Document:

esnd-ex106_59.htm

Exhibit 10.6

 

 

 

 

 

 

 

 

SEPARATION AGREEMENT

Dated as of April 12, 2018

By and Between

GENUINE PARTS COMPANY

and

RHINO SPINCO, INC.

 

 

 

 

 

TABLE OF CONTENTS

 

Page

Article I
DEFINITIONS

	
Section 1.01.
	
Definitions2

Article II
INTERNAL REORGANIZATION AND SEPARATION

	
Section 2.01.
	
Internal Reorganization2

	
Section 2.02.
	
Conveyance of Transferred Assets2

	
Section 2.03.
	
Assignment of Contracts3

	
Section 2.04.
	
Certain Transaction Documents4

	
Section 2.05.
	
Intercompany Accounts and Obligations4

	
Section 2.06.
	
Release of Pre-Distribution Claims5

	
Section 2.07.
	
Calculation of and Adjustments to the SpinCo Special Cash Payment6

	
Section 2.08.
	
Certain Resignations9

	
Section 2.09.
	
SPR HoldCo Preferred Stock9

Article III
CERTAIN COVENANTS, AGREEMENTS AND ACTIONS PRIOR TO THE DISTRIBUTION

	
Section 3.01.
	
Governmental Filings; Consents9

	
Section 3.02.
	
SpinCo Debt; SPR Transfer10

Article IV
THE DISTRIBUTION

	
Section 4.01.
	
Form of Distribution10

	
Section 4.02.
	
Manner of Effecting Distribution10

	
Section 4.03.
	
Actions Prior to the Distribution11

	
Section 4.04.
	
Conditions Precedent to the Distribution12

	
Section 4.05.
	
Additional Matters in Connection with the Distribution12

Article V
INFORMATION AND CONFIDENTIALITY

	
Section 5.01.
	
Retention of Information13

	
Section 5.02.
	
Access to Information; Cooperation13

	
Section 5.03.
	
Ownership of Information14

	
Section 5.04.
	
Confidentiality14

	
Section 5.05.
	
Privilege and Related Rights16

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Section 5.06.
	
Other Agreements18

Article VI
DISCLAIMER; NO REPRESENTATIONS OR WARRANTIES

	
Section 6.01.
	
Disclaimer; No Representations or Warranties19

Article VII
INDEMNIFICATION; LIMITATION OF LIABILITY

	
Section 7.01.
	
Remedies19

	
Section 7.02.
	
Indemnification20

	
Section 7.03.
	
Procedures20

	
Section 7.04.
	
Limitations22

Article VIII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS

	
Section 8.01.
	
Further Assurances22

	
Section 8.02.
	
Insurance23

	
Section 8.03.
	
Non-Solicitation of Employees23

Article IX
TAX MATTERS

	
Section 9.01.
	
Tax Matters24

	
Section 9.02.
	
Bulk Sales Laws24

Article X
TRANSITION SERVICES

	
Section 10.01.
	
Transition Services Agreement24

	
Section 10.02.
	
Supply Chain Transition Services Agreement24

	
Section 10.03.
	
Day One Readiness24

Article XI
REAL PROPERTY MATTERS

	
Section 11.01.
	
Leased Premises25

Article XII
TERMINATION

	
Section 12.01.
	
Termination25

	
Section 12.02.
	
Effect of Termination25

Article XIII
MISCELLANEOUS

ii

 

	
Section 13.01.
	
Notices25

	
Section 13.02.
	
Amendments; Waivers27

	
Section 13.03.
	
Expenses28

	
Section 13.04.
	
Successors and Assigns28

	
Section 13.05.
	
Construction28

	
Section 13.06.
	
Entire Agreement29

	
Section 13.07.
	
Counterparts; Effectiveness29

	
Section 13.08.
	
Governing Law29

	
Section 13.09.
	
Dispute Resolution; Consent to Jurisdiction29

	
Section 13.10.
	
Severability29

	
Section 13.11.
	
Captions30

	
Section 13.12.
	
Specific Performance30

 

EXHIBITS

Exhibit ADefinitions

ATTACHMENTS

Attachment IInternal Reorganization
Attachment IIAccounting Principles
Attachment IIITax Matters Agreement
Attachment IVForm of Transition Services Agreement
Attachment VForm of Supply Chain Transition Services Agreement
Attachment VILeased Premises and Lease Terms
Attachment VIIForm of Lease
Attachment VIIIBill of Sale

SCHEDULES

Schedule 2.05(a)Intercompany Liabilities
Schedule 2.05(b)Intercompany Accounts
Schedule 5.05(a)GPC Counsel
Schedule 10.03(a)Day-One Plan
Schedule A-1Indebtedness of RMT Parent
Schedule A-2Indebtedness of SpinCo
Schedule BRMT Parent Cash Award Agreements

ANNEXES

Annex IDebt-Like Items of RMT Parent as of December 31, 2017
Annex IIDebt-Like Items of SpinCo as of December 31, 2017
Annex IIINet Working Capital as of December 31, 2017

 

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Exhibit 10.6

SEPARATION AGREEMENT

This Separation Agreement (together with the Exhibits, Attachments and Schedules hereto, this “Agreement”) is made as of the 12th day of April, 2018, by and between Genuine Parts Company, a Georgia corporation (“GPC”), and Rhino SpinCo, Inc., a Delaware corporation and wholly-owned Subsidiary of GPC (“SpinCo”). Each of GPC and SpinCo is sometimes referred to individually as a “Party” and collectively they are sometimes referred to as the “Parties.”

RECITALS

WHEREAS, GPC, among other things, is engaged in the wholesale distribution of office and other business related products, including furniture and facility, breakroom, safety and technology supplies (the “SpinCo Business”) through (i) S.P. Richards Company, a Georgia corporation and currently wholly-owned Subsidiary of GPC (“SPR”), and its Subsidiaries, (ii) SPR Procurement Company, a Georgia corporation and currently wholly-owned Subsidiary of GPC (“SPR Procurement”) and (iii) S.P. Richards Co. Canada Inc., a British Columbia, Canada corporation and indirect wholly-owned Subsidiary of GPC (“SPR Canada”), and its Subsidiaries;

WHEREAS, the Board of Directors of GPC has determined that it is in the best interests of GPC and its stockholders to separate the SpinCo Business from the other businesses of GPC and its Subsidiaries (the “Separation”), on the terms and conditions set forth in this Agreement and the other Transaction Documents;

WHEREAS, to implement the Separation, (i) the SpinCo Business will be reorganized in accordance with Section 2.01 and as set forth in Attachment I (the “Internal Reorganization”) such that each of SPR, SPR Procurement and SPR Canada and their respective Subsidiaries will become direct or indirect Subsidiaries of SpinCo and (ii) upon the terms and conditions set forth in this Agreement, the Board of Directors of GPC has determined to distribute, without consideration, all of the then outstanding shares of capital stock of SpinCo to GPC’s stockholders by way of a pro rata dividend (the “Distribution”);

WHEREAS, pursuant to the Agreement and Plan of Merger dated of even date herewith, (the “Merger Agreement”), among GPC, SpinCo, Essendant Inc., a Delaware corporation (“RMT Parent”) and Elephant Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of RMT Parent (“Merger Sub”), immediately following the Distribution, Merger Sub will merge with and into SpinCo (the “Merger”) and, in connection with the Merger, SpinCo Common Stock will be converted into the right to receive shares of common stock of RMT Parent on the terms and conditions set forth in the Merger Agreement;

WHEREAS, GPC and SpinCo contemplate that, concurrently with or immediately prior to the Internal Reorganization and on the terms and conditions set forth in this Agreement and the other Transaction Documents, SpinCo will enter into the definitive debt financing arrangements for the SpinCo Debt;

 

 

WHEREAS, in connection with the Internal Reorganization and the Separation, GPC and SpinCo each have determined that it is appropriate for SpinCo to pay the Internal Reorganization Cash Payments to GPC on the terms and conditions set forth in this Agreement and in the Merger Agreement;

WHEREAS, the Parties intend that, for U.S. federal income Tax purposes, the Internal Reorganization, the Distribution and the Merger be treated consistent with the Intended Tax Treatment as contemplated by the Tax Matters Agreement;

WHEREAS, it is a condition to the Merger that, prior to the Merger Effective Time, the Internal Reorganization and the Distribution will have been completed; and

WHEREAS, the Parties are entering into the Tax Matters Agreement contemporaneously with this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

Article I
DEFINITIONS

Section 1.01.Definitions

. Capitalized terms used in this Agreement shall have the meanings specified in Exhibit A.

Article II
INTERNAL REORGANIZATION AND SEPARATION

Section 2.01.Internal Reorganization

. At or prior to the Distribution Effective Time, to the extent not already completed, each of GPC and SpinCo shall, and shall cause their Affiliates to effect the Internal Reorganization.

Section 2.02.Conveyance of Transferred Assets

.

(a)Except as otherwise expressly provided herein or in any of the other Transaction Documents, and except to the extent previously effected pursuant to the Internal Reorganization, upon the terms and subject to the conditions set forth in this Agreement, effective as of immediately prior to the Distribution Effective Time, GPC will assign, transfer, convey and deliver (“Transfer”), or will cause the Affiliated Transferors to Transfer, to SpinCo or to one or more SpinCo Companies as SpinCo may designate, and SpinCo will accept from GPC (or the applicable Affiliated Transferor), or will cause any applicable SpinCo Company to accept, all of GPC’s and the applicable Affiliated Transferors’ respective right, title and interest in and to all of the Transferred Assets (it being understood that any Transferred Assets that are already held by a SpinCo Company as of the Distribution Effective Time will continue to be held by such SpinCo Company).

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(b)In the event that any Transfer of a Transferred Asset required by any of the Transaction Documents is not effected at or before the Distribution Effective Time, upon receipt of written notice from SpinCo describing such Transferred Assets in reasonable detail (which notice must be delivered before the later of (i) the 18-month anniversary of the Distribution Effective Time and (ii) the 45th day after SpinCo first learns that such Transfer was not effected), GPC shall Transfer such Transferred Asset to SpinCo as soon thereafter as practicable, subject to the terms and conditions set forth in the Transaction Documents; provided that, to the extent any such Transferred Asset (x) was not reflected in the calculation of the Final SpinCo Special Cash Payment and (y) existed immediately prior to the Distribution Effective Time, in connection with such Transfer SpinCo shall pay to GPC any additional amount that would have been payable to GPC to the extent such Transferred Asset should have been reflected in the calculation of the Final SpinCo Special Cash Payment.

(c)From and after the Distribution Effective Time, GPC shall promptly Transfer or cause the other members of its Group promptly to Transfer to SpinCo or the appropriate member of SpinCo’s Group, from time to time, any Assets received that constitute a Transferred Asset; provided that, to the extent any such Transferred Asset (x) was not reflected in the calculation of the Final SpinCo Special Cash Payment and (y) existed immediately prior to the Distribution Effective Time, in connection with such Transfer SpinCo shall pay to GPC any additional amount that would have been payable to GPC to the extent such Transferred Asset should have been reflected in the calculation of the Final SpinCo Special Cash Payment.

Section 2.03.Assignment of Contracts

(a). Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign or otherwise sell, convey, sublicense or Transfer any Contract constituting a Transferred Asset, or any claim, right or benefit arising thereunder or resulting therefrom, if an attempted assignment, sale, conveyance, sublicense or Transfer thereof without the consent of a third party would constitute a breach of, or other contravention under, such Contract. With respect to any such Contract (or any claim, right or benefit arising thereunder or resulting therefrom), from and after the date hereof, the Parties shall use commercially reasonable efforts (but without any payment of money or other transfer of value by any Party to any third party) to obtain any required consent for the assignment, sale, conveyance, sublicense or Transfer of such Contract to SpinCo, or written confirmation from such parties reasonably satisfactory in form and substance to the Parties confirming that such consent is not required. If a required consent is not obtained prior to the Distribution Effective Time with respect to any such Contract, then, if and to the extent permitted under, and subject to the terms of, such Contract, and subject to Applicable Law, GPC and SpinCo shall use commercially reasonable efforts to cooperate to enter into, as of the Distribution Effective Time, a mutually agreeable arrangement under which (i) SpinCo would obtain, through a subcontracting, sublicensing or subleasing arrangement or otherwise, the claims, rights and benefits of the GPC Companies under such Contract in accordance with this Agreement, (ii) SpinCo would assume all obligations of the GPC Companies under such Contracts and agree to perform and discharge all obligations under such Contracts and (iii) the GPC Companies would enforce at SpinCo’s cost and at the reasonable request of and for the benefit of SpinCo, 

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any and all claims, rights and benefits of the GPC Companies against any third party thereto arising from any such Contract; provided that neither Party shall be required to make any payment of money or other transfer of value in connection with any such arrangement. In the event SpinCo shall elect to make any payment of money or other transfer of value, including any consent fee, transfer fee or similar arrangement, whether in connection with obtaining any consent under this Section 2.03 or entering into any arrangement contemplated by the preceding sentence (collectively, a “Consent Fee”), SpinCo shall be solely responsible for such Consent Fee.

Section 2.04.Certain Transaction Documents

. In furtherance of the Separation, on the Distribution Date, GPC and SpinCo shall execute and deliver (or shall cause the applicable SpinCo Company to execute and deliver):

(a)the Transition Services Agreement;

(b)the Supply Chain Transition Services Agreement;

(c)the Leases;

(d)any Bill of Sale reasonably necessary to effect the Transfer of the Transferred Assets; and

(e)such other agreements, assignments, leases, subleases, documents or instruments as the Parties agree are necessary or desirable to achieve the purposes set forth in the Transaction Documents.

Section 2.05.Intercompany Accounts and Obligations

.

(a)Except as provided in this Section 2.05 and in Article VII, or as otherwise set forth in Schedule 2.05(a), from and after the Distribution Effective Time neither GPC nor SpinCo nor any member of their respective Groups shall have any Liability to the other or any member of the other’s Group based upon, arising out of or resulting from any agreement, arrangement, course of dealing or understanding existing on or prior to the Distribution Effective Time (other than this Agreement or any other Transaction Document), and each of GPC and SpinCo shall terminate, and shall cause all members in its respective Group to terminate, any and all then-existing agreements, arrangements, courses of dealing or understandings between it or any members of its Group and the other Party, or any members of its Group, effective as of the Distribution Effective Time (other than this Agreement or any other Transaction Document), and any such Liability, whether or not in writing, that is not reflected in any Transaction Document is hereby irrevocably cancelled, released and waived effective as of the Distribution Effective Time. No such terminated agreement, arrangement, course of dealing or understanding (including any provision thereof that purports to survive termination) shall be of any further force or effect after the Distribution Effective Time.

(b)Except as set forth in Schedule 2.05(b), each Intercompany Account outstanding immediately prior to the Distribution Effective Time shall be satisfied and/or settled by the relevant GPC Company and SpinCo Company no later than the 

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Distribution Effective Time by (i) forgiveness by the relevant obligor, (ii) one or a related series of distributions of capital, (iii) non-cash intercompany transfer and settlement through GPC’s corporate procedures, (iv) cash payment, in each case as determined by the Parties or (v) any combination of the foregoing.

Section 2.06.Release of Pre-Distribution Claims

.

(a)Effective as of the Distribution Effective Time, GPC, for itself and each member of the GPC Group and, to the extent permitted by Applicable Law, all Persons who at any time prior to the Distribution Effective Time were directors, officers, partners, managers, agents or employees of any member of the GPC Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, does hereby remise, release and forever discharge the SpinCo Indemnified Parties from any and all Liabilities, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of law or otherwise, in each case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Effective Time, including in connection with the Separation and the Distribution and any of the other transactions contemplated hereunder and under the other Transaction Documents. Without limitation, the foregoing release includes a release of any rights and benefits with respect to such Liabilities that GPC and each member of the GPC Group, and their respective successor and assigns, now has or in the future may have conferred upon them by virtue of any statute or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party’s settlement with the obligor. In this connection, GPC hereby acknowledges that it is aware that factual matters unknown to it may have given or may hereafter give rise to Liabilities that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness and it nevertheless hereby intends to release the SpinCo Indemnified Parties from the Liabilities described in the first sentence of this Section 2.06(a).

(b)Effective as of the Distribution Effective Time, SpinCo, for itself and each member of the SpinCo Group and, to the extent permitted by Applicable Law, all Persons who at any time prior to the Distribution Effective Time were directors, officers, partners, managers, agents or employees of any member of the SpinCo Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, does hereby remise, release and forever discharge the GPC Indemnified Parties from any and all Liabilities, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of law or otherwise, in each case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Effective Time, including in connection with the Separation and the Distribution and any of the other transactions contemplated hereunder and under the other Transaction Documents. Without limitation, the foregoing release includes a release of any rights and benefits with respect to such 

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Liabilities that SpinCo and each member of the SpinCo Group, and their respective successor and assigns, now has or in the future may have conferred upon them by virtue of any statute or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party’s settlement with the obligor. In this connection, SpinCo hereby acknowledges that it is aware that factual matters unknown to it may have given or may hereafter give rise to Liabilities that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness and it nevertheless hereby intends to release the GPC Indemnified Parties from the Liabilities described in the first sentence of this Section 2.06(b).

(c)Nothing contained in Section 2.06(a) or Section 2.06(b) shall (i) limit or otherwise affect any Person’s rights or obligations pursuant to or contemplated by, or ability to enforce, any Transaction Document, in each case in accordance with its terms, (ii) apply to any Liability the release of which would result in the release of any Person other than a Person expressly released pursuant to Section 2.06(a) or Section 2.06(b) or (iii) release any Person from, or waive any rights under, any Liability provided in or resulting from any Contract to which any member of the SpinCo Group, on the one hand, and any GPC Group, on the other hand, is a party, that does not terminate as of the Distribution Date in accordance with Section 2.05.

(d)Following the Distribution Effective Time, GPC shall not, and shall cause each other member of the GPC Group not to, make any claim or demand, or commence any Proceeding asserting any claim or demand, including any claim of contribution, recovery or any indemnification, against any member of the SpinCo Group or any of their respective Affiliates, or any other Person released with respect to any Liabilities released pursuant to Section 2.06(a). Following the Distribution Effective Time, SpinCo shall not, and shall cause each member of the SpinCo Group not to, make any claim or demand, or commence any Proceeding asserting any claim or demand, including any claim of contribution, recovery or any indemnification, against any member of the GPC Group or any of their respective Affiliates, or any other Person released with respect to any Liabilities released pursuant to Section 2.06(b).

Section 2.07.Calculation of and Adjustments to the SpinCo Special Cash Payment

.

(a)No later than five Business Days prior to the anticipated Distribution Date, and following reasonable consultation with RMT Parent, GPC shall, at its expense, prepare and submit to SpinCo and RMT Parent a written statement (the “Estimated Statement”) prepared and calculated in accordance with the accounting principles, policies, practices and methods described on Attachment II applied on a consistent basis (the “Accounting Principles”) and setting forth, in reasonable detail using the format in the illustrative example attached to the Accounting Principles, GPC’s good faith estimates of (i) Estimated Net Working Capital, (ii) Estimated Net Debt of SpinCo, (iii) Estimated Net Debt of RMT Parent), (iv) the RMT Parent Expense Reimbursement, (v) the SpinCo Expense Reimbursement, (vi) the Equity Award True-up and (vii) the SpinCo 

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Special Cash Payment. Each of GPC, SpinCo and RMT Parent shall provide the others in a timely fashion with all information and supporting documentation reasonably requested by any of them in connection with the preparation and review of the Estimated Statement. SpinCo may (and, at RMT Parent’s request, shall) provide GPC with comments to the Estimated Statement, and GPC, SpinCo and RMT Parent shall cooperate reasonably and in good faith to address any such comments and mutually agree on the Estimated Statement to the maximum extent practicable under the circumstances, and GPC shall reflect any such mutually agreed comments in the Estimated Statement used for determining the payment of the SpinCo Special Cash Payment made pursuant to Section 3.02(b).

(b)Promptly following the Distribution Date, but in no event later than 60 days after the Distribution Date, SpinCo shall, at its expense, prepare and submit to GPC a written statement (the “Proposed Final Statement”) prepared and calculated in accordance with the Accounting Principles setting forth, in reasonable detail using the format in the illustrative example attached to the Accounting Principles, SpinCo’s calculation of (i) Final Net Working Capital, (ii) Final Net Debt of SpinCo, (iii) Final Net Debt of RMT Parent, (iv) the RMT Parent Expense Reimbursement, (v) the SpinCo Expense Reimbursement, (vi) the Equity Award True-up and (vii) the Final SpinCo Special Cash Payment. Each of GPC, SpinCo and RMT Parent shall provide the others in a timely fashion with all information and supporting documentation reasonably requested by any of them in connection with the preparation and review of the Proposed Final Statement.

(c)In the event GPC disputes the correctness of the calculations in the Proposed Final Statement, GPC shall notify SpinCo in writing of its objections within 30 days after receipt of the Proposed Final Statement, and shall set forth, in writing and in reasonable detail, the reasons for GPC’s objections. To the extent GPC does not object within the time period contemplated by this Section 2.07(c) to a matter in, or component of, the Proposed Final Statement, GPC shall be deemed to have accepted SpinCo’s calculation and presentation in respect of the matter or component and the matter or component shall be deemed accepted by GPC. GPC and SpinCo shall endeavor in good faith to resolve any disputed matters within 15 days after SpinCo’s receipt of GPC’s notice of objections. If GPC and SpinCo are unable to resolve such disputed matters, GPC and SpinCo jointly shall, as soon as practicable and in any event within 15 days after the expiration of such 15-day period, engage a nationally known independent accounting firm, which firm shall not be the then regular auditors of, or have any material relationship with, GPC, SpinCo or RMT Parent, that is jointly appointed by the Parties (the firm so engaged, “Unaffiliated Accounting Firm”), to resolve the matters in dispute (in a manner consistent with this Section 2.07(c)). Promptly after joint engagement of the Unaffiliated Accounting Firm, GPC and SpinCo shall provide the Unaffiliated Accounting Firm with a copy of this Agreement, the Accounting Principles, the Proposed Final Statement and GPC’s written notice of objections thereto. Each of GPC and SpinCo shall deliver to the Unaffiliated Accounting Firm and to the other party simultaneously a written submission of its final position with respect to each of the matters in dispute (which position may be different than the position set forth in or contemplated by the Proposed Final Statement or GPC’s notice of objections, but may not be outside of the range of the applicable amount as set forth in the Proposed Final Statement and the 

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calculation of such amounts set forth in GPC’s notice of objections) within 15 days of the engagement of such Unaffiliated Accounting Firm. Each of GPC and SpinCo shall thereafter be entitled to submit a rebuttal to the other’s submission, which rebuttals shall be delivered to the Unaffiliated Accounting Firm and to the other Party simultaneously within 15 days of the delivery of the Parties’ initial submissions to the Unaffiliated Accounting Firm and to each other. The Unaffiliated Accounting Firm may request additional information solely to the extent necessary to resolve the matter in dispute from either Party, but absent such a request neither Party may make (nor permit any of its Affiliates or Representatives to make) any additional submission to the Unaffiliated Accounting Firm or otherwise communicate with the Unaffiliated Accounting Firm, and in no event shall either Party (i) communicate (or permit any of its Affiliates or Representatives to communicate) with the Unaffiliated Accounting Firm without providing the other Party a reasonable opportunity to participate in such communication or (ii) make (or permit any of its Affiliates or Representatives to make) a written submission to the Unaffiliated Accounting Firm unless a copy of such submission is simultaneously provided to the other Party. The Unaffiliated Accounting Firm shall have 15 days following submission of the Parties’ rebuttals to review the documents provided to it pursuant to this Section 2.07(c) and to deliver its written determination, acting as expert and not as arbitrator, with respect to each of the items in dispute submitted to it for resolution. The Unaffiliated Accounting Firm shall resolve the differences regarding the Proposed Final Statement based solely on the information provided to the Unaffiliated Accounting Firm by the Parties pursuant to the terms of this Agreement and not by independent review. The Unaffiliated Accounting Firm’s authority shall be limited to resolving disputes with respect to whether the individual disputed items on the Proposed Final Statement were prepared in accordance with the terms of this Agreement. In resolving each disputed item, the Unaffiliated Accounting Firm shall choose either the value assigned by GPC to such item or the value assigned by SpinCo to such item based on the Unaffiliated Accounting Firm’s assessment of which value is most consistent with the Accounting Principles, and may not assign a value for any item other than a value proposed by GPC or SpinCo in its respective initial submission to the Unaffiliated Accounting Firm. The determination of the Unaffiliated Accounting Firm in respect of the correctness of each matter remaining in dispute shall be final, conclusive and binding on GPC and SpinCo and not subject to appeal by either of the Parties, and judgment thereof may be entered or enforced in any court of competent jurisdiction.

(d)Not later than five Business Days after the final determination of the Final SpinCo Special Cash Payment pursuant to Section 2.07(c), a payment by wire transfer in respect thereof shall be made as follows:

(i)if the Final SpinCo Special Cash Payment is greater than the SpinCo Special Cash Payment, then an amount equal to such excess shall be paid by SpinCo to GPC; and

(ii)if the SpinCo Special Cash Payment is greater than the Final SpinCo Special Cash Payment, then an amount equal to such excess shall be paid by GPC to SpinCo.

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Any payment pursuant to this Section 2.07(d) shall be treated as an adjustment to the SpinCo Special Cash Payment for U.S. federal income Tax purposes and shall be made in immediately available funds by wire transfer to a bank account designated in writing by the Party entitled to receive the payment.

(e)The fees and expenses, if any, of the Unaffiliated Accounting Firm incurred in connection with this Agreement shall be borne equally by GPC and SpinCo.

Section 2.08.Certain Resignations

. At or prior to the Distribution Date, GPC shall cause each director or employee of GPC and its Subsidiaries who will not be employed by a SpinCo Company after the Distribution Date to resign, effective no later than the Distribution Date, from all boards of directors or similar governing bodies of each SpinCo Company (other than SpinCo), and from all positions as officers of any SpinCo Company in which they serve.

Section 2.09.SPR HoldCo Preferred Stock

. The SPR HoldCo Preferred Stock issued pursuant to the Internal Reorganization shall (i) be issued in an aggregate principal amount not exceeding $5,000,000 and (ii) have no voting rights except for limited customary protective voting rights with respect to (a) changes to the terms of the SPR HoldCo Preferred Stock and (b) authorization or issuance of securities by SPR HoldCo that are senior to the SPR HoldCo Preferred Stock with respect to dividend rights or on liquidation.

Article III
CERTAIN COVENANTS, AGREEMENTS AND ACTIONS PRIOR TO THE DISTRIBUTION

Section 3.01.Governmental Filings; Consents

.

(a)The Parties shall cooperate with each other in determining whether any action by or in respect of, or filing with, any Governmental Authority is required in connection with the consummation of the Contemplated Transactions. Subject to the terms and conditions of this Agreement, including Section 8.01, and the terms and conditions of the Merger Agreement, including Section 7.06(b) of the Merger Agreement, GPC and SpinCo shall use reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary to consummate and make effective as promptly as practicable the Contemplated Transactions, including using reasonable best efforts to obtain consents and approvals of all Governmental Authorities and other Persons necessary to consummate the Distribution and the other Contemplated Transactions. Except as otherwise expressly contemplated by another provision of the Transaction Documents, each Party shall bear its respective costs and expenses incurred in connection with obtaining such consents and approvals.

(b)Without limiting the provisions of this Section 3.01, SpinCo agrees to provide such assurances as to financial capability, resources and creditworthiness as reasonably may be requested by any Governmental Authority, the consent or approval of which is sought or with whom a filing is made hereunder.

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(c)The Parties agree that the level of efforts to obtain any approvals related to any Antitrust Law shall be governed by Section 7.06 of the Merger Agreement.

Section 3.02.SpinCo Debt; SPR Transfer

.

(a)On or before the Distribution Date, subject to the terms and conditions of Section 7.07 of the Merger Agreement, SpinCo shall enter into a definitive agreement or agreements providing for indebtedness in an aggregate principal amount equal to the SpinCo Borrowing Amount, which indebtedness shall consist of borrowings under a credit facility on the terms and conditions contemplated by the SpinCo Commitment Letter and Section 7.07 of the Merger Agreement (collectively, the “SpinCo Debt”).

(b)Between the date of this Agreement and the Distribution Effective Time, subject to the terms and conditions of Section 7.07 of the Merger Agreement, SpinCo shall incur the SpinCo Debt and receive the proceeds thereof. Immediately thereafter, in accordance with the steps contemplated by the Internal Reorganization, and in any event prior to the Distribution, GPC shall contribute 100% of the equity interests in SPR HoldCo to SpinCo and as consideration for, and substantially contemporaneously with, such contribution, SpinCo shall (i) issue and deliver to GPC a stock certificate representing the number of shares of SpinCo Common Stock determined pursuant to Section 2.04(c) of the Merger Agreement and (ii) prior to the Distribution Effective Time, pay to GPC the SpinCo Special Cash Payment by wire transfer of immediately available funds to one or more accounts designated in writing by GPC (collectively, the “SPR Transfer”).

Article IV
THE DISTRIBUTION

Section 4.01.Form of Distribution

. The Board of Directors of GPC (or a committee of the Board of Directors of GPC acting pursuant to delegated authority), in accordance with Section 14-2-640 of the Georgia Business Corporations Code, any applicable securities laws and the rules and regulations of the New York Stock Exchange, shall set the Record Date and the Distribution Date, which shall be the same as the Closing Date, and GPC shall establish appropriate procedures in connection with the Distribution. In connection with the Distribution, all shares of SpinCo Common Stock held by GPC on the Distribution Date will be distributed to Record Holders in the manner determined by GPC and in accordance with Section 4.02.

Section 4.02.Manner of Effecting Distribution

.

(a)Subject to the terms and conditions established pursuant to Section 4.01, each Record Holder shall be entitled to receive for each share of GPC Common Stock held by such Record Holder a number of shares of SpinCo Common Stock equal to the number of shares of SpinCo Common Stock held by GPC on the Distribution Date, multiplied by a fraction, the numerator of which is one and the denominator of which is the total number of shares of GPC Common Stock outstanding on the Record Date.

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(b)No Party, nor any of its Affiliates, will be liable to any Person in respect of any shares of SpinCo Common Stock, or distributions in respect thereof, that are delivered to a public official in accordance with the provisions of any applicable escheat, abandoned property or similar Applicable Law.

Section 4.03.Actions Prior to the Distribution

.

(a)SpinCo shall cooperate with GPC to give effect to and accomplish the Distribution, including in connection with the preparation of all documents and the making of all filings required under Applicable Law in connection with the Distribution. GPC shall be entitled to direct and control the efforts of the Parties in connection with, and prior to, the Distribution, including the selection of an investment bank or banks to manage the Distribution, as well as any financial, legal, accounting and other advisors of GPC, and SpinCo shall use reasonable best efforts to take, or to cause to be taken, all actions and to do, or cause to be done, all other things reasonably necessary to facilitate the Distribution as reasonably directed by GPC. Without limiting the foregoing, prior to the Distribution, SpinCo shall and shall cause its employees, advisors, agents, accountants, counsel and other representatives to, as directed by GPC, reasonably cooperate in and take the following actions: (i) preparing and filing a registration statement or statements for the registration under the Securities Act or the Exchange Act, as applicable, on an appropriate registration form or forms designated by GPC; (ii) participating in meetings, drafting sessions, due diligence sessions, management presentation sessions, “road shows” and similar meetings or sessions in connection with the Distribution; (iii) furnishing to any dealer manager or similar agent participating in the Distribution (A) “comfort” letters from independent public accountants in customary form and covering such matters as are customary for an underwritten public offering (including with respect to events subsequent to the date of financial statements included in any offering document) and (B) opinions and negative assurance letters of counsel in customary form and covering such matters as reasonably may be requested; and (iv) furnishing all historical and forward-looking financial and other relevant financial and other information that is available to SpinCo and is reasonably required in connection with the Distribution.

(b)GPC and SpinCo shall prepare and mail, prior to the Distribution Date and in accordance with Applicable Law, to the holders of GPC Common Stock, such information concerning GPC, SpinCo and RMT Parent, their respective businesses, operations and management, the Distribution and such other matters as GPC reasonably shall determine and as may be required by Applicable Law. GPC and SpinCo shall prepare, and SpinCo shall, to the extent required by Applicable Law, file with the SEC any such documentation and any requisite no-action letter that GPC determines are necessary or desirable to effectuate the Distribution, and GPC and SpinCo each shall use reasonable best efforts to obtain all necessary approvals from the SEC with respect to the foregoing as soon as practicable.

(c)GPC and SpinCo shall take all actions as may be necessary or desirable under any applicable securities, “blue sky” or comparable laws of the United States, the 

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states and territories thereof and any foreign jurisdiction in connection with the Distribution.

(d)GPC and SpinCo shall take all actions and steps reasonably necessary and appropriate to cause the conditions to the Distribution set forth in Section 4.04 to be satisfied as soon as practicable and to effect the Distribution on the Distribution Date in accordance with this Agreement.

Section 4.04.Conditions Precedent to the Distribution

. The obligation of GPC to effect the Distribution shall be subject to the fulfillment or waiver (subject to Section 13.02) at or prior to the Distribution Date of each of the following conditions (provided, however, that unless the Merger Agreement shall have been terminated in accordance with its terms, any such waiver shall be subject to the written consent of RMT Parent):

(a)Each Transaction Document shall have been executed and delivered by each party thereto; and

(b)Each of the conditions to the obligation of the parties to the Merger Agreement to consummate the Merger and effect the other transactions contemplated by the Merger Agreement shall have been satisfied or waived by the party entitled to the benefit thereto (other than those conditions that by their nature are to be satisfied contemporaneously with or immediately following the Distribution).

The foregoing conditions are for the benefit of GPC and shall not give rise to or create any duty on the part of GPC or the Board of Directors of GPC to waive or not waive any condition precedent under this Agreement or the Merger Agreement; provided, however, that the foregoing shall not limit RMT Parent’s rights under Section 7.09 of the Merger Agreement.

Section 4.05.Additional Matters in Connection with the Distribution

.

(a)GPC, SpinCo and the Agent appointed in connection with the Distribution, as applicable, shall be entitled to withhold and deduct from the consideration otherwise payable pursuant to this Agreement such amounts as are required to be withheld and deducted in connection with such payments under Applicable Law. Any withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Persons otherwise entitled thereto.

(b)Upon consummation of the Distribution, GPC shall deliver to the Agent a global certificate representing the SpinCo Common Stock being distributed in the Distribution for the account of the GPC stockholders that are entitled to such shares. The Agent shall hold such certificate or certificates, as the case may be, for the account of GPC stockholders pending the Merger, as provided in the Merger Agreement.

(c)From immediately after the Distribution Effective Time and to the Merger Effective Time, the shares of SpinCo Common Stock shall not be transferable and the transfer agent for the SpinCo Common Stock shall not transfer any shares of SpinCo 

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Common Stock. GPC shall give written notice of the Distribution Effective Time to the transfer agent with written authorization to proceed as set forth in Section 4.02.

Article V
INFORMATION AND CONFIDENTIALITY

Section 5.01.Retention of Information

. Each of SpinCo and GPC shall preserve all books and records of and substantially related to the SpinCo Business that are in their respective possession or control for a period of six years commencing on the Distribution Date, and thereafter shall not destroy or dispose of such books and records without giving notice to the other Party of such pending disposal and offering to the other Party such books and records.

Section 5.02.Access to Information; Cooperation

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(a)Except as may be necessary to comply with any Applicable Laws and subject to (x) any applicable privileges (including the attorney-client privilege), (y) this Section 5.02 and (z) the terms and conditions of any confidentiality or similar agreements between GPC or any of its Subsidiaries and a third party, including customers, vendors and distributors, from and after the Distribution Date, GPC shall, and shall cause the other GPC Companies to: (i) afford SpinCo and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of GPC Companies, to the extent relating to the conduct of the SpinCo Business prior to the Distribution Effective Time, and provide copies of such information relating to the SpinCo Companies or the SpinCo Business as SpinCo may reasonably request for any proper purpose, including in connection with (A) any judicial, quasi-judicial, administrative, audit or arbitration proceeding, (B) the preparation of any financial statements or reports and (C) the defense or pursuit of any claims, allegations or actions that relate to or may relate to the Transferred Assets, the SpinCo Companies or the SpinCo Business; and (ii) use reasonable best efforts to cooperate in the defense or pursuit of any claim or action that relates to occurrences involving the Transferred Assets, the SpinCo Companies or the SpinCo Business prior to the Distribution Date; provided that SpinCo shall reimburse GPC Companies for any reasonable out-of-pocket expenses (including fees and expenses of attorneys, accountants and other agents or representatives) incurred by GPC Companies in connection with any such defense, claim or action. SpinCo agrees to treat and hold as confidential all information provided or otherwise made available to it or any of its Representatives under this Section 5.02 in accordance with the provisions of Section 5.04(a); provided, further, that if any applicable privilege or the terms and conditions of any confidentiality or similar agreement restrict the GPC Companies’ ability to make any such information available to SpinCo or its Representatives, the Parties shall use their reasonable best efforts to cause such information to be provided in a manner that would not jeopardize such privilege or violate such agreement.

(b)Except as may be necessary to comply with any Applicable Laws and subject to (x) any applicable privileges (including the attorney-client privilege), (y) this Section 5.02(b), and (z) the terms and conditions of any confidentiality or similar 

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agreements between any SpinCo Company and a third party, including customers, vendors and distributors, from and after the Distribution Date, SpinCo shall, and shall cause the other SpinCo Companies to: (i) afford GPC and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of the SpinCo Companies, to the extent relating to the SpinCo Business prior to the Distribution Effective Time, and provide copies of such information relating to the SpinCo Companies or the SpinCo Business as GPC may reasonably request for any proper purpose, including in connection with (A) any judicial, quasi-judicial, administrative, audit or arbitration proceeding, (B) the preparation of any financial statements or reports and (C) the defense or pursuit of any claims, allegations or actions that relate to or may relate to the SpinCo Companies or the SpinCo Business prior to the Distribution Effective Time; and (ii) use reasonable best efforts to cooperate in the defense or pursuit of any claim or action that relates to occurrences involving the SpinCo Companies or the SpinCo Business prior to the Distribution Date; provided that GPC shall reimburse the SpinCo Companies for any reasonable out-of-pocket expenses (including fees and expenses of attorneys, accountants and other agents or representatives) incurred by SpinCo Companies in connection with any such defense, claim or action. GPC agrees to treat and hold as confidential all information provided or otherwise made available to it or any of its Representatives under this Section 5.02(b) in accordance with the provisions of Section 5.04.

Section 5.03.Ownership of Information

. Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article V, Article VII or the Tax Matters Agreement shall be deemed to remain the property of the providing Party. Unless specifically set forth or contemplated herein, nothing contained in this Agreement shall be construed as granting or conferring license rights or any other rights in any such information.

Section 5.04.Confidentiality

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(a)SpinCo shall, and shall cause the other SpinCo Companies to, (i) treat and hold as confidential all Confidential Information of any GPC Company in the possession or control of the SpinCo Companies as of the Distribution Date, (ii) limit disclosure of all such GPC Company Confidential Information within SpinCo’s organization to officers, directors, employees, contractors and representatives of the SpinCo Companies who in each case are obligated to maintain the confidentiality of all such GPC Company Confidential Information and have a need to know such GPC Company Confidential Information in order to accomplish the purpose for which such GPC Company Confidential Information was disclosed or provided to, or retained by, the SpinCo Companies in accordance with this Agreement (and may disclose GPC Company Confidential Information pursuant to this clause (ii) only for so long as such purpose continues to be applicable to the SpinCo Business), and (iii) refrain from disclosing any such GPC Company Confidential Information to any other Person without the prior written consent of GPC, in each case for a period commencing on the date of this Agreement and continuing for so long as such GPC Company Confidential Information constitutes Confidential Information of any GPC Company. SpinCo shall, and shall cause the other SpinCo Companies to, use such GPC Company Confidential Information only 

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in connection with the purpose for which such GPC Company Confidential Information was disclosed or provided to, or retained by the SpinCo Business, in accordance with this Agreement, and for no other reason (and only for so long as such purpose continues to be applicable to the SpinCo Business). In the event any SpinCo Companies are requested or required (by oral or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or by Applicable Law) to disclose any such GPC Company Confidential Information, SpinCo shall notify GPC promptly of the request or requirement so that GPC, at its expense, may seek an appropriate protective order or waive compliance with this Section 5.04(a).

(b)If, in the absence of a protective order or receipt of a waiver hereunder, any SpinCo Companies are, on the advice of counsel, compelled to disclose such GPC Company Confidential Information, such SpinCo Companies may so disclose such GPC Company Confidential Information; provided that SpinCo shall, and shall cause such other SpinCo Companies, as applicable, to, use reasonable best efforts to obtain reliable assurance that confidential treatment will be afforded to such GPC Company Confidential Information. Notwithstanding the foregoing, the provisions of this Section 5.04(b) shall not prohibit the disclosure of GPC Company Confidential Information by any SpinCo Companies to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance or benefits claims, (iv) to comply with Applicable Law or (v) in connection with asserting any rights or remedies or performing any obligations under any of the Transaction Documents. Notwithstanding the foregoing, the provisions of this Section 5.04(b) shall not apply to information that (x) is or becomes publicly available other than as a result of a disclosure by any SpinCo Company, (y) is or becomes available to a SpinCo Company on a non-confidential basis from a source that, to SpinCo’s or such SpinCo Company’s knowledge, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation, or (z) following the Distribution, is independently developed by a SpinCo Company.

(c)GPC shall, and shall cause the other GPC Companies to, (i) treat and hold as confidential all Confidential Information of the SpinCo Companies in the possession or control of the GPC Companies as of the Distribution Date, (ii) limit disclosure of all such Confidential Information within GPC’s organization to officers, directors, employees, contractors and representatives of GPC Companies who in each case are obligated to maintain the confidentiality of all such Confidential Information and have a need to know such Confidential Information in order to accomplish the purpose for which such confidential formation was retained by the GPC Companies in accordance with this Agreement (and may disclose such Confidential Information pursuant to this clause (ii) only for so long as such purpose continues to be applicable to the GPC Companies), and (iii) refrain from disclosing any such Confidential Information to any other Person without the prior written consent of SpinCo, in each case for a period commencing on the date of this Agreement and continuing for so long as such Confidential Information constitutes confidential or proprietary information of any SpinCo Company. GPC shall, and shall cause the other GPC Companies to, use such Confidential Information only in connection with the purpose for which such Confidential Information was retained by the 

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GPC Companies in accordance with this Agreement, and for no other reason (and only for so long as such purpose continues to be applicable to the GPC Companies). In the event any GPC Companies are requested or required (by oral or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or by Applicable Law) to disclose any such Confidential Information, GPC shall notify SpinCo promptly of the request or requirement so that SpinCo, at its expense, may seek an appropriate protective order or waive compliance with this Section 5.04(c).

(d)If, in the absence of a protective order or receipt of a waiver hereunder, any GPC Companies are, on the advice of counsel, compelled to disclose any such Confidential Information of the SpinCo Companies, such GPC Companies may so disclose such Confidential Information; provided that GPC shall, and shall cause such other GPC Companies, as applicable, to, use reasonable best efforts to obtain reliable assurance that confidential treatment will be afforded to such Confidential Information. Notwithstanding the foregoing, the provisions of this Section 5.04(d) shall not prohibit the disclosure of Confidential Information of the SpinCo Companies by any GPC Companies to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance or benefits claims, (iv) to comply with Applicable Law, (v) to provide services to any SpinCo Companies in accordance with the terms and conditions of any of the Transaction Documents or (vi) in connection with asserting any rights or remedies or performing any obligations under any of the Transaction Documents. Notwithstanding the foregoing, the provisions of this Section 5.04(d) shall not apply to information that (x) is or becomes publicly available other than as a result of a disclosure by any GPC Company, (y) is or becomes available to a GPC Company on a non-confidential basis from a source that, to GPC’s or such GPC Company’s knowledge, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation or (z) is or has been independently developed by a GPC Company.

Section 5.05.Privilege and Related Rights

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(a)The Parties recognize that legal and other professional services that have been and will be provided prior to the Distribution Effective Time in connection with this Agreement, the other Transaction Documents and the Contemplated Transactions in respect of the SpinCo Companies and the SpinCo Business have been and will be rendered for the collective benefit of each of the GPC Companies and the SpinCo Companies, and that each of the GPC Companies and the SpinCo Companies shall be deemed to be the client with respect to such pre-Distribution services for the purposes of asserting any privileges, protections or doctrines that may be asserted under Applicable Law. With respect to such pre-Distribution services, the Parties agree as follows:

(i)GPC Counsel. Each of the parties identified on Schedule 5.05(a) (collectively, the “GPC Counsel”) has acted as counsel for the GPC Companies and the SpinCo Companies in connection with this Agreement, the other Transaction Documents and the Contemplated Transactions (the “Transaction 

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Engagement”) and not as counsel for any other Person, including RMT Parent and its Affiliates.

(ii)Transaction Engagement. Only the GPC Companies and the SpinCo Companies shall be considered clients of the GPC Counsel in the Transaction Engagement. Communications, including those constituting or pertaining to legal advice, between any one or more of the GPC Companies or any of the SpinCo Companies, on the one hand, and any of the GPC Counsel, on the other hand, shall be deemed to be subject to attorney-client privilege, work product protection or other privileges or protections that belong solely to the GPC Companies and not SpinCo or any other SpinCo Company to the extent such communications (or the specific portion thereof) relate to the Transaction Engagement (collectively, the “Transaction Engagement Communications”). Accordingly, RMT Parent and Merger Sub shall not have access to the Transaction Engagement Communications, or to any Transaction Engagement Communications in the files of the GPC Counsel, whether or not the Closing shall have occurred. Without limiting the generality of the foregoing, upon and after the Closing, (i) the GPC Companies shall be the sole holders of the attorney-client privilege, work product protection or other privileges or protections with respect to the Transaction Engagement Communications, and none of the SpinCo Companies, RMT Parent or Merger Sub shall be a holder thereof, (ii) to the extent that any Transaction Engagement Communications in the files of the GPC Counsel constitute property of a client, only the GPC Companies shall hold such property rights, and (iii) none of the GPC Counsel shall have any duty whatsoever to reveal or disclose any such Transaction Engagement Communications to the SpinCo Companies, RMT Parent or Merger Sub by reason of any attorney-client relationship between any of the GPC Counsel and any of the SpinCo Companies or otherwise, unless otherwise directed by a court order or the order of any Governmental Authority.

(b)The Parties agree that they shall have a shared privilege or protection, with equal right to assert or waive, subject to the restrictions in this Section 5.05, with respect to all privileges, doctrines or protections not allocated pursuant to the terms of Section 5.05(a). All privileges relating to any claims, proceedings, litigation, disputes or other matters that involve both a GPC Company and a SpinCo Company in respect of which both Parties retain any responsibility or Liability under this Agreement, or otherwise, shall be subject to a shared privilege among them.

(c)Subject to the provisions of Section 5.05(d) and Section 5.05(e), no Party may waive any privilege, doctrine or protection that could be asserted under any Applicable Law and in which the other Party has a shared privilege, without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed. Each Party shall use its reasonable best efforts to preserve any privilege or protection held by the other Party if that privilege or protection is a shared privilege or protection or has been allocated to the other Party pursuant to Section 5.05(a).

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(d)In the event of any litigation or dispute between or among the Parties, or any members of their respective Groups, either such Party may waive a privilege or protection in which the other Party or member of such Group has a shared privilege or protection, without obtaining the consent of the other Party; provided, however, that such waiver of a shared privilege or protection shall be effective only as to the use of Privileged Information with respect to the litigation or dispute between the relevant Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to third parties.

(e)If a dispute arises between the Parties or their respective Subsidiaries regarding whether a privilege or protection should be waived to protect or advance the interest of either Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party, and shall not unreasonably withhold, condition or delay consent to any request for waiver by the other Party. Each Party specifically agrees that it will not withhold, condition or delay consent to waiver for any purpose other than to protect its own legitimate interests.

(f)Upon receipt by either Party or by any Subsidiary thereof of any subpoena, discovery or other request that calls for the production or disclosure of information subject to a shared privilege or protection, or as to which the other Party has the sole right hereunder to assert a privilege or protection, or if either Party obtains knowledge that any of its or any of its Subsidiaries’ current or former directors, officers, agents or employees have received any subpoena, discovery or other request that calls for the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have under this Section 5.05 or otherwise to prevent the production or disclosure of such Privileged Information.

(g)The transfer of all Privileged Information pursuant to this Agreement is made in reliance on the agreement of GPC and SpinCo as set forth in Section 5.04 and this Section 5.05 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges, doctrines or protections. Nothing provided for herein or in any other Transaction Document shall be deemed a waiver of any privilege, doctrine or protection that has been or may be asserted under this Agreement or otherwise.

Section 5.06.Other Agreements

. Except as otherwise expressly provided in this Article V, the rights and obligations granted under this Article V shall be subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of data and information set forth in any other Transaction Document.

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Article VI
DISCLAIMER; NO REPRESENTATIONS OR WARRANTIES

Section 6.01.Disclaimer; No Representations or Warranties

. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION DOCUMENTS, EACH PARTY ON BEHALF OF ITSELF AND EACH OF ITS AFFILIATES UNDERSTANDS AND AGREES THAT NEITHER PARTY NOR ANY OF ITS AFFILIATES IS MAKING ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, TO THE OTHER PARTY OR ANY OF ITS AFFILIATES OR TO ANY OTHER PERSON IN RESPECT OF THE CONTEMPLATED TRANSACTIONS OR ANY INFORMATION THAT MAY HAVE BEEN EXCHANGED OR PROVIDED PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, (I) NEITHER GPC NOR ANY OF ITS AFFILIATES HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES IN ANY PRESENTATION OR WRITTEN INFORMATION RELATING TO THE SPINCO BUSINESS GIVEN OR TO BE GIVEN IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS OR IN ANY FILING MADE OR TO BE MADE BY OR ON BEHALF OF GPC OR ANY OF ITS AFFILIATES WITH ANY GOVERNMENTAL AUTHORITY, AND NO STATEMENT MADE IN ANY SUCH PRESENTATION OR WRITTEN MATERIALS, MADE IN ANY SUCH FILING OR CONTAINED IN ANY SUCH OTHER INFORMATION SHALL BE DEEMED A REPRESENTATION OR WARRANTY HEREUNDER OR OTHERWISE, AND (II) GPC, ON ITS OWN BEHALF AND ON BEHALF OF THE OTHER GPC COMPANIES, EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES, INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF MERCHANTABILITY. SPINCO ACKNOWLEDGES THAT GPC HAS INFORMED IT THAT NO PERSON HAS BEEN AUTHORIZED BY GPC OR ANY OF ITS AFFILIATES TO MAKE ANY REPRESENTATION OR WARRANTY IN RESPECT OF THE SPINCO BUSINESS OR IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS, UNLESS IN WRITING AND CONTAINED IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION DOCUMENTS TO WHICH THEY ARE A PARTY.

Article VII
INDEMNIFICATION; LIMITATION OF LIABILITY

Section 7.01.Remedies

. It is understood and agreed that (a) after the Distribution, the sole and exclusive remedy with respect to any breach of this Agreement shall be a claim for Damages (whether in contract, in tort or otherwise, and whether in law, in equity or both) made pursuant to, and subject to the limitations of, this Article VII; provided, however, that notwithstanding the foregoing, nothing in this Article VII shall limit the right of any Party (i) to pursue an action for or to seek remedies with respect to claims for Fraud or Willful Breach or (ii) to seek specific performance or other equitable relief; and (b) before the Distribution, indemnification under this Article VII shall not apply.

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Section 7.02.Indemnification

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(a)Effective as of the Distribution Date and subject to the limitations set forth in Section 7.04, SpinCo hereby indemnifies GPC, its Affiliates, and their respective Representatives (together, in each case, with their respective successors and permitted assigns, the “GPC Indemnified Parties”) against, and agrees to hold them harmless from, any and all Damages arising out of, resulting from or related to (i) any breach by SpinCo or any SpinCo Company of, or failure by SpinCo or any SpinCo Company to perform, any covenants, agreements or obligations to be performed by SpinCo or the SpinCo Companies pursuant to this Agreement or (ii) except to the extent subject to indemnification by GPC under this Agreement or with respect to matters addressed by the Tax Matters Agreement, any Liabilities or claims, other than Excluded Liabilities, relating to the SpinCo Companies or arising out of the conduct of the SpinCo Business.

(b)Effective as of the Distribution Effective Time and subject to the limitations set forth in Section 7.04, GPC hereby indemnifies SpinCo, its Affiliates and their respective Representatives (together, in each case, with their respective successors and permitted assigns, the “SpinCo Indemnified Parties”) against, and agrees to hold them harmless from, any and all Damages arising out of, resulting from or related to (i) any breach by GPC or any GPC Company of, or failure by GPC or any GPC Company to perform, any covenants, agreements or obligations to be performed by GPC or the GPC Companies pursuant to this Agreement or (ii) any Excluded Liability (including any GPC Company’s failure to perform or in due course pay or discharge any Excluded Liability).

Section 7.03.Procedures

.

(a)If any GPC Indemnified Party shall seek indemnification pursuant to Section 7.02(a), or if any SpinCo Indemnified Party shall seek indemnification pursuant to Section 7.02(b), the Person seeking indemnification (the “Indemnified Person”) shall give written notice to the Party from whom such indemnification is sought (the “Indemnifying Party”) promptly (and in any event within 10 days) after the Indemnified Person (or, if the Indemnified Person is a corporation, any officer or director of the Indemnified Person) becomes aware of the facts giving rise to such claim for indemnification (an “Indemnified Claim”), which notice shall specify in reasonable detail the factual basis of the Indemnified Claim, state the amount of Damages (or if not known, a good faith estimate of the amount of Damages) and the method of computation thereof, contain a reference to the provision of this Agreement in respect of which such Indemnified Claim arises and demand indemnification therefor. The failure of an Indemnified Person to provide notice in accordance with this Section 7.03(a), or any delay in providing such notice, shall not constitute a waiver of that Person’s claims to indemnification pursuant to Section 7.02, except to the extent that any such failure or delay in giving notice causes the amounts paid or to be paid by the Indemnifying Party to be greater than they otherwise would have been or otherwise results in prejudice to the Indemnifying Party. If the Indemnified Claim arises from the assertion of any claim, or the commencement of any Proceeding, brought by a Person that is not a GPC Company or a SpinCo Company (a “Third Party Claim”), any such notice to the Indemnifying Party 

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shall be accompanied by a copy of any papers theretofore served on or delivered to the Indemnified Person in connection with such Third Party Claim.

(b)In the event of receipt of notice of a Third Party Claim from an Indemnified Person pursuant to Section 7.03(a), the Indemnifying Party will be entitled to assume the defense and control of such Third Party Claim subject to the provisions of this Section 7.03(b); provided, however, that if (i) in the reasonable judgment of the Indemnified Person, after consultation with outside counsel, there exists a conflict of interest between the Indemnifying Party and the applicable Indemnified Person in the defense of such Third Party Claim by the Indemnifying Party, (ii) the party making such Third Party Claim is a Governmental Authority with regulatory or other authority over the Indemnified Person or any of its material assets or (iii) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim, then, in each case, the Indemnified Person may assume its own defense and the Indemnifying Party shall be liable for all reasonable costs or expenses paid or incurred in connection with such defense. After written notice by the Indemnifying Party to the Indemnified Person of its election to assume the defense and control of a Third Party Claim, the Indemnifying Party shall not be liable to such Indemnified Person for any legal fees or expenses subsequently incurred by such Indemnified Person in connection therewith. Notwithstanding anything in this Section 7.03(b) to the contrary, until such time as the Indemnifying Party assumes the defense and control of a Third Party Claim as provided in this Section 7.03(b), the Indemnified Person shall have the right to defend such Third Party Claim, subject to the limitations set forth in this Section 7.03(b), in such manner as it may deem appropriate. Without regard to whether the Indemnifying Party or the Indemnified Person is defending and controlling any such Third Party Claim, it shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take reasonable steps necessary in the investigation, defense or settlement thereof, and shall diligently and promptly pursue the resolution thereof. The Party conducting the defense thereof shall at all times act as if all Damages relating to the Third Party Claim were for its own account and shall act in good faith and with reasonable prudence to minimize Damages therefrom. The Indemnified Person shall, and shall cause each of its Affiliates and Representatives to, cooperate fully with the Indemnifying Party in connection with any Third Party Claim.

(c)The Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any Third Party Claims, and the Indemnified Person shall consent to a settlement of, or the entry of any judgment arising from, such Third Party Claims, if (A) such settlement shall not encumber any of the assets of any Indemnified Person or contain any restriction or condition that would apply to such Indemnified Person or to the conduct of that Person’s business, (B) such settlement or entry of judgment does not contain or involve an admission or statement providing for or acknowledging any liability or criminal wrongdoing on behalf of the Indemnified Person or any of its Affiliates, (C) such settlement provides for no injunctive or non-monetary relief and (D) such settlement contains as a condition thereto, a complete release of the Indemnified Person. No settlement or entry of judgment in respect of any Third Party Claim shall be consented to by any Indemnified Person without the express written consent of the Indemnifying Party.

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(d)If an Indemnifying Party makes any payment on an Indemnified Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Person to any insurance benefits or other claims or benefits of the Indemnified Person with respect to such claim.

Section 7.04.Limitations

. Notwithstanding anything to the contrary in this Agreement or in any of the Transaction Documents:

(a)Each Party shall, and shall cause its Subsidiaries (and its and the Subsidiaries’ Representatives), to take all reasonable steps to mitigate Damages subject to indemnification under this Article VII upon and after becoming aware of any event that reasonably could be expected to give rise to any such Damages, and indemnification shall not be available under this Article VII to the extent any such Damages are attributable to a failure of any such Person to take reasonable steps to mitigate such Damages;

(b)No GPC Indemnified Party or SpinCo Indemnified Party shall be entitled to payment or indemnification more than once with respect to the same matter (including by being taken into account in the determination of the amounts payable pursuant to Section 2.07); and

(c)No Party shall be entitled to set off, or shall have any right of set off, in respect of any Damages under this Article VII against any payments to be made by such Party under this Agreement or any other Transaction Document.

Article VIII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS

Section 8.01.Further Assurances

. Subject to the terms and conditions of this Agreement, before and after the Distribution each Party shall use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper, advisable or desirable under any Applicable Law, to consummate or implement the Contemplated Transactions; provided, however, that the foregoing shall not be deemed to require either Party to waive compliance by the other Party and its Affiliates of its respective covenants or obligations under this Agreement or to waive any conditions precedent required to be satisfied by the other Party. GPC and SpinCo shall execute and deliver, and shall cause GPC Companies and SpinCo Companies, respectively, as appropriate or required and as the case may be, to execute and deliver, such other documents, certificates, agreements and other writings and to take such other actions as may be necessary, proper, advisable or desirable to consummate or implement the Contemplated Transactions. In furtherance and not in limitation of the foregoing, to the extent a Transaction Document provides for a GPC Company (other than GPC) or another SpinCo Company (other than SpinCo) to take or refrain from taking any action, GPC shall cause every other GPC Company, and SpinCo shall cause every other SpinCo Company, to abide by the terms of the Transaction Document as if each such Party and GPC Company or SpinCo Company, as the case may be, was a signatory to the Transaction Documents. Except as otherwise expressly set forth in the Transaction Documents, nothing in this Section 8.01 or in any other provision of this Agreement shall 

22

 

require any GPC Companies or SpinCo Companies to make any payments in order to obtain any consents or approvals necessary, proper, advisable or desirable in connection with the consummation of the Contemplated Transactions.

Section 8.02.Insurance

.

(a)Except as otherwise may be agreed in writing by the Parties, GPC shall not have any obligation to maintain any form of insurance covering all or any part of the SpinCo Companies or the employees thereof after the Merger Effective Time or to make any monetary payment in connection with any such policy.

(b)For any claim asserted against SpinCo or any SpinCo Company prior to or after the Distribution Effective Time arising out of an occurrence taking place prior to the Distribution Effective Time (“Post-Closing Claims”), SpinCo and each SpinCo Company may access coverage under the occurrence-based insurance policies of GPC or its Subsidiaries (as applicable) issued or in place prior to the Distribution Effective Time under which SpinCo or any other SpinCo Company is insured (the “Pre-Closing Occurrence Based Policies”), to the extent such insurance coverage exists. After the Distribution Effective Time, the SpinCo Companies may seek coverage for any Post-Closing Claim under any applicable Pre-Closing Occurrence Based Policies, to the extent such insurance coverage exists, and GPC and its Subsidiaries (as applicable) shall cooperate with SpinCo and the SpinCo Companies in connection with the tendering of such claims; provided, however, that: (i) SpinCo or the SpinCo Companies shall promptly notify GPC of all such Post-Closing Claims; and (ii) SpinCo shall be responsible for the satisfaction or payment of any applicable retention, deductible or retrospective premium with respect to any Post-Closing Claim and shall reimburse to GPC and its Subsidiaries all reasonable out of pocket costs and expenses incurred in connection with such claims. In the event that a Post-Closing Claim relates to the same occurrence for which GPC or its Subsidiaries is seeking coverage under Pre-Closing Occurrence Based Policies, and the limits under an applicable Pre-Closing Occurrence Based Policy are not sufficient to fund all covered claims of SpinCo or any SpinCo Company (as applicable) and GPC or its Subsidiaries (as applicable), amounts due under such a Pre-Closing Occurrence Based Policy shall be paid to the respective entities in proportion to the amounts which otherwise would be due were the limits of liability infinite.

Section 8.03.Non-Solicitation of Employees

.

(a)For a period of eighteen months after the Distribution Date, neither SpinCo nor any of its Affiliates shall, without the prior written approval of GPC, directly or indirectly solicit any non-administrative employees of any GPC Company to terminate his or her employment relationship with GPC or any of its Subsidiaries; provided, however, that the foregoing shall not apply to any employee solicited or hired as a result of the use of an independent employment agency (so long as the agency was not directed to solicit employees of a GPC Company) or as a result of the use of advertisements and other general solicitation not specifically directed to employees of a GPC Company.

23

 

(b)For a period of eighteen months after the Distribution Date, neither GPC nor any of its Subsidiaries shall, without the prior written approval of SpinCo, directly or indirectly solicit any non-administrative employees of the SpinCo Business as of the Distribution Date to terminate his or her employment relationship with any SpinCo Company; provided, however, that the foregoing shall not apply to any employee solicited or hired as a result of the use of an independent employment agency (so long as the agency was not directed to solicit employees of the SpinCo Business) or as a result of the use of advertisements and other general solicitation not specifically directed to employees of the SpinCo Business.

Article IX
TAX MATTERS

Section 9.01.Tax Matters

. Neither this Agreement nor any Transaction Document (other than the Tax Matters Agreement) shall govern Tax matters (including any administrative, procedural and related matters thereto, “Tax Matters”), except as otherwise expressly provided herein or therein. Tax Matters shall be exclusively governed by the Tax Matters Agreement.

Section 9.02.Bulk Sales Laws

. Each Party, on behalf of itself and each of the other members of its Group, hereby waives compliance with the requirements and provisions of all Applicable Laws in respect of “bulk sales” or “bulk transfers” in any jurisdiction that may be applicable to any Transfer of the Transferred Assets.

Article X
TRANSITION SERVICES

Section 10.01.Transition Services Agreement

. From and after the Distribution Effective Time, GPC agrees to provide transition services to the SpinCo Companies as set forth in the Transition Services Agreement. In the event of any inconsistency regarding transition service matters between the Transition Services Agreement and this Agreement, the Transition Services Agreement shall govern to the extent of the inconsistency.

Section 10.02.Supply Chain Transition Services Agreement

. From and after the Distribution Effective Time, GPC agrees to provide supply chain transition services to the SpinCo Companies as set forth in the Supply Chain Transition Services Agreement. In the event of any inconsistency regarding transition services matters between the Supply Chain Transition Services Agreement and this Agreement, the Supply Chain Transition Services Agreement shall govern to the extent of the inconsistency.

Section 10.03.Day One Readiness

.

(a)For the purpose of allowing and enabling the SpinCo Companies and RMT Parent, as applicable, to prepare to receive transfer of the Transferred Assets on the Distribution Date, to receive the transition services contemplated by the Transition Services Agreement and the Supply Chain Transition Services Agreement and to operate the SpinCo Business on the Distribution Date (“Day-One Readiness”), the Parties shall, 

24

 

as soon as practicable after the date of this Agreement, prepare in good faith a plan for Day-One Readiness, the purpose of which is to facilitate Day-One Readiness (the “Day-One Plan”). Each Party shall use its commercially reasonable efforts to implement the tasks contemplated to be taken by it in the Day-One Plan on the terms and conditions, and within the scheduled time periods, outlined in the Day-One Plan; provided that (i) neither Party shall be obligated to incur any liability, obligation or out-of-pocket cost or expense (other than Compensated Expenses) relating to the Day-One Plan prior to the Distribution Date and (ii) the Parties acknowledge that the time periods set forth in the Day-One Plan may shift based on various factors that arise after the development of the Day-One Plan. Among other actions, the Day-One Plan shall include the actions set forth on Schedule 10.03(a). From and after the Distribution Effective Time, neither Party shall have any liability to the other with respect to the design or implementation of the Day-One Plan.

(b)To the extent that, as of the Distribution Date, any of the actions, deliverables or plans contemplated under the Day-One Plan have not been accomplished, the Parties shall cooperate in good faith and use commercially reasonable efforts to design and implement one or more workaround solutions to facilitate Day-One Readiness on and after the Distribution Date; provided that any liabilities, costs or expenses incurred by any GPC Company in connection therewith shall be promptly reimbursed by SpinCo.

Article XI
REAL PROPERTY MATTERS

Section 11.01. Leased Premises

. The Parties shall cooperate with each other and use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to effect the lease, effective immediately prior to the Distribution Effective Time, of the Leased Premises to the SpinCo Companies on the terms and conditions set forth in the Leases.

Article XII
TERMINATION

Section 12.01.Termination

. This Agreement shall terminate without further action at any time before the Closing upon termination of the Merger Agreement.

Section 12.02.Effect of Termination

. In the event of any termination of this Agreement pursuant to Section 12.01 prior to the Closing, and except as provided in the Merger Agreement, neither Party nor any of its Affiliates shall have any liability or further obligation to the other Party or any of its Affiliates under this Agreement or in respect of the transactions contemplated hereby.

Article XIII
MISCELLANEOUS

Section 13.01.Notices

. All notices, requests and other communications to any Party hereunder shall be in writing (including email) and shall be given:

25

 

if to GPC:

Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Treg S. Brown

Scott Smith
Christopher T. Galla

E-mail:Treg_Brown@genpt.com
Scott_Smith@genpt.com
Chris_Galla@genpt.com

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: John H. Butler
Email: john.butler@davispolk.com

if to SpinCo prior to the Merger Effective Time:

Rhino SpinCo, Inc.
c/o Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Treg S. Brown

Scott Smith
Christopher T. Galla

E-mail:Treg_Brown@genpt.com
Scott_Smith@genpt.com
Chris_Galla@genpt.com

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: John H. Butler
Email: john.butler@davispolk.com

26

 

if to SpinCo after the Merger Effective Time:

Essendant Inc.
One Parkway North Boulevard
Suite 100
Deerfield, Illinois 60015
Attention:Elizabeth Meloy, Senior Vice President
Brendan McKeough, General Counsel
E-mail: emeloy@essendant.com
bmckeough@essendant.com

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP
155 North Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
Email: charles.mulaney@skadden.com

or to such other address or email address and with such other copies, as such Party may hereafter specify for that purpose by notice to the other Party. Each such notice, request or other communication shall be effective (a) on the day delivered (or if that day is not a Business Day, on the first following day that is a Business Day) when (i) delivered personally against receipt or (ii) sent by overnight courier, (b) on the day when email is transmitted (so long as receipt is requested and received) (or if that day is not a Business Day, on the first following day that is a Business Day) and (c) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 13.01 (or such other address as a Party hereafter may specify by notice to the other Parties).

Section 13.02.Amendments; Waivers

.

(a)This Agreement and the Exhibits, Schedules and Attachments hereto may be amended, and any provision of this Agreement and the Exhibits, Schedules and Attachments hereto may be waived, if and only if such amendment or waiver, as the case may be, is in writing and signed, in the case of an amendment, by the Parties or, in the case of a waiver, by the Party against whom the waiver is to be effective, in each case subject to the prior written consent of RMT Parent pursuant to Section 7.14 of the Merger Agreement.

(b)No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. Any term, covenant or condition of this Agreement may be waived at any time by the Party 

27

 

that is entitled to the benefit thereof, but only by a written notice signed by such Party expressly waiving such term, covenant or condition. The waiver by any Party of a breach of any provision hereunder shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder.

Section 13.03.Expenses

. Except as otherwise provided in this Agreement or any other Transaction Document, all costs and expenses incurred in connection with the preparation and negotiation of this Agreement and the Contemplated Transactions (including costs and expenses attributable to the Transfer of the Assets as contemplated herein) shall be paid by the Party incurring such costs or expenses.

Section 13.04.Successors and Assigns

. The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign, delegate or otherwise transfer, directly or indirectly, in whole or in part, any of its rights or obligations under this Agreement without the prior written consent of the other Party. Notwithstanding the foregoing, (i) after the Distribution Date, SpinCo may assign or transfer its rights under this Agreement to any of its wholly-owned Subsidiaries and (ii) no assignment, delegation or other transfer of rights under this Agreement shall relieve the assignor of any liability or obligation hereunder. Any attempted assignment, delegation or transfer in violation of this Section 13.04 shall be void.

Section 13.05.Construction

. As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. References in this Agreement to a Party or other Person include their respective successors and assigns. The words “include,” “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation” unless such phrase otherwise appears. Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits, Schedules and Attachments shall be deemed references to Articles and Sections of, and Exhibits, Schedules and Attachments to this Agreement. Unless the context otherwise requires, the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision hereof. Except when used together with the word “either” or otherwise for the purpose of identifying mutually exclusive alternatives, the term “or” has the inclusive meaning represented by the phrase “and/or”. With regard to each and every term and condition of this Agreement, the Parties understand and agree that, if at any time the Parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject thereto, no consideration shall be given to the issue of which Party actually prepared, drafted or requested any term or condition of this Agreement. All references in this Agreement to “dollars” or “$” shall mean United States dollars. Any period of time hereunder ending on a day that is not a Business Day shall be extended to the next Business Day. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder.

28

 

Section 13.06.Entire Agreement

. This Agreement, the other Transaction Documents and any other agreements contemplated hereby or thereby, constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the Parties with respect to the subject matter hereof. Except as expressly provided herein, neither this Agreement nor any provision hereof is intended to confer upon any Person other than the Parties (and their successors and permitted assigns) any rights or remedies hereunder.

Section 13.07.Counterparts; Effectiveness

. This Agreement may be signed in any number of counterparts (including by facsimile or PDF), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Party hereto.

Section 13.08.Governing Law

. This Agreement shall be construed in accordance with and governed by federal law and by the laws of the State of Delaware (without regard to the choice of law provisions thereof).

Section 13.09.Dispute Resolution; Consent to Jurisdiction

.

(a)Any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement shall be brought in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the Parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such Proceeding and waives any objection to venue laid therein. Process in any such Proceeding may be served on any Party anywhere in the world, whether within or without the State of Delaware. Without limiting the foregoing, GPC and SpinCo agree that service of process upon such Party at the address referred to in Section 13.01 (or such other address as may be specified in accordance with Section 13.01 shall be deemed effective service of process upon such Party).

(b)EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.

Section 13.10.Severability

. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. The application of such invalid or unenforceable provision to Persons or 

29

 

circumstances other than those as to which it is held invalid or unenforceable shall be valid and be enforced to the fullest extent permitted by Applicable Law. To the extent any provision of this Agreement is determined to be prohibited or unenforceable in any jurisdiction or determined to be impermissible by any Governmental Authority, GPC and SpinCo agree to use reasonable best efforts to substitute one or more valid, legal and enforceable provisions that, insofar as practicable, implement the purposes and intent of the prohibited, unenforceable or impermissible provision.

Section 13.11.Captions

. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

Section 13.12.Specific Performance

. Each Party acknowledges that, from and after the Distribution Date, money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such Party and that any such breach would cause the other Party irreparable harm. Accordingly, each Party also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such Party, the other Party shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance, in addition to all other remedies available to such other Party at law or in equity.

[SIGNATURE PAGE FOLLOWS]

 

 

30

Exhibit 10.6

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed under seal by their respective authorized representatives on the day and year first above written.

		
	
GENUINE PARTS COMPANY

 

 

	
By:
	
/s/ Treg Brown

	
Name:
	
Treg Brown

	
Title:
	
Senior Vice President

 

		
	
RHINO SPINCO, INC.

 

 

	
By:
	
/s/ Treg Brown

	
Name:
	
Treg Brown

	
Title:
	
Assistant Vice President

 

 

[Signature Page to the Separation Agreement]

 

Exhibit A

Definitions

	
(a)
	
The following terms have the following meanings:

[*]

[*]

 “Acquisition Expenditures of RMT Parent” means, from the date hereof until any time of determination, the aggregate cash consideration paid or funded by RMT Parent and its Subsidiaries in respect of acquisitions and investments made (i) in accordance with Section 6.02(a)(v)(A) of the Merger Agreement or (ii) with the express written consent of GPC.

“Acquisition Expenditures of SpinCo” means, from the date hereof until any time of determination, the aggregate cash consideration paid or funded by any GPC Company (as defined in the Merger Agreement) in respect of acquisitions and investments made (i) in accordance with Section 6.01(a)(v)(A) of the Merger Agreement or (ii) with the express written consent of RMT Parent.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such specified Person. For purposes of determining whether a Person is an Affiliate, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise.

“Affiliated Transferors” means any Affiliate of GPC (other than a SpinCo Company) that owns, licenses or leases any of the Assets that constitute Transferred Assets.

“Agent” means the Exchange Agent appointed pursuant to the Merger Agreement.

“Antitrust Law” has the meaning set forth in the Merger Agreement.

“Applicable Law” means, with respect to any Person, any federal, state, county, municipal, local, multinational or foreign statute, treaty, law, executive order, common law, ordinance, rule, regulation, administrative order, writ, injunction, judicial decision, decree, permit or other legally binding requirement of any Governmental Authority applicable to such Person or any of its respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person).

A-1

 

“Assets” means all assets, properties, rights, licenses, permits, Contracts, Intellectual Property, causes of action and business of every kind and description, wherever located, real, personal or mixed, tangible or intangible.

“Bill of Sale” means any bill of sale to be entered into by GPC and the Affiliated Transferors and SpinCo and/or any other SpinCo Companies designated in writing by SpinCo in substantially the form attached as Attachment VIII.

“Books and Records” means any books, records, files and papers, whether in written, oral, electronic or other tangible or intangible form, including books of account, invoices, engineering information, sales and promotional literature, manuals, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records of present and former employees, and documentation developed or used for accounting, marketing, engineering, manufacturing or any other purpose.

“Business Day” means a day, other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

“Cash of RMT Parent” means, as of any time of determination, the consolidated cash and cash equivalents of RMT Parent and its Subsidiaries at such time, determined in accordance with the Accounting Principles and net of any unpaid costs, fees and expenses of professional advisors incurred in connection with the Merger.

“Cash of SpinCo” means, as of any time of determination, the consolidated cash and cash equivalents of the SpinCo Companies at such time (after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the Internal Reorganization Cash Payments), determined in accordance with the Accounting Principles and net of any unpaid costs, fees and expenses of professional advisors incurred in connection with the Separation, the Distribution and the Merger; provided that to the extent that such unpaid amounts are reflected in Net Working Capital for the purposes of calculating the SpinCo Special Cash Payment, such amounts shall not be deducted in calculating Cash of SpinCo.

“Closing” has the meaning set forth in the Merger Agreement.

“Closing Date” has the meaning set forth in the Merger Agreement.

 [*]

“Code” means the Internal Revenue Code of 1986.

“Compensated Expenses” means the aggregate amount of all costs and expenses incurred by the Parties pursuant to Section 10.03 with the prior written consent of RMT Parent.

A-2

 

“Confidential Information” of a Person, means all confidential, proprietary or non-public information of such Person.

“Contemplated Transactions” means the transactions contemplated by the Transaction Documents.

“Contract” has the meaning set forth in the Merger Agreement.

“Cut-Off Time” means the time immediately prior to the Distribution.

“Damages” means all assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including reasonable costs, fees and expenses of attorneys, accountants and other agents or representatives of such Person (with such amounts to be determined net of any refund or reimbursement of any portion of such amounts actually received or realized, including reimbursement by way of insurance or third party indemnification), but specifically excluding (i) any costs incurred by or allocated to an Indemnified Person with respect to time spent by employees of the Indemnified Person or any of its Affiliates or (ii) any lost profits or opportunity costs, or any special, punitive or consequential damages (except in any such case to the extent assessed in connection with a third party claim or except to the extent such damages are the reasonable and foreseeable result of the matter in question).

“Data” means, whether in written, oral, electronic or other tangible or intangible forms, stored in any medium, the following: financial and business information, including rates and pricing data and information, earnings reports and forecasts, macro-economic reports and forecasts, marketing plans, business and strategic plans, general market evaluations and surveys, budgets, accounting, financing and credit-related information, quality assurance policies, procedures and specifications, customer information and lists, and business and other processes, procedures and policies (including for example handbooks and manuals, control procedures, and process descriptions), including any blueprints, diagrams, flow charts, or other charts, user manuals, training manuals, training materials, and documentation, and other financial or business information.

“Distribution Date” means the date on which the Distribution is consummated.

“Distribution Effective Time” means the time established by GPC as the effective time of the Distribution, Eastern Time, on the Distribution Date.

 [*]

“Equity Conversion Ratio” means, as of any date, the quotient of (i) the GPC Stock Value as of such date divided by (ii) the RMT Parent Stock Value as of such date.

“Estimated Net Debt of RMT Parent” means the difference of (a) Indebtedness of RMT Parent on a consolidated basis as of 11:59 p.m. Eastern Time on the last day of the Reference Month minus (b) Cash of RMT Parent as of such time minus (c) Acquisition Expenditures of RMT Parent as of such time.

A-3

 

“Estimated Net Debt of SpinCo” means the difference of (a) Indebtedness of SpinCo on a consolidated basis as of 11:59 p.m. Eastern Time on the last day of the Reference Month (and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments) minus (b) Cash of SpinCo on a consolidated basis as of such time (and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments) minus (c) Acquisition Expenditures of SpinCo as of such time.

“Estimated Net Working Capital” means Net Working Capital as of 11:59 p.m. Eastern Time on the last day of the Reference Month.

“Estimated Net Working Capital Adjustment” means (i) $0 if Estimated Net Working Capital reflected on the Estimated Statement is equal to or greater than the Lower Working Capital Target and less than or equal to the Upper Working Capital Target, (ii) the amount by which Estimated Net Working Capital reflected on the Estimated Statement is greater than the Upper Working Capital Target or (iii) the product of (x) the amount by which Estimated Net Working Capital reflected on the Estimated Statement is less than the Lower Working Capital Target multiplied by (y) negative 1 (-1).

“Exchange Act” means the Securities Exchange Act of 1934.

“Excluded Liabilities” means the following Liabilities:

(i)all Liabilities of the GPC Companies, or their predecessors (other than the SpinCo Companies and their predecessors), that are not SpinCo Liabilities;

(ii)all Liabilities of the GPC Companies in respect of indebtedness for borrowed money (excluding any guarantees by or other obligations of the GPC Companies relating to the SpinCo Financing Agreements, including the SpinCo Debt);

(iii)all Liabilities expressly assumed by a GPC Company pursuant to this Agreement or any other Transaction Document;

(iv)all Liabilities that will be terminated, satisfied and/or settled pursuant to Section 2.05, excluding for the avoidance of doubt any Liabilities set forth on Schedule 2.05(a) or Intercompany Accounts set forth on Schedule 2.05(b); and

(v)all Liabilities of the SpinCo Companies relating to any non-compliance by any GPC Company with any Environmental Law (as defined in the Merger Agreement) or Title IV of ERISA (as defined in the Merger Agreement), in each case to the extent imposed on a SpinCo Company on a joint and several basis solely by virtue of the SpinCo Companies having been Affiliates of the GPC Companies prior to the consummation of the Distribution.

A-4

 

“Final Net Debt of RMT Parent” means the difference of (a) Indebtedness of RMT Parent on a consolidated basis as of the Cut-Off Time minus (b) Cash of RMT Parent as of such time minus (c) Acquisition Expenditures of RMT Parent as of such time.

“Final Net Debt of SpinCo” means the difference of (a) Indebtedness of SpinCo on a consolidated basis as of the Cut-Off Time (and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments) minus (b) Cash of SpinCo on a consolidated basis as of such time (and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments) minus (c) Acquisition Expenditures of SpinCo as of such time.

“Final Net Working Capital” means Net Working Capital as of the Cut-Off Time.

“Final Net Working Capital Adjustment” means (i) $0 if Final Net Working Capital as determined in accordance with Section 2.07(c) is equal to or greater than that the Lower Working Capital Target and less than or equal to the Upper Working Capital Target, (ii) the amount by which Final Net Working Capital as determined in accordance with Section 2.07(c) is greater than the Upper Working Capital Target or (iii) the product of (x) the amount by which Final Net Working Capital as determined in accordance with Section 2.07(c) is less than the Lower Working Capital Target multiplied by (y) negative 1 (-1).

“Final SpinCo Special Cash Payment” means the sum of (i) $346,729,011, plus (ii) the Final Net Working Capital Adjustment (which may be positive or negative), minus (iii) an amount (which may be positive or negative) equal to the sum of (a) Final Net Debt of SpinCo as determined in accordance with Section 2.07(c) minus (b) $10,285,000 plus (iv) an amount (which may be positive or negative) equal to the sum of (a) Final Net Debt of RMT Parent as determined in accordance with Section 2.07(c) minus (b) $505,639,000, minus (v) any and all Internal Reorganization Cash Payments (other than the SpinCo Special Cash Payment) ), minus (vi) the RMT Parent Expense Reimbursement as determined in accordance with Section 2.07(c), plus (vii) the SpinCo Expense Reimbursement as determined in accordance with Section 2.07(c) and minus (viii) the Equity Award True-up as determined in accordance with Section 2.07(c).

“Fraud” has the meaning set forth in the Merger Agreement.

“Governmental Authority” means any multinational, foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing.

“GPC Bonus Allocation” means, with respect to any SpinCo Business Employee that is party to a Retention Agreement, the amount, if any, by which such SpinCo 

A-5

 

Business Employee’s annual bonus for the 2018 calendar year based on performance is less than 90% of such SpinCo Business Employee’s Target Annual Bonus (as defined in such SpinCo Business Employee’s Retention Agreement) for the 2018 calendar year.

“GPC Common Stock” means the common stock, par value $1.00 per share, of GPC.

“GPC Companies” means GPC and its Subsidiaries, other than the SpinCo Companies.

“GPC Stock Value” means, as of any date, the average, rounded to the nearest one ten thousandth, of the closing-sale prices of GPC Common Stock on the New York Stock Exchange as reported by The Wall Street Journal for the ten full trading days ending on (and including) the trading day preceding the date of calculation (or, if the date of calculation is after the Record Date, the number, if less, of full trading days commencing on the day after the Record Date and ending on (and including) the trading day preceding the date of calculation).

“GPC RSU” has the meaning set forth in the Merger Agreement.

“GPC SAR” has the meaning set forth in the Merger Agreement.

“Group” means (i) with respect to GPC, the GPC Companies and (ii) with respect to SPR, the SpinCo Companies.

“Indebtedness of RMT Parent” means, as of any time of determination, with respect to RMT Parent and its Subsidiaries as of such time, without duplication, all principal, accrued and unpaid interest and any other amounts due and owing in respect of (a) indebtedness for borrowed money, (b) indebtedness evidenced by notes, debentures, bonds or other similar instruments, (c) obligations related to the deferred purchase price of property, goods or services (including all seller financing, earn-outs and similar contingent consideration), (d) obligations under any interest rate, currency, commodity or other hedging contract, (e) capital lease obligations, (f) amounts drawn under letters of credit or surety bonds, (g) obligations of the kinds listed on Schedule A-1, (h) any stay bonus, transaction bonus, change in control bonus or similar payment payable to an RMT Parent Employee (as defined in the Merger Agreement) in connection with the consummation of the Contemplated Transactions (except to the extent that any such bonuses or payments become payable pursuant to the agreements listed in Schedule B) and (i) the guarantee of any obligations of the type referred to in clauses (a) through (h) of any other Person.

“Indebtedness of SpinCo” means, as of any time of determination, with respect to the SpinCo Companies as of such time (and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments), without duplication, all principal, accrued and unpaid interest and any other amounts due and owing in respect of (a) indebtedness for borrowed money, (b) indebtedness evidenced by notes, debentures, bonds or other similar instruments, (c) obligations related to the deferred purchase price of property, goods or 

A-6

 

services (including all seller financing, earn-outs and similar contingent consideration), (d) obligations under any interest rate, currency, commodity or other hedging contract, (e) capital lease obligations, (f) amounts drawn under letters of credit or surety bonds, (g) the aggregate principal amount of the outstanding SPR HoldCo Preferred Stock, (h) obligations of the kinds listed on Schedule A-2, (i) any stay bonus, transaction bonus, change in control bonus or similar payment payable to a SpinCo Business Employee in connection with the consummation of the Contemplated Transactions, (j) the aggregate GPC Bonus Allocation with respect to all Retention Agreements (but excluding, for the avoidance of doubt, any other portion of the annual bonuses for the 2018 calendar year payable pursuant to the Retention Agreements), and (k) the guarantee of any obligations of the type referred to in clauses (a) through (j) of any other Person, but excluding, in each case, any obligations of the type referred to in clauses (a) through (j) owing from any SpinCo Company to any GPC Company (other than any SpinCo Company) that will be terminated, satisfied and/or settled pursuant to Section 2.05.

“Intellectual Property” means the Intellectual Property as defined in the Merger Agreement.

“Intercompany Accounts” means any receivable, payable or loan between any member of GPC’s Group, on the one hand, and any member of SpinCo’s Group, on the other hand, that exists immediately prior to the Distribution Effective Time, except for (i) the Internal Reorganization Cash Payments and (ii) any such receivable, payable or loan that arises pursuant to this Agreement or any other Transaction Document.

“Internal Reorganization Cash Payments” means each of the cash payments made to the GPC Companies in the Internal Reorganization, including the SpinCo Special Cash Payment.

“Leased Premises” means the premises to be leased to the SpinCo Companies by GPC pursuant to the Leases.

“Leases” means leases for each of the premises set forth on Attachment VI, in each case on the terms set forth on Attachment VI and in the form attached as Attachment VII.

“Liabilities” means all liabilities and obligations of any kind, character or description, whether liquidated or unliquidated, known or unknown, fixed or contingent, accrued or unaccrued, absolute, determined, determinable or indeterminable, or otherwise.

“Lower Working Capital Target” means $470,000,000.

“Merger Effective Time” means the effective time of the Merger in accordance with the terms and conditions set forth in the Merger Agreement.

“Net Working Capital” means, as of any time of determination, the excess of consolidated current assets (other than Cash of SpinCo) over consolidated current liabilities (other than Indebtedness of SpinCo) of the SpinCo Companies as of such time 

A-7

 

(and after giving pro forma effect to the Internal Reorganization, including the incurrence of the SpinCo Debt and the payment of the Internal Reorganization Cash Payments), in each case determined in accordance with the Accounting Principles.

“Person” means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, a limited liability partnership, a joint venture, an association, a trust or any other entity or organization, including a Governmental Authority or any department or agency thereof.

“Privileged Information” means privileged or protected information (including communications by or to lawyers (including attorney client privileged communications), memos and other materials prepared by lawyers or under the direction of a lawyer (including attorney work product) and communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding).

“Proceeding” means any proceeding (public or private), litigation, suit, arbitration, dispute, demand, claim, action, cause of action, subpoena, inquiry or investigation before any court, grand jury, Governmental Authority or any arbitration or mediation tribunal or authority.

“Record Date” means the close of business on the date determined by the Board of Directors of GPC as the record date for determining stockholders of GPC entitled to receive shares of SpinCo Common Stock in the Distribution.

“Record Holders” means the record holders of GPC Common Stock as of the Record Date.

“Reference Month” means (i) if the Distribution Date occurs on or after the 15th day of a given month, the month immediately preceding the month in which the Distribution Date occurs (i.e., if the Distribution Date is in October 2018, the Reference Month is September 2018) or (ii) if the Distribution Date occurs before the 15th day of a given month, the month immediately preceding the last month ending prior to the month in which the Distribution Date occurs (i.e., if the Distribution Date is in October 2018, the Reference Month is August 2018).

“Representatives” means, with respect to a Person, each of its respective directors, officers, attorneys, accountants, employees, advisors or agents.

“Retention Agreement” means those certain Subsidiary Retention Agreements entered into between SPR and certain of the SpinCo Business Employees in contemplation of the transactions contemplated by the Merger Agreement, including any retention agreements entered into after the date hereof but prior to the Distribution Effective Time and disclosed in Section 6.01(a)(vi)(D) of the GPC Disclosure Letter. 

“RMT Parent Common Stock” has the meaning set forth in the Merger Agreement.

A-8

 

“RMT Parent Expense Reimbursement” means one-half of any Shared Expenses (as defined in the Merger Agreement) paid or incurred by RMT Parent and its Subsidiaries.

“RMT Parent Stock Value” means, as of any date, the average, rounded to the nearest one ten thousandth, of the closing-sale prices of RMT Parent Common Stock on the Nasdaq Global Select Market as reported by The Wall Street Journal for the ten full trading days ending on (and including) the trading day preceding the date of calculation (or, if the date of calculation is after the Record Date, the number, if less, of full trading days commencing on the day after the Record Date and ending on (and including) the trading day preceding the date of calculation).

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933.

“Signing Date RMT Parent Equivalent Equity Awards” means the product of (i) the sum of (a) the aggregate net number of shares of GPC Common Stock into which all outstanding GPC SARs granted in calendar years 2015, 2016 or 2017 and held by SpinCo Business Employees as of the date hereof are convertible based on the GPC Stock Value as of the date hereof (determined based on the excess, if any, of such GPC Stock Value over the base price of the applicable GPC SARs) plus (b) the aggregate number of shares of GPC Common Stock subject to all outstanding GPC RSUs held by SpinCo Business Employees as of the date hereof (assuming (x) the granting on the date hereof of the 2018 GPC RSUs and the 2018 GPC Performance-RSUs at the levels set forth in the definitions above and (y) the achievement of target-level performance with respect to the performance periods applicable to the 2018 GPC Performance-RSUs) multiplied by (ii) the Equity Conversion Ratio as of the date hereof; provided that the calculation of Signing Date RMT Parent Equivalent Equity Awards shall not include the effect of any adjustment by GPC to GPC SARs or GPC RSUs pursuant to Section 15.1 of the Genuine Parts Company 2015 Incentive Plan and the Genuine Parts Company 2006 Long-Term Incentive Plan in connection with the Distribution in accordance with Section 4.03 of the GPC Disclosure Letter.

“SpinCo Borrowing Amount” means $400,000,000.

“SpinCo Business Employee” has the meaning set forth in the Merger Agreement.

“SpinCo Commitment Letter” has the meaning set forth in the Merger Agreement.

“SpinCo Common Stock” means the common stock, par value $0.01 per share, of SpinCo.

“SpinCo Companies” means (i) prior to the Internal Reorganization, SpinCo and the SPR Entities and (ii) after the Internal Reorganization, SpinCo and its Subsidiaries.

A-9

 

“SpinCo Expense Reimbursement” means the sum of (i) all Compensated Expenses plus (ii) one-half of any Shared Expenses (as defined in the Merger Agreement) paid or incurred by the GPC Companies or the SpinCo Companies.

“SpinCo Financial Statements” means the SpinCo Financial Statements as defined in the Merger Agreement.

“SpinCo Financing Agreements” means the SpinCo Financing Agreements as defined in the Merger Agreement.

“SpinCo Leases” means the SpinCo Leases as defined in the Merger Agreement.

“SpinCo Liabilities” means each of the following Liabilities, but in each case excluding the Excluded Liabilities:

(i)all Liabilities set forth on, or reflected or referred to in, the SpinCo Financial Statements;

(ii)all Liabilities that SpinCo is expressly assuming pursuant to this Agreement or any other Transaction Document (including the performance obligations of the SpinCo Companies under the Transaction Documents arising after the Distribution Effective Time);

(iii)all Liabilities in respect of past and present SpinCo Business Employees and dependents and beneficiaries of such SpinCo Business Employees, except to the extent otherwise provided in the Merger Agreement to be retained by GPC;

(iv)all Liabilities relating to errors or omissions or allegations of errors or omissions or claims of design or other defects with respect to any product sold or service provided by the SpinCo Business from the date of the initial formation of SPR through the Distribution Effective Time;

(v)all Liabilities relating to warranty or similar obligations or services with respect to any product sold or service provided by the SpinCo Business from the date of the initial formation of SPR through the Distribution Effective Time;

(vi)all Liabilities in respect of the SpinCo Financing Agreements, including the SpinCo Debt, and all other Indebtedness of SpinCo as of the Cut-Off Time;

(vii)Liabilities relating to or arising out of the ownership of the Transferred Assets;

(viii)all Liabilities arising directly or indirectly from Proceedings relating to the SpinCo Business or any Transferred Assets, including in respect of any alleged tort, breach of Contract, violation or noncompliance with Applicable 

A-10

 

Law or any franchise, permit, license or similar authorization, from the date of the initial formation of SPR through the Distribution Effective Time; and

(ix)except as otherwise expressly provided in any other Transaction Document or in this Agreement, all other Liabilities relating to or arising out of the Transferred Assets or the operation, affairs, or conduct of the SpinCo Business from the date of the initial formation of SPR through the Distribution Effective Time.

“SpinCo Special Cash Payment” means a cash payment in an amount equal to the sum of (i) $346,729,011, plus (ii) the Estimated Net Working Capital Adjustment (which may be positive or negative), minus (iii) an amount (which may be positive or negative) equal to the sum of (a) Estimated Net Debt of SpinCo reflected on the Estimated Statement minus (b) $10,285,000 plus (iv) an amount (which may be positive or negative) equal to the sum of (a) Estimated Net Debt of RMT Parent reflected on the Estimated Statement minus (b) $505,639,000, minus (v) any and all Internal Reorganization Cash Payments (other than the SpinCo Special Cash Payment), minus (vi) the RMT Parent Expense Reimbursement, plus (vii) the SpinCo Expense Reimbursement and minus (viii) the Equity Award True-up.

“SPR Entities” means (i) SPR and its Subsidiaries, (ii) SPR Procurement and (iii) SPR Canada and its Subsidiaries, which constitute all of the direct or indirect Subsidiaries of GPC that are, on the date hereof, engaged in the SpinCo Business.

“SPR HoldCo” means the Subsidiary of GPC created pursuant to the Internal Reorganization that immediately prior to the SPR Transfer directly or indirectly owns SPR Procurement and SPR and its Subsidiaries.

“SPR HoldCo Preferred Stock” means the preferred stock of SPR HoldCo issued pursuant to the Internal Reorganization.

“Subsidiary” means with respect to any Person, any other Person of which the specified Person, either directly or through or together with any other of its Subsidiaries, owns more than 50% of the voting power in the election of directors or their equivalents, other than as affected by events of default.

“Supply Chain Transition Services Agreement” means the supply chain transition services agreement in the form attached as Attachment V pursuant to which GPC will provide certain supply chain services to the SpinCo Companies on a transitional basis following the Distribution.

“Tax” or “Taxes” has the meaning set forth in the Tax Matters Agreement.

“Tax Matters Agreement” means the Tax sharing and indemnification agreement by and between GPC, SpinCo and RMT Parent attached hereto as Attachment III.

“Tax Returns” has the meaning set forth in the Tax Matters Agreement.

A-11

 

“Transaction Documents” means this Agreement, the Merger Agreement, the Tax Matters Agreement, the Transition Services Agreement, the Supply Chain Transition Services Agreement, the Leases and any other written agreement signed by GPC and SpinCo that is expressly identified as a “Transaction Document,” and any exhibits or attachments to any of the foregoing.

“Transferred Assets” means all of the Assets, as the same shall exist immediately prior to the Distribution Effective Time, owned, leased, held, or licensed by GPC or any Affiliated Transferor, whether or not reflected in the books and records thereof, and used exclusively in the conduct of the SpinCo Business as the same shall exist immediately prior to the Distribution Effective Time, and including, except as otherwise specified in this Agreement, all direct or indirect right, title and interest of GPC or any Affiliated Transferor in, to and under:

(i)all Assets set forth on, or reflected or referred to in, the SpinCo Financial Statements (other than any assets disposed of since such date in a manner that did not constitute a breach of Section 6.01(a) of the Merger Agreement);

(ii)the rights and interests of the lessees under the SpinCo Leases, it being understood that other than the rights and interests of the lessees under the SpinCo Leases and the Leases, no other real property interests shall constitute a Transferred Asset;

(iii)other than Intellectual Property and rights and interests therein, all personal property and interests therein, including machinery, equipment, furniture, office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts, fuel and other property (and interests in any of the foregoing) that are used exclusively connection with the SpinCo Business;

(iv)all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories that relate exclusively to the SpinCo Business;

(v)all Contracts with third parties that relate exclusively to the SpinCo Business;

(vi)all accounts receivable and notes receivable from third parties relating exclusively to the operation of the SpinCo Business;

(vii)all expenses that have been prepaid by GPC or any of its Subsidiaries (other than a SpinCo Company) relating exclusively to the operation of the SpinCo Business, including lease and rental payments;

(viii)all rights, claims, credits, causes of action or rights of set-off against Persons, other than GPC Companies, relating exclusively to the SpinCo Business or the Transferred Assets, including unliquidated rights under manufacturers’ and vendors’ warranties;

A-12

 

(ix)all Intellectual Property relating exclusively to the operation of the SpinCo Business;

(x)all transferable franchises, licenses, permits or other authorizations issued by a Governmental Authority owned by, or granted to, or held or used by, GPC or any of its Subsidiaries (other than a SpinCo Company) and exclusively related to the SpinCo Business;

(xi)all Data and Books and Records relating exclusively to the operation of the SpinCo Business;

(xii)(A) all corporate or limited liability company minute books and related stock records of the SpinCo Companies that are in the possession of GPC or any Affiliated Transferor, and all information and records related exclusively to the SpinCo Companies used to demonstrate compliance with Applicable Law and any other compliance records exclusively related to the SpinCo Business and (B) all of the separate financial and Tax records of the members of the SpinCo Companies that are (i) in the possession of GPC or any Affiliated Transferor that do not form part of the general ledger of GPC or any of its Affiliates (other than solely the SpinCo Companies) or (ii) maintained on the GPS Finance Drive/Network;

(xiii)all software programs, documentation and other related materials used or held for use exclusively in connection with the SpinCo Business; and

(xiv)all insurance proceeds, net of any retrospective premiums, deductibles, retention or similar amounts, arising out of or related to damage, destruction or loss of any Transferred Assets (or assets existing as of the date of this Agreement that would have been Transferred Assets but for the occurrence of the event giving rise to the insurance proceeds) to the extent of any damage or destruction that remains unrepaired, or to the extent any property or asset remains unreplaced at the Distribution Date.

For the avoidance of doubt, Transferred Assets shall not include (x) any Assets owned by a GPC Company (i) relating to GPC’s global sourcing or third party logistics operations or (ii) utilized by GPC or any Affiliated Transferor in providing any of the services contemplated by the Transition Services Agreement or the Supply Chain Transition Services or (y) any Tax Assets, the treatment of which is addressed exclusively in the Tax Matters Agreement.

“Transition Services Agreement” means the transition services agreement in the form attached as Attachment IV pursuant to which GPC will provide certain services to SpinCo on a transitional basis following the Distribution.

“Upper Working Capital Target” means $500,000,000.

“Willful Breach” shall mean a material breach of, or failure to perform any of the covenants or other agreements contained in, this Agreement, that is a consequence of an 

A-13

 

act or failure to act by the breaching or non-performing Person with actual knowledge that such Person’s act or failure to act would, or would be reasonably expected to, result in or constitute a breach of or failure of performance under this Agreement.

	
(b)
	
Each of the following terms is defined in the Section set forth opposite such term:

		
	
Accounting Principles
	
2.07(a)

	
Agreement
	
Preamble

	
Consent Fee
	
2.03

	
Day-One Plan
	
10.03(a)

	
Day-One Readiness
	
10.03(a)

	
Distribution
	
Recitals

	
Estimated Statement
	
2.07(a)

	
GPC
	
Preamble

	
GPC Counsel
	
5.05(a)(i)

	
GPC Indemnified Parties
	
7.02(a)

	
Indemnified Claim
	
7.03(a)

	
Indemnified Person
	
7.03(a)

	
Indemnifying Party
	
7.03(a)

	
Internal Reorganization
	
Recitals

	
Merger
	
Recitals

	
Merger Agreement
	
Recitals

	
Merger Sub
	
Recitals

	
Party or Parties
	
Preamble

	
Post-Closing Claims
	
8.02(b)

	
Pre-Closing Occurrence Based Policies
	
8.02(b)

	
Proposed Final Statement
	
2.07(b)

	
RMT Parent
	
Recitals

	
Separation
	
Recitals

	
SpinCo
	
Preamble

	
SpinCo Business
	
Recitals

	
SpinCo Debt
	
3.02(a)

	
SpinCo Indemnified Parties
	
7.02(b)

	
SPR
	
Recitals

	
SPR Canada
	
Recitals

	
SPR Procurement
	
Recitals

	
SPR Transfer
	
3.02(b)

	
Tax Matters
	
9.01

	
Third Party Claim
	
7.03(a)

	
Transaction Engagement
	
5.05(a)(i)

	
Transaction Engagement Communications
	
5.05(a)(ii)

	
Transfer
	
2.02(a)

	
Unaffiliated Accounting Firm
	
2.07(c)

 

A-14

 

Attachment III

Tax Matters Agreement

 

[Attached]

 

 

 

 

TAX MATTERS AGREEMENT

BY AND AMONG

GENUINE PARTS COMPANY,

RHINO SPINCO, INC.,

AND

ESSENDANT, INC.,

 

DATED AS OF APRIL 12, 2018 

 

 

 

TABLE OF CONTENTS

 

Page

Article I
Definitions

	
Section 1.01.  General
	
2

	
Section 1.02.  Construction
	
11

Article II
Preparation, Filing and Payment of Taxes Shown Due on Tax Returns

	
Section 2.01.  Tax Returns
	
11

	
Section 2.02.  Tax Return Procedures
	
12

	
Section 2.03.  Straddle Period Tax Allocation
	
14

	
Section 2.04.  Timing of Payments
	
14

	
Section 2.05.  Expenses
	
14

	
Section 2.06.  Apportionment of SpinCo Taxes
	
14

	
Section 2.07.  No Extraordinary Actions on the Distribution Date
	
15

	
Section 2.08.  Allocation of Tax Attributes
	
15

Article III
Indemnification

	
Section 3.01.  Indemnification by GPC
	
15

	
Section 3.02.  Indemnification by SpinCo
	
15

	
Section 3.03.  Characterization of and Adjustments to Payments
	
15

	
Section 3.04.  Timing of Indemnification Payments
	
15

Article IV
Refunds, Carrybacks, Timing Difference and Tax Attributes

	
Section 4.01.  Refunds
	
16

	
Section 4.02.  Carrybacks
	
16

	
Section 4.03.  Carryforwards
	
16

	
Section 4.04.  Timing Differences
	
16

	
Section 4.05.  Equity Compensation Deductions
	
17

	
Section 4.06.  Annual Bonus Deductions
	
17

	
Section 4.07.  Transaction Bonus Deductions
	
17

Article V
Tax Proceedings

	
Section 5.01.  Notification of Tax Proceedings
	
17

	
Section 5.02.  Tax Proceeding Procedures
	
18

i

 

Article VI
Intended Tax Treatment of the Distribution

	
Section 6.01.  Representations and Warranties
	
19

	
Section 6.02.  Covenants
	
20

	
Section 6.03.  Procedures Regarding Opinions and Rulings
	
24

Article VII
Cooperation

	
Section 7.01.  General Cooperation
	
25

	
Section 7.02.  Retention of Records
	
26

	
Section 7.03.  338(h)(10) Elections
	
26

	
Section 7.04.  Allocation
	
27

Article VIII
Miscellaneous

	
Section 8.01.  Governing Law
	
28

	
Section 8.02.  Dispute Resolution
	
28

	
Section 8.03.  Tax Sharing Agreements
	
28

	
Section 8.04.  Interest on Late Payments
	
28

	
Section 8.05.  Survival of Covenants
	
28

	
Section 8.06.  Severability
	
28

	
Section 8.07.  Entire Agreement
	
29

	
Section 8.08.  Successors and Assigns
	
29

	
Section 8.09.  No Third Party Beneficiaries
	
29

	
Section 8.10.  Specific Performance
	
29

	
Section 8.11.  Amendments; Waivers
	
30

	
Section 8.12.  Counterparts; Effectiveness
	
30

	
Section 8.13.  Confidentiality
	
30

	
Section 8.14.  Waiver of Jury Trial
	
30

	
Section 8.15.  Jurisdiction; Service of Process
	
31

	
Section 8.16.  Notices
	
31

	
Section 8.17.  Captions
	
32

 

 

 

 

ii

 

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT (this “Agreement”), dated as of April 12, 2018, is entered into by and among Genuine Parts Company, a Georgia corporation (“GPC”), Rhino SpinCo, Inc., a Delaware corporation and a wholly owned Subsidiary of GPC (“SpinCo”), and Essendant, Inc., a Delaware corporation (“RMT Parent”) (collectively, the “Parties”). Any capitalized term used herein without definition shall have the meaning given to it in the Separation Agreement, dated as of the date hereof, by and among GPC and SpinCo (as such agreement may be amended from time to time, the “Separation Agreement”).

RECITALS 

WHEREAS, SpinCo is a wholly-owned, direct Subsidiary of GPC; 

WHEREAS, contemporaneously with this Agreement, (x) GPC and SpinCo are entering into the Separation Agreement, and (y) GPC, SpinCo, RMT Parent and Elephant Merger Sub, Inc., a Delaware corporation and direct, wholly owned Subsidiary of RMT Parent (“Merger Sub”) are entering into the Merger Agreement;

WHEREAS, on or prior to the Closing Date, and subject to the terms and conditions set forth in the Separation Agreement, GPC will consummate the Internal Reorganization, and following the Internal Reorganization and prior to the Merger Effective Time, GPC will transfer (the “Distribution”) all of the issued and outstanding shares of SpinCo’s common stock, $0.01 par value per share (“SpinCo Common Stock”), to holders of GPC’s common stock, $1.00 par value per share (“GPC Common Stock”);

WHEREAS, subject to the terms and conditions of the Separation Agreement, the Distribution shall be made without consideration, by way of a pro rata dividend;

WHEREAS, following the Distribution and at the Merger Effective Time, the Parties will effect the merger of Merger Sub with and into SpinCo (the “Merger”), with SpinCo continuing as the surviving corporation; and

WHEREAS, the Parties wish to (i) provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing and defense of Tax Returns, and provide for certain other matters relating to Taxes and (ii) set forth certain covenants and indemnities relating to the preservation of the intended tax treatment of certain transactions contemplated hereby and by the other Transaction Documents.

NOW, THEREFORE, in consideration of these premises, and of the representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 

 

Article I
Definitions

Section 1.01.General.  

(a)As used in this Agreement, the following terms shall have the following meanings.

“338(h)(10) Elections” means elections under Section 338(h)(10) of the Code (and any corresponding or similar elections under state or local Tax law) with respect to the qualified stock purchase of the stock of each of SPR Procurement and SPR and the deemed qualified stock purchase of the stock of each of SPR’s direct and indirect Subsidiaries.

“Active Trade or Business” means each of the SPR Core Business and the SPR Core Canadian Business.

“Affiliate” has the meaning set forth in the Separation Agreement.

“Alternative SpinCo Commitment Letter” has the meaning set forth in the Merger Agreement.

“Ancillary Agreements” means the Transition Services Agreement, the Supply Chain Transition Services Agreement and the Leases.

“Applicable Law” has the meaning set forth in the Separation Agreement.

“Business Day” has the meaning set forth in the Separation Agreement.

“Canada Consideration” means the amount of the consideration in Canadian Dollars allocated to the sale of the shares of SPR Canada pursuant to the Internal Reorganization.

 “Canada Intercompany Settlement” means the netting and setting off of Intercompany Accounts (as defined in the Separation Agreement) between SPR Canada ULC and UAP, Inc., followed by a contribution by UAP, Inc. to SPR Canada ULC of any remaining Intercompany Accounts owed to UAP, Inc. by SPR Canada ULC and/or The Safety Zone Canada, ULC, a Canadian unlimited liability company.  

“CanadaCo” means the entity formed pursuant to the Internal Reorganization and described as CanadaCo in Attachment I of the Separation Agreement.

 

“Closing” has the meaning set forth in the Merger Agreement.

“Closing Date” has the meaning set forth in the Merger Agreement.

“Code” means the Internal Revenue Code of 1986, as amended.

2

 

“Commitment Letters” has the meaning set forth in the Merger Agreement.

“Covered Transactions” means (w) transactions specifically described in the Final Internal Reorganization Plan, the Separation Agreement, the Merger Agreement, or the Final Post-Closing Integration Plan, (x) transactions occurring prior to the Closing of the Merger and not involving the capital structure of RMT Parent or its Subsidiaries, (y) transactions taken to effectuate the Closing of the Merger or other transactions taking place on the Closing Date and specifically contemplated by the Merger Agreement or the Commitment Letters (e.g., transactions occurring in connection with the RMT Parent Group Entities’ joinder to the Financing Agreement) or (z) transactions required by Applicable Law.

“Distribution Date” has the meaning set forth in the Separation Agreement.

“Distribution Effective Time” has the meaning set forth in the Separation Agreement. 

“Due Date” means (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under Applicable Law and (b) with respect to a payment of Taxes, the date on which such payment is required to be made to avoid the incurrence of interest, penalties and/or additions to Tax.

“Equity Interests” means any stock or other securities treated as equity for U.S. federal Income Tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.

“Excluded Tax” means (i) any use, custom duty or property tax, and (ii) any Goods and Services Tax levied by Canada and any provincial sales Tax levied by any province of Canada, in each case imposed with respect to a Transferred Entity. For purposes of clarification, “Excluded Tax” shall not include sales, escheat or unclaimed property Tax.

“Excluded Tax Return” means any Tax Return in respect of Excluded Taxes.

“Final Determination” means the final resolution of liability for any Tax for any taxable period, by or as a result of (a) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Applicable Law of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a Refund in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations.

“Final Net Working Capital” has the meaning set forth in the Separation Agreement. 

3

 

“Financing Agreements” has the meaning set forth in the Merger Agreement.

“GPC 338(h)(10) Tax Opinion” means the opinions, received by GPC from GPC Tax Counsel as of the date hereof and to be received as of the Closing, with respect to (i) the treatment of the SPR HoldCo Exchange as a qualified stock purchase of the stock of each of [*]and SPR, (ii) the eligibility of GPC to make the 338(h)(10) Elections for U.S. federal income tax purposes and (iii) certain U.S. federal income tax consequences resulting from the 338(h)(10) Elections.

“GPC Bonus Allocation” has the meaning set forth in the Separation Agreement. 

“GPC Business” means the businesses of GPC and its Subsidiaries other than the SpinCo Business.

 “GPC Distribution Tax Opinion” means the opinions, received by GPC from GPC Tax Counsel as of the date hereof and to be received as of the Closing, with respect to the qualification of the Distribution as a distribution of SpinCo Common Stock to GPC’s stockholders pursuant to Section 355(a) of the Code.

“GPC Group Entity” means GPC and any entity that is a Subsidiary of GPC after the Distribution.

“GPC Income Tax Return” means any Income Tax Return required to be filed by any GPC Group Entity, including for the avoidance of doubt, the U.S. federal consolidated Income Tax Return for the group of which GPC is the common parent.

“GPC Merger Tax Opinion” means the opinions, received by GPC from GPC Tax Counsel as of the date hereof and to be received as of the Closing, with respect to (i) the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the treatment of each of RMT Parent, Merger Sub and SpinCo as a “party to the reorganization” within the meaning of Section 368(b) of the Code.

“GPC Non-Income Tax Return” means any Non-Income Tax Return required to be filed by any GPC Group Entity.

“GPC RSU” has the meaning set forth in the Merger Agreement. 

“GPC SAR” has the meaning set forth in the Merger Agreement.

“GPC Tax Counsel” means Davis Polk & Wardwell LLP.

“GPC Tax Opinions” means the GPC Distribution Tax Opinion, the GPC Merger Tax Opinion, and the GPC 338(h)(10) Tax Opinion.

“GPC Taxes” means any: (i) Taxes attributable to a GPC Business, (ii) any U.S. federal consolidated and U.S. state consolidated, combined or unitary Income Taxes for a group of which any GPC Group Entity is the common parent, (iii) Taxes that arise under Treasury Regulations section 1.1502-6 or any similar provision of state, local or foreign 

4

 

Applicable Law by virtue of any Transferred Entity having been a member of a consolidated, combined, affiliated, unitary or other similar tax group prior to the Distribution, excluding groups consisting solely of Transferred Entities, (iv) Taxes of a Transferred Entity attributable to amounts required to be included in income pursuant to Section 965 of the Code, (v) Taxes of any Transferred Entity for any Pre-Distribution Period and (vi) Taxes resulting from the Internal Reorganization (including the 338(h)(10) Elections) or the Distribution, provided that, clauses (i)-(vi) notwithstanding, GPC Taxes shall not include any SpinCo Taxes or any Taxes that are taken into account for purposes of the calculation of Final Net Working Capital in the Separation Agreement.

“Governmental Authority” has the meaning set forth in the Separation Agreement.

 “Income Tax Return” means any Tax Return on which Income Taxes are reflected or reported.

“Income Taxes” means any Taxes in whole or in part based upon, measured by, or calculated with respect to net income or profits, net worth or net receipts (including, but not limited to, any capital gains, franchise Tax, doing business Tax, minimum Tax or any Tax on items of Tax preference, but not including sales, use, real or personal property, or transfer or similar Taxes).

“Indemnified Party” means, with respect to a matter, a Person that is entitled to seek indemnification under this Agreement with respect to such matter.

“Indemnifying Party” means, with respect to a matter, a Person that is obligated to provide indemnification under this Agreement with respect to such matter.

“Intended Tax Treatment” means (i) the treatment of the SPR HoldCo Exchange as a qualified stock purchase under Section 338 of the Code with respect to the stock of each of SPR Procurement and SPR, (ii) the 338(h)(10) Election with respect to the qualified stock purchase of the stock of SPR resulting in a deemed qualified stock purchase with respect to the stock of each of SPR’s direct and indirect Subsidiaries, (iii) each of the 338(h)(10) Elections being valid and effective and (iv) the Tax-Free Status.

 “Intended Tax Treatment Failure” means (i) any failure of any of (a) the SPR HoldCo Exchange to qualify as a qualified stock purchase under Section 338 of the Code with respect to the stock of SPR Procurement or SPR, (b) the 338(h)(10) Election with respect to the qualified stock purchase of the stock of SPR to result in a deemed qualified stock purchase of the stock of each of SPR’s direct and indirect Subsidiaries, (c) the 338(h)(10) Elections to be valid and effective, and (ii) any Tax-Free Transaction Failure.

“Internal Reorganization” has the meaning set forth in the Separation Agreement.

“Internal Reorganization Cash Payments” has the meaning set forth in the Separation Agreement.

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“IRS” means the U.S. Internal Revenue Service or any successor thereto, including its agents, representatives, and attorneys acting in their official capacity.

“Merger Agreement” has the meaning set forth in the Separation Agreement.

“Merger Effective Time” has the meaning set forth in the Merger Agreement.

 [*]

“Non-Income Tax Return” means any Tax Return relating to Non-Income Taxes.

“Non-Income Taxes” means any Taxes other than Income Taxes.

“Opinion” means any GPC Tax Opinion or the RMT Parent Merger Tax Opinion.

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

“Person” or “person” has the meaning set forth in the Separation Agreement.

“Post-Closing Integration Plan” means the transactions set forth in Schedule II hereto, as revised in accordance with Section 6.02(h).

“Post-Distribution Period” means any taxable period (or portion thereof) beginning after the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period beginning after the Distribution Date.

“Pre-Distribution Period” means any taxable period (or portion thereof) ending on or before the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period ending at the end of the day on the Distribution Date.

“Proceeding” has the meaning set forth in the Merger Agreement. 

“Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes.

“RMT Parent Common Stock” has the meaning set forth in the Merger Agreement.

“RMT Parent Group Entity” means RMT Parent and any entity that is a Subsidiary of RMT Parent at any time after the Merger Effective Time.

“RMT Parent Merger Tax Opinion” means the opinion to be received by RMT Parent with respect to (i) the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the treatment of each of RMT Parent, Merger Sub and SpinCo as a “party to the reorganization” within the meaning of Section 368(b) of the Code.

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“RMT Parent RSU” has the meaning set forth in the Merger Agreement. 

“RMT Parent SAR” has the meaning set forth in the Merger Agreement.

“RMT Parent Tax Representations” means the Tax Representation Letters to be provided by RMT Parent on the date hereof and on the Closing Date, including any related or supporting information or schedule attached thereto.

“SpinCo Business” has the meaning set forth in the Separation Agreement.

“SpinCo Canada SAG” means SpinCo, CanadaCo, SPR Canada and SPR Canada ULC.

“SpinCo Commitment Letter” has the meaning set forth in the Merger Agreement.

“SpinCo Debt” has the meaning set forth in the Separation Agreement.

“SpinCo Enterprise Value” means the sum of (i) the product of (x) the aggregate number of shares of RMT Parent Common Stock issued in the Merger and (y) the VWAP of a share of RMT Parent Common Stock on the Closing Date, plus (ii) the principal amount of the SpinCo Debt, plus (iii) the face amount of the SPR Holdco Preferred Stock, plus (iv) any other liabilities of any Transferred Entity properly taken into account for U.S. federal income Tax purposes. 

“SpinCo SAG” means a group made up of one or more chains of includible corporations connected through stock ownership if SpinCo owns directly stock meeting the Stock Ownership Requirement in at least one other includible corporation, and stock meeting the Stock Ownership Requirement in each of the includible corporations (except SpinCo) is owned directly by one or more of the other includible corporations.

“SpinCo Taxes” means (i) any Taxes arising from or attributable to the SpinCo Business or imposed on any Transferred Entity, in each case, with respect to any Post-Distribution Period, (ii) any Excluded Taxes and (iii) any SpinCo Transaction Taxes.

“SpinCo Transaction Taxes” means any Income Taxes incurred by any Party to this Agreement or its Affiliates which would not have been incurred but for an Intended Tax Treatment Failure (including, if applicable, any Taxes incurred by GPC as a result of the failure of any 338(h)(10) Election to be valid and effective) if such Intended Tax Treatment Failure (i) would not have arisen but for one or more transactions or events (other than a Covered Transaction) occurring after the Merger Effective Time and involving (directly or indirectly) the stock or assets of any RMT Parent Group Entity (including any action taken pursuant to Section 6.02(f)), which transaction or event was reasonably likely to lead to such Intended Tax Treatment Failure, or (ii) results from or is attributable to (i) a breach on the part of RMT Parent of any of its representations, warranties or covenants in this Agreement or (ii) a breach on the part of SpinCo of any of its representations, warranties or covenants in this Agreement that occurs after the Merger Effective Time. 

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“SPR” has the meaning set forth in the Separation Agreement.

“SPR Canada” has the meaning set forth in the Separation Agreement.

“SPR Canada ULC” means the successor to SPR Canada as shown in Attachment I of the Separation Agreement.

 

 “SPR Core Business” means the SPR Core Office business, which engages in the wholesale distribution of general office and school supplies, paper products, technology products, office furniture, and facilities and breakroom supplies, as further specified in the Tax Representation Letters provided to RMT Parent.

“SPR Core Canadian Business” means the SPR Core Office business as conducted by members of the SpinCo Canada SAG, as further specified in the Tax Representation Letters provided to RMT parent.

“SPR HoldCo” has the meaning set forth in the Separation Agreement.

“SPR HoldCo Exchange” means the transfer pursuant to the Internal Reorganization by GPC of all of the outstanding stock of SPR Procurement and SPR, together with certain indebtedness of SPR that is held by GPC or its Affiliates, to SPR HoldCo in exchange for all of the SPR HoldCo Preferred Stock and common stock of SPR HoldCo.

“SPR HoldCo Preferred Stock” has the meaning set forth in the Separation Agreement.

“SPR Procurement” has the meaning set forth in the Separation Agreement.

“Straddle Period” means any taxable period that begins on or before and ends after the Distribution Date.

“Stock Ownership Requirement” means, with respect to a corporation, stock owned representing at least 80% of the total voting power and at least 80% of the total value of the stock of such corporation.

“Subsidiary” has the meaning set forth in the Separation Agreement.

“Tax” means any tax, including any net income, gross income, gross receipts, recapture, alternative or add-on minimum, sales, use, business and occupation, business, professional and occupational license, value-added, trade, goods and services, ad valorem, franchise, profits, license, business royalty, withholding, payroll, employment, capital, exercise, transfer, recording, severance, stamp, occupation, premium, property, escheat, unclaimed property, asset, real estate acquisition, environmental, custom duty, impost, obligation, assessment, levy, tariff or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount imposed by a Taxing Authority.

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“Tax Attributes” means net operating losses, capital losses, investment tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, previously taxed income, separate limitation losses and any other losses, deductions, credits or other comparable items that could reduce a Tax liability for a past or future taxable period.

“Tax-Free Status” means (i) the qualification of the Distribution as a distribution to the shareholders of GPC under Section 355(a) of the Code, (ii) the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code, and (iii) the treatment of each of RMT Parent, Merger Sub and SpinCo as a “party to the reorganization” within the meaning of Section 368(b) of the Code.

 “Tax-Free Transaction Failure” means any failure of any of (i) the Distribution to qualify as a distribution to the shareholders of GPC under Section 355(a) of the Code, (ii) the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and (iii) each of RMT Parent, Merger Sub and SpinCo to be treated as a “party to the reorganization” within the meaning of Section 368(b) of the Code.

“Tax-Free Transaction Failure Loss” means any liabilities, costs, expenses, losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax on any current or former GPC stockholder which would not have been incurred but for a Tax-Free Transaction Failure if such Tax-Free Transaction Failure (i) would not have arisen but for one or more transactions or events (other than a Covered Transaction) occurring after the Merger Effective Time and involving (directly or indirectly) the stock or assets of any RMT Parent Group Entity (including any action taken pursuant to  Section 6.02(f)), which transaction or event was reasonably likely to lead to such Intended Tax Transaction Failure, or (ii) results from or is attributable to (i) a breach on the part of RMT Parent of any of its representations, warranties or covenants in this Agreement or (ii) a breach on the part of SpinCo of any of its representations, warranties or covenants in this Agreement that occurs after the Merger Effective Time. 

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases, decreases or otherwise impacts Taxes paid or payable.

“Tax Proceeding” means any audit, assessment of Taxes, pre-filing agreement, other examination by any Taxing Authority, proceeding, appeal of a proceeding or litigation relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

“Tax Representation Letters” has the meaning set forth in the Merger Agreement.

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, or declaration of estimated Tax) filed with or required to be 

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filed with a Taxing Authority in connection with the payment, determination, assessment or collection of any Tax or the administration of any Applicable Law relating to any Tax and any amended Tax return or claim for Refund.

“Taxing Authority” means any Governmental Authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

“Transaction Documents” has the meaning set forth in the Separation Agreement.

“Transferred Entity” means SpinCo, SPR HoldCo, SPR Procurement, SPR, Supply Source Enterprises, Inc., a Georgia corporation, Impact Products, LLC, a Delaware limited liability company, Safety Zone, LLC, a Connecticut limited liability company, CanadaCo, SPR Canada, SPR Canada ULC, The Safety Zone Canada, ULC, and any other Subsidiary of SpinCo immediately after the Distribution (including any successor thereto, other than any GPC Group Entity).

“Treasury Regulations” means the proposed, final and temporary income Tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Unqualified Tax Opinion” means a “will” opinion, without substantive qualifications, of a nationally recognized law or accounting firm, which firm is reasonably acceptable to GPC, to the effect that a transaction will not affect the Intended Tax Treatment (assuming that the Intended Tax Treatment otherwise applied). GPC acknowledges that Davis Polk & Wardwell LLP, Skadden, Arps, Slate, Meagher & Flom LLP,  Ernst & Young LLP, and Deloitte Touche Tohmatsu Limited are each reasonably acceptable to GPC.

“VWAP” means the volume weighted average trading price of a publicly-traded share of equity interests in a Person from 9:30am to 4:00pm New York City time on the Closing Day as reported by Bloomberg, L.P. or, if not reported therein, in another authoritative source mutually selected by RMT Parent and GPC.

(b)Each of the following terms is defined in the Section set forth opposite such term:

		
	
Accounting Firm
	
Section 8.02

	
Agreement
	
Preamble

	
Allocation Statement
	
Section 7.05(a)

	
Common Stock SPR HoldCo Exchange
	
Section 6.02(j)(i)

	
Distribution
	
Preamble

	
Final Internal Reorganization Plan
	
Section 6.02(i)

	
Final Post-Closing Integration Plan
	
Section 6.02(h)

	
GPC
	
Preamble

	
GPC Common Stock
	
Preamble

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Merger Sub
	
Preamble

	
Notified Action
	
Section 6.03(a)

	
Restriction Period
	
Section 6.02(b)

	
RMT Parent
	
Preamble

	
Separation Agreement
	
Preamble

	
SpinCo
	
Preamble

	
SpinCo Replacement Debt
	
Section 6.02(c)(iv)

	
Tax Matter
	
Section 7.01

 

Section 1.02.Construction.  As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural.  References in this Agreement to a Party or other Person include their respective successors and assigns.  The words “include,” “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation” unless such phrase otherwise appears.  Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits, Schedules and Attachments shall be deemed references to Articles and Sections of, and Exhibits, Schedules and Attachments to this Agreement.  Unless the context otherwise requires, the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision hereof.  Except when used together with the word “either” or otherwise for the purpose of identifying mutually exclusive alternatives, the term “or” has the inclusive meaning represented by the phrase “and/or”.  With regard to each and every term and condition of this Agreement, the Parties understand and agree that, if at any time the Parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject thereto, no consideration shall be given to the issue of which Party actually prepared, drafted or requested any term or condition of this Agreement.  All references in this Agreement to “dollars” or “$” shall mean United States dollars.  Any period of time hereunder ending on a day that is not a Business Day shall be extended to the next Business Day.

Article II
Preparation, Filing and Payment of Taxes Shown Due on Tax Returns 

Section 2.01.Tax Returns.

(a)Tax Returns Required to be Filed by GPC. GPC shall prepare and file (or cause to be prepared and filed) each Tax Return required to be filed by a GPC Group Entity and shall pay, or cause such GPC Group Entity to pay, all Taxes shown to be due and payable on each such Tax Return; provided that SpinCo shall reimburse GPC for any such Taxes that are SpinCo Taxes.

(b)Certain Transferred Entity Tax Returns that Include GPC Taxes. GPC shall prepare (or cause to be prepared) each Tax Return (other than (i) any Excluded Tax Return or (ii) any Tax Return that includes both (x) one or more Transferred Entities and (y) one or more RMT Parent Group Entities (other than the Transferred Entities)) 

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required to be filed by a Transferred Entity after the Distribution if such Tax Return includes GPC Taxes. SpinCo shall cause each such Tax Return to be filed on or prior to its Due Date and shall pay, or cause to be paid, all Taxes shown to be due and payable on such Tax Return; provided that GPC shall reimburse SpinCo for any such Taxes that are GPC Taxes.

(c)Other Transferred Entity Tax Returns. Except as otherwise provided in this Section 2.01, SpinCo shall prepare and file (or cause to be prepared and filed) (i) each Tax Return required to be filed by a Transferred Entity after the Distribution Date and (ii) each Excluded Tax Return, and shall pay, or cause to be paid, all Taxes shown to be due and payable on such Tax Return.

Section 2.02.Tax Return Procedures.

(a)GPC Income Tax Returns. Except as otherwise provided in Section 6.02(g), GPC may take any position on or make any elections or other determinations with respect to any GPC Income Tax Return in its sole and absolute discretion and SpinCo shall have no rights with respect to any GPC Income Tax Return; provided that (i) GPC shall take the position that it is not entitled to any deduction under Section 167(a) of the Code for any additional allowance pursuant to Section 168(k)(1)(A) of the Code as result of any property being treated as sold pursuant to a 338(h)(10) Election (even if GPC does not make an election pursuant to Section 168(k)(7) with respect to any class of property placed in service during the same taxable year) and (ii) GPC shall not take any position or make any determination on any Tax Return that is inconsistent with the Allocation Statement, in each case, absent an inconsistent Final Determination.

(b)GPC Non-Income Tax Returns. The portion of any GPC Non-Income Tax Return that reflects the SpinCo Business shall (to the extent permitted by Applicable Law) be prepared in a manner consistent with past practice. GPC shall provide to SpinCo the information relating to the SpinCo Business reflected on any GPC Non-Income Tax Return with respect to which SpinCo is required to make a payment pursuant to Section 2.01(a)) at least thirty (30) days prior to the Due Date for such Tax Return or, in the case of any such Tax Return filed on a monthly basis, five (5) days prior to such Due Date. The Parties shall negotiate in good faith to resolve all disputed issues relating to any such Tax Return. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.02.

(c)Certain Transferred Entity Tax Returns Prepared by GPC. In the case of any Tax Return described in Section 2.01(b), (i) the portion (if any) of such Tax Return with respect to SpinCo Taxes (including, for the avoidance of doubt, in cases where no SpinCo Taxes are shown as due and owing on such Tax Return), or that would reasonably be expected to materially adversely affect the Tax position of any RMT Parent Group Entity for any Post-Distribution Period,  shall (to the extent permitted by Applicable Law) be prepared in a manner consistent with past practice and (ii) GPC shall provide a draft of such Tax Return to SpinCo for its review and comment at least thirty (30) days prior to the Due Date for such Tax Return or, in the case of any such Tax Return filed on a monthly basis or property Tax Return, five (5) days prior to such Due 

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Date. In the event that past practice is not applicable to a particular item or matter, GPC shall determine the reporting of such item or matter in good faith in consultation with SpinCo. The Parties shall negotiate in good faith to resolve all disputed issues relating to any such Tax Return. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.02. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Tax Return, such Tax Return shall be timely filed as prepared by GPC and such Tax Return shall be amended as necessary to reflect the resolution of such dispute in a manner consistent with such resolution. For the avoidance of doubt, GPC shall be responsible for any interest, penalties or additions to Tax resulting from the late filing of any Tax Return described in Section 2.01(b), except to the extent that such late filing is caused by the failure of any Transferred Entity to provide any relevant information requested by GPC that is necessary for the preparation and filing of such Tax Return.

(d)Certain Transferred Entity Tax Returns Prepared by SpinCo. In the case of any Tax Return described in Section 2.01(c) (including, for the avoidance of doubt, any Excluded Tax Return) with respect to GPC Taxes (including, for the avoidance of doubt, in cases where no GPC Taxes are shown as due and owing on such Tax Return), or that would reasonably be expected to materially adversely affect the Tax position of any GPC Group Entity, (i) such Tax Return shall (to the extent permitted by Applicable Law) be prepared in a manner consistent with past practice and (ii) SpinCo shall provide a draft of such Tax Return (or the portion thereof that relates exclusively to the Transferred Entities, in the case of any such Tax Return that includes both (x) one or more Transferred Entities and (y) one or more RMT Parent Group Entities (other than the Transferred Entities)) to GPC for its review and comment at least thirty (30) days prior to the Due Date for such Tax Return, or in the case of any such Tax Return filed on a monthly basis or property Tax Return, five (5) days prior to such Due Date. The Parties shall negotiate in good faith to resolve all disputed issues relating to any such Tax Return. In the event that past practice is not applicable to a particular item or matter, SpinCo shall determine the reporting of such item or matter in good faith in consultation with GPC. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.02. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Tax Return, such Tax Return shall be timely filed as prepared by SpinCo and such Tax Return shall be amended as necessary to reflect the resolution of such dispute in a manner consistent with such resolution. For the avoidance of doubt, SpinCo shall be responsible for any interest, penalties or additions to Tax resulting from the late filing of any Tax Return described in Section 2.01(c) except to the extent that such late filing is caused by the failure of any GPC Group Entity to provide any relevant information requested by SpinCo that is necessary for the preparation and filing of such Tax Return.

(e)Unless otherwise required by Applicable Law, GPC and SpinCo, as applicable, shall file the appropriate information and statements, as required by Treasury Regulations sections 1.355-5(a) and 1.368-3, with the IRS, and shall retain the 

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appropriate information relating to the Distribution and the Merger as described in Treasury Regulations sections 1.355-5(d) and 1.368-3(d).

(f)Any amendment of any Tax Return described in Section 2.01 shall be subject to the same procedures required for the preparation of such type of Tax Return pursuant to this Section 2.02.

Section 2.03.Straddle Period Tax Allocation.  To the extent permitted by Applicable Law, GPC and SpinCo shall elect to close the taxable year of each Transferred Entity as of the close of the Distribution Date.  With respect to the U.S. federal consolidated Income Tax Return for the group of which GPC is the common parent, for the taxable year which includes the Distribution Date, GPC shall use the closing of the books method under Treasury Regulations section 1.1502-76.  In the case of any Straddle Period, (a) with respect to Taxes that are imposed on a periodic basis (such as real or personal property Taxes), the portion of such Taxes attributable to the portion of the Straddle Period ending on, or beginning after, the Distribution Date shall be determined based on the relative number of days in each portion of the Straddle Period, and (b) with respect to any other Taxes (including Income Taxes and payroll Taxes), the portion of such Taxes attributable to the portion of the Straddle Period ending on, or beginning after, the Distribution Date shall be made by means of a closing of the books and records of such Transferred Entity as of the close of the Distribution Date.

Section 2.04.Timing of Payments.  Any reimbursement of Taxes under Section 2.01 shall be made by the later of (a) two (2) business days before the Due Date of such Taxes and (b) ten (10) business days after the party required to make such reimbursement has received notice from the party entitled to such reimbursement. For the avoidance of doubt, a party may provide notice of reimbursement of Taxes prior to the time such Taxes were paid, and such notice may represent a reasonable estimate (provided that the amount of reimbursement shall be based on the actual Tax liability and not on such reasonable estimate).

Section 2.05.Expenses.  Except as provided in Section 8.02 in respect of the Accounting Firm, each party shall bear its own expenses incurred in connection with this Article II.

Section 2.06.Apportionment of SpinCo Taxes.  For all purposes of this Agreement, GPC and SpinCo shall jointly determine in good faith which Tax Items are properly attributable to assets or activities of the SpinCo Business (and in the case of a Tax Item that is properly attributable to both the SpinCo Business and the GPC Business, the allocation of such Tax Item between the SpinCo Business and the GPC Business) in a manner consistent with the provisions hereof and any disputes shall be resolved by the Accounting Firm in accordance with Section 8.02.

Section 2.07.No Extraordinary Actions on the Distribution Date.  Except for Covered Transactions, SpinCo shall not, and shall not permit any Transferred Entity to, take any action outside of the ordinary course of business on the Distribution Date after the Merger Effective Time. 

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Section 2.08.Allocation of Tax Attributes.  GPC shall determine in good faith, consistent with the books and records of GPC, the allocation of Tax Attributes among GPC Group Entities and Transferred Entities in accordance with the Code and Treasury Regulations, including Treasury Regulations section 1.1502-76 (and any state, local and foreign Applicable Law). GPC shall consult in good faith with RMT Parent and SpinCo regarding the allocation of Tax Attributes and shall consider in good faith any written comments received from RMT Parent and SpinCo regarding such allocation of Tax Attributes. GPC and SpinCo hereby agree to compute all Taxes consistently with the determination of the allocation of Tax Attributes pursuant to this Section 2.08 unless otherwise required by a Final Determination.

Article III
Indemnification 

Section 3.01.Indemnification by GPC.  GPC shall pay (or cause to be paid), and shall indemnify and hold SpinCo and the RMT Parent Group Entities harmless from and against, without duplication, all GPC Taxes.

Section 3.02.Indemnification by SpinCo.  SpinCo shall pay (or cause to be paid), and shall indemnify and hold GPC and the GPC Group Entities harmless from and against, without duplication, (i) all SpinCo Taxes and (ii) all Tax-Free Transaction Failure Losses.

Section 3.03.Characterization of and Adjustments to Payments.  (a) In the absence of a Final Determination to the contrary, for all Tax purposes, GPC, SpinCo and RMT Parent shall treat or cause to be treated any payment required by this Agreement (other than as required by Applicable Law) as either a contribution by GPC to SpinCo or a distribution by SpinCo to GPC, as the case may be, occurring immediately prior to the Distribution Effective Time.

(b)Any indemnity payment pursuant to this Agreement shall be increased to include all reasonable accounting, legal and other professional fees and court costs incurred by the Indemnified Party in connection with such indemnity payment.

Section 3.04.Timing of Indemnification Payments.  Indemnification payments in respect of any liabilities for which an Indemnified Party is entitled to indemnification pursuant to this Article III shall be paid by the Indemnifying Party to the Indemnified Party within ten (10) days after written notification thereof by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for, and calculation of, the amount of such indemnification payment.

Article IV
Refunds, Carrybacks, Timing Difference and Tax Attributes 

Section 4.01.Refunds.  (a) Except as provided in Section 4.02, GPC shall be entitled to all Refunds of Taxes for which GPC is responsible pursuant to Article III (except to the extent such Refunds were taken into account in calculating the Final Net 

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Working Capital Amount), and SpinCo shall be entitled to all Refunds of Taxes for which SpinCo is responsible pursuant to Article III. A party receiving a Refund to which the other party is entitled pursuant to this Agreement shall pay the amount to which such other party is entitled (less any tax or other reasonable out-of-pocket costs incurred by the first party in receiving such Refund) within ten (10) days after the receipt of the Refund.

(b)To the extent that the amount of any Refund under this Section 4.01 is later reduced by a Taxing Authority or in a Tax Proceeding, such reduction shall be allocated to the party to which such Refund was allocated pursuant to this Section 4.01 and an appropriate adjusting payment shall be made.

Section 4.02.Carrybacks.  To the extent permitted by Applicable Law, each Transferred Entity shall relinquish, waive or otherwise forgo the carryback of any loss, credit or other Tax Attribute from any Post-Distribution Period to any Pre-Distribution Period or Straddle Period. If GPC (or any GPC Group Entity) receives (or realizes) a Refund as a result of any carryback permitted by the previous sentence, it shall remit to SpinCo, within 30 days, the amount of such Refund (less any Tax or other reasonable out-of-pocket costs incurred by GPC to obtain such Refund); provided, however, if a Taxing Authority subsequently reduces or disallows such Refund, SpinCo shall, within 30 days of the reduction or disallowance, return the amount previously remitted to SpinCo.

Section 4.03.Carryforwards.  Except as required by Applicable Law, no loss recognized as a result of the Internal Reorganization shall be allocated to any RMT Parent Group Entity.

Section 4.04.Timing Differences.  If pursuant to a Final Determination any Tax Attribute is made allowable to an RMT Parent Group Entity as a result of an adjustment to any Taxes for which GPC is responsible hereunder and such Tax Attribute would not have arisen or been allowable but for such adjustment, or if pursuant to a Final Determination any Tax Attribute is made allowable to a GPC Group Entity as a result of an adjustment to any Taxes for which RMT Parent or SpinCo is responsible hereunder and such Tax Attribute would not have arisen or been allowable but for such adjustment, RMT Parent or GPC, as the case may be, shall make a payment to either GPC or RMT Parent, as appropriate, within thirty (30) days after such party (or its Affiliates) actually realizes a Tax benefit by way of a Refund or a decrease in Taxes reported on a filed Tax Return that is attributable to such Tax Attribute, determined on a “with and without” basis (treating any deductions or amortization attributable to such Tax Attribute as the last items claimed for any taxable year, including after the utilization of any available net operating loss carryforwards).  In the event of any overlap between Section 3.03 and this Section 4.04, this Section 4.04 shall apply and Section 3.03 shall not apply.

Section 4.05.Equity Compensation Deductions.  If any RMT Parent Group Entity utilizes any deduction (including, for the avoidance of doubt, by utilizing a net operating loss carryforward attributable to such deduction) for a taxable period ending after the Distribution Date with respect to the exercise, vesting or settlement after the Distribution Date of any GPC SAR or GPC RSU [*], RMT Parent shall cause SpinCo to 

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remit an amount to GPC equal to the overall net reduction in actual cash Taxes paid (determined on a “with and without” basis (treating any such deductions as the last items claimed for any taxable year, including after the utilization of any available net operating loss carryforwards)) by such member of the RMT Parent Group resulting from the event giving rise to such deduction in the year of such event.

Section 4.06.Annual Bonus Deductions.  If any RMT Parent Group Entity utilizes any deduction (including, for the avoidance of doubt, by utilizing a net operating loss carryforward attributable to such deduction) for a taxable period ending after the Distribution Date with respect to the payment after the Distribution Date of any portion of the aggregate GPC Bonus Allocation, RMT Parent shall cause SpinCo to remit an amount to GPC equal to the overall net reduction in actual cash Taxes paid (determined on a “with and without” basis (treating any such deductions as the last items claimed for any taxable year, including after the utilization of any available net operating loss carryforwards)) by such member of the RMT Parent Group resulting from the event giving rise to such deduction in the year of such event.

Section 4.07.Transaction Bonus Deductions.  If any RMT Parent Group Entity utilizes any deduction (including, for the avoidance of doubt, by utilizing a net operating loss carryforward attributable to such deduction) for a taxable period ending after the Distribution Date with respect to the payment after the Distribution Date of any transaction bonuses (but, for the avoidance of doubt, excluding annual bonuses and severance or similar payments) payable pursuant to the Retention Agreements (as defined in the Separation Agreement) and taken into account in the determination of Indebtedness of SpinCo, RMT Parent shall cause SpinCo to remit an amount to GPC equal to the overall net reduction in actual cash Taxes paid (determined on a “with and without” basis (treating any such deductions as the last items claimed for any taxable year, including after the utilization of any available net operating loss carryforwards)) by such member of the RMT Parent Group resulting from the event giving rise to such deduction in the year of such event.

Article V
Tax Proceedings 

Section 5.01.Notification of Tax Proceedings.  Within ten (10) Business Days after an Indemnified Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which an Indemnifying Party is responsible pursuant to Article III, such Indemnified Party shall notify the Indemnifying Party in writing of such Tax Proceeding, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications relating to such Tax Proceeding. The failure of the Indemnified Party to notify the Indemnifying Party in writing of the commencement of any such Tax Proceeding within such ten (10) day period or promptly forward any further notices or communications shall not relieve the Indemnifying Party of any obligation which it may have to the Indemnified Party under this Agreement except to the extent (and only to the extent) that the Indemnifying Party is actually materially prejudiced by such failure. In connection with any other Tax Proceeding that is reasonably expected to impact the Intended Tax Treatment, the Parties 

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shall confer in good faith and the Party controlling such Tax Proceeding shall keep the other party reasonably informed of developments in connection therewith.

Section 5.02.Tax Proceeding Procedures.

(a)GPC Income Tax Returns.  GPC shall be entitled to contest, compromise and settle in its sole discretion any adjustment that is proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any GPC Income Tax Return. Notwithstanding the preceding sentence, if SpinCo Taxes are asserted in any Tax Proceeding involving a GPC Income Tax Return, GPC shall (A) keep SpinCo informed in a timely manner of the actions proposed to be taken by GPC with respect to such assertion in such Tax Proceeding, and (B) permit SpinCo to participate in the aspects of such Tax Proceeding that relate to such SpinCo Taxes and (C) not settle any aspect of such Tax Proceeding that relates to such SpinCo Taxes without the prior written consent of SpinCo, which shall not be unreasonably withheld, delayed or conditioned and provided further that the rights of SpinCo and obligations of GPC set forth above shall not apply if and to the extent that GPC elects in writing to forgo its right to indemnification in respect of the SpinCo Taxes that are the subject of such Tax Proceeding.

(b)GPC Non-Income Tax Returns.  GPC shall be entitled to contest, compromise and settle any adjustment that is proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any GPC Non-Income Tax Return, provided that to the extent that such Tax Proceeding relates to SpinCo Taxes or would reasonably be expected to materially adversely affect the Tax position of SpinCo or any RMT Parent Group Entity for any Post-Distribution Period, GPC shall (A) keep SpinCo informed in a timely manner of the actions proposed to be taken by GPC with respect to such Tax Proceeding, (B) permit SpinCo to participate in the aspects of such Tax Proceeding that relate to SpinCo Taxes and (C) not settle any aspect of such Tax Proceeding that relates to SpinCo Taxes without the prior written consent of SpinCo, which shall not be unreasonably withheld, delayed or conditioned and provided further that SpinCo’s rights and GPC’s obligations set forth above shall not apply if and to the extent that GPC elects in writing to forgo its right to indemnification in respect of the SpinCo Taxes that are the subject of such Tax Proceeding.

(c)Certain Transferred Entity Tax Returns.  GPC shall be entitled to contest, compromise and settle any adjustment that is proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Tax Return of a Transferred Entity for which the amount in controversy with respect to GPC Taxes forms the greater part of the total amount in controversy, provided that to the extent that such Tax Proceeding relates to SpinCo Taxes or would reasonably be expected to materially adversely affect the Tax position of SpinCo or any RMT Parent Group Entity for any Post-Distribution Period, GPC shall (A) keep SpinCo informed in a timely manner of the actions proposed to be taken by GPC with respect to such Tax Proceeding, (B) permit SpinCo to participate in the aspects of such Tax Proceeding that relate to SpinCo Taxes and (C) not settle any aspect of such Tax Proceeding that relates to SpinCo Taxes without the prior written consent of SpinCo, which shall not be  unreasonably withheld, delayed or conditioned 

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and provided further that the rights of SpinCo and obligations of GPC set forth above shall not apply if and to the extent that GPC elects in writing to forgo its right to indemnification and agrees to indemnify RMT Parent and SpinCo in respect of any SpinCo Taxes that are the subject of such Tax Proceeding.

(d)Other SpinCo Tax Returns.  Except as otherwise provided in Section 5.02(c), SpinCo shall be entitled to contest, compromise and settle any adjustment that is proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Tax Return of a Transferred Entity or any Excluded Tax Return, provided that to the extent that such Tax Proceeding relates to GPC Taxes or would reasonably be expected to materially adversely affect the Tax position of GPC or any GPC Group Entity, SpinCo shall (A) keep GPC informed in a timely manner of the actions proposed to be taken by SpinCo with respect to such Tax Proceeding, (B) permit GPC to participate in the aspects of such Tax Proceeding that relate to GPC Taxes and (C) not settle any aspect of such Tax Proceeding that relates to GPC Taxes without the prior written consent of GPC, which shall not be unreasonably withheld, delayed or conditioned and provided further that the rights of GPC and obligations of SpinCo set forth above shall not apply if and to the extent that SpinCo elects in writing to forgo its right to indemnification in respect of any GPC Taxes that are the subject of such Tax Proceeding.

 

Article VI
Intended Tax Treatment of the Distribution 

Section 6.01.Representations and Warranties.  

(a)RMT Parent Representations and Warranties.  RMT Parent hereby represents, warrants and covenants that as of the date hereof and as of the Merger Effective Time, except for Covered Transactions, there is no plan or intention:

(i)to liquidate SpinCo or SPR HoldCo (including as a result of an election under Treasury Regulations section 301.7701-3 or a conversion to a limited liability company under applicable law) or to merge or consolidate any Transferred Entity with any other Person subsequent to the Distribution;

(ii)to sell or otherwise dispose of any material asset of any Transferred Entity to a Person other than a Transferred Entity except (w) dispositions in the ordinary course of business, (x) any cash paid to acquire assets in arm’s length transactions, and (y) transactions that are disregarded for U.S. federal Tax purposes;

(iii)to sell or otherwise dispose of any stock of SPR Procurement, SPR or SPR’s direct and indirect subsidiaries in a transaction, or engage in any other transaction, in each case, that results in the failure of SPR HoldCo to maintain the ownership requirements of Section 1504(a)(2) of the Code with respect to such entities; 

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(iv)to take or fail to take any action in a manner that is inconsistent with the written information and representations furnished in the RMT Parent Tax Representations; or

(v)to repurchase stock of RMT Parent other than in a manner that satisfies the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48).

(b)Except as provided in Schedule I, RMT Parent hereby represents and warrants that as of the date hereof, RMT Parent has not taken or agreed to take any action and knows of no fact, agreement, plan or other circumstance that would, or would reasonably be expected to, cause RMT Parent to be required under Applicable Law to have a plan or intent described in Section 6.01(a). Prior to Closing, RMT Parent shall promptly notify GPC in writing if RMT Parent takes or agrees to take any action, or becomes aware of any fact, agreement, plan or other circumstance that would, or would reasonably be expected to, cause RMT Parent to be required under Applicable Law to have a plan or intent described in Section 6.01(a).

(c)RMT Parent hereby represents, warrants and covenants that as of the date hereof RMT Parent does not expect SpinCo to be required to make any payments, directly or indirectly, in respect of principal on the SpinCo Debt prior to the third anniversary of the Closing Date. 

(d)Tax Representations.  Upon delivery of any tax representation letter to GPC Tax Counsel to support any GPC Tax Opinion or the RMT Parent Merger Tax Opinion, RMT Parent shall be deemed to represent to GPC that all representations made relating to RMT Parent, its Subsidiaries, and its shareholders in such tax representation letter are (subject to any qualifications contained in such tax representation letter) true, correct and complete and, to the knowledge of RMT Parent, any other representations in such tax representation letter are (subject to any qualifications contained in such tax representation letter) true, correct and complete. 

Section 6.02.Covenants.  

(a)Following the Merger Effective Time, except for Covered Transactions, (i) GPC will not (and will cause each GPC Group Entity not to) take any action (or refrain from taking any action) which (x) is inconsistent with the facts presented and the representations made on or prior to the Distribution Date in the Tax Representation Letters or (y) could reasonably be expected to cause any Intended Tax Treatment Failure; and (ii) RMT Parent will not (and will cause each RMT Parent Group Entity not to) take any action (or refrain from taking any action) which (x) is inconsistent with the facts presented and the representations made on or prior to the Distribution Date in the RMT Parent Tax Representations or (y) could reasonably be expected to cause any Intended Tax Treatment Failure.

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(b)Covenants Relating to Tax-Free Status.  Following the Merger Effective Time and prior to the first day following the second anniversary of the Distribution (the “Restriction Period”), except for Covered Transactions, 

(i)SpinCo will (w) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, and (x) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, in each case taking into account Section 355(b)(3) of the Code; 

(ii)SpinCo will continue to hold sufficient assets to satisfy the continuity of business enterprise requirements under section 1.368-1(d) of the Treasury Regulations;

(iii)neither SpinCo nor RMT Parent will repurchase stock of RMT Parent in a manner contrary to the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48); and

(iv)neither RMT Parent nor SpinCo will, or will agree to, merge, consolidate or amalgamate with any other Person (except as provided for under the Merger Agreement) unless, in the case of a merger or consolidation, RMT Parent or SpinCo is the survivor of the merger, consolidation or amalgamation. 

(c)Other Covenants Relating to Intended Tax Treatment. Following the Merger Effective Time, except for Covered Transactions,

(i)Prior to the first day following the fifth anniversary of the issuance of the SPR HoldCo Preferred Stock, RMT Parent shall not cause or permit (A) any portion of the SPR HoldCo Preferred Stock to cease to be outstanding or to be held by RMT Parent or any of its Affiliates, (B) RMT Parent or any of its Affiliates to acquire stock that is the same class as the SPR HoldCo Preferred Stock for purpose of Section 368(c) of the Code, or (C) RMT Parent and its Affiliates to collectively gain “control” of SPR HoldCo (or any tax successor) within the meaning of Section 368(c) of the Code, provided that clause (C) shall not apply if RMT Parent and its Affiliates owned stock constituting “control” of SPR HoldCo (or any tax successor) within the meaning of Section 368(c) of the Code immediately after the Merger or as a result of Step 2 of the Post-Closing Integration Plan;

(ii)During the Restriction Period, RMT Parent will not cause or permit SPR HoldCo to, merge, consolidate or amalgamate with any other Person unless SPR HoldCo is the survivor of the merger, consolidation or amalgamation;

(iii)During the Restriction Period, no RMT Parent Group Entity will amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, in each case, affecting the voting rights of the Equity Interests of SPR HoldCo or SpinCo 

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(including through the conversion of one class of Equity Interests of SPR HoldCo or SpinCo into another class of Equity Interests of SPR HoldCo or SpinCo);

(iv)During the three year period following Merger Effective Time, RMT Parent will not cause or permit (i) any portion of the principal of the SpinCo Debt to be voluntarily repaid, (ii) any action to be voluntarily taken on the part of RMT Parent or its Affiliates which (if taken) would require any portion of the principal amount of the SpinCo Debt to be repaid, (iii) a co-borrower to be added to the SpinCo Debt, (iv) any portion of the SpinCo Debt to be assumed by a different taxpayer for U.S. federal income tax purposes (including by reason of a merger) or (v) a significant modification (within the meaning of Treasury Regulations section 1.1001-3(b)) of the SpinCo Debt in each case, without regard to whether such action is permissible pursuant to the Financing Agreements; provided, that for purposes of this Section 6.02(c)(iv), SpinCo may repay any portion of the SpinCo Debt with the proceeds of new third-party indebtedness of SpinCo (the “SpinCo Replacement Debt”) in which case the representations, warranties and covenants in this Agreement with respect to the SpinCo Debt shall be deemed to refer to the SpinCo Replacement Debt.

(d)Other Covenants. The parties shall use reasonable best efforts (i) to implement the transactions contemplated by the SpinCo Commitment Letter, the Financing Agreements and the Alternative SpinCo Commitment Letter (if any) such that there will not be a significant modification (within the meaning of Treasury Regulations section 1.1001-3(b)) of the SpinCo Debt in connection with the Closing or as part of a plan that includes any transaction effected in connection with the Merger pursuant to the SpinCo Commitment Letter, the Financing Agreements, or the Alternative SpinCo Commitment Letter, and (ii) to implement the transactions described in clause (y) of the definition of "Covered Transaction" in a manner that ensures the Intended Tax Treatment. 

(e)Assignment or Transfer. Notwithstanding Section 13.04 of the Separation Agreement, RMT Parent will not cause or permit SpinCo to assign or transfer its rights to receive any transfer of cash or property from GPC under the Separation Agreement to any of its Affiliates.

(f)Certain Exceptions. Notwithstanding the restrictions imposed by Section 6.02(b), Section 6.02(c) and Section 6.02(e), RMT Parent or SpinCo may proceed with any of the actions or transactions described therein, if (i) GPC shall have given its prior written consent to the action or transaction (such consent not to be unreasonably withheld, conditioned or delayed) (ii) GPC shall have received a ruling in accordance with Section 6.03(a) in form and substance reasonably satisfactory to GPC to the effect that such action or transaction will not affect the Intended Tax Treatment of any applicable transaction, or (iii) (in the event that GPC chooses not to pursue such ruling or if such action or transaction is covered by an area in which the Internal Revenue Service will not issue letter rulings), RMT Parent or SpinCo shall have provided to GPC an Unqualified Tax Opinion in form and substance reasonably satisfactory to GPC prior to effecting such action or transaction (it being understood that GPC shall use its reasonable 

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best efforts to determine whether such Unqualified Tax Opinion is reasonably satisfactory to GPC within ten (10) days of receipt of such Unqualified Tax Opinion by GPC); provided that RMT Parent agrees in writing to bear any reasonable expenses associated with obtaining such a ruling or opinion, and, provided further, that the RMT Parent Group Entities shall not be relieved of any liability under Section 3.02 by reason of seeking or having obtained such a ruling or opinion.  In determining whether a ruling or opinion is satisfactory, GPC may consider, among other factors, the appropriateness of any underlying assumptions or representations used as a basis for the ruling or opinion and the views on the substantive merits. For the avoidance of doubt, notwithstanding the covenants set forth in this Section 6.02, SpinCo shall be permitted to enter into the Merger.

(g)Tax Reporting.  Each of GPC, SpinCo and RMT Parent covenants and agrees that it will file, and cause each of its Affiliates to file, all Tax Returns consistent with the Intended Tax Treatment and, except as required pursuant to a Final Determination, shall not to take, or cause to be taken, any action that would be inconsistent with the Intended Tax Treatment in any Tax Return, Tax audit, Tax litigation or otherwise. 

(h)Post-Closing Integration Plan. From the date hereof until the delivery of the Final Post-Closing Integration Plan, GPC and RMT Parent shall continue to confer in good faith regarding any transactions that RMT Parent desires to undertake in order to integrate the Transferred Entities (or their operations) with the other RMT Parent Group Entities (or their operations), and to realize cost synergies, following the Merger, and the parties shall use reasonable best efforts to agree upon any such transactions prior to the Closing provided, GPC shall not be required to agree to any amendment of the Post-Closing Integration Plan that it determines in good faith could reasonably be expected to prevent the Intended Tax Treatment or to materially adversely affect the value of the Distribution, Internal Reorganization Cash Payments or the Merger to GPC or its stockholders. Any such agreed transactions shall be reflected in a modified Post-Closing Integration Plan agreed to by the Parties prior to the Closing, and such plan shall be treated as the “Final Post-Closing Integration Plan.” 

(i)Internal Reorganization Plan.  From the date hereof until the delivery of the Final Internal Reorganization Plan, GPC and RMT Parent shall continue to confer in good faith regarding any transactions that GPC desires to undertake in order to effect the Internal Reorganization prior to the Distribution, and the parties shall use reasonable best efforts to agree upon any such transactions prior to the Closing provided, RMT Parent shall not be required to agree to any amendment of the Internal Reorganization that it determines in good faith could reasonably be expected to materially adversely affect the value of the Distribution, Internal Reorganization Cash Payments or the Merger to RMT Parent or its stockholders.  Any such agreed transactions shall be reflected in a modified Internal Reorganization plan agreed to by the Parties at least three (3) days prior to the Closing, and such plan shall be treated as the “Final Internal Reorganization Plan.” 

(j)SPR HoldCo Preferred Stock. 

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(i)Notwithstanding any provision in this Agreement and the Separation Agreement, GPC may implement the SPR HoldCo Exchange as a transfer by GPC of all of the outstanding stock of SPR Procurement and SPR, together with indebtedness of SPR that is held by GPC and its Affiliates, to SPR HoldCo in exchange for common stock of SPR HoldCo and no SPR HoldCo Preferred Stock (the “Common Stock SPR HoldCo Exchange”).  

(ii)If GPC determines pursuant to Section 6.02(j)(i) above to implement the Common Stock SPR HoldCo Exchange, notwithstanding anything to the contrary in this Agreement or the Separation Agreement:

(A)(1)SPR HoldCo will not issue any SPR HoldCo Preferred Stock pursuant to the Internal Reorganization; 

(2)there will be no binding agreement for GPC to sell the SPR HoldCo Prefered Stock to a third party; and 

(3)no 338(h)(10) Election will be made.

(B)“GPC Tax Opinions” will not include the GPC 338(h)(10) Tax Opinion.

(C)“Intended Tax Treatment” will have the same meaning as Tax Free Status.

(D) “Intended Tax Treatment Failure” will have the same meaning as Tax-Free Transaction Failure.

(E)The following Sections of this Agreement shall no longer apply: ‎Section 6.01(a)(i) with respect to SPR HoldCo only, ‎Section 6.01(a)(iii), ‎Section 6.02(c)(i), ‎Section 6.02(c)(ii), ‎Section 6.02(c)(iii) with respect to SPR HoldCo only, ‎Section 7.03 and ‎Section 7.05(a)(i).

Section 6.03.Procedures Regarding Opinions and Rulings.  (a) If RMT Parent or SpinCo notifies GPC that it desires to take one of the actions described in Section 6.02(b), Section 6.02(c) or Section 6.02(e) (a “Notified Action”), GPC, SpinCo and RMT Parent shall cooperate in obtaining a ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting SpinCo to take the Notified Action unless GPC shall have waived in writing the requirement to obtain such ruling or Unqualified Tax Opinion. If a ruling from the IRS is to be sought, GPC shall apply for such ruling and GPC shall control the process of obtaining such ruling. In no event shall GPC be required to file any ruling request under this Section 6.03(a) unless each of RMT Parent and SpinCo represents that (i) it has read such ruling request, and (ii) all information and representations, if any, relating to SpinCo, its current or former shareholders or any RMT Parent Group Entity contained in such ruling request documents are (subject to any qualifications therein) true, correct and complete in all material respects. RMT Parent shall reimburse GPC for all reasonable out-of-pocket costs and expenses incurred by any 

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GPC Group Entity in connection with any Notified Action within ten (10) days after receiving an invoice from GPC therefor.

(b)GPC shall have the right to obtain a ruling relating to the Intended Tax Treatment or an Unqualified Tax Opinion at any time in its sole and absolute discretion. If GPC notifies RMT Parent or SpinCo that it has determined to obtain such ruling or opinion, RMT Parent and SpinCo shall (and shall cause each RMT Parent Group Entity to) cooperate with GPC and take any and all actions reasonably requested by GPC in connection with obtaining such ruling or opinion (including by making any representation that is true or any reasonable covenant or providing any materials reasonably requested by the IRS or the law firm issuing such opinion). In connection with obtaining such ruling, GPC shall apply for such ruling and shall have sole and exclusive control over the process of obtaining such ruling. GPC shall reimburse RMT Parent for all reasonable out-of-pocket costs and expenses incurred by any RMT Parent Group Entity in connection with any ruling or Unqualified Tax Opinion requested by GPC within ten (10) days after receiving an invoice from RMT Parent therefor.

(c)Except as provided in Section 6.03(a) or (b), following the Distribution Effective Time, no RMT Parent Group Entity shall voluntarily seek any guidance from the IRS or any other Taxing Authority (whether written, verbal or otherwise) concerning the Intended Tax Treatment of the SPR HoldCo Exchange (if applicable), the Distribution or the Merger.

Article VII
Cooperation 

Section 7.01.General Cooperation.  The Parties shall each cooperate fully (and each shall cause their respective Subsidiaries to cooperate fully) with all reasonable requests in writing or via e-mail from another party hereto, or from an agent, representative or advisor to such party, in connection with the preparation and filing of Tax Returns, claims for Refunds, Tax Proceedings, any revisions or amendments to the Internal Reorganization or the Post-Closing Integration Plan, and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of any of the Parties or their respective Subsidiaries covered by this Agreement, any revisions or amendments to the Internal Reorganization or the Post-Closing Integration Plan or the establishment of any reserve required in connection with any financial reporting (a “Tax Matter”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter and shall include at each party’s own cost: 

(i)the provision, in hard copy and electronic forms, of any Tax Returns of the Parties and their respective Subsidiaries, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities; 

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(ii)the execution of any document (including any power of attorney) reasonably requested by another party in connection with any Tax Proceedings of any of the Parties or their respective Subsidiaries, or the filing of a Tax Return or a Refund claim of the Parties or any of their respective Subsidiaries; and 

(iii)the use of the party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter.

Each party shall make its employees, advisors, and facilities available, without charge, on a reasonable and mutually convenient basis in connection with the foregoing matters in a manner that does not interfere with the ordinary business operations of such party.

Notwithstanding any other provision of this Agreement, GPC shall not be required to provide SpinCo or any RMT Parent Group Entity with a copy of (or access to) any GPC Income Tax Return or any GPC Non-Income Tax Return (except for pro forma separate company Tax Returns of any of the Transferred Companies) or any information with respect to any GPC Business.

Section 7.02.Retention of Records.  GPC and SpinCo shall retain or cause to be retained all Tax Returns, schedules and work papers, and all material records or other documents relating thereto in their possession, including all such electronic records, and shall maintain all hardware  necessary to retrieve such electronic records, in all cases until sixty (60) days after the expiration of the applicable statute of limitations (including any waivers or extensions thereof) of the taxable periods to which such Tax Returns and other documents relate or until the expiration of any additional period that any party reasonably requests, in writing, with respect to specific material records and documents. A party intending to destroy any material records or documents shall provide the other party with reasonable advance notice and the opportunity to copy or take possession of such records and documents. The parties hereto will notify each other in writing of any waivers or extensions of the applicable statute of limitations that may affect the period for which the foregoing records or other documents must be retained.

Section 7.03.338(h)(10) Elections.  GPC shall be responsible for making timely 338(h)(10) Elections with the IRS (and other applicable Taxing Authorities) in connection with the SPR HoldCo Exchange; provided, that (a) GPC shall provide draft Forms 8023 (and any similar state and local forms) to RMT Parent, and RMT Parent shall be entitled to a reasonable amount of time to provide GPC with written comments to the Form 8023 to the SPR HoldCo Exchange and (b) RMT Parent shall execute any such forms as reasonably requested by GPC. 

Section 7.04.Tax Filings. GPC shall provide RMT Parent with proof of timely filing of (i) the 338(h)(10) Elections (if any) and (ii) any other Tax elections made in respect of the Transferred Entities in connection with the transactions contemplated by the Final Internal Reorganization Plan (including any entity classification elections in respect of SPR Canada and The Safety Zone Canada, ULC made on IRS Forms 8832), 

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along with, in each case, any acceptance from or other correspondence with any Taxing Authority in connection therewith. 

Section 7.05.Allocation.  

(a)GPC shall prepare a statement setting forth the allocation (i) of the SpinCo Enterprise Value (reduced by the Canada Consideration) among the assets of each of the entities for which a 338(h)(10) Election is made and (ii) the allocation of the Canada Consideration (and all other amounts properly taken into account under Applicable Law) among the assets of SPR Canada and The Safety Zone Canada, ULC (the “Allocation Statement”) and shall deliver the Allocation Statement to RMT Parent within one hundred and twenty (120) days after the Closing Date.  If within 30 days after delivery of the Allocation Statement RMT Parent notifies GPC in writing that RMT Parent objects to the allocation set forth in the Allocation Statement, GPC and RMT Parent shall use commercially reasonable efforts to resolve such dispute within 20 days.  In the event that GPC and RMT Parent are unable to resolve such dispute within 20 days, GPC and RMT Parent shall jointly retain the Accounting Firm (as defined below) to resolve the disputed items. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution.   GPC, SpinCo and RMT Parent agree that they will file all Tax Returns (including IRS Form 8023s, IRS Form 8883s and IRS Form 8594s) consistent with the Allocation Statement.

(b)The parties shall use reasonable best efforts and negotiate in good faith to agree as to the amount of the Canada Consideration by the date that is three (3) days prior to Closing;[*].

Article VIII
Miscellaneous 

Section 8.01.Governing Law.  This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware (without regard to the choice of law provisions thereof).

Section 8.02.Dispute Resolution.  In the event of any dispute between the Parties to be resolved by the Accounting Firm in accordance with the terms of Article II, Article III, Article IV, Article VI, Section 7.05(a) or Section 7.05(b), and with respect to any Taxes or other dispute involving computational matters, the parties shall appoint a nationally recognized independent public accounting firm (the “Accounting Firm”) to resolve such dispute. In this regard, the Accounting Firm shall make determinations with respect to the disputed items based solely on representations made by GPC and SpinCo and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator and shall be required to make a determination in favor of one party only. The parties shall require the Accounting Firm to resolve all disputes no later than thirty (30) days after the submission of such dispute to the Accounting Firm and agree that all decisions by the Accounting Firm with respect thereto shall be final and conclusive and binding on the parties. The Accounting Firm shall resolve all disputes in a manner consistent with this Agreement. The parties shall require 

27

 

the Accounting Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination. The fees and expenses of the Accounting Firm shall be borne equally by GPC, on the one hand, and RMT Parent, on the other hand.

Section 8.03.Tax Sharing Agreements.  All Tax sharing, indemnification and similar agreements, written or unwritten, as between a GPC Group Entity, on the one hand, and a Transferred Entity, on the other (other than this Agreement, the Separation Agreement, the Merger Agreement, any Ancillary Agreement, and any other agreement for which Taxes is not the principal subject matter), shall be or shall have been terminated no later than the Distribution Date (and prior to the Distribution) and, after the Distribution, no GPC Group Entity or Transferred Entity shall have any further rights or obligations under any such Tax sharing, indemnification or similar agreement.

Section 8.04.Interest on Late Payments.  With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the rate in effect for underpayments under Section 6621 of the Code from such due date to and including the payment date.

Section 8.05.Survival of Covenants.  Except as otherwise contemplated by this Agreement, the covenants and agreements contained herein to be performed following the Distribution shall survive the Closing Date in accordance with their respective terms.

Section 8.06.Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.  The application of such invalid or unenforceable provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall be valid and be enforced to the fullest extent permitted by Applicable Law.  To the extent any provision of this Agreement is determined to be prohibited or unenforceable in any jurisdiction or determined to be impermissible by any Governmental Authority, GPC and SpinCo agree to use reasonable best efforts to substitute one or more valid, legal and enforceable provisions that, insofar as practicable, implement the purposes and intent of the prohibited, unenforceable or impermissible provision.

Section 8.07.Entire Agreement.  This Agreement, the other Transaction Documents and any other agreements contemplated hereby or thereby, constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the Parties with respect to the subject matter hereof.  Except as expressly provided herein, neither this Agreement nor any provision hereof is intended to confer upon any Person other than the Parties (and their successors and permitted assigns) any rights or remedies hereunder.

Section 8.08.Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and 

28

 

permitted assigns.  No Party may assign, delegate or otherwise transfer, directly or indirectly, in whole or in part, any of its rights or obligations under this Agreement without the prior written consent of the other Party.  Notwithstanding the foregoing, no assignment, delegation or other transfer of rights under this Agreement shall relieve the assignor of any liability or obligation hereunder.  Any attempted assignment, delegation or transfer in violation of this Section 8.08 shall be void.  From and after the Closing, RMT Parent shall be subject to all of the obligations and restrictions imposed on SpinCo hereunder, including the indemnification obligations of SpinCo under Section 3.02. 

Section 8.09.No Third Party Beneficiaries.  Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than the parties and their respective successors and permitted assigns) any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, and, except as provided in Article III relating to certain indemnitees, no Person shall be deemed a third party beneficiary under or by reason of this Agreement.

Section 8.10.Specific Performance.  Each Party acknowledges that, from and after the Distribution Date, money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such Party and that any such breach would cause the other Party irreparable harm.  Accordingly, each Party also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such Party, the other Party shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance, in addition to all other remedies available to such other Party at law or in equity.

Section 8.11.Amendments; Waivers.  

(a)This Agreement may be amended, and any provision of this Agreement may be waived if and only if such amendment or waiver, as the case may be, is in writing and signed, in the case of an amendment, by the Parties or, in the case of a waiver, by the Party against whom the waiver is to be effective.

(b)No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as otherwise provided herein, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement.  Any term, covenant or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but only by a written notice signed by such Party expressly waiving such term, covenant or condition.  The waiver by any Party of a breach of any provision hereunder shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder.

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Section 8.12.Counterparts; Effectiveness.  This Agreement may be signed in any number of counterparts (including by facsimile or PDF), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Party hereto.

Section 8.13.Confidentiality.  All information exchanged, received or obtained pursuant to this Agreement shall be subject to the provisions of Section 5.04 of the Separation Agreement, mutatis mutandis.

Section 8.14.Waiver of Jury Trial.  EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.  EACH PARTY HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY SUCH SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION 8.14.

Section 8.15.Jurisdiction; Service of Process.  Except as expressly contemplated by another provision of this Agreement, any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the Parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such Proceeding and waives any objection to venue laid therein. Process in any such Proceeding may be served on any Party anywhere in the world, whether within or without the State of Delaware. Without limiting the foregoing, the Parties agree that service of process upon such Party at the address referred to in Section 8.16 (or such other address as may be specified in accordance with Section 8.16) shall be deemed effective service of process upon such Party.

Section 8.16.Notices.  All notices, requests and other communications to any Party hereunder shall be in writing (including email) and shall be given: 

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if to Genuine Parts Company:

Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Mary Vann Hamilton 

David Haskett
Christopher T. Galla

E-mail:Mary_VannHamilton@genpt.com
David_Haskett@genpt.com
Chris_Galla@genpt.com

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: David H. Schnabel
Email: david.schnabel@davispolk.com

if to SpinCo prior to the Merger Effective Time:

Rhino SpinCo, Inc.
c/o Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Mary Vann Hamilton 

David Haskett
Christopher T. Galla

E-mail:Mary_VannHamilton@genpt.com
David_Haskett@genpt.com
Chris_Galla@genpt.com

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: David H. Schnabel
Email: david.schnabel@davispolk.com

 

If to RMT Parent, and, after the Merger Effective Time, SpinCo: 

 

Essendant Inc.

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015

31

 

Attention:Janet Zelenka, Chief Financial Officer
Brendan McKeough, General Counsel
E-mail: jzelenka@essendant.com
bmckeough@essendant.com

 

 

with a copy (which shall not constitute notice) to: 

 

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Steven J. Matays
Email: steven.matays@skadden.com

 

or to such other address or email and with such other copies, as such Party may hereafter specify for that purpose by notice to the other Parties. Each such notice, request or other communication shall be effective (a) on the day delivered (or if that day is not a Business Day, on the first following day that is a Business Day) when (i) delivered personally against receipt or (ii) sent by overnight courier, (b) on the day when email is transmitted (so long as receipt is requested and received) (or if that day is not a Business Day, on the first following day that is a Business Day) and (c) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 8.16 (or such other address as a Party hereafter may specify by notice to the other Parties).

Section 8.17.Captions.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

[The remainder of this page is intentionally left blank.] 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

		
	
GENUINE PARTS COMPANY

	
By:
	
/s/ Christopher T. Galla

	
 
	
Name:Christopher T. Galla

	
 
	
Title:Vice President and

 Assistant General Counsel

 

		
	
RHINO SPINCO, INC.

	
By:
	
/s/ Christopher T. Galla

	
 
	
Name:Christopher T. Galla

	
 
	
Title:Assistant Vice President

 

		
	
ESSENDANT INC.

	
By:
	
/s/ Richard D. Phillips

	
 
	
Name:Richard D. Phillips

	
 
	
Title:President and Chief Executive

 Officer

 

 

 

[Signature Page to Tax Matters Agreement]

Attachment IV

Form of Transition Services Agreement

 

[Attached]

 

 

 

 

 

 

 

 

TRANSITION SERVICES AGREEMENT

dated as of

[•], 2018

between

GENUINE PARTS COMPANY

and

S.P. RICHARDS COMPANY

 

 

 

 

TABLE OF CONTENTS

Page

Article 1
Services and Term

	
Section 1.01.
	
Services to be Performed1

	
Section 1.02.
	
Additional Services1

	
Section 1.03.
	
Term and Termination2

	
Section 1.04.
	
Standard of Performance3

	
Section 1.05.
	
Service Limitations3

	
Section 1.06.
	
Acknowledgment and Representation3

	
Section 1.07.
	
Contract Managers; Disputes4

Article 2
Payments

	
Section 2.01.
	
Service Fees4

	
Section 2.02.
	
Taxes4

Article 3
Other Covenants and Agreements

	
Section 3.01.
	
Independent Contractors5

	
Section 3.02.
	
Confidential Information5

	
Section 3.03.
	
IT Access6

	
Section 3.04.
	
IT Security6

Article 4
Indemnity and Losses

	
Section 4.01.
	
Indemnification7

	
Section 4.02.
	
Limitation of Liability7

Article 5
Miscellaneous

	
Section 5.01.
	
Notices8

	
Section 5.02.
	
Amendments and Waivers9

	
Section 5.03.
	
Expenses9

	
Section 5.04.
	
Successors and Assigns10

	
Section 5.05.
	
Governing Law10

	
Section 5.06.
	
Dispute Resolution10

	
Section 5.07.
	
Counterparts; Effectiveness; Third Party Beneficiaries10

	
Section 5.08.
	
Entire Agreement10

	
Section 5.09.
	
Severability11

	
Section 5.10.
	
Force Majeure11

i

	
Section 5.11.
	
Survival of Obligations11

	
Section 5.12.
	
Inconsistency11

	
Section 5.13.
	
Headings11

	
Section 5.14.
	
No Strict Construction12

 

EXHIBITS

Exhibit AServices Schedule

 

ii

 

TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT (this “Agreement”) dated as of [•], 2018 between Genuine Parts Company, a Georgia corporation (“Service Provider”), and S.P. Richards Company, a Georgia corporation (“Service Recipient”).  Service Provider and Service Recipient are herein referred to individually as a “Party” and collectively as the “Parties”.  Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Separation Agreement (as defined below) or the Merger Agreement (as defined below), as applicable.

W I T N E S S E T H :

WHEREAS, (i) Service Provider and Rhino SpinCo, Inc., a Delaware corporation (“Spinco”), have entered into that certain Separation Agreement dated as of April 12, 2018 (the “Separation Agreement”) and (ii) Service Provider, Spinco, Essendant Inc., a Delaware corporation, and Elephant Merger Sub Corp., a Delaware corporation, have entered into that certain Agreement and Plan of Merger dated as of April 12, 2018 (the “Merger Agreement”);

WHEREAS, the Parties are entering into this Agreement in connection with the Distribution and the Closing; and

WHEREAS, subject to the terms and conditions of this Agreement, Service Provider agrees to provide, by itself or through its Affiliates or other designated third parties, and Service Recipient desires to contract for the use of, the Services (as defined below).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the Parties agree as follows:

Article 1
Services and Term

Section 1.01.Services to be Performed

.  In accordance with the terms and provisions of this Agreement, Service Provider shall perform, or cause one or more of its Affiliates to perform, or procure one or more third parties (each, a “Third-Party Provider”) to perform, the Services; provided that if the use of any such Third-Party Provider is inconsistent with Service Provider’s past practices, the prior written consent of Service Recipient (such consent not to be unreasonably withheld, delayed or conditioned) shall be required prior to Service Provider’s engagement of such Third-Party Provider.  Service Provider shall remain responsible, in accordance with the terms of this Agreement, for performance of any Service by any of its Affiliates or any Third-Party Provider.  “Services” shall mean the services described in the Services Schedule attached hereto as Exhibit A (the “Services Schedule”), in each case to be performed by Service Provider or any of its Affiliates or Third-Party Providers for the benefit of Service Recipient and its Subsidiaries.

Section 1.02.Additional Services

.  If, after the date hereof, Service Recipient identifies to Service Provider in writing services (other than (i) the services contemplated to be provided under the Supply Chain Transition Services Agreement or (ii) the services identified under the 

 

heading “Excluded Services” on the Services Schedule (collectively, the “Excluded Services”)) that Service Provider or its Affiliates provided to (or procured the provision of for) Service Recipient and its Subsidiaries prior to the Closing Date that are reasonably necessary for Service Recipient and its Subsidiaries to continue to operate in substantially the same manner in which Service Recipient and its Subsidiaries operated over the period from January 1, 2018 to the Closing Date, and such services were not included in the Services Schedule, then Service Provider shall act reasonably and in good faith to provide (or procure the provision of) such services at the cost reflected in the SpinCo Financial Statements for fiscal year 2017, (such services, the “Additional Services”).  The Parties shall, pursuant to Section 5.04, amend the Services Schedule to include such Additional Services, and such Additional Services shall be deemed Services hereunder.

Section 1.03.Term and Termination

.  (a) Unless earlier terminated in accordance with Section 1.04 below, the term of this Agreement (the “Term”) shall commence immediately after the Closing and shall terminate with respect to all Services (except as provided in Section 1.03(b) or Section 1.03(c)) on Service Recipient’s first fiscal quarter end occurring at least twelve months after the Closing Date (the “Expiration Date”).

(b)Notwithstanding anything to the contrary contained herein, this Agreement may be terminated at any time:

(i)by the mutual written consent of the Parties;

(ii)by Service Provider in the event of any material breach or default (other than with respect to payment obligations under Article 2, which are addressed in Section 1.03(b)(iii) below) by Service Recipient of Service Recipient’s obligations under this Agreement and the failure of Service Recipient to cure such breach or default within thirty (30) days after receipt of written notice from Service Provider specifying in reasonable detail the alleged material breach or default and requesting such breach or default be cured;

(iii)by Service Provider in the event Service Provider has not received a payment, except payments being disputed in good faith pursuant to a Dispute Notice, from Service Recipient pursuant to Article 2 by the applicable payment date set forth therein and Service Recipient fails to make such payment within thirty (30) days after receipt of written notice from Service Provider requesting that such payment be made; or

(iv)by Service Recipient in the event of any material breach or default by Service Provider of Service Provider’s obligations under this Agreement and the failure of Service Provider to cure such breach or default within thirty (30) days after receipt of written notice from Service Recipient specifying in reasonable detail the alleged material breach or default and requesting such breach or default be cured.

(c)Service Recipient may discontinue one or more particular Services from time to time during the Term by providing no less than thirty (30) days’ advance written notice to Service Provider.  Notwithstanding the foregoing, (i) a particular Service may be discontinued only upon discontinuation of all related interdependent or bundled Services and (ii) no such 

2

discontinuation shall relieve Service Recipient of any of its obligations under this Agreement with respect to Services provided prior to such discontinuation (including payment therefor).  Upon any such discontinuation, Exhibit A shall be deemed amended to delete such Service.

Section 1.04.Standard of Performance

.  Service Provider shall provide the Services with a standard of care, skill, priority, frequency, timeliness and diligence consistent with the manner in which the Services were provided to Service Recipient and its Subsidiaries over the period from January 1, 2018 to the Closing Date.  Service Provider shall assign sufficient resources and qualified personnel as are reasonably required to perform the Services in accordance with the standards set forth in the preceding sentence.  Except as provided in this Section 1.04, Service Provider makes no warranties of any kind, express or implied, with respect to any Service provided hereunder.

Section 1.05.Service Limitations

.  (a) Notwithstanding anything to the contrary contained herein, in providing the Services, neither Service Provider nor any of its Affiliates shall be obligated to (i) hire any additional employees, (ii) maintain the employment of any specific employee or (iii) take any action that would violate any Applicable Law or result in, in each case, whether with notice, lapse of time or both, a breach of or default, or the loss of any benefit, or the need to obtain consent of any third party, under any agreement to which Service Provider or any of its Affiliates is a party as of the date hereof.  Service Provider shall use its commercially reasonable efforts to obtain any such consent; provided that Service Provider shall not be required to make any payment to, waive or lose any right or benefit from, or otherwise incur any monetary or non-monetary liability to any third party for any such consent.  To the extent that any such consent is not obtained, the Parties will cooperate in good faith to make alternative arrangements reasonably acceptable to each Party under which Service Recipient would obtain the benefit of such Service to the same extent (or as nearly as practicable) as if such consent were obtained.  Service Provider and its Affiliates may make changes to their contracts, arrangements and relationships with third parties without the consent of Service Recipient, and Service Provider shall have no liability or obligation hereunder for any such changes (or any changes in the level or quality of Services resulting therefrom) to the extent such changes (x) are, to the extent relevant, generally applicable to other services that (i) are similar to the Services and (ii) Service Provider and its subsidiaries provide to Service Provider’s other subsidiaries and (y) do not have a disproportionate (to the extent Service Provider provides similar services to its subsidiaries) and adverse effect on the provision, or receipt, of the Services.

(b)Service Recipient may utilize the Services only in connection with the operation of the business of Service Recipient and its Subsidiaries in substantially the same manner in which Service Recipient and its Subsidiaries operated over the period from January 1, 2018 to the Closing Date (and without giving effect to any acquisitions), and neither Service Recipient nor any of its Subsidiaries shall be permitted to assign, resell or provide the Services to any Person whatsoever other than to Service Recipient’s Subsidiaries.

Section 1.06.Acknowledgment and Representation

.  Each Party understands that the Services provided hereunder are transitional in nature and are furnished solely for the purpose of accommodating the Distribution and the Merger.

3

Section 1.07.Contract Managers; Disputes

.  (a) Service Provider and Service Recipient shall each appoint an individual (each, a “Contract Manager”) to act as the primary point of contact for the administration and operation of this Agreement.  The Contract Managers shall meet on the phone or in person at least monthly to discuss in good faith, among other items, the provision of the Services, any unresolved disputes and such other items deemed appropriate by the Contract Managers.  Service Provider and Service Recipient may each change its respective Contract Manager from time to time upon prior written notice to the other Party.

(b)In the event of any dispute arising out of or related to this Agreement or the Services, prior to a Party pursuing its other rights and remedies under this Agreement, such Party’s Contract Manager must give written notice (a “Dispute Notice”) to the other Party’s Contract Manager specifying the nature of the dispute.  During the fifteen (10) Business Day period following receipt of such Dispute Notice, the Contract Managers shall discuss and negotiate in good faith to resolve such dispute.  If, following such period, the Contract Managers have not resolved such dispute, then, during the subsequent ten (10) Business Day period, a member of senior management of each of Service Provider and Service Recipient shall discuss and negotiate in good faith to resolve such dispute.  If, following such period, such dispute remains unresolved, then either Party may pursue its rights and remedies under this Agreement, including as provided in Section 5.06.

Article 2
Payments

Section 2.01.Service Fees

.  In consideration for each Service to be provided hereunder, Service Recipient shall pay to Service Provider such fees and costs as are set forth in the Services Schedule with respect to such Service (“Service Fees”).  Service Provider shall send to Service Recipient on a monthly basis a written invoice for the Services, listing with reasonable detail the Services provided hereunder and the calculation of the applicable Service Fees.  Invoices shall be payable within thirty (30) days after receipt by Service Recipient.  Any Service Fees owed to Service Provider under this Agreement which are not paid within thirty (30) days of their due date will be considered delinquent and a late payment charge of the lesser of 0.5% of the delinquent balance due and the maximum amount permissible by Applicable Law will be assessed per month on the amounts that remain delinquent.  Should Service Recipient dispute any portion of any invoice, Service Recipient shall promptly pay any undisputed amounts and deliver a Dispute Notice to Service Provider’s Contract Manager with respect thereto.

Section 2.02.Taxes

.  Service Recipient shall bear all Goods and Services Taxes levied by Canada, provincial sales taxes levied by any province of Canada, sales taxes, use taxes, value-added taxes or similar taxes, duties, levies, imposts, assessments and other similar charges (including any related interest, penalties and other liabilities related thereto ) (“Service Recipient Taxes”) imposed as a result of the provision and receipt of Services under this Agreement.  For the avoidance of doubt, Service Recipient Taxes shall not include any Income Taxes (as defined in the Tax Matters Agreement) of Service Provider.  All payments made by or on behalf of Service Recipient under this Agreement shall be made free and clear of any Taxes, unless Service Recipient is required to withhold or deduct Taxes by Applicable Law.  If Service Recipient is so required by Applicable Law to withhold or deduct any amount from any payment made pursuant to this Agreement, such withheld or deducted amount will be treated as having 

4

been paid to Service Provider to the extent such amounts are properly paid over to the appropriate governmental authority, and Service Recipient shall furnish to Service Provider within ten (10) business days of such payment the original or certificated copy of any receipt issued by such governmental authority evidencing such payment.  If Service Recipient intends to deduct or withhold from any payment made pursuant to this Agreement, it shall notify the Service Recipient of its intention to withhold, which notice shall include a statement of the amounts it intends to deduct or withhold in respect of making of such payment and the applicable provision of law requiring the Service Recipient to withhold or deduct, in each case at least fifteen (15) days prior to the due date for such payment (unless a change in law prevents Service Recipient from providing any such notice, in which case Service Recipient shall use commercially reasonable efforts to provide such notice and statement as soon as possible following Service Recipient becoming aware of such change in law).  Service Recipient and Service Provider shall reasonably cooperate to reduce or eliminate any withholding or deduction from any payment made pursuant to this Agreement.

 

Article 3
Other Covenants and Agreements

Section 3.01.Independent Contractors

.  Service Provider is an independent contractor, and none of Service Provider’s or any of its Affiliates’ respective employees, representatives or agents will be deemed to be employees, representatives or agents of Service Recipient or any of its Subsidiaries for any purpose or under any circumstances.  Service Provider or its applicable Affiliate shall be responsible for (i) payment of compensation, benefits and labor costs (including workers’ compensation obligations) attributable to such employees and (ii) withholding and remitting of taxes with respect to such employees as required by Applicable Law.  No partnership, joint venture, alliance, fiduciary or any relationship other than that of independent contractors is created hereby, expressly or by implication.  The Parties’ respective rights and obligations hereunder shall be limited to the contractual rights and obligations expressly set forth herein on the terms and conditions set forth herein.

Section 3.02.Confidential Information

.  (a) Service Provider and Service Recipient, respectively, shall, and shall cause their respective Affiliates to, hold all Confidential Information relating to Service Recipient or Service Provider, respectively, confidential, and shall not use such Confidential Information other than as necessary for the provision or receipt of the Services, unless legally compelled or required to disclose such information, in which event the Party legally compelled or required to disclose shall provide written notice of such legal compulsion or requirement to disclose as promptly as practicable and shall reasonably cooperate with the other Party in connection with such Party’s seeking of a protective order or similar remedy.  Notwithstanding the foregoing, Service Provider may only provide Service Recipient’s Confidential Information to Third-Party Providers that have been informed of the confidentiality obligations of this Section 3.02; provided, that Service Provider shall be responsible or any breach of this Section 3.02 by any such Third-Party Providers.  As used in this Agreement, the term “Confidential Information” means any and all information, data, materials, products, intellectual property rights and processes disclosed by or on behalf of a Party to any other Party, or otherwise obtained by a Party from or on behalf of any other Party, in connection with the provision or receipt of any Service during the Term, to the extent the same (i) is not and does not 

5

become generally available to the public other than as a result of a breach of this Agreement, (ii) was not already known by the recipient on a non-confidential basis when received or obtained from or on behalf of the disclosing Party and (iii) was not independently acquired or developed by the recipient without violating the terms of this Agreement or any other obligation of confidentiality.  Service Provider shall not, and shall not be required to, disclose to Service Recipient any confidential or proprietary information, including pricing information, of any Third-Party Provider.  To the extent practicable, Service Recipient shall not, without the prior written consent of Service Provider, contact, engage in discussions with, or otherwise communicate directly with any Third-Party Provider with respect to the provision of Services hereunder; provided that employees of Service Recipient and its Subsidiaries may communicate with Third-Party Providers in the ordinary course of business consistent with past practice.

(b)Upon expiration or termination of this Agreement, Service Provider and Service Recipient, respectively, shall promptly return to Service Recipient or Service Provider, respectively, or destroy all Confidential Information of Service Recipient or Service Provider, respectively, which is in the possession of Service Provider or Service Recipient, respectively; provided that each Party may retain Confidential Information of the other Party if required by Applicable Law or bona fide document retention policy; provided, further, that any such retained Confidential Information shall remain subject to this Section 3.02.

Section 3.03.IT Access

.  As of the date hereof, except as otherwise expressly provided herein, or unless required in connection with, or as specifically contemplated by, the performance, delivery or receipt of a Service, Service Recipient shall cease to use and shall have no further access to, and Service Provider shall have no obligation to otherwise provide, (i) Service Provider’s intranet and other owned, licensed or leased information technology related resources, including software, networks, hardware, servers or other related technology, and (ii) computer-based resources (including e-mail and access to Service Provider’s computer networks and databases) which require a password or are available on a secured access basis (collectively, the “Provider Systems”).

Section 3.04.IT Security

.  (a)  Service Recipient shall cause all of its personnel, employees, officers, contractors, consultants or other agents (collectively, the “Recipient Personnel”) having access to the Provider Systems to comply with all documented security guidelines applicable to Service Provider’s and its Subsidiaries’ personnel, employees, officers, contractors, consultants or other agents generally (including physical security, network access, data security and privacy guidelines and similar policies) of Service Provider and shall not knowingly tamper with, compromise or circumvent any security or audit measures employed by Service Provider.  Service Recipient shall ensure that such access shall be made by such Recipient Personnel only as required in connection with, or as specifically contemplated by, the performance, delivery or receipt of a Service hereunder.

(b)Service Provider shall cause all of its personnel, employees, officers, contractors, consultants or other agents (collectively, the “Provider Personnel”) having access to (i) Service Recipient’s intranet and other owned, licensed or leased information technology related resources, including software, networks, hardware, servers or other related technology, and (ii) computer-based resources (including e-mail and access to Service Recipient’s computer networks and databases) which require a password or are available on a secured access basis 

6

(collectively, the “Recipient Systems”) to comply with all documented security guidelines applicable to Service Recipient’s and its Subsidiaries’ personnel, employees, officers, contractors, consultants or other agents generally (including physical security, network access, data security and privacy guidelines and similar policies) of Service Recipient and shall not knowingly tamper with, compromise or circumvent any security or audit measures employed by Service Recipient.  Service Provider shall ensure that such access shall be made by such Provider Personnel only as required in connection with, or as specifically contemplated by, the performance, delivery or receipt of a Service hereunder.

(c)In the event of a cyber incident or attack for which Service Provider reasonably believes the Provider Systems have been or could be compromised, Service Recipient agrees that Service Provider may take all steps it deems reasonably necessary and/or advisable in its sole discretion to remediate such cyber incident, including temporary termination of or blocking Service Recipient’s and Recipient Personnel’s access and connectivity to the Provider Systems.  If Service Provider reasonably believes that any of the Recipient Personnel have failed to comply with the security guidelines of Service Provider, or that any of the Recipient Personnel has accessed any Provider Systems other than in accordance with the terms and conditions of this Agreement, Service Recipient agrees that Service Provider may temporarily terminate or block such Recipient Personnel’s access and connectivity to the Provider Systems until such time as Service Recipient has remedied such non-compliance in a manner satisfactory to Service Provider in its reasonable discretion.

Article 4
Indemnity and Losses

Section 4.01.Indemnification

.  (a) Service Recipient shall indemnify, defend, and hold harmless Service Provider and its Affiliates from and against any and all Damages arising out of or resulting from (i) Service Recipient’s breach of Service Recipient’s obligations under this Agreement and (ii) any claim or action by a party other than Service Recipient in connection with Service Provider’s performance or procurement of the Services under this Agreement, to the extent such Damages arise out of Service Recipient’s gross negligence, fraud or willful misconduct in the performance of its obligations under this Agreement.

(b)Subject to Section 4.02, Service Provider shall indemnify, defend and hold harmless Service Recipient and its Affiliates from and against any and all Damages arising out of or resulting from Service Provider’s gross negligence, fraud, intentional breach or willful misconduct in the performance of its obligations under this Agreement.

(c)This Section 4.01 will provide the exclusive remedy for any claim arising out of this Agreement or the transactions contemplated hereby; provided that nothing herein shall be construed to limit any remedy set forth in the Merger Agreement or any other Transaction Document.

Section 4.02.Limitation of Liability

.  (a) Service Provider shall not have any liability relating to the provision of Services unless such liability arises from the gross negligence, fraud, intentional breach or willful misconduct of Service Provider in the performance of its obligations hereunder, and Service Provider’s maximum aggregate liability (based on breach of warranty, 

7

breach of contract, negligence, strict liability in tort or any other legal or equitable theory) to Service Recipient for Damages hereunder shall not exceed the sum of the aggregate Service Fees paid and payable by Service Recipient to Service Provider pursuant to this Agreement.

(b)NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN NO EVENT WILL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE FOR ANY (X) SPECIAL, INCIDENTAL, INDIRECT, OR PUNITIVE DAMAGES OR (Y) CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, LOSS OF REVENUE, LOST SALES OR DIMINUTION IN VALUE) THAT ARE NOT REASONABLY FORESEEABLE, IN EACH CASE IN CONNECTION WITH ANY CLAIMS, LOSSES, DAMAGES OR INJURIES ARISING OUT OF THEIR CONDUCT PURSUANT TO THIS AGREEMENT REGARDLESS OF WHETHER SUCH PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR NOT.

(c)EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, THE SEPARATION AGREEMENT, THE MERGER AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, THE SERVICES ARE PROVIDED “AS IS” AND SERVICE PROVIDER DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO THE SERVICES AND MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY, SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE OR NON-INFRINGEMENT.

Article 5
Miscellaneous

Section 5.01.Notices

.  All notices, requests and other communications to any Party shall be in writing (including electronic mail (“e-mail”) transmission) and shall be given,

if to Service Recipient, to:

S.P. Richards Company

c/o Essendant Inc.

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015

Attention:Janet Zelenka, Chief Financial Officer

Brendan McKeough, General Counsel

E-mail: jzelenka@essendant.com

bmckeough@essendant.com

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

155 North Wacker Drive

Chicago, Illinois 60606

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Attention: Charles W. Mulaney, Jr.

E-mail: charles.mulaney@skadden.com

if to Service Provider, to:

Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Treg S. Brown

Scott Smith
Christopher T. Galla

E-mail:Treg_Brown@genpt.com
Scott_Smith@genpt.com
Chris_Galla@genpt.com

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York  10017

Attention: John H. Butler

E-mail: john.butler@davispolk.com

or such other address or e-mail address as such Party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.

Section 5.02.Amendments and Waivers

.  (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b)No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as set forth in Section 4.01(c), the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 5.03.Expenses

.  In any proceeding to enforce Service Provider’s rights or obligations under this Agreement, on the one hand, or Service Recipient’s rights or obligations under this Agreement, on the other hand, the substantially prevailing Party shall be entitled to reimbursement by the other Party of all out-of-pocket costs and expenses (including, for the avoidance of doubt, attorneys’ fees) incurred in connection with such proceedings promptly upon written demand therefor.

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Section 5.04.Successors and Assigns

.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, that Service Provider shall be entitled, without the consent of Service Recipient, to assign its rights and obligations hereunder to any of its Affiliates.

Section 5.05.Governing Law

.  This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 5.06.Dispute Resolution

.  (a) Any dispute arising out of or in connection with this Agreement shall first be subject to the procedures described in Section 1.07(b).

(b)Thereafter, except as provided in Section 5.06(c), any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement shall be brought in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the Parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such Proceeding and waives any objection to venue laid therein.  EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.

(c)Any dispute arising out of or in connection with this Agreement relating to taxes shall not be subject to Section 5.06(b) and shall instead be subject to the procedures described in Section 8.02 of the Tax Matters Agreement.

Section 5.07.Counterparts; Effectiveness; Third Party Beneficiaries

.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Parties.  Until and unless each Party has received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the Parties and their respective successors and permitted assigns.

Section 5.08.Entire Agreement

.  This Agreement (and the Exhibits delivered in connection herewith) constitutes the entire agreement between the Parties with respect to the 

10

subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.

Section 5.09.Severability

.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 5.10.Force Majeure

.  Except for Service Recipient’s obligation to make timely payments for Services performed in accordance with the terms hereof, no Party will have any liability for any Losses or delay due to fire, explosion, lightning, pest damage, power failure or surges, strikes or labor disputes, water or flood, acts of God, the elements, war, cyber attack, civil disturbances, acts of civil or military authorities or the public enemy, interruption of transportation, or any other cause beyond such Party’s reasonable control similar to the foregoing that prevent such Party from materially performing its obligations hereunder.  If any Party claims a condition of force majeure as an excuse for non-performance of any provision of Services, the Party asserting the claim must notify the other Parties as soon as practicable of the force majeure condition, describing the condition in reasonable detail and, to the extent known, the probable extent and duration of the condition.  For so long as a condition of force majeure continues, (i) the Party invoking the condition as an excuse for non-performance hereunder will use reasonable best efforts to cure or remove the condition as promptly as possible so as to resume performance of its obligations hereunder and (ii) the Parties will cooperate in good faith to make alternative arrangements reasonably acceptable to each Party under which the Party not invoking the condition as an excuse for non-performance hereunder would obtain the benefit of this Agreement to the same extent (or as nearly as practicable) as if such condition did not exist.

Section 5.11.Survival of Obligations

.  The obligations of the Parties under Article 2, Section 3.02, Article 4 and this Article 5 shall survive the expiration of this Agreement.

Section 5.12.Inconsistency

.  In the event of any inconsistency between the terms of this Agreement and the terms of the Separation Agreement or the Merger Agreement, as applicable, the terms of the Separation Agreement or the Merger Agreement shall control, as applicable.  In the event of any inconsistency between the terms of this Agreement the terms of the Separation Agreement and the Merger Agreement, the terms of the Separation Agreement shall control.

Section 5.13.Headings

.  The heading references herein and the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

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Section 5.14.No Strict Construction

.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

[signature page follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

		
	
GENUINE PARTS COMPANY

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

		
	
S.P. RICHARDS COMPANY

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

[Signature Page to Transition Services Agreement]

Attachment V

Form of Supply Chain Transition Services Agreement

 

[Attached]

 

 

 

 

 

 

 

 

SUPPLY CHAIN TRANSITION SERVICES AGREEMENT

dated as of

[•], 2018

between

[GPC SERVICES, LLC]

and

S.P. RICHARDS COMPANY

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

Article 1
Services and Term

	
Section 1.01.
	
Services to be Performed1

	
Section 1.02.
	
Term and Termination2

	
Section 1.03.
	
Standard of Performance2

	
Section 1.04.
	
Service Limitations2

	
Section 1.05.
	
Acknowledgment and Representation4

	
Section 1.06.
	
Contract Managers; Disputes4

Article 2
Payments

	
Section 2.01.
	
Service Fees4

	
Section 2.02.
	
Taxes5

Article 3
Other Covenants and Agreements

	
Section 3.01.
	
Independent Contractors5

	
Section 3.02.
	
Confidential Information5

	
Section 3.03.
	
IT Access6

	
Section 3.04.
	
IT Security6

Article 4
Indemnity and Losses

	
Section 4.01.
	
Indemnification7

	
Section 4.02.
	
Limitation of Liability8

Article 5
Miscellaneous

	
Section 5.01.
	
Notices8

	
Section 5.02.
	
Amendments and Waivers9

	
Section 5.03.
	
Expenses10

	
Section 5.04.
	
Successors and Assigns10

	
Section 5.05.
	
Governing Law10

	
Section 5.06.
	
Dispute Resolution10

	
Section 5.07.
	
Counterparts; Effectiveness; Third Party Beneficiaries11

	
Section 5.08.
	
Entire Agreement11

	
Section 5.09.
	
Severability11

	
Section 5.10.
	
Force Majeure11

i

	
Section 5.11.
	
Survival of Obligations12

	
Section 5.12.
	
Inconsistency12

	
Section 5.13.
	
Headings12

	
Section 5.14.
	
No Strict Construction12

 

EXHIBITS

Exhibit AServices Schedule

Exhibit BConsent Exceptions

 

ii

 

SUPPLY CHAIN TRANSITION SERVICES AGREEMENT

SUPPLY CHAIN TRANSITION SERVICES AGREEMENT (this “Agreement”) dated as of [•], 2018 between [GPC Services, LLC], a Delaware limited liability company (“Service Provider”), and S.P. Richards Company, a Georgia corporation (“Service Recipient”).  Service Provider and Service Recipient are herein referred to individually as a “Party” and collectively as the “Parties”.  Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Separation Agreement (as defined below) or the Merger Agreement (as defined below), as applicable.

W I T N E S S E T H :

WHEREAS, (i) Genuine Parts Company, a Georgia corporation (“GPC”), and Rhino SpinCo, Inc., a Delaware corporation (“Spinco”), have entered into that certain Separation Agreement dated as of April 12, 2018 (the “Separation Agreement”) and (ii) GPC, Spinco, Essendant Inc., a Delaware corporation (“Essendant”), and Elephant Merger Sub Corp., a Delaware corporation, have entered into that certain Agreement and Plan of Merger dated as of April 12, 2018 (the “Merger Agreement”);

WHEREAS, Service Provider is a wholly-owned indirect Subsidiary of GPC;

WHEREAS, the Parties are entering into this Agreement in connection with the Distribution and the Closing; and

WHEREAS, subject to the terms and conditions of this Agreement, Service Provider agrees to provide, by itself or through its Affiliates or other designated third parties, and Service Recipient desires to contract for the use of, the Services (as defined below).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the Parties agree as follows:

Article 1
Services and Term

Section 1.01.Services to be Performed

.  In accordance with the terms and provisions of this Agreement, Service Provider shall perform, or cause one or more of its Affiliates to perform, or procure one or more third parties (each, a “Third-Party Provider”) to perform, the Services; provided that if the use of any such Third-Party Provider is inconsistent with Service Provider’s past practices, the prior written consent of Service Recipient (such consent not to be unreasonably withheld, delayed or conditioned) shall be required prior to Service Provider’s engagement of such Third-Party Provider. Service Provider shall remain responsible, in accordance with the terms of this Agreement, for performance of any Service by any of its Affiliates or any Third-Party Provider.  “Services” shall mean the services described in the Services Schedule attached hereto as Exhibit A (the “Services Schedule”), in each case to be performed by Service Provider or any of its Affiliates or Third-Party Providers for the benefit of Service Recipient and its Subsidiaries.

 

Section 1.02.Term and Termination

.  (a) Unless earlier terminated in accordance with Section 1.03 below, the term of this Agreement (the “Term”) shall commence immediately after the Closing and shall terminate with respect to all Services (except as provided in Section 1.02(b)) on December 31, 2020 (the “Expiration Date”); provided, however, that the Expiration Date may be extended to December 31, 2021 by Service Recipient by delivery of irrevocable written notice to Service Provider during the 30-day period commencing on the 90th day prior to the initial Expiration Date.

(b)Notwithstanding anything to the contrary contained herein, this Agreement may be terminated at any time:

(i)by the mutual written consent of the Parties;

(ii)by Service Provider in the event of any material breach or default (other than with respect to payment obligations under Article 2, which are addressed in Section 1.02(b)(iii) below) by Service Recipient of Service Recipient’s obligations under this Agreement and the failure of Service Recipient to cure such breach or default within thirty (30) days after receipt of written notice from Service Provider specifying in reasonable detail the alleged material breach or default and requesting such breach or default be cured;

(iii)by Service Provider in the event Service Provider has not received a payment, except payments being disputed in good faith pursuant to a Dispute Notice, from Service Recipient pursuant to Article 2 by the applicable payment date set forth therein and Service Recipient fails to make such payment within thirty (30) days after receipt of written notice from Service Provider requesting that such payment be made; or

(iv)by Service Recipient in the event of any material breach or default by Service Provider of Service Provider’s obligations under this Agreement and the failure of Service Provider to cure such breach or default within thirty (30) days after receipt of written notice from Service Recipient specifying in reasonable detail the alleged material breach or default and requesting such breach or default be cured.

Section 1.03.Standard of Performance

.  Service Provider shall provide the Services with a standard of care, skill, priority, frequency, timeliness and diligence consistent with the manner in which the Services were provided to Service Recipient and its Subsidiaries over the period from January 1, 2018 to the Closing Date.  Service Provider shall assign sufficient resources and qualified personnel as are reasonably required to perform the Services in accordance with the standards set forth in the preceding sentence.  Except as provided in this Section 1.03, Service Provider makes no warranties of any kind, express or implied, with respect to any Service provided hereunder.

Section 1.04.Service Limitations

.  (a) Notwithstanding anything to the contrary contained herein, in providing the Services, neither Service Provider nor any of its Affiliates shall be obligated to (i) hire any additional employees, (ii) maintain the employment of any specific employee or (iii) take any action that would violate any Applicable Law or result in, in each case, whether with notice, lapse of time or both, a breach of or default, or the loss of any 

benefit, or the need to obtain consent of any third party (other than any consent from the Persons set forth Exhibit B hereto), under any agreement to which Service Provider or any of its Affiliates is a party as of the date hereof.  Service Provider shall use its commercially reasonable efforts to obtain any such consent; provided that Service Provider shall not be required to make any payment to, waive or lose any right or benefit from, or otherwise incur any monetary or non-monetary liability to any third party for any such consent.  To the extent that any such consent is not obtained, the Parties will cooperate in good faith to make alternative arrangements reasonably acceptable to each Party under which Service Recipient would obtain the benefit of such Service to the same extent (or as nearly as practicable) as if such consent were obtained.  Service Provider and its Affiliates may make changes to their contracts, arrangements and relationships with third parties without the consent of Service Recipient, and Service Provider shall have no liability or obligation hereunder for any such changes (or any changes in the level or quality of Services resulting therefrom) to the extent such changes (x) are, to the extent relevant, generally applicable to other services that (i) are similar to the Services and (ii) GPC and its subsidiaries provide to GPC’s other subsidiaries and (y) do not have a disproportionate (to the extent GPC provides similar services to its subsidiaries) and adverse effect on the provision, or receipt, of the Services.

(b)Service Recipient may utilize the Services only in connection with the operation of the business of Service Recipient and its Subsidiaries in substantially the same manner in which Service Recipient and its Subsidiaries operated over the period from January 1, 2018 to the Closing Date (and without giving effect to any acquisitions), and neither Service Recipient nor any of its Subsidiaries shall be permitted to assign, resell or provide the Services to any Person whatsoever other than to Service Recipient’s Subsidiaries; provided, however, that, with the consent of any applicable Third Party Providers, Essendant and its Subsidiaries (other than Service Recipient and its Subsidiaries) may utilize the Obligatory Third Party Logistics Services and the Optional Third Party Logistics Services in connection with the operation of their businesses.

(c)During the Term, (i) Service Recipient and its Subsidiaries shall be obligated to utilize the Global Sourcing Services with respect to purchase orders worth at least $70 million in the aggregate per fiscal year (or a pro rata portion of such amount for any partial fiscal year occurring during the Term) (the “Global Sourcing Minimum”) and (ii) Service Recipient shall be obligated to utilize the Ocean Shipment Services in substantially the same manner in which Service Recipient and its Subsidiaries used the Ocean Shipment Services over the period from January 1, 2018 to the Closing Date (and without giving effect to any acquisitions).

(d)During the Term, (i) Service Recipient and its Subsidiaries shall be obligated to utilize the Parcel Shipment Services for all of their parcel shipments and (ii) if Service Recipient does not, or if it is reasonably likely that Service Recipient and its Subsidiaries will not, utilize the Parcel Shipment Services with respect to at least $40 million of gross parcel shipments in a given fiscal year (or a pro rata portion of such amount for any partial fiscal year occurring during the Term) (the “Parcel Shipment Minimum”), then, subject to receipt of any required consent of any applicable Third Party Providers, Service Recipient shall cause Essendant and/or any of its Subsidiaries (other than Service Recipient and its Subsidiaries) to utilize the Parcel Shipment Services to the extent required to cause the Parcel Shipment Minimum to be satisfied for such fiscal year (or partial fiscal year, if applicable).  In addition, for purposes of assisting Essendant 

in its determination of whether or not to exercise its right to utilize the Obligatory Third Party Logistics Services and the Optional Third Party Logistics Services pursuant to Section 1.04(b), Service Provider may attempt to demonstrate that utilizing the Parcel Shipment Services (instead of other shipment services) for other parcel shipments by Essendant and its Subsidiaries (other than Service Recipient and its Subsidiaries) will, taking all relevant factors into consideration (including rates, ancillary services, reporting capabilities and service level commitments), result in a meaningful economic benefit for Essendant and/or such Subsidiaries.

Section 1.05.Acknowledgment and Representation

.  Each Party understands that the Services provided hereunder are transitional in nature and are furnished solely for the purpose of accommodating the Distribution and the Merger.

Section 1.06.Contract Managers; Disputes

.  (a)  Service Provider and Service Recipient shall each appoint an individual (each, a “Contract Manager”) to act as the primary point of contact for the administration and operation of this Agreement.  The Contract Managers shall meet on the phone or in person at least monthly to discuss in good faith, among other items, the provision of the Services, any unresolved disputes and such other items deemed appropriate by the Contract Managers.  Service Provider and Service Recipient may each change its respective Contract Manager from time to time upon prior written notice to the other Party.

(b)In the event of any dispute arising out of or related to this Agreement or the Services, prior to a Party pursuing its other rights and remedies under this Agreement, such Party’s Contract Manager must give written notice (a “Dispute Notice”) to the other Party’s Contract Manager specifying the nature of the dispute.  During the fifteen (10) Business Day period following receipt of such Dispute Notice, the Contract Managers shall discuss and negotiate in good faith to resolve such dispute.  If, following such period, the Contract Managers have not resolved such dispute, then, during the subsequent ten (10) Business Day period, a member of senior management of each of Service Provider and Service Recipient shall discuss and negotiate in good faith to resolve such dispute.  If, following such period, such dispute remains unresolved, then either Party may pursue its rights and remedies under this Agreement, including as provided in Section 5.06.

Article 2
Payments

Section 2.01.Service Fees

.  In consideration for each Service to be provided hereunder, Service Recipient shall pay to Service Provider such fees and costs as are set forth in the Services Schedule with respect to such Service (“Service Fees”).  Service Provider shall send to Service Recipient on a monthly basis (or, in the case of Third Party Logistics Services, a weekly basis) a written invoice for the Services, listing with reasonable detail the Services provided hereunder and the calculation of the applicable Service Fees.  Invoices shall be payable within thirty (30) days after receipt by Service Recipient.  Any Service Fees owed to Service Provider under this Agreement which are not paid within thirty (30) days of their due date will be considered delinquent and a late payment charge of the lesser of 0.5% of the delinquent balance due and the maximum amount permissible by Applicable Law will be assessed per month on the amounts that remain delinquent.  Should Service Recipient dispute any portion of any invoice, 

Service Recipient shall promptly pay any undisputed amounts and deliver a Dispute Notice to Service Provider’s Contract Manager with respect thereto.

Section 2.02.Taxes

.  Service Recipient shall bear all Goods and Services Taxes levied by Canada, provincial sales taxes levied by any province of Canada, sales taxes, use taxes, value-added taxes or similar taxes, duties, levies, imposts, assessments and other similar charges (including any related interest, penalties and other liabilities related thereto ) (“Service Recipient Taxes”) imposed as a result of the provision and receipt of Services under this Agreement.  For the avoidance of doubt, Service Recipient Taxes shall not include any Income Taxes (as defined in the Tax Matters Agreement) of Service Provider.  All payments made by or on behalf of Service Recipient under this Agreement shall be made free and clear of any Taxes, unless Service Recipient is required to withhold or deduct Taxes by Applicable Law.  If Service Recipient is so required by Applicable Law to withhold or deduct any amount from any payment made pursuant to this Agreement, such withheld or deducted amount will be treated as having been paid to Service Provider to the extent such amounts are properly paid over to the appropriate governmental authority, and Service Recipient shall furnish to Service Provider within ten (10) business days of such payment the original or certificated copy of any receipt issued by such governmental authority evidencing such payment.  If Service Recipient intends to deduct or withhold from any payment made pursuant to this Agreement, it shall notify the Service Recipient of its intention to withhold, which notice shall include a statement of the amounts it intends to deduct or withhold in respect of making of such payment and the applicable provision of law requiring the Service Recipient to withhold or deduct, in each case at least fifteen (15) days prior to the due date for such payment (unless a change in law prevents Service Recipient from providing any such notice, in which case Service Recipient shall use commercially reasonable efforts to provide such notice and statement as soon as possible following Service Recipient becoming aware of such change in law).  Service Recipient and Service Provider shall reasonably cooperate to reduce or eliminate any withholding or deduction from any payment made pursuant to this Agreement.

 

Article 3
Other Covenants and Agreements

Section 3.01.Independent Contractors

.  Service Provider is an independent contractor, and none of Service Provider’s or any of its Affiliates’ respective employees, representatives or agents will be deemed to be employees, representatives or agents of Service Recipient or any of its Subsidiaries for any purpose or under any circumstances.  Service Provider or its applicable Affiliate shall be responsible for (i) payment of compensation, benefits and labor costs (including workers’ compensation obligations) attributable to such employees and (ii) withholding and remitting of taxes with respect to such employees as required by Applicable Law.  No partnership, joint venture, alliance, fiduciary or any relationship other than that of independent contractors is created hereby, expressly or by implication.  The Parties’ respective rights and obligations hereunder shall be limited to the contractual rights and obligations expressly set forth herein on the terms and conditions set forth herein.

Section 3.02.Confidential Information

.  (a) Service Provider and Service Recipient, respectively, shall, and shall cause their respective Affiliates to, hold all Confidential Information relating to Service Recipient or Service Provider, respectively, confidential, and 

shall not use such Confidential Information other than as necessary for the provision or receipt of the Services, unless legally compelled or required to disclose such information, in which event the Party legally compelled or required to disclose shall provide written notice of such legal compulsion or requirement to disclose as promptly as practicable and shall reasonably cooperate with the other Party in connection with such Party’s seeking of a protective order or similar remedy.  Notwithstanding the foregoing, Service Provider may only provide Service Recipient’s Confidential Information to Third-Party Providers that have been informed of the confidentiality obligations of this Section 3.02; provided, that Service Provider shall be responsible or any breach of this Section 3.02 by any such Third-Party Providers.  As used in this Agreement, the term “Confidential Information” means any and all information, data, materials, products, intellectual property rights and processes disclosed by or on behalf of a Party to any other Party, or otherwise obtained by a Party from or on behalf of any other Party, in connection with the provision or receipt of any Service during the Term, to the extent the same (i) is not and does not become generally available to the public other than as a result of a breach of this Agreement, (ii) was not already known by the recipient on a non-confidential basis when received or obtained from or on behalf of the disclosing Party and (iii) was not independently acquired or developed by the recipient without violating the terms of this Agreement or any other obligation of confidentiality.  Service Provider shall not, and shall not be required to, disclose to Service Recipient any confidential or proprietary information, including pricing information, of any Third-Party Provider.  To the extent practicable, Service Recipient shall not, without the prior written consent of Service Provider, contact, engage in discussions with, or otherwise communicate directly with any Third-Party Provider with respect to the provision of Services hereunder; provided that employees of Service Recipient and its Subsidiaries may communicate with Third-Party Providers in the ordinary course of business consistent with past practice.

(b)Upon expiration or termination of this Agreement, Service Provider and Service Recipient, respectively, shall promptly return to Service Recipient or Service Provider, respectively, or destroy all Confidential Information of Service Recipient or Service Provider, respectively, which is in the possession of Service Provider or Service Recipient, respectively; provided that each Party may retain Confidential Information of the other Party if required by Applicable Law or bona fide document retention policy; provided, further, that any such retained Confidential Information shall remain subject to this Section 3.02.

Section 3.03.IT Access

.  As of the date hereof, except as otherwise expressly provided herein, or unless required in connection with, or as specifically contemplated by, the performance, delivery or receipt of a Service, Service Recipient shall cease to use and shall have no further access to, and Service Provider shall have no obligation to otherwise provide, (i) Service Provider’s intranet and other owned, licensed or leased information technology related resources, including software, networks, hardware, servers or other related technology, and (ii) computer-based resources (including e-mail and access to Service Provider’s computer networks and databases) which require a password or are available on a secured access basis (collectively, the “Provider Systems”).

Section 3.04.IT Security

.  (a) Service Recipient shall cause all of its personnel, employees, officers, contractors, consultants or other agents (collectively, the “Recipient Personnel”) having access to the Provider Systems to comply with all documented security guidelines applicable to Service Provider’s and its Subsidiaries’ personnel, employees, officers, 

contractors, consultants or other agents generally (including physical security, network access, data security and privacy guidelines and similar policies) of Service Provider and shall not knowingly tamper with, compromise or circumvent any security or audit measures employed by Service Provider.  Service Recipient shall ensure that such access shall be made by such Recipient Personnel only as required in connection with, or as specifically contemplated by the performance, delivery or receipt of a Service hereunder.

(b)Service Provider shall cause all of its personnel, employees, officers, contractors, consultants or other agents (collectively, the “Provider Personnel”) having access to (i) Service Recipient’s intranet and other owned, licensed or leased information technology related resources, including software, networks, hardware, servers or other related technology, and (ii) computer-based resources (including e-mail and access to Service Recipient’s computer networks and databases) which require a password or are available on a secured access basis (collectively, the “Recipient Systems”) to comply with all documented security guidelines applicable to Service Recipient’s and its Subsidiaries’ personnel, employees, officers, contractors, consultants or other agents generally (including physical security, network access, data security and privacy guidelines and similar policies) of Service Recipient and shall not knowingly tamper with, compromise or circumvent any security or audit measures employed by Service Recipient.  Service Provider shall ensure that such access shall be made by such Provider Personnel only as required in connection with, or as specifically contemplated by, the performance, delivery or receipt of a Service hereunder.

(c)In the event of a cyber incident or attack for which Service Provider reasonably believes the Provider Systems have been or could be compromised, Service Recipient agrees that Service Provider may take all steps it deems reasonably necessary and/or advisable in its sole discretion to remediate such cyber incident, including temporary termination of or blocking Service Recipient’s and Recipient Personnel’s access and connectivity to the Provider Systems.  If Service Provider reasonably believes that any of the Recipient Personnel have failed to comply with the security guidelines of Service Provider, or that any of the Recipient Personnel has accessed any Provider Systems other than in accordance with the terms and conditions of this Agreement, Service Recipient agrees that Service Provider may temporarily terminate or block such Recipient Personnel’s access and connectivity to the Provider Systems until such time as Service Recipient has remedied such non-compliance in a manner satisfactory to Service Provider in its reasonable discretion.

Article 4
Indemnity and Losses

Section 4.01.Indemnification

.  (a) Service Recipient shall indemnify, defend, and hold harmless Service Provider and its Affiliates from and against any and all Damages arising out of or resulting from (i) Service Recipient’s breach of Service Recipient’s obligations under this Agreement and (ii) any claim or action by a party other than Service Recipient in connection with Service Provider’s performance or procurement of the Services under this Agreement, to the extent such Damages arise out of Service Recipient’s gross negligence, fraud or willful misconduct in the performance of its obligations under this Agreement.

(b)Subject to Section 4.02, Service Provider shall indemnify, defend and hold harmless Service Recipient and its Affiliates from and against any and all Damages arising out of or resulting from Service Provider’s gross negligence, fraud, intentional breach or willful misconduct in the performance of its obligations under this Agreement.

(c)This Section 4.01 will provide the exclusive remedy for any claim arising out of this Agreement or the transactions contemplated hereby; provided that nothing herein shall be construed to limit any remedy set forth in the Merger Agreement or any other Transaction Document.

Section 4.02.Limitation of Liability

.  (a) Service Provider shall not have any liability relating to the provision of Services unless such liability arises from the gross negligence, fraud, intentional breach or willful misconduct of Service Provider in the performance of its obligations hereunder, and Service Provider’s maximum aggregate liability (based on breach of warranty, breach of contract, negligence, strict liability in tort or any other legal or equitable theory) to Service Recipient for Damages hereunder shall not exceed the sum of the aggregate Service Fees paid and payable by Service Recipient to Service Provider pursuant to this Agreement.

(b)NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN NO EVENT WILL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE FOR ANY (X) SPECIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES OR (Y) CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, LOSS OF REVENUE, LOST SALES OR DIMINUTION IN VALUE) THAT ARE NOT REASONABLY FORESEEABLE, IN EACH CASE IN CONNECTION WITH ANY CLAIMS, LOSSES, DAMAGES OR INJURIES ARISING OUT OF THEIR CONDUCT PURSUANT TO THIS AGREEMENT REGARDLESS OF WHETHER SUCH PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR NOT.

(c)EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, THE SEPARATION AGREEMENT, THE MERGER AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, THE SERVICES ARE PROVIDED “AS IS” AND SERVICE PROVIDER DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO THE SERVICES AND MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY, SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE OR NON-INFRINGEMENT.

Article 5
Miscellaneous

Section 5.01.Notices

.  All notices, requests and other communications to any Party shall be in writing (including electronic mail (“e-mail”) transmission) and shall be given,

if to Service Recipient, to:

S.P. Richards Company

c/o Essendant Inc.

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015

Attention:Elizabeth Meloy, Senior Vice President

Brendan McKeough, General Counsel

E-mail: emeloy@essendant.com

bmckeough@essendant.com

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

155 North Wacker Drive

Chicago, Illinois 60606

Attention: Charles W. Mulaney, Jr.

E-mail: charles.mulaney@skadden.com

if to Service Provider, to:

[GPC Services, LLC]
c/o Genuine Parts Company

2999 Wildwood Parkway

Atlanta, Georgia 30339

Attention: Treg S. Brown

Scott Smith
Christopher T. Galla

E-mail:Treg_Brown@genpt.com
Scott_Smith@genpt.com
Chris_Galla@genpt.com

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York  10017

Attention: John H. Butler

E-mail: john.butler@davispolk.com

or such other address or e-mail address as such Party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. 

Section 5.02.Amendments and Waivers

.  (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the 

case of an amendment, by each Party, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b)No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as set forth in Section 4.01(c), the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 5.03.Expenses

.  In any proceeding to enforce Service Provider’s rights or obligations under this Agreement, on the one hand, or Service Recipient’s rights or obligations under this Agreement, on the other hand, the substantially prevailing Party shall be entitled to reimbursement by the other Party of all out-of-pocket costs and expenses (including, for the avoidance of doubt, attorneys’ fees) incurred in connection with such proceedings promptly upon written demand therefor.

Section 5.04.Successors and Assigns

.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.  No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, that Service Provider shall be entitled, without the consent of Service Recipient, to assign its rights and obligations hereunder to any of its Affiliates.

Section 5.05.Governing Law

.  This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 5.06.Dispute Resolution

.  (a) Any dispute arising out of or in connection with this Agreement shall first be subject to the procedures described in Section 1.06(b).

(b)Thereafter, except as provided in Section 5.06(c), any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement shall be brought in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the Parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such Proceeding and waives any objection to venue laid therein.  EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) DIRECTLY OR INDIRECTLY ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.

(c)Any dispute arising out of or in connection with this Agreement relating to taxes shall not be subject to Section 5.06(b) and shall instead be subject to the procedures described in Section 8.02 of the Tax Matters Agreement.

Section 5.07.Counterparts; Effectiveness; Third Party Beneficiaries

.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Parties.  Until and unless each Party has received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the Parties and their respective successors and permitted assigns.

Section 5.08.Entire Agreement

.  This Agreement (and the Exhibits delivered in connection herewith) constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.

Section 5.09.Severability

.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 5.10.Force Majeure

.  Except for Service Recipient’s obligation to make timely payments for Services performed in accordance with the terms hereof, no Party will have any liability for any Losses or delay due to fire, explosion, lightning, pest damage, power failure or surges, strikes or labor disputes, water or flood, acts of God, the elements, war, cyber attack, civil disturbances, acts of civil or military authorities or the public enemy, interruption of transportation, or any other cause beyond such Party’s reasonable control similar to the foregoing that prevent such Party from materially performing its obligations hereunder.  If any Party claims a condition of force majeure as an excuse for non-performance of any provision of Services, the Party asserting the claim must notify the other Parties as soon as practicable of the force majeure condition, describing the condition in reasonable detail and, to the extent known, the probable extent and duration of the condition.  For so long as a condition of force majeure continues, (i) the Party invoking the condition as an excuse for non-performance hereunder will use reasonable best efforts to cure or remove the condition as promptly as possible so as to resume performance of its obligations hereunder and (ii) the Parties will cooperate in good faith to make alternative arrangements reasonably acceptable to each Party under which the Party not invoking the condition as an excuse for non-performance hereunder would obtain the benefit of this Agreement to the same extent (or as nearly as practicable) as if such condition did not exist.

Section 5.11.Survival of Obligations

.  The obligations of the Parties under Article 2, Section 3.02, Article 4 and this Article 5 shall survive the expiration of this Agreement.

Section 5.12.Inconsistency

.  In the event of any inconsistency between the terms of this Agreement and the terms of the Separation Agreement or the Merger Agreement, as applicable, the terms of the Separation Agreement or the Merger Agreement shall control, as applicable.  In the event of any inconsistency between the terms of this Agreement the terms of the Separation Agreement and the Merger Agreement, the terms of the Separation Agreement shall control.

Section 5.13.Headings

.  The heading references herein and the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

Section 5.14.No Strict Construction

.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

[signature page follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

		
	
[GPC SERVICES, LLC]

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

		
	
S.P. RICHARDS COMPANY

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

[Signature Page to Supply Chain Transition Services Agreement]EX-4.9

 Exhibit 4.9 

EXECUTION COPY 
 DATED NOVEMBER 8,
2017 
 USD 100,000,000 

FACILITY AGREEMENT 
 for

 KNUTSEN SHUTTLE TANKERS 15 AS 

as Borrower 
 with 

KNOT OFFSHORE PARTNERS LP 

as Guarantor 
 arranged by 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. 

acting as Mandated Lead Arranger 

with 
 THE FINANCIAL
INSTITUTIONS listed in Schedule 1 
 acting as Original Lenders 

and 
 THE BANK OF
TOKYO-MITSUBISHI UFJ, LTD. 
 acting as Agent 

in relation to the refinancing of 

“TORILL KNUTSEN” 

 CONTENTS 
  

							
	Clause	  	Page	 
	 1.
	 	 Definitions And Interpretation
	  	 	1	 
			
	 2.
	 	 The Facility
	  	 	17	 
			
	 3.
	 	 Purpose
	  	 	17	 
			
	 4.
	 	 Conditions Of Utilisation
	  	 	17	 
			
	 5.
	 	 Utilisation
	  	 	19	 
			
	 6.
	 	 Repayment
	  	 	20	 
			
	 7.
	 	 Prepayment And Cancellation
	  	 	20	 
			
	 8.
	 	 Interest
	  	 	24	 
			
	 9.
	 	 Interest Periods
	  	 	25	 
			
	 10.
	 	 Changes To The Calculation Of Interest
	  	 	25	 
			
	 11.
	 	 Fees
	  	 	26	 
			
	 12.
	 	 Tax Gross Up And Indemnities
	  	 	27	 
			
	 13.
	 	 Increased Costs
	  	 	30	 
			
	 14.
	 	 Other Indemnities
	  	 	31	 
			
	 15.
	 	 Mitigation By The Lenders
	  	 	32	 
			
	 16.
	 	 Costs And Expenses
	  	 	33	 
			
	 17.
	 	 Security
	  	 	34	 
			
	 18.
	 	 Guarantee And Indemnity
	  	 	34	 
			
	 19.
	 	 Representations
	  	 	38	 
			
	 20.
	 	 Information Undertakings
	  	 	43	 
			
	 21.
	 	 Financial Covenants
	  	 	45	 
			
	 22.
	 	 General Undertakings
	  	 	47	 
			
	 23.
	 	 Vessel Undertakings
	  	 	52	 
			
	 24.
	 	 Events Of Default
	  	 	57	 
			
	 25.
	 	 Changes To The Lenders
	  	 	61	 
			
	 26.
	 	 Changes To The Obligors
	  	 	64	 
			
	 27.
	 	 Role Of The Agent, The Mandated Lead Arranger And The Reference Banks
	  	 	65	 
			
	 28.
	 	 Conduct Of Business By The Finance Parties
	  	 	73	 
			
	 29.
	 	 Sharing Among The Finance Parties
	  	 	73	 
			
	 30.
	 	 Payment Mechanics
	  	 	75	 
			
	 31.
	 	 Set-Off
	  	 	77	 
			
	 32.
	 	 Notices
	  	 	77	 

							
			
	 33.
	 	 Calculations And Certificates
	  	 	79	 
			
	 34.
	 	 Partial Invalidity
	  	 	79	 
			
	 35.
	 	 Remedies And Waivers
	  	 	80	 
			
	 36.
	 	 Amendments And Waivers
	  	 	80	 
			
	 37.
	 	 Counterparts
	  	 	81	 
			
	 38.
	 	 Conflict
	  	 	81	 
			
	 39.
	 	 Disclosure Of Information And Confidentiality
	  	 	82	 
			
	 40.
	 	 Confidentiality Of Funding Rates And Reference Bank Quotations
	  	 	82	 
			
	 41.
	 	 “Know Your Customer” Checks
	  	 	84	 
			
	 42.
	 	 Governing Law
	  	 	85	 
			
	 43.
	 	 Enforcement
	  	 	85	 
		
	 SCHEDULE 1 THE ORIGINAL
LENDERS
	  	 	86	 
		
	 SCHEDULE 2 CONDITIONS PRECEDENT
AND SUBSEQUENT
	  	 	87	 
		
	 SCHEDULE 3 FORM OF
UTILISATION REQUEST
	  	 	91	 
		
	 SCHEDULE 4 FORM OF
TRANSFER CERTIFICATE
	  	 	92	 
		
	 SCHEDULE 5 FORM OF
COMPLIANCE CERTIFICATE
	  	 	94	 
		
	 SCHEDULE 6 STRUCTURE CHART
	  	 	95	 

 THIS AGREEMENT is dated 8 November 2017 and is made between: 

 

	(1)	KNUTSEN SHUTTLE TANKERS 15 AS, Norwegian registration no. 997 006 968, with registered offices at Smedasundet 40, N-5529 Haugesund, Norway (the
“Borrower”); 

  

	(2)	KNOT OFFSHORE PARTNERS LP, a limited partnership formed under the laws of the Marshall Islands whose principal executive and administrative offices are at 2 Queens Cross, Aberdeen, Aberdeenshire AB15 4YB, United
Kingdom and which is listed on the New York Stock Exchange, as guarantor (the “Guarantor”); 

  

	(3)	THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., acting through its office at Ropemaker Place, 25 Ropemaker St, London EC2Y 9AN, United Kingdom as mandated lead arranger (the “Mandated Lead
Arranger”); 

  

	(4)	THE FINANCIAL INSTITUTIONS listed in Schedule 1 as lenders (the “Original Lenders”); and 

  

	(5)	THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., acting through its office at Ropemaker Place, 25 Ropemaker St, London EC2Y 9AN, United Kingdom as facility agent and security agent for the other Finance Parties (the
“Agent”). 

 IT IS AGREED as follows: 

SECTION 1 

INTERPRETATION 
  

	1.	DEFINITIONS AND INTERPRETATION 

  

	1.1	Definitions 

 In this Agreement: 

“Account” means USD account no. NO45 1250 04 73523, held in the name of Borrower with the Account Bank. 

“Account Bank” means DNB BANK ASA, Norwegian registration no. 984 851 006, a banking institution organised under the laws
of Norway acting through its office at Solheimsgaten 7C, N-5058 Bergen, Norway. 
 “Account
Pledge” means an agreement dated on or about the date hereof for the pledge of the Account, entered or to be entered into between Borrower and the Agent (on behalf of the Finance Parties) in form and substance satisfactory to the Agent (on
behalf of the Finance Parties). 
 “Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding
Company of that person or any other Subsidiary of that Holding Company. 
 “Agreement” means this facility agreement, as it
may be amended, supplemented and varied in writing from time to time, including its schedules. 
 “Approved Shipbroker”
means Fearnleys, Lorentzen & Stemoco, or any other shipbroker(s) the Lenders may approve. 
 “Assignment Agreement”
means an agreement dated on or about the Utilisation Date for the assignment of the Earnings (including the Charterhire), the Insurances and any Requisition Compensation in respect of the Vessel, entered or to be entered into between the Borrower
and the Agent (on behalf of the Finance Parties) in form and substance satisfactory to the Agent (on behalf of the Finance Parties). 

  
 1 

 “Authorisation” means an authorisation, consent, approval, resolution, licence,
exemption, filing, notarisation or registration. 
 “Availability Period” means the period from and including the date of
this Agreement to and including 31 January 2018. 
 “Available Facility” means the aggregate for the time being of each
Lender’s Commitment in relation to a Facility. 
 “Basel II Accord” means the “International Convergence of
Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 as updated prior to, and in the form existing on, the date of this Agreement, excluding any amendment thereto
arising out of the Basel III Accord. 
 “Basel II Approach” means, in relation to any Finance Party, either the Standardised
Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel II Accord) adopted by that Finance Party (or any of its Affiliates) for the purposes of implementing or complying with the Basel II Accord.

“Basel II Regulation” means: 
  

	 	(a)	any law or regulation implementing the Basel II Accord (including the relevant provisions of directive 2013/36/EU (“CRD IV”) and regulation 575/2013 (“CRR”) of the European Union) to
the extent only that such law or regulation re-enacts and/or implements the requirements of the Basel II Accord but excluding any provision of such law or regulation implementing the Basel III Accord; and

  

	 	(b)	any Basel II Approach adopted by a Finance Party or any of its Affiliates. 

 “Basel III
Accord” means, together: 
  

	 	(a)	the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III:
International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December
2010, each as amended, supplemented or restated; 

  

	 	(b)	the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement—Rules text” published by the
Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and 

  

	 	(c)	any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”. 

“Basel III Regulation” means any law or regulation implementing the Basel III Accord (including CRD IV and CRR) save to the
extent that such law or regulation re-enacts a Basel II Regulation. 

  
 2 

 “Borrower Share Pledge” means an agreement for the charge/pledge of 100% of the
shares in the Borrower dated on or about the date hereof in agreed form between (a) KNOT ST and (b) the Agent (on behalf of the Finance Parties) in form and substance satisfactory to the Agent (on behalf of the Finance Parties). 

“Break Costs” means the amount (if any) by which: 
  

	 	(a)	the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest
Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period; 

exceeds: 
  

	 	(b)	the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting
on the Business Day following receipt or recovery and ending on the last day of the current Interest Period. 

“Business Day” means a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are open for general
business in Oslo, Hong Kong, Tokyo, London and New York City. 
 “Change of Control” means: 

 

	 	(a)	if (i) TS Shipping Invest AS (or a 100% owned subsidiary of TS Shipping Invest AS) and (ii) NYK Logistics Holding (Europe) B.V. (or Nippon Yusen Kabushiki Kaisha or another 100% owned subsidiary of Nippon
Yusen Kabushiki Kaisha) ) each does not own or is not able to vote for (directly or indirectly) for 50% the shares in KNOT; 

  

	 	(b)	if the Guarantor does not own or is not able to vote for (directly or indirectly) all of the shares in the Borrower; 

  

	 	(c)	if the Guarantor does not own or it not able to vote for (directly or indirectly) all of the shares in KNOT ST; 

  

	 	(d)	if KNOT does not own or is not able to vote for (directly or indirectly) all of the shares in the General Partner (being the general partner in the Guarantor); 

 

	 	(e)	the General Partner ceases to be the only general partner of the Guarantor under the Limited Partnership Agreement; 

  

	 	(f)	if KNOT does not own at least 25% of the common and general units in the Guarantor (capital and voting rights to be subject to the limitations on voting rights relating to election of board members, amendments and
certain other matters as set out in the Limited Partnership Agreement); or 

  

	 	(g)	if any person or group of persons acting in concert (other than KNOT and/or any of its wholly owned Subsidiaries) acquires, legally or beneficially, and either directly or indirectly, more than thirty three point thirty
three per cent. (33.33%) of the common and general units or voting rights in the Guarantor. 

  
 3 

 “Charterer” means ENI Trading & Shipping S.p.A or, as the case maybe,
each other charterer of the Vessel from the Borrower from time to time. 
 “Charterhire” means all freight, hire and passage
moneys or other moneys payable by the Charterer to the Borrower under each Charterparty. 
 “Charterparty” means the time
charterparty dated May 31, 2011 entered into between the Borrower and the Charterer for the chartering of the Vessel or, as the case maybe, each other charterparty for the chartering of the Vessel entered into by the Borrower and any charterer from
time to time. 
 “Code” means the US Internal Revenue Code of 1986. 

“Commitment” means: 
  

	 	(a)	in relation to an Original Lender, the amount set opposite its name under the heading “Commitment” in Schedule 1 (The Original Lenders) and the amount of any other Commitment transferred to it
under this Agreement; and 

  

	 	(b)	in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement, 

to the extent not cancelled, reduced or transferred by it under this Agreement. 

“Companies Act” means the Norwegian Limited Liability Companies Act of 13 June 1997 No. 44 (in No.
aksjeloven). 
 “Compliance Certificate” means a certificate substantially in the form set out in Schedule 5
(Form of Compliance Certificate). 
 “Default” means an Event of Default or any event or circumstance specified in
Clause 24 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default. 

“Disruption Event” means either or both of: 
  

	 	(a)	a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise
in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or 

 

	 	(b)	the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party: 

 

	 	(i)	from performing its payment obligations under the Finance Documents; or 

  

	 	(ii)	from communicating with other Parties in accordance with the terms of the Finance Documents, 

and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted. 

  
 4 

 “DOC” means in relation to the Manager of the Vessel a valid document of
compliance issued to such company pursuant to paragraph 13.2 of the ISM Code. 
 “Earnings” means all moneys whatsoever
which are now or later become, payable (actually or contingently) to the Borrower in respect of and/or arising out of the use of or operation of the Vessel, including (but not limited to): 

 

	 	(a)	all freight, hire and passage moneys payable to the Borrower, including (without limitation) the Charterhire and payments of any nature under any contract or any other agreement for the employment, use, possession,
management and/or operation of the Vessel; 

  

	 	(b)	any claim under any guarantees related to hire payable to the Vessel as a consequence of the operation of the Vessel; 

  

	 	(c)	any compensation payable to the Borrower in the event of any requisition of the Vessel or for the use of the Vessel by any government authority or other competent authority; 

 

	 	(d)	remuneration for salvage, towage and other services performed by the Vessel payable to the Borrower; 

  

	 	(e)	demurrage and retention money receivable by the Borrower in relation to the Vessel; 

  

	 	(f)	all moneys which are at any time payable under the Insurances in respect of loss of earnings from the Vessel; 

  

	 	(g)	if and whenever the Vessel is employed on terms whereby any moneys falling within paragraph a) to f) above are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or
sharing arrangement which is attributable to the Vessel; and 

  

	 	(h)	any other money which arise out of the use of or operation of the Vessel and moneys whatsoever due or to become due to the Borrower from third parties in relation to the Vessel. 

“Environmental Claim” means any claim, proceeding, formal notice or investigation by any person or company in respect of any
Environmental Law or Environmental Permits. 
 “Environmental Law” means any applicable law or regulation which relates to:

  

	 	(a)	the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment; 

  

	 	(b)	harm to or the protection of human health; 

  

	 	(c)	the conditions of the workplace; or 

  

	 	(d)	any emission or substance capable of causing harm to any living organism or the environment. 

“Environmental Permits” means any permit, licence, consent, approval and other and other authorisation and the filing of any
notification, report or assessment required under any Environmental Law for the operation of business conducted on or from the properties owned or used by an Obligor. 

  
 5 

 “Event of Default” means any event or circumstance specified as such in
Clause 24 (Events of Default). 
 “Existing Indebtedness” means, at any particular date, the aggregate principal
amount of the Borrower’s indebtedness outstanding on that date under the Existing Loan Agreement which, as at the date of this Agreement, is USD 73,177,556 . 

“Existing Loan Agreement” means the loan agreement dated 3 November 2011 (as amended from time to time) made between, amongst
others, the Borrower and certain banks and financial institutions as banks (for whom Nordea Bank Norge ASA acts as agent and security trustee) in relation to a senior term loan facility originally in the amount of USD117,000,000 provided to the
Borrower to assist it in financing its acquisition of the Vessel. 
 “Facility” means the term loan facility made available
under this Agreement. 
 “Facility Office” means: 
  

	 	(a)	the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices
through which it will perform its obligations under this Agreement; or 

  

	 	(b)	in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes. 

“FATCA” means: 
  

	 	(a)	sections 1471 to 1474 of the Code or any associated regulations; 

  

	 	(b)	any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or
regulation referred to in paragraph (a) above; or 

  

	 	(c)	any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation
authority in any other jurisdiction. 

 “FATCA Application Date” means: 

 

	 	(a)	in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;

  

	 	(b)	in relation to a “withholdable payment” described in section 1473(1)(A)(ii) of the Code (which relates to “gross proceeds” from the disposition of property of a type that can produce interest from
sources within the US), 1 January 2017; or 

  

	 	(c)	in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017, 

or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any
change in FATCA after the date of this Agreement. 

  
 6 

 “FATCA Deduction” means a deduction or withholding from a payment under a
Finance Document required by FATCA. 
 “FATCA Exempt Party” means a Party that is entitled to receive payments free from any
FATCA Deduction. 
 “Fee Letter” means a fee letter dated on or about the date of this Agreement from the Agent to the
Borrower and the Guarantor setting out any of the fees referred to in Clause 11 (Fees). 
 “Final Maturity Date”
means the numerically corresponding date of the Utilisation Date in the Month falling seventy two (72) Months after the Utilisation Date provided that: 
  

	 	(a)	if such date is not a Business Day, the immediately succeeding Business Day shall be the Final Maturity Date (unless such succeeding Business Day falls in the next calendar month, in which event, the Final Maturity Date
shall be the immediately preceding Business Day); and 

  

	 	(b)	if there is no such numerically corresponding date in the relevant calendar month, the Final Maturity Date shall be the immediately succeeding Business Day (unless such succeeding Business Day falls in the next calendar
month, in which event, the Final Maturity Date shall be the immediately preceding Business Day). 

 “Finance
Document” means this Agreement, the Intercreditor Agreement, any Security Document, any Fee Letter, any Manager’s Undertaking and any other document designated as such by the Agent and the Borrower. 

“Finance Party” means the Agent, the Mandated Lead Arranger or a Lender. 

“Financial Indebtedness” means any indebtedness for or in respect of: 

 

	 	(a)	moneys borrowed; 

  

	 	(b)	any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; 

  

	 	(c)	any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; 

 

	 	(d)	the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease; 

 

	 	(e)	receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); 

 

	 	(f)	any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;

  

	 	(g)	any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value (or, if any actual amount is due as a result of the
termination or close-out of that derivative transaction, that amount) of any derivative transaction, only the marked to market value shall be taken into account); 

  
 7 

	 	(h)	any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and 

 

	 	(i)	the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above. 

“Flag State” means the United Kingdom or such other state or territory in which the Borrower’s ownership title of the
Vessel is from time to time registered in accordance with the provisions of Clause 23.3 (Flag). 
 “Funding Rate”
means any individual rate notified by a Lender to the Agent pursuant to paragraph (a)(ii) of Clause 10.4 (Cost of funds). 

“GAAP” means: 
  

	 	(a)	in respect of the Borrower, generally accepted accounting principles in Norway, including IFRS; or 

  

	 	(b)	in respect of the Guarantor, generally accepted accounting principles in the United States of America. 

“General Partner” means KNOT Offshore Partners GP LLC, a company formed under the laws of the Marshall Islands and having its
principal office at 2 Queen’s Cross, Aberdeen, Aberdeenshire, AB15 4YB, United Kingdom being the general partner in the Guarantor. 

“Group” means KNOP and its Subsidiaries. 

“Guarantee” means the guarantee liabilities of the Guarantor pursuant to Clause 18 (Guarantee and indemnity). 

“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a
Subsidiary. 
 “IFRS” means international accounting standards within the meaning of the IAS Regulation 1606/2002 to the
extent applicable to the relevant financial statements. 
 “Insurances” means, in relation to the Vessel, all policies and
contracts of insurance (which expression includes all entries of the Vessel in a protection and indemnity or war risk association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of
the Borrower (whether in the sole name of the Borrower or in the joint names of the Borrower and any other person) in respect of the Vessel or otherwise in connection with the Vessel and all benefits thereunder (including claims of whatsoever nature
and return of premiums). 
 “Intercreditor Agreement” means an intercreditor agreement dated on or about the Utilisation
Date entered or to be entered into between the Agent and the Lenders to regulate the order of priority of payments between the Lenders of certain amounts due under this Agreement and the other Finance Documents. 

“Interest Payment Date” means the last day of an Interest Period; 

“Interest Period” means, in relation to the Loan, each period determined in accordance with Clause 9 (Interest Periods)
and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest). 

  
 8 

 “Interpolated Screen Rate” means, in relation to LIBOR for the Loan, the rate
(rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between: 
  

	 	(a)	the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of the Loan; and 

 

	 	(b)	the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the Loan, 

each as of 11.00 a.m. in London on the Quotation Day for USD. 

“ISM Code” means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention. 

“ISPS Code” means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime
Organization’s (IMO) Diplomatic Conference of December 2002. 
 “ISSC” means an International Ship Security Certificate
issued by the Classification Society confirming that the Vessel is in compliance with the ISPS Code. 
 “KNOT” means
Knutsen NYK Offshore Tankers AS, Norwegian registration no. 995 221 713, with registered offices at Smedasundet 40, N-5529 Haugesund, Norway. 

“KNOT ST” means KNOT Shuttle Tankers AS, Norwegian registration no. 998 942 829, with registered offices at Smedasundet 40, N-5529, Haugesund, Norway. 
 “Lender” means: 

 

	 	(a)	any Original Lender; and 

  

	 	(b)	any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 25 (Changes to the Lenders), 

which in each case has not ceased to be a Party in accordance with the terms of this Agreement. 

“LIBOR” means, in relation to the Loan: 
  

	 	(a)	the applicable Screen Rate; 

  

	 	(b)	(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or 

  

	 	(c)	if: 

  

	 	(i)	no Screen Rate is available for USD; or 

  

	 	(ii)	no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan, 

the Reference Bank Rate, 

as of, in the case of paragraphs (a) and (c) above, 11.00 a.m. London time on the Quotation Day for USD and for a period equal in length
to the Interest Period of that Loan and, if that rate is less than zero (0), LIBOR shall be deemed to be zero (0). 

  
 9 

 “Limited Partnership Agreement” means the third amended and restated agreement
of limited partnership of KNOP dated as of June 30, 2017 made between the Guarantor, the General Partner and such other Persons (as defined therein) who are or become Partners (as defined therein) in the Guarantor (as the same may be
subsequently amended or restated). 
 “Loan” means the loan made or to be made under the Facility or the principal amount
outstanding for the time being of that loan. 
 “Majority Lenders” means: 

 

	 	(a)	before the Loan has been drawn, a Lender or Lenders whose Commitments aggregate more than 662/3% of the Total
Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 662/3% of the Total Commitments immediately prior
to the reduction); or 

  

	 	(b)	at any other time, a Lender or Lenders whose participations in the Loan then outstanding aggregate more than
662/3% of all the Loan then outstanding. 

“Management Agreement” means any agreement made or to be made between the Borrower and a Manager for the technical and/or
commercial management of the Vessel. 
 “Manager” means KNOT Management AS or one of its Affiliates acceptable to the Agent.

 “Manager’s Undertaking” means an undertaking to be provided by the Manager in favour of the Agent in form and
substance satisfactory to the Agent (on behalf of the Finance Parties). 
 “Margin” means two point one per cent. (2.1%) per
annum. 
 “Market Value” means the fair market value of the Vessel, being the average of valuations of the Vessel obtained
from two Approved Shipbrokers, with or without physical inspection of the Vessel (as the Agent may require) on the basis of a sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing buyer and a willing
seller, on an “as is, where is” basis, free of any existing charter or other contract of employment and/or pool arrangement. 

“Material Adverse Effect” means any event or occurrence that in the reasonable opinion of the Lenders has or would have
materially adversely affected or could adversely affect: 
  

	 	(a)	the business, condition (financial or otherwise), operations, performance, assets or prospects of an Obligor or the Group taken as a whole since the date at which its latest audited financial statements were prepared;
or 

  

	 	(b)	the ability of an Obligor to perform its obligations under the Finance Documents; or 

  

	 	(c)	the validity or enforceability of, or the effectiveness or ranking of any Security granted or purporting to be granted pursuant to, any Finance Document; or 

 

	 	(d)	the right or remedy of a Finance Party in respect of a Finance Document. 

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next
calendar month, except that: 
  

	 	(a)	if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately
preceding Business Day; 

  
 10 

	 	(b)	if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month. 

The above rules will only apply to the last Month of any period. 

“Mortgage” means the first priority United Kingdom statutory ship mortgage in account current form over the Vessel and deed of
covenants collateral thereto to be executed by the Borrower in favour of the Agent (on behalf of the Finance Parties) and registered, in the case of the statutory mortgage, in the United Kingdom register of ships, in form and substance satisfactory
to the Agent (on behalf of the Finance Parties). 
 “Mortgaged Assets” means: 

 

	 	(a)	the Vessel; 

  

	 	(b)	the Earnings (including the Charterhire); 

  

	 	(c)	the Insurances; 

  

	 	(d)	the Account; 

  

	 	(e)	any Requisition Compensation; and 

  

	 	(f)	the shares in the Borrower. 

 “Obligors” means the Borrower and the Guarantor,
and “Obligor” means any of them. 
 “Original Financial Statements” means: 

 

	 	(a)	in relation to the Borrower, the audited financial statements for the financial year ended 31 December 2016; and 

  

	 	(b)	in relation to the Guarantor, its audited financial statements for its financial year ended 31 December 2016. 

“Outstanding Indebtedness” means the aggregate of all sums of money at any time and from time to time owing to the Finance
Parties under or pursuant to the Finance Documents. 
 “Party” means a party to this Agreement. 

“Payment Account” means USD current account no.
USD-CUA-014423 held in the name of Borrower with the Bank of Tokyo-Mitsubishi UFJ, Ltd. London Branch. 

“Quotation Day” means, in relation to any period for which an interest rate is to be determined, two (2) Business Days
before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if
quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days). 

“Reference Bank Quotation” means any quotation supplied to the Agent by a Reference Bank. 

“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent
at its request by the Reference Banks as the rate at which the relevant Reference Bank could borrow funds in the London interbank market in USD for the relevant period were it to do so by asking for and then accepting interbank offers for deposits
in reasonable market size in that currency and for that period. 

  
 11 

 “Reference Banks” means the Lenders or such other banks as may be appointed by
the Agent in consultation with the Borrower. 
 “Relevant Interbank Market” means the London interbank market.  
 “Relevant Person” means: 

 

	 	(a)	each member of the Group; and 

  

	 	(b)	each of its directors, officers, employees, agents and representatives. 

 “Repayment
Date” means the first Repayment Date, which is the numerically corresponding calendar day falling three (3) months after the Utilisation Date, and each day which is the numerically corresponding calendar day three (3) month
thereafter, provided that: 
  

	 	(a)	the last Repayment Date shall be the Final Maturity Date; 

  

	 	(b)	if any Repayment Date is not a Business Day, the immediately succeeding Business Day shall be such Repayment Date (unless such succeeding Business Day falls in the next calendar month, in which event such Repayment Date
shall be the immediately preceding Business Day); and 

 if there is no such corresponding date in the relevant calendar month,
that Repayment Date shall be the last Business Day of such month. 
 “Repeating Representations” means each of the
representations set out in Clause 19 (Representations). 
 “Representative” means any delegate, agent, manager,
administrator, nominee, attorney, trustee or custodian. 
 “Requisition Compensation” means all sums of money or other
compensation from time to time payable in respect of any requisition for title of other compulsory acquisition, requisition, expropriation or similar of the Vessel by any governmental entity. 

“Restricted Party” means a person that is: 
  

	 	(a)	listed on any Sanctions List or targeted by Sanctions (whether designated by name or by reason of being included in a class of person); or 

 

	 	(b)	located in or incorporated under the laws of any country or territory that is the target of comprehensive, country- or territory-wide Sanctions; or 

 

	 	(c)	directly or indirectly owned or controlled by, or acting on behalf, at the direction or for the benefit of, a person referred to in (a) and/or (to the extent relevant under Sanctions) (b) above; or

 in each case, only to the extent a Finance Party would be prohibited or restricted by Sanctions from transacting or dealing
with (including but not limited to being a party to this Agreement), or otherwise exercising any rights in respect of, or fulfilling any duties or obligations owed to, such a person. 

  
 12 

 “Sanctions” means any applicable (to the Obligors and/or any Relevant Person
and/or Finance Party as the context provides) laws, regulations or orders concerning any trade, economic or financial sanctions or embargoes. 

“Sanctions Authority” means the Norwegian State, the United Kingdom, the United Nations, the European Union, the member states
of the European Union, the United States of America, Australia, Japan and any authority acting on behalf of any of them in connection with Sanctions. 

“Sanctions List” means (a) the lists of Sanctions designations and/or targets maintained by any Sanctions Authority
and/or (b) any other Sanctions designation or target listed and/or adopted by a Sanctions Authority, in all cases, from time to time. 

“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other
person which takes over the administration of that rate) for USD for the relevant period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01/LIBOR02 of the Thomson Reuters Screen (or any replacement
Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Agent may
specify another page or service displaying the relevant rate after consultation with the Borrower and the Lenders. 

“Security” means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any
other agreement or arrangement having a similar effect. 
 “Security Document” means each document listed in Clause 17
(Security) and any other document agreement agreed between the Parties to be a Security Document. 
 “Security Period” means
the period commencing on the date of this Agreement and ending the date on which the Agent notifies the Borrower and the other Finance Parties that: 
  

	 	(a)	all amounts which have become due for payment by the Borrower under the Finance Documents have been paid; 

  

	 	(b)	no amount is owing or has accrued (without yet having become due for payment) under any of the Finance Documents; 

  

	 	(c)	none of the Obligors have any future or contingent liability under any provision of this Agreement and the other Finance Documents; and 

 

	 	(d)	the Agent and the Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or
possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security created by a Finance Document. 

“Shareholder Loans” means shareholder loans and/or loans from other companies within the Group and/or loans from other
Affiliates. 
 “SMC” means a valid safety management certificate issued for the Vessel issued by the Classification Society
pursuant to paragraph 13.7 of the ISM Code. 

  
 13 

 “SMS” means a safety management system for the Vessel developed and implemented
in accordance with the ISM Code and including the functional requirements duties and obligations that follow from the ISM Code. 

“Subsidiary” means an entity of which a person has direct or indirect control (whether through the ownership of voting
capital, by contract or otherwise) or owns directly or indirectly more than 50 % of the shares and for this purpose an entity shall be treated as controlled by another if that entity is able to direct its affairs and/or to control the
composition of the board of directors or equivalent body. 
 “Tax” means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same). 

“Total Commitments” means the aggregate of the Commitments being USD 100,000,000 at the date of this Agreement. 

“Total Loss” means, in relation to the Vessel: 
  

	 	(a)	the actual, constructive, compromised, agreed, arranged or other total loss of the Vessel; 

  

	 	(b)	the requisition for title or compulsory acquisition of the Vessel by any government or other competent authority; 

  

	 	(c)	the capture, seizure, destruction, abandonment, condemnation, arrest, detention or confiscation of the Vessel by any government or by persons acting or purporting to act on behalf of any government or public authority,
unless the Vessel is released and returned to the possession of the Borrower within thirty (30) days after the capture, seizure, arrest, detention or confiscation in question; or 

 

	 	(d)	any piracy, hijacking or theft of the Vessel, unless the Vessel is released and restored to the Borrower within thirty (30) days after the occurrence of such incident. 

“Total Loss Date” means: 
  

	 	(a)	in the case of an actual total loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; 

 

	 	(b)	in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of: (i) the date on which a notice of abandonment is given to the insurers (provided a claim for total loss is
admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or
arbitration panel to have occurred or, if earlier, the date falling three (3) Months after notice of abandonment of the Vessel was given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the
Borrower with the Vessel’s insurers in which the insurers agree to treat the Vessel as a total loss; or 

  

	 	(c)	in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred. 

  
 14 

 “Transaction Documents” means each Charterparty and each Management Agreement,
together with the other documents contemplated herein or therein or otherwise designated as a Transaction Document by the Agent and the Borrower, and “Transaction Document” means any of them. 

“Transfer Certificate” means a certificate substantially in the form set out in Schedule 4 (Form of Transfer
Certificate) or any other form agreed between the Agent and the Borrower. 
 “Transfer Date” means, in relation to a
transfer, the later of: 
  

	 	(a)	the proposed Transfer Date specified in the relevant Transfer Certificate; and 

  

	 	(b)	the date on which the Agent executes the relevant Transfer Certificate. 

 “US”
means the United States of America. 
 “US Tax Obligor” means: 

 

	 	(a)	the Borrower which is resident for tax purposes in the US; or 

  

	 	(b)	an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes. 

“Unpaid Sum” means any sum due and payable but unpaid by an Obligor under the Finance Documents. 

“Utilisation” means the utilisation of the Facility. 

“Utilisation Date” means the date of the Utilisation, being the date on which the Loan is to be made. 

“Utilisation Request” means a notice substantially in the form set out in Schedule 3 (Form of Utilisation
Request). 
 “VAT” means: 
  

	 	(a)	any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); 

 

	 	(b)	value added tax as provided for in the Norwegian Value Added Tax Act of 19 June 2009 no. 58 (in Norwegian Merverdiavgiftsloven); or 

 

	 	(c)	any other tax of a similar nature. 

 “Vessel” means the 123,166 dwt aframax
shuttle tanker “TORILL KNUTSEN” with IMO number 9630030 registered in the ownership of the Borrower under the laws and flag of the United Kingdom with ABERDEEN as her port of choice and official number 919703. 

 

	1.2	Construction 

  

	 	(a)	Unless a contrary indication appears, any reference in this Agreement to: 

  

	 	(i)	the “Agent”, the “Mandated Lead Arranger”, any “Finance Party”, any “Lender”, or any “Party” shall be construed so as to include its
successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents; 

  
 15 

	 	(ii)	“assets” includes present and future properties, revenues and rights of every description; 

  

	 	(iii)	a “Finance Document”, “Transaction Document” or any other agreement or instrument is a reference to that Finance Document, Transaction Document or other agreement or instrument as
amended, novated, supplemented, extended or restated; 

  

	 	(iv)	a “group of Lenders” includes all the Lenders; 

  

	 	(v)	“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; 

 

	 	(vi)	a “person” includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not
having separate legal personality); 

  

	 	(vii)	a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency,
department or of any regulatory, self-regulatory or other authority or organisation; 

  

	 	(viii)	a provision of law is a reference to that provision as amended or re-enacted; 

  

	 	(ix)	words importing the singular shall include the plural and vice versa; and 

  

	 	(x)	a time of day is a reference to Bergen time unless specified otherwise. 

  

	 	(b)	Section, Clause and Schedule headings are for ease of reference only. 

  

	 	(c)	Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this
Agreement. 

  

	 	(d)	A Default is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived. 

 

	1.3	Currency symbols and definitions 

 “$”, “USD” and
“dollars” denote the lawful currency of the United States of America. 
  

	1.4	Third party rights 

  

	 	(a)	Unless expressly provided to the contrary in that Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

  

	 	(b)	The consent of any third party to whom rights have been provided under a Finance Document is not required, unless otherwise specifically required under the terms of any Finance Document, to rescind, vary, amend or
terminate a Finance Document at any time. 

  
 16 

 SECTION 2 

THE FACILITY 
  

	2.	THE FACILITY 

  

	2.1	The Facility 

 Subject to the terms of this Agreement, the Lenders make
available to the Borrower a senior secured USD term loan facility in an aggregate amount equal to the Total Commitments. 
  

	2.2	Finance Parties’ rights and obligations 

  

	 	(a)	The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under
the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents. 

  

	 	(b)	The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a
separate and independent debt. 

  

	 	(c)	A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents. 

 

	 	(d)	No Finance Party will be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it under or in connection with any Finance Document, unless directly
caused by its gross negligence or wilful misconduct. 

  

	3.	PURPOSE 

  

	3.1	Purpose of the Facility 

 The Borrower shall apply all amounts borrowed by it under the
Facility towards (a) repaying the Existing Indebtedness and (b) general corporate purposes. 
  

	3.2	Monitoring 

 No Finance Party is bound to monitor or verify the application of any amount
borrowed pursuant to this Agreement. 
  

	4.	CONDITIONS OF UTILISATION 

  

	4.1	Initial conditions precedent  

  

	 	(a)	The Borrower may not deliver a Utilisation unless the Agent is satisfied that it has received all of the documents and other evidence listed in Part I (Conditions Precedent to Utilisation) of Schedule 2
(Conditions Precedent and Subsequent), except those documents which specifically will only be available on the Utilisation Date or within another specified date as previously notified and agreed to by the Majority Lenders. The Agent shall
notify the Borrower and the Lenders promptly upon being so satisfied. 

  

	 	(b)	Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives the notification described in paragraph (a) above, the Lenders authorise (but do not require)
the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification. 

  
 17 

	4.2	Further conditions precedent 

 The Lenders will only be obliged to comply with Clause 5.4
(Lenders’ participation) if on the date of the Utilisation Request and on the proposed Utilisation Date: 
  

	 	(a)	no Default is continuing or would result from the proposed Loan; 

  

	 	(b)	no Change of Control has occurred; and 

  

	 	(c)	the Repeating Representations to be made by each Obligor are true in all material respects. 

  

	4.3	Conditions subsequent 

 The Borrower shall undertake to deliver or cause to be delivered
to the Agent the additional documents and other evidence listed in Part II (Conditions Subsequent) of Schedule 2 (Conditions Precedent and Subsequent), on or prior to the dates specified in Part II (Conditions Subsequent)
of Schedule 2 (Conditions Precedent and Subsequent) in relation to such other additional documents and other evidence (or such other time period as may be agreed by the Agent). 

 

	4.4	Number of Utilisations 

 The Facility may be drawn in only one single amount. 

 

	4.5	Form and content 

 All documents and evidence delivered to the Agent pursuant to this
Clause 4 (Conditions of Utilisation) shall: 
  

	 	(a)	be in form and substance satisfactory to the Agent; 

  

	 	(b)	if required by the Agent, be in original; and 

  

	 	(c)	if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent. 

  

	4.6	Waiver of conditions precedent  

 The conditions specified in this Clause 4
(Conditions of Utilisation) are solely for the benefit of the Lenders and may be waived on their behalf in whole or in part and with or without conditions by the Agent (acting on the instructions of all of the Lenders). 

  
 18 

 SECTION 3 

UTILISATION 
  

	5.	UTILISATION 

  

	5.1	Delivery of the Utilisation Request 

 The Borrower may utilise the Facility
by delivery to the Agent of the duly completed Utilisation Request not later than 12:00 noon London time on the date falling four (4) Business Days prior to the Utilisation Date. 

 

	5.2	Completion of a Utilisation Request 

 The Utilisation Request is irrevocable and will not
be regarded as having been duly completed unless: 
  

	 	(a)	the proposed Utilisation Date is a Business Day within the Availability Period; and 

  

	 	(b)	the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount). 

  

	5.3	Currency and amount 

  

	 	(a)	The currency specified in the Utilisation Request must be USD. 

  

	 	(b)	The amount of the Loan must be an amount which is not more than the Available Facility. 

  

	5.4	Lenders’ participation 

  

	 	(a)	If the conditions set out in this Agreement have been met, each Lender shall make its participation in the Loan available by the Utilisation Date through its Facility Office. 

 

	 	(b)	The amount of the Lender’s participation in the Loan will be equal to the proportion borne by its Commitment to the Available Facility immediately prior to making the Loan. 

 

	 	(c)	The Agent shall notify each Lender of the amount of the Loan and the amount of its participation in the Loan by 12:00 noon London time on the date falling three (3) Business Day prior to the relevant Utilisation
Date. 

  

	5.5	Cancellation of Commitment 

 The Commitments which, at that time, are unutilised shall be
immediately cancelled at the end of the Availability Period. 

  
 19 

 SECTION 4 

REPAYMENT, PREPAYMENT AND CANCELLATION 
  

	6.	REPAYMENT 

  

	 	(a)	Subject to the provisions of this Agreement, the Borrower shall repay the Loan in twenty four (24) instalments, each in the amount of USD1,666,666 together with a balloon instalment of USD60,000,016 payable with
(and forming part of) the final instalment. If the full amount of the Loan is not advanced to the Borrower, the amount of each repayment instalment shall be reduced pro rata to the amount actually advanced. 

 

	 	(b)	The repayment instalments in respect of the Loan shall be paid on each of the Repayment Date. 

  

	 	(c)	Any Outstanding Indebtedness related to the Loan is due and payable on the Final Maturity Date. 

  

	 	(d)	The Borrower may not reborrow any part of the Loan which is repaid. 

  

	7.	PREPAYMENT AND CANCELLATION 

  

	7.1	Voluntary prepayment of Loan 

  

	 	(a)	The Borrower may, if it gives the Agent not less than ten (10) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of the Loan (but, if in part,
being an amount that reduces the amount of the Loan by a minimum amount of USD 5,000,000). 

  

	 	(b)	Any prepayment under this Clause 7.1 (Voluntary prepayment of Loan) shall be applied pro rata against each of the remaining repayment instalments (including the balloon payment) as set out in Clause 6
(Repayment). 

  

	7.2	Mandatory prepayment – illegality 

 If it becomes unlawful in any applicable
jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan or it becomes contrary to Sanctions to do the same: 

 

	 	(a)	that Lender shall promptly notify the Agent upon becoming aware of that event; 

  

	 	(b)	upon the Agent notifying the Borrower, the Commitment of that Lender will be immediately cancelled; and 

  

	 	(c)	to the extent that the Lender’s participation has not been transferred pursuant to paragraph (d) of Clause 7.6 (Right of replacement or repayment and cancellation in relation to a single Lender), the
Borrower shall repay that Lender’s participation in the Loan on the last day of the Interest Period for the Loan occurring after the Agent has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the
Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lender’s corresponding Commitment shall be cancelled in the amount of the participations repaid. 

 

	7.3	Mandatory prepayment – Total Loss or sale of the Vessel 

 If the
Vessel is sold or shall suffer a Total Loss, the Agent shall: 

  
 20 

	 	(a)	in case of a sale, on or before the date on which the sale is completed by delivery of the Vessel to the buyer; or 

  

	 	(b)	in the case of a Total Loss, on the earlier of the date falling ninety (90) days after the Total Loss Date and the receipt by the Agent of the proceeds of Insurance relating to such Total Loss (or in the event of a
requisition for title of the Vessel, immediately after the occurrence of such requisition of title) 

 cancel the Total
Commitments and declare the outstanding Loan, together with accrued interest and all other amounts accrued in relation thereto immediately due and payable, whereupon the Total Commitments will be cancelled and all such outstanding amounts will
become immediately due and payable. 
  

	7.4	Mandatory prepayment – Market Value 

  

	 	(a)	If the aggregate Market Value of the Vessel falls below: 

  

	 	(i)	one hundred and ten per cent (110%) of the Loan during the period from the Utilisation Date up to (but not including) the second anniversary of the Utilisation Date, 

 

	 	(ii)	one hundred and twenty per cent (120%) of the Loan during the period from (and including) the second anniversary of the Utilisation Date up to (but not including) the fourth anniversary of the Utilisation Date, or

  

	 	(iii)	one hundred and twenty-five per cent (125%) of the Loan at any time thereafter; 

 then, the
Borrower shall, unless otherwise agreed with the Agent within thirty (30) days after being notified the above in writing by the Agent, either: 
  

	 	(i)	prepay such part of the Loan, together with accrued interest on the Loan and all other amounts which shall have become due on or prior to the date of such prepayment; and/or 

 

	 	(ii)	provide the Lenders with such additional security, in form and substance and being of a kind and having a value satisfactory to the Lenders, 

required to restore the aforesaid ratio. Any additional security shall be documented and perfected in such terms as the Agent (on behalf of
all Lenders) may approve or require. 
  

	 	(b)	Any prepayment under this Clause 7.4 (Mandatory prepayment – Market Value) shall be applied pro rata against each of the remaining repayment instalments (including the balloon payment) as set out in Clause 6
(Repayment). 

  

	7.5	Mandatory prepayment – Change of Control 

 If a Change of Control occurs: 

 

	 	(a)	the Borrower shall promptly notify the Agent upon becoming aware of that event; and 

  

	 	(b)	in the event that that Change of Control is continuing for sixty (60) days, the Total Commitments shall be cancelled and the Loan, together with accrued interest and all other amounts accrued under the Finance
Documents shall be immediately due and payable on the date sixty (60) days upon the occurrence of that Change of Control. 

  
 21 

	7.6	Right of replacement or repayment and cancellation in relation to a single Lender 

  

	 	(a)	If: 

  

	 	(i)	any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 12.2 (Tax gross-up); or 

 

	 	(ii)	any Lender claims indemnification from the Borrower under Clause 12.3 (Tax indemnity) or Clause 13.1 (Increased costs), 

the Borrower may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Agent notice
of cancellation of the Commitment(s) of that Lender and its intention to procure the repayment of that Lender’s participation in the Loan or give the Agent notice of its intention to replace that Lender in accordance with paragraph
(d) below. 
  

	 	(b)	On receipt of a notice of cancellation referred to in paragraph (a) above, the Commitment(s) of that Lender shall immediately be reduced to zero. 

 

	 	(c)	On the last day of each Interest Period which ends after the Borrower has given notice of cancellation under paragraph (a) above (or, if earlier, the date specified by the Borrower in that notice), the Borrower
shall repay that Lender’s participation in that Loan. 

  

	 	(d)	If: 

  

	 	(i)	any of the circumstances set out in paragraph (a) above apply to a Lender; or, 

  

	 	(ii)	an Obligor becomes obliged to pay any amount in accordance with Clause 7.2 (Mandatory prepayment – illegality) to any Lender, 

the Borrower may, on thirty (30) Business Days’ prior notice to the Agent and that Lender, replace that Lender by requiring that
Lender to (and, to the extent permitted by law, that Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial
institution, trust, fund or other entity selected by the Borrower which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 25 (Changes to the Lenders) for a purchase
price in cash payable at the time of the transfer in an amount equal to the outstanding principal amount of such Lender’s participation in the outstanding Loan and all accrued interest (to the extent that the Agent has not given a notification
under Clause 25.7 (Pro rata interest settlement)), Break Costs and other amounts payable in relation thereto under the Finance Documents. 
  

	 	(e)	The replacement of a Lender pursuant to paragraph (d) above shall be subject to the following conditions: 

  

	 	(i)	the Borrower shall have no right to replace the Agent; 

  

	 	(ii)	neither the Agent nor any Lender shall have any obligation to find a replacement Lender; 

  
 22 

	 	(iii)	in no event shall the Lender replaced under paragraph (d) above be required to pay or surrender any of the fees received by such Lender pursuant to the Finance Documents; and 

 

	 	(iv)	the Lender shall only be obliged to transfer its rights and obligations pursuant to paragraph (d) above once it is satisfied that it has complied with all necessary “know your customer” or other similar
checks under all applicable laws and regulations In relation to that transfer. 

  

	 	(f)	A Lender shall perform the checks described in paragraph (e)(iv) above as soon as reasonably practicable following delivery of a notice referred to in paragraph (d) above and shall notify the Agent and the Borrower
when it is satisfied that it has complied with this checks. 

  

	7.7	Restrictions 

  

	 	(a)	Any notice of cancellation or prepayment given by any Party under this Clause 7 (Prepayment and cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the
date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment. 

  

	 	(b)	Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty. 

 

	 	(c)	The Borrower may not reborrow any part of the Facility which is prepaid. 

  

	 	(d)	The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement. 

 

	 	(e)	No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated. 

  

	 	(f)	If the Agent receives a notice under this Clause 7 (Prepayment and cancellation) it shall promptly forward a copy of that notice to either the Borrower or the affected Lender, as appropriate. 

 

	 	(g)	If all or part of any Lender’s participation in the Loan is repaid or prepaid an amount of that Lender’s Commitment (equal to the amount of the participation which is repaid or prepaid) will be deemed to be
cancelled on the date of repayment or prepayment. 

  

	7.8	Application of prepayments 

 Any prepayment of the Loan pursuant to Clause 7.1
(Voluntary prepayment of Loan), Clause 7.3 (Mandatory prepayment – Total Loss or sale of the Vessel) or Clause 7.4 (Mandatory prepayment – Market Value) or Clause 7.5 (Mandatory prepayment – Change of
Control) shall be applied pro rata to each Lender’s participation in that Loan. 

  
 23 

 SECTION 5 

COSTS OF UTILISATION 
  

	8.	INTEREST 

  

	8.1	Calculation of interest 

  

	 	(a)	The rate of interest on the Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable: 

 

	 	(i)	Margin; and 

  

	 	(ii)	LIBOR. 

  

	 	(b)	Interest shall be calculated on the actual number of days elapsed on the basis of a three hundred and sixty (360) day year. 

  

	 	(c)	For purpose of calculation of such number of days, the first day of each Interest Period shall be included and the last day thereof shall be excluded. 

 

	 	(d)	If, after calculation of any amount payable under this Clause 8, there is any fraction equating to less than one hundredth of one dollar (USD0.01), such fraction shall be discarded. 

 

	8.2	Payment of interest 

 The Borrower shall pay accrued interest on the Loan on each of the
Interest Payment Date. 
  

	8.3	Default interest 

  

	 	(a)	If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after
judgment) at a rate which is the higher of (i) four per cent (4%) per annum above the actual cost at which the Lenders obtain funds from any financial institution or source for the purpose of this Agreement and (ii) two per cent (2%) per
annum above the interest rate applicable to the Interest Period immediately prior to such default, on the basis of a year of 360 days. In the event that a Lender suffers any loss of any kind whatsoever due to a delay in the payment of such defaulted
amount, the Borrower shall pay a sum as shall be sufficient to cover such loss plus interest on such sum at the aforesaid rate from the date of such loss until such sum and interest are paid in full. 

 

	 	(b)	Any interest accruing under this Clause 8.3 shall be immediately payable by the Obligor on demand by the Agent. 

  

	 	(c)	Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

  

	8.4	Notification of rates of interest 

  

	 	(a)	The Agent shall promptly notify the Lenders and the Borrower of the determination of a rate of interest under this Agreement. 

  

	 	(b)	The Agent shall promptly notify the Borrower of each Funding Rate relating to the Loan. 

  
 24 

	9.	INTEREST PERIODS 

  

	9.1	Duration of Interest Periods 

 Each Interest Period in respect of the Loan shall be for a
period of three (3) months and shall commence, in the case of the first Interest Period, on the Utilization Date or, in the case of each subsequent Interest Period, on the expiry of the immediately preceding Interest Period. 

 

	9.2	Non-Business Day 

 If an Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not). 

 

	10.	CHANGES TO THE CALCULATION OF INTEREST 

  

	10.1	Unavailability of Screen Rate 

  

	 	(a)	If no Screen Rate is available for LIBOR for the Interest Period of the Loan, the applicable LIBOR shall be the Interpolated Screen Rate for a period equal in length to that Interest Period. 

 

	 	(b)	If no Screen Rate is available for LIBOR for: 

  

	 	(i)	USD; or 

  

	 	(ii)	the Interest Period of the Loan and it is not possible to calculate the Interpolated Screen Rate, 

the applicable LIBOR shall be the Reference Bank Rate as of noon London time on the Quotation Day and for a period equal in length to the
Interest Period of the Loan. 
  

	10.2	Calculation of Reference Bank Rate 

  

	 	(a)	Subject to paragraph (b) below, if LIBOR is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by noon London time on the Quotation Day, the Reference Bank Rate
shall be calculated on the basis of the quotations of the remaining Reference Banks. 

  

	 	(b)	If at or about noon London time on the Quotation Day, none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for the relevant Interest Period. 

 

	 	(c)	If paragraph (b) above applies but no Reference Bank Rate is available for USD or the relevant Interest Period there shall be no LIBOR for that Loan and Clause 10.4 (Cost of funds) shall apply to that Loan
for that Interest Period. 

  

	10.3	Market disruption 

 If before close of business in London on the Quotation Day for the
relevant Interest Period the Agent receives notifications from a Lender or Lenders (whose participations in the Loan exceed fifty per cent. (50%) of the Loan) that the cost to it of funding its participation in the Loan from whatever source it may
reasonably select would be in excess of LIBOR then Clause 10.4 (Cost of funds) shall apply to the Loan for the relevant Interest Period. 
  

	10.4	Cost of funds 

  

	 	(a)	If this Clause 10.4 (Cost of funds) applies, the rate of interest on each Lender’s share of the Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:

  
 25 

	 	(i)	the Margin; and 

  

	 	(ii)	the rate notified to the Agent by that Lender as soon as practicable and in any event within three (3) Business Days of the first day of that Interest Period (or, if earlier, on the date falling three
(3) Business Days before the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to the relevant Lender of funding its participation in that Loan from
whatever source it may reasonably select. 

  

	 	(b)	If this Clause 10.4 (Cost of Funds) applies and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a period of not more than thirty (30) days) with a view to
agreeing a substitute basis for determining the rate of interest. 

  

	 	(c)	Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties. 

 

	10.5	Break Costs 

  

	 	(a)	The Borrower shall, within three (3) Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrower on a
day other than the last day of an Interest Period for that Loan or Unpaid Sum. 

  

	 	(b)	Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue. 

 

	11.	FEES 

  

	11.1	Flat fee 

 The Borrower shall pay to the Agent (for further distribution to the Original
Lenders) a non-refundable flat fee in the amount of one million dollars (USD1,000,000), such fee to be paid within ten (10) Business Days after the date of this Agreement. 

  
 26 

 SECTION 6 

ADDITIONAL PAYMENT OBLIGATIONS 
  

	12.	TAX GROSS UP AND INDEMNITIES 

  

	12.1	Definitions 

  

	 	(a)	In this Agreement: 

 “Protected Party” means a Finance Party which is or will
be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document. 

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than
a FATCA Deduction. 
  

	12.2	Tax gross-up 

  

	 	(a)	Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law. 

  

	 	(b)	The Borrower shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall
notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrower and that Obligor. 

 

	 	(c)	If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the
payment which would have been due if no Tax Deduction had been required. 

  

	 	(d)	If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by
law. 

  

	 	(e)	Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party
entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority. 

 

	12.3	Tax indemnity 

  

	 	(a)	The Borrower shall (within three (3) Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly
or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document. 

  

	 	(b)	Paragraph (a) above shall not apply: 

  

	 	(i)	with respect to any Tax assessed on a Finance Party: 

  

	 	(A)	under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

  
 27 

	 	(B)	under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction, 

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or
receivable) by that Finance Party; or 
  

	 	(ii)	to the extent a loss, liability or cost: 

  

	 	(A)	is compensated for by an increased payment under Clause 12.2 (Tax gross-up); or 

  

	 	(B)	would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph
(d) of Clause 12.2 (Tax gross-up) applied; or 

  

	 	(C)	relates to a FATCA Deduction required to be made by a Party. 

  

	 	(c)	A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify
the Borrower. 

  

	 	(d)	A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3 (Tax indemnity), notify the Agent. 

  

	12.4	Stamp taxes 

 The Borrower shall pay and, within three (3) Business Days of demand,
indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document. 

 

	12.5	VAT 

  

	 	(a)	All amounts set out or expressed in a Finance Document to be payable by any Party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to
be exclusive of any VAT which is chargeable on such supply or supplies, that Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and
such Finance Party shall promptly provide an appropriate VAT invoice to such Party). 

  

	 	(b)	Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such
cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority. 

 

	12.6	FATCA Information 

  

	 	(a)	Subject to paragraph (c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party: 

  

	 	(i)	confirm to that other Party whether it is: 

  

	 	(A)	a FATCA Exempt Party; or 

  
 28 

	 	(B)	not a FATCA Exempt Party; 

  

	 	(ii)	supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA;

  

	 	(iii)	supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party’s compliance with any other law,
regulation, or exchange of information regime. 

  

	 	(b)	If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify
that other Party reasonably promptly. 

  

	 	(c)	Paragraph (a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a
breach of: 

  

	 	(i)	any law or regulation; 

  

	 	(ii)	any fiduciary duty; or 

  

	 	(iii)	any duty of confidentiality. 

  

	 	(d)	If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance
of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the
requested confirmation, forms, documentation or other information. 

  

	 	(e)	If an Obligor is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten (10) Business Days of:

  

	 	(i)	where that Obligor is a US Tax Obligor and the relevant Lender is an Original Lender, the date of this Agreement; 

  

	 	(ii)	where that Obligor is a US Tax Obligor on a Transfer Date and the relevant Lender is a New Lender, the relevant Transfer Date; or 

  

	 	(iii)	where that Obligor is not a US Tax Obligor, the date of a request from the Agent, 

 supply to
the Agent: 
  

	 	(A)	a withholding certificate on Form W-8, Form W-9 or any other relevant form; or 

 

	 	(B)	any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation. 

  
 29 

	 	(f)	The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the relevant Obligor. 

 

	 	(g)	If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, that
Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the
Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the relevant Obligor. 

  

	 	(h)	The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent
shall not be liable for any action taken by it under or in connection with paragraphs (e), (f) or (g) above. 

  

	12.7	FATCA Deduction 

  

	 	(a)	Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it
makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. 

  

	 	(b)	Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and,
in addition, shall notify the Borrower and the Agent and the Agent shall notify the other Finance Parties. 

  

	13.	INCREASED COSTS 

  

	13.1	Increased costs 

  

	 	(a)	Subject to Clause 13.3 (Exceptions) the Borrower shall, within three (3) Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that
Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation, (ii) compliance with any law or regulation made after the
date of this Agreement or (iii) the implementation or application of or compliance with any Basel III Regulation (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates).

  

	 	(b)	In this Agreement “Increased Costs” means: 

  

	 	(i)	a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital; 

  

	 	(ii)	an additional or increased cost; or 

  

	 	(iii)	a reduction of any amount due and payable under any Finance Document, 

 which is incurred or
suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document. 

  
 30 

	13.2	Increased cost claims 

  

	 	(a)	A Finance Party intending to make a claim pursuant to Clause 13.1 (Increased costs) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrower.

  

	 	(b)	Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs. 

 

	13.3	Exceptions 

  

	 	(a)	Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is: 

  

	 	(i)	attributable to a Tax Deduction required by law to be made by an Obligor; 

  

	 	(ii)	attributable to a FATCA Deduction required to be made by a Party; 

  

	 	(iii)	compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph
(b) of Clause 12.3 (Tax indemnity) applied); or 

  

	 	(iv)	attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation. 

  

	 	(b)	In this Clause 13.3 (Exceptions), a reference to a “Tax Deduction” has the same meaning given to the term in Clause 1 (Definitions and Interpretation). 

 

	14.	OTHER INDEMNITIES 

  

	14.1	Currency indemnity 

  

	 	(a)	If any sum due from an Obligor under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First
Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of: 

  

	 	(i)	making or filing a claim or proof against that Obligor; 

  

	 	(ii)	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings, 

that Obligor shall as an independent obligation, within three (3) Business Days of demand, indemnify each Finance Party to whom that Sum
is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the
rate or rates of exchange available to that person at the time of its receipt of that Sum. 
  

	 	(b)	Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable. 

 

	14.2	Other indemnities 

 Each Obligor shall, within three (3) Business Days of demand,
indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of: 
  

	 	(a)	the occurrence of any Event of Default; 

  
 31 

	 	(b)	a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 29 (Sharing among the Finance
Parties); 

  

	 	(c)	any claim, action, civil penalty or fine against, any settlement, and any other kind of loss or liability, and all reasonable costs and expenses (including reasonable counsel fees and disbursements) incurred by the
Agent or any Lender as a result of conduct of any Obligor or any of their partners, directors, officers, employees, agents or advisors, that violates any Sanctions; 

 

	 	(d)	funding, or making arrangements to fund, its participation in a Loan requested by the Borrower in the Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement
(other than by reason of default or negligence by that Finance Party alone); or 

  

	 	(e)	the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower. 

The indemnity in this Clause 14.2 (Other indemnities) shall cover any cost, loss or liability incurred by each Finance Party in any
jurisdiction arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions. 
  

	14.3	Indemnity to the Agent 

 The Borrower shall promptly indemnify the Agent against any
cost, loss or liability incurred by the Agent (acting reasonably) as a result of: 
  

	 	(a)	investigating any event which it reasonably believes is a Default; 

  

	 	(b)	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or 

 

	 	(c)	instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement. 

 

	15.	MITIGATION BY THE LENDERS 

  

	15.1	Mitigation 

  

	 	(a)	Each Finance Party shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled
pursuant to, any of Clause 7.2 (Mandatory prepayment – illegality), Clause 12 (Tax gross-up and indemnities) or Clause 13 (Increased costs) including (but not limited to) transferring
its rights and obligations under the Finance Documents to another Affiliate or Facility Office. 

  

	 	(b)	Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents. 

  

	15.2	Limitation of liability 

  

	 	(a)	The Borrower shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation). 

  
 32 

	 	(b)	A Finance Party is not obliged to take any steps under Clause 15.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it. 

 

	16.	COSTS AND EXPENSES 

  

	16.1	Transaction expenses 

 The Borrower shall promptly on demand pay the Agent and the
Mandated Lead Arranger the amount of all costs and expenses (including legal fees) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication, perfection, amendment, enforcement and
preservation of: 
  

	 	(a)	this Agreement and any other documents referred to in this Agreement; and 

  

	 	(b)	any other Finance Documents executed after the date of this Agreement. 

  

	16.2	Amendment and enforcement costs 

 The Borrower shall, within three (3) Business Days
of demand, reimburse the Agent and any Finance Party for the amount of all costs and expenses (including but not limited to legal fees and administration fees, including costs of utilising the Agent’s management time) incurred by the Agent and
any such Finance Party in connection with: 
  

	 	(a)	responding to, evaluating, negotiating or complying with a request or requirement for any amendment, waiver or consent; 

  

	 	(b)	the granting of any release, waiver or consent under the Finance Documents; 

  

	 	(c)	any amendment or variation of a Finance Document; and 

  

	 	(d)	the enforcement of, or the preservation, protection or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance Parties under the Finance Documents. 

 

	16.3	Costs and expenses payable even if no Utilisation 

 For the avoidance of doubt, costs
payable by the Borrower under Clause 16.1 (Transaction Expenses) and this Clause 16.2 (Amendment and enforcement costs) remain payable whether or not the Utilisation is ever made. 

  
 33 

 SECTION 7 

SECURITY 
  

	17.	SECURITY 

  

	17.1	Security 

 The obligations and liabilities of the Obligors under the Finance Documents in
respect of the Facility, including (without limitation) the Borrower’s obligation to repay the Loan utilised hereunder together with all unpaid interest, default interest, charges, expenses and any other derived liability whatsoever of the
Borrower towards the Finance Parties in connection therewith, shall at all times from the time of Utilisation until all amounts due to the Finance Parties under any Finance Document in respect of the Facility have been paid and/or repaid in full, be
secured by the following security: 
  

	 	(a)	the Mortgage; 

  

	 	(b)	the Assignment Agreement; 

  

	 	(c)	the Account Pledge; 

  

	 	(d)	the Guarantee; and 

  

	 	(e)	the Borrower Share Pledge, 

 and any other document that may have been or shall from time to
time hereafter be executed as Security for the Obligors’ obligations under or pursuant to the Finance Documents in respect of the Facility. 

The Security Documents shall rank with first priority and shall include any obligations under the Finance Documents in respect of the Facility,
always subject to the provision of Clause 30.5 (Partial Payments). 
  

	17.2	Perfection etc. 

 The Obligors undertake to ensure that the Security Documents are duly
executed by the parties thereto in favour of the Agent (on behalf of the Finance Parties) on or about the Utilisation Date in accordance with Clause 4 (Conditions of Utilisation), legally valid, enforceable by the Finance Parties and in full
force and effect, and to execute or procure the execution of such further documentation as the Agent may reasonable require in order for the relevant Finance Parties to maintain the security position envisaged hereunder or to facilitate the
realisation of any assets the subject of any Security. 
  

	18.	GUARANTEE AND INDEMNITY 

  

	18.1	Guarantee and indemnity  

 The Guarantor irrevocably and unconditionally: 

 

	 	(a)	guarantees to each Finance Party punctual performance by the Borrower of all the Borrower’s obligations under the Finance Documents; 

 

	 	(b)	undertakes with each Finance Party that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document, the Guarantor shall immediately on demand pay that amount, and the
Guarantor shall not have any right of reservation or objection to such demand for payment by the Agent and no conflict or dispute of whatsoever nature between the Agent and the Borrower shall have an impact on the Guarantor’s obligation to pay
under the guarantee set out in this Clause 18 (Guarantee and indemnity). 

  
 34 

	 	(c)	agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on
demand against any cost, loss or liability it incurs as a result of the Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would
have been due. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 18 (Guarantee and indemnity) if the amount claimed had been recoverable on the basis of a guarantee.

  

	18.2	Guarantee limitations 

 Notwithstanding the obligations of the Guarantor pursuant to the
guarantee set out in this Clause 18 (Guarantee and indemnity): 
  

	 	(a)	the maximum guarantee liability of the Guarantor hereunder shall always be limited to USD 100,000,000 plus (i) any interest, default interest, Break Cost or other costs, fees and expenses related to the
Borrower’s obligations under the Finance Documents and (ii) any default interest or other costs, fees and expenses related to the liability of the Guarantor hereunder; 

 

	 	(b)	the guarantee set out in this Clause 18 (Guarantee and indemnity) does not apply to any liability if and to the extent that it would result in this guarantee constituting unlawful financial assistance within the
meaning of Chapter 8 of the Companies Act or any equivalent and applicable provisions under the laws of the relevant jurisdiction of the Guarantor. 

  

	18.3	Continuing guarantee 

 This guarantee is a continuing guarantee and will extend to the
ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. 
  

	18.4	Reinstatement 

 If any discharge, release or arrangement (whether in respect of the
obligations of any Obligor or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation,
administration or otherwise, without limitation, then the liability of the Guarantor under this Clause 18 (Guarantee and indemnity) will continue or be reinstated as if the discharge, release or arrangement had not occurred. 

 

	18.5	Waiver of defences 

 The obligations of the Guarantor under this Clause 18 (Guarantee
and indemnity) will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 18 (Guarantee and indemnity) (without limitation and whether
or not known to it or any Finance Party) including: 
  

	 	(a)	any time, waiver or consent granted to, or composition with, any Obligor or other person; 

  

	 	(b)	the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group; 

  
 35 

	 	(c)	the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

  

	 	(d)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person; 

 

	 	(e)	any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including without limitation any
change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security; 

 

	 	(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or 

 

	 	(g)	any insolvency or similar proceedings. 

  

	18.6	Immediate recourse 

 the Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 18 (Guarantee and indemnity). This waiver
applies irrespective of any law or any provision of a Finance Document to the contrary. 
  

	18.7	Appropriations 

 Until all amounts which may be or become payable by the Obligors under
or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may: 
  

	 	(a)	refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such
manner and order as it sees fit (whether against those amounts or otherwise) and the Guarantor shall not be entitled to the benefit of the same; and 

  

	 	(b)	hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor’s liability under this Clause 18 (Guarantee and indemnity). 

 

	18.8	Deferral of the Guarantor’s rights 

 Until all amounts which may be or become
payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, the Guarantor will not exercise any rights which it may have by reason of performance by it of its
obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 18 (Guarantee and indemnity): 
  

	 	(a)	to be indemnified by an Obligor; 

  

	 	(b)	to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; 

  
 36 

	 	(c)	to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in
connection with, the Finance Documents by any Finance Party; 

  

	 	(d)	to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which the Guarantor has given a guarantee, undertaking or indemnity under Clause 18
(Guarantee and Indemnity); 

  

	 	(e)	to exercise any right of set-off against any Obligor; and/or 

  

	 	(f)	to claim or prove as a creditor of any Obligor in competition with any Finance Party. 

 If the
Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Finance Parties by the
Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 30
(Payment mechanics). 
  

	18.9	Additional security 

 This guarantee is in addition to and is not in any way prejudiced
by any other guarantee or security now or subsequently held by any Finance Party. 

  
 37 

 SECTION 8 

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT 
  

	19.	REPRESENTATIONS 

 Each Obligor makes the representations and warranties set out in this
Clause 19 (Representations) to each Finance Party on the date of this Agreement and on the dates on which the Repeating Representations are made. 
  

	19.1	Status 

  

	 	(a)	The Borrower is duly incorporated and validly existing under the laws of Norway as a limited liability company and its shares are directly wholly owned by KNOT ST. 

 

	 	(b)	The Guarantor is a publicly traded limited partnership duly organised under the Limited Partnership Agreement and validly existing under the laws of the Republic of Marshall Islands and is a “Publicly Traded
Partnership” under the Code. 

  

	 	(c)	The General Partner is duly incorporated and validly existing under the laws of Norway as a limited liability company and has been appointed as general partner of the Guarantor pursuant to the Limited Partnership
Agreement. 

  

	 	(d)	KNOT ST is duly incorporated and validly existing under the laws of Norway as a limited liability company and its shares are indirectly wholly owned by the Guarantor as shown in the structure chart set out in Schedule 6
(Structure Chart). 

  

	 	(e)	Each Obligor has the power to own its assets and carry on its business as it is being conducted. 

  

	19.2	Binding obligations 

  

	 	(a)	The obligations expressed to be assumed by it in each Finance Document are, subject to any general principles of law limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to
Clause 4 (Conditions of Utilisation), legal, valid, binding and enforceable obligations. 

  

	 	(b)	Save as provided herein or therein and/or as have been or shall be completed prior to the Utilisation Date, no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the
Finance Documents enforceable against the Obligors, and in respect of the Vessel, for the Mortgage over the Vessel to constitute a valid and enforceable first priority mortgage over the Vessel. 

 

	19.3	Non-conflict with other obligations 

 The entry
into and performance by it of, and the transactions contemplated by, the Finance Documents and the Transaction Documents do not and will not conflict with: 
  

	 	(a)	any law, statute, rule or regulation applicable to it, or any order, judgment, decree or permit to which it is subject (including the Council Directive 2001/97/EC of the European Parliament and of the Council of
4 December 2001 amending Council Directive 91/308/EEC of the Council of the European Community implemented to combat “money laundering”); 

  

	 	(b)	its constitutional documents; or 

  

	 	(c)	any agreement or instrument binding upon it or any of its assets. 

  
 38 

	19.4	Power and authority 

  

	 	(a)	It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents and the Transaction Documents to which it is a
party and the transactions contemplated by those Finance Documents and Transaction Documents. 

  

	 	(b)	All necessary corporate, shareholder and other action have been taken by it to approve and authorize the execution of the Finance Documents and the Transaction Documents, the compliance with the provisions thereof and
the performance of its obligations thereunder. 

  

	 	(c)	The Borrower acts for its own account by entering into the Finance Documents and obtaining the Facility. 

  

	19.5	Validity and admissibility in evidence 

 All Authorisations required or desirable: 

 

	 	(a)	to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents and the Transaction Documents to which it is a party; 

 

	 	(b)	to make the Finance Documents and the Transaction Documents to which it is a party admissible in evidence in its jurisdiction of incorporation; and 

 

	 	(c)	in connection with its business and ownership of assets, 

 have been obtained or effected and
are in full force and effect, and there are no circumstances which indicate that any of the same are likely to be revoked in whole or in part. 
  

	19.6	Governing law and enforcement 

  

	 	(a)	The choice of Norwegian and English law respectively as the governing law of the Finance Documents will be recognised and enforced in its jurisdiction of incorporation. 

 

	 	(b)	Any judgment obtained in Norway and/or England And Wales in relation to a Finance Document will be recognised and enforced in its jurisdiction of incorporation. 

 

	19.7	Insolvency 

 No corporate action, legal proceeding or other procedure or step described
in Clause 24.6 (Insolvency), 24.7 (Insolvency proceedings) or Clause 24.8 (Creditors’ process) is currently pending or, to its knowledge, threatened in relation to it, and none of the circumstances described in Clause 24.6
(Insolvency), 24.7 (Insolvency proceedings) or Clause 24.8 (Creditors’ process) applies to it. 
  

	19.8	Deduction of Tax 

 It is not required to make any Tax Deduction (as defined in Clause 1
(Definitions and Interpretation)) from any payment it may make under any Finance Document. 
  

	19.9	No filing or stamp taxes 

 Under the law of its jurisdiction of incorporation it is not
necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions
contemplated by the Finance Documents. 

  
 39 

	19.10	No default 

  

	 	(a)	No Event of Default is continuing or might reasonably be expected to result from the making of the Utilisation. 

  

	 	(b)	No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or to which its assets are subject (including, without limitation, the Transaction
Documents) which might have a Material Adverse Effect. 

  

	19.11	No misleading information 

  

	 	(a)	Any factual information provided by any member of the Group was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated. 

 

	 	(b)	The financial information provided by any member of the Group has been prepared on the basis of recent historical information and on the basis of reasonable assumptions. 

 

	 	(c)	Nothing has occurred or been omitted and no information has been given or withheld that results in the information provided by any member of the Group being untrue or misleading in any material respect.

  

	19.12	Financial statements 

  

	 	(a)	Its Original Financial Statements and the financial information most recently delivered to the Agent pursuant to Clause 20 (Information Undertakings) were prepared in accordance with GAAP consistently applied.

  

	 	(b)	Its Original Financial Statements and the financial information most recently delivered to the Agent pursuant to Clause 20 (Information Undertakings) fairly represent its financial condition as at the end of the
relevant financial year and operations during the relevant financial year (consolidated in the case of the Guarantor). 

  

	 	(c)	As of the date of the Original Financial Statements and the financial information most recently delivered to the Agent pursuant to Clause 20 (Information Undertakings), no Obligor has had any material
liabilities, direct or indirect, actual or contingent which has not been disclosed to the Agent, and there is no material, unrealised or anticipated losses from any unfavourable commitments not disclosed by or reserved against it in the Original
Financial Statements, the most recent delivered financial information or in the notes thereto. 

  

	 	(d)	There has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of the Group) since the date of delivery of its latest financial statements.

  

	19.13	Pari passu ranking 

 Its payment obligations under the Finance Documents rank at least
pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally. 
  

	19.14	No proceedings pending or threatened 

 No litigation, arbitration or administrative
proceedings of or before any court, arbitral body or agency which, if adversely determined, might reasonably be expected to have a Material Adverse Effect has or have (to the best of its knowledge and belief) been started or threatened against it.

  
 40 

	19.15	Title 

 The Borrower holds the legal title and/or is the beneficial party, as the case
may be, to the Mortgaged Assets (other than the shares pledged pursuant to the Borrower Share Pledge, which are owned by KNOT ST. 
  

	19.16	No security 

 None of the Mortgaged Assets are affected by any Security, and it is not a
party to, nor is it or any of the Mortgaged Assets bound by any order, agreement or instrument under which it is, or in certain events may be, required to create, assume or permit to arise any Security over any of the Mortgaged Assets, save for the
Security created under the Security Documents, for liens arising solely by operation of law and/or in the ordinary course of business or otherwise as permitted pursuant to the terms of Clause 22.2 (Negative pledge). 

 

	19.17	No immunity 

 Neither it, nor any of its assets, are entitled to immunity from suit,
execution, attachment or other legal process, and its entry into of the Finance Documents and the Transaction Documents constitutes, and the exercise of its rights and performance of and compliance with its obligations under Finance Documents and
the Transaction Documents will constitute, private and commercial acts done and performed for private and commercial purposes. 
  

	19.18	Ranking of Security Documents 

 The Security created by the Security Documents has or
will have the ranking in priority which it is expressed to have in the Security Documents and the Security is not subject to any prior ranking. 
  

	19.19	Taxation 

  

	 	(a)	It is not overdue in the filing of any Tax returns. 

  

	 	(b)	No claims or investigations are being, or are reasonably likely to be, made or conducted against it with respect to Taxes which is reasonably likely to have a material adverse effect on its ability to perform its
obligations under the Finance Documents. 

  

	 	(c)	It is resident for Tax purposes only in the jurisdiction of its incorporation, unless the Agent shall have been otherwise informed in writing. 

 

	19.20	Environmental compliance 

 The Borrower and the Manager have performed and observed all
Environmental Laws, Environmental Permits and all other covenants, conditions, restrictions or agreements directly or indirectly concerned with any contamination, pollution or waste or the release or discharge of any toxic or hazardous substance in
connection with the Vessel. 
  

	19.21	Environmental Claims 

 No Environmental Claim has been commenced or (to the best of its
knowledge and belief, having made due and careful enquiry) is threatened against it where that claim has or is reasonably likely, if determined against it, to have a material adverse effect on its ability to perform its obligations under the Finance
Documents and the Transaction Documents. 
  

	19.22	Laws and regulations 

  

	 	(a)	 Neither of it nor any of its employees, representatives, agents, servants or contractors will pay, promise to pay
or authorise the payment of any money or anything of value, directly or indirectly, whether as a bribe, pay-off, kickback, gift, commission or gratuity, to any public officials for the purpose of illegally or
improperly inducing any 

  
 41 

	 	
government or corporation in public sector to make a buying or selling decision or illegally or improperly influencing any public official of present or prospective government or public sector
customers of it in obtaining or retaining business or taking any other improper action favourable to it. 

  

	 	(b)	It and parties acting on its behalf shall observe and abide with all applicable laws and regulations applicable to it including, amongst other things, SOLAS conventions. 

 

	19.23	ISM Code and ISPS Code compliance 

 All requirements of the ISM Code and the ISPS Code as
they relate to the Borrower (or any of their Affiliates), the Manager any charterers and the Vessel have been complied with. 
  

	19.24	The Vessel 

 The Vessel will on the Utilisation Date be: 

 

	 	(a)	in the absolute ownership of the Borrower free and clear of all encumbrances (other than current crew wages and the Mortgage) and the Borrower will be the sole, legal and beneficial owner of the Vessel;

  

	 	(b)	registered in the name of the Borrower under British flag with the United Kingdom ship registry; 

  

	 	(c)	operationally seaworthy in every way and fit for service; and 

  

	 	(d)	classed with the class with such classification society as the Lenders shall accept, free of all overdue requirements and other recommendations. 

 

	19.25	Financial Indebtedness 

 It is not in breach of or in default under any agreement or
other instrument relating to Financial Indebtedness to which it is a party or by which it is bound (nor would it be with the giving of notice or lapse of time or both). 
  

	19.26	Sanctions 

 None of the Obligors, nor any of their Subsidiaries nor any of their
directors and officers or to their knowledge any other Relevant Person is or has been: 
  

	 	(a)	a Restricted Party; or 

  

	 	(b)	in breach of Sanctions; or 

  

	 	(c)	subject to or involved in any complaint, claim, proceeding, formal notice, investigation or other action by any regulatory or enforcement authority or third party concerning any Sanctions. 

 

	19.27	Ownership 

 The structure chart set out in Schedule 6 (Structure Chart)
hereto correctly reflects the Group at the date of this Agreement and the Obligors will procure that the Agent receives an updated version of Schedule 6 (Structure Chart) if any changes are made to the structure of the Group. 

 

	19.28	Transaction Documents 

  

	 	(a)	No material terms of any of the Transaction Documents have been amended or terminated, nor have any waivers of any material terms thereof been agreed, without the prior written consent of the Agent. 

  
 42 

	 	(b)	It has not received any notice of termination or force majeure under any of the Transaction Documents and is not aware of any event which is reasonably likely to cause termination or force majeure under any of the
Transaction Documents. 

  

	19.29	Repetition 

 The Repeating Representations are deemed to be made by each Obligor by
reference to the facts and circumstances then existing on the date of the Utilisation Request and the first day of each Interest Period and on the date of delivery of each Compliance Certificate (or, if no such Compliance Certificate is forwarded,
on each day such certificate should have been forwarded to the Agent at the latest). 
  

	20.	INFORMATION UNDERTAKINGS 

 The undertakings in this Clause 20 (Information
undertakings) remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force. 
  

	20.1	Financial statements 

 The Borrower shall supply to the Agent in sufficient copies for
all the Lenders: 
  

	 	(a)	as soon as the same become available, but in any event within one hundred and fifty (150) days after the end of each of its financial years: 

 

	 	(i)	its audited financial statements of the Borrower for that financial year; and 

  

	 	(ii)	the audited consolidated financial statements of the Guarantor for that financial year; 

  

	 	(b)	as soon as the same become available, but in any event within ninety (90) days after the end of its financial quarters: 

  

	 	(i)	its unaudited financial statements of the Borrower for that financial quarter; and 

  

	 	(ii)	the unaudited consolidated financial statements of the Guarantor for that financial quarter; 

  

	 	(c)	as soon as the same become available, but in any event within 31 January of each financial year, the consolidated annual budget and cash flow projections for that financial year for the Guarantor, specifying major
assumptions and structure charts which correctly reflects the Group on such date. 

  

	20.2	Compliance Certificate 

 The Borrower shall supply to the Agent, with each set of
financial statements delivered pursuant to paragraph (a)(i) or (b)(i) of Clause 20.1 (Financial statements), a Compliance Certificate signed by the chief financial officer of the Borrower and the Guarantor setting out (in reasonable detail)
computations as to compliance with Clause 21 (Financial covenants) as at the date as at which those financial statements were drawn up. 
  

	20.3	Requirements as to financial statements 

  

	 	(a)	Each set of financial statements delivered by the Borrower pursuant to Clause 20.1 (Financial statements) shall be certified by a director of the relevant company as fairly representing its financial condition as
at the date as at which those financial statements were drawn up. 

  
 43 

	 	(b)	The Borrower shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 20.1 (Financial statements) is prepared using GAAP, accounting practices and financial reference periods
consistent with those applied in the preparation of the Original Financial Statements for that Obligor unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in GAAP, the accounting practices or
reference periods and its auditors (or, if appropriate, the auditors of the Obligor) deliver to the Agent: 

  

	 	(i)	a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which that Obligor’s Original Financial Statements were prepared; and

  

	 	(ii)	sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 21 (Financial covenants) has been complied with and make an accurate
comparison between the financial position indicated in those financial statements and that Obligor’s Original Financial Statements. 

Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to
reflect the basis upon which the Original Financial Statements were prepared. 
  

	20.4	Information: miscellaneous 

 Each Obligor shall supply to the Agent (in sufficient copies
for all the Lenders, if the Agent so requests): 
  

	 	(a)	all relevant documents dispatched by an Obligor to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched; 

 

	 	(b)	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which might, if adversely
determined, have a Material Adverse Effect; 

  

	 	(c)	promptly upon becoming aware of them, the details of any inquiry, claim, action, suit, proceeding or investigation by any Sanctions Authority against it, any of its direct or indirect owners, other member of the Group,
any of their joint ventures or any of their respective directors, officers, employees, agents or representatives, as well as information on what steps are being taken with regards to answer or oppose such; 

 

	 	(d)	promptly upon becoming aware that it, any of its direct or indirect owners, other member of the Group, any of their joint ventures or any of their respective directors, officers, employees, agents or representatives has
become or is likely to become a Restricted Party; and 

  

	 	(e)	promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Agent) may reasonably request. 

 

	20.5	Notification of default 

  

	 	(a)	Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been
provided by another Obligor). 

  
 44 

	 	(b)	Promptly upon a request by the Agent, each Obligor shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is
continuing, specifying the Default and the steps, if any, being taken to remedy it). 

  

	20.6	Notification of Environmental Claims 

 Each Obligor shall inform the Agent in writing as
soon as reasonably practicable upon becoming aware of the same: 
  

	 	(a)	if any Environmental Claim has been commenced or (to the best of its knowledge and belief) is threatened against an Obligor (or any of its Affiliates), the Manager or the Vessel; and 

 

	 	(b)	of any fact and circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against an Obligor (or any of its Affiliates), the Manager or the Vessel,

 where the claim would be reasonably likely, if determined against an Obligor (or any of its Affiliates) or the Vessel, to
have a Material Adverse Effect. 
  

	20.7	Market Value and inspection reports 

 The Borrower shall: 

 

	 	(a)	arrange, at its own expense, or undertake to let the Agent arrange for the Market Value of the Vessel to be determined at its expense, semi-annually and otherwise at the cost of, and when requested by, the Majority
Lenders, unless an Event of Default has occurred whereby any future valuation shall be at the expense of the Borrower; and 

  

	 	(b)	if any relevant inspection reports are made or issued in respect of the Vessel, promptly forward copies of such reports to the Agent. 

 

	21.	FINANCIAL COVENANTS 

  

	21.1	Definitions 

 In this Agreement: 

“Book Equity” means, at any time, the value of the paid-in capital and reserves
determined on a consolidated basis in accordance with GAAP and as shown in the latest financial statements (and the preferred equity shall be included in the calculation of Book Equity when determining the equity ratio for the Guarantor pursuant to
Clause 21.3(c) (Minimum Equity Ratio)).. 
 “Current Assets” means the aggregate value of the Guarantor’s (on a
consolidated basis) or the Borrower’s (as the case may be) assets, which are treated as current assets in accordance with GAAP. 

“Current Liabilities” means the aggregate amount of the Guarantor’s (on a consolidated basis) or the Borrower’s (as
the case may be) liabilities, which are treated as current liabilities in accordance with GAAP, but excluding instalments on long-term debt and finance leases which fall due during the next twelve months and (when calculating the Current Liabilities
of the Borrower) any intercompany balances.. 
 “EBITDA” means, in respect of any Relevant Period, the consolidated
earnings, before: 
  

	 	(a)	deducting any provision on account of taxation; 

  
 45 

	 	(b)	deducting any interest, discounts or other fees incurred or payable, by any member of the Group in respect of Financial Indebtedness; 

 

	 	(c)	taking into account any items treated as exceptional or extraordinary items; and 

  

	 	(d)	any amount attributable to the amortisation of intangible assets and depreciation of tangible assets. 

“Free Liquidity” means the aggregate value of: 
  

	 	(a)	cash in hand or on deposit with any bank or financial institution; 

  

	 	(b)	cash equivalents as reported in accordance with GAAP; and 

  

	 	(c)	2/3 of the available facilities in respect of all revolving facilities to the Guarantor. 

“Relevant Period” means each period of twelve (12) months ending on the last day of each financial quarter of each
financial year, provided that for the purposes of the calculation of EBITDA, the earnings of a vessel (following its delivery) shall be annualised (by reference to annual earnings of similar ships acceptable to the Agent for this purpose) until it
has operated for a period of twelve (12) months. 
 “Total Assets” means, at any time, the total book value of all the
assets which would, in accordance with GAAP, less goodwill.. 
 “Working Capital” means, on any date, Current Assets less
Current Liabilities. 
  

	21.2	Financial condition – Borrower 

  

	 	(a)	Working Capital – Borrower  

 The Borrower shall at all times maintain positive
Working Capital. 
  

	21.3	Financial condition – Guarantor 

  

	 	(a)	Working Capital 

 The Guarantor (on a consolidated basis) shall at all times maintain
positive Working Capital. 
  

	 	(b)	Free Liquidity 

 The Guarantor (on a consolidated basis) shall at all times maintain a
Free Liquidity equal to or greater than USD 15,000,000 plus USD 1,500,000 for each owned (directly or indirectly) vessel (up to a total of eight (8) vessels) with employment contracts with less than twelve (12) months’ remaining
tenor (excluding options) plus USD 1,000,000 for each vessel in excess of eight (8) vessels owned (directly or indirectly) with employment contracts with less than twelve (12) months’ remaining tenor (excluding options), provided
always that employment contracts entered into with KNOT or any of its Subsidiaries shall not count as employment contracts for the purpose of this provision. 
  

	 	(c)	Minimum Equity Ratio 

 The Guarantor (on a consolidated basis) shall at all times have a
ratio of Book Equity to Total Assets greater than 30%. 

  
 46 

	 	(d)	Interest Coverage Ratio 

 The Guarantor (on a consolidated basis) shall have a ratio of
EBITDA to interest expense greater than 2.5x. 
  

	21.4	Financial testing 

 The financial covenants set out in Clause 21.2 (Financial
condition – Borrower) and Clause 21.3 (Financial condition – Guarantor) shall be calculated on the Guarantor’s consolidated figures and in accordance with GAAP and tested (i) by reference to each of its financial
statements delivered pursuant to Clause 20.1 (Financial statements) (whether audited or un-audited) and each Compliance Certificate delivered pursuant to Clause 20.2 (Compliance
Certificate) and (ii) at such other times as reasonably requested by the Agent by reference to such documentation as is then available or made available in accordance with paragraph (c) of Clause 20.4 (Information:
miscellaneous), and presented to the Agent in form and substance satisfactory to the Agent. 
  

	21.5	Financial covenants in other agreements 

 If any other loans, bonds or similar debt
financing instruments have any stronger financial covenants on the Guarantor, such covenants shall at all times apply for the Facility as if expressly set out in this Agreement. 

 

	22.	GENERAL UNDERTAKINGS 

 The undertakings in this Clause 22 (General undertakings)
remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force. 
  

	22.1	Authorisations 

 Each Obligor shall promptly: 

 

	 	(a)	obtain, comply with and do all that is necessary to maintain in full force and effect; and 

  

	 	(b)	supply certified copies to the Agent of, 

 any Authorisation required under any law or
regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance
Document. 
  

	22.2	Negative pledge 

  

	 	(a)	No Obligor shall create or permit to subsist any Security over any of the Mortgaged Assets. 

  

	 	(b)	The Borrower shall not create or permit to subsist any Security over any of its assets nor any factoring agreement to be registered with the Norwegian Registry of Movable Property (in No.
Løsøreregisteret). 

  

	 	(c)	The Guarantor shall not create or permit to exist any security over any of the shares or other ownership interests in KNOT Offshore Partners UK LLC. 

 

	 	(d)	The Borrower shall not: 

  

	 	(i)	sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;

  
 47 

	 	(ii)	sell, transfer or otherwise dispose of any of its receivables on recourse terms; 

  

	 	(iii)	enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or 

 

	 	(iv)	enter into any other preferential arrangement having a similar effect, 

 in circumstances where
the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset. 
  

	 	(e)	Paragraph (a), (b) and (c) above do not apply to any Security listed below: 

  

	 	(i)	any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

  

	 	(ii)	any lien arising by operation of law and in the ordinary course of trading and securing obligations not more than thirty (30) days overdue; 

 

	 	(iii)	any Security entered into pursuant to any Finance Document; 

  

	 	(iv)	any Security securing the Existing Indebtedness (but only up to the Utilisation Date); or 

  

	 	(v)	Security consented to in writing by the Agent (acting upon instructions from the Lenders). 

  

	22.3	Disposals 

  

	 	(a)	The Borrower shall not, enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.

  

	 	(b)	Paragraph (a) above does not apply to any sale, lease, transfer or other disposal: 

  

	 	(i)	made in the ordinary course of trading of the disposing entity; or 

  

	 	(ii)	of assets in exchange for other assets comparable or superior as to type, value and quality. 

  

	22.4	Merger 

  

	 	(a)	No Obligor shall enter into any amalgamation, demerger, merger or corporate reconstruction other than a merger or consolidation with other members of the Group into a single surviving entity which is such Obligor and
which succeeds by operation of law to all of the assets and liabilities of such Obligor immediately prior to such merger or consolidation. 

  

	 	(b)	The Borrower shall not enter into any joint venture, partnership or similar arrangement with any person without prior written approval of the Agent. 

 

	22.5	Change of business 

  

	 	(a)	Each Obligor shall procure that no substantial change is made to the general nature of its business from that carried on at the date of this Agreement. 

  
 48 

	 	(b)	Each Obligor shall ensure that its substantial part of business or assets shall not be destroyed, abandoned, seized, appropriated or forfeited for any reason which has or is reasonably likely to have a Material Adverse
Effect. 

  

	 	(c)	There shall be no change in ownership of the Borrower and no material changes to the corporate structure of the Group without the prior written consent of the Lenders (not to be unreasonably withheld) except as
permitted under the Finance Documents. 

  

	22.6	Transactions with Affiliates 

 Each Obligor shall procure that all transactions entered
into between a member of the Group and an Affiliate are made on arm’s length terms. 
  

	22.7	Title 

 The Obligors (as the case may be) shall hold legal title to and own the entire
beneficial interest in the Mortgaged Assets, free of all Security and other interests and rights of every kind, except for those created by the Finance Documents and as permitted by Clause 22.2 (Negative pledge). 

 

	22.8	Insurances – general 

 Each Obligor shall maintain appropriate insurance cover with
respect to its properties, assets and operations of such types, in such amounts and against such risks as are maintained by prudent companies carrying on the same or substantially similar business. All insurances must be with financially sound and
reputable insurance companies, funds or underwriters. 
  

	22.9	Bank Accounts 

 The Borrower shall maintain the Account with the Account Bank and all its
other bank accounts (including the Payment Account) with any of the Lenders and ensure that all Earnings are paid to the Account . 
  

	22.10	Derivative transactions 

 No Obligor shall enter into any derivative transactions with
other parties than the Finance Parties unless the Finance Parties have received a reasonable opportunity, in writing, to provide competitive rates to the Borrower and the Finance Parties cannot provide such competitive rates. 

 

	22.11	Distribution restrictions 

  

	 	(a)	The Guarantor shall not, without the prior written consent of the Agent (on behalf of the Lenders): 

  

	 	(i)	declare, make or pay any dividend or other distribution (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital); 

 

	 	(ii)	repay or distribute any of its share premium reserve; 

  

	 	(iii)	service or repay any loan from a shareholder comparable to equity; or 

  

	 	(iv)	redeem, repurchase or repay any of its shares capital (or resolve to do so), 

 to its
shareholders (or any Affiliates thereof) in respect of any financial year, unless: 
  

	 	(A)	no Default has occurred and is continuing at the time the making, payment or declaration of the relevant dividend or other distribution is made, or would result from the making, payment or declaration of the relevant
dividend or other distribution; and 

  
 49 

	 	(B)	The Guarantor and the Borrower will be in compliance with the financial covenants following the making, payment or declaration of the relevant dividend or other distribution. 

 

	 	(b)	The Borrower shall not, without the prior written consent of the Agent (on behalf of the Lenders) declare, make or pay any dividend or other distribution (whether in cash or in kind) on or in respect of its share
capital (or any class of its share capital) to its shareholders (or any Affiliates thereof) in respect of any financial year, unless: 

  

	 	(i)	no Default has occurred and is continuing at the time the making, payment or declaration of the relevant dividend or other distribution is made, or would result from the making, payment or declaration of the relevant
dividend or other distribution; 

  

	 	(ii)	The Borrower and the Guarantor will be in compliance with the financial covenants following the making, payment or declaration of the relevant dividend or other distribution. 

 

	22.12	Transaction Documents 

 The Obligors shall procure that no material terms of any of the
Transaction Documents are amended or terminated, or any waivers of any material terms thereof are agreed, without the prior written consent of the Agent. 
  

	22.13	Taxation 

 Each Obligor shall pay and discharge all Taxes imposed upon it or its assets
within the time period allowed without incurring penalties unless and only to the extent that such payment is being contested in good faith or can be lawfully withheld. 
  

	22.14	No change of name etc. 

 No Obligor shall change: 

 

	 	(a)	the end of its fiscal year; 

  

	 	(b)	its nature of business; 

  

	 	(c)	its constitutional documents; 

  

	 	(d)	its legal name; 

  

	 	(e)	its type of organization; or 

  

	 	(f)	its jurisdiction; 

 without the prior written consent of the Agent. 

 

	22.15	Subordination 

 The Borrower shall procure that all Shareholder Loans and all amounts
payable to and/or claims against it from the Manager and/or any manager are fully subordinated to the interest of the Finance Parties hereunder. 
  

	22.16	Indebtedness 

 The Borrower shall not, without the prior written consent of the Agent,
borrow any additional funds or enter into any transaction (including derivative transactions) that may result in the incurrence of any additional Financial Indebtedness (it being understood however that

  
 50 

 
intercompany loans, deposits or equity contributions within the Group (“Intra-Group Indebtedness”) shall be allowed provided always that (x) no Default is then in existence
or will occur from such disposition, (y) after giving effect to such disposition, the Obligors will be in compliance with the financial covenants in Clause 21 (Financial covenants), and (z) Intra-Group Indebtedness shall be fully
subordinated to the Facility). 
  

	22.17	Investments 

 The Borrower shall not, without the prior written consent of the Lenders
make any further investments or acquisitions , except for investments in the ordinary course of business.. 
  

	22.18	Financial support 

 The Borrower shall not make or grant any loans, guarantees or any
other form of financial support, except financial support in the ordinary course of operation of the Vessel, except for intercompany loans, deposits or equity contributions within the Group (“Intra-Group Indebtedness”) provided
always that: 
  

	 	(a)	no Default has occurred and is continuing or will occur from such Intra-Group Indebtedness; 

  

	 	(b)	after giving effect to such Intra-Group Indebtedness, the Obligors will be in compliance with the financial covenants in Clause 21 (Financial covenants);and 

 

	 	(c)	the Intra-Group Indebtedness shall be fully subordinated to the Facility. 

  

	22.19	Compliance with laws etc. 

 The Obligors shall (and shall ensure that each other member
of the Group, as well as any manager and charterer): 
  

	 	(a)	comply with all laws or regulations: 

  

	 	(i)	applicable to its business; and 

  

	 	(ii)	applicable to the Vessel, its ownership, employment, operation, management and registration, 

including the ISM Code, the ISPS Code, all Environmental Laws, all Sanctions and the laws of the Flag State; 

 

	 	(b)	obtain, comply with and do all that is necessary to maintain in full force and effect any Environment Approvals; and 

without limiting paragraph (a) above, not employ the Vessel nor allow its employment, operation or management in any manner contrary to
any law or regulation including but not limited to the ISM Code, the ISPS Code, all Environmental Laws, anti-bribery and corruption laws and all Sanctions. 
  

	22.20	Sanctions 

  

	 	(a)	No Obligor shall (and shall ensure that no other Relevant Person will) take any action, make any omission or use (directly or indirectly) any proceeds of a Loan, in a manner that: 

 

	 	(i)	is a breach of Sanctions or is an attempt to evade any Sanctions; and/or 

  

	 	(ii)	causes (or will cause) a breach of Sanctions by any Relevant Person or Finance Party. 

  
 51 

	 	(b)	No Obligor shall (and shall ensure that no other Relevant Person will) take any action or make any omission that results, or is reasonably likely to result, in it or any Finance Party becoming a Restricted Party or
otherwise a target of sanctions (“target of sanctions” signifying an entity or person (“Target”) that is a target of laws, regulations or orders concerning any trade, economic or financial sanctions or embargoes by virtue
of prohibitions and/or restrictions being imposed on any US person or other legal or natural person subject to the jurisdiction or authority of a US Sanctions Authority which prohibit or restrict them from them engaging in trade, business or other
activities with such Target without all appropriate licences or exemptions issued by all applicable US Sanctions Authorities). 

  

	23.	VESSEL UNDERTAKINGS 

  

	23.1	General 

 The undertakings in this Clause 23 (Vessel undertakings) are granted by
the Borrower and remain in force from the Utilisation Date and for so long as any amount is outstanding under the Finance Documents or any Commitment is in force. 
  

	23.2	Insurance – Vessel 

  

	 	(a)	The Borrower shall maintain or ensure that the Vessel is insured against such risks, including but not limited to, hull and machinery, protection & indemnity (including cover for pollution liability to the
uppermost limit available via the P&I club), hull interest, freight interest, war risk insurances, including confiscation, terrorism and piracy, and Loss of Hire, in such amounts, on such terms and placed through first class insurance brokers
with such first class insurers as the Agent shall approve. 

  

	 	(b)	The aggregate value of the hull and machinery insurance, hull interest insurance, freight interest insurance and war risk insurance for the Vessel shall be at least equal to one hundred and twenty per cent (120%) of the
Loan. 

  

	 	(c)	The Borrower shall procure that the Agent (on behalf of the Finance Parties) is noted as first priority mortgagee in the insurance contracts, and that confirmation is promptly given by the underwriters thereof to the
Agent that the notice of assignment with regards to the Insurances and the loss payable clauses are noted in the insurance contracts and that standard letters of undertaking/cover notes/policies/certificates of entry are promptly executed by the
insurers and/or the insurance broker(s). 

  

	 	(d)	Within reasonable time prior to the expiry date of the relevant Insurances, the Borrower shall procure the delivery to the Agent of a confirmation from the insurance broker(s) through whom the Insurances referred to in
paragraph (a) above have been renewed and taken out in respect of the Vessel with insurance values as required by paragraph (b) above, and similarly from the P&I club in which the Vessel is entered that such entry is continuing, that
such Insurances are or shall be in full force and effect and that the Agent (on behalf of the Finance Parties) has been noted as first priority mortgagee by the relevant insurers and that the broker and, if applicable, the P&I club shall
promptly issue a letter of undertaking in respect of such renewed insurances. 

  

	 	(e)	The Borrower shall allow the Agent to take out (for the benefit of the Finance Parties but at the cost and expense of the Borrower), a Mortgagee’s Interest Insurance and a Mortgagee’s Interest—Additional
Perils Pollution Insurance (covering one hundred and ten per cent (110%) of the Loan). 

  
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	 	(f)	If any of the Insurances referred to in paragraph (a) above form part of a fleet cover, the Borrower shall procure, except for protection & indemnity (where the Borrower shall procure to obtain standard
market undertakings in favour of the Agent with respect to protection & indemnity from the insurers or the insurance broker), that the insurers or the insurer broker shall undertake to the Agent that they shall neither set-off against any claims in respect of the Vessel any premiums due in respect of other vessels or units under such fleet cover or any premiums due for other insurances, nor cancel this Insurance for reason of non-payment of premiums for other units under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of the Vessel if and when so requested by the Agent.

  

	 	(g)	The Borrower shall procure that the Vessel always is employed in conformity with the terms of the instruments of Insurances (including any warranties expressed or implied therein) and comply with such requirements as to
extra premium or otherwise as the insurers may prescribe. 

  

	 	(h)	The Borrower will not make any material change to the insurances described under (a) above without the prior written consent of the Agent. 

 

	 	(i)	The Borrower shall pay for an insurance audit report commissioned by the Agent to be prepared by an independent insurance consultant, in form and contents acceptable to the Agent, to be tabled prior to the Utilization
Date and thereafter (if requested by the Agent or Lenders) upon each (annual) renewal of the Insurances referred to in paragraph (a) above. 

  

	23.3	Flag 

  

	 	(a)	The Vessel shall be registered in the United Kingdom or another Flag State approved by the Lenders. The Borrower may not move the Vessel to any other ship register without the prior written consent of the Lenders.

  

	 	(b)	The Borrower, forthwith upon the first request of the Agent so to do, and always subject to consent from the charterer of the Vessel, will procure the transfer of the Vessel to an alternative flag (including, but not
limited to, the United Kingdom, Norway (NIS), Denmark (DIS), Malta, Isle of Man and Bermuda) acceptable to the Lenders in circumstances where the Lenders are of the reasonable opinion, based on the advice of the Lenders’ local legal counsel,
that the security constituted by the Mortgage has been weakened or jeopardised by the changes to the law of the flag under which the Vessel is registered at that time and on such transfer of flag, the Borrower shall execute and deliver, or procure
that there be executed and delivered, to the Lenders such Finance Documents as the Lenders may require which are equivalent to the security held by the Lenders under the previous flag, at the cost and expense of the Borrower 

 

	23.4	Classification and repairs 

 The Borrower shall, and shall procure that the relevant
Manager shall, keep or shall procure that the Vessel is kept in a good, safe and efficient condition consistent with first class ownership and management practice and in particular: 

 

	 	(a)	so as to maintain the highest class with such classification society as the Lenders shall approve, free of all overdue requirements and other recommendations; 

  
 53 

	 	(b)	so as to comply with the laws and regulations (statutory or otherwise) applicable to units registered under the flag state of the Vessel or to vessels trading to any jurisdiction to which the Vessel may trade from time
to time; 

  

	 	(c)	not, without the prior written consent of the Majority Lenders, change the classification society of the Vessel; 

  

	 	(d)	not, without the prior written consent of the Agent, bring the Vessel or allow the Vessel to be brought to any yard for repairs or for the purpose of work being done upon her where the costs of such repairs or work is
likely to exceed USD 1,000,000 (or the equivalent thereof in any other currency), unless such person shall first have given to the Agent and in terms reasonably satisfactory to it, a written undertaking not to exercise any lien on the Vessel or her
Insurances or Earnings for the cost of such repairs or work or otherwise; provided that, unless an Event of Default has occurred, the Borrower may procure that the Vessel enter periodic dry-dockings required
under applicable laws and regulations without the prior written consent of the Agent and the written undertaking set out above; 

  

	 	(e)	not permit any major change or structural alteration to be made to the Vessel, nor any modification of, or part removal from, the Vessel in a way which would materially diminish her value; 

 

	 	(f)	procure that the Vessel is kept in a good, safe and efficient condition and state of repair consistent with the industry’s best ownership and management practice with
dry-docking to be completed at the frequency required under the Charterparty; and 

  

	 	(g)	not permit the Vessel to enter the territorial waters (12 mile limit) of the US unless a valid Certificate of Financial Responsibility as required by the United States Coast Guard has been obtained for the Vessel in
advance and the Vessel is in compliance with all other regulations in the US applicable to the Vessel. 

  

	23.5	Inspections and class records 

  

	 	(a)	The Borrower, whenever requested by the Lenders so to do (which requests shall be made by the Lender only at reasonable intervals), shall procure that evidence is delivered satisfactory to the Lenders on the general
condition and seaworthiness of the Vessel prepared by surveyors approved by the Lenders (each such survey to be carried out at the Borrower’s expense). 

  

	 	(b)	The Borrower shall procure that the Agent’s surveyor at the Borrower’s cost, is permitted to inspect the condition of the Vessel twice a year provided always that such arrangement shall not interfere with the
operation of the Vessel and subject to satisfactory indemnities approved by the P&I insurers. 

  

	 	(c)	The Borrower shall, and shall procure that the Manager shall procure that the Agent is: 

  

	 	(i)	granted permission to access class records and other information from the classification society in relation to the Vessel, through a letter sent by the Borrower to the classification society (in a form prepared or
approved by the Agent), which will also specify that should there be a condition of class imposed or a class recommendation issued in respect of the Vessel, the classification society shall immediately inform the Agent by email; and

  
 54 

	 	(ii)	granted electronic access to class records directly by the classification society or indirectly via the account manager of the Borrower and/or the Manager (as the case may be) and designating the Agent as a user or
administrator of the system under its account. 

  

	 	(d)	The Borrower shall, and shall procure that the Manager shall, instruct the classification society to send to the Agent, following a written request from the Agent, copies of all class records held by the classification
society in relation to the Vessel. 

  

	23.6	Surveys 

 The Borrower shall, and shall procure that the Manager shall, submit to or
cause the Vessel to be submitted to such periodic or other surveys as may be required for classification purposes and to ensure full compliance with regulations of the flag state of the Vessel and to supply or to cause to be supplied to the Agent
copies of all survey reports and confirmations of class issued in respect thereof whenever such is required by the Agent, however such requests are limited to once a year. 
  

	23.7	Notification of certain events 

 The Borrowers shall immediately notify the Agent of:

  

	 	(a)	any accident to the Vessel involving repairs where the costs will or is likely to exceed USD 1,000,000 (or the equivalent in any other currency); 

 

	 	(b)	any requirement or recommendation made by any insurer or classification society or by any competent authority which is not, or cannot be, complied with immediately; 

 

	 	(c)	any exercise or purported exercise of any arrest or lien on the Vessel, its Earnings or its Insurances; 

  

	 	(d)	any occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss; and 

 

	 	(e)	any claim for a material breach of the ISM Code or the ISPS Code being made against the Borrower or otherwise in connection with the Vessel. 

 

	23.8	Operation of the Vessel 

  

	 	(a)	The Borrower shall procure that the Vessel is managed by the Manager pursuant to the Management Agreement and shall not, without the prior written consent of the Majority Lenders, change or allow the change of the
technical or commercial management of the Vessel. 

  

	 	(b)	The Borrower shall, and shall procure that the Manager shall, comply, or procure the compliance in all material respects with the International Convention for the Safety of Life at Sea (SOLAS) 1974, the ISM Code and the
ISPS Code, all Environmental Laws and all other laws or regulations relating to the Vessel (all as adopted, amended or replaced from time to time), its ownership, operation and management or to the business of the Borrower and the Manager and shall
not employ the Vessel nor allow its employment: 

  

	 	(i)	in any manner contrary to law or regulation in any relevant jurisdiction including but not limited to the ISM Code; 

  

	 	(ii)	to carry any nuclear waste or nuclear material under any circumstances; 

  
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	 	(iii)	in carrying illicit or prohibited goods; 

  

	 	(iv)	in a way which may make it liable to be condemned by a prize court or destroyed, seized or confiscated; and 

  

	 	(v)	in any part of the world where there are hostilities (whether war is declared or not) or in any zone which is declared a war zone by any government or is or becomes a listed area of enhanced risk by the war risk
insurers of the Vessel unless the Borrower has (at its own expense) effected any special, additional or modified insurance cover which shall be necessary or customary for first class vessel owners within the territorial waters of such country at
such time and has provided evidence of such cover to the Agent. 

  

	23.9	ISM Code compliance 

 The Borrower shall: 

 

	 	(a)	procure that the Vessel remains subject to a SMS; 

  

	 	(b)	procure that a valid and current SMC is maintained for the Vessel; 

  

	 	(c)	if not itself, procure that the Manager maintains a valid and current DOC; 

  

	 	(d)	immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of the Vessel or of its DOC or the DOC of the Manager; and 

 

	 	(e)	immediately notify the Agent in writing of any “accident” or “major nonconformity”, each as those terms is defined in the Guidelines in the application of the IMO International Safety Management Code
issued by the International Chamber of Shipping and International Shipping Federation. 

  

	23.10	Environmental compliance 

 The Borrower shall, and shall procure that any charterers
shall, comply in all respects with all Environmental Laws applicable to any of them or the Vessel, including without limitation, requirements relating to manning and establishment of financial responsibility and to obtain and comply with all
Environmental Permits applicable to any of them and/or the Vessel. 
  

	23.11	Arrest 

 The Borrower shall pay and discharge when due: 

 

	 	(a)	all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Vessel, its Earnings or its Insurances; 

 

	 	(b)	all tolls, taxes, dues, fines, penalties and other amounts charged in respect of the Vessel, its Earnings or its Insurances; and 

  

	 	(c)	all other outgoings whatsoever in respect of the Vessel, its Earnings and its Insurances, 

 and
forthwith (however not later than after thirty (30) Business Days) upon receiving a notice of arrest of the Vessel, or its detention in exercise or purported exercise of any lien or claim, the Borrower shall procure its release by providing
bail or providing the provision of security or otherwise as the circumstances may require. 

  
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	23.12	Chartering and employment 

 The Borrower shall not enter into arrangements which provide
an obligation to charter (or similar arrangement) in any tonnage. 
  

	23.13	Restrictions on sale etc. 

 The Borrower shall not, without the prior written consent of
the Lenders sell or otherwise dispose of the Vessel, unless the Loan is prepaid in accordance with Clause 7.3 (Mandatory prepayment—Total Loss or sale of the Vessel) in connection therewith. 

 

	23.14	Charterparty 

 The Borrower shall: 

 

	 	(a)	immediately notify the Agent of any amendment, modification or supplement of the material provisions of the Charterparty or the termination or expiration thereof; and 

 

	 	(b)	if the Borrower executes a new Charterparty (including any revision or renewal of the Charterparty in effect from time to time), promptly deliver a copy of the new Charterparty to the Agent subject to the
Charterer’s consent and take any steps so as to ensure that the Security over the Charterhire pursuant to the Assignment Agreement is legally valid, enforceable by the Finance Parties and in full force and effect (including, without limitation,
execution of any supplement or amendment to the Assignment Agreement or a new assignment agreement, serving of a notice of assignment to the Charterer or (if obtainable) acquiring of the acknowledgement by the Charterer), and to execute or procure
the execution of such further documentation in accordance with Clause 17.2 (Perfection etc.). 

  

	24.	EVENTS OF DEFAULT 

 Each of the events or circumstances set out in Clause 24 (Events
of Default) is an Event of Default (save for Clause 24.16 (Acceleration)). 
  

	24.1	Non-payment 

 An Obligor or KNOT ST does not pay
on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless: 
  

	 	(a)	its failure to pay is caused by: 

  

	 	(i)	administrative or technical error; or 

  

	 	(ii)	a Disruption Event; and 

  

	 	(b)	payment is made within three (3) Business Days of its due date. 

  

	24.2	Financial covenants etc. 

 Any requirement of Clause 21 (Financial
covenants), Clause 22.19 (Compliance with laws etc.), Clause 22.20 (Sanctions), Clause 23.2 (Insurance – Vessel), Clause 23.3 (Flag) and Clause 23.4 (Classification and repairs) is not satisfied. 

 

	24.3	Other obligations 

  

	 	(a)	An Obligor or KNOT ST does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (Non-payment) and Clause 24.2 (Financial
covenants etc.)). 

  
 57 

	 	(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the earlier of (A) the Agent giving notice to the
Borrower and (B) the Borrower becoming aware of the failure to comply. 

  

	24.4	Misrepresentation 

 Any representation or statement made or deemed to be made by an
Obligor or KNOT ST in the Finance Documents or any other document delivered by or on behalf of any Obligor or KNOT ST under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when
made or deemed to be made. 
  

	24.5	Cross default 

  

	 	(a)	Any Financial Indebtedness of any Obligor or KNOT ST is not paid when due nor within any originally applicable grace period. 

  

	 	(b)	Any Financial Indebtedness of any Obligor or KNOT ST is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described). 

 

	 	(c)	Any commitment for any Financial Indebtedness of any Obligor or KNOT ST is cancelled or suspended by a creditor as a result of an event of default (however described). 

 

	 	(d)	Any creditor of any Obligor or KNOT ST becomes entitled to declare any Financial Indebtedness due and payable prior to its specified maturity as a result of an event of default (however described). 

 

	 	(e)	No Event of Default will occur under this Clause 24.5 (Cross default) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is
less than USD 5,000,000 (or its equivalent in any other currency or currencies). 

  

	24.6	Insolvency 

  

	 	(a)	An Obligor or KNOT ST: 

  

	 	(i)	is unable or admits inability to pay its debts as they fall due; 

  

	 	(ii)	suspends making payments on any of its debts; or 

  

	 	(iii)	by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding any Finance Party in its capacity as such) with a view to rescheduling any of its
indebtedness. 

  

	 	(b)	The value of the assets of any Obligor or KNOT ST is less than its liabilities (taking into account contingent and prospective liabilities). 

 

	 	(c)	A moratorium is declared in respect of any indebtedness of any Obligor or KNOT ST. 

  

	24.7	Insolvency proceedings 

 Any corporate action, legal proceedings or other procedure or
step is taken in relation to: 
  

	 	(a)	the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or
otherwise) of any Obligor or KNOT ST; 

  
 58 

	 	(b)	a composition, compromise, assignment or arrangement with any creditor of any Obligor or KNOT ST; 

  

	 	(c)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Obligor or KNOT ST or any of its assets; or 

 

	 	(d)	enforcement of any Security over any assets of any Obligor or KNOT ST, 

 or any analogous
procedure or step is taken in any jurisdiction. 
 This Clause 24.7 (Insolvency proceedings) shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within thirty (30) days of commencement. 
  

	24.8	Creditors’ process 

 Any expropriation, attachment, sequestration, distress or
execution affects any asset or assets of an Obligor or KNOT ST having an aggregate value of USD 5,000,000 and is not discharged within thirty (30) days. 
  

	24.9	Cessation of business 

 An Obligor or KNOT ST suspends or ceases to carry on (or
threatens to suspense or cease to carry on) all or a part of its business. 
  

	24.10	Unlawfulness 

 It is or becomes unlawful for an Obligor or KNOT ST to perform any of its
obligations under the Finance Documents or any Security created or expressed to be created or evidenced by any Security Document ceases to be effective or does not create the ranking and priority it is expressed to have. 

 

	24.11	Material adverse change 

 Any event or series of events occur which, in the opinion of
the Majority Lenders, has or is likely to have a Material Adverse Effect. 
  

	24.12	Repudiation, validity and cancellation/termination 

  

	 	(a)	An Obligor or KNOT ST repudiates a Finance Document or evidences an intention to repudiate a Finance Document or a Transaction Document. 

 

	 	(b)	Any Finance Document or Transaction Document ceases to be legal, valid, binding, enforceable or effective. 

  

	24.13	Insurances 

 Any insurance policy taken out in respect of the Vessel is cancelled,
revoked or lapses, or any insurance claim(s) by the Borrower is repudiated following a Total Loss. 
  

	24.14	The Vessel 

  

	 	(a)	Class certification of the Vessel is withdrawn. 

  

	 	(b)	There is an instability affecting a country of flag and the Vessel is not transferred to another ship registry acceptable to the Lenders immediately upon request by the Agent. 

 

	24.15	Delisting 

 the Guarantor ceases to be listed on the New York Stock Exchange. 

  
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	24.16	Acceleration 

 On and at any time after the occurrence of an Event of Default which is
continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Borrower: 
  

	 	(a)	require payment of default interest on the Loan in accordance with Clause 8.3 (Default interest); 

  

	 	(b)	cancel the Total Commitments whereupon they shall immediately be cancelled; 

  

	 	(c)	declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due
and payable; and/or 

  

	 	(d)	declare that all or part of the Loan be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders. 

  
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 SECTION 9 

CHANGES TO PARTIES 
  

	25.	CHANGES TO THE LENDERS 

  

	25.1	Transfers by the Lenders 

 Subject to this Clause 25 (Changes to the Lenders), a
Lender (the “Existing Lender”) may transfer by novation any of its rights and obligations, to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of
making, purchasing or investing in loans, securities or other financial assets (the “New Lender”). 
  

	25.2	Conditions of transfer 

  

	 	(a)	The consent of the Borrower is required for a transfer by an Existing Lender, unless the transfer is to another Lender or an Affiliate of a Lender or an Event of Default has occurred which is continuing.

  

	 	(b)	The consent of the Borrower to a transfer must not be unreasonably withheld or delayed. The Borrower will be deemed to have given its consent five (5) Business Days after the Existing Lender has requested it unless
consent is expressly refused by the Borrower within that time. 

  

	 	(c)	A transfer will only be effective if the procedure set out in Clause 25.4(Procedure for transfer) is complied with. 

  

	 	(d)	If: 

  

	 	(i)	a Lender transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and 

  

	 	(ii)	as a result of circumstances existing at the date the transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 (Tax gross-up and indemnities) or Clause 13 (Increased Costs), 

 then the New Lender
or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the transfer or change had
not occurred. This paragraph (d) shall not apply in respect of a transfer made in the ordinary course of the primary syndication of the Facility. 
  

	 	(e)	Each New Lender, by executing the relevant Transfer Certificate, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf
of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender
would have been had it remained a Lender. 

  

	25.3	Limitation of responsibility of Existing Lenders 

  

	 	(a)	Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for: 

  
 61 

	 	(i)	the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents; 

  

	 	(ii)	the financial condition of any Obligor; 

  

	 	(iii)	the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or 

  

	 	(iv)	the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document, 

and any representations or warranties implied by law are excluded. 
  

	 	(b)	Each New Lender confirms to the Existing Lender and the other Finance Parties that it: 

  

	 	(i)	has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this
Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and 

  

	 	(ii)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

  

	 	(c)	Nothing in any Finance Document obliges an Existing Lender to: 

  

	 	(i)	accept a re-transfer from a New Lender of any of the rights and obligations transferred under this Clause 25 (Changes to the Lenders); or 

 

	 	(ii)	support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.

  

	25.4	Procedure for transfer 

  

	 	(a)	Subject to the conditions set out in Clause 25.2 (Conditions of transfer) a transfer is effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Transfer
Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to
comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate. 

  

	 	(b)	The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other
similar checks under all applicable laws and regulations in relation to the transfer to such New Lender. 

  

	 	(c)	Subject to Clause 25.7 (Pro rata interest settlement), on the Transfer Date: 

  

	 	(i)	to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from
further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the “Discharged Rights and Obligations”); 

  
 62 

	 	(ii)	each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the
New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender; 

  

	 	(iii)	the Agent, the Mandated Lead Arranger, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an
Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Mandated Lead Arranger and the Existing Lender shall each be released from further obligations to each other
under the Finance Documents; and 

  

	 	(iv)	the New Lender shall become a Party as a “Lender”. 

  

	25.5	Copy of Transfer Certificate to the Borrower 

 The Agent shall, as soon as
reasonably practicable after it has executed a Transfer Certificate, send to the Borrower a copy of that Transfer Certificate. 
  

	25.6	Security over Lenders’ rights 

 In addition to the other rights provided to Lenders
under this Clause 25 (Changes to the Lenders), each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all
or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation: 
  

	 	(a)	any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and 

  

	 	(b)	in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security
for those obligations or securities, 

 except that no such charge, assignment or Security shall: 

 

	 	(i)	release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or

  

	 	(ii)	require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.

  

	25.7	Pro rata interest settlement 

  

	 	(a)	If the Agent has notified the Lenders that it is able to distribute interest payments on a “pro rata basis” to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 25.4
(Procedure for transfer) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period): 

  
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	 	(i)	any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer
Date (“Accrued Amounts”) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six
(6) Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and 

  

	 	(ii)	the rights transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt: 

 

	 	(A)	when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and 

  

	 	(B)	the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 25.7 (Pro rata interest settlement), have been payable to it on that date, but after
deduction of the Accrued Amounts. 

  

	 	(b)	In this Clause 25.7 (Pro rata interest settlement) references to “Interest Period” shall be construed to include a reference to any other period for accrual of fees. 

 

	26.	CHANGES TO THE OBLIGORS 

 No Obligor may assign any of its rights or transfer any of its
rights or obligations under the Finance Documents. 

  
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 SECTION 10 

THE FINANCE PARTIES 
  

	27.	ROLE OF THE AGENT, THE MANDATED LEAD ARRANGER AND THE REFERENCE BANKS 

  

	27.1	Appointment of the Agent 

  

	 	(a)	Each other Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents. 

  

	 	(b)	Each other Finance Party authorises the Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in
connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions. 

  

	27.2	Instructions 

  

	 	(a)	The Agent shall: 

  

	 	(i)	unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by:

  

	 	(A)	all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and 

  

	 	(B)	in all other cases, the Majority Lenders; and 

  

	 	(ii)	not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above. 

  

	 	(b)	The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group
of Lenders, from that Lender or group of Lenders) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion. The Agent may refrain from acting unless and until it receives any such
instructions or clarification that it has requested. 

  

	 	(c)	Save in the case of decisions stipulated to be a matter for any other Lender or group of Lenders under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given
to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties. 

  

	 	(d)	The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders until it has received any indemnification and/or security that it may in its discretion require (which may be
greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions. 

 

	 	(e)	In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders. 

  
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	 	(f)	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document. 

 

	27.3	Duties of the Agent 

  

	 	(a)	The Agent’s duties under the Finance Documents are solely mechanical and administrative in nature. 

  

	 	(b)	Subject to paragraph (c) below, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party. 

 

	 	(c)	Without prejudice to Clause 25.5 (Copy of Transfer Certificate to the Borrower), paragraph (b) above shall not apply to any Transfer Certificate. 

 

	 	(d)	Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party. 

 

	 	(e)	If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.

  

	 	(f)	If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Mandated Lead Arranger)
under this Agreement it shall promptly notify the other Finance Parties. 

  

	 	(g)	The Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied). 

 

	27.4	Role of the Mandated Lead Arranger 

 Except as specifically provided in the Finance
Documents, the Mandated Lead Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document. 
  

	27.5	No fiduciary duties 

  

	 	(a)	Nothing in any Finance Document constitutes the Agent or the Mandated Lead Arranger as a trustee or fiduciary of any other person. 

  

	 	(b)	Neither the Agent nor the Mandated Lead Arranger shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account. 

 

	27.6	Business with the Group 

 The Agent and the Mandated Lead Arranger may accept deposits
from, lend money to and generally engage in any kind of banking or other business with any member of the Group. 
  

	27.7	Rights and discretions 

  

	 	(a)	The Agent may: 

  

	 	(i)	rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised; 

  

	 	(ii)	assume that: 

  
 66 

	 	(A)	any instructions received by it from the Majority Lenders, any Lender or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and 

 

	 	(B)	unless it has received notice of revocation, that those instructions have not been revoked; and 

  

	 	(iii)	rely on a certificate from any person: 

  

	 	(A)	as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or 

  

	 	(B)	to the effect that such person approves of any particular dealing, transaction, step, action or thing, 

as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that
certificate. 
  

	 	(b)	The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that: 

  

	 	(i)	no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Non-payment)); 

 

	 	(ii)	any right, power, authority or discretion vested in any Party or any group of Lenders has not been exercised; and 

  

	 	(iii)	any notice or request made by the Borrower (other than the Utilisation Request) is made on behalf of and with the consent and knowledge of all the Obligors. 

 

	 	(c)	The Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts. 

 

	 	(d)	Without prejudice to the generality of paragraph (c) above or paragraph (e) below, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so
separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be necessary. 

  

	 	(e)	The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable
for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying. 

  

	 	(f)	The Agent may act in relation to the Finance Documents through its officers, employees and agents. 

  

	 	(g)	Unless a Finance Document expressly provides otherwise the Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement. 

 

	 	(h)	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor any Mandated Lead Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion
constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality. 

  
 67 

	 	(i)	Notwithstanding any provision of any Finance Document to the contrary, the Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or
responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.

  

	27.8	Responsibility for documentation 

 Neither the Agent nor the Mandated Lead Arranger is
responsible or liable for: 
  

	 	(a)	the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent, any Mandated Lead Arranger, an Obligor or any other person given in or in connection with any Finance Document
or the transactions contemplated in the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; or 

 

	 	(b)	the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with
any Finance Document; or 

  

	 	(c)	any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by
applicable law or regulation relating to insider dealing or otherwise. 

  

	27.9	No duty to monitor 

 The Agent shall not be bound to enquire: 

 

	 	(a)	whether or not any Default has occurred; 

  

	 	(b)	as to the performance, default or any breach by any Party of its obligations under any Finance Document; or 

  

	 	(c)	whether any other event specified in any Finance Document has occurred. 

  

	27.10	Exclusion of liability 

  

	 	(a)	Without limiting paragraph (b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent), the Agent will not be liable for: 

 

	 	(i)	any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document, unless directly
caused by its gross negligence or wilful misconduct. 

  

	 	(ii)	exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document or any other agreement, arrangement or document entered into, made or executed in
anticipation of, under or in connection with, any Finance Document, other than by reason of its gross negligence or wilful misconduct; or 

  

	 	(iii)	without prejudice to the generality of paragraphs (i) and (ii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation, for negligence
or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of: 

  
 68 

	 	(A)	any act, event or circumstance not reasonably within its control; or 

  

	 	(B)	the general risks of investment in, or the holding of assets in, any jurisdiction, 

 including
(in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or
fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or
systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action. 
  

	 	(b)	No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by
that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause. 

  

	 	(c)	The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as
soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose. 

 

	 	(d)	Nothing in this Agreement shall oblige the Agent or the Mandated Lead Arranger to carry out: 

  

	 	(i)	any “know your customer” or other checks in relation to any person; or 

  

	 	(ii)	any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, 

on behalf of any Lender and each Lender confirms to the Agent and the Mandated Lead Arranger that it is solely responsible for any such checks
it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or any Mandated Lead Arranger. 
  

	 	(e)	Without prejudice to any provision of any Finance Document excluding or limiting the Agent’s liability, any liability of the Agent arising under or in connection with any Finance Document shall be limited to the
amount of actual loss which has been suffered (as determined by reference to the date of default of the Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or
circumstances known to the Agent at any time which increase the amount of that loss. In no event shall the Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect
or consequential damages, whether or not the Agent has been advised of the possibility of such loss or damages. 

  
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	27.11	Lenders’ indemnity to the Agent 

 Each Lender shall (in proportion to its share of
the Total Commitments or, if the Total Commitments are then zero (0), to its share of the Total Commitments immediately prior to their reduction to zero (0)) indemnify the Agent, within three (3) Business Days of demand, against any cost, loss
or liability incurred by the Agent (otherwise than by reason of the Agent’s gross negligence or wilful misconduct) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance
Document). 
  

	27.12	Resignation of the Agent 

  

	 	(a)	The Agent may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties and the Borrower. 

  

	 	(b)	Alternatively the Agent may resign by giving thirty (30) days’ notice to the other Finance Parties and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a
successor Agent. 

  

	 	(c)	If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within twenty (20) days after notice of resignation was given, the retiring Agent (after consultation with
the Borrower) may appoint a successor Agent. 

  

	 	(d)	If the Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Agent is entitled to appoint a successor Agent under paragraph
(c) above, the Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Agent to become a party to this Agreement as Agent) agree with the proposed successor Agent amendments to
this Clause 27 (Role of the Agent, the Mandated Lead Arranger and the Reference Banks) and any other term of this Agreement dealing with the rights or obligations of the Agent consistent with then current market practice for the appointment
and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Agent’s normal fee rates and those amendments will bind the Parties.

  

	 	(e)	The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its
functions as Agent under the Finance Documents. The Borrower shall, within three (3) Business Days of demand, reimburse the retiring Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making
available such documents and records and providing such assistance. 

  

	 	(f)	The Agent’s resignation notice shall only take effect upon the appointment of a successor. 

  

	 	(g)	Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (e) above) but shall remain
entitled to the benefit of Clause 14.3 (Indemnity to the Agent) and this Clause 27 (Role of the Agent, the Mandated Lead Arranger and the Reference Banks) (and any agency fees for the account of the retiring Agent shall cease to accrue
from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party. 

  
 70 

	 	(h)	After consultation with the Borrower, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with
paragraph (b) above. 

  

	 	(i)	The Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the
date which is three (3) Months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either: 

  

	 	(i)	the Agent fails to respond to a request under Clause 12.6(FATCA Information) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA
Application Date; 

  

	 	(ii)	the information supplied by the Agent pursuant to Clause 12.6 (FATCA Information) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or

  

	 	(iii)	the Agent notifies the Borrower and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; 

and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the
Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign. 
  

	27.13	Confidentiality 

  

	 	(a)	In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

  

	 	(b)	If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it. 

 

	27.14	Relationship with the Lenders 

  

	 	(a)	Subject to Clause 25.7 (Pro rata Interest Settlement), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent’s principal office as notified to
the Finance Parties from time to time) as the Lender acting through its Facility Office: 

  

	 	(i)	entitled to or liable for any payment due under any Finance Document on that day; and 

  

	 	(ii)	entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day, 

unless it has received not less than five (5) Business Days’ prior notice from that Lender to the contrary in accordance with the
terms of this Agreement. 

  
 71 

	 	(b)	Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice
shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 32.5 (Electronic communication)) electronic mail address and/or any other information required to enable the
sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address,
department and officer by that Lender for the purposes of Clause 32.2 (Addresses) and paragraph (a)(iii) of Clause 32.5 (Electronic communication) and the Agent shall be entitled to treat such person as the person entitled to receive
all such notices, communications, information and documents as though that person were that Lender. 

  

	27.15	Credit appraisal by the Lenders 

 Without affecting the responsibility of any Obligor for
information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the Mandated Lead Arranger that it has been, and will continue to be, solely responsible for making its own independent
appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to: 
  

	 	(a)	the financial condition, status and nature of each member of the Group; 

  

	 	(b)	the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with
any Finance Document; 

  

	 	(c)	whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the
Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and 

 

	 	(d)	the adequacy, accuracy or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by any Finance Document
or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document. 

  

	27.16	Role of Reference Banks 

  

	 	(a)	No Reference Bank is under any obligation to provide a quotation or any other information to the Agent. 

  

	 	(b)	No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct.

  

	 	(c)	No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of
any act or omission of any kind by that officer, employee or agent in relation to any Finance Document, or to any Reference Bank Quotation, and any officer, employee or agent of each Reference Bank may rely on this Clause 27.16 (Role of the
Reference Banks). 

  
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	27.17	Third party Reference Banks 

 A Reference Bank which is not a Party may rely on
Clause 27.16 (Role of Reference Banks), Clause 36.3 (Other exceptions) and Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations). 

 

	27.18	Reference Banks 

 If a Reference Bank (or, if a Reference Bank is not a Lender, the
Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Borrower) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank. 

 

	27.19	Deduction from amounts payable by the Agent 

 If any Party owes an amount to the Agent
under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the
amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted. 

 

	28.	CONDUCT OF BUSINESS BY THE FINANCE PARTIES 

 No provision of this Agreement will: 

 

	 	(a)	interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit; 

  

	 	(b)	oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or 

 

	 	(c)	oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax. 

 

	29.	SHARING AMONG THE FINANCE PARTIES 

  

	29.1	Payments to Finance Parties 

 If a Finance Party (a “Recovering Finance
Party”) receives or recovers any amount from an Obligor other than in accordance with Clause 30 (Payment mechanics) (a “Recovered Amount”) and applies that amount to a payment due under the Finance Documents then:

  

	 	(a)	the Recovering Finance Party shall, within three (3) Business Days, notify details of the receipt or recovery to the Agent; 

  

	 	(b)	the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in
accordance with Clause 30 (Payment mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and 

 

	 	(c)	the Recovering Finance Party shall, within three (3) Business Days of demand by the Agent, pay to the Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which
the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 30.5 (Partial payments). 

  
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	29.2	Redistribution of payments 

 The Agent shall treat the Sharing Payment as if it had been
paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the “Sharing Finance Parties”) in accordance with Clause 30.5 (Partial payments) towards the obligations of
that Obligor to the Sharing Finance Parties. 
  

	29.3	Recovering Finance Party’s rights 

 On a distribution by the Agent under Clause 29.2
(Redistribution of payments) of a payment received by a Recovering Finance Party from an Obligor, as between the relevant Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated
as not having been paid by that Obligor. 
  

	29.4	Reversal of redistribution 

 If any part of the Sharing Payment received or recovered by
a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then: 
  

	 	(a)	each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with
an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the “Redistributed Amount”); and

  

	 	(b)	as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor. 

 

	29.5	Exceptions 

  

	 	(a)	This Clause 29 (Sharing among the Finance Parties) shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim
against the relevant Obligor. 

  

	 	(b)	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

  

	 	(i)	it notified that other Finance Party of the legal or arbitration proceedings; and 

  

	 	(ii)	that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or
arbitration proceedings. 

  
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 SECTION 11 

ADMINISTRATION 
  

	30.	PAYMENT MECHANICS 

  

	30.1	Payments to the Agent 

  

	 	(a)	On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance
Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment. 

 

	 	(b)	Payment shall be made to such account with such bank as the Agent specifies. 

  

	 	(c)	Without prejudice to the foregoing, any payment payable by the Borrower under a Finance Document may be withdrawn from the Payment Account by the Agent to such account with such bank as the Agent specifies without the
Borrower’s consent. 

  

	30.2	Distributions by the Agent 

 Each payment received by the Agent under the Finance
Documents for another Party shall, subject to Clause 30.3 (Distributions to an Obligor), Clause 30.4 (Clawback and pre-funding) and the Intercreditor Agreement, be made available by the Agent as
soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement and the Intercreditor Agreement (in the case of a Lender, for the account of its Facility Office), to such account with such bank as that
Party may notify to the Agent by not less than five (5) Business Days’ notice. 
  

	30.3	Distributions to an Obligor 

 The Agent may (with the consent of the Obligor or in
accordance with Clause 31 (Set-off)) apply any amount received by it from that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor
under the Finance Documents or in or towards purchase of any amount of any currency to be so applied. 
  

	30.4	Clawback and pre-funding 

  

	 	(a)	Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has
been able to establish to its satisfaction that it has actually received that sum. 

  

	 	(b)	Unless paragraph (c) below applies, if the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the
proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its
cost of funds. 

  

	 	(c)	If the Agent has notified the Lenders that it is willing to make available amounts for the account of the Borrower before receiving funds from the Lenders then if and to the extent that the Agent does so but it proves
to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to the Borrower: 

  

	 	(i)	the Agent shall notify the Borrower of that Lender’s identity and the Borrower shall on demand refund it to the Agent; and 

  
 75 

	 	(ii)	the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower, shall on demand pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent
against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender. 

  

	30.5	Partial payments 

  

	 	(a)	If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that
Obligor under the Finance Documents in the following order: 

  

	 	(i)	first, in or towards payment pro rata of any unpaid amount owing to the Agent under the Finance Documents; 

  

	 	(ii)	secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement; 

 

	 	(iii)	thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; 

  

	 	(iv)	fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents. 

  

	 	(b)	The Agent shall, if so directed by the Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above. 

  

	 	(c)	Paragraphs (a) and (b) above will override any appropriation made by an Obligor. 

  

	30.6	No set-off by Obligors 

 All payments to be made
by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim. 

 

	30.7	Business Days 

  

	 	(a)	Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if
there is not). 

  

	 	(b)	During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date. 

 

	30.8	Currency of account 

  

	 	(a)	Subject to paragraphs (b) and (c) below, USD is the currency of account and payment for any sum due from an Obligor under any Finance Document. 

 

	 	(b)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred. 

 

	 	(c)	Any amount expressed to be payable in a currency other than USD shall be paid in that other currency. 

  
 76 

	31.	SET-OFF 

 A Finance Party may set off any
matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or
currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the
set-off. 
  

	32.	NOTICES 

  

	32.1	Communications in writing 

 Any communication to be made under or in connection with the
Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter. 
  

	32.2	Addresses 

 The address and fax number (and the department or officer, if any, for whose
attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is: 
  

	 	(a)	in the case of Borrower, that identified with its name below: 

 Knutsen Shuttle Tankers
15 AS 
 P. O. Box 2017 
 N-5504 Haugesund 
 Norway 
  

	 	Fax no.:	+47 52 70 40 40 

	 	E-mail:	finance@knutsenoas.com 

 oem@knotgroup.com 

hho@knotgroup.com 

kly@knutsenoas.com 

jka@knotgroup.com 

tya@knotgroup.com 
  

	 	(b)	in the case of the Guarantor, that identified with its name below: 

 KNOT OFFSHORE PARTNERS LP

 2 Queen’s Cross, 

Aberdeen AB15 4YB, 
 UK 

 

	 	Fax no.:	+47 52 70 40 40                 

	 	E-mail:	finance@knutsenoas.com 

 oem@knotgroup.com 

hho@knotgroup.com 

jka@knotgroup.com 

tya@knotgroup.com 

jco@knotoffshorepartners.com 

ali@knutsenoas.com 
  

	 	(c)	in the case of each Lender or any other Obligor, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and 

  
 77 

	 	(d)	in the case of the Agent, that identified with its name below: 

 The Bank of Tokyo-Mitsubishi
UFJ, Ltd. 
 Ropemaker Place, 

25 Ropemaker Street 
 London
EC2Y 9AN 
  

	 	Fax no.:	+44 20 7577 1123 

	 	E-mail:	yuki.murayama@uk.mufg.jp 

 yoshino.cobb@uk.mufg.jp 

or any substitute address or fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other
Parties, if a change is made by the Agent) by not less than five (5) Business Days’ notice. 
  

	32.3	Delivery 

  

	 	(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective: 

 

	 	(i)	if by way of fax, when received in legible form; 

  

	 	(ii)	if by way of electronic communication, when actually received in readable form and in the case of any electronic communication made to the Agent only if it is addressed in such a manner as the Agent shall specify for
this purpose; or 

  

	 	(iii)	if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; 

and, if a particular department or officer is specified as part of its address details provided under Clause 32.2 (Addresses), if
addressed to that department or officer. 
  

	 	(b)	Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer
identified with the Agent’s signature below (or any substitute department or officer as the Agent shall specify for this purpose). 

  

	 	(c)	All notices from or to an Obligor shall be sent through the Agent. 

  

	 	(d)	Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors. 

 

	32.4	Notification of address and fax number 

 Promptly upon receipt of notification of an
address or fax number or change of address or fax number pursuant to Clause 32.2 (Addresses) or changing its own address or fax number, the Agent shall notify the other Parties. 

 

	32.5	Electronic communication 

  

	 	(a)	Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:

  
 78 

	 	(i)	agree that, unless and until notified to the contrary, this is to be an accepted form of communication; 

  

	 	(ii)	notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and 

 

	 	(iii)	notify each other of any change to their address or any other such information supplied by them. 

  

	 	(b)	Any electronic communication made between the Agent and a Lender will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Agent only if it is
addressed in such a manner as the Agent shall specify for this purpose. 

  

	32.6	English language 

  

	 	(a)	Any notice given under or in connection with any Finance Document must be in English. 

  

	 	(b)	All other documents provided under or in connection with any Finance Document must be: 

  

	 	(i)	in English; or 

  

	 	(ii)	if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other
official document. 

  

	33.	CALCULATIONS AND CERTIFICATES 

  

	33.1	Accounts 

 In any litigation or arbitration proceedings arising out of or in connection
with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate. 
  

	33.2	Certificates and Determinations 

 Any certification or determination by a Finance Party
of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates. 
  

	33.3	Day count convention 

 Any interest, commission or fee accruing under a Finance Document
will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of three hundred and sixty (360) days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with
that market practice. 
  

	33.4	Fraction 

 Any fractional amount less than one (1) cent arising as a result of any
calculation of the interests or other amounts pursuant hereto shall be rounded down to zero. 
  

	34.	PARTIAL INVALIDITY 

 If, at any time, any provision of a Finance Document is or becomes
illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any
other jurisdiction will in any way be affected or impaired. 

  
 79 

	35.	REMEDIES AND WAIVERS 

 No failure to exercise, nor any delay in exercising, on the part
of any Finance Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Finance Documents. No election to affirm any Finance Document on the part of any
Finance Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance
Document are cumulative and not exclusive of any rights or remedies provided by law. 
  

	36.	AMENDMENTS AND WAIVERS 

  

	36.1	Required consents 

  

	 	(a)	Subject to Clause 36.2 (All Lender matters) and Clause 36.3 (Other exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and
any such amendment or waiver will be binding on all Parties. 

  

	 	(b)	The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause. 

  

	36.2	All Lender matters 

 An amendment or waiver of any term of any Finance Document that has
the effect of changing or which relates to: 
  

	 	(a)	the definitions of “Change of Control”, “Majority Lenders”, “Relevant Person”, “Restricted Party”, “Sanctions”, “Sanctions Authority” or “Sanctions
List” in Clause 1.1 (Definitions); 

  

	 	(b)	an extension to the date of payment of any amount under the Finance Documents; 

  

	 	(c)	a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable; 

  

	 	(d)	an increase in any Commitment, an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably under the Facility; 

 

	 	(e)	any provision which expressly requires the consent of all the Lenders; 

  

	 	(f)	Clause 2.2 (Finance Parties’ rights and obligations), Clause 7.8 (Application of prepayments), Clause 19.26 (Sanctions), Clause 22.19 (Compliance with laws etc.), Clause 22.20
(Sanctions), Clause 25 (Changes to the Lenders), Clause 26 (Changes to the Obligors), Clause 29 (Sharing among the Finance Parties), this Clause 36 (Amendments and waivers), Clause 42 (Governing law) or
Clause 43.1(Jurisdiction of English courts); 

  

	 	(g)	the nature or scope of the guarantee and indemnity granted under Clause 18 (Guarantee and indemnity); 

  
 80 

	 	(h)	release of any Security created by the Security Documents unless permitted under the Finance Documents or undertaken by the Agent acting on instruction of the Majority Lenders following an Event of Default which is
continuing; 

  

	 	(i)	a change to any Obligor; or 

  

	 	(j)	any material change in any of the Security Documents, 

 shall not be made without the prior
consent of all the Lenders. 
  

	36.3	Other exceptions 

 An amendment or waiver which relates to the rights or obligations of
the Agent, the Mandated Lead Arranger or the Reference Bank (each in their capacity as such) may not be effected without the consent of the Agent, the Mandated Lead Arranger or the Reference Bank, as the case may be. 

 

	37.	COUNTERPARTS 

 Each Finance Document may be executed in any number of counterparts, and
this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document. 
  

	38.	CONFLICT 

 In case of conflict between the Security Documents and this Agreement, the
provisions of this Agreement shall prevail, provided however that this will not in any way be interpreted or applied to prejudice the legality, validity or enforceability of any Security Document. 

  
 81 

 SECTION 12 

MISCELLANEOUS 
  

	39.	DISCLOSURE OF INFORMATION AND CONFIDENTIALITY 

  

	 	(a)	Each Obligor irrevocably authorises any Finance Party to give, divulge and reveal from time to time information and details relating to its account, the Vessel, the Finance Documents, the Transaction Documents, the
Facility, any Commitment and any agreement entered into by any Obligor or information provided by any Obligor in connection with the Finance Documents to; 

  

	 	(i)	any private, public or internationally recognised authorities; 

  

	 	(ii)	the head offices, branches and Affiliates, auditors and professional advisors of any Finance Party; 

  

	 	(iii)	any other parties to the Finance Documents; 

  

	 	(iv)	a rating agency or their professional advisors; 

  

	 	(v)	any person with whom they propose to enter (or contemplate entering) into contractual relations in relation to the Facility and/or Commitments; or 

 

	 	(vi)	any other person(s) regarding the funding, re-financing, transfer, assignment, sale, sub-participation or operational arrangement or other
transaction in relation thereto, 

 including, without limitation, any enforcement, preservation, assignment, transfer, sale
or sub-participation of any of the rights and obligations of any Finance Documents. 
  

	 	(b)	The Agent and/or the Mandated Lead Arranger shall have the right, at its own expense, to publish information about its participation in and the agency and arrangement of the Facility and for such purpose use the
Obligors’ logos and trademark in connection with such publication. 

  

	40.	CONFIDENTIALITY OF FUNDING RATES AND REFERENCE BANK QUOTATIONS 

  

	40.1	Confidentiality and disclosure 

  

	 	(a)	The Agent and each Obligor agree to keep each Funding Rate (and, in the case of the Agent, each Reference Bank Quotation) confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (b),
(c) and (d) below. 

  

	 	(b)	The Agent may disclose: 

  

	 	(i)	any Funding Rate (but not, for the avoidance of doubt, any Reference Bank Quotation) to the Borrower pursuant to Clause 8.4 (Notification of rates of interest); and 

 

	 	(ii)	any Funding Rate or any Reference Bank Quotation to any person appointed by it to provide administration services in respect of one or more of the Finance Documents to the extent necessary to enable such service
provider to provide those services if the service provider to whom that information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With
Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Agent and the relevant Lender or Reference Bank, as the case may be. 

  
 82 

	 	(c)	The Agent may disclose any Funding Rate or any Reference Bank Quotation, and each Obligor may disclose any Funding Rate, to: 

  

	 	(i)	any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives if any person to whom that Funding Rate or Reference Bank Quotation is to be
given pursuant to this paragraph (i) is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional
obligations to maintain the confidentiality of that Funding Rate or Reference Bank Quotation or is otherwise bound by requirements of confidentiality in relation to it; 

 

	 	(ii)	any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any
relevant stock exchange or pursuant to any applicable law or regulation if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive
information except that there shall be no requirement to so inform if, in the opinion of the Agent or the relevant Obligor, as the case may be, it is not practicable to do so in the circumstances; 

 

	 	(iii)	any person to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes if the person to whom
that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Agent or
the relevant Obligor , as the case may be, it is not practicable to do so in the circumstances; and 

  

	 	(iv)	any person with the consent of the relevant Lender or Reference Bank, as the case may be. 

  

	 	(d)	The Agent’s obligations in this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations) relating to Reference Bank Quotations are without prejudice to its obligations to make notifications
under Clause 8.4 (Notification of rates of interest) provided that (other than pursuant to paragraph (b)(i) above) the Agent shall not include the details of any individual Reference Bank Quotation as part of any such
notification. 

  

	40.2	Related obligations 

  

	 	(a)	The Agent and each Obligor acknowledge that each Funding Rate (and, in the case of the Agent, each Reference Bank Quotation) is or may be price-sensitive information and that its use may be regulated or prohibited by
applicable legislation including securities law relating to insider dealing and market abuse and the Agent and each Obligor undertake not to use any Funding Rate or, in the case of the Agent, any Reference Bank Quotation for any unlawful purpose.

  
 83 

	 	(b)	The Agent and each Obligor agree (to the extent permitted by law and regulation) to inform the relevant Lender or Reference Bank, as the case may be: 

 

	 	(i)	of the circumstances of any disclosure made pursuant to paragraph (c)(ii) of Clause 40.1 (Confidentiality and disclosure) except where such disclosure is made to any of the persons referred to in that
paragraph during the ordinary course of its supervisory or regulatory function; and 

  

	 	(ii)	upon becoming aware that any information has been disclosed in breach of this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations). 

 

	40.3	No Event of Default 

 No Event of Default will occur under Clause 24.3 (Other
obligations) by reason only of an Obligor’s failure to comply with this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations). 
  

	41.	“KNOW YOUR CUSTOMER” CHECKS 

  

	 	(a)	If: 

  

	 	(i)	the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation (whether in public regulation or in internal regulation of any of the Finance Parties) made after
the date hereof; 

  

	 	(ii)	any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date hereof; 

  

	 	(iii)	a proposed assignment or transfer by a Finance Party of any of its rights and/or obligations under this Agreement to a party that is not a Finance Party prior to such assignment or transfer; or 

 

	 	(iv)	any internal requirements or routines of any of the Finance Parties, 

 obliges the Agent or any
Finance Party (or, in the case of paragraph (iii) above, any prospective new Finance Party) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already
available to it, each Obligor shall promptly upon the request of the Agent or any Finance Party supply, or procure the supply of, such documentation and other evidence as is requested by the Agent (for itself or on behalf of any Finance Party) or
any Finance Party (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Finance Party) in order for the Agent, such Finance Party or, in the case of the event described in paragraph
(iii) above, any prospective new Finance Party to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any relevant person pursuant to the transactions contemplated in the
Finance Documents. 
  

	 	(b)	Each Finance Party shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is requested by the Agent (for itself) in order for the Agent to carry out and
be satisfied with the results of all necessary “know your customer” or other checks on Finance Parties or prospective new Finance Parties pursuant to the transactions contemplated in the Finance Documents. 

  
 84 

 SECTION 13 

GOVERNING LAW AND ENFORCEMENT 
  

	42.	GOVERNING LAW 

 This Agreement and any
non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law. 
  

	43.	ENFORCEMENT 

  

	43.1	Jurisdiction of English courts 

  

	 	(a)	The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or
any non-contractual obligation arising out of or in connection with this Agreement) (a “Dispute”). 

  

	 	(b)	The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary. 

 

	 	(c)	Notwithstanding paragraph (a) above, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may
take concurrent proceedings in any number of jurisdictions. 

  

	43.2	Service of process 

  

	 	(a)	Without prejudice to any other mode of service allowed under any relevant law, each Obligor: 

  

	 	(i)	irrevocably appoints SH Process Agents Limited whose current registered office is at 1 Finsbury Circus, London EC2M 7SH as its agent for service of process in relation to any proceedings before the English courts in
connection with any Finance Document; and; 

  

	 	(ii)	agrees that failure by an agent for service of process to notify the relevant Obligor of the process will not invalidate the proceedings concerned. 

 

	 	(b)	If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, each Obligor must immediately (and in any event within 5 days of such event taking place)
appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose. 

 This
Agreement has been entered into on the date stated at the beginning of this Agreement. 

  
 85 

 Schedule 1 

THE ORIGINAL LENDERS 

THE FACILITY 
  

					
	 Name of Original Lender:
	  	Commitment	 
	 BTMU (Europe) Limited
	  	 	USD 60,000,000	 
	 Mitsubishi UFJ Lease & Finance (Hong Kong) Limited
	  	 	USD 20,000,000	 
	 BOT Lease Co., Ltd.
	  	 	USD 20,000,000	 
	 Total
	  	 	USD 100,000,000	 

  
 86 

 Schedule 2 

CONDITIONS PRECEDENT AND SUBSEQUENT 

Part I 
 Conditions
Precedent to Utilisation 
  

	1.	Obligors 

  

	 	(a)	Certified copies of the constitutional documents of each Obligor (including, without limitation, the Limited Partnership Agreement). 

 

	 	(b)	A certified copy of a resolution of the board of directors (or similar authorities) of each Obligor: 

  

	 	(i)	approving the terms of, and the transactions contemplated by, the Finance Documents and Transaction Documents to which it is a party and resolving that it shall execute the Finance Documents and Transaction Documents to
which it is a party; 

  

	 	(ii)	authorising a specified person or persons to execute the Finance Documents and Transaction Documents to which it is a party on its behalf; and 

 

	 	(iii)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, the Utilisation Request) to be signed and/or despatched by it under or in connection
with the Finance Documents to which it is a party. 

  

	 	(c)	A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above. 

  

	 	(d)	An original Power of Attorney (notarised and legalised if requested by the Agent). 

  

	 	(e)	A written confirmation in original from a Director of each Obligor that each document provided by that Obligor under Part I (Conditions Precedent to Utilisation) of this Schedule 2 (Conditions Precedent
and Subsequent) are true copies of the originals. 

  

	2.	Know Your Customer (KYC) requirements 

 Any documents required by the Agent and the
Lenders pursuant to any “Know your customer Checks” with respect to the Obligors and their signatories, directors and ultimate beneficial owners. 
  

	3.	Authorisations 

 All approvals, authorisations and consents required by any government or
other authorities for the Obligors to enter into and perform their obligations under this Agreement and/or any of the Finance Documents and Transaction Documents to which they are respective parties. 

 

	4.	Finance Documents 

  

	 	(a)	This Agreement. 

  

	 	(b)	Any Fee Letter. 

  
 87 

	 	(c)	The Intercreditor Agreement. 

  

	 	(d)	The Assignment Agreement. 

  

	 	(e)	A notice of assignment of Insurances. 

  

	 	(f)	A notice of assignment of Earnings (including the Charterhire). 

  

	 	(g)	The Account Pledge. 

  

	 	(h)	A notice of pledge of the Account 

  

	 	(i)	The Borrower Share Pledge together with any letters, transfers, certificates and other documents required to be delivered thereunder. 

 

	 	(j)	Evidence of perfection of the Borrower Share Pledge. 

  

	 	(k)	The Mortgage. 

  

	 	(l)	Evidence that the Mortgage is capable of immediate registration with first priority in the United Kingdom ship registry. 

  

	 	(m)	A Manager’s Undertaking from the Manager. 

 (All Finance Documents to be delivered in
original). 
  

	5.	Transaction Documents 

  

	 	(a)	A certified copy of the Charterparty. 

  

	 	(b)	A certified copy of the Management Agreement. 

  

	6.	Other documents relating to the Vessel 

  

	 	(a)	Copies of insurance policies/cover notes documenting that insurance cover has been taken out in respect of the Vessel in accordance with Clause 23.2 (Insurance—Vessel), and evidencing that the Agent’s
Security in the insurance policies will be noted in accordance with the relevant notices as required under the Assignment Agreement. 

  

	 	(b)	A copy of the current relevant DOC. 

  

	 	(c)	A copy of the relevant sale and purchase agreement of the Vessel or the shares in the Borrower between KNOT and the Guarantor, evidence of the purchase price thereof having been paid to KNOT. 

 

	 	(d)	Evidence (by way of transcript of registry) that the Vessel is registered in the name of the Borrower with the relevant authorities in the United Kingdom, that the Mortgage has been executed and will, in connection with
Utilisation of the Loan be, recorded with first priority against the Vessel and that no other encumbrances, maritime liens, mortgages or debts whatsoever are registered against the Vessel (other than the Security securing the Existing Indebtedness).

  

	 	(e)	A certified copy of an updated class certificate related to the Vessel from the relevant classification society, confirming that the Vessel is classed with the highest class in accordance with Clause 23.4
(Classification and repairs), free of extensions and overdue recommendations. 

  
 88 

	 	(f)	A copy of the current SMC. 

  

	 	(g)	A copy of the current ISSC. 

  

	 	(h)	Valuation certificates issued not earlier than two hundred and ten (210) days before the Utilisation Date evidencing the Market Value of the Vessel. 

 

	7.	Existing Indebtedness 

  

	 	(a)	Evidence that on the Utilisation Date or immediately thereafter the whole of the Existing Indebtedness will be repaid.; 

  

	 	(b)	all undrawn and available commitments under the Existing Facility Agreement will be finally and irrevocably cancelled; and 

  

	 	(c)	all of the Security securing the Existing Indebtedness will be finally and unconditionally released and discharged. 

  

	8.	Other documents and evidence 

  

	 	(a)	The Original Financial Statements of each Obligor. 

  

	 	(b)	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and expenses) have been paid or will be paid by the Utilisation Date.

  

	 	(c)	If relevant, assurance that any withholding tax will be paid or application to tax authorities is or will be sent. 

  

	 	(d)	An original Compliance Certificate confirming that the Borrower and the Guarantor are in compliance with the financial covenants as set out in Clause 21 (Financial covenants). 

 

	 	(e)	A copy of a letter accepting appointment as agent for service of process pursuant to paragraph (c) of Clause 43.1 (Jurisdiction of English courts). 

 

	 	(f)	Any other document, authorisation, opinion or assurance requested by the Agent. 

  

	9.	Legal opinions 

 The following documents to be received by the Agent latest on the
Utilisation Date: 
  

	 	(a)	A legal opinion from Schjødt , the legal advisers to the Agent in Norway, substantially in the form distributed to the Original Lenders prior to signing this Agreement; 

 

	 	(b)	A legal opinion from Poles, Tublin, Stratakis & Gonzalez LLP, the legal advisers to the Agent in respect of the laws of the Republic of the Marshall Islands, substantially in the form distributed to the
Original Lenders prior to signing this Agreement; 

  

	 	(c)	A legal opinion from Holman Fenwick Willan LLP, the legal advisers to the Agent in England and Wales, substantially in the form distributed to the Original Lenders prior to signing this Agreement; 

  
 89 

	 	(d)	If any Mortgaged Asset is situated or registered in a jurisdiction other than Norway, the Republic of the Marshall Islands or England and Wales, or any Finance Document is subject to any other choice of law other than
Norwegian law, Marshall Islands law or English law, a legal opinion from the legal advisers to the Agent in the relevant jurisdiction, substantially in the form distributed to the Original Lenders prior to signing this Agreement; and

  

	 	(e)	Any such other favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions, 

or, in respect of any one or more of such legal opinions, confirmation satisfactory to the Agent that the opinion in question will be issued
substantially in the form distributed to the Original Lenders prior to signing this Agreement within such period after the Utilisation Date as is acceptable to the Agent. 

Part II 
 Conditions
Subsequent 
  

	1.	Finance Documents 

  

	 	(a)	No later than one (1) Business Day after the Utilisation Date: 

  

	 	(b)	the Charterer’s acknowledgement to the notice of assignment of Earnings (including Charterhire) thereof; 

  

	 	(c)	the Account Bank’s acknowledgement of the notice of pledge of the Account; and 

  

	 	(d)	evidence that the Mortgage has been registered with first priority in the United Kingdom ship registry; 

  

	2.	Existing Indebtedness 

 Evidence that on the date one (1) Business Day after the
Utilisation Date: 
  

	 	(a)	the whole of the Existing Indebtedness has been repaid 

  

	 	(b)	all undrawn and available commitments under the Existing Facility Agreement have been finally and irrevocably cancelled; and 

  

	 	(c)	all of the Security securing the Existing Indebtedness has been finally and unconditionally released and discharged. 

  

	3.	Legal opinions 

 No later than seven (7) days after the Utilisation Date, such of
the legal opinions specified in paragraph 9 (Legal opinions) of Part I (Conditions precedent) of this Schedule 2 (Conditions precedent and conditions subsequent) as have not already been provided to the Agent. 

  
 90 

 Schedule 3 

FORM OF UTILISATION REQUEST 

From:    Knutsen Shuttle Tankers 15 AS 

To:        The Bank of Tokyo-Mitsubishi UFJ, Ltd., London Branch 

Dated:     
 Dear Sirs 

KNUTSEN SHUTTLE TANKERS 15 AS – 

USD 100,000,000 Facility Agreement dated 8 November 2017 (the “Agreement”) 

 

	1.	We refer to the Agreement. This is the Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

  

	2.	We wish to borrow a Loan under the Facility on the following terms: 

  

			
	Proposed Utilisation Date:	  	[•] (or, if that is not a Business Day, the next Business Day)
	Amount:	  	USD[•]

  

	3.	We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request. 

 

	4.	The proceeds of this Loan should be credited to [account]. 

  

	5.	This Utilisation Request is irrevocable. 

 Yours faithfully 

 
  

authorised signatory for 

KNUTSEN SHUTTLE TANKERS 15 AS 

  
 91 

 Schedule 4 

FORM OF TRANSFER CERTIFICATE 

To:        The Bank of Tokyo-Mitsubishi UFJ, Ltd. as Agent 

From:    [The Existing Lender] (the “Existing Lender”) and [The New Lender] (the “New
Lender”) 
 Dated: 
 KNUTSEN
SHUTTLE TANKERS 15 AS – 
 USD 100,000,000 Facility Agreement dated 8 November 2017 (the “Agreement”) 

 

	1.	We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.

  

	2.	We refer to Clause 25.4 (Procedure for transfer): 

  

	 	(a)	The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in
accordance with Clause 25.4 (Procedure for transfer). 

  

	 	(b)	The proposed Transfer Date is [•]. 

  

	 	(c)	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 32.2(Addresses) are set out in the Schedule. 

 

	3.	The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 25.3 (Limitation of responsibility of Existing Lenders). 

 

	4.	This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate. 

 

	5.	This Transfer Certificate is governed by Norwegian law. 

  

	6.	This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate. 

  
 92 

 THE SCHEDULE 

Commitment/rights and obligations to be transferred 

[insert relevant details] 

[Facility Office address, fax number and attention details for notices and account details for payments,] 

 

			
	[Existing Lender]	  	[New Lender]
	By:	  	By:

 This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as
[                ]. 
 [Agent] 

By: 

  
 93 

 Schedule 5 

FORM OF COMPLIANCE CERTIFICATE 
  

	From:	  Knutsen Shuttle Tankers 15 AS 

   KNOT Offshore Partners LP 

 

	To:	The Bank of Tokyo-Mitsubishi UFJ, Ltd. as Agent 

 Dated: [•] 

Dear Sirs 
 KNUTSEN SHUTTLE TANKERS 15 AS
– 
 USD 100,000,000 Facility Agreement dated 8 November 2017 (the “Agreement”) 

 

	1.	We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

  

	2.	We confirm that: 

  

	    	[•] 

  

	3.	[We confirm that each Repeating Representation is true and correct on this date and that no Default is continuing.]* 

Yours faithfully 
  

 
 authorised
signatory for 
 KNUTSEN SHUTTLE TANKERS 15 AS 

KNOT OFFSHORE PARTNERS LP 
  

 

	*	If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it. 

  
 94 

 Schedule 6 

STRUCTURE CHART 
  

 

  
 95 

 EXECUTION PAGES 

Borrower: 
 KNUTSEN SHUTTLE TANKERS 15 AS 

 

			
	By:	 	 /s/ Trygve Seglem

	Name:	 	Trygve Seglem
	Title:	 	Chairman and Director

  
 96 

 Guarantor 
 KNOT
OFFSHORE PARTNERS LP 
  

			
	By:	 	 /s/ John Costain

	Name:	 	John Costain
	Title:	 	CEO and CFO

  
 97 

 Agent and Mandated Lead Arranger: 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. 
  

			
	By:	 	 /s/ Takashi Okuda

	Name:	 	Mr. Takashi Okuda
	Title:	 	Managing Director, Head of Asian Corporate Banking Group for UK

  
 98 

 Original Lender 

BTMU (EUROPE) LIMITED 
  

			
	By:	 	 /s/ Takashi Okuda

	Name:	 	Mr. Takashi Okuda
	Title:	 	Duly Authorised Attorney

  
 99 

 Original Lender 

BOT LEASE CO., LTD. 
  

			
	By:	 	 /s/ Shigeru Yamamoto

	Name:	 	Shigeru Yamamoto
	Title:	 	Attorney-In-Fact

  
 100 

 Original Lender 

MITSUBISHI UFJ LEASE & FINANCE (HONG KONG) LIMITED 
  

			
	By:	 	 /s/ Tsuyoshi Takano

	Name:	 	Tsuyoshi Takano
	Title:	 	Managing Director

  
 101

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