Document:

Exhibit 10.7

 

TAX RECEIVABLE AGREEMENT

 

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of        , 2014, is hereby entered into by and among Moelis & Company, a Delaware corporation (the “Corporation”), Moelis & Company Group LP, a Delaware limited partnership (the “Partnership”), and each of the Partners listed on Schedule 1 hereto.

 

RECITALS

 

WHEREAS, the Partners hold Common Units in the Partnership (“Common Units”), which is treated as a partnership for United States federal income tax purposes, and are selling a portion of such Common Units (the “Initial Sale”) as described in the registration statement on Form S-1 initially filed with the Securities and Exchange Commission on [         ] (Registration No. [             ]), as amended prior to the date hereof;

 

WHEREAS, a wholly-owned Subsidiary of the Corporation will become the general partner of, and will hold general partnership units in, the Partnership;

 

WHEREAS, the Common Units are exchangeable with the Corporation in certain circumstances for Class A shares (the “Class A Shares”) in the Corporation and/or cash pursuant to Section 14.1(a) of the Partnership Agreement;

 

WHEREAS, the Partnership and certain direct and indirect Subsidiaries treated as partnerships for United States federal income tax purposes will have in effect an election under section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for the Taxable Year of the IPO Date and for each other Taxable Year in which an exchange by a Partner of Common Units for Class A Shares and/or cash occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Partnership and such Subsidiaries, solely with respect to the Corporation, at the time of an exchange by a Partner of Common Units for Class A Shares and/or cash or any other acquisition of Common Units for cash or otherwise, (collectively, including the Initial Sale, an “Exchange”) (such time, the “Exchange Date”) (such assets and any asset whose tax basis is determined, in whole or in part, by reference to the adjusted basis of any such asset, the “Adjusted Assets”) by reason of such Exchange and the receipt of payments under this Agreement;

 

WHEREAS, the income, gain, loss, expense and other Tax items of (i) the Partnership and such Subsidiaries solely with respect to the Corporation may be affected by the Basis Adjustment (defined below) with respect to the Adjusted Assets and (ii) the Corporation may be affected by the Imputed Interest (as defined below);

 

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustment and Imputed Interest on the actual liability for Taxes of the Corporation.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the undersigned parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

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

 

“AAA” has the meaning set forth in Section 7.08(c) of this Agreement.

 

“Adjusted Asset” is defined in the recitals of this Agreement.

 

“Advisory Firm” means any accounting firm or any law firm, in each case that is nationally recognized as being expert in Tax matters and that is agreed to by the Board.

 

“Advisory Firm Letter” shall mean a letter from the Advisory Firm stating that the relevant schedule, notice or other information to be provided by the Corporation to the Applicable Partner and all supporting schedules and work papers were prepared in a manner consistent with the terms of this Agreement and, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedule, notice or other information is delivered to the Applicable Partner.

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR.

 

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

 

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

 

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“Amount Realized” means, in respect of an Exchange by an Applicable Partner, the amount that is deemed for purposes of this Agreement to be the amount realized by the Applicable Partner on the Exchange, which shall be the sum of (i) the Market Value of the Class A Shares, the amount of cash and the amount or fair market value of other consideration transferred to the Exchanging Member in the Exchange and (ii) the Share of Liabilities attributable to the Common Units Exchanged.

 

“Applicable Partner” means any Partner to whom any portion of a Realized Tax Benefit is Attributable hereunder.

 

“Attributable”:  The portion of any Realized Tax Benefit of the Corporation that is “Attributable” to any Partner shall be determined by reference to the assets from which arise the depreciation, amortization or other similar deductions for recovery of cost or basis (“Depreciation”) and with respect to increased basis upon a disposition of an asset or Imputed Interest that produce the Realized Tax Benefit, under the following principles:

 

(i)                                     Any Realized Tax Benefit arising from a deduction to the Corporation with respect to a Taxable Year for Depreciation arising in respect of a Basis Adjustment to an Adjusted Asset is Attributable to the Applicable Partner to the extent that the ratio of all Depreciation for the Taxable Year in respect of Basis Adjustments resulting from all Exchanges by the Applicable Partner bears to the aggregate of all Depreciation for the Taxable Year in respect of Basis Adjustments resulting from all Exchanges by all Partners.

 

(ii)                                  Any Realized Tax Benefit arising from the disposition of an asset is Attributable to the Applicable Partner to the extent that the ratio of all Basis Adjustments resulting from all Exchanges by the Applicable Partner with respect to such asset bears to the aggregate of all Basis Adjustments resulting from all Exchanges by all Partners with respect to such asset.

 

(iii)                               Any Realized Tax Benefit arising from a deduction to the Corporation with respect to a Taxable Year in respect of Imputed Interest is Attributable to the Applicable Partner that is required to include the Imputed Interest in income (without regard to whether such Partner is actually subject to tax thereon).

 

(iv)                              For the avoidance of doubt, in the case of a Basis Adjustment arising with respect to an Exchange under section 734(b) of the Code, depreciation, amortization or other similar deductions for recovery of cost or basis shall constitute Depreciation only to the extent that such depreciation, amortization or other similar deductions may produce a Realized Tax Benefit (and not to the extent that such depreciation, amortization or other similar deductions may be for the benefit of a Person other than the Corporation), as reasonably determined by the Corporation.

 

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“Basis Adjustment” means the adjustment to the Tax basis of an Adjusted Asset under section 732 of the Code (in situations where, as a result of one or more Exchanges, a Partnership becomes an entity that is disregarded as separate from its owner for tax purposes) or sections 734(b) or 743(b) and section 754 of the Code (including in situations where, following an Exchange, a Partnership remains in existence as an entity for Tax purposes) and, in each case, comparable sections of state, local and foreign Tax laws (as calculated under Section 2.01 of this Agreement) as a result of an Exchange and the payments made pursuant to this Agreement.  Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from (i) an Exchange of one or more Common Units shall be determined without regard to any Pre-Exchange Transfer of such Common Units and as if any such Pre-Exchange Transfer had not occurred.

 

“Beneficial Ownership” (including correlative terms) shall have the meaning ascribed to that term in Rule 13d-3 promulgated under the Exchange Act .

 

“Board” means the board of directors of the Corporation.

 

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

 

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

 

(i)                                     any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act, or any successor provisions thereto, excluding any Permitted Transferee or any group of Permitted Transferees, becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing more than fifty percent (50%) of the combined voting power of the Corporation’s then outstanding voting securities; or

 

(ii)                                  the following individuals cease for any reason to constitute a majority of the number of directors of the Corporation then serving: individuals who, on the IPO Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election by the Board or nomination for election by the Corporation’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or

 

(iii)                               there is consummated a merger or consolidation of the Corporation or any direct or indirect subsidiary of the Corporation with any other corporation or other entity, and, immediately after the consummation of such merger or 

 

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consolidation, either (x) the members of the Board immediately prior to the merger or consolidation do not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a subsidiary, the ultimate parent thereof, or (y) all of the Persons who were the respective Beneficial Owners of the voting securities of the Corporation immediately prior to such merger or consolidation do not Beneficially Own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then-outstanding voting securities of the Person resulting from such merger or consolidation; or

 

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

 

Notwithstanding the foregoing, (i) a “Change in Control” shall not be deemed to have occurred (x) as a result of any transaction or series of integrated transactions following which Kenneth Moelis or any of his Affiliates possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the Corporation (or any successor thereto), whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the Board or the board of directors or similar body governing the affairs of any successor to the Corporation or (y) except with respect to clause (ii) and clause (iii)(x) above, by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions.  For purposes of this definition, “Permitted Transferee” means a shareholder’s family members or a trust for the benefit of the shareholder and/or family members.

 

“Class A Shares” is defined in the recitals of this Agreement.

 

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

 

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

 

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“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporate Entity” means any direct Subsidiary of the Corporation which is classified as a corporation for U.S. federal income tax purposes.

 

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

 

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

 

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporation, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

 

“Default Rate” means LIBOR plus 400 basis points.

 

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

 

“Disability” means, with respect to any Partner, the Partner’s inability due to illness or other physical or mental impairment to substantially perform his duties to the Corporation or an Affiliate for a period of 90 consecutive days during any six-month period or for 180 days during any 12-month period, as determined in the good faith discretion of the Corporation.

 

“Dispute” has the meaning set forth in Section 7.08(c) of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Exchange” is defined in the recitals of this Agreement, and “Exchanged” and “Exchanging” shall have correlative meanings.  For the avoidance of doubt, if the Partnership exercises its rights to redeem Partnership Common Units under Section 7.3 of the Partnership Agreement, such redemption shall be considered an Exchange under this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

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

 

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

 

“Exchange Payment” is defined in Section 5.01 of this Agreement.

 

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

 

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

 

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Corporation (and/or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation) using the same methods, elections, conventions and similar practices used on the relevant Corporation Return (and/or Tax Return of the Partnership) but using the Non-Stepped Up Tax Basis instead of the tax basis reflecting the Basis Adjustments of the Adjusted Assets and excluding any deduction attributable to Imputed Interest.

 

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

 

“Initial Sale” is defined in the recitals of this Agreement.

 

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“IPO Date” means the date on which Class A Shares in the Corporation are sold in an initial public offering.

 

“IRS” means the United States Internal Revenue Service.

 

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

 

“Market Value” shall mean the closing price of the Class A Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Class A Shares on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided further, that if the Class A Shares are not then listed on a National Securities Exchange or Interdealer Quotation System, “Market Value” shall mean the cash consideration paid for Class A Shares, or the fair market value of the other property delivered for Class A Shares, as determined by the Board in good faith.

 

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

 

“Net Tax Benefit” has the meaning set forth in Section 3.01(b) of this Agreement.

 

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

 

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

 

“Partner” means each party hereto (other than the Corporation and the Partnership), and each other Person who from time to time executes a joinder to this Agreement in form and substance reasonably satisfactory to the Corporation.

 

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

 

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“Partnership Agreement” means the Amended and Restated Limited Partnership Agreement of the Partnership, as such is from time to time amended or restated.

 

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

 

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

 

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

 

“Realized Tax Benefit” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the Hypothetical Tax Liability over the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), such actual Tax liability to be computed with the adjustments described in this Agreement. If all or a portion of the actual liability for Taxes of the Corporation, or the Partnership (but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

“Realized Tax Detriment” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year) over the Hypothetical Tax Liability for such Taxable Year, such actual Tax liability to be computed with the adjustments described in this Agreement. If all or a portion of the actual liability for Taxes of the Corporation, or the Partnership (but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

 

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

 

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

 

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“Rules” has the meaning set forth in Section 7.08(c) of this Agreement.

 

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

 

“Share of Liabilities” means, as to any Common Unit at the time of an exchange, the portion of the relevant Partnership’s “liabilities” (as such term is defined in section 752 and section 1001 of the Code) allocated to that Common Unit pursuant to section 752 of the Code and the applicable Treasury Regulations.

 

“Specified Partner” means, as of any date of determination, any Applicable Partner who has Exchanged Common Units in one or more Exchanges with an aggregate Amount Realized of $50,000,000 (fifty million dollars) or more.

 

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

 

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

 

“Tax Benefit Schedule” is defined in Section 2.03 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

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

 

“Taxes” means any and all U.S. federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, whether on an exclusive or on an alternative basis, and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

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

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporation will have taxable income sufficient to fully utilize the deductions arising from the Basis Adjustment and the Imputed Interest during such Taxable Year, (2) the federal income tax rates and state, local and foreign income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss carryovers generated by the Basis Adjustment or the Imputed Interest and available as of the date of the Early Termination Schedule will be utilized by the Corporation on a pro rata basis from the date of the Early Termination Schedule through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets are deemed to be disposed of on the fifteenth anniversary of the earlier of the Basis Adjustment and the Early Termination Date, provided, that in the event of a Change of Control non-amortizable assets shall be deemed disposed of at the earlier of (i) the time of sale of the relevant asset or (ii) as generally provided in this Valuation Assumption (4), and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date, provided that this assumption (5) shall not apply in the case of an Early Termination Payment made pursuant to Section 4.01(b).

 

ARTICLE II

 

DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01                             Basis Adjustment.  For purposes of this Agreement, as a result of an Exchange, the Partnership shall be deemed to be entitled to a Basis Adjustment for each of its Adjusted Assets with respect to the Corporation, the amount of which Basis Adjustment shall be the excess, if any, of (i) the sum of (x) the Amount Realized by the Applicable Partner in the Exchange, to the extent attributable to such Adjusted Asset, plus (y) the amount of payments made pursuant to this Agreement with respect to such Exchange, to the extent attributable to such Adjusted Asset, over (ii) the Corporation’s share of the Partnership’s Tax basis for such Adjusted Asset immediately after the Exchange, attributable to the Common Units Exchanged, determined as if (x) the Partnership remains in existence as an entity for tax purposes, and (y) the Partnership had not made the election provided by section 754 of the Code.  For the avoidance of doubt, payments made under this Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.

 

Section 2.02                             Exchange Basis Schedule. Within 180 calendar days after the filing of the U.S. federal income tax return of the Corporation for each Taxable Year in which any Exchange has been effected, the Corporation shall deliver to the Applicable Partner a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail, for purposes of Taxes, (i) the actual unadjusted tax basis of the Adjusted Assets as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Adjusted Assets as a result of the Exchanges effected in such Taxable Year and 

 

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all prior Taxable Years, calculated (a) in the aggregate and (b) solely with respect to Exchanges by the Applicable Partner, (iii) the period or periods, if any, over which the Adjusted Assets are amortizable and/or depreciable and (iv) the period or periods, if any, over which each Basis Adjustment is amortizable and/or depreciable (which, for non-amortizable assets shall be based on the Valuation Assumptions).

 

Section 2.03                             Tax Benefit Schedule. Within 180 calendar days after the filing of the U.S. federal income tax return of the Corporation for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, the Corporation shall provide to the Applicable Partner a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year (a “Tax Benefit Schedule”). The Schedule will become final as provided in Section 2.04(a) of this Agreement and may be amended as provided in Section 2.04(b) of this Agreement (subject to the procedures set forth in Section 2.04(b)).

 

Section 2.04                             Procedures, Amendments

 

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

 

(b)                       Amended Schedule. The applicable Schedule for any Taxable Year shall be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the Applicable Partner or the correction of computational errors set forth in such Schedule, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable 

 

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Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (such Schedule, an “Amended Schedule”).  In the event that the Corporation delivers an Amended Schedule to an Applicable Partner pursuant to Section 2.04(b)(ii) within 180 days of the payment of the Tax Benefit Payment, if any, related to the original Schedule being amended by such Amended Schedule, the Applicable Partner shall, unless otherwise determined by the Corporation in its sole discretion, be obligated to refund to the Corporation the amount (if any) by which the Tax Benefit Payment made pursuant to such original schedule exceeds the Tax Benefit Payment as computed pursuant to the Amended Schedule.

 

Section 2.05                             Limitation of Benefits. Notwithstanding anything to the contrary contained in this Agreement, unless otherwise determined by the Corporation in its sole discretion, in the event that a Partner’s  employment or service with the Corporation and all of its Affiliates is terminated prior to the date of an Exchange for any reason other than death or termination by the Corporation due to the Disability of such Partner, such Partner shall not be entitled to any benefits hereunder with respect to such Exchange, including, for the avoidance of doubt, the right to the receipt of any Tax Benefit Payments attributable to Basis Adjustments arising from such Exchange.  For the avoidance of doubt, such termination shall not impact a Partner’s rights hereunder with respect to Exchanges occurring on or prior to the date of such termination.

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.01                             Payments

 

(a)                       Within fifteen (15) calendar days of a Tax Benefit Schedule delivered to an Applicable Partner becoming final in accordance with Section 2.04(a), or earlier in the Corporation’s discretion, the Corporation shall pay to the Applicable Partner for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.01(b) in the amount Attributable to the Applicable Partner. Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account of the Applicable Partner previously designated by such Partner to the Corporation.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal income tax payments.

 

(b)                       A “Tax Benefit Payment” means an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Interest Amount.  The “Net Tax Benefit” for each Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the total amount of payments previously made under this Section 3.01, excluding payments attributable to Interest Amount; provided, however, that for the avoidance of doubt, no Partner shall be required to return any portion of any previously made Tax Benefit Payment.  The “Interest Amount” for a given Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without extensions) for filing the Corporation Return with respect to Taxes for the most 

 

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recently ended Taxable Year until the Payment Date.  In the case of a Tax Benefit Payment made in respect of an Amended Schedule, the “Interest Amount” shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the date of such Amended Schedule becoming final in accordance with Section 2.04(a) until the Payment Date.  Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by using Valuation Assumptions (1), (3), and (4), substituting in each case the terms “the date on which a Change of Control becomes effective” for an “Early Termination Date”.  The Net Tax Benefit and the Interest Amount shall be determined separately with respect to each separate Exchange, on a Common Unit-by-Common Unit basis by reference to the Amount Realized by the Applicable Partner on the Exchange of a Common Unit and the resulting Basis Adjustment to the Corporation.  For purposes of this Section 3.01(b), the amendment to the definition of “Agreed Rate” set forth herein shall be effective as of the date of the Prior Agreement.  Notwithstanding any provision of this Agreement to the contrary, any Partner may elect with respect to any Exchange to limit the aggregate Tax Benefit Payments made to such Partner in respect of any such Exchange to a specified percentage of the Amount Realized by such Partner with respect to such Exchange (or such other limitation selected by the Partner and consented to by the Corporation, which consent shall not be unreasonably withheld).  The Partner shall exercise its rights under the preceding sentence by notifying the Corporation of its desire to impose such a limit and the specified percentage (or such other limitation selected by the Partner) and such other details as may be necessary (including whether such limit includes the Interest Amounts in respect of any such Exchange) in such manner and at such time (but in no event later than the date of any such Exchange) as reasonably directed by the Corporation; provided, however, that, in the absence of such direction, the Partner shall give such notice in the same manner as is required by the Partnership Agreement of notice given to the partners under the Partnership Agreement, with such notice given contemporaneously with the Partner’s notice of intention to compel redemption delivered pursuant to the Partnership Agreement. For purposes of the computation of any Tax Benefit Payment, each Partner who is entitled to receive Tax Benefit Payments under this Agreement shall be deemed to share the gains and losses of the Partnership under section 704(c)(1)(A) of the Code (and the principles thereof) as of the IPO Date in proportion to the Partner’s number of Common Units as of the IPO Date.

 

Section 3.02                             No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement will result in 85% of the Corporation’s Cumulative Net Realized Tax Benefit, and the Interest Amount thereon, being paid to the Partners pursuant to this Agreement.  The provisions of this Agreement shall be construed in the appropriate manner so that these fundamental results are achieved.

 

Section 3.03                             Pro Rata Payments. For the avoidance of doubt, to the extent (i) the Corporation’s deductions with respect to any Basis Adjustment is limited in a particular Taxable Year or (ii) the Corporation lacks sufficient funds to satisfy its obligations to make all Tax Benefit Payments due in a particular Taxable Year, the limitation on the deductions, or the Tax Benefit Payments that may be made, as the case may be, shall be taken into account or made for the Applicable Partner in the same proportion as Tax Benefit Payments would have been made absent the limitations set forth in clauses (i) and (ii) of this paragraph, as applicable.

 

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ARTICLE IV

 

TERMINATION

 

Section 4.01                             Early Termination and Breach of Agreement.

 

(a)                       The Corporation may terminate this Agreement with respect to all of the Common Units held (or previously held and exchanged) by all Partners at any time by paying to all of the Partners the Early Termination Payment; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all Partners, and provided, further, that the Corporation may withdraw any notice to execute its termination rights under this Section 4.01(a) prior to the time at which any Early Termination Payment has been paid.  Upon payment of the Early Termination Payments by the Corporation under this Section 4.01(a), neither the Applicable Partners nor the Corporation shall have any further payment obligations under this Agreement in respect of such Partners, other than for any (a) Tax Benefit Payment agreed to by the Corporation and an Applicable Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment).  For the avoidance of doubt, if an Exchange occurs after the Corporation makes the Early Termination Payments with respect to all Partners, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement with respect to such Exchange in such case shall be its obligations to all Partners under Section 4.03(a).

 

(b)                       The Corporation may terminate the rights under this Agreement of any Partner who is not a Specified Partner with respect to Exchanges occurring prior to the date thereof at any time by paying to such Partner the Early Termination Payment as calculated with respect to such Partner (taking into account only those Exchanges that have occurred prior to the date thereof, and for the avoidance of doubt not taking into account Common Units not yet Exchanged, nor taking into account Common Units Exchanged in prior Exchanges for which Early Termination Payments have already been received); provided, however, that the Corporation may withdraw any notice to execute its termination rights under this Section 4.01(b) prior to the time at which any Early Termination Payment has been paid.  Upon payment of the Early Termination Payment by the Corporation to such Partner, neither the Applicable Partner nor the Corporation shall have any further payment obligations under this Agreement in respect of such Exchanges by such Partner, other than for any (a) Tax Benefit Payment agreed to by the Corporation and an Applicable Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment).  For the avoidance of doubt, a termination pursuant to this Section 4.01(b) shall not impact the rights or obligations of the Corporation and such Partner with respect to Exchanges occurring after the date of such termination.

 

(c)                        In the event that the Corporation breaches any of its material obligations under this Agreement with respect to one or more Partners, whether as a result of failure 

 

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to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, and does not cure such breach within ninety (90) days of receipt of notice of such breach from such Partner or Partners, then all obligations hereunder with respect to such Partner or Partners shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to, (1) an Early Termination Payment calculated with respect to such Partner or Partners pursuant to Section 4.01(a) as if an Early Termination Notice had been delivered to such Partner or Partners on the date of the breach, (2) any Tax Benefit Payment agreed to by the Corporation and such Partner or Partners as due and payable but unpaid as of the date of a breach, and (3) any Tax Benefit Payment due to such Partner or Partners for the Taxable Year ending with or including the date of a breach.  Notwithstanding the foregoing, in the event that the Corporation breaches this Agreement with respect to one or more Partners, such Partners shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3), above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due.

 

(d)                       The undersigned parties hereby acknowledge and agree that the timing, amounts and aggregate value of Tax Benefit Payments pursuant to this Agreement are not reasonably ascertainable.

 

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

 

Section 4.03                             Payment upon Early Termination. (a) Within fifteen (15) calendar days after agreement between the Applicable Partner and the Corporation of the Early Termination Schedule, the Corporation shall pay to the Applicable Partner an amount equal to the Early Termination Payment. Such payment shall be made by wire transfer of immediately available funds to a bank account designated by the Applicable Partner.

 

(b)                       The “Early Termination Payment” as of the date of the delivery of an Early Termination Schedule shall equal with respect to the Applicable Partner the present value, 

 

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discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Applicable Partner beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

 

ARTICLE V

 

SUBORDINATION AND LATE PAYMENTS

 

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

 

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

 

ARTICLE VI

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

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

 

Section 6.02                             Consistency.  The Corporation and the Partners agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation under this Agreement unless the Corporation or a Partner receives a written opinion from an Advisory Firm that reporting in such manner is more likely than not to result in an imposition of penalties pursuant to the Code.  Any Dispute concerning such advice shall be subject to the terms of Section 7.09.

 

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Section 6.03                             Cooperation. The Partners shall each (a) furnish to the Corporation in a timely manner such information, documents and other materials as the Corporation may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the Corporation and its representatives to provide explanations of documents and materials and such other information as the Corporation or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporation shall reimburse each Partner for any reasonable third-party costs and expenses incurred pursuant to this Section.

 

ARTICLE VII

 

MISCELLANEOUS

 

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

 

if to the Corporation, to:

 

[                                                                                                                                            ]

 

with a copy to:

 

[                                                                                                                                            ]

 

if to the Partnership, to:

 

[                                                                                                                                            ]

 

with a copy to:

 

[                                                                                                                                            ]

 

if to the Partners or any Partner, to:

 

the address and facsimile number set forth for such Partner in the records of the Partnership.

 

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

 

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

 

Section 7.03                             Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 7.04                             Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

 

Section 7.05                             Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

Section 7.06                             Successors; Assignment; Amendments; Waivers. No Partner may assign this Agreement to any person without the prior written consent of the Corporation; provided, however, (i) that, to the extent Common Units are effectively transferred in accordance with the terms of the Partnership Agreement, and any other agreements the Partners may have entered into with each other, or a Partner may have entered into with the Corporation and/or the Partnership, the transferring Partner shall assign to the transferee of such Common Units the transferring Partner’s rights under this Agreement with respect to such transferred Common Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to become a “Partner” for all purposes of this Agreement, except as otherwise provided in such joinder, and (ii) that, once an Exchange has occurred, any and all payments that may become payable to a Partner pursuant to this Agreement with respect to such Exchange may be assigned to any Person or Persons, as long as any such Person has executed and delivered, or, in connection with such assignment, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to be bound by Section 7.12 and 

 

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acknowledging specifically the last sentence of the next paragraph.  For the avoidance of doubt, to the extent a Partner or other Person transfers Common Units to a Partner as may be permitted by any agreement to which the Partnership is a party, the Partner receiving such Common Units shall have all rights under this Agreement with respect to such transferred Common Units as such  Partner has, under this Agreement, with respect to the other Common Units held by him.

 

Notwithstanding the foregoing provisions of this Section 7.06, no transferee described in clause (i) of the immediately preceding paragraph shall have the right to enforce the provisions of Section 2.04, 4.02, 6.01 or 6.02 of this Agreement, and no assignee described in clause (ii) of the immediately preceding paragraph shall have any rights under this Agreement except for the right to enforce its right to receive payments under this Agreement.

 

No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporation and the Partnership, and by Partners who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Partners hereunder if the Corporation had exercised its right of early termination under Section 4.01(a) on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Partner pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain Partners will or may receive under this Agreement unless at least two-thirds of such Partners disproportionately effected (with such two-thirds threshold being measured by the entitlement to Early Termination Payments as set forth in the preceding portion of this sentence) consent in writing to such amendment. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

 

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

 

Section 7.08                             Submission to Jurisdiction; Dispute Resolution.

 

(a)                       Except as provided in Section 7.09. any Dispute as to the interpretation of this Agreement shall be resolved by the Corporation in its sole discretion, provided that such resolution shall reflect a reasonable interpretation of the provisions of this Agreement and that such

 

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resolution shall not be inconsistent with the fundamental results described in Section 3.02 of this Agreement.

 

(b)                       The remainder of this Section 7.08 shall not apply with respect to claims of a Specified Partner arising out of, relating to or in connection with the validity, negotiation, execution, performance or non-performance of this Agreement.

 

(c)                        Except as otherwise expressly provided by Section 7.08(a) or Section 7.09, any dispute, controversy or claim arising out of or in connection with this Agreement, or the interpretation, breach, termination or validity thereof (“Dispute”) shall be finally resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) then in effect (the “Rules”), except as modified herein and such arbitration shall be administered by the AAA. The place of arbitration shall be New York, New York.

 

(d)                       There shall be one arbitrator who shall be agreed upon by the parties within twenty (20) days of receipt by respondent of a copy of the demand for arbitration. If any arbitrator is not appointed within the time limit provided herein, such arbitrator shall be appointed by the AAA in accordance with the listing, striking and ranking procedure in the Rules, with each party being given a limited number of strikes, except for cause. Any arbitrator appointed by the AAA shall be a retired judge or a practicing attorney with no less than fifteen years of experience with corporate and limited partnership matters and an experienced arbitrator. In rendering an award, the arbitrator shall be required to follow the laws of the state of Delaware.

 

(e)                        The award shall be in writing and shall briefly state the findings of fact and conclusions of law on which it is based. The arbitrator shall not be permitted to award punitive, multiple or other non-compensatory damages. The award shall be final and binding upon the parties and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues or accounting presented to the arbitrator.  Judgment upon the award may be entered in any court having jurisdiction over any party or any of its assets. Any costs or fees (including attorneys’ fees and expenses) incident to enforcing the award shall be charged against the party resisting such enforcement.

 

(f)                         All Disputes shall be resolved in a confidential manner. The arbitrator shall agree to hold any information received during the arbitration in the strictest of confidence and shall not disclose to any non-party the existence, contents or results of the arbitration or any other information about such arbitration. The parties to the arbitration shall not disclose any information about the evidence adduced or the documents produced by the other party in the arbitration proceedings or about the existence, contents or results of the proceeding except as may be required by law, regulatory or governmental authority or as may be necessary in an action in aid of arbitration or for enforcement of an arbitral award.  Before making any disclosure permitted by the preceding sentence (other than private disclosure to financial regulatory authorities), the party intending to make such disclosure shall use reasonable efforts to give the other party reasonable 

 

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written notice of the intended disclosure and afford the other party a reasonable opportunity to protect its interests.

 

(g)                        Barring extraordinary circumstances (as determined in the sole discretion of the arbitrator), discovery shall be limited to pre-hearing disclosure of documents that each side will present in support of its case, and non-privileged documents essential to a matter of import in the proceeding for which a party has demonstrated a substantial need. The parties agree that they will produce to each other all such requested non-privileged documents, except documents objected to and with respect to which a ruling has been or shall be sought from the arbitrator. There will be no depositions.

 

Section 7.09                             Reconciliation. In the event that the Corporation and an Applicable Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.04, 4.02 and 6.02 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with either the Corporation or the Applicable Partner or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the AAA. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before the date any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, such payment shall be paid on the date such payment would be due and such Tax Return may be filed as prepared by the Corporation, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne jointly by the Corporation and the Applicable Partner, with each party bearing one-half of such costs.  The Corporation and each Applicable Partner shall bear their own costs and expenses of such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on the Corporation and the Applicable Partner and may be entered and enforced in any court having jurisdiction.

 

Section 7.10                             Withholding. The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Applicable Partner.

 

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Section 7.11                             Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets.

 

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

 

(b)                       Notwithstanding any other provision of this Agreement, if the Corporation acquires one or more assets that, as of an Exchange Date, have not been contributed to the Partnership (other than the Corporation’s interests in the Partnership) (such assets, “Excluded Assets”), then all Tax Benefit Payments due hereunder shall be computed as if such assets had been contributed to the Partnership on the date such assets were first acquired by the Corporation; provided, however, that if an Excluded Asset consists of stock in a corporation, then, for purposes of this Section 7.11(b), such corporation (and any corporation Controlled by such corporation) shall be deemed to have contributed its assets to the Partnership on the date on which the Corporation acquired stock of such corporation.

 

(c)                        If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with which such entity does not file a consolidated tax return pursuant to section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset (as reasonably determined by the governing body, or the Person responsible for management, of such entity acting in good faith), plus (i) the amount of debt to which such asset is subject, in the case of a contribution of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a contribution of a partnership interest.

 

Section 7.12                             Confidentiality.  Each Partner and assignee acknowledges and agrees that the information of the Corporation is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporation, its Affiliates and successors and the other Partners, confidential information concerning the Corporation, its Affiliates and successors and the other Partners, including marketing, investment, performance data, credit and financial information, and other business affairs of the Corporation, its Affiliates and successors and the other Partners learned of by the Partner heretofore or hereafter.  This clause 7.12 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates, becomes public knowledge (except as a result of an act of such Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Partner to prepare and file his or her tax returns, to respond to any inquiries regarding the same from any 

 

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taxing authority or to prosecute or defend any action, proceeding or audit by any taxing authority with respect to such returns.  Notwithstanding anything to the contrary herein, each Partner and assignee (and each employee, representative or other agent of such Partner or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of (x) the Corporation, the Partnership, the Partners and their Affiliates and (y) any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the Partners relating to such tax treatment and tax structure.

 

If a Partner or assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporation shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Affiliates or the other Partners and that money damages alone shall not provide an adequate remedy to such Persons.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13                             Partnership Agreement. To the extent this Agreement imposes obligations upon the Partnership or a partner of the Partnership, this Agreement shall be treated as part of the partnership agreement of the Partnership as described in section 761(c) of the Code and sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

Section 7.14                             Joinder. The Corporation hereby agrees that, to the extent it acquires a general partnership interest, managing member interest or similar interest in any Person after the date hereof, it shall cause such Person to execute and deliver a joinder to this Agreement promptly upon acquisition of such interest, and such person shall be treated in the same manner as the Partnership for all purposes of this Agreement.  The Corporation hereby agrees to cause any Corporate Entity that acquires an interest in the Partnership (or any entity described in the foregoing sentence) to execute a joinder to this Agreement (to the extent such Person is not already a party hereto) promptly upon such acquisition, and such Corporate Entity shall be treated in the same manner as the Corporation for all purposes of this Agreement.  The Partnership shall have the power and authority (but not the obligation) to permit any Person who becomes a limited partner of the Partnership to execute and deliver a joinder to this Agreement promptly upon acquisition of limited partnership interests in the Partnership by such Person, and such Person shall be treated as a “Partner” for all purposes of this Agreement.

 

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

 

[Signature pages follow]

 

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

 

	
 
    	
MOELIS &   COMPANY
    
	
 
    	
 
    
	
 
    	
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MOELIS &   COMPANY GROUP LP
    
	
 
    	
 
    
	
 
    	
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MOELIS &   COMPANY PARTNER HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
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MOELIS &   CO. MANAGER LLC
    
	
 
    	
 
    
	
 
    	
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Signature Page to Tax Receivable AgreementExhibit 10.9

 

MASTER SERVICES AGREEMENT

 

This SERVICES AGREEMENT, dated as of [S-1 Effective Date] is made by and between MOELIS & COMPANY GROUP LP, a Delaware limited partnership ( “Advisory”), and MOELIS ASSET MANAGEMENT LP, a Delaware limited partnership (“Asset Management”) and each of the following subsidiaries of Asset Management: MOELIS CAPITAL PARTNERS LLC, a Delaware limited liability company (“MCP”), P&S CREDIT MANAGEMENT, L.P., a Delaware limited partnership ( “Gracie”), FREEPORT FINANCIAL PARTNERS LLC, a Delaware limited liability company (“Freeport”), and STEELE CREEK INVESTMENT MANAGEMENT LLC, a Delaware limited liability company (“Steele Creek”).

 

RECITALS

 

A.            Each of the Advisory and Asset Management were operated as businesses under Moelis Asset Management LP”) formerly named Moelis & Company Holdings LP, prior to Advisory being distributed to its partners in connection with an initial public offering of Advisory.

 

B.            Advisory currently maintains certain staff and services which each of Asset Management, MCP, Gracie, Freeport and Steele Creek utilizes in the course of its business

 

C.            Asset Management and Advisory each desire that Advisory shall  henceforth provide the Asset Management Services (as defined below) to each of Asset Management, MCP, Gracie, Freeport and Steele Creek on the terms of and in accordance with this agreement.

 

D.            The parties additionally desire that this agreement govern any provision of services from Asset Management to Advisory.

 

AGREEMENT

 

The parties to this agreement, in exchange for the mutual promises made herein and intending to be legally bound hereby, agree as follows:

 

ARTICLE 1.

 

SERVICES TO BE PROVIDED

 

1.1          Description of Services.  During the term of this agreement, Advisory will provide to Asset Management the services (the “Asset Management Services”) described on Schedule A-1 attached hereto (as the same may be amended from time to time, “Schedule A-1”).  Schedule A may be amended from time to time as set forth in Section 6.5 below.  During the term of this agreement, Asset Management will provide to Advisory the services (the “Advisory Services”, and together with the Asset Management Services, the “Services”) described on Schedule A-2 attached hereto (as the same may be amended from time to time, “Schedule A-2”).  Each of Schedule A-1 and Schedule A-2 may be amended from time to time as set forth in Section 6.5 below.  Any entity receiving Services hereunder shall be referred to as a “Recipient” and any entity providing Services hereunder shall be referred to as a “Provider” as applicable. Additionally, Advisory will sublet certain office space to Asset Management as set forth on Schedule A-3 attached hereto.

 

 

1.2          Personnel.

 

(a)           The Services to be provided by a Provider to a Recipient shall be provided by employees of such Provider or by service providers to such Provider, as applicable. In the event that any employees of a Provider as of the date of this agreement cease to be employed by such Provider, the Provider will have no obligation to hire a new employee for the purpose of providing the Services to the applicable Recipient and will not be liable for any losses, costs or damages caused by, attributable to or arising in connection with (A) such Recipient’s failure to receive such Services, or (B) such Recipient’s transition from the Services to any replacement services.

 

(b)           Each entity acting as a Provider shall be responsible for the payment of all wages and federal, state and local taxes and withholdings payable with respect to the wages of such persons, shall maintain workers’ compensation insurance required by applicable statutes with respect to such persons and shall maintain and provide all applicable employee benefits for such persons.  No person providing Services to a Recipient shall be considered an employee of the Recipient because of the provision of such Services.

 

1.3          Compensation.  Each Recipient shall pay each Provider a fee as set forth in Schedule B attached hereto as the total consideration for the Services to be provided to such Recipient during the term of this agreement and such Recipient shall not pay any additional fee or other compensation for such Services, unless the scope of those Services is expanded by mutual agreement of the parties and the parties agree that additional compensation should be paid in connection therewith.

 

1.4          Warranty Disclaimer.  NO PROVIDER MAKES ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES IMPLIED BY LAW OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, REGARDING THIS AGREEMENT, OR THE PERFORMANCE OF THE SERVICES CONTEMPLATED BY THIS AGREEMENT.

 

1.5          Limitation of Liability.  No Provider will be liable to any Recipient or to any other person or entity for any losses, costs or damages caused by, attributable to or arising in connection with the performance, nonperformance or delayed performance of the Services to be provided to such Recipient contemplated by this agreement, except for such losses, costs or damages attributable to such Provider’s bad faith, gross negligence or willful misconduct for which damages the Provider will be liable.  Notwithstanding the foregoing, no Provider shall be liable for any special, indirect, consequential or punitive damages in connection with the Services to any Recipient even if the Provider has been advised of the possibility of such damages.  No Provider will be liable for any failure to perform or any delay in the performance of its obligations hereunder due to Force Majeure (as hereinafter defined).

 

1.6          Consents.  Notwithstanding any provision of this agreement to the contrary, if the provision of any Service as contemplated by this agreement requires the consent, approval or authorization of any third party, the Provider providing such Service shall use its commercially reasonable efforts to obtain as promptly as possible after the date of this agreement such consent, approval or authorization (including obtaining from third party vendors all consents necessary to grant any sublicenses in connection with the performance of such Service) and shall be excused from performing such Service while it continues to use such commercially reasonable efforts.  Any fee, cost or expense incurred in connection with obtaining such consent, approval or authorization shall be paid by the Provider.  If any such consent, approval or authorization is not obtained promptly after the date of this

 

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agreement, the Provider shall notify the applicable Recipient and the parties shall cooperate in good faith to devise an alternative arrangement to the provision of such Service, which alternative arrangement shall be reasonably satisfactory to each party.

 

ARTICLE 2.

 

TERM AND TERMINATION

 

2.1          Term.  The term of this agreement will commence upon [S-1 Effective Date] and will continue until the one year anniversary thereof, subject to earlier termination as provided in Section 2.2 hereof or extension by mutual agreement.

 

2.2          Termination.  This agreement may be terminated in accordance with the following provisions:

 

(a)           Any party may terminate this agreement solely as it applies to services provided or received between itself and another party by giving notice in writing to such other party should an event of Force Majeure (as defined in Section 3.1) continue for more than ninety (90) consecutive calendar days;

 

(b)           Any party may terminate this agreement solely as it applies to services provided or received between itself and another party by giving notice in writing to the other party in the event such other party is in material breach of this agreement and shall have failed to cure such breach within thirty (30) calendar days of receipt of written notice thereof from the non-breaching party; or

 

(c)           Any party may terminate this agreement solely as it applies to services provided or received between itself and another party by giving ninety (90) calendar days written notice to such other party.

 

(d)           Any two parties hereto may terminate this agreement solely as it applies to services provided or received between such parties with the mutual written consent of such parties.

 

2.3          Rights and Obligations on Termination.  In the event of the termination of this agreement pursuant to Section 2.2, a Provider will have the right to terminate any or all Services provided to any Recipient.  Such Recipient shall bear sole responsibility for obtaining replacement services, and such Provider shall bear no liability for such Recipient’s failure to obtain such service or for any difficulties in transitioning from the Services to such replacement service.

 

ARTICLE 3.

 

FORCE MAJEURE

 

3.1          Definition.  “Force Majeure” means any event or condition, not existing as of the date of this agreement and not reasonably within the control of either party, which prevents in whole or in material part the performance by a Provider of its obligations hereunder or which renders the performance of such obligations so difficult or costly as to make such performance commercially unreasonable.  Without limiting the foregoing, the following, without limitation, will constitute events or conditions of Force Majeure: acts of state or governmental action, riots, disturbance, war, acts of terrorism, strikes,

 

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labor slowdowns, prolonged shortage of energy supplies, epidemics, fire, flood, hurricane, typhoon, earthquake and explosion.

 

3.2          Notice.  Upon giving written notice to a Recipient, the Provider being affected by an event of Force Majeure will be released without any liability on its part from the performance of its obligations under this agreement, but, subject to Section 2.2, only to the extent and only for the period that its performance of such obligations is prevented by the event of Force Majeure.  Such notice must include a description of the nature of the event of Force Majeure, its cause and to the extent known its likely consequences.  Such Provider will promptly notify the applicable Recipient of the termination of such event.

 

ARTICLE 4.

 

INDEMNIFICATION

 

Each Recipient severally and not jointly agrees to protect, defend, hold harmless and indemnify each Provider severally and not jointly and its successors, assigns, directors, officers, members, employees and agents (collectively, the “Provider Representatives”), from and against any and all claims, demands, actions, liabilities, damages, losses, fines, penalties, costs and expenses, including reasonable attorneys’ fees (collectively referred to as “Claims”), actually or allegedly, directly or indirectly, arising out of or related to any actions taken or omitted to be taken by such Provider or any of such Provider Representatives in connection with the performance of any of the Services to be provided by such Provider to such Recipient hereunder, other than Claims that are the direct result of bad faith, gross negligence or willful misconduct of such Provider or such Provider’s Representative.  Notwithstanding the foregoing, no Recipient shall be liable for any special, indirect, consequential or punitive damages in connection with any Claim even if such Recipient has been advised of the possibility of such damages.

 

ARTICLE 5.

 

CONFIDENTIALITY

 

5.1          Definition. In connection with the Services to be performed hereunder, a Recipient may provide to a Provider information about it, the funds, accounts or clients to which such Recipient provides investment management or advisory services, as applicable, their investors or other third parties that is confidential or proprietary in nature (the “Confidential Information”), which may include, but is not limited to, information of a technical, administrative and/or financial nature relating to the business operations of such Recipient.  The Recipient shall, except to the extent necessary for the Service, not disclose to the Provider Confidential Information about any issuer of securities to the public in the United States. Notwithstanding the foregoing, Confidential Information with respect to any Provider shall not include information that: (a) has come into the public domain through no breach of this Article 5 by such Provider or any related Provider Representative; (b) is or becomes available to such Provider from any third party not known to be breaching an obligation of confidentiality to the Recipient; or (c) is independently developed by such Provider without reference to or use of the Confidential Information of the Recipient.

 

5.2          Use and Protection of Confidential Information. Each Provider severally and not jointly, on behalf of itself and its Provider Representatives, agrees that the Confidential Information shall be kept confidential and, except with the prior written consent of the applicable Recipient, shall not

 

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disclose to any third party, including to any other Recipient, any of the Confidential Information disclosed to such Provider or any Provider Representative hereunder in any manner whatsoever, except as needed to Provider Representatives who are subject to confidentiality obligations substantially similar to those set forth herein and who have a reasonable need to know such Confidential Information in order to provide the Services under this agreement.  This Article 5 shall terminate as between any two parties two years following termination of this agreement between such two parties.

 

5.3          Legally Compelled Disclosure.  If a Provider or a Provider Representative is requested or required (in either case by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, such Provider agrees to the extent permissible to provide the applicable Recipient with prompt notice of each such request, to the extent practicable, so that the Recipient may seek an appropriate protective order or waive such Provider’s compliance with the provisions of this agreement.  If, absent the entry of a protective order or the receipt of a waiver under this agreement, any Provider or its Provider Representative, as the case may be, on the advice of its counsel, is legally compelled to disclose such information, such Provider or Provider Representative as the case may be may disclose such information to the persons and to the extent required without liability under this agreement, and the Provider agrees to cooperate with the Recipient’s efforts to obtain reliable assurances that confidential treatment will be accorded any Confidential Information so furnished.  For the avoidance of doubt, the immediately preceding sentence shall not require any Provider to take any action that would cause it to incur more than de minimis cost or expense unless the applicable Recipient agrees to advance or reimburse the Provider for such cost and expense.  In addition, a Provider may also disclose its business records (including documents including Confidential Information) to its financial regulatory authorities without notice to the Recipient in connection with customary examinations and inquiries with respect to its business.

 

5.4          Return or Destruction of Confidential Information. Upon demand by a Recipient at any time, or upon expiration or termination of this agreement with respect to the Services, the applicable Provider agrees promptly to, and to cause each of its Provider Representative to, return or destroy, at the Recipient’s option, all Confidential Information, provided that the Provider may maintain such Confidential Information in accordance with its internal document retention policies.

 

ARTICLE 6.

 

MISCELLANEOUS

 

6.1          Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made when delivered in person or when transmitted by facsimile, or one business day after having been dispatched by a nationally recognized overnight courier service to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.1):

 

If to Advisory, addressed to:

 

Moelis & Company Group LP

399 Park Avenue, 5th Floor

New York, NY  10022-8604

Attention:  Osamu Watanabe

 

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Email: osamu.watanabe@moelis.com

 

If to MCP, addressed to:

 

Moelis Capital Partners LLC

399 Park Avenue, 5th Floor

New York, NY  10022-8604

Attention:  [Andrew Goldfarb]

Email: []

 

If to Gracie, addressed to:

 

P&S Credit Management, L.P.

399 Park Avenue, 6th Floor

New York, NY  10022-8604

Attention:  Mary Nir

Email: mnir@graciecap.com

 

If to Freeport, addressed to:

 

Freeport Financial Partners LLC

300 North LaSalle, Suite 5300

Chicago, IL 60654

Attention:  Joseph Walker

Email: jvwalker@freeportfinancial.com

 

If to Steele Creek, addressed to:

 

Steele Creek Investment Management LLC

401 North Tryon Street

10th Floor, Suite 1067

Charlotte, North Carolina 28202

Attention:  Glenn Duffy

Email: glenn.duffy@steelecreek.com

 

If to Asset Management, addressed to:

 

Moelis Asset Management LP

399 Park Avenue, 5th Floor

New York, NY  10022-8604

Attention:  []

Email: []

 

6.2          Independent Contracting Parties.  The parties hereto expressly acknowledge that no employment, partnership or joint venture relationship is created by this agreement, and hereby agree as follows:

 

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(a)           Each party at all times during the term of this agreement shall be an independent contracting party;

 

(b)           For purposes of the Services to be performed under this agreement, except for certain dual employees of Advisory and Asset Management, no Provider nor anyone employed by or acting for or on behalf of any Provider shall be construed as an employee of any Recipient, and no Recipient shall be liable for employment or withholding taxes respecting any Provider or any employee of any Provider, or any employee benefits therefor.

 

6.3          Cooperation.  The parties will each use good faith efforts to reasonably cooperate with each other in all matters relating to the provision and receipt of the Services.  Such cooperation shall include the applicable Recipient obtaining all consents, licenses or approvals necessary to permit a Provider to perform its obligations hereunder.  The parties will, for a period of five (5) years after the termination of this agreement, maintain information relating to the Services and cooperate with each other in making such information available as needed, subject to appropriate confidentiality requirements, in the event of any audit, investigation or litigation.

 

6.4          Assignment.  No party has the right to, directly or indirectly, in whole or in part, assign, delegate, convey or otherwise transfer, whether voluntarily, involuntarily or by operation of law, its rights and obligations under this agreement, except with the prior written approval of the other party or parties as applicable. Notwithstanding the foregoing, any party may assign, delegate, convey or otherwise transfer its own rights and obligations under this agreement without obtaining the prior written approval of any other party to a successor by merger, consolidation or similar business combination or to a purchaser in connection with the sale of all or substantially all of such party’s assets.  Any action prohibited by this Section 6.4 will be null and void.

 

6.5          Amendment; Waiver.  Neither this agreement nor any provision hereof may be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument duly executed by the applicable parties hereto.  No failure or delay by a party to take any action or assert any right or remedy hereunder or to enforce strict compliance with any provision hereof will be deemed to be a waiver of, or estoppel with respect to, such right, remedy or noncompliance in the event of the continuation or repetition of the circumstances giving rise to such right, remedy or noncompliance.  No waiver shall be effective unless given in a duly executed written instrument.

 

6.6          Survival of Provisions.  The rights, remedies, agreements, obligations and covenants of each of the parties contained in or made pursuant to this agreement which by their terms extend beyond the termination of this agreement, including, without limitation, Article 4 (relating to indemnification) and Article 5 (relating to confidentiality), will survive the termination of this agreement and will remain in full force and effect.

 

6.7          Severability.  Any term or provision of this agreement that is held by a court of competent jurisdiction to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.  If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid, void or unenforceable, the parties hereto agree that the court making such determination, to the greatest extent legally permissible, shall have the power to reduce or alter the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or

 

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provision that is valid and enforceable and that comes closest to expressing the intent of the invalid, void or unenforceable term or provision.

 

6.8          Entire Agreement.  This agreement and the Schedules hereto constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, by and among the parties with respect to the subject matter hereof.

 

6.9          Governing Law; Non-Binding Mediation; Jurisdiction.  This agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without regard to the laws of conflict of any jurisdiction).  Any dispute, controversy or claim arising out of or in connection with this Agreement, or the interpretation, breach, termination or validity thereof (“Dispute”) shall be finally resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) then in effect (the “Rules”), except as modified herein and such arbitration shall be administered by the AAA.  The place of arbitration shall be New York, New York.  There shall be one arbitrator who shall be agreed upon by the parties within twenty (20) days of receipt by respondent of a copy of the demand for arbitration.  If any arbitrator is not appointed within the time limit provided herein, such arbitrator shall be appointed by the AAA in accordance with the listing, striking and ranking procedure in the Rules, with each party being given a limited number of strikes, except for cause.  Any arbitrator appointed by the AAA shall be a retired judge or a practicing attorney with no less than fifteen years of experience with trademark or related intellectual property matters and an experienced arbitrator.  In rendering an award, the arbitrator shall be required to follow the laws of the state of New York.  The award shall be in writing and shall briefly state the findings of fact and conclusions of law on which it is based.  The arbitrator shall not be permitted to award punitive, multiple or other non-compensatory damages.  The award shall be final and binding upon the parties and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues or accounting presented to the arbitrator.  Judgment upon the award may be entered in any court having jurisdiction over any party or any of its assets.  Any costs or fees (including attorneys’ fees and expenses) incident to enforcing the award shall be charged against the party resisting such enforcement.  All Disputes shall be resolved in a confidential manner.  The arbitrator shall agree to hold any information received during the arbitration in the strictest of confidence and shall not disclose to any non-party the existence, contents or results of the arbitration or any other information about such arbitration.  The parties to the arbitration shall not disclose any information about the evidence adduced or the documents produced by the other party in the arbitration proceedings or about the existence, contents or results of the proceeding except as may be required by law, regulatory or governmental authority or as may be necessary in an action in aid of arbitration or for enforcement of an arbitral award.  Before making any disclosure permitted by the preceding sentence (other than private disclosure to financial regulatory authorities), the party intending to make such disclosure shall use reasonable efforts to give the other party reasonable written notice of the intended disclosure and afford the other party a reasonable opportunity to protect its interests.  Barring extraordinary circumstances (as determined in the sole discretion of the arbitrator), discovery shall be limited to pre-hearing disclosure of documents that each side will present in support of its case, and non-privileged documents essential to a matter of import in the proceeding for which a party has demonstrated a substantial need. The parties agree that they will produce to each other all such requested non-privileged documents, except documents objected to and with respect to which a ruling has been or shall be sought from the arbitrator. There will be no depositions..

 

6.10        Counterparts; Headings.  This agreement may be executed and delivered (including by facsimile or PDF transmission) in one or more counterparts, and by the different parties in separate

 

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counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.  The headings of the sections and articles of this agreement are inserted for convenience only and do not constitute a substantive part 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 by their authorized representatives as of the date first above written.

 

	
MOELIS &   COMPANY GROUP LP
    	
 
    	
MOELIS   CAPITAL PARTNERS LLC
    
	
a   Delaware limited partnership
    	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
By:         Moelis & Company Group GP   LLC, its General Partner
    	
 
    	
By:         Moelis Asset Management LP, its Sole   Member
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Name:
    	
 
    	
 
    	
Name:
    	
 
    
	
Title:
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
P&S CREDIT MANAGEMENT L.P.,
    	
 
    	
FREEPORT   FINANCIAL PARTNERS LLC
    
	
a Delaware limited partnership
    	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    	
 
    	
 
    
	
By:         P&S   Credit Management, LLC,
    	
 
    	
By:         Moelis []Freeport Holdings LLC, its   Manager
    
	
its   General Partner
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Name:
    	
 
    	
 
    	
Name:
    	
 
    
	
Title:
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
STEELE   CREEK INVESTMENT MANAGEMENT LLC, a Delaware limited   liability company
    	
 
    	
MOELIS   ASSET MANAGEMENT LP, 
    a Delaware limited partnership
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:         Moelis Steele Creek Holdings LLC, its   Sole Member
    	
 
    	
By:         Moelis & Company Holdings GP   LLC,

its   General Partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Name:
    	
 
    	
 
    	
Name:
    	
 
    
	
Title:
    	
 
    	
 
    	
Title:
    	
 
    

 

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SCHEDULE A-1 — ADVISORY SERVICES PROVIDED

 

This Schedule A outlines the services to be provided by the Provider to the Recipient during the term of the agreement.

 

1)             Gracie Asset Management

 

·                  Rent & Office Related

 

·                  NYC 6th floor rent, utilities and occupancy tax

·                  Repairs and maintenance

 

2)             Freeport Financial

 

·                  Rent & Office Related

 

·                  Chicago rent, utilities, and occupancy tax

·                  Repairs and maintenance

·                  RR Donnelly (print, mail, presentations services)

·                  Office and kitchen supplies

·                  Courier and postage

·                  Other office expenses

 

·                  Technology and Communications

 

·                  Technology infrastructure

·                  Phone and communication services

 

·                  Information Services

 

·                  Market data licenses assigned to Freeport employees

 

3)             Steele Creek

 

·                  Information Services

 

·                  Market data licenses assigned to Steele Creek employees

 

4)             Moelis Capital Partners (MCP)

 

·                  Rent & Office Related

 

·                  NYC 5th floor rent, utilities, and occupancy tax

·                  Repairs and maintenance

·                  RR Donnelly (print, mail, presentations services)

·                  Office & kitchen supplies

·                  Courier and postage

·                  Other office expenses

 

·                  Technology and Communications

 

·                  Technology infrastructure

 

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·                  Phone and communication services

 

·                  Information Services / Market Data

 

·                  Market data licenses assigned to MCP employees

 

5)             Asset Management Holdings

 

·                  Management Infrastructure Support

 

·                  Financial Reporting and Consolidation

·                  Accounts Payable

·                  Audit & Tax

·                  Legal & Compliance

·                  Human Resources

·                  Investor Relations

·                  Office Services Management and Administration

·                  IT Helpdesk and Support Services

 

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SCHEDULE A-2 — ASSET MANAGEMENT SERVICES PROVIDED

 

·                  General Management Support Services

 

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SCHEDULE A-3 — SPACE AGREEMENT TERMS AND CONDITIONS

 

Space AgreementAdvisory hereby permit Freeport use of a portion of the Chicago Premises (as defined below) pursuant to the following terms and conditions. “Chicago Premises” means 9,216 square feet on the 53rd floor at 300 North LaSalle Street, Chicago, IL, leased by Advisory pursuant to an Office Lease Agreement between [Advisory] as Tenant and 300 LaSalle LLC as Landlord as of April 26, 2010 (the “Chicago Lease”).

 

UserSpace AgreementAdvisory hereby agrees to permit each of Gracie and MCP (severally and not jointly, and together with Freeport, each, a “User”) use of its respective portion of the New York Premises (as defined below) pursuant to the following terms and conditions. “New York Premises” means the fifth and sixth floors at 299 Park Avenue, New York, NY, leased by Advisory pursuant to a Lease Agreement between [Advisory] as Tenant and BP 399 Park Avenue LLC as Landlord as of August 12, 2009, as amended and restated from time to time (the “New York Lease”, and together with the Chicago Lease, the “Leases”).  Each of the Space Agreementagreements to permit use of spaces addressed herein shall be referred to as a “Space AgreementSpace Agreement,” and the Chicago Premises and the New York Premises shall each be referred to as a “Premises”.

 

Advisory represents to each User separately and not jointly that a true, correct, and complete copy of the applicable Lease as amended and all other agreements between Advisory and the applicable Landlord relating to the leasing, use and occupancy of the Premises has been delivered to and received by User and are annexed hereto as [Exhibit F]; (ii) the Leases have not been amended or modified, the Leases are in full force and effect; (iii) neither Landlord nor Advisory are in default thereunder beyond the applicable cure period and there exist no conditions or events which, with the passing of time or the giving of notice or both, would constitute an event of default under the Leases by the parties thereto[ and (iv) Advisory has not assigned its interest in or sublet any portion of the Sublet Premises].

 

Each Space Agreement is conditional upon obtaining the approval of the respective Landlord to such Space Agreement, if required under the Lease.

 

Each Space Agreement and all rights of each User thereunder are and shall remain subject and subordinate to and incorporates within it the terms, covenants and conditions of the applicable Lease by reference. If any of the express provisions of a Space Agreement shall conflict with any of the Leases, such conflict shall be resolved in favor of the provisions of the Lease.  Except to the extent that the Leases provisions (hereinafter referred to as the “Incorporated Provisions”) are inapplicable, the Incorporated Provisions which are binding or inuring to the benefit of any Landlord shall, in respect of this Space Agreement, bind or inure to the benefit of Advisory, and the Incorporated Provisions which are binding or inuring to the benefit of the Advisory thereunder shall, in respect of this Space Agreement, bind or inure to the benefit of each applicable User, with the same force and effect as if the Incorporated Provisions were completely set forth in this Space Agreement, and as if the words “Landlord” and “Tenant” or words of similar import, wherever the same appear in the Incorporated Provisions, were construed to mean, respectively, “Advisory” and “User” in this Space Agreement, and as if the words “Premises,” or words of similar import, wherever the same appear in the Incorporated Provisions, were construed to have the definition provided herein.  Each Space Agreement is

 

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subordinate and subject to and incorporates within it any and all amendments to the applicable Lease and supplemental agreements relating thereto hereafter made between Advisory and the applicable Landlord, provided that any such amendments and/or supplemental agreements do not individually or in the aggregate materially adversely affect such User or its use of the applicable Premises

 

Each Space Agreement shall include the appurtenant right to the use, in common with Advisory and others, the lobbies, entrances, stairs, corridors, elevators and other public portions of the Chicago Premises and the New York Premises, to the extent that Advisory has the right to use the same as tenant under the Chicago Lease or the New York Lease, as applicable.  Each User shall be entitled, during the term, to receive all services, utilities, repairs, facilities and other benefits to be furnished by the applicable Landlord under the Lease subject to the provisions of the Lease and this Space Agreement. Advisory shall have no liability for any failure or interruption of these services except to the extent attributable to Advisory’ default beyond the applicable cure period under the Lease.

 

Advisory shall have no responsibility or liability of any kind whatsoever for any default of or by a Landlord under the the applicable Lease for the furnishing to User or the Premises of any services of any kind whatsoever which Landlord is required to furnish to the Premises under the the applicable Lease.  In furtherance (and without limitation) of the foregoing, User agrees that Advisory shall not have any obligation to furnish heat, air conditioning, electricity, cleaning service, and/or any other building services of any kind whatsoever, and that Advisory shall not be obligated to make any repairs or restorations of any kind whatsoever in any Premises, except if caused by Advisory’s negligence or willful act.

 

Except as otherwise provided herein, User agrees to look solely to the applicable Landlord for any services, repairs, restorations and/or work of any kind whatsoever to be furnished to the Premises; however, Advisory agrees to use commercially reasonable efforts to cause the Landlord to perform such obligations of the Landlord under the the applicable Lease with respect to the Premises.

 

If a Landlord shall default in any of its obligations with respect to the Premises (including without limitation canceling the applicable Lease, except pursuant to the terms thereof) User shall be entitled to participate with Advisory in the enforcement of Advisory’s rights against such Landlord (and in any recovery or relief obtained), but Advisory shall not have any obligation to bring any action or proceeding or to take any steps to enforce Advisory’s rights against Landlord, except upon User’s written request as provided herein.  Any action or proceeding so instituted by Advisory at the request of User shall be at the sole expense of User, but User shall be entitled to all damages whatsoever that may be awarded against a Landlord in any such action or proceeding.  Any such action or proceeding shall be conducted by counsel selected by Advisory and reasonably satisfactory to User.  User shall have the right, at User’s expense, to take such action in its own name and, for that purpose and only to such extent, all of the rights of Advisory to cause a Landlord to perform the obligations of such Landlord under the applicable Lease are hereby conferred upon and are assigned to each User severally and as applicable and each User hereby is subrogated to such rights (including, without limitation, the benefit of any recovery or relief); provided, however, that User shall only have such rights if

 

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User shall not be in default under this Space Agreement which continues after notice and the expiration of any applicable cure period.  Provided that Advisory has complied with its covenants contained in this Section, User shall indemnify and hold Advisory harmless from and against any and all losses, liabilities, obligations, claims, damages, penalties, fines and costs and expenses of every kind and nature (including, without limitation, reasonable attorneys’ fees and disbursements and court costs) which Advisory may incur arising out of or in connection with the taking of any such action by User.

 

Notwithstanding anything to the contrary in the foregoing, Advisory shall promptly forward to a Landlord any requests or other communications made by User related to the performance by such Landlord of its obligation under the the applicable Lease, as they pertain to the Premises, and shall promptly forward to the User any communication received a Landlord related to the Premises.

 

Each User shall use and occupy the applicable Premises for the purposes permitted by the applicable Lease and for no other purposes.  No User shall, without the prior written consent of Advisory and the applicable Landlord, do or permit anything to be done that may result in a violation of the Lease or that may render Advisory liable for any damages, claims, fines, penalties, costs or expenses thereunder.

 

Each User severally and not jointly hereby indemnifies holds Advisory harmless from and against any and all losses, liabilities, obligations, claims, damages, penalties, fines and costs and expenses of every kind and nature (including, without limitation, reasonable attorneys’ fees and disbursements and court costs) which Advisory may incur by reason of (A) any failure of or by such User to perform or comply with any and all of the terms, covenants and conditions of this Space Agreement beyond any applicable notice and cure periods, (B) any breach or violation by (or caused by) such User of the terms, covenants and conditions of the Lease incorporated herein after notice and beyond any applicable cure periods, (C) any work or thing of whatsoever kind done in, on or about the Premises by User’s employees, contractors, agents, licensees or invitees (including, but not limited to, construction alterations, repairs or similar acts of any kind whatsoever, and whether or not authorized by this Space Agreement), (D) any negligence or gross negligence of User or User’s officers, employees, contractors, agents, licensees or invitees or (E) any injuries to persons or property occurring in the Premises; provided, however, that this subsection shall not apply to injuries to persons or property to the extent caused by the acts, omissions or gross negligence of Advisory or the applicable Landlord or its or their employees, contractors, agents, licensees or invitees.

 

Advisory hereby indemnifies and holds each User severally and not jointly harmless from and against any and all losses, liabilities, obligations, claims, damages, penalties, fines and costs and expenses of every kind and nature (including, without limitation, reasonable attorneys’ fees and disbursements and court costs) which such User may incur by reason of (A) any failure of or by Advisory to perform or comply with any and all of the terms, covenants and conditions of this Space Agreement beyond any applicable notice and cure periods, (B) any breach or violation by (or caused by) Advisory of the terms, covenants and conditions of the Lease incorporated herein beyond any applicable notice and cure periods, (C) any work or thing of whatsoever kind done in, on or about the Premises by Advisory’s employees, contractors, agents, licensees or invitees

 

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(including, but not limited to, construction alterations, repairs or similar acts of any kind whatsoever, and whether or not authorized by this Space Agreement), (D) any negligence or gross negligence of Advisory or Advisory’s officers, employees, contractors, agents, licensees or invitees or (E) any injuries to persons or property occurring in the Premises; provided, however, that this subsection shall not apply to injuries to persons or property to the extent caused by the acts, omissions or gross negligence of User or the applicable Landlord or its or their employees, contractors, agents, licensees or invitees.

 

The term of the Space Agreements shall be as follows, subject to extension by mutually agreement and early termination upon [90] days written notice:

 

Freeport: [TBD]

Gracie: [TBD]

MCP: [TBD]

 

In the event of and upon the termination or cancellation of a Lease pursuant to the terms and provisions thereof, this Space Agreement shall automatically cease and terminate on the date of such termination or cancellation, subject however to all of the rights of the applicable Landlord pursuant to the Lease and to any rights of such User to bring and maintain an action or proceeding against Landlord for wrongful termination or cancellation of the Lease, which rights of User shall survive the termination of this Space Agreement.  Notwithstanding anything herein to the contrary, Advisory shall not be liable to User by reason thereof unless such termination shall have been effected because of the breach or default of Advisory as Tenant under the applicable Lease.

 

Each User shall pay rent and related expenses and taxes for the applicable Premises as set forth on [Schedule B] hereto.

 

Neither this Space Agreement nor the term and estate hereby granted shall be assigned, mortgaged, pledged, encumbered or otherwise transferred by any User, by operation of law or otherwise, and no Premises, nor any part thereof, shall be encumbered or sublet or used or occupied or permitted to be used or occupied, or utilized by anyone other than User without the prior written consent of Landlord and of Advisory to the extent required under the applicable lease.  Notwithstanding the foregoing, each User shall remain fully and severally liable for the payment of its respective rent and expenses due and to become due under this Space Agreement and for the performance and observance of all terms and conditions regardless of any act or omission of any permitted further Sublessee.

 

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SCHEDULE B — FEE METHODOLOGY

 

This Schedule B outlines the methodology used to determine the fees to be paid for Services provided during the term of the agreement.

 

All fees are billed and payable quarterly in arrears. The fees for any calendar quarter during which the Provider is engaged in providing the Services for less than a full quarter shall be determined on a pro rata basis.  Recipient shall pay to Provider such fee in cash within ten days after the last business day of the calendar quarter.

 

	
 
    	
 
    	
Gracie
    	
 
    	
Freeport
    	
 
    	
Steele Creek
    	
 
    	
MCP
    	
 
    	
Asset Management
    	
 
    	
Total Asset
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Holdings
    	
 
    	
Management
    
	
Rent,   Utilities & Occupancy Tax
    	
 
    	
Incurred or accrued expenses allocated based on total rentable square   footage (including common areas) utilized by each Recipient at its applicable   office location as of the first day of each fiscal quarter

 

Ex: (Gracie utilized 6th floor sq ft / total 6th floor rentable sq   ft) x 6th floor rent expense = Gracie allocated rent expense
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   Office Expenses(1)
    	
 
    	
Incurred or accrued expenses allocated based percent of total   headcount for each Recipient relative to total US Advisory plus Asset   Management headcount as of the first day of each fiscal quarter

 

Ex: (Gracie headcount / (total US Advisory + AM headcount)) x Other   Office Expenses = Gracie allocated Other Office Expense
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
IT   Infrastructure / Communications
    	
 
    	
Incurred or accrued expenses allocated based percent of total   headcount for each Recipient relative to total US Advisory plus Asset   Management headcount as of the first day of each fiscal quarter
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Information   Services
    	
 
    	
Based on specific market data licenses or other expenses incurred   specifically by the Recipient
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Financial   Reporting (incl. Audit Support)
    	
 
    	
Fixed quarterly fees for service-related expenses to be mutually   agreed
    
	
Accounts   Payable
    	
 
    
	
Tax   Compliance Support
    	
 
    
	
Legal &   Compliance
    	
 
    
	
Human   Resources
    	
 
    
	
Investor   Relations
    	
 
    
	
Office   Services Management
    	
 
    
	
Helpdesk
    	
 
    
	
 
    	
 
    	
 
    
	
Recipient   Services to Provider
    	
 
    	
Fixed quarterly fee for general management support services provided   by Asset Management to Advisory to be mutually agreed
    

 

(1)         Other Office Expenses consists of RR Donnelly (print, mail, presentations services), Repairs & Maintenance, Office & Kitchen Supplies, and Courier & Postage; Gracie Other Office Expenses includes only Repairs & Maintenance

 

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