Document:

ex10-19.htm

 

EXHIBIT 10.19

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

AND LIMITED CONSENT

This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LIMITED CONSENT (this “Amendment”), dated as of February 10, 2010, is made by and among the financial institutions party hereto (collectively, “Lenders”), Bank of America, N.A., as a Lender and as agent for Lenders (in its capacity as agent, “Agent”), Hypercom U.S.A., Inc. a Delaware corporation (“Hypercom U.S.A.”), and Hypercom Manufacturing Resources, Inc., an Arizona corporation (“Hypercom Manufacturing”; and together with Hypercom U.S.A., collectively, “Borrowers” and each individually a “Borrower”).

R E C I T A L S:

A. WHEREAS, Borrowers, Agent and Lenders have entered into that certain Loan and Security Agreement dated as of January 15, 2008 (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”);

 

B. WHEREAS, Borrowers have informed Agent and Lenders that HBNet, Inc., an Arizona corporation, will convert to a Delaware limited liability company (the “HBNet Conversion”);

 

C. WHEREAS, Borrowers have informed Agent and Lenders that Hypercom U.S.A. will enter into a joint venture arrangement with Dunluce Investors, V, LLC, a Delaware limited liability company, whereby Hypercom U.S.A. will contribute (a) all of its ownership interest in HBNet, LLC, a Delaware limited liability company (“HBNet”), and (b) certain other assets identified on Exhibit A attached hereto related to HBNet’s business, which are not material to Hypercom U.S.A.’s business, to Phoenix Managed Networks, LLC, a Delaware limited liability company (“PMN”) in exchange for cash and 40% of the Equity Interests of PMN (the “HBNet Transaction”); and

 

D. WHEREAS, Borrowers have requested that Agent and Lenders consent to the HBNet Conversion and the HBNet Transaction and amend the Loan Agreement in certain respects, and Agent and Lenders have agreed to the foregoing request in accordance with the terms of this Amendment.

 

NOW, THEREFORE, in consideration of the premises, and in order to induce Agent and Lenders to amend the Loan Agreement pursuant to the terms hereof, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Recitals.  The foregoing Recitals are accurate and are incorporated herein and made a part hereof for all purposes.

2. Definitions.  Unless otherwise defined in this Amendment, all initially capitalized terms and phrases wherever used in this Amendment shall have the respective meanings given to them in the Loan Agreement, as amended hereby.

3. New Definitions.  The following definitions are hereby added to Section 1.1 of the Loan Agreement to read in their entirety as follows:

Defaulting Lender: any Lender that (a) fails to make any payment or provide funds to Agent or any Borrower as required hereunder or fails otherwise to perform its obligations under any Loan Document, and such failure is not cured within one Business Day, or (b) is the subject of any Insolvency Proceeding.

 

Federal Funds Rate: (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds

 

  

  

  

brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/8 of 1%) charged to Bank of America on the applicable day on such transactions, as determined by Agent.

 

First Amendment Closing Date: February 10, 2010.

 

Prime Rate: the rate of interest announced by Bank of America from time to time as its prime rate.  Such rate is set by Bank of America on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such rate.  Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

 

4. Amendment of Definitions.  The following definitions contained in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:

Applicable Margin: as of the First Amendment Closing Date,

(a)           with respect to Base Rate Revolver Loans, .50% per annum; and

 

(b)           with respect to LIBOR Revolver Loans, 2.00% per annum;

 

in each case subject to adjustment from time to time thereafter to the applicable percentage specified in the table below corresponding to the Fixed Charge Coverage Ratio set forth below:

 

	
Fixed Charge Coverage Ratio

	
Level

	
Base Rate Revolver Loans

	
LIBOR

Revolver Loans

	
greater than or equal to 1.30 to 1.00

	
I

	
.50%

	
2.00%

	
less than 1.30 to 1.00

	
II

	
.75%

	
2.50%

The margins shall be subject to increase or decrease upon receipt by Agent pursuant to Section 10.1.2 of the financial statements and corresponding Compliance Certificate for the last Fiscal Quarter, which change shall be effective on the first day of the calendar month following receipt.  If, by the first day of a month, any financial statements and Compliance Certificate due in the preceding month have not been received, then, at the option of Agent or Required Lenders, the margins shall be determined as if Level II were applicable, from such day until the first day of the calendar month following actual receipt.

Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c) LIBOR for a 30 day interest period as determined on such day, plus 1.0%.

 

Borrowing Base: on any date of determination, an amount equal to the lesser of (a) the aggregate amount of Revolver Commitments, minus the LC Reserve, minus the Availability

 

  

  

  

Block; or (b) the sum of the Accounts Formula Amount, plus the Installment Receivables Formula Amount, minus the Availability Reserve; provided that in no event shall the amount under this clause (b) attributable to the sum of Eligible Accounts owing by Account Debtors located in the U.K. exceed the lesser of (i) $20,000,000 or (ii) 50% of the total Borrowing Base.

 

Guarantors: Parent, Hypercom EMEA, Inc., Hypercom Latino America, Inc., Hypercom Puerto Rico, Hypercom U.K., and each Borrower and each other Person who guarantees payment or performance of any Obligations.

 

Installment Receivables Formula Amount: following the First Amendment Closing Date, so long as the Fixed Charge Coverage Ratio is greater than 1.30 to 1.00 for the most recent four consecutive Fiscal Quarter ended, up to the lesser of:

 

(a)           $3,500,000; or

 

(b)           60% of the Value of Eligible Installment Receivables;

 

provided, however, that if for any subsequent quarter, the Fixed Charge Coverage Ratio is not greater than 1.30 to 1.00 for the applicable testing period, the Installment Receivables Formula Amount will immediately become zero and all advances against such amount will automatically become due and payable without demand of any kind.  Thereafter, upon demonstration that the Fixed Charge Coverage Ratio is greater than 1.30 to 1.00 for a subsequent testing period, the Installment Receivables Formula Amount will again be the lesser of clauses (a) or (b) above; provided, further that should the Fixed Charge Coverage Ratio not be greater that 1.30 to 1.00 for a second testing period following the First Amendment Closing Date, the Installment Receivables Formula Amount will be permanently reduced to zero.

 

5. Amendment of the Definition of “Change of Control”.  Clause (b) of the definition of “Change of Control” contained in Section 1.1 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“(b) Hypercom U.S.A. ceases to own and control, beneficially and of record, all of the Equity Interests of each of Hypercom Manufacturing Resources, Inc., Hypercom EMEA, Inc., Hypercom Puerto Rico and Hypercom Latino America, Inc.;”

 

6. Amendment of the Definition of “Ineligible Account”.  The definition of “Ineligible Account” contained in Section 1.1 of the Loan Agreement is hereby amended by deleting the references to “90” and replacing them with “120”.

7. Deletion of Definitions.  Section 1.1 of the Loan Agreement is hereby amended to delete each of the following definitions:  “Eligible In-Transit Inventory”, “Eligible Inventory”, and “Inventory Formula Amount”.

8. Amendment of Section 2.3.1 of the Loan Agreement.  Clause (a) of Section 2.3.1 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“(a)           Each Borrower acknowledges that Issuing Bank’s willingness to issue any Letter of Credit is conditioned upon Issuing Bank’s receipt of a LC Application with respect to the requested Letter of Credit, as well as such other instruments and agreements as Issuing Bank may customarily require for issuance of a letter of credit of similar type and amount.  Issuing Bank shall have no obligation to issue any Letter of Credit unless (i) Issuing Bank receives a LC

 

Request and LC Application at least three Business Days prior to the requested date of issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting Lender exists, such Lender or Borrowers have entered into arrangements satisfactory to Agent and Issuing Bank to eliminate any funding risk associated with the Defaulting Lender.  If Issuing Bank receives written notice from a Lender at least five Business Days before issuance of a Letter of Credit that any LC Condition has not been satisfied, Issuing Bank shall have no obligation to issue the requested Letter of Credit (or any other) until such notice is withdrawn in writing by that Lender or until Required Lenders have waived such condition in accordance with this Agreement.  Prior to receipt of any such notice, Issuing Bank shall not be deemed to have knowledge of any failure of LC Conditions.”

 

9. Amendment of Section 2.3.3 of the Loan Agreement.  Section 2.3.3 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“2.3.3.           Cash Collateral.                                  If any LC Obligations, whether or not then due or payable, shall for any reason be outstanding at any time (a) that an Event of Default exists, (b) that Availability is less than zero, (c) after the Commitment Termination Date, or (d) within 20 Business Days prior to the Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and pay to Issuing Bank the amount of all other LC Obligations.  Borrowers shall, on demand by Issuing Bank or Agent from time to time, Cash Collateralize the LC Obligation of any Defaulting Lender.  If Borrowers fail to provide Cash Collateral as required herein, Lenders may (and shall upon direction of Agent) advance, as Revolver Loans, the amount of the Cash Collateral required (whether or not the Commitments have terminated, an Overadvance exists, or the conditions in Section 6 are satisfied).”

 

10. Amendment of Section 4.1.2 of the Loan Agreement.  The last sentence of Section 4.1.2 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“If a Lender’s share of any Borrowing or of any settlement pursuant to Section 4.1.3(b) is not in fact received by Agent, then Borrowers agree to repay to Agent on demand the amount of such share, together with interest thereon from the date disbursed until repaid, at the rate applicable to such Borrowing.”

 

11. Amendment of Section 4.2 of the Loan Agreement.  Section 4.2 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“4.2           Defaulting Lender.  Agent may (but shall not be required to), in its discretion, retain any payments or other funds received by Agent that are to be provided to a Defaulting Lender hereunder, and may apply such funds to such Lender’s defaulted obligations or readvance the funds to Borrowers in accordance with this Agreement.  The failure of any Lender to fund a Loan, to make any payment in respect of LC Obligations or to otherwise perform its obligations hereunder shall not relieve any other Lender of its obligations, and no Lender shall be responsible for default by another Lender.  Lenders and Agent agree (which agreement is solely among them, and not for the benefit of or enforceable by any Borrower) that, solely for purposes of determining a Defaulting Lender’s right to vote on matters relating to the Loan Documents and to share in payments, fees and Collateral proceeds thereunder, a Defaulting Lender shall not be deemed to be a ‘Lender’ until all its defaulted obligations have been cured.”

  

  

  

12. Amendment of Section 5.10 of the Loan Agreement.  A new Section 5.10.3 is hereby added to the Loan Agreement to read in its entirety as follows:

“5.10.3                      Lender Obligations. Each Lender and Issuing Bank shall promptly notify Borrowers and Agent of any change in circumstances that would change any claimed Tax exemption or reduction.  Each Lender and Issuing Bank shall indemnify, hold harmless and reimburse (within 10 days after demand therefor) Borrowers and Agent for any Taxes, losses, claims, liabilities, penalties, interest and expenses (including reasonable attorneys’ fees) incurred by or asserted against a Borrower or Agent by any Governmental Authority due to such Lender's or Issuing Bank's failure to deliver, or inaccuracy or deficiency in, any documentation required to be delivered by it pursuant to this Section.  Each Lender and Issuing Bank authorizes Agent to set off any amounts due to Agent under this Section against any amounts payable to such Lender or Issuing Bank under any Loan Document.”

13. Amendment of Section 8.3.3 of the Loan Agreement.  Section 8.3.3 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“8.3.3           Acquisition, Sale and Maintenance.  No Borrower shall acquire or accept any Inventory on consignment or approval, and shall take all steps to assure that all Inventory is produced in accordance with Applicable Law, including the FLSA, in all material respects.  If any Borrower sells any Inventory on consignment or approval or any other basis under which the customer may return or require a Borrower to repurchase such Inventory, Borrowers shall provide Agent evidence that Borrowers have complied with all requirements of Applicable Law (including the UCC) to perfect their consignment interest in such consigned Inventory and to assign its rights therein to Agent as Collateral.  Borrowers shall use, store and maintain all Inventory with reasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all Applicable Law in all material respects, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where any Collateral is located.”

14. Amendment of Section 12.1.1 of the Loan Agreement.  The last sentence of Section 12.1.1 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“Agent alone shall be authorized to determine whether any Accounts constitute Eligible Accounts, whether any Installment Receivables constitute Eligible Installment Receivables, or whether to impose or release any reserve, which determinations and judgments, if exercised in good faith, shall exonerate Agent from liability to any Lender or other Person for any error in judgment.”

15. Amendment of Section 12.10 of the Loan Agreement.  Section 12.10 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“12.10           Replacement of Certain Lenders.  If a Lender (a) is a Defaulting Lender, or (b) fails to give its consent to any amendment, waiver or action for which consent of all Lenders was required and Required Lenders consented, then, in addition to any other rights and remedies that any Person may have, Agent may, by notice to such Lender within 120 days after such event, require such Lender to assign all of its rights and obligations under the Loan Documents to Eligible Assignee(s) specified by Agent, pursuant to appropriate Assignment and Acceptance(s) and within 20 days after Agent's notice.  Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment and Acceptance if the Lender fails to execute same.  Such Lender

  

  

  

shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed to it under the Loan Documents, including all principal, interest and fees through the date of assignment (but excluding any prepayment charge).”

16. Amendment of Section 12.11.2 of the Loan Agreement.  The last sentence of Section 12.11.2 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“In no event shall Borrowers be entitled to receive credit for any interest paid by a Lender to Agent, nor shall any Defaulting Lender be entitled to interest on any amounts held by Agent pursuant to Section 4.2.”

17. Amendment of Section 14.1 of the Loan Agreement.  Clause (d) of Section 14.1 of the Loan Agreement is hereby amended by deleting the reference to “defaulting Lender” and replacing it with “Defaulting Lender”.

18. Amendment of Section 14.14.4 of the Loan Agreement.  Section 14.14.4 of the Loan Agreement is hereby amended by adding the following new sentence at the end thereto:

“The arbitrator shall not have the power to commit errors of law or legal reasoning, and any award may be reviewed and vacated or corrected on appeal to a court of competent jurisdiction for any such error.”

 

19. Amendment of Schedule 8.5 of the Loan Agreement.  Schedules 8.5 (Deposit Accounts) of the Loan Agreement is hereby amended and restated as set forth on Exhibit 8.5 attached hereto to delete the information related to HBNet, Inc.

20. Amendment of Schedule 8.6.1 of the Loan Agreement.  Schedules 8.6.1 (Business Locations) of the Loan Agreement is hereby amended and restated as set forth on Exhibit 8.6.1 attached hereto to delete the information related to HBNet, Inc.

21. Amendment of Schedule 9.1.4 of the Loan Agreement.  Schedules 9.1.4 (Names and Capital Structure) of the Loan Agreement is hereby amended and restated as set forth on Exhibit 9.1.4 attached hereto to delete the information related to HBNet, Inc.

22. Limited Consent.  Notwithstanding anything contrary in the Loan Agreement or any other provision set forth in the other Loan Documents, Agent and Lenders hereby consent to the following:

(a) the HBNet Conversion so long as such conversion is completed not more than five Business Days before the close of the HBNet Transaction; provided, however, that if the HBNet Transaction is not consummated for any reason whatsoever, Borrowers shall deliver such instruments, assignments, title certificates, or other documents or agreements, and shall take such actions, as Agent deems appropriate under Applicable Law to evidence or perfect its Lien on any Collateral of HBNet.  HBNet authorizes Agent to file any financing statement that indicates the Collateral of HBNet, or words to similar effect;

(b) the HBNet Transaction so long as, (i) not more than two Business Days before the close of the HBNet Transaction, Agent shall have received all documents, certificates, opinions, and information related to the HBNet Transaction that Agent shall require, each in form and substance satisfactory to Agent in its sole discretion and (ii) immediately before the close of

  

  

  

(c) the HBNet Transaction, no Default or Event of Default shall have occurred and be continuing; and

(d) the deposit of funds in an amount not less than $1,000,000 received by Hypercom U.S.A. in connection with the HBNet Transaction into Hypercom U.S.A.’s cash account no. 4496835166 so long as, immediately before the close of the HBNet Transaction, (i) no Default or Event of Default shall have occurred and be continuing and (ii) there are no Obligations outstanding.

The foregoing consents are limited strictly as written and no other terms of the Loan Agreement or any other Loan Document are intended to be affected hereby.

23. Conditions Precedent.  This Amendment shall not be binding upon Agent or any Lender until each of the following conditions precedent has been satisfied in form and substance satisfactory to Agent and Lenders:

(a) The representations and warranties contained herein and in the Loan Agreement shall be true and correct in all material respects as of the date hereof as if made on the date hereof, except for those representations and warranties that are limited by their terms to a specific date (such representations and warranties being true and correct in all material respects as of the specified date relative thereto);

(b) No Default or Event of Default shall have occurred and be continuing;

(c) Borrowers shall have delivered to Agent an executed original of this Amendment (including all consents and ratifications hereto);

(d) Borrowers shall have paid to Agent all fees, costs, and expenses owed to and/or incurred by Agent arising in connection with this Amendment (including reasonable attorneys’ fees and costs);

(e) All proceedings taken in connection with the transactions contemplated by this Amendment and all documentation and other legal matters incident thereto shall be satisfactory to Agent in the exercise of its discretion, reasonably exercised; and

(f) Agent shall have received such other documents, certificates, opinions, and information that Agent shall require, each in form and substance satisfactory to Agent in its sole discretion.

24. Acknowledgment of the Borrower.  Each Borrower hereby represents and warrants that the execution and delivery of this Amendment and compliance by such Borrower with all of the provisions of this Amendment:  (i) are within the powers and purposes of such Borrower; (ii) have been duly authorized or approved by the board of directors of such Borrower; and (iii) when executed and delivered by or on behalf of such Borrower, will constitute valid and binding obligations of such Borrower, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and to the effects of general principles of equity whether applied by a court of law or equity.  Each Borrower reaffirms its obligation to pay all amounts due to Agent and Lenders under the Loan Agreement and the other Loan Documents in accordance with the terms thereof.

  

  

  

25. Effect on Loan Agreement.  Except as specifically amended hereby, the terms and provisions of the Loan Agreement and the other Loan Documents are, in all other respects, ratified and confirmed and remain in full force and effect.  No reference to this Amendment need be made in any notice, writing, or other communication relating to the Loan Agreement and the other Loan Documents, any such reference to the Loan Agreement and the other Loan Documents to be deemed a reference thereto as respectively amended by this Amendment.  All references to the Loan Agreement and the other Loan Documents in any document, instrument, or agreement executed in connection with the Loan Agreement and the other Loan Documents will be deemed to refer to the Loan Agreement and the other Loan Documents as respectively amended hereby.

26. Fees and Expenses.  Each Borrower hereby agrees to pay all fees and other reasonable out-of-pocket expenses incurred by Agent in connection with the preparation, negotiation, and consummation of this Amendment, and all other documents related hereto, including without limitation, the reasonable fees and expenses of Lenders’ counsel.

27. Successors.  This Amendment will be binding upon and inure to the benefit of each Borrower, Lenders, Agent, and their respective successors and assigns, provided, however, that no interest herein may be assigned by any Borrower without the prior written consent of Agent and each Lender.

28. Governing Law.  This Amendment shall be governed by the laws of the State of New York, without giving effect to any conflict of law principles (but giving effect to federal laws relating to national banks).

29. Jury Trial Waiver.  To the fullest extent permitted by applicable law, each of the parties hereto waives its right to trial by jury in any proceeding or dispute of amy kind relating to this Amendment or the other Loan Documents, Obligations or Collateral.  Without limiting the applicability of any other section of the Loan Agreement, Section 14.15 of the Loan Agreement is hereby incorporated by this reference and shall apply to any action, proceeding, claim or controversy arising out of this Amendment.

30. Counterparts.  This Amendment may be executed in the original or by telecopy in any number of counterparts, each of which will be deemed original and all of which taken together will constitute one and the same Amendment.

31. Total Agreement.  This Amendment, the Loan Agreement, and all other Loan Documents embody the entire understanding of the parties with respect to the subject matter thereof and supersede all prior understandings regarding the same subject matter.

32. Acknowledgements and Release.  Each Borrower hereby acknowledges that:  (a) it has no defenses, claims or set-offs to the enforcement by Agent or Lenders of the Obligations on the date hereof; (b) to its knowledge, Agent and Lenders have fully performed all undertakings and obligations owed to it as of the date hereof; and (c) except to the limited extent expressly set forth in this Amendment, Agent and Lenders do not waive, diminish or limit any term or condition contained in the Loan Agreement or any of the other Loan Documents.  EACH BORROWER HEREBY IRREVOCABLY RELEASES AND FOREVER DISCHARGES AGENT AND LENDERS AND THEIR AFFILIATES, AND EACH SUCH PERSON’S RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, ATTORNEYS AND REPRESENTATIVES (EACH, A “RELEASED PERSON”) OF AND FROM ALL DAMAGES, LOSSES, CLAIMS, DEMANDS, LIABILITIES, OBLIGATIONS, ACTIONS OR CAUSES OF ACTION WHATSOEVER (EACH A “CLAIM”) THAT SUCH BORROWER MAY NOW HAVE OR CLAIM TO HAVE AGAINST ANY RELEASED PERSON ON THE DATE

  

  

  

HEREOF, WHETHER KNOWN OR UNKNOWN, OF EVERY NATURE AND EXTENT WHATSOEVER, FOR OR BECAUSE OF ANY MATTER OR THING DONE, OMITTED OR SUFFERED TO BE DONE OR OMITTED BY ANY OF THE RELEASED PERSONS THAT BOTH (I) OCCURRED PRIOR TO OR ON THE DATE HEREOF AND (II) IS ON ACCOUNT OF OR IN ANY WAY CONCERNING, ARISING OUT OF OR FOUNDED UPON THE LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT.

EACH BORROWER INTENDS THE ABOVE RELEASE TO COVER, ENCOMPASS, RELEASE, AND EXTINGUISH, INTER ALIA, ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION THAT MIGHT OTHERWISE BE RESERVED BY THE CALIFORNIA CIVIL CODE SECTION 1542 (AND ANY EQUIVALENT PROVISION UNDER NEW YORK LAW), WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

EACH BORROWER ACKNOWLEDGES THAT IT MAY HEREAFTER DISCOVER FACTS DIFFERENT FROM OR IN ADDITION TO THOSE NOW KNOWN OR BELIEVED TO BE TRUE WITH RESPECT TO SUCH CLAIMS, DEMANDS, OR CAUSES OF ACTION, AND AGREES THAT THIS AMENDMENT AND THE ABOVE RELEASE ARE AND WILL REMAIN EFFECTIVE IN ALL RESPECTS NOTWITHSTANDING ANY SUCH DIFFERENCES OR ADDITIONAL FACTS.

[Remainder of Page Intentionally Left Blank]

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

BORROWERS:

HYPERCOM U.S.A., INC.,

a Delaware corporation

By: /s/ Thomas B. Sabol                                                                

Name: Thomas B. Sabol

Title: Vice President

HYPERCOM MANUFACTURING RESOURCES, INC., an Arizona corporation

By: /s/ Thomas B. Sabol                                                                

Name: Thomas B. Sabol

Title: Vice President

  

  

  

AGENT AND LENDERS:

BANK OF AMERICA, N.A.,

as Agent and Lender

By: /s/ Carlos Gil                                                                

Name: Carlos Gil

Title: Vice President

  

  

  

CONSENTS AND REAFFIRMATIONS

Each of HYPERCOM CORPORATION, a Delaware corporation, HBNET, INC., an Arizona corporation, HYPERCOM EMEA, INC., an Arizona corporation, HYPERCOM LATINO AMERICA, INC., an Arizona corporation, HYPERCOM PUERTO RICO REPAIR FACILITY, GP, an Arizona general partnership, and HYPERCOM EMEA LTD, a company organized under the laws of the United Kingdom (collectively, “Obligors”, and each individually, an “Obligor”), hereby acknowledges the execution of, and consents to, the terms and conditions of that First Amendment to Loan and Security Agreement and Limited Consent dated as of February 10, 2010 (the “Amendment”), by and among HYPERCOM U.S.A., INC., HYPERCOM MANUFACTURING RESOURCES, INC. (collectively, “Borrowers”) and BANK OF AMERICA, N.A. (“Agent”), and reaffirms its obligations under each Secured Continuing Guaranty (each, a “Guaranty”) dated as of January 15, 2008, and executed individually by each of the undersigned in favor of Agent in connection with that certain Loan and Security Agreement dated as of January 15, 2008 (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”) by and among Borrowers, Agent and Lenders.  Each of the undersigned acknowledges and agrees that each such Guaranty remains in full force and effect and is hereby ratified and confirmed.  All initially capitalized terms and phrases wherever used in this consent shall have the respective meanings given to them in the Loan Agreement, as amended by the Amendment.

 

Each Obligor hereby acknowledges that:  (a) it has no defenses, claims or set-offs to the enforcement by Agent or Lenders of the Obligations on the date hereof; (b) to its knowledge, Agent and Lenders have fully performed all undertakings and obligations owed to it as of the date hereof; and (c) except to the limited extent expressly set forth in the Amendment, Agent and Lenders do not waive, diminish or limit any term or condition contained in the Loan Agreement or any of the other Loan Documents.  EACH OBLIGOR HEREBY IRREVOCABLY RELEASES AND FOREVER DISCHARGES AGENT AND LENDERS AND THEIR AFFILIATES, AND EACH SUCH PERSON’S RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, ATTORNEYS AND REPRESENTATIVES (EACH, A “RELEASED PERSON”) OF AND FROM ALL DAMAGES, LOSSES, CLAIMS, DEMANDS, LIABILITIES, OBLIGATIONS, ACTIONS OR CAUSES OF ACTION WHATSOEVER (EACH A “CLAIM”) THAT SUCH BORROWER MAY NOW HAVE OR CLAIM TO HAVE AGAINST ANY RELEASED PERSON ON THE DATE HEREOF, WHETHER KNOWN OR UNKNOWN, OF EVERY NATURE AND EXTENT WHATSOEVER, FOR OR BECAUSE OF ANY MATTER OR THING DONE, OMITTED OR SUFFERED TO BE DONE OR OMITTED BY ANY OF THE RELEASED PERSONS THAT BOTH (I) OCCURRED PRIOR TO OR ON THE DATE HEREOF AND (II) IS ON ACCOUNT OF OR IN ANY WAY CONCERNING, ARISING OUT OF OR FOUNDED UPON THE GUARANTY, THE LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT.

EACH OBLIGOR INTENDS THE ABOVE RELEASE TO COVER, ENCOMPASS, RELEASE, AND EXTINGUISH, INTER ALIA, ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION THAT MIGHT OTHERWISE BE RESERVED BY THE CALIFORNIA CIVIL CODE SECTION 1542 (AND ANY EQUIVALENT PROVISION UNDER NEW YORK LAW), WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

EACH OBLIGOR ACKNOWLEDGES THAT IT MAY HEREAFTER DISCOVER FACTS DIFFERENT FROM OR IN ADDITION TO THOSE NOW KNOWN OR BELIEVED TO BE TRUE WITH RESPECT TO SUCH CLAIMS, DEMANDS, OR CAUSES OF ACTION, AND AGREES THAT THE AMENDMENT, THE GUARANTY AND THE ABOVE RELEASE ARE AND WILL REMAIN EFFECTIVE IN ALL RESPECTS NOTWITHSTANDING ANY SUCH DIFFERENCES OR ADDITIONAL FACTS.

 

Dated as of February 10, 2010.

 

HYPERCOM CORPORATION,

 

a DELAWARE corporation

 

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: CFO

 

HBNET, INC.,

 

an ARIZONA corporation

 

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: Vice President

HYPERCOM EMEA, INC.,

 

an ARIZONA corporation

 

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: Vice President

  

  

  

HYPERCOM LATINO AMERICA, INC.,

 

an ARIZONA corporation

 

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: Vice President

HYPERCOM PUERTO RICO REPAIR

 

FACILITY, GP,

 

an ARIZONA general partnership

 

By:           HYPERCOM U.S.A., INC.,

its general partner

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: CFO

By: HYPERCOM LATINO AMERICA, INC., its general partner

By: /s/ Thomas B. Sabol

Name: Thomas B. Sabol

Title: CFO

HYPERCOM EMEA LTD,

 

a company organized under the laws of the United Kingdom

 

By: /s/ Douglas J. Reich

Name: Douglas J. Reich

Title: DirectorExhibit 10.1

 

 

 

SECOND
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

 

 

OF

 

 

KKR MANAGEMENT HOLDINGS L.P.

 

 

Dated as of October 1, 2009

 

 

 

THE PARTNERSHIP UNITS OF KKR
MANAGEMENT HOLDINGS L.P. HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED, THE SECURITIES LAWS OF ANY STATE, PROVINCE OR ANY OTHER
APPLICABLE SECURITIES LAWS AND ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  SUCH UNITS MUST BE ACQUIRED FOR INVESTMENT
ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE
SECURITIES ACT, ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR PROVINCE, AND
ANY OTHER APPLICABLE SECURITIES LAWS; AND (II) THE TERMS AND CONDITIONS OF
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT.  THE UNITS MAY NOT BE TRANSFERRED OF
RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS LIMITED PARTNERSHIP
AGREEMENT.  THEREFORE, PURCHASERS AND
OTHER TRANSFEREES OF SUCH UNITS WILL BE REQUIRED TO BEAR THE RISK OF THEIR
INVESTMENT OR ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.

 

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  
	
  ARTICLE I

  
	
   

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions

  	
  1

  
	
   

  
	
  ARTICLE II

  
	
   

  
	
  FORMATION, TERM, PURPOSE AND
  POWERS

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  Formation

  	
  9

  
	
  SECTION 2.02.

  	
  Name

  	
  9

  
	
  SECTION 2.03.

  	
  Term

  	
  9

  
	
  SECTION 2.04.

  	
  Offices

  	
  9

  
	
  SECTION 2.05.

  	
  Agent
  for Service of Process

  	
  9

  
	
  SECTION 2.06.

  	
  Business
  Purpose

  	
  9

  
	
  SECTION 2.07.

  	
  Powers
  of the Partnership

  	
  9

  
	
  SECTION 2.08.

  	
  Partners;
  Admission of New and Substitute Partners

  	
  9

  
	
  SECTION 2.09.

  	
  Withdrawal

  	
  10

  
	
  SECTION 2.10.

  	
  Initial
  Limited Partner

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  
	
  MANAGEMENT

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  General
  Partner

  	
  10

  
	
  SECTION 3.02.

  	
  Compensation

  	
  11

  
	
  SECTION 3.03.

  	
  Expenses

  	
  11

  
	
  SECTION 3.04.

  	
  Officers

  	
  11

  
	
  SECTION 3.05.

  	
  Authority
  of Partners

  	
  11

  
	
  SECTION 3.06.

  	
  Action
  by Written Consent or Ratification

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  DISTRIBUTIONS

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Distributions

  	
  12

  
	
  SECTION 4.02.

  	
  Liquidation
  Distribution

  	
  13

  
	
  SECTION 4.03.

  	
  Limitations
  on Distribution

  	
  13

  
	
  SECTION 4.04.

  	
  Designated Percentage

  	
  13

  

 

i

 

	
  ARTICLE V

  
	
   

  
	
  CAPITAL CONTRIBUTIONS;
  CAPITAL ACCOUNTS;

  TAX ALLOCATIONS; TAX MATTERS

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Initial
  Capital Contributions

  	
  14

  
	
  SECTION 5.02.

  	
  No
  Additional Capital Contributions

  	
  14

  
	
  SECTION 5.03.

  	
  Capital
  Accounts

  	
  14

  
	
  SECTION 5.04.

  	
  Allocations
  of Profits and Losses

  	
  14

  
	
  SECTION 5.05.

  	
  Special
  Allocations

  	
  15

  
	
  SECTION 5.06.

  	
  Tax
  Allocations

  	
  16

  
	
  SECTION 5.07.

  	
  Tax
  Advances

  	
  16

  
	
  SECTION 5.08.

  	
  Tax
  Matters

  	
  17

  
	
  SECTION 5.09.

  	
  Other
  Tax Provisions

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  
	
  BOOKS AND RECORDS; REPORTS

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Books
  and Records

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  PARTNERSHIP UNITS

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Units

  	
  18

  
	
  SECTION 7.02.

  	
  Register

  	
  19

  
	
  SECTION 7.03.

  	
  Registered
  Partners

  	
  19

  
	
  SECTION 7.04.

  	
  Exchange
  Transactions

  	
  19

  
	
  SECTION 7.05.

  	
  Transfers;
  Encumbrances

  	
  19

  
	
  SECTION 7.06.

  	
  Further
  Restrictions

  	
  19

  
	
  SECTION 7.07.

  	
  Rights
  of Assignees

  	
  20

  
	
  SECTION 7.08.

  	
  Admissions,
  Withdrawals and Removals

  	
  20

  
	
  SECTION 7.09.

  	
  Admission
  of Assignees as Substitute Limited Partners

  	
  21

  
	
  SECTION 7.10.

  	
  Withdrawal
  and Removal of Limited Partners

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  DISSOLUTION, LIQUIDATION
  AND TERMINATION

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  No
  Dissolution

  	
  21

  
	
  SECTION 8.02.

  	
  Events
  Causing Dissolution

  	
  21

  
	
  SECTION 8.03.

  	
  Distribution
  upon Dissolution

  	
  22

  
	
  SECTION 8.04.

  	
  Time
  for Liquidation

  	
  22

  
	
  SECTION 8.05.

  	
  Termination

  	
  23

  
	
  SECTION 8.06.

  	
  Claims
  of the Partners

  	
  23

  
	
  SECTION 8.07.

  	
  Survival of Certain Provisions

  	
  23

  

 

ii

 

	
  ARTICLE IX

  
	
   

  
	
  LIABILITY AND
  INDEMNIFICATION

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.

  	
  Liability
  of Partners

  	
  23

  
	
  SECTION 9.02.

  	
  Indemnification

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  
	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01.

  	
  Severability

  	
  26

  
	
  SECTION 10.02.

  	
  Notices

  	
  27

  
	
  SECTION 10.03.

  	
  Cumulative
  Remedies

  	
  27

  
	
  SECTION 10.04.

  	
  Binding
  Effect

  	
  27

  
	
  SECTION 10.05.

  	
  Interpretation

  	
  27

  
	
  SECTION 10.06.

  	
  Counterparts

  	
  28

  
	
  SECTION 10.07.

  	
  Further
  Assurances

  	
  28

  
	
  SECTION 10.08.

  	
  Entire
  Agreement

  	
  28

  
	
  SECTION 10.09.

  	
  Governing
  Law

  	
  28

  
	
  SECTION 10.10.

  	
  Arbitration

  	
  28

  
	
  SECTION 10.11.

  	
  Expenses

  	
  29

  
	
  SECTION 10.12.

  	
  Amendments
  and Waivers

  	
  30

  
	
  SECTION 10.13.

  	
  No
  Third Party Beneficiaries

  	
  30

  
	
  SECTION 10.14.

  	
  Headings

  	
  31

  
	
  SECTION 10.15.

  	
  Construction

  	
  31

  
	
  SECTION 10.16.

  	
  Power
  of Attorney

  	
  31

  
	
  SECTION 10.17.

  	
  Schedules

  	
  32

  
	
  SECTION 10.18.

  	
  Partnership
  Status

  	
  32

  
	
  SECTION 10.19.

  	
  Effectiveness

  	
  32

  

 

iii

 

SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT

 

OF

 

KKR MANAGEMENT HOLDINGS L.P.

 

This
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”)
of KKR Management Holdings L.P. (the “Partnership”) is made as of the 1st day of October, 2009, by and among KKR
Management Holdings Corp., a corporation formed under the laws of the State of
Delaware, as general partner, and the Limited Partners (as defined herein) of
the Partnership.

 

WHEREAS,
the Partnership was formed as a limited partnership pursuant to the Act (as
defined herein), by the filing of a Certificate of Limited Partnership (the “Certificate”)
with the Office of the Secretary of State of the State of Delaware and the
execution of the Limited Partnership Agreement of the Partnership dated as of July 22, 2008 by and between the
General Partner and the Initial Limited Partner (the “Original Agreement”);

 

WHEREAS,
the Original Agreement was amended and restated on August 4, 2009 by and
among the General Partner, KKR & Co. L.L.C., as limited partner, and
the Initial Limited Partner (the “First Amended and Restated Limited
Partnership Agreement”); and

 

NOW,
THEREFORE, in consideration of the mutual promises and agreements herein made
and intending to be legally bound hereby, the parties hereto agree to amend and
restate the First Amended and Restated Limited Partnership Agreement in its
entirety to read as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01.      Definitions.  Capitalized terms used herein without
definition have the following meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):

 

“Act” means, the
Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Section 17-101,
et seq., as it may be amended from time to time.

 

“Additional Credit Amount”
has the meaning set forth in Section 4.01(b)(ii).

 

“Adjusted Capital Account Balance” means, with respect to each
Partner, the balance in such Partner’s Capital Account adjusted (i) by
taking into account the adjustments, allocations and distributions described in
Treasury Regulations Sections 
1.704-1(b)(2)(ii)(c)(4), (5) and (6); and (ii) by adding to
such balance such Partner’s share of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, determined pursuant to Treasury Regulations
Sections 1.704-2(g) and 1.704-2(i)(5), and any amounts such Partner is
obligated to restore pursuant to any provision of this Agreement or by
applicable Law or is deemed to be obligated to restore under applicable
Treasury Regulations. The foregoing definition of Adjusted Capital Account
Balance is intended to

 

1

 

comply
with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.

 

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

 

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

 

“Amended Tax Amount”
has the meaning set forth in Section 4.01(b)(ii).

 

“Assignee” has the
meaning set forth in Section 7.07.

 

“Assumed
Tax Rate” means the highest effective marginal combined U.S. federal, state
and local income tax rate for a Fiscal Year prescribed for an individual or
corporate resident in New York, New York (taking into account (a) the
nondeductiblity of expenses subject to the limitation described in Section 67(a) of
the Code and (b) the character (e.g., long-term or short-term capital gain
or ordinary or exempt income) of the applicable income, but not taking into
account the deductibility of state and local income taxes for U.S. federal
income tax purposes). For the avoidance of doubt, the Assumed Tax Rate will be
the same for all Partners.

 

“Available Cash”
means, with respect to any fiscal
period, the amount of cash on hand that the General Partner, in its reasonable discretion, deems available for
distribution to the Partners, taking into account all debts, liabilities and
obligations of the Partnership then due and amounts that the General Partner, in its reasonable discretion, deems necessary to expend or
retain for working capital or to place into reserves for customary and usual
claims with respect to the Partnership’s operations.

 

“Capital Account”
means the separate capital account maintained for each Partner in accordance
with Section 5.03.

 

“Capital Contribution”
means, with respect to any Partner, the aggregate amount of money contributed
to the Partnership and the Carrying Value of any property (other than money),
net of any liabilities assumed by the Partnership upon contribution or to which
such property is subject, contributed to the Partnership pursuant to Article V.

 

“Carrying Value”
means, with respect to any Partnership asset, the asset’s adjusted basis for
U.S. federal income tax purposes, except that the initial carrying value of
assets contributed to the Partnership shall be their respective gross fair
market values on the date of contribution as determined by the General Partner,
and the Carrying Values of all Partnership assets may be adjusted to equal
their respective fair market values, in accordance with the rules set
forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), except as
otherwise provided herein, as of: (a) the date of the acquisition of any
additional Units by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) the date of the distribution of more
than a de minimis amount of Partnership assets to a Partner; (c) the date
a Unit is relinquished to the Partnership; or (d) any other date specified
in the Treasury Regulations; provided,
however, that adjustments 

 

2

 

pursuant to clauses (a), (b),
(c) and (d) above shall be made only if such adjustments are deemed
necessary or appropriate by the General Partner to reflect the relative
economic interests of the Partners. The Carrying Value of any Partnership asset
distributed to any Partner shall be adjusted immediately before such
distribution to equal its fair market value. In the case of any asset that has
a Carrying Value that differs from its adjusted tax basis, Carrying Value shall
be adjusted by the amount of depreciation calculated for purposes of the
definition of “Profits (Losses)” rather than the amount of depreciation
determined for U.S. federal income tax purposes, and depreciation shall be
calculated by reference to Carrying Value rather than tax basis once Carrying
Value differs from tax basis.

 

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

 

“Class” means the
classes of Units into which the interests in the Partnership may be classified
or divided from time to time pursuant to the provisions of this Agreement.

 

“Class A Percentage
Interest” means, with respect to any Partner, the quotient obtained by
dividing the number of Class A Units then owned by such Partner by the
number of Class A Units then owned by all Partners.

 

“Class A Tax Amount”
means the General Partner’s estimate of the Net Taxable Income
in accordance with Article V allocable to holders of Class A Units,
multiplied by the Assumed Tax Rate.

 

“Class A Tax
Distribution” has the meaning set forth in Section 4.01(b)(i).

 

“Class A Units”
means the Units of partnership interest in the Partnership designated as the “Class A
Units” herein and having the rights pertaining thereto as are set forth in this
Agreement.

 

“Class B Percentage
Interest” means, with respect to any Partner, the quotient obtained by
dividing the number of Class B Units then owned by such Partner by the
number of Class B Units then owned by all Partners.

 

“Class B Tax Amount”
means the General Partner’s estimate of the Net Taxable Income
in accordance with Article V allocable to holders of Class B Units,
multiplied by the Assumed Tax Rate.

 

“Class B Tax
Distribution” has the meaning set forth in Section 4.01(b)(i).

 

“Class B Units”
means the Units of partnership interest in the Partnership designated as “Class B
Units” herein and having the rights pertaining thereto as are set forth in this
Agreement.

 

“Code” means the U.S.
Internal Revenue Code of 1986, as amended from time to time.

 

3

 

“Common Units” means (i) prior
to the US Listing, common units representing limited partner interests of the
Issuer and (ii) on and after the US Listing, common units representing
limited partner interests of KKR & Co. L.P., a Delaware limited
partnership.

 

“Contingencies” has
the meaning set forth in Section 8.03(a).

 

“Contribution and
Indemnification Agreement” means the contribution and indemnification
agreement dated October 1, 2009 among the Group Partnerships, KKR
Associates Holdings L.P. and KKR Intermediate Partnership L.P.

 

“Control” (including
the terms “Controlled by” and “under common Control with”) means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, 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 of
directors or similar body governing the affairs of such Person.

 

“Credit Amount” has
the meaning set forth in Section 4.01(b)(ii).

 

“Creditable Non-U.S. Tax”
means a non-U.S. tax paid or accrued for U.S. federal income tax purposes by
the Partnership, in either case to the extent that such tax is eligible for credit
under Section 901(a) of the Code. 
A non-U.S. tax is a Creditable Non-U.S. Tax for these purposes without
regard to whether a Partner receiving an allocation of such non-U.S. tax elects
to claim a credit for such amount.  This
definition is intended to be consistent with the definition of “creditable
foreign tax expenditures” in Treasury Regulations Section 1.704-1(b)(4)(viii)(b),
and shall be interpreted consistently therewith.

 

“Delaware Arbitration Act”
has the meaning set forth in Section 10.10(d) of this Agreement.

 

“Designated Percentage”
has the meaning set forth in Section 4.04.

 

“Disabling Event” means the General
Partner ceasing to be the general partner of the Partnership pursuant to Section 17-402
of the Act.

 

“Dissolution Event”
has the meaning set forth in Section 8.02.

 

“Effective Time” shall
have the meaning set forth in the Purchase and Sale Agreement.

 

“Encumbrance” means
any mortgage, claim, lien, encumbrance, conditional sales or other title
retention agreement, right of first refusal, preemptive right, pledge, option,
charge, security interest or other similar interest, easement, judgment or
imperfection of title of any nature whatsoever.

 

“ERISA” means the U.S.
Employee Retirement Income Security Act of 1974, as amended.

 

4

 

“Exchange Act” means
the U.S. Securities Exchange Act of 1934, as amended, including the rules and
regulations promulgated thereunder.

 

“Exchange Agreement”
means the exchange agreement dated as of or about the date hereof among the
Issuer, KKR Group Holdings L.P., KKR Holdings L.P., the Partnership and KKR
Fund Holdings, as amended from time to time, or such other exchange agreement
entered into from time to time by KKR & Co. L.P., a Delaware limited
partnership, and the Partnership.

 

“Existing Carried
Interests” means profits interests (or similar incentive allocations) owned
directly or indirectly by the Partnership in investments made on or prior to December 31,
2009.

 

“Final Tax Amount” has
the meaning set forth in Section 4.01(b)(ii).

 

“First Amended and
Restated Limited Partnership Agreement” has the meaning set forth in the
preamble of this Agreement.

 

“Fiscal Year” means (i) the
period commencing upon the Effective Time and ending on December 31, 2009
or (ii) any subsequent twelve-month period commencing on January 1
and ending on December 31.

 

“Fund” has the meaning
set forth in Section 9.02(a).

 

“Future Carried Interests”
means profits interests (or similar incentive allocations) owned directly or
indirectly by the Partnership in investments made after December 31, 2009.

 

“GAAP” means
accounting principles generally accepted in the United States of America as in
effect from time to time.

 

“General Partner”
means KKR Management Holdings Corp., a corporation formed under the laws of the
State of Delaware, or any successor general partner admitted to the Partnership
in accordance with the terms of this Agreement.

 

“Group Partnerships”  means,
collectively,  the Partnership and KKR Fund
Holdings (and any future partnership designated as a Group Partnership by KKR
Group Holdings L.P. (it being understood that such designation may only be made
if such future partnership enters into a group partnership agreement
substantially the same as, and which provides for substantially the same
obligations as, the group partnership agreements then in existence)), and any
successors thereto.

 

“Incapacity” means, with respect to any Person, the bankruptcy, dissolution,
termination, entry of an order of incompetence, or the insanity, permanent
disability or death of such Person.

 

“Initial Limited Partner”
means William J. Janetschek.

 

5

 

“Investment Agreement”
means the investment agreement among the Issuer, the Partnership and the
other parties thereto, as amended from time to time.

 

“Issuer” means KKR
Private Equity Investors, L.P., a Guernsey limited partnership, or any
successor thereto.

 

“KKR Fund Holdings”
means KKR Fund Holdings L.P., a Cayman limited partnership, or any successor thereto.

 

“KPE Transaction” means, collectively, the transactions
contemplated in the Purchase and Sale Agreement.

 

“Law” means any
statute, law, ordinance, regulation, rule, code, executive order, injunction,
judgment, decree or other order issued or promulgated by any national,
supranational, state, federal, provincial, local or municipal government or any
administrative or regulatory body with authority therefrom with jurisdiction
over the Partnership or any Partner, as the case may be, or principles in equity.

 

“Limited Partner”
means each of the Persons from time to time listed as a limited partner in the
books and records of the Partnership.

 

“Liquidation Agent”
has the meaning set forth in Section 8.03.

 

“Net Taxable Income”
has the meaning set forth in Section 4.01(b)(i).

 

“Nonrecourse Deductions”
has the meaning set forth in Treasury Regulations Section 1.704-2(b).  The amount of Nonrecourse Deductions of the
Partnership for a fiscal year equals the net increase, if any, in the amount of
Partnership Minimum Gain of the Partnership during that fiscal year, determined
according to the provisions of Treasury Regulations Section 1.704-2(c).

 

“Other Company” has
the meaning set forth in Section 9.02(a).

 

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

 

“Partner Nonrecourse Debt Minimum Gain” means an amount with
respect to each partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b)(4))
equal to the Partnership Minimum Gain that would result if such partner
nonrecourse debt were treated as a nonrecourse liability (as defined in
Treasury Regulations Section 1.752-1(a)(2)) determined in accordance with
Treasury Regulations Section 1.704-2(i)(3).

 

“Partner Nonrecourse
Deductions” has the meaning ascribed to the term “partner nonrecourse
deductions” set forth in Treasury Regulations Section 1.704-2(i)(2).

 

“Partners” means, at
any time, each person listed as a Partner (including the General Partner) on
the books and records of the Partnership, in each case for so long as he, she
or it remains a partner of the Partnership as provided hereunder.

 

6

 

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

 

“Partnership Minimum Gain” has the meaning set forth in Treasury
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 

“Person” or “person”
means any individual, corporation, partnership, limited partnership, limited
liability company, limited company, joint venture, trust, entity,
unincorporated or governmental organization or any agency or political
subdivision thereof.

 

“Profits” and “Losses” means, for each Fiscal Year or
other period, the taxable income or loss of the Partnership, or particular
items thereof, determined in accordance with the accounting method used by the
Partnership for U.S. federal income tax purposes with the following
adjustments: (a) all items of income, gain, loss or deduction allocated
pursuant to Section 5.05 shall not be taken into account in computing such
taxable income or loss but shall be computed in accordance with the principles
of this definition; (b) any income of the Partnership that is exempt from
U.S. federal income taxation and not otherwise taken into account in computing
Profits and Losses shall be added to such taxable income or loss; (c) if
the Carrying Value of any asset differs from its adjusted tax basis for U.S.
federal income tax purposes, any gain or loss resulting from a disposition of
such asset shall be calculated with reference to such Carrying Value; (d) upon
an adjustment to the Carrying Value (other than an adjustment in respect of
depreciation) of any asset, pursuant to the definition of Carrying Value, the
amount of the adjustment shall be included as gain or loss in computing such
taxable income or loss; (e) if the Carrying Value of any asset differs
from its adjusted tax basis for U.S. federal income tax purposes, the amount of
depreciation, amortization or cost recovery deductions with respect to such
asset for purposes of determining Profits and Losses, if any, shall be an
amount which bears the same ratio to such Carrying Value as the U.S. federal
income tax depreciation, amortization or other cost recovery deductions bears
to such adjusted tax basis (provided that if the U.S. federal income tax
depreciation, amortization or other cost recovery deduction is zero, the
General Partner may use any reasonable method for purposes of determining
depreciation, amortization or other cost recovery deductions in calculating
Profits and Losses); and (f) except for items in (a) above, any
expenditures of the Partnership not deductible in computing taxable income or
loss, not properly capitalizable and not otherwise taken into account in
computing Profits and Losses pursuant to this definition shall be treated as
deductible items.  For the avoidance of
doubt, Profits and Losses exclude any items of income, gain, loss or deduction
in respect of Existing Carried Interests or Future Carried Interests allocable
to the Class B Units.

 

“Purchase and Sale Agreement” means the amended and restated purchase and
sale agreement among the Partnership, the Issuer and the other parties thereto,
dated July 19, 2009.

 

“Restructuring
Transactions” has the meaning set forth in the Purchase and Sale Agreement.

 

“Securities Act” means
the U.S. Securities Act of 1933, as amended, including the rules and
regulations promulgated thereunder.

 

7

 

“Similar Law” means
any law or regulation that could cause the underlying assets of the Partnership
to be treated as assets of the Limited Partner by virtue of its limited partner
interest in the Partnership and thereby subject the Partnership and the General
Partner (or other persons responsible for the investment and operation of the
Partnership’s assets) to Laws that are similar to the fiduciary responsibility
or prohibited transaction provisions contained in Title I of ERISA or Section 4975
of the Code.

 

“Special Allocations”
means any allocations to Partners pursuant to Section 5.05.

 

“Subsidiary Person”
has the meaning set forth in Section 9.02(a).

 

“Tax Advances” has the
meaning set forth in Section 5.07.

 

“Tax Amount” means,
collectively, Class A Tax Amount and Class B Tax Amount.

 

“Tax Distributions”
means, collectively, Class A Tax Distributions and Class B Tax
Distributions.

 

“Tax Matters Partner”
has the meaning set forth in Section 5.08.

 

“Transfer” means, in
respect of any Unit, property or other asset, any sale, assignment, transfer,
distribution or other disposition thereof, whether voluntarily or by operation
of Law, including, without limitation, the exchange of any Unit for any other
security.

 

“Transferee” means any
Person that is a transferee of a Partner’s interest in the Partnership, or part
thereof.

 

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

 

“Units” means the Class A
Units, Class B Units and any other Class of Units authorized in
accordance with this Agreement, which shall constitute interests in the
Partnership as provided in this Agreement and under the Act, entitling the
holders thereof to the relative rights, title and interests in the profits,
losses, deductions and credits of the Partnership at any particular time as set
forth in this Agreement, and any and all other benefits to which a holder
thereof may be entitled as a Partner as provided in this Agreement, together
with the obligations of such Partner to comply with all terms and provisions of
this Agreement.

 

“US Listing” shall
have the meaning set forth in the Investment Agreement.

 

8

 

ARTICLE II 

FORMATION, TERM, PURPOSE AND POWERS

 

SECTION 2.01.      Formation.  The Partnership was formed as a limited
partnership under the provisions of the Act by the filing on July 22, 2008
of the Certificate as provided in the preamble of this Agreement and the
execution of the Original Agreement. If requested by the General Partner, the
Limited Partners shall promptly execute all certificates and other documents
consistent with the terms of this Agreement necessary for the General Partner
to accomplish all filing, recording, publishing and other acts as may be
appropriate to comply with all requirements for (a) the formation and
operation of a limited partnership under the laws of the State of Delaware, (b) if
the General Partner deems it advisable, the operation of the Partnership as a
limited partnership, or partnership in which the Limited Partners have limited
liability, in all jurisdictions where the Partnership proposes to operate and (c) all
other filings required to be made by the Partnership.

 

SECTION 2.02.      Name.
The name of the Partnership shall be, and the business of the Partnership shall
be conducted under the name of, KKR Management Holdings L.P.

 

SECTION 2.03.      Term. The term of the Partnership
commenced on the date of the filing of the Certificate, and the term shall
continue until the dissolution of the Partnership in accordance with Article VIII.
The existence of the Partnership shall continue until cancellation of the
Certificate in the manner required by the Act.

 

SECTION 2.04.      Offices.  The Partnership may have offices at such places
either within or outside the State of Delaware as the General Partner from time
to time may select.

 

SECTION 2.05.      Agent
for Service of Process. The Partnership’s registered agent for service of
process in the State of Delaware shall be as set forth in the Certificate, as
the same may be amended by the General Partner from time to time.

 

SECTION 2.06.      Business
Purpose. The Partnership was formed for the object and purpose of, and the
nature and character of the business to be conducted by the Partnership is,
engaging in any lawful act or activity for which limited partnerships may be
formed under the Act.

 

SECTION 2.07.      Powers
of the Partnership. Subject to the limitations set forth in this Agreement,
the Partnership
will possess and may exercise all of the powers and privileges granted to it by
the Act including, without limitation, the ownership and operation of the
assets contributed to the Partnership by the Partners, by any other Law
or this Agreement, together with all powers incidental thereto, so far as such
powers are necessary or convenient to the conduct, promotion or attainment of
the purpose of the Partnership set forth in Section 2.06.

 

SECTION 2.08.      Partners;
Admission of New and Substitute Partners. 
Each of the Persons listed as Partners in the books and records of the
Partnership, as the same may be amended from time to time in accordance with
this Agreement, by virtue of the execution of this Agreement, are admitted as
Partners of the Partnership as of the Effective Time. The rights, duties and
liabilities of the Partners shall be as provided in the Act, except as is
otherwise expressly provided herein, and the Partners consent to the variation
of such rights, duties and liabilities as 

 

9

 

provided herein. A Person
may be admitted from time to time as a new Limited Partner with the approval of
the General Partner, as a substitute Limited Partner in accordance with Section 7.09
or as an additional General Partner or substitute General Partner in accordance
with Section 7.08; provided, however, that (i) each new and
substitute Limited Partner shall execute and deliver to the General Partner a
supplement to this Agreement in the form of Annex A hereto (or in such
other form as the General Partner may reasonably require) and (ii) each
additional General Partner or substitute General Partner, as the case may be,
shall execute and deliver to the General Partner an appropriate supplement to
this Agreement, in each case pursuant to which the new Partner agrees to be
bound by the terms and conditions of the Agreement, as it may be amended from
time to time.

 

SECTION 2.09.      Withdrawal.  Except as provided in Section 2.10, no
Partner shall have the right to withdraw as a Partner of the Partnership other
than following the Transfer of all Units owned by such Partner in accordance
with Article VIII.

 

SECTION 2.10.      Initial
Limited Partner.  The execution of
this Agreement by the Initial Limited Partner constitutes his withdrawal as a
limited partner of the Partnership with the consent of the General Partners as
of the Effective Time.  Because of such
withdrawal, the Initial Limited Partner has no further right, interest or
obligation of any kind whatsoever as a limited partner of the Partnership,
effective immediately after the Effective Time. 
Any capital contribution of the Initial Limited Partner will be returned
to him at the Effective Time.

 

ARTICLE III

MANAGEMENT

 

SECTION 3.01.      General
Partner. (a)  The business, property and affairs of the Partnership shall
be managed under the sole, absolute and exclusive direction of the General
Partner, which may from time to time delegate authority to officers or to
others to act on behalf of the Partnership.

 

(b)   Without limiting the foregoing provisions of this Section 3.01,
the General Partner shall have the general power to manage or cause the
management of the Partnership (which may be delegated to officers of the
Partnership), including, without limitation, the following powers:

 

(i)                    to develop
and prepare a business plan each year which will set forth the operating goals
and plans for the Partnership;

 

(ii)                   to execute
and deliver or to authorize the execution and delivery of contracts, deeds,
leases, licenses, instruments of transfer and other documents on behalf of the
Partnership;

 

(iii)                  the making
of any expenditures, the lending or borrowing of money, the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness and the incurring of any other
obligations;

 

10

 

(iv)                  to employ,
retain, consult with and dismiss personnel;

 

(v)                   to establish
and enforce limits of authority and internal controls with respect to all
personnel and functions;

 

(vi)                  to engage
attorneys, consultants and accountants for the Partnership;

 

(vii)                 to develop
or cause to be developed accounting procedures for the maintenance of the
Partnership’s books of account; and

 

(viii)                to do all
such other acts as shall be authorized in this Agreement or by the Partners in
writing from time to time.

 

SECTION 3.02.      Compensation. 
The General Partner shall not be entitled to any compensation for
services rendered to the Partnership in its capacity as General Partner.

 

SECTION 3.03.      Expenses.  The Partnership shall bear and/or reimburse
the General Partner for any expenses incurred by the General Partner in
connection with serving as the general partner of the Partnership.

 

SECTION 3.04.      Officers.  Subject to the direction and oversight of the
General Partner, the day-to-day administration of the business of the
Partnership may be carried out by natural persons who may be designated as
officers by the General Partner, with titles including but not limited to “Chief
Executive Officer” or “Co-Chief Executive Officer,” “Chief Operating Officer,” “Chief
Financial Officer,” “General Counsel,” “Chief Administrative Officer,” “Chief
Compliance Officer,” “Principal Accounting Officer,” “President,” “Vice
President,” “Treasurer,” “Assistant Treasurer,” “Secretary,” “Assistant
Secretary,” “General Manager,” “Senior Managing Director,” “Managing Director,”
“Director” and “Principal” as and to the extent authorized by the General
Partner.  The officers of the Partnership
shall have such titles and powers and perform such duties as shall be
determined from time to time by the General Partner and otherwise as shall
customarily pertain to such offices.  Any
number of offices may be held by the same person.  All officers shall be subject to the
supervision and direction of the General Partner and may be removed from such
office by the General Partner and the authority, duties or responsibilities of
any officer of the Partnership may be suspended by the General Partner from
time to time, in each case in the sole discretion of the General Partner.  The General Partner shall not cease to be a
general partner of the Partnership as a result of the delegation of any duties
hereunder.  No officer of the
Partnership, in its capacity as such, shall be considered a general partner of
the Partnership by agreement, estoppel, as a result of the performance of its
duties hereunder or otherwise.

 

SECTION 3.05.      Authority
of Partners.  No Limited Partner, in
its capacity as such, shall participate in the conduct of the business of the
Partnership or have any control over the business of the Partnership. Except as
expressly provided herein, the Units do not confer any rights upon the Limited
Partners to participate in the affairs of the Partnership described in this
Agreement. Except as expressly provided herein, the Limited Partners shall have
no right to vote on any matter involving the Partnership, including with
respect to any merger, consolidation, combination or conversion of the
Partnership. The conduct, control and management of the Partnership shall be
vested exclusively in the General Partner. In all matters relating to or
arising 

 

11

 

out of the conduct of the
operation of the Partnership, the decision of the General Partner shall be the
decision of the Partnership. Except as required or permitted by Law, or
expressly provided in the ultimate sentence of this Section 3.05 or by
separate agreement with the Partnership, no Partner who is not also a General
Partner (and acting in such capacity) shall take any part in the management,
conduct or control of the operation or business of the Partnership in its
capacity as a Partner, nor shall any Partner who is not also a General Partner
(and acting in such capacity) have any right, authority or power to act for or
on behalf of or bind the Partnership in his or its capacity as a Partner in any
respect or assume any obligation or responsibility of the Partnership or of any
other Partner. Notwithstanding the foregoing, the Partnership may employ one or
more Partners from time to time, and such Partners, in their capacity as
employees, officers or agents of the Partnership (and not, for clarity, in
their capacity as Limited Partners of the Partnership), may take part in the
control, conduct and management of the business of the Partnership to the
extent such authority and power to act for or on behalf of the Partnership has
been delegated to them by the General Partner.

 

SECTION 3.06.      Action
by Written Consent or Ratification. 
Any action required or permitted to be taken by the Partners pursuant to
this Agreement shall be taken if all Partners whose consent or ratification is
required consent thereto or provide a ratification in writing.

 

ARTICLE IV

DISTRIBUTIONS

 

SECTION 4.01.      Distributions.  (a)  The General Partner, in its sole
discretion, may authorize distributions by the Partnership to the Partners.  The Designated Percentage of any distribution that is
attributable to Existing Carried Interests or Future Carried Interests shall be
made to holders of Class B Units and the remaining amount of any such distribution
shall be made to holders of Class A Units, in each case pro rata in accordance with such Partners’ respective Class B
Percentage Interest and Class A Percentage Interest.  All other distributions not attributable to
Existing Carried Interests or Future Carried Interests shall be made solely to
the holders of Class A Units pro rata in
accordance with such Partners’ respective Class A Percentage Interests.

 

(b)   (i)    If the General Partner
reasonably determines that the Partnership has taxable income for a Fiscal Year
(“Net Taxable Income”) allocable to holders of Class A Units, the
General Partner shall cause the Partnership to
distribute Available Cash attributable to Class A Units, to the
extent that other distributions made by the Partnership to holders of Class A
Units for such year were otherwise insufficient, in an amount equal to the Class A
Tax Amount (the “Class A Tax Distributions”).  If the General Partner reasonably determines
that the Partnership has Net Taxable Income allocable to holders of Class B
Units, the General Partner shall cause the Partnership to
distribute Available Cash attributable to Class B Units, to the
extent that other distributions made by the Partnership to holders of Class B
Units for such year were otherwise insufficient, in an amount equal to the Class B
Tax Amount (the “Class B Tax Distributions”).  For purposes of
computing the Tax Amount, the effect of any adjustment under Section 743(b) of
the Code arising after the Restructuring Transactions will be ignored. Class A
Tax Distributions and Class B Tax Distributions shall be made pro rata to holders of Class A Units or Class B
Units in accordance with their Class A Percentage
Interest or Class B Percentage Interest, as applicable.  Any Tax 

 

12

 

Distributions shall be
treated in all respects as offsets against future distributions pursuant to Section 4.01(a).

 

(ii) Tax Distributions shall be
calculated and paid no later than one day prior to each quarterly due date for
the payment by corporations on a calendar year of estimated taxes under the
Code in the following manner (A) for the first quarterly period, 25% of
the Tax Amount, (B) for the second quarterly period, 50% of the Tax
Amount, less the prior Tax Distributions for the Fiscal Year, (C) for the
third quarterly period, 75% of the Tax Amount, less the prior Tax Distributions
for the Fiscal Year and (D) for the fourth quarterly period, 100% of the
Tax Amount, less the prior Tax Distributions for the Fiscal Year. Following
each Fiscal Year, and no later than one day prior to the due date for the
payment by corporations of income taxes for such Fiscal Year, the General
Partner shall make an amended calculation of the Tax Amount for such Fiscal
Year (the “Amended Tax Amount”), and shall cause the Partnership to
distribute a Tax Distribution, out of Available Cash, to the extent that
the Amended Tax Amount so calculated exceeds the cumulative Tax Distributions
previously made by the Partnership in respect of such Fiscal Year. If the
Amended Tax Amount is less than the cumulative Tax Distributions previously
made by the Partnership in respect of the relevant Fiscal Year, then the
difference (the “Credit Amount”) shall be applied against, and shall
reduce, the amount of Tax Distributions made for subsequent Fiscal Years.   Within 30 days following the date on which
the Partnership files a U.S. tax return on Form 1065, the General Partner
shall make a final calculation of the Tax Amount of such Fiscal Year (the “Final
Tax Amount”) and shall cause the Partnership to distribute a Tax
Distribution, out of Available Cash, to the extent that the Final Tax
Amount so calculated exceeds the Amended Tax Amount. If the Final Tax Amount is
less than the Amended Tax Amount in respect of the relevant Fiscal Year, then
the difference (“Additional Credit Amount”) shall be applied against,
and shall reduce, the amount of Tax Distributions made for subsequent Fiscal
Years.  Any Credit Amount and Additional
Credit Amount applied against future Tax Distributions shall be treated as an
amount actually distributed pursuant to this Section 4.01(b) for
purposes of the computations herein.

 

SECTION 4.02.      Liquidation
Distribution.  Distributions made
upon dissolution of the Partnership shall be made as provided in Section 8.03.

 

SECTION 4.03.      Limitations
on Distribution.  Notwithstanding any
provision to the contrary contained in this Agreement, the General Partner
shall not make a Partnership distribution to any Partner if such distribution
would violate Section 17-607 of the Act or other applicable Law.

 

SECTION 4.04.      Designated
Percentage.  The “Designated
Percentage” means (i) with respect to Existing Carried Interests, 40%, and
(ii) with respect to each Future Carried Interest, 40% or such percentage
as designated from time to time by a General Partner.  Such Designated Percentage shall apply to any
Future Carried Interests with respect to investments made until such time as a
new Designated Percentage is designated by the General Partner.  For the avoidance of doubt, the Designated
Percentage shall apply to a Future Carried Interest regardless of when the
underlying investment is realized.

 

13

 

ARTICLE V

CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;

TAX ALLOCATIONS; TAX MATTERS

 

SECTION 5.01.      Initial
Capital Contributions.  (a)  The
Partners have made, on or prior to the Effective Time, Capital Contributions
and, in exchange, the Partnership has issued to the Partners the number of Class A
Units and Class B Units as specified in the books and records of the
Partnership.

 

(b)   Upon issuance by the Partnership of Class A Units to the
Partners, the interests in the Partnership as provided in this Agreement and
under the Act held by KKR Management Holdings Limited Partner LLC will be
cancelled.

 

SECTION 5.02.      No
Additional Capital Contributions. 
Except as otherwise provided in this Article V, no Partner shall be
required to make additional Capital Contributions to the Partnership without
the consent of such Partner or permitted to make additional capital
contributions to the Partnership without the consent of the General Partner.

 

SECTION 5.03.      Capital
Accounts.  (a) A separate
capital account (a “Capital Account”) shall be established and
maintained for each Partner in accordance with the provisions of Treasury
Regulations Section 1.704-1(b)(2)(iv). 
To the extent consistent with such Treasury Regulations, the Capital
Account of each Partner shall be credited with such Partner’s Capital
Contributions, if any, all Profits allocated to such Partner pursuant to Section 5.04
and any items of income or gain which are specially allocated pursuant to Section 5.05;
and shall be debited with all Losses allocated to such Partner pursuant to Section 5.04,
any items of loss or deduction of the Partnership specially allocated to such
Partner pursuant to Section 5.05, and all cash and the Carrying Value of
any property (net of liabilities assumed by such Partner and the liabilities to
which such property is subject) distributed by the Partnership to such
Partner.  Any references in any section
of this Agreement to the Capital Account of a Partner shall be deemed to refer
to such Capital Account as the same may be credited or debited from time to
time as set forth above.  In the event of
any transfer of any interest in the Partnership in accordance with the terms of
this Agreement, the Transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.

 

SECTION 5.04.      Allocations
of Profits and Losses.  Except as
otherwise provided in this Agreement, Profits and Losses (and, to the extent
necessary, individual items of income, gain or loss or deduction of the
Partnership) shall be allocated to holders of Class A Units in a manner
such that the Capital Account of each Partner after giving effect to the
Special Allocations set forth in Section 5.05 is, as nearly as possible,
equal (proportionately) to (i) the distributions that would be made to
holders of Class A Units pursuant to Article IV if the Partnership
were dissolved, its affairs wound up and its assets sold for cash equal to
their Carrying Value, all Partnership liabilities were satisfied (limited with
respect to each non-recourse liability to the Carrying Value of the assets securing
such liability) and the net assets of the Partnership were distributed to the
Partners pursuant to this Agreement, minus (ii) such Partner’s
share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain,
computed immediately prior to the hypothetical sale of assets. Notwithstanding
the foregoing, the General Partner shall make such adjustments to Capital
Accounts as it determines in its sole discretion to be appropriate to ensure
allocations are made in accordance with a Partner’s interest in the
Partnership.  For the 

 

14

 

avoidance of doubt, and
in light of Section 5.05(a), no Profits or Losses will be allocated in
respect of Class B Units or distributions attributable thereto.

 

SECTION 5.05.      Special
Allocations.  Notwithstanding any
other provision in this Article V:

 

(a)   Class B Allocation. 
The Designated Percentage of items of income, gain, loss or deduction
attributable to an Existing Carried Interest or Future Carried Interests shall be
allocated to the holders of Class B Units, pro rata,
in accordance with their Class B Percentage Interest.

 

(b)   Minimum Gain Chargeback. 
If there is a net decrease in Partnership Minimum Gain or Partner
Nonrecourse Debt Minimum Gain (determined in accordance with the principles of
Treasury Regulations Sections 1.704-2(d) and 1.704-2(i)) during any
Partnership taxable year, the Partners shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to their respective shares of such net decrease during such
year, determined pursuant to Treasury Regulations Sections 1.704-2(g) and
1.704-2(i)(5).  The items to be so
allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f).  This Section 5.05(a) is intended to
comply with the minimum gain chargeback requirements in such Treasury
Regulations Sections and shall be interpreted consistently therewith; including
that no chargeback shall be required to the extent of the exceptions provided
in Treasury Regulations Sections 1.704-2(f) and 1.704-2(i)(4).

 

(c)   Qualified Income Offset. 
If any Partner unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate the
deficit balance in such Partner’s Adjusted Capital Account Balance created by
such adjustments, allocations or distributions as promptly as possible;  provided that an allocation
pursuant to this Section 5.05(b) shall be made only to the extent
that a Partner would have a deficit Adjusted Capital Account Balance in excess
of such sum after all other allocations provided for in this Article V
have been tentatively made as if this Section 5.05(b) were not in
this Agreement.  This Section 5.05(b) is
intended to comply with the “qualified income offset” requirement of the Code
and shall be interpreted consistently therewith.

 

(d)   Gross Income Allocation. 
If any Partner has a deficit Capital Account at the end of any Fiscal
Year which is in excess of the sum of (i) the amount such Partner is
obligated to restore, if any, pursuant to any provision of this Agreement, and (ii) the
amount such Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and
1.704-2(i)(5), each such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible; provided that an allocation pursuant to this Section 5.05(c) shall
be made only if and to the extent that a Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this Article V
have been tentatively made as if Section 5.05(b) and this Section 5.05(c) were
not in this Agreement.

 

(e)   Nonrecourse Deductions. 
Nonrecourse Deductions shall be allocated to the Partners in accordance
with their respective Class A Percentage Interests.

 

15

 

(f)    Partner Nonrecourse Deductions.  Partner Nonrecourse Deductions for any
taxable period shall be allocated to the Partner who bears the economic risk of
loss with respect to the liability to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulations Section 1.704-2(j).

 

(g)   Creditable Non-U.S. Taxes. 
Creditable Non-U.S. Taxes for any taxable period attributable to the
Partnership, or an entity owned directly or indirectly by the Partnership,
shall be allocated to the Partners in proportion to the partners’ distributive
shares of income (including income allocated pursuant to Section 704(c) of
the Code) to which the Creditable Non-U.S. Tax relates (under principles of
Treasury Regulations Section 1.904-6). 
The provisions of this Section 5.05(f) are intended to comply
with the provisions of Treasury Regulations Section 1.704-1 (b)(4)(viii),
and shall be interpreted consistently therewith.

 

(h)   Ameliorative
Allocations. Any special allocations of income or gain pursuant to Sections
5.05(b) or 5.05(c) shall be taken into account in computing
subsequent allocations pursuant to Section 5.04 and this Section 5.05(g),
so that the net amount of any items so allocated and all other items allocated
to each Partner shall, to the extent possible, be equal to the net amount that
would have been allocated to each Partner if such allocations pursuant to
Sections 5.05(b) or 5.05(c) had not occurred.

 

(i)    Compensation Deduction. If the Partnership is entitled to
a deduction for compensation to a person providing services to the Partnership
or its subsidiaries the economic cost of which is borne by a Partner (and not
the Partnership or its subsidiaries), whether paid in cash, Class A Units
or other property, the Partner who bore such economic cost shall be treated as
having contributed to the Partnership such cash, Class A Units or other
property, and the Partnership shall allocate the deduction attributable to such
payment to such Partner.  If any income or gain is recognized by the
Partnership by reason of such transfer of property to the person providing
services to the Partnership or its subsidiaries, such income or gain will be allocated
to the Partner who transferred such property.

 

SECTION 5.06.      Tax
Allocations.  For income tax
purposes, each item of income, gain, loss and deduction of the Partnership
shall be allocated among the Partners in the same manner as the corresponding
items of Profits and Losses and specially allocated items are allocated for
Capital Account purposes; provided that in the case of any asset the
Carrying Value of which differs from its adjusted tax basis for U.S. federal
income tax purposes, income, gain, loss and deduction with respect to such
asset shall be allocated solely for income tax purposes in accordance with the
principles of Section 704(c)(1)(A) of the Code (using the traditional
method as set forth in Treasury Regulation 1.704-3(b), unless otherwise agreed
to by the Limited Partners) so as to take account of the difference between
Carrying Value and adjusted basis of such asset.  Notwithstanding the foregoing, the General
Partner may make such allocations as it deems reasonably necessary to ensure
allocations are made in accordance with a Partner’s interest in the
Partnership, taking into account such facts and circumstances as it deems
reasonably necessary for this purpose.

 

SECTION 5.07.      Tax
Advances.  To the extent the General
Partner reasonably believes that the Partnership is required by Law to withhold
or to make tax payments on behalf of or with respect to any Partner or the
Partnership is subjected to tax itself by reason of the status of 

 

16

 

any Partner (“Tax
Advances”), the General Partner may withhold such amounts and make such tax
payments as so required.  All Tax
Advances made on behalf of a Partner shall be repaid by reducing the amount of
the current or next succeeding distribution or distributions which would
otherwise have been made to such Partner or, if such distributions are not
sufficient for that purpose, by so reducing the proceeds of liquidation
otherwise payable to such Partner.  For all purposes of this Agreement such Partner shall be treated as having
received the amount of the distribution that is equal to the Tax Advance.  Each Partner hereby agrees to indemnify
and hold harmless the Partnership and the other Partners from and against any
liability (including, without limitation, any liability for taxes, penalties,
additions to tax or interest) imposed as a result of the Partnership’s failure
to withhold or make a tax payment on behalf of such Partner which withholding
or payment is required pursuant to applicable Law.

 

SECTION 5.08.      Tax
Matters.  The General Partner shall
be the initial “tax matters partner” within the meaning of Section 6231(a)(7) of
the Code (the “Tax Matters Partner”). The Partnership shall file as a
partnership for federal, state, provincial and local income tax purposes,
except where otherwise required by Law. All elections required or permitted to
be made by the Partnership, and all other tax decisions and determinations
relating to federal, state, provincial or local tax matters of the Partnership,
shall be made by the Tax Matters Partner, in consultation with the Partnership’s
attorneys and/or accountants. Tax audits, controversies and litigations shall
be conducted under the direction of the Tax Matters Partner. The Tax Matters
Partner shall keep the other Partners reasonably informed as to any tax
actions, examinations or proceedings relating to the Partnership and shall
submit to the other Partners, for their review and comment, any settlement or
compromise offer with respect to any disputed item of income, gain, loss,
deduction or credit of the Partnership. As soon as reasonably practicable after
the end of each Fiscal Year, the Partnership shall send to each Partner a copy
of U.S. Internal Revenue Service Schedule K-1, and any comparable statements
required by applicable U.S. state or local income tax Law as a result of the
Partnership’s activities or investments, with respect to such Fiscal Year. The
Partnership also shall provide the Partners with such other information as may
be reasonably requested for purposes of allowing the Partners to prepare and
file their own tax returns.

 

SECTION 5.09.      Other
Tax Provisions.  Certain of the
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury
Regulations Section 1.704-1(b) and shall be interpreted and applied
in a manner consistent with such regulations. 
Sections 5.03, 5.04 and 5.05 may be amended at any time by the General
Partner if necessary, in the opinion of qualified tax advisor to the
Partnership, to comply with such regulations or any other applicable Law, so
long as any such amendment does not materially change the relative economic
interests of the Partners.

 

ARTICLE VI

BOOKS AND RECORDS; REPORTS

 

SECTION 6.01.      Books
and Records.  (a)      At all times during the continuance of the
Partnership, the Partnership shall prepare and maintain separate books of
account for the Partnership in accordance with GAAP.

 

17

 

(b)   Except as limited by Section 6.01(c), each Limited Partner
shall have the right to receive, for a purpose reasonably related to such
Limited Partner’s interest as a Limited Partner in the Partnership, upon
reasonable written demand stating the purpose of such demand and at such
Limited Partner’s own expense:

 

(i)            a copy of the
Certificate and this Agreement and all amendments thereto, together with a copy
of the executed copies of all powers of attorney pursuant to which the
Certificate and this Agreement and all amendments thereto have been executed;
and

 

(ii)           promptly after
their becoming available, copies of the Partnership’s U.S. federal, state and
local income tax returns and reports, if any, for the three most recent years.

 

(c)   The General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
discretion, (i) any information that the General Partner reasonably
believes to be in the nature of trade secrets or (ii) other information
the disclosure of which the General Partner believes is not in the best
interests of the Partnership, could damage the Partnership or its business or
that the Partnership is required by Law or by agreement with any third party to
keep confidential.

 

ARTICLE VII

PARTNERSHIP UNITS

 

SECTION 7.01.      Units.  Interests in the Partnership shall be
represented by Units.  The Units
initially are comprised of two Classes: Class A Units and Class B
Units.  The General Partner may
establish, from time to time in accordance with such procedures as the General
Partner shall determine from time to time, other Classes, one or more series of
any such Classes, or other Partnership securities with such designations,
preferences, rights, powers and duties (which may be senior to existing Classes
and series of Units or other Partnership securities), as shall be determined by
the General Partner, including (i) the right to share in Profits and
Losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) the rights upon dissolution and liquidation of the
Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may or shall be required to redeem the Units or other Partnership
securities (including sinking fund provisions); (v) whether such Unit or
other Partnership security is issued with the privilege of conversion or
exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the
terms and conditions upon which each Unit or other Partnership security will be
issued, evidenced by certificates and assigned or transferred; (vii) the
method for determining the Class A Percentage Interest and Class B
Percentage Interest as to such Units or other Partnership securities; and (viii) the
right, if any, of the holder of each such Unit or other Partnership security to
vote on Partnership matters, including matters relating to the relative
designations, preferences, rights, powers and duties of such Units or other
Partnership securities. Except as expressly provided in this Agreement to the
contrary, any reference to “Units” shall include the Class A Units, the Class B
Units and any other Classes that may be established in accordance with this
Agreement.  All Units of a particular Class shall
have identical rights in all respects as all other Units of such Class, except
in each case as otherwise specified in this Agreement.

 

18

 

SECTION 7.02.      Register.  The register of the Partnership shall be the
definitive record of ownership of each Unit and all relevant information with
respect to each Partner.  Unless the
General Partner shall determine otherwise, Units shall be uncertificated and
recorded in the books and records of the Partnership.

 

SECTION 7.03.      Registered
Partners.  The Partnership shall be
entitled to recognize the exclusive right of a Person registered on its records
as the owner of Units for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in Units on the part of any other Person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the Act or other applicable Law.

 

SECTION 7.04.      Exchange
Transactions.  To the extent
permitted to do so under the Exchange Agreement, a Limited Partner may exchange
all or a portion of the Class A Units owned by such Limited Partner for
Common Units.

 

SECTION 7.05.      Transfers;
Encumbrances.

 

(a)         No Limited Partner or
Assignee may Transfer all or any portion of its Units (or any beneficial
interest therein), other than in connection with an exchange permitted by Section 7.04,
unless the General Partner consents in writing thereto, which consent may be
given or withheld, or made subject to such conditions as are determined by the
General Partner, in the General Partner’s sole discretion and, in the case of Class B
Units, unless such Transferee enters into a contribution and indemnification
agreement that is substantially consistent with the Contribution and
Indemnification Agreement. Any purported Transfer that is not in accordance
with this Agreement shall be, to the fullest extent permitted by law, null and
void.

 

(b)        No Limited Partner or
Assignee may create an Encumbrance with respect to all or any portion of its
Units (or any beneficial interest therein) other than Encumbrances that run in
favor of the Limited Partner unless the General Partner consents in writing
thereto, which consent may be given or withheld, or made subject to such
conditions as are determined by the General Partner, in the General Partner’s sole
discretion.  Consent of the General
Partner shall be withheld until the holder of the Encumbrance acknowledges the
terms and conditions of this Agreement. 
Any purported Encumbrance that is not in accordance with this Agreement
shall be, to the fullest extent permitted by Law, null and void.

 

SECTION 7.06.      Further
Restrictions.  Notwithstanding any
contrary provision in this Agreement, in no event may any Transfer of a Unit be
made by any Limited Partner or Assignee if:

 

(a)         such Transfer is made
to any Person who lacks the legal right, power or capacity to own such Unit;

 

(b)        such Transfer would
require the registration of such transferred Unit or of any Class of Unit
pursuant to any applicable U.S. federal or state securities laws (including,
without limitation, the Securities Act or the Exchange Act) or other non-U.S 

 

19

 

securities
laws or would constitute a non-exempt distribution pursuant to applicable
provincial or state securities laws;

 

(c)         such Transfer would
cause the Partnership to become a publicly traded partnership taxable as a
corporation for U.S. federal tax law purposes;

 

(d)        such Transfer would
cause (i) all or any portion of the assets of the Partnership to (A) constitute
“plan assets” (under ERISA, the Code or any applicable Similar Law) of any
existing or contemplated Limited Partner, or (B) be subject to the
provisions of ERISA, Section 4975 of the Code or any applicable Similar
Law, or (ii) the General Partner to become a fiduciary with respect to any
existing or contemplated Limited Partner, pursuant to ERISA, any applicable
Similar Law, or otherwise;

 

(e)         to the extent requested by the General Partner, the
Partnership does not receive such legal or tax opinions and written instruments
(including, without limitation, copies of any instruments of Transfer and such
Assignee’s consent to be bound by this Agreement as an Assignee) that are in a
form satisfactory to the General Partner, as determined in the General Partner’s
sole discretion.

 

SECTION 7.07.      Rights of Assignees.  Subject to Section 7.09, the Transferee
of any permitted Transfer pursuant to this Article VII will be an assignee
only (“Assignee”), and only will receive, to the extent transferred, the
distributions and allocations of income, gain, loss, deduction, credit or
similar item to which the Partner which transferred its Units would be
entitled, and such Assignee will not be entitled or enabled to exercise any
other rights or powers of a Partner, such other rights, and all obligations
relating to, or in connection with, such Interest remaining with the
transferring Partner.  The transferring
Partner will remain a Partner even if it has transferred all of its Units to
one or more Assignees until such time as the Assignee(s) is admitted to
the Partnership as a Partner pursuant to Section 7.09.

 

SECTION 7.08.      Admissions,
Withdrawals and Removals.

 

(a)   The General
Partner may not be removed.

 

(b)   No Person may be admitted to the Partnership as an additional
General Partner or substitute General Partner without the prior written consent
or ratification of Partners whose Class A Percentage Interests exceed 50%
of the Class A Percentage Interests of all Partners in the aggregate. A
General Partner will not be entitled to Transfer all of its Units or to
withdraw from being a General Partner of the Partnership unless another General
Partner shall have been admitted hereunder (and not have previously been
removed or withdrawn).

 

(c)   No Limited Partner will be removed or entitled to withdraw from
being a Partner of the Partnership except in accordance with Section 7.10.

 

(d)   Except as otherwise provided in Article VIII or the Act, no
admission, substitution, withdrawal or removal of a Partner will cause the
dissolution of the Partnership.  To the
fullest extent permitted by law, any purported admission, withdrawal or removal
that is not in accordance with this Agreement shall be null and void.

 

20

 

SECTION 7.09.                                         Admission of Assignees as Substitute
Limited Partners.  An Assignee will become a substitute Limited
Partner only if and when each of the following conditions is satisfied:

 

(a)                          the General
Partner consents in writing to such admission, which consent may be given or
withheld, or made subject to such conditions as are determined by the General
Partner, in each case in the General Partner’s sole discretion;

 

(b)                         if required by
the General Partner, the General Partner receives written instruments
(including, without limitation, copies of any instruments of Transfer and such
Assignee’s consent to be bound by this Agreement as a substitute Limited
Partner) that are in a form satisfactory to the General Partner (as determined
in its sole discretion);

 

(c)                          if required by
the General Partner, the General Partner receives an opinion of counsel
satisfactory to the General Partner to the effect that such Transfer is in
compliance with this Agreement and all applicable Law; and

 

(d)                         if required by
the General Partner, the parties to the Transfer, or any one of them, pays all
of the Partnership’s reasonable expenses connected with such Transfer
(including, but not limited to, the reasonable legal and accounting fees of the
Partnership).

 

SECTION 7.10.                                         Withdrawal and Removal of Limited
Partners.  If a Limited Partner ceases to hold any
Units, then such Limited Partner shall withdraw from the Partnership and shall
cease to be a Limited Partner and to have the power to exercise any rights or
powers of a Limited Partner.

 

ARTICLE
VIII

 

DISSOLUTION,
LIQUIDATION AND TERMINATION

 

SECTION 8.01.                                         No Dissolution. 
Except as required by the Act, the Partnership shall not be dissolved by
the admission of additional Partners or withdrawal of Partners in accordance
with the terms of this Agreement.  The
Partnership may be dissolved, liquidated wound up and terminated only pursuant
to the provisions of this Article VIII, and the Partners hereby
irrevocably waive any and all other rights they may have to cause a dissolution
of the Partnership or a sale or partition of any or all of the Partnership
assets.

 

SECTION 8.02.                                         Events Causing Dissolution. 
The Partnership shall be dissolved and its affairs shall be wound up
upon the occurrence of any of the following events (each, a “Dissolution
Event”):

 

(a)                          the entry of a
decree of judicial dissolution of the Partnership under Section 17-802 of
the Act upon the finding by a court of competent jurisdiction that the General
Partner (i) is permanently incapable of performing its part of this
Agreement, (ii) has been guilty of conduct that is calculated to affect
prejudicially the carrying on of the business of the Partnership, (iii) willfully
or persistently commits a material breach of this Agreement or (iv) conducts
itself in a manner relating to the Partnership or its business such that it is

 

21

 

not
reasonably practicable for the other Partners to carry on the business of the
Partnership with the General Partner;

 

(b)                         any event which
makes it unlawful for the business of the Partnership to be carried on by the
Partners;

 

(c)                          the written
consent of all Partners;

 

(d)                         any other event
not inconsistent with any provision hereof causing a dissolution of the
Partnership under the Act;

 

(e)                          the Incapacity
or removal of the General Partner or the occurrence of a Disabling Event with
respect to the General Partner; provided that  the Partnership will not be
dissolved or required to be wound up in connection with any of the events
specified in this Section 8.02(e) if: (i) at the time of the
occurrence of such event there is at least one other general partner of the
Partnership who is hereby authorized to, and elects to, carry on the business
of the Partnership; or (ii) all Limited Partners consent to or ratify the
continuation of the business of the Partnership and the appointment of another
general partner of the Partnership, effective as of the event that caused the
General Partner to cease to be a general partner of the Partnership, within 90
days following the occurrence of any such event, which consent shall be deemed
(and if requested each Limited Partner shall provide a written consent or
ratification) to have been given for all Limited Partners if the holders of
more than 50% of the Units then outstanding agree in writing to so continue the
business of the Partnership.

 

SECTION 8.03.                                         Distribution upon Dissolution. 
Upon dissolution, the Partnership shall not be terminated and shall
continue until the winding up of the affairs of the Partnership is completed.
Upon the winding up of the Partnership, the General Partner, or any other
Person designated by the General Partner (the “Liquidation Agent”),
shall take full account of the assets and liabilities of the Partnership and
shall, unless the General Partner determines otherwise, liquidate the assets of
the Partnership as promptly as is consistent with obtaining the fair value
thereof. The proceeds of any liquidation shall be applied and distributed in
the following order:

 

(a)                          First, to the
satisfaction of debts and liabilities of the Partnership (including
satisfaction of all indebtedness to Partners and their Affiliates to the extent
otherwise permitted by Law) including the expenses of liquidation, and
including the establishment of any reserve which the Liquidation Agent shall
deem reasonably necessary for any contingent, conditional or unmatured
contractual liabilities or obligations of the Partnership (“Contingencies”).
Any such reserve may be paid over by the Liquidation Agent to any attorney-at-law,
or acceptable party, as escrow agent, to be held for disbursement in payment of
any Contingencies and, at the expiration of such period as shall be deemed
advisable by the Liquidation Agent for distribution of the balance in the
manner hereinafter provided in this Section 8.03; and

 

(b)                         The balance, if
any, to the Partners in accordance with Section 4.01.

 

SECTION 8.04.                                         Time for Liquidation. 
A reasonable amount of time shall be allowed for the orderly liquidation
of the assets of the Partnership and the discharge of liabilities to

 

22

 

creditors so as to enable
the Liquidation Agent to minimize the losses attendant upon such liquidation.

 

SECTION 8.05.                                         Termination. 
The Partnership shall terminate when all of the assets of the
Partnership, after payment of or due provision for all debts, liabilities and
obligations of the Partnership, shall have been distributed to the holders of
Units in the manner provided for in this Article VIII, and the Certificate
shall have been cancelled in the manner required by the Act.

 

SECTION 8.06.                                         Claims of the Partners. 
The Partners shall look solely to the Partnership’s assets for the
return of their Capital Contributions and if the assets of the Partnership
remaining after payment of or due provision for all debts, liabilities and
obligations of the Partnership are insufficient to return such Capital
Contributions, the Partners shall have no recourse against the Partnership or
any other Partner or any other Person. No Partner with a negative balance in
such Partner’s Capital Account shall have any obligation to the Partnership or
to the other Partners or to any creditor or other Person to restore such
negative balance during the existence of the Partnership, upon dissolution or
termination of the Partnership or otherwise, except to the extent required by
the Act.

 

SECTION 8.07.                                         Survival of Certain Provisions. 
Notwithstanding anything to the contrary in this Agreement, the
provisions of Section 9.02 and Section 10.10 shall survive the
termination of the Partnership.

 

ARTICLE
IX

 

LIABILITY
AND INDEMNIFICATION

 

SECTION 9.01.                                         Liability of Partners.

 

(a)          No
Limited Partner shall be liable for any debt, obligation or liability of the
Partnership or of any other Partner or have any obligation to restore any
deficit balance in its Capital Account solely by reason of being a Partner of
the Partnership, except to the extent required by the Act.

 

(b)         This
Agreement is not intended to, and does not, create or impose any fiduciary duty
on any of the Partners (including without limitation, the General Partner)
hereto or on their respective Affiliates. 
Further, the Partners hereby waive any and all fiduciary duties that,
absent such waiver, may exist at or be implied by Law, and in doing so,
recognize, acknowledge and agree that their duties and obligations to one
another and to the Partnership are only as expressly set forth in this
Agreement and those required by the Act.

 

(c)          To the extent that, under
Law, any Partner (including
without limitation, the General Partner) has duties (including
fiduciary duties) and liabilities relating thereto to the Partnership or to
another Partner, the Partners (including
without limitation, the General Partner) acting under this Agreement
will not be liable to the Partnership or to any such other Partner for their
good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the
extent that they restrict or eliminate the duties and liabilities relating
thereto of any Partner (including
without limitation, the General Partner) otherwise existing under
Law, are agreed by the

 

23

 

Partners to replace to that
extent such other duties and liabilities of the Partners relating thereto (including without limitation, the General Partner).

 

(d)         The General Partner may
consult with legal counsel, accountants and financial or other advisors and any
act or omission suffered or taken by the General Partner on behalf of the
Partnership or in furtherance of the interests of the Partnership in good faith
in reliance upon and in accordance with the advice of such counsel, accountants
or financial or other advisors will be full justification for any such act or
omission, and the General Partner will be fully protected in so acting or
omitting to act so long as such counsel or accountants or financial or other
advisors were selected with reasonable care.

 

(e)          Notwithstanding any other
provision of this Agreement or otherwise applicable provision of Law, whenever
in this Agreement the General Partner is permitted or required to make a
decision (i) in its “sole discretion” or “discretion” or under a grant of
similar authority or latitude, such General Partner shall be entitled to
consider only such interests and factors as it desires, including its own
interests, and shall, to the fullest extent permitted by applicable Law, have
no duty or obligation to give any consideration to any interest of or factors
affecting the Partnership or the Limited Partners, or (ii) in its “good
faith” or under another expressed standard, such General Partner shall act
under such express standard and shall not be subject to any other or different
standards.

 

SECTION 9.02.                                         Indemnification.

 

(a)          Indemnification. To the fullest
extent permitted by law, the Partnership shall indemnify any person (including
such person’s heirs, executors or administrators) who was or is made or is
threatened to be made a party to or is otherwise involved in any threatened,
pending or completed action, suit, claim or proceeding (brought in the right of
the Partnership or otherwise), whether civil, criminal, administrative or
investigative, and whether formal or informal, including appeals, by reason of
the fact that such person, or a person for whom such person was the legal
representative, is or was a Partner (including
without limitation, the General Partner) or a director, officer,
partner, trustee, manager, member, employee or agent of a Partner (including without limitation, the General Partner) or the
Partnership or, while a director, officer, partner, trustee, manager, member,
employee or agent of a Partner (including
without limitation, the General Partner) or the Partnership, is or
was serving at the request of the Partnership as a director, officer, partner,
trustee, manager, member, employee or agent of another corporation,
partnership, joint venture, trust, limited liability company, nonprofit entity
or other enterprise or person (an “Other Company”), for and against all
loss and liability suffered and expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement reasonably incurred by such
person in connection with such action, suit, claim or proceeding, including
appeals; provided that such person shall not be entitled to indemnification
hereunder only to the extent such person’s conduct constituted fraud, bad faith
or willful misconduct. A director, officer, partner, trustee, manager, member,
employee or agent of a wholly-owned subsidiary of the Partnership or any other
subsidiary designated from time to time by the Partnership (a “Subsidiary
Person”) will be deemed to be serving at the request of the Partnership as
a director, officer, partner, trustee, manager, member, employee or agent of
such subsidiary as an Other Company for purposes of this Section 9.02
(regardless of whether such person is or was a director, officer, partner,
trustee, manager, member, employee or agent of a Partner), and the Partnership
shall indemnify such Subsidiary Person in accordance with this

 

24

 

Section 9.02; provided
that such person shall not be entitled to indemnification hereunder to the
extent (i) such person’s conduct constituted fraud, bad faith or willful
misconduct or (ii) such person’s actions or omissions were not made during
the course of performing or otherwise in connection with (x) his or her
duties as a director, officer, partner, trustee, manager, member, employee or
agent of such subsidiary or an affiliate thereof or (y) a request made by
such subsidiary or an affiliate thereof. Notwithstanding the foregoing two
sentences, except as otherwise provided in Section 9.02(c), the
Partnership shall be required to indemnify a person described in the foregoing
two sentences in connection with any action, suit, claim or proceeding (or part
thereof) commenced by such person only if the commencement of such action,
suit, claim or proceeding (or part thereof) by such person was authorized by
the General Partner or, in the case of a Subsidiary Person, such subsidiary or
the General Partner. The indemnification of a person who is or was serving at
the request of the Partnership as a director, officer, partner, trustee,
manager, member, employee or agent of an Other Company shall be secondary to
any and all indemnification to which such person is entitled from, firstly, the
relevant Other Company (including such subsidiary), and from, secondly, the
relevant Fund (if applicable), and will only be paid to the extent the primary
indemnification is not paid and the provisos set forth in the first two
sentences of this Section 9.02(a) do not apply; provided that such
Other Company and such Fund shall not be entitled to contribution or
indemnification from or subrogation against the Partnership, unless otherwise
mandated by applicable law.  If,
notwithstanding the foregoing sentence, the Partnership makes an
indemnification payment or advances expenses to such a person entitled to
primary indemnification, the Partnership shall be subrogated to the rights of
such person against the person or persons responsible for the primary
indemnification.  “Fund” means any
fund, investment vehicle or account whose investments are managed or advised by
the Partnership (if any) or an affiliate thereof.

 

(b)         Advancement of Expenses.  To the fullest extent permitted by Law, the
Partnership shall promptly pay expenses (including attorneys’ fees) incurred by
any person described in Section 9.02(a) in appearing at,
participating in or defending any action, suit, claim or proceeding in advance
of the final disposition of such action, suit, claim or proceeding, including
appeals, upon presentation of an undertaking on behalf of such person to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified under this Section 9.02 or otherwise.  Notwithstanding the preceding sentence,
except as otherwise provided in Section 9.02(c), the Partnership shall be
required to pay expenses of a person described in such sentence in connection
with any action, suit, claim or proceeding (or part thereof) commenced by such
person only if the commencement of such action, suit, claim or proceeding (or
part thereof) by such person was authorized by the General Partner.

 

(c)          Unpaid Claims.  If a claim for indemnification (following the
final disposition of such action, suit, claim or proceeding) or advancement of
expenses under this Section 9.02 is not paid in full within thirty (30)
days after a written claim therefor by any person described in Section 9.02(a) has
been received by the Partnership, such person may file proceedings to recover
the unpaid amount of such claim and, if successful in whole or in part, shall
be entitled to be paid the expense of prosecuting such claim.  In any such action the Partnership shall have
the burden of proving that such person is not entitled to the requested
indemnification or advancement of expenses under applicable Law.

 

25

 

(d)         Insurance.  To the fullest extent permitted by law, the
Partnership may purchase and maintain insurance on behalf of any person
described in Section 9.02(a) against any liability asserted against
such person, whether or not the Partnership would have the power to indemnify
such person against such liability under the provisions of this Section 9.02
or otherwise.

 

(e)          Enforcement of Rights.  The provisions of this Section 9.02
shall be applicable to all actions, claims, suits or proceedings made or
commenced on or after the Effective Time, whether arising from acts or
omissions to act occurring on, before or after its adoption.  The provisions of this Section 9.02
shall be deemed to be a contract between the Partnership and each person
entitled to indemnification under this Section 9.02 (or legal
representative thereof) who serves in such capacity at any time while this Section 9.02
and the relevant provisions of applicable Law, if any, are in effect, and any
amendment, modification or repeal hereof shall not affect any rights or
obligations then existing with respect to any state of facts or any action,
suit, claim or proceeding then or theretofore existing, or any action, suit,
claim or proceeding thereafter brought or threatened based in whole or in part
on any such state of facts.  If any provision
of this Section 9.02  shall be found
to be invalid or limited in application by reason of any Law, it shall not
affect the validity of the remaining provisions hereof.  The rights of indemnification provided in
this Section 9.02 shall neither be exclusive of, nor be deemed in
limitation of, any rights to which any person may otherwise be or become
entitled or permitted by contract, this Agreement, insurance or as a matter of
Law, both as to actions in such person’s official capacity and actions in any
other capacity, it being the policy of the Partnership that indemnification of
any person whom the Partnership is obligated to indemnify pursuant to Section 9.02(a) shall
be made to the fullest extent permitted by Law.

 

(f)            Benefit Plans.  For purposes of this Section 9.02,
references to “other enterprises” shall include employee benefit plans;
references to “fines” shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to “serving at the request
of the Partnership” shall include any service as a director, officer, employee
or agent of the Partnership which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries.

 

(g)         Non-Exclusivity.  This Section 9.02  shall not limit
the right of the Partnership, to the extent and in the manner permitted by law,
to indemnify and to advance expenses to, and purchase and maintain insurance on
behalf of, persons other than persons described in Section 9.02(a).

 

ARTICLE
X

 

MISCELLANEOUS

 

SECTION 10.01.                                   Severability.  If any term
or other provision of this Agreement is held to be invalid, illegal or
incapable of being enforced by any rule of Law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
is not affected in any manner materially adverse to any party. Upon a
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 a mutually

 

26

 

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

 

SECTION 10.02.                                   Notices.  All notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by courier service, by fax, or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):

 

(a)  If to the
Partnership, to:

 

KKR Management Holdings L.P.

c/o KKR Management Holdings
Corp.

9 West 57th Street, Suite 4200

New York, New York, 10019

Attention:
Chief Financial Officer

Fax:
(212) 750-0003

 

(b)  If to any
Partner, to:

 

c/o KKR Management Holdings
Corp.

9 West 57th Street, Suite 4200

New York, New York, 10019

Attention:
Chief Financial Officer

Fax:
(212) 750-0003

 

(c) If to the
General Partner, to:

 

KKR Management Holdings
Corp.

9 West 57th Street, Suite 4200

New York, New York, 10019

Attention:
Chief Financial Officer

Fax:
(212) 750-0003

 

SECTION 10.03.                                   Cumulative Remedies.  The rights
and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive its right to use any
or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by Law.

 

SECTION 10.04.                                   Binding Effect.  This
Agreement shall be binding upon and inure to the benefit of all of the parties
and, to the extent permitted by this Agreement, their successors, executors,
administrators, heirs, legal representatives and assigns.

 

SECTION 10.05.                                   Interpretation.  Unless the
context requires otherwise: (a) any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa;

 

27

 

(b) references to
Articles and Sections refer to Articles and Sections of this Agreement; and (c) the
terms “include,” “includes,” “including” or words of like import shall be
deemed to be followed by the words “without limitation;” and the terms “hereof,”
“herein” or “hereunder” refer to this Agreement as a whole and not to any
particular provision of this Agreement. The table of contents and headings
contained in this Agreement are for reference purposes only, and shall not
affect in any way the meaning or interpretation of this Agreement.

 

SECTION 10.06.                                   Counterparts.  This
Agreement may be executed and delivered (including by facsimile transmission)
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be
an original but all of which taken together shall constitute one and the same
agreement. Copies of executed counterparts transmitted by telecopy or other
electronic transmission service shall be considered original executed
counterparts for purposes of this Section 10.06.

 

SECTION 10.07.                                   Further Assurances. Each Limited Partner shall perform all other acts
and execute and deliver all other documents as may be necessary or appropriate
to carry out the purposes and intent of this Agreement.

 

SECTION 10.08.                                   Entire Agreement.  This
Agreement constitutes the entire agreement among the parties hereto pertaining
to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.

 

SECTION 10.09.                                   Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of Delaware.

 

SECTION 10.10.                                   Arbitration.

 

(a)          Any and all disputes which
cannot be settled amicably, including any ancillary claims of any party arising
out of, relating to or in connection with the validity, negotiation, execution,
interpretation, performance or non-performance of this Agreement (including
without limitation the validity, scope and enforceability of this arbitration
provision) shall be finally settled by arbitration conducted by a single
arbitrator in New York, New York in accordance with the then-existing Rules of
Arbitration of the International Chamber of Commerce; provided, however, that
KKR & Co. L.L.C., a Delaware limited liability company, in its
capacity as a Limited Partner, shall not be subject to this Section 10.10.
If the parties to the dispute fail to agree on the selection of an arbitrator
within thirty (30) days of the receipt of the request for arbitration, the
International Chamber of Commerce shall make the appointment.  The arbitrator shall be a lawyer and shall
conduct the proceedings in the English language. Performance under this
Agreement shall continue if reasonably possible during any arbitration
proceedings. Except as required by law or as may be reasonably required in
connection with ancillary judicial proceedings to compel arbitration, to obtain
temporary or preliminary judicial relief in aid of arbitration, or to confirm
or challenge an arbitration award, the arbitration proceedings, including any
hearings, shall be confidential, and the parties shall not disclose any awards,
any materials in the proceedings created for the purpose of the arbitration, or
any documents produced by another party in the proceedings not otherwise in the
public domain.

 

28

 

(b)         Notwithstanding the
provisions of paragraph (a), the General Partner may bring, or may cause the
Partnership to bring, on behalf of the General Partner or the Partnership or on
behalf of one or more Partners, an action or special proceeding in any court of
competent jurisdiction for the purpose of compelling a party to arbitrate,
seeking temporary or preliminary relief in aid of an arbitration hereunder, or
enforcing an arbitration award and, for the purposes of this paragraph (b),
each Partner (i) expressly consents to the application of paragraph (c) of
this Section 10.10 to any such action or proceeding, (ii) agrees that
proof shall not be required that monetary damages for breach of the provisions
of this Agreement would be difficult to calculate and that remedies at law
would be inadequate, and (iii) irrevocably appoints the General Partner as
such Partner’s agent for service of process in connection with any such action
or proceeding and agrees that service of process upon such agent, who shall
promptly advise such Partner of any such service of process, shall be deemed in
every respect effective service of process upon the Partner in any such action
or proceeding.

 

(c)          EACH PARTNER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED
IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 10.10, OR ANY JUDICIAL
PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT
OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial
proceedings include any suit, action or proceeding to compel arbitration, to
obtain temporary or preliminary judicial relief in aid of arbitration, or to
confirm or challenge an arbitration award. The parties acknowledge that the
fora designated by this paragraph (c) have a reasonable relation to this
Agreement, the Partnership and to the parties’ relationship with one another.
The Partners and the Partnership hereby waive, to the fullest extent permitted
by applicable Law, any objection which they now or hereafter may have to
personal jurisdiction or to the laying of venue of any such ancillary suit,
action or proceeding referred to in this Section 10.10 brought in any
court referenced herein and such parties agree not to plead or claim the same.

 

(d)         Notwithstanding any
provision of this Agreement to the contrary, this Section 10.10 shall be
construed to the maximum extent possible to comply with the laws of the State
of Delaware, including the Delaware Uniform Arbitration Act (10 Del. C. § 5701
et seq.) (the “Delaware Arbitration Act”).  If, nevertheless, it shall be determined by a
court of competent jurisdiction that any provision or wording of this Section 10.10,
including any rules of the International Chamber of Commerce, shall be
invalid or unenforceable under the Delaware Arbitration Act, or other
applicable Law, such invalidity shall not invalidate all of this Section 10.10.  In that case, this Section 10.10 shall
be construed so as to limit any term or provision so as to make it valid or
enforceable within the requirements of the Delaware Arbitration Act or other
applicable Law, and, in the event such term or provision cannot be so limited,
this Section 10.10 shall be construed to omit such invalid or
unenforceable provision.

 

SECTION 10.11.                                   Expenses.  Except as
otherwise specified in this Agreement, the Partnership shall be responsible for
all costs and expenses, including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred in connection with its
operation.

 

29

 

SECTION 10.12.                                   Amendments and Waivers.  (a)  This
Agreement (including the Annexes hereto) may be amended, supplemented, waived
or modified by the action of the General Partner without the consent of any
other Partner; provided that any amendment that would have a material adverse
effect on the rights or preferences of any Class of Units in relation to
other Classes of Units must be approved by the holders of not less than a
majority of the Class A Percentage Interests; provided further, that the General Partner may, without
the written consent of any Limited Partner or any other Person, amend, supplement,
waive or modify any provision of this Agreement and execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect: (i) any amendment, supplement, waiver or
modification that the General Partner determines to be necessary or appropriate
in connection with the creation, authorization or issuance of any class or
series of equity interest in the Partnership; (ii) the admission, substitution, withdrawal
or removal of Partners in accordance with this Agreement; (iii) a change in the name of the Partnership,
the location of the principal place of business of the Partnership, the
registered agent of the Partnership or the registered office of the
Partnership; (iv) any amendment, supplement, waiver or
modification that the General Partner determines in its sole discretion to be
necessary or appropriate to address changes in U.S. federal income tax
regulations, legislation or interpretation; and (v) a change in the Fiscal Year or taxable
year of the Partnership and any other changes that the General Partner
determines to be necessary or appropriate as a result of a change in the Fiscal
Year or taxable year of the Partnership including a change in the dates on
which distributions are to be made by the Partnership.

 

(b)         No failure or delay by any
party in exercising any right, power or privilege hereunder (other than a
failure or delay beyond a period of time specified herein) shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.

 

(c)          The General Partner may, in
its sole discretion, unilaterally amend this Agreement on or before the
effective date of the final regulations to provide for (i) the election of
a safe harbor under proposed Treasury Regulation Section 1.83-3(l) (or
any similar provision) under which the fair market value of a partnership
interest that is transferred is treated as being equal to the liquidation value
of that interest, (ii) an agreement by the Partnership and each of its
Partners to comply with all of the requirements set forth in such regulations
and Notice 2005-43 (and any other guidance provided by the U.S. Internal Revenue
Service with respect to such election) with respect to all partnership
interests transferred in connection with the performance of services while the
election remains effective, (iii) the allocation of items of income,
gains, deductions and losses required by the final regulations similar to
proposed Treasury Regulation Section 1.704-1(b)(4)(xii)(b) and (c),
and (iv) any other related amendments.

 

(d)         Except as may be otherwise
required by law in connection with the winding-up, liquidation, or dissolution
of the Partnership, each Partner hereby irrevocably waives any and all rights
that it may have to maintain an action for judicial accounting or for partition
of any of the Partnership’s property.

 

SECTION 10.13.                                   No Third Party Beneficiaries. 
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their permitted assigns and successors and nothing
herein, express or implied, is intended to or shall confer upon any other

 

30

 

Person or entity, any
legal or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement (other than pursuant to Section 9.02).

 

SECTION 10.14.                                   Headings.  The headings
and subheadings in this Agreement are included for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof.

 

SECTION 10.15.                                   Construction.  Each party
hereto acknowledges and agrees it has had the  opportunity
to draft, review and edit the language of this Agreement and that it is the
intent of the parties hereto that no presumption for or against any party
arising out of drafting all or any part of this Agreement will be applied in
any dispute relating to, in connection with or involving this Agreement.
Accordingly, the parties hereby waive to the fullest extent permitted by law
the benefit of any rule of Law or any legal decision that would require
that in cases of uncertainty, the language of a contract should be interpreted
most strongly against the party who drafted such language.

 

SECTION 10.16.                                   Power of Attorney.  (a) 
Each Limited Partner, by its execution hereof, hereby irrevocably makes,
constitutes and appoints the General Partner as its true and lawful agent and
attorney in fact, with full power of substitution and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
record and file (i) this Agreement and any amendment to this Agreement
that has been adopted as herein provided; (ii) the original Certificate
and all amendments thereto required or permitted by law or the provisions of
this Agreement; (iii) all certificates and other instruments (including
consents and ratifications which the Limited Partners have agreed to provide
upon a matter receiving the agreed support of Limited Partners) deemed
advisable by the General Partner to carry out the provisions of this Agreement
(including the provisions of Section 7.04) and Law or to permit the
Partnership to become or to continue as a limited partnership or partnership
wherein the Limited Partners have limited liability in each jurisdiction where
the Partnership may be doing business; (iv) all instruments that the
General Partner deems appropriate to reflect a change or modification of this
Agreement or the Partnership in accordance with this Agreement, including,
without limitation, the admission of additional Limited Partners or substituted
Limited Partners pursuant to the provisions of this Agreement; (v) all
conveyances and other instruments or papers deemed advisable by the General
Partner to effect the liquidation and termination of the Partnership; and (vi) all
fictitious or assumed name certificates required or permitted (in light of the
Partnership’s activities) to be filed on behalf of the Partnership.

 

(b)         The appointment by all
Limited Partners of the General Partner as attorney-in-fact will be deemed to
be a power coupled with an interest, in recognition of the fact that each of
the Partners under this Agreement will be relying upon the power of the General
Partners to act as contemplated by this Agreement in any filing and other
action by it on behalf of the Partnership, will survive the disability or
Incapacity of any Person hereby giving such power, and the transfer or
assignment of all or any portion of the Units of such Person, and will not be
affected by the subsequent Incapacity of the principal.  In the event of the assignment by a Partner
of all of its Units, the foregoing power of attorney of an assignor Partner
will survive such assignment until such Partner has withdrawn from the
Partnership pursuant to Section 7.10.

 

31

 

SECTION 10.17.                                   Schedules.  The General
Partner may from time to time execute and deliver to the Limited Partners
schedules which set forth information contained in the books and records of the
Partnership and any other matters deemed appropriate by the General
Partner.  Such schedules shall be for
information purposes only and shall not be deemed to be part of this Agreement
for any purpose whatsoever.

 

SECTION 10.18.                                   Partnership Status.  The parties
intend to treat the Partnership as a partnership for U.S. federal income tax
purposes, and no person shall take any action inconsistent with such
classification.

 

SECTION 10.19.                                   Effectiveness.  This
Agreement shall become effective upon the Effective Time and prior to such time
this Agreement shall have no force or effect and the Original Agreement, as may
be amended other than pursuant to this Agreement, shall remain in full force
and effect and shall continue to constitute the limited partnership agreement
of the Partnership until the Effective Time.

 

[Remainder of Page Intentionally
Left Blank]

 

32

 

IN
WITNESS WHEREOF, the parties hereto have entered into this Agreement or have
caused this Agreement to be duly executed by their respective authorized
officers, in each case as of the date first above stated.

 

 

	
   

  	
  KKR
  MANAGEMENT HOLDINGS CORP., as

  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  WILLIAM J. JANETSCHEK

  
	
   

  	
   

  	
  Name:
  William J. Janetschek

  
	
   

  	
   

  	
  Title:
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KKR &
  CO. L.L.C., as Limited Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  WILLIAM J. JANETSCHEK

  
	
   

  	
   

  	
  Name:
  William J. Janetschek

  
	
   

  	
   

  	
  Title:
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  WILLIAM J. JANETSCHEK

  
	
   

  	
  William J. Janetschek, as Initial Limited Partner

  (solely for purposes of Section 2.10)

  

 

 

ANNEX A

 

KKR Management Holdings
Corp.

9 West 57th Street, Suite 4200

New York, New York, 10014

 

[Date]

 

Dear [    ],

 

Reference
herein is made to the Amended and Restated Limited Partnership Agreement of KKR
Management Holdings L.P. (the “Partnership”) dated as of
[    ], 2009 by and between KKR Management Holdings Corp.,
as general partner, and KKR & Co. L.L.C., as limited partner, as it
may be amended from time to time (the “Agreement”).  By signing below, you acknowledge your
admission to the Partnership as a new or substitute Limited Partner pursuant to
Sections 2.08 and 7.9 of the Agreement and you agree to be bound by the terms
and conditions in the Agreement.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  KKR
  MANAGEMENT HOLDINGS CORP.,

  as General Partner of the Partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Agreed
and Accepted as of the date first set forth above:

 

[    ]

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