided or made available by the Corporations to TRA Holders or the Principals, as the case may be, and all supporting schedules and work papers were prepared in a manner consistent with the terms of this Agreement and, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedule, notice or other information is delivered or made available to the TRA Holders or the Principals, as the case may be.

 

“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.

 

“AOH” is defined in the preamble of this Agreement.

 

“AOH Partnership Agreement” means the limited partnership agreement of AOH.

 

“AOH Units” means limited partnership interests in AOH.

 

“Ares Group” means, collectively, the Corporations, the Partnerships and any other entity designated by the Board as being a member of the Ares Group.

 

“Ares Holdco” means Ares Partners Holdco LLC, a Delaware limited liability company.

 

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

 

2

 

“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 1012, 732, 734(b), 743(b) and 754 of the Code and, in each case, comparable sections of U.S. state and 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. In the case of an interest in a Partnership that owns a Reference Asset and that has been the subject of an Exchange, if at any time after such Exchange the interest is transferred to (i) a Corporation or (ii) any entity that is owned directly or indirectly in whole or in part by a Corporation or that is a member of an affiliated or consolidated group of corporations described in Section 7.11(b) that includes a Corporation, the Basis Adjustment for such Reference Asset shall include, to the extent reasonably determined to be appropriate by such Corporation, any adjustment to the tax basis of the Reference Asset under Sections 1012, 732, 734(b), 743(b) and 754 of the Code and, in each case, comparable sections of U.S. state and local and foreign tax laws (as calculated under Section 2.01 of this Agreement) as a result of such transfer to the extent such adjustment does not exceed the unamortized Basis Adjustment for the Reference Asset as determined immediately before such transfer. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Partnership Units shall be determined separately for each such Exchange and without regard to any Pre-Exchange Transfer of such Partnership Units and as if any such Pre-Exchange Transfer had not occurred.

 

A “Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security or (ii) investment power, which includes the power to dispose, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

 

“Board” means the board of directors of the General Partner.

 

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

 

“Change of Control” means the occurrence of any of the following events:

 

(i)  any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, excluding a group of Persons, which, if it includes any Principal or any of its Affiliates, includes all Principals then employed by the Parent or any of its Affiliates, is or becomes the Beneficial Owner, directly or indirectly, of securities of the Parent representing more than 50% of the combined voting power of the Parent’s then outstanding voting securities;

 

(ii)  Ares Holdco no longer has the right to appoint the members of the Board;

 

(iii)  there is consummated a merger or consolidation of the Parent or any direct or indirect subsidiary of the Parent with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation Ares Holdco no longer has the right to appoint the members of the Board; or

 

3

 

(iv)  the unitholders of the Parent approve a plan of complete liquidation or dissolution of the Parent or there is consummated an agreement or series of related agreements for the sale or other disposition, directly, or indirectly, by the Parent of all or substantially all of the Parent’s assets, other than such sale or other disposition by the Parent of all or substantially all of the Parent’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by unitholders of the Parent in substantially the same proportions as their ownership of the Parent immediately prior to such sale.

 

Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii) above, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the units of the Parent immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Parent immediately following such transaction or series of transactions.

 

“Code” means the Internal Revenue Code of 1986.

 

“Common Units” means Common Units of the Parent, as defined in the partnership agreement of Parent.

 

“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 Holdcos” means, collectively, each of the Corporations, Ares Real Estate Holdings LLC, a Delaware limited liability company, Ares Offshore Holdings, Ltd., a Cayman limited company, Parent (if it is at any time treated as a corporation for U.S. federal income tax purposes) and any other entity designated as a Corporate Holdco by the Board.

 

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

 

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

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” has the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of U.S. state and local and foreign tax law, as applicable, or any other event (including the execution of an IRS Form 870-AD (Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment)) 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.

 

4

 

“Early Termination Objection 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) the Agreed Rate.

 

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

 

“Exchange Agreement” means the Exchange Agreement, dated as of the date hereof, among Parent, the Corporations, the Partnerships and the other parties thereto.

 

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

 

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

 

“Exchange Payment” means any Tax Benefit Payment or Early Termination Payment required to be made by a Corporation to the TRA Holders under this Agreement.

 

“Exchange Price” is the amount of cash, Common Units or other consideration transferred to a holder of Partnership Units pursuant to an Exchange as payment for the exchanged Partnership Units, other than amounts payable pursuant to this Agreement.

 

“Excluded Assets” is defined in Section 7.11(c) of this Agreement.

 

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

 

“General Partner” means Ares Management GP, LLC or any successor general partner of Parent.

 

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

 

“IRS” means the U.S. Internal Revenue Service.

 

“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” is defined in the Recitals of this Agreement.

 

“Market Value” means the closing price of the Common Units on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which

 

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such Common Units are then traded or listed (the “National Exchange”), as reported in the principal consolidated transaction reporting system of the National Exchange; provided that if the closing price is not so reported on 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 Exchange, as reported in the principal consolidated transaction reporting system of the National Exchange; 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.

 

“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 a Corporation or any Partnership in which such Corporation owns an interest, but only with respect to Taxes imposed on such Partnership and allocable to such Corporation using the same methods, elections, conventions and similar practices used on the relevant Corporation Return, but using the Non-Stepped Up Tax Basis instead of the tax basis of the Reference Assets and excluding any deduction attributable to the Imputed Interest.

 

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

 

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

 

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

 

“Partnership Agreement” means, with respect to a Partnership, the limited partnership agreement or similar agreement of such Partnership.

 

“Partnership Units” is defined in the Recitals 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 direct or indirect transfer of one or more Partnership Units (i) that occurs prior to an Exchange of such Partnership Units, and (ii) to which either Section 734(b) or 743(b) of the Code applies.

 

“Principals” means the individuals set forth on Schedule B hereto and any additional individuals who may from time to time be designated by the Board as principals of the Parent, in each case for so long as such individual remains an employee of the Parent or one or more of its Subsidiaries or Affiliates.

 

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“Put Right” means a contractual right, pursuant to which a TRA Holder has the right, but not the obligation, to cause the Partnerships or their Affiliates to redeem all, or a portion of, such TRA Holder’s Partnership Units at a predetermined price.

 

“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 a Corporation or any Partnership in which such Corporation owns an interest, 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 a Corporation or any Partnership in which such Corporation owns an interest 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.

 

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

 

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

 

“Reference Assets” is defined in the Recitals of this Agreement.

 

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

 

“Subsequent Exchange” is defined in Section 4.01 of this Agreement.

 

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

 

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made) ending on or after the 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” means 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.

 

“TRA Holder” is defined in the Recitals of this Agreement, and for the avoidance of doubt shall not include any direct or indirect holder of Partnership Units that is not a party to this Agreement.

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” means, as of an Early Termination Date, with respect to a Corporation, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporation 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 generated by the Basis Adjustment or the Imputed Interest and available as of the date of the Early Termination Schedule will be utilized by the Corporation on a pro rata basis from the date of the Early Termination Date through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets are deemed to be disposed of (A) with respect to 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 (or, (y) if such expected liquidation date has passed, on the Early Termination Date and (z) if with respect to “evergreen” funds, after eighteen (18) months) 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 Partnership Units, the first sentence of Section 2.01 shall be read to include the cash, Common Units or other consideration that would be transferred if the Exchange occurred on the Early Termination Date.

 

Section 1.02.                          Interpretation. Unless a clear contrary intention appears: (i) the defined terms herein shall apply equally to both the singular and plural forms of such terms; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) any pronoun shall include the corresponding masculine, feminine and neuter forms; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended

 

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or modified and in effect from time to time in accordance with the terms thereof; (v) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) “hereunder,” “hereof,” “hereto,”  and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (vii) numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement; (viii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (ix) “or” is used in the inclusive sense of “and/or”; (x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; and (xi) reference to dollars or $ shall be deemed to refer to U.S. dollars.

 

ARTICLE II
 DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01.                          Basis Adjustment. The Corporations and the Partnerships, on the one hand, and the TRA Holders, on the other hand, acknowledge that, as a result of an Exchange, each Corporation’s basis in the applicable Reference Assets shall be increased, if at all, as provided in the definition of Basis Adjustment. 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. The parties agree that (i) all Tax Benefit Payments attributable to the Basis Adjustments (other than amounts treated as interest under the Code) (A) will be treated as purchase price adjustments that result in additional Basis Adjustments to the Reference Assets for the Corporations and (B) have the effect of creating additional Basis Adjustments to the Reference Assets for the Corporations in the year such Tax Benefit Payments are made, and (ii) as a result, such additional Basis Adjustments will be included in computing the current year’s Tax Benefit Payment calculation and included in computing future years’ 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 a Corporation for each Taxable Year in which any Exchange has been effected, the Corporation shall deliver to the Principals a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail, for purposes of Taxes, (i) the actual unadjusted tax basis of the Reference Assets as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Reference Assets as a result of the Exchanges effected in such Taxable Year, calculated in the aggregate and separately stated for each applicable TRA Holder, (iii) the period or periods, if any, over which the Reference Assets are amortizable or depreciable and (iv) the period or periods, if any, over which each Basis Adjustment is amortizable 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 a Corporation for any Taxable Year in which there is a Realized Tax

 

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Benefit or Realized Tax Detriment, such Corporation shall provide to the Principals a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year setting forth the Realized Tax Benefit or Realized Tax Detriment, as the case may be, for each TRA Holder (a “Tax Benefit Schedule”). The Schedule will become final as provided in Section 2.04(a) and may be amended as provided, and subject to the procedures set forth, in Section 2.04(b).

 

Section 2.04.                          Procedures, Amendments

 

(a)                                 Procedure. Every time a Corporation makes available to the Principals 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, such Corporation shall also (x) make available to the Principals schedules and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Letter supporting such Schedule and (y) allow the Principals reasonable access at no cost to the appropriate representatives at each of such Corporation and the Advisory Firm in connection with a review of such Schedule. The applicable Schedule shall become final and binding on all parties unless a Principal, within 30 calendar days after receiving notice that an Exchange Basis Schedule or amendment thereto is available or 30 calendar days after receiving notice that a Tax Benefit Schedule or amendment thereto is available, provides such Corporation with notice (an “Objection Notice”) of a material objection to such Schedule made in good faith; provided that only Principals (or their designees) 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 Corporation of an Objection Notice, if with respect to an Exchange Basis Schedule, or 30 calendar days of receipt by such Corporation of an Objection Notice, if with respect to a Tax Benefit Schedule, after such Schedule was made available to the Principals, such Corporation and such Principal 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 a Corporation (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 made available to the Principals, (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 calendar days of a Tax Benefit Schedule becoming final in accordance with Section 2.04(a), the applicable Corporation shall pay to each applicable TRA Holder for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.01(b). The portion of such Tax Benefit Payment that is payable to a particular TRA Holder shall be determined by taking into account (A) in the case of an Exchange by a  TRA Holder (other than pursuant to the exercise of a Put Right), the portion of such Tax Benefit Payment attributable to such TRA Holder’s Exchanges and (B) in the case of AOH, the portion of such Tax Benefit Payment attributable to an Exchange pursuant to the exercise of a Put Right or an Exchange by a holder of Partnership Units who is not a TRA Holder, in all cases, for such Taxable Year relative to the aggregate Tax Benefit Payments attributable to all Exchanges for such Taxable Year, provided that such accounting shall be determined by the Corporation in good faith and exercising reasonable discretion. Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account previously designated by the applicable TRA Holder. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including federal income tax payments. For the avoidance of doubt, no Tax Benefit Payment shall be made to any current or former holder of AOH Units or Partnership Units that is not a party to this Agreement. Notwithstanding anything herein to the contrary, in no event shall the Aggregate Tax Benefit Payments to any TRA Holder (other than amounts treated as interest under the Code) in respect of the Exchanges under this Agreement exceed an amount equal to 85% of the portion of the Exchange Price paid to such TRA Holder (or in the case of AOH, the Exchange Price paid to the holders of Partnership Units who are not party to this Agreement or the Exchange Price paid pursuant to the exercise of a Put Right, as applicable) pursuant to such Exchanges.

 

(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) each Corporation’s Realized Tax Benefit, if any, for a Taxable Year plus (2) the excess of the 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 Corporation’s Realized Tax Detriment (if any) for the current or any previous Taxable Year, minus (4) the excess of the 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 that (x) to the extent 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 and (y) no TRA Holder 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 Corporation Return with respect to Taxes for such Taxable

 

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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 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 Corporation’s Realized Tax Benefit and Interest Amount is paid to the TRA Holders pursuant to this Agreement. The provisions of this Agreement shall be construed in the appropriate manner so that such intentions are realized.

 

Section 3.03.         Pro Rata Payments. For the avoidance of doubt, to the extent any Corporation’s deductions with respect to a Basis Adjustment is limited in a particular Taxable Year, or such Corporation lacks sufficient funds to satisfy its obligations to make all Tax Benefit Payments due in a particular taxable year, the limitation on such deduction shall be taken into account, or the Tax Benefit Payments shall be made, as the case may be, to each TRA Holder on a pro rata basis which reflects the proportion of the total amount of deductions attributable to such TRA Holder relative to the aggregate deductions for all of the TRA holders (as determined by the Corporation in good faith and exercising reasonable discretion).

 

ARTICLE IV
 TERMINATION

 

Section 4.01.         Early Termination and Breach of Agreement.

 

(a)           A Corporation may terminate this Agreement with respect to all of the Partnership Units held (or previously held and exchanged) by the TRA Holders, or indirectly held by holders of AOH Units, at any time by paying to the TRA Holders the Early Termination Payment; provided that (a) this Agreement shall only terminate upon the receipt of the Early Termination Payment by the TRA Holders, and (b) that a Corporation may withdraw any notice to execute its termination rights under this Section 4.01 prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payments by a Corporation, such Corporation shall not have any further payment obligations under this Agreement in respect of the TRA Holders, other than for any (a) Tax Benefit Payment agreed to by such Corporation and the Principals 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 Corporation exercises its termination rights under this Section 4.01, such Corporation shall have no obligations under this Agreement with respect to such Exchange.

 

(b)           If a Corporation 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

 

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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 Corporation and any TRA Holders 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, if a Corporation breaches this Agreement, the TRA Holders 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 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; provided 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 if such payment is made 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 Corporation chooses to exercise its right of early termination under Section 4.01 above, such Corporation shall deliver to the TRA Holders notice of such intention to exercise such right (“Early Termination Notice”) and shall deliver to the Principals a schedule (the “Early Termination Schedule”) specifying such Corporation’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 a Principal, within 30 calendar days after receiving the Early Termination Schedule thereto provides such Corporation with notice (“Early Termination Objection Notice”) of a material objection to such Schedule 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 after receipt by such Corporation of the Early Termination Objection Notice, such Corporation and a Principal 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 Principals and a Corporation of the Early Termination Schedule, such Corporation shall pay to the TRA Holders an amount equal to the Early Termination Payment. Such payment shall be made by wire transfer of immediately available funds to the bank accounts designated by each of the TRA Holders.

 

(b)           The “Early Termination Payment” as of the date of the delivery of an Early Termination Schedule shall equal with respect to a TRA Holder 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 such Corporation to such TRA Holder beginning from the Early Termination Date assuming the Valuation Assumptions are applied.

 

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ARTICLE V
 LATE PAYMENTS

 

Section 5.01.         Late Payments by a Corporation. The amount of all or any portion of any Exchange Payment not made to the TRA Holders 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.         Principal Participation in the Corporations’ and Partnerships’ Tax Matters. Except as otherwise provided herein, each Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning such Corporation and the Partnerships, including the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, each Corporation shall notify each Principal of, and keep the Principals reasonably informed with respect to the portion of any audit of such Corporation and the Partnerships by a Taxing Authority the outcome of which is reasonably expected to affect any TRA Holder’s rights and obligations under this Agreement, and shall provide to the Principals reasonable opportunity to provide information and other input to such Corporation, the Partnerships and their respective advisors concerning the conduct of any such portion of such audit; provided that each Corporation and the Partnerships shall not be required to take any action that is inconsistent with any provision of any of the Partnership Agreements.

 

Section 6.02.         Consistency. Except upon the written advice of an Advisory Firm, each Corporation and the TRA Holders 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 the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by each Corporation in any Schedule required to be provided by or on behalf of such Corporation under this Agreement.

 

Section 6.03.         Cooperation. The TRA Holders shall (a) furnish to each Corporation in a timely manner such information, documents and other materials as such Corporation 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 themselves available to each Corporation and its representatives to provide explanations of documents and materials and such other information as such Corporation 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 Corporation shall reimburse the TRA Holders for any reasonable and documented third-party costs and expenses incurred pursuant to this Section.

 

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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 email upon confirmation of transmission by the sender’s server 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:

 

Ares Management, L.P.
 2000 Avenue of the Stars, 12th Floor
 Los Angeles, California 90067
 (T) (310) 201-4100
 Attention:  Michael D. Weiner
 Email:  list_taxreceivablenotice@aresmgmt.com

 

with a copy to:

 

Proskauer Rose LLP
 2049 Century Park East, Suite 3200
 Los Angeles, California 90067
 (T) (310) 557-2900
 Attention:  Michael A. Woronoff

Jonathan Benloulou
 Email:  MWoronoff@proskauer.com

JBenloulou@proskauer.com

 

If to any Corporation, any Partnership or AOH, to:

 

c/o Ares Management, L.P.
 2000 Avenue of the Stars, 12th Floor
 Los Angeles, California 90067
 (T) (310) 201-4100
 Attention:  Michael D. Weiner
 Email:  list_taxreceivablenotice@aresmgmt.com

 

with a copy to:

 

Proskauer Rose LLP
 2049 Century Park East, Suite 3200
 Los Angeles, California 90067
 (T) (310) 557-2900
 Attention:  Michael A. Woronoff

 

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Jonathan Benloulou
 Email:  MWoronoff@proskauer.com

JBenloulou@proskauer.com

 

If to Alleghany, to:

 

The address and electronic mail address set forth in the records of the Partnerships.

 

If to a Limited Partner, to:

 

The address and electronic mail address set forth in the records of the AOH.

 

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

 

Section 7.02.         Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic transmission), all of which shall constitute one and the same instrument.

 

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 construed and enforced, along with any rights, remedies, or obligations provided for hereunder, in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware by residents of the State of Delaware; provided, that the enforceability of Section 7.08 shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and not the laws of the State of Delaware.

 

Section 7.05.         Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein, if the economic and legal substance of the arrangements contemplated hereby are not affected in any manner materially adverse to any party hereto. Upon such a determination, each of the Corporations and the Principals shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties

 

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as closely as possible in an acceptable manner that the transactions contemplated hereby shall be consummated as originally contemplated to the fullest extent possible.

 

Section 7.06.         Successors; Assignment; Amendments; Waivers. No TRA Holder may assign this Agreement to any Person without the prior written consent of each Corporation; provided that (i) except with respect to a transfer of Partnership Units (including indirectly through a transfer of AOH Units), to the extent the Partnership Units are effectively transferred by a TRA Holder (including indirectly through a transfer of AOH Units) in accordance with the terms of the relevant Partnership Agreements (or the AOH Partnership Agreement), the transferring TRA Holder shall have the option to assign to the transferee of such Partnership Units (including indirectly through a transfer of AOH Units) the transferring TRA Holder’s rights under this Agreement, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to each Corporation, agreeing to become a “TRA Holder” for all purposes of this Agreement, except as otherwise provided in such joinder, and (ii) once an Exchange has occurred, any and all payments that may become payable to a TRA Holder 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 Corporation. For the avoidance of doubt, to the extent a Principal or other Person transfers Partnership Units (including indirectly through a transfer of AOH Units) to another Principal, the Principal receiving such Partnership Units (including indirectly through a transfer of AOH Units) shall have all rights under this Agreement with respect to such transferred Partnership Units as such Principal has, under this Agreement, with respect to the other Partnership Units directly or indirectly held by such Principal.

 

No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporations, on behalf of themselves and the respective Partnerships they Control, and by the Principals that control, directly or indirectly, at least two-thirds of the Partnership Units held by all Principals; provided that no such amendment shall be effective if such amendment will have a disproportionate adverse effect on the payments certain TRA Holders will or may receive under this Agreement unless all such TRA Holders disproportionately adversely affected consent in writing. 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.

 

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 and their respective successors, assigns, heirs, executors, administrators and legal representatives. Each Corporation 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 Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that such Corporation would be required to perform if no such succession had taken place. Notwithstanding anything to the contrary herein, if a Principal transfers Partnership Units (including indirectly through a transfer of AOH Units), to a Permitted Transferee (as defined in the relevant Partnership Agreements), excluding any other Principal, such Principal shall have

 

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the right, on behalf of such transferee, to enforce the provisions of Sections 2.04, 4.02 or 6.01 with respect to such transferred Partnership Units.

 

Section 7.07.         Headings. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

 

Section 7.08.         Resolution of Disputes. (a) Any and all disputes, claims or controversies arising out of or relating to this Agreement, including any and all disputes, claims or controversies arising out of or relating to (i) the parties to this Agreement, (ii) any party’s rights and obligations hereunder, (iii) the validity or scope of any provision of this Agreement, (iv) whether a particular dispute, claim or controversy is subject to arbitration under this Section 7.08, and (v) the power and authority of any arbitrator selected hereunder, that are not resolved by mutual agreement shall be submitted to final, binding and confidential arbitration in Los Angeles, California, before one arbitrator, conducted by the Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its successor.  Disputes shall be resolved in accordance with the Federal Arbitration Act, 9 U.S.C. §§1—16, and JAMS’ Comprehensive Arbitration Rules and Procedures then in effect.  The arbitrator will have the same, but no greater, remedial authority than would a court of law and shall issue a written decision including the arbitrator’s essential findings and conclusions and a statement of the award.  Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.  The prevailing party in any such arbitration proceeding, as determined by the arbitrator, or in any proceeding to enforce the arbitration award, will be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses and attorneys’ fees.  If no party entirely prevails in such arbitration or proceeding, the arbitrator or court shall apportion an award of such fees based on the relative success of each party.  In the event of a conflict between this provision and any provision in the applicable rules of JAMS, the provisions of this Agreement will prevail.  The parties to the arbitration shall participate in the arbitration in good faith.

 

(b)           The provisions of this Section 7.08 may be enforced by any court of competent jurisdiction, and, to the extent permitted by law, the party seeking enforcement shall be entitled to an award of all costs, fees and expenses, including attorneys’ fees, to be paid by the party against whom enforcement is ordered. Notwithstanding any provision of this Agreement to the contrary, a party to an arbitration pursuant to this Section 7.08 shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any violation of the provisions of this Agreement pending a final determination on the merits by the arbitrator, and each party hereby consents that such a restraining order or injunction may be granted without the necessity of posting any bond.

 

(c)           The details of any arbitration pursuant to this Section 7.08, including the existence and/or outcome of such arbitration and any information obtained in connection with any such arbitration, shall be kept strictly confidential and shall not be disclosed or discussed with any person not a party to the arbitration; provided that such party may make such disclosures as are required by applicable law or legal process; provided further that such party may make such disclosures to its, his or her attorneys, accountants or other agents and

 

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representatives who reasonably need to know the disclosed information in connection with any arbitration pursuant to this Section 7.08 and who are obligated to keep such information confidential to the same extent as such party. If either party to the arbitration, as the case may be, receives a subpoena or other request for information from a third party that seeks disclosure of any information that is required to be kept confidential pursuant to the prior sentence, or otherwise believes that it, he or she may be required to disclose any such information, such the party to the arbitration, as the case may be, shall (i) promptly notify the other party to the arbitration and (ii) reasonably cooperate with such other party in taking any legal or otherwise appropriate actions, including the seeking of a protective order, to prevent the disclosure, or otherwise protect the confidentiality, of such information.

 

Section 7.09.         Reconciliation. If a Corporation and a Principal 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 (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with either such Corporation or such Principal or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within 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 Corporation, 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 Corporation; except as provided in the next sentence. Each participating Corporation and each Principal shall bear their own costs and expenses of such proceeding, unless the Principal has a prevailing position that is more than 10% of the payment at issue, in which case such Corporation shall reimburse such Principal 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 determinations of the Expert pursuant to this Section 7.09 shall be final and binding on such Corporation and such Principal and may be entered and enforced in any court having jurisdiction.

 

Section 7.10.         Withholding. Each Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as such Corporation 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 the Corporation, such withheld amounts shall

 

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be treated for all purposes of this Agreement as having been paid to such TRA Holder. The TRA Holders shall provide each Corporation with such withholding and other tax certificates (including all required attachments) as may be reasonably requested from time to time.

 

Section 7.11.         Affiliated Corporations of the Corporate Holdcos; Admission of the Corporations into a Consolidated Group; Transfers of Corporate Assets.

 

(a)           The other Corporate Holdcos shall provide that all provisions of this Agreement shall correspondingly apply, including the payment of Tax Benefit Payments by any corporation owned directly or indirectly in whole or in part, now or in the future, by the other Corporate Holdcos, with respect to any Realized Tax Benefit with respect to limited partnership interests in the other Ares Group entities, that are part of the Exchange and in which such corporation owns an interest, under the same terms and conditions as set forth in this Agreement, and the other Corporate Holdcos shall cause such corporation to execute and deliver a joinder to this Agreement to such effect. If either (i) the Parent or any other Corporate Holdco (other than the Corporations) elects to be treated or is otherwise treated as a corporation for tax purposes, or (ii) the Parent holds any other Corporate Holdco directly or indirectly through an entity that is treated as a corporation for tax purposes, then the provisions of this Agreement shall apply (w) to the Parent or such other Corporate Holdco or such entity as the case may be in the same manner as it applies to the Corporations and (x) to each partnership, limited partnership and limited liability company Controlled by any other Corporate Holdco as if each such entity were a Partnership; provided that, if any Partnership Units or limited partnership interests in other Ares Group entities were Exchanged prior to an event described in clause (i) or (ii) above, then (y) such Exchange shall be treated for purposes of this Agreement as having occurred immediately after such event at the Market Value in existence at the time of such prior Exchange, and (z) the entity that is to be treated in the same manner as the Corporations 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 in the same manner as the Corporations on the date of such Exchange; provided that such Tax Benefit Payments shall be payable only with respect to (I) Reference Assets that are still owned at the time of the event described in clause (i) or (ii) above, and (II) taxable years of such entity ending on or after the date of the event described in clause (i) or (ii) above. The parties agree that the terms of this Agreement will be applied to any corporation under this Section 7.11 only if the aggregate Tax Benefit Payments payable with respect to such corporation are reasonably expected to be more than $10 million.

 

(b)           If a Corporation 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 of the group as a whole.

 

(c)           Notwithstanding any other provision of this Agreement, if Parent acquires one or more assets that, as of an Exchange Date, have not been contributed to a Corporation (other than Parent’s interests in the other Corporate Holdcos) (such assets, “Excluded Assets”), then all Tax Benefit Payments due hereunder shall be computed as if such

 

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assets had been contributed to such Corporation on the date such assets were first acquired by Parent; provided that if an Excluded Asset consists of stock in a corporation, then, for purposes of this Section 7.11(c), (i) such corporation (and any corporation Controlled by such corporation) shall be deemed to have contributed its assets to the Corporation in a transaction described in Section 351 of the Code, and (ii) such Corporation shall be deemed to have contributed all such assets to the Partnership, in each case on the date on which the Parent acquired stock of such corporation.

 

(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 partnership interest.

 

Section 7.12.         Partnerships. Each Corporation hereby agrees that, to the extent it acquires a general partnership interest, managing member interest or similar interest in any Person after the date hereof, it shall cause such Person to execute and deliver a joinder to this Agreement and become a “Partnership” for all purposes of this Agreement.

 

Section 7.13.         Conclusive Nature of Calculations. All determinations, interpretations, calculations, adjustments and other actions of a Corporation or any Partnership or a designee of any of the foregoing that are within such Person’s authority hereunder (including in connection with the preparation of any Schedule) shall be made in good faith by such Person and shall be binding and conclusive absent manifest error. In connection with any such determination, interpretation, calculation, adjustment or other action, each Corporation or any Partnership or the designee of any of the foregoing shall be entitled to resolve any ambiguity with respect to the manner in which such determination, interpretation, calculation, adjustment or other action is to be made or taken, and shall be entitled to interpret the provisions of this Agreement, in such a manner as it determines to be fair and equitable, and such resolution or interpretation shall be binding and conclusive absent manifest error.

 

[Signatures on following pages]

 

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

 

 

	
 
    	
Ares   Management, L.P.
    
	
 
    	
By:   Ares Management GP LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Ares   Holdings Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Ares   Domestic Holdings Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Ares   Holdings L.P.
    
	
 
    	
By:   Ares Holdings Inc., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature Page to Tax Receivable Agreement]

 

 

	
 
    	
Ares   Domestic Holdings L.P.
    
	
 
    	
By:   Ares Domestic Holdings Inc., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Ares   Owners Holdings L.P.
    
	
 
    	
By:   Ares Partners Holdco LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature Page to Tax Receivable Agreement]

 

 

	
 
    	
Alleghany   Insurance Holdings LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature Page to Tax Receivable Agreement]

 

 

	
 
    	
LIMITED   PARTNERS
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    

 

[Signature Page to Tax Receivable Agreement]

 

 

	
 
    	
Each   Limited Partner set forth on Schedule A hereto:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
Attorney-in-fact
    

 

[Signature Page to Tax Receivable Agreement]

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