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Document

Exhibit 10.3

THIRD AMENDMENT 
TO ABL CREDIT AGREEMENT
This THIRD AMENDMENT TO ABL CREDIT AGREEMENT (this “Amendment”), is made and entered into as of October 15, 2020, by and among BASIC ENERGY SERVICES, INC., a Delaware corporation (the “Borrower”), the Subsidiaries of the Borrower party to the Amendment (collectively, the “Guarantors”), the financial institutions party to this Amendment constituting the Required Lenders, and BANK OF AMERICA, N.A., a national banking association (“Bank of America”), as administrative agent for the Lenders (in such capacity, “Administrative Agent”), a Swing Line Lender and an L/C Issuer.
A.    The Borrower has entered into that certain ABL Credit Agreement, dated as of October 2, 2018 (as amended by that certain Limited Consent and First Amendment to ABL Credit Agreement dated as of March 9, 2020, as further amended by that certain Second Amendment to ABL Credit Agreement dated as of June 15, 2020, and as may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with the Lenders party thereto and the Administrative Agent;
B.    The Borrower has advised the Administrative Agent and the Lenders that it seeks to enter into the Second Lien Note (as defined herein) and obtain loans thereunder; 
C.    The Administrative Agent, the Required Lenders and the Borrower have agreed to amend the Credit Agreement to permit, among other things, the Second Lien Note and the loans thereunder subject to the terms and conditions set forth herein; and
D.    In consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.    Definitions. All terms used herein that are defined in the Credit Agreement and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
2.    Amendments.
(a)    New Definitions. Section 1.01 of the Credit Agreement is hereby amended by adding the following definitions, in appropriate alphabetical order:
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto. 
“LIBOR Replacement Date” has the meaning specified in Section 3.03(b). 
“Pre-Adjustment Successor Rate” has the meaning specified in Section 3.03(b).
“Related Adjustment” means, in determining any LIBOR Successor Rate, the first relevant available alternative set forth in the order below that can be determined by the Administrative Agent applicable to such LIBOR Successor Rate: 
(A)    the spread adjustment, or method for calculating or determining such spread adjustment, that has been selected or recommended by the Relevant Governmental Body for the relevant Pre-Adjustment Successor Rate (taking into account the interest period, interest payment date or payment period for interest calculated and/or tenor thereto) and which adjustment or method (x) is published on an information service as selected by the Administrative Agent from time to time in its discretion or (y) solely with respect to Term SOFR, if not currently published, which was previously so recommended for Term SOFR and published on an information service acceptable to the Administrative Agent; or 
(B)    the spread adjustment that would apply (or has previously been applied) to the fallback rate for a derivative transaction referencing the ISDA Definitions (taking into account the interest period, interest payment date or payment period for interest calculated and/or tenor thereto).
“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York. 

Exhibit 10.3

“Second Lien Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Third Amendment Effective Date, between Ascribe and Administrative Agent, and acknowledged by the Borrower and Guarantors.
“Second Lien Loans” means one or more term loans in an aggregate amount not to exceed $15,000,000 made by Ascribe to the Borrower pursuant to the Second Lien Note, maturing no earlier than January 2, 2024 (or, if an Acceptable Senior Notes Refinancing has not occurred by July 3, 2023, October 3, 2023) and bearing a non-default interest rate of 9.75% per annum, with quarterly payments of interest and no principal amortization.
“Second Lien Note” means that certain Second Lien Delayed Draw Promissory Note dated as of the Third Amendment Effective Date, by the Borrower and the Guarantors in favor of Ascribe, together with any permitted amendments, modifications, replacements, supplements or restatements made in accordance with the Second Lien Intercreditor Agreement.
“Second Lien Note Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any of the Borrower and the Guarantors arising under any Loan Document (as defined in the Second Lien Note) or otherwise with respect to any Loan (as defined in the Second Lien Note), and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. 
“Second Lien Refinancing Debt” means Indebtedness in the form of loans or notes issued or incurred by the Borrower and/or any of its Subsidiaries following the Third Amendment Effective Date the proceeds of which shall be used, in part, to refinance the Second Lien Note Obligations in full, for other general corporate purposes and, at the option of the Borrower, to reimburse all or a portion of the Make-Whole Payment; provided that (a) the aggregate principal amount of such Indebtedness shall be not less than $15,000,000, (b) any Liens granted on property of the Borrower and the Guarantors to secure such Indebtedness shall be limited to property not constituting Collateral and (c) such Indebtedness shall otherwise be on terms and conditions reasonably satisfactory to Administrative Agent.
“SOFR” with respect to any Business Day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s website (or any successor source) at approximately 8:00 a.m. (New York City time) on the immediately succeeding Business Day and, in each case, that has been selected or recommended by the Relevant Governmental Body. 
“Term SOFR” means the forward-looking term rate for any period that is approximately (as determined by the Administrative Agent) as long as any of the Interest Period options set forth in the definition of “Interest Period” and that is based on SOFR and that has been selected or recommended by the Relevant Governmental Body, in each case as published on an information service as selected by the Administrative Agent from time to time in its discretion.
“Third Amendment Effective Date” means October 15, 2020.
(b)    Existing Definitions. Section 1.01 of the Credit Agreement is hereby amended by amending and restating the following existing definitions set forth therein in their entirety as follows:
“LIBOR Screen Rate” means the LIBOR quote on the applicable screen page the Administrative Agent designates to determine LIBOR (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time).
“LIBOR Successor Rate” has the meaning specified in Section 3.03(b).
“LIBOR Successor Rate Conforming Changes” means, with respect to any proposed LIBOR Successor Rate, any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other technical, administrative or operational matters (including, for the avoidance of doubt, the definition of Business Day, timing of borrowing requests or prepayment, conversion or continuation notices and length of lookback periods) as may be appropriate, in the discretion of the Administrative Agent, to reflect the adoption and implementation of such LIBOR Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate 

Exhibit 10.3

exists, in such other manner of administration as the Administrative Agent determines is reasonably necessary in connection with the administration of this Agreement and any other Loan Document).
 “Scheduled Unavailability Date” has the meaning specified in Section 3.03(b).
(c)    LIBOR Amendment. Section 1.09 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
1.09     Reserved.
(d)    Inability to Determine Rates. Section 3.03 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
(a)    The Administrative Agent will promptly notify the Borrower and the Lenders if, in connection with any Loan or request with respect to a Loan, (i) the Administrative Agent determines that (A) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable Loan amount or Interest Period, or (B) adequate and reasonable means do not exist for determining LIBOR for the Loan or Interest Period (including with respect to calculation of the Base Rate); or (ii) the Administrative Agent or the Required Lenders determine for any reason that LIBOR for the Interest Period does not adequately and fairly reflect the cost to Lenders of funding or maintaining the Loan.  Thereafter, the Lenders’ obligations to make or maintain affected LIBOR Loans and utilization of the LIBOR component (if affected) in determining Base Rate shall be suspended until the Administrative Agent determines (or is instructed by the Required Lenders) to withdraw the notice.  Upon receipt of such notice, the Borrower may revoke any pending request for funding, conversion or continuation of a LIBOR Loan or, failing that, will be deemed to have requested a Base Rate Loan, and the Administrative Agent may (or shall upon request by the Required Lenders) immediately convert any affected LIBOR Loan to a Base Rate Loan and/or disregard the use of LIBOR in determining Base Rate.
(b)    Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the Administrative Agent determines (which determination shall be conclusive absent manifest error), or the Borrower or Required Lenders notify the Administrative Agent (with, in the case of the Required Lenders, a copy to the Borrower) that the Borrower or Required Lenders (as applicable) have determined, that:
(i)    adequate and reasonable means do not exist for ascertaining LIBOR for any Interest Period hereunder or any other tenors of LIBOR, including, without limitation, because the LIBOR Screen Rate is not available or published on a current basis and such circumstances are unlikely to be temporary; or 
(ii)    the administrator of the LIBOR Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent or such administrator has made a public statement identifying a specific date after which LIBOR or the LIBOR Screen Rate shall no longer be made available, or used for determining the interest rate of loans, provided that, at the time of such statement, there is no successor administrator that is satisfactory to the Administrative Agent, that will continue to provide LIBOR after such specific date (such specific date, the “Scheduled Unavailability Date”); or
(iii)    the administrator of the LIBOR Screen Rate or a Governmental Authority having jurisdiction over such administrator has made a public statement announcing that all Interest Periods and other tenors of LIBOR are no longer representative; or
(iv)    syndicated loans currently being executed, or that include language similar to that contained in this Section 3.03, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR;
then, (x) in the case of clauses (i)-(iii) above, on a date and time determined by the Administrative Agent (any such date, the “LIBOR Replacement Date”), which date shall be at the end of an Interest Period or on the relevant interest payment date, as applicable, for interest calculated and shall occur reasonably promptly upon the occurrence of any of the events or circumstances under clauses (i), (ii) or (iii) above and, solely with respect to clause (ii) above, no later than the Scheduled Unavailability Date, LIBOR will be replaced hereunder and under the other Loan Documents with, subject to the proviso below, the first available alternative set forth in the order below for any payment period for interest calculated that can be determined by the Administrative Agent, in each case, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document (the “LIBOR Successor Rate”; and any such rate before giving effect to the Related Adjustment, the “Pre-Adjustment Successor Rate”):

Exhibit 10.3

(A)    Term SOFR plus the Related Adjustment; and
(B)     SOFR plus the Related Adjustment; 
and (y) in the case of clause (iv) above, the Borrower and Administrative Agent may amend this Agreement solely for the purpose of replacing LIBOR under this Agreement and under the other Loan Documents in accordance with the definition of “LIBOR Successor Rate” and such amendment will become effective at 5:00 p.m., on the fifth Business Day after the Administrative Agent shall have notified all Lenders and the Borrower of the occurrence of the circumstances described in clause (iv) above unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders object to the implementation of a LIBOR Successor Rate pursuant to such clause;
provided that, if the Administrative Agent determines that Term SOFR has become available, is administratively feasible for the Administrative Agent and would have been identified as the Pre-Adjustment Successor Rate in accordance with the foregoing if it had been so available at the time that the LIBOR Successor Rate then in effect was so identified, and the Administrative Agent notifies the Borrower and each Lender of such availability, then from and after the beginning of the Interest Period, relevant interest payment date or payment period for interest calculated, in each case, commencing no less than thirty (30) days after the date of such notice, the Pre-Adjustment Successor Rate shall be Term SOFR and the LIBOR Successor Rate shall be Term SOFR plus the relevant Related Adjustment.
The Administrative Agent will promptly (in one or more notices) notify the Borrower and each Lender of (x) any occurrence of any of the events, periods or circumstances under clauses (i) through (iii) above, (y) a LIBOR Replacement Date and (z) the LIBOR Successor Rate.
Any LIBOR Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for the Administrative Agent, such LIBOR Successor Rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.
Notwithstanding anything else herein, if at any time any LIBOR Successor Rate as so determined would otherwise be less than 1.00%, the LIBOR Successor Rate will be deemed to be 1.00% for the purposes of this Agreement and the other Loan Documents.
In connection with the implementation of a LIBOR Successor Rate, the Administrative Agent will have the right to make LIBOR Successor Rate Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such LIBOR Successor Rate Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that, with respect to any such amendment effected, the Administrative Agent shall post each such amendment implementing such LIBOR Successor Rate Conforming Changes to the Borrower and the Lenders reasonably promptly after such amendment becomes effective.
If the events or circumstances of the type described in Section 3.03(b)(i)-(iii) have occurred with respect to the LIBOR Successor Rate then in effect, then the successor rate thereto shall be determined in accordance with the definition of “LIBOR Successor Rate.”
(c)    Notwithstanding anything to the contrary herein, (i) after any such determination by the Administrative Agent or receipt by the Administrative Agent of any such notice described under Section 3.03(b)(i)-(iii), as applicable, if the Administrative Agent determines that none of the LIBOR Successor Rates is available on or prior to the LIBOR Replacement Date, (ii) if the events or circumstances described in Section 3.03(b)(iv) have occurred but none of the LIBOR Successor Rates is available, or (iii) if the events or circumstances of the type described in Section 3.03(b)(i)-(iii) have occurred with respect to the LIBOR Successor Rate then in effect and the Administrative Agent determines that none of the LIBOR Successor Rates is available, then in each case, the Administrative Agent and the Borrower may amend this Agreement solely for the purpose of replacing LIBOR or any then current LIBOR Successor Rate in accordance with this Section 3.03 at the end of any Interest Period, relevant interest payment date or payment period for interest calculated, as applicable, with another alternate benchmark rate giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for such alternative benchmarks and, in each case, including any Related Adjustments and any other mathematical or other adjustments to such benchmark giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for such benchmarks, which adjustment or method for calculating such adjustment shall be published on an information service as selected by the Administrative Agent from time to time in its discretion and may be 

Exhibit 10.3

periodically updated. For the avoidance of doubt, any such proposed rate and adjustments shall constitute a LIBOR Successor Rate. Any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Borrower unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders object to such amendment.
(d)    If, at the end of any Interest Period, relevant interest payment date or payment period for interest calculated, no LIBOR Successor Rate has been determined in accordance with clauses (b) or (c) of this Section 3.03 and the circumstances under clauses (b)(i) or (b)(iii) above exist or the Scheduled Unavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain LIBOR Loans shall be suspended (to the extent of the affected LIBOR Loans, Interest Periods, interest payment dates or payment periods), and (y) the LIBOR component shall no longer be utilized in determining the Base Rate, until the LIBOR Successor Rate has been determined in accordance with clauses (b) or (c). Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of LIBOR Loans (to the extent of the affected LIBOR Loans, Interest Periods, interest payment dates or payment periods) or, failing that, will be deemed to have converted such request into a request for a Revolving Credit Borrowing of Base Rate Loans (subject to the foregoing clause (y)) in the amount specified therein.
(e)    Certificates; Other Information. Section 6.02 of the Credit Agreement is hereby amended by amending and restating clause (b) thereto in its entirety to read as follows:
(b)    concurrently with the delivery of the financial statements referred to in Sections 6.01(a), (b) and (d), a duly completed Compliance Certificate, including a calculation of the Consolidated Fixed Charge Coverage Ratio whether or not the financial covenant is being tested at such time, signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower (which delivery may, unless the Administrative Agent, or a Lender requests executed originals, be by electronic communication including fax or email and shall be deemed to be an original authentic counterpart thereof for all purposes);
(f)    Administration of Deposit Accounts. Section 6.18 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
6.18    Administration of Deposit Accounts. Schedule 6.18 sets forth all deposit accounts maintained by the Loan Parties, including all Dominion Accounts. The Loan Parties shall take all actions necessary, subject to the terms of the Security Agreement, to establish Administrative Agent’s control of each such deposit account (other than an account exclusively used for payroll, payroll taxes or employee benefits and one  or more deposit accounts established for the benefit of the Senior Notes Trustee containing solely proceeds of collateral for the Senior Notes (and not proceeds of the Collateral or any Loans) (each, a “Senior Notes Collateral Account”)), except for a deposit account containing not more than $250,000 at any time; provided that such deposit accounts over which Administrative Agent does not have control shall not contain more than $2,000,000 in the aggregate as of any date. The applicable Loan Party shall be the sole account holder of each deposit account and shall not allow any other Person (other than Administrative Agent or, solely in respect of any Senior Notes Collateral Account, the Senior Notes Trustee or, subject to and as set forth in the Second Lien Intercreditor Agreement, Ascribe) to have control over a deposit account or any property deposited therein. The Borrower shall promptly notify the Administrative Agent of any opening or closing of a deposit account by any Loan Party and, with the consent of Administrative Agent, will amend Schedule 6.18 to reflect same.
(g)    Liens. Section 7.01 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the end of clause (o) thereof, (ii) replacing the “.” at the end of clause (p) thereof with “;” and (iii) adding new clauses (q) and (r) which shall read as follows:
(q)    until such time as the Borrower incurs the Second Lien Refinancing Debt, junior Liens on Collateral (other than Eligible Pledged Cash) securing the Second Lien Note Obligations and subject to the Second Lien Intercreditor Agreement; and 
(r)    concurrently with or after repayment in full of the Second Lien Note Obligations, Liens on property of the Borrower and the Guarantors not constituting Collateral and securing the Second Lien Refinancing Debt. 

Exhibit 10.3

(h)    Other Indebtedness. Section 7.02 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the end of clause (n) thereof, (ii) replacing the “.” at the end of clause (o) thereof with “;” and (iii) adding a new clauses (p) and (q) which shall read as follows:
(p)    until such time as Borrower incurs the Second Lien Refinancing Debt, Indebtedness under the Second Lien Note and the other Loan Documents (as defined in the Second Lien Note) in an aggregate principal amount not to exceed $15,000,000; and 
(q)    concurrently with or after repayment in full of the Second Lien Note Obligations, the Second Lien Refinancing Debt.
(i)    Transactions with Affiliates. Section 7.08 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the end of clause (h) thereof, (ii) replacing the “.” at the end of clause (i) thereof with “, or” and (iii) adding a new clause (i) which shall read as follows:
(i)    the Second Lien Loans and, if applicable, the Second Lien Refinancing Debt (including agreements entered into and any upfront or commitment fees incurred in connection therewith). 
(j)    Burdensome Agreements. Section 7.09 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
7.09    Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement, any other Loan Document, any Senior Notes Document (and any refinancing, refunding, renewal or extension thereof permitted by Section 7.02(g)(ii)) and the Second Lien Refinancing Debt) that (a) limits the ability (i) of any Restricted Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to or invest in the Borrower or any Guarantor, except for any agreement in effect (A) on the date hereof and set forth on Schedule 7.09 or (B) at the time any Person becomes a Restricted Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of the Borrower, (ii) of any Restricted Subsidiary to Guarantee the Obligations or (iii) of the Borrower or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens on its property to secure the Obligations; provided, however, that (x) this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.02(f) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness or customary restrictions on assignment, encumbrances or subletting in leases and other contracts and (y) this clause (iii) and the preceding clause (i) shall not prohibit customary restrictions and conditions contained in agreements relating to the sale of a Loan Party or an asset pending such sale, provided that such restrictions and conditions apply only to such Loan Party or such asset that is to be sold and such sale is permitted under this Agreement; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure the Obligations.
(k)    Prepayments, Etc. of Indebtedness. Section 7.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
7.14    Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness, except (a) the prepayment of the Credit Extensions in accordance with the terms of this Agreement, (b) regularly scheduled payments of principal of Indebtedness set forth on Schedule 7.02 (other than relating to the Bridge Note), (c) mandatory prepayments, repurchases or redemptions of the Senior Notes as required under the Senior Notes Indenture as in effect on the date hereof, (d) refinancings, refundings, extensions or renewals of Indebtedness to the extent such refinancing, refunding, extension or renewal is permitted by Sections 7.02(d) or 7.02(g)(ii), as applicable, (together with mandatory repayments, repurchases or redemptions required by the terms thereof) (e) the conversion to or exchange for Equity Interests of convertible or exchangeable debt securities, and customary payments in cash in lieu of fractional shares in connection therewith, (f) any reimbursement for the Make-Whole Payment so long as (i) such reimbursement is made through the issuance of additional Senior Notes or the incurrence of the Second Lien Refinancing Debt or (ii) if such reimbursement is not made pursuant to clause (f)(i), the applicable Payment Conditions are satisfied before and after giving effect thereto, (g) the consummation of the Exchange Transaction, (h) prepayments of Indebtedness relating to the Bridge Note so long as (i) such 

Exhibit 10.3

prepayments are made solely with proceeds from the sale of fixed assets constituting collateral for the Senior Notes (including the repayment of Capitalized Leases relating to such fixed assets) and not with the proceeds of any Collateral or (ii) if such prepayments are not made pursuant to clause (h)(i), the applicable Payment Conditions are satisfied before and after giving effect thereto or such prepayments are consistent with those described in clause (D) of Section 7.02(g)(ii), (i) prepayments of Indebtedness relating to the Second Lien Refinancing Debt so long as (i) such prepayments are made solely with proceeds from the sale of fixed assets constituting collateral for the Senior Notes (including the repayment of Capitalized Leases relating to such fixed assets) and not with the proceeds of any Collateral or (ii) if such prepayments are not made pursuant to clause (i)(i), the applicable Payment Conditions are satisfied before and after giving effect thereto or, if the Second Lien Refinancing Debt takes the form of notes, such prepayments are consistent with those described in the proviso to clause (D) of Section 7.02(g)(ii), (j) prepayments of Indebtedness relating to the repayment of Capitalized Leases so long as (i) such prepayments are made solely with proceeds from the sale of fixed assets constituting collateral for the Senior Notes and not with the proceeds of any Collateral or (ii) if such prepayments are not made pursuant to clause (j)(i), the applicable Payment Conditions are satisfied before and after giving effect thereto, (k) prepayments of Indebtedness relating to the Second Lien Loans so long as (i) such prepayments are made solely with proceeds from the Second Lien Refinancing Debt or (ii) if such prepayments are not made pursuant to clause (k)(i), the applicable Payment Conditions are satisfied before and after giving effect thereto and (l) any other prepayments or redemptions with respect to Indebtedness not otherwise permitted pursuant to this Section 7.14; provided that, in the case of this clause (l), the applicable Payment Conditions are satisfied before and after giving effect thereto.
(l)    Amendments, Etc. of Indebtedness. A new clause (d) is hereby added to Section 7.15 of the Credit Agreement to read as follows:
(d)    Amend, modify or change in any manner any term or condition of Second Lien Note or any other material agreements, supplements and other documents executed in connection therewith, except for any amendments or modifications permitted by the Second Lien Intercreditor Agreement.
(m)    Events of Default. Section 8.01 of the Credit Agreement is hereby amended by amending and restating clause (e) thereto in its entirety to read as follows:
(e)    Cross-Default.  (i) Any Loan Party or any Restricted Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of the Bridge Note, the Second Lien Note or the Second Lien Refinancing Debt or any other Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $15,000,000 (including the Senior Notes), or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness (other than secured Indebtedness that becomes due as a result of the voluntary sale or transfer, casualty or condemnation of the assets securing such Indebtedness) or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event under this clause (B) is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Subsidiary as a result thereof is greater than $15,000,000; or
(n)    Electronic Signatures. Section 10.17 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Exhibit 10.3

10.17    Electronic Signatures.  This Agreement, the Loan Documents and any other document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Agreement (each a “Communication”), including Communications required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures.  Each Loan Party agrees that any Electronic Signature on or associated with any Communication shall be valid and binding on such Loan Party to the same extent as a manual signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of such Loan Party enforceable against such in accordance with the terms thereof to the same extent as if manually executed.  Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication.  For the avoidance of doubt, the authorization under this paragraph may include use or acceptance by Administrative Agent and each of the Lenders of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention.  Administrative Agent and each of the Lenders may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document.  All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by Administrative Agent pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent Administrative Agent has agreed to accept such Electronic Signature, Administrative Agent and each of the Lenders shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party without further verification and (b) upon the request of Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by such manually executed counterpart.  For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.
3.    Conditions to Effectiveness. This Amendment shall become effective as of the date first written above only upon satisfaction in full (or written waiver, including in the form of an email, by the Administrative Agent) of the following conditions precedent to the satisfaction of Administrative Agent and the Lenders (the “Amendment Effective Date”):
(a)    Delivery of Documents. Administrative Agent shall have received on or before the Amendment Effective Date the following, each dated the Amendment Effective Date, unless indicated otherwise:
(i)    this Amendment, duly executed by the Borrower, the Guarantors, Administrative Agent and the Required Lenders; 
(ii)    the Second Lien Intercreditor Agreement, duly executed by Ascribe and Administrative Agent and acknowledged by the Borrower and the Guarantors;
(iii)    a copy of the fully executed Second Lien Note, Second Lien Security Agreement and all material agreements, supplements and other documents executed in connection therewith, in each case, in form and substance satisfactory to the Administrative Agent;
(iv)    a Second Amended and Restated Deposit Account Control Agreement, duly executed by the Administrative Agent, Bank of America, N.A., as Bank, and the Loan Parties party thereto;
(v)    a certificate, in form and substance reasonably satisfactory to Administrative Agent, from a Responsible Officer of the Borrower certifying as to the representations and warranties set forth in Sections 4(a), (b), (e) and (f);
(vi)    a certificate of each Loan Party certifying (A) that there has been no change to the Loan Parties’ Organization Documents since the Closing Date (or otherwise attaching such changed Organization Documents or resolutions) and (B) resolutions authorizing execution and delivery of this Amendment and the other transactions contemplated hereunder; and
(vii)    good standing certificates of each Loan Party, issued by the Secretary of State or other appropriate official of such Loan Party’s jurisdiction of organization; 

Exhibit 10.3

(b)    Initial Funding of Second Lien Loans. Administrative Agent shall have received satisfactory evidence of the Borrower’s receipt of the net proceeds of the initial Second Lien Loans in an amount not less than $7,359,375.
(c)    Fees and Expenses. The Borrower shall have paid (i) a consent fee of $10,000 to each Lender executing this Amendment, which fee shall be non-refundable and fully earned and due and payable in cash on the date hereof, and (ii) all other fees and expenses to Administrative Agent incurred on or prior to the Amendment Effective Date that are required to be paid under the Loan Documents, including all invoiced fees and expenses of Administrative Agent’s legal counsel. 
4.    Representations and Warranties. The Borrower hereby represents and warrants to Administrative Agent and Lenders as follows:
(a)    Representations and Warranties. After giving effect to this Amendment, the representations and warranties herein, in Article V of the Credit Agreement and in each other Loan Document are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to materiality in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of such date as though made on and as of such date (except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case, such representation or warranty shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to materiality in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of such earlier date).
(b)    No Default. No Default or Event of Default has occurred and is continuing as of the Amendment Effective Date or would result from this Amendment becoming effective in accordance with its terms.
(c)    Authorization, Etc. Each Loan Party is duly authorized to execute, deliver and perform this Amendment and each other Loan Document to which it is a party. The execution, delivery and performance of the Loan Documents, as amended hereby, have been duly authorized by all necessary action, and do not (i) contravene the terms of any Loan Party’s Organization Documents; (ii) conflict with or result in any breach or contravention of, under, or require any payment to be made under any Contractual Obligation to which a Loan Party is a party or affecting a Loan Party or the properties of a Loan Party or any of its Restricted Subsidiaries, except for conflicts, breaches or contraventions that could not reasonably be expected to result in a Material Adverse Effect, (iii) violate any Law or any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which a Loan Party or its property is subject; or (iv) result in the creation or imposition of any Lien on any property of the Borrower or any Restricted Subsidiary except Liens created under the Loan Documents. 
(d)    Enforceability of Loan Documents. This Amendment is, and each other Loan Document to which any Loan Party is a party, is, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, except as enforceability may be limited by equitable principles or by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.
(e)    Governmental Approvals. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Amendment or any other Loan Document. 
(f)    Indenture Compliance. None of the execution or performance of this Amendment, the execution or performance of the Second Lien Note and related documents nor borrowing of the Second Lien Loans violates any of the terms of the Senior Notes Indenture, including Sections 3.2 and 3.3 thereof, or any of the other Senior Notes Documents.
5.    Continued Effectiveness of the Credit Agreement and Other Loan Documents. Each Loan Party hereby (a) acknowledges and consents to this Amendment, (b) confirms and agrees that the Credit Agreement and each other Loan Document to which it is a party, in each case, to the extent amended hereby, is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Amendment Effective Date, all references in any such Loan Document to the “Credit Agreement”, the “Agreement”, “thereto”, “thereof’, “thereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended by this Amendment, and (c) confirms and agrees that, 

Exhibit 10.3

to the extent that any such Loan Document purports to assign or pledge to Administrative Agent, for the benefit of it and the Lenders, or to grant to Administrative Agent, for the benefit of it and the Lenders, a security interest in or Lien on any Collateral as security for the Obligations of the Loan Parties from time to time existing in respect of the Credit Agreement and the other Loan Documents, such pledge, assignment and/or grant of the security interest or Lien is hereby ratified and confirmed in all respects. This Amendment does not and shall not affect any of the obligations of the Loan Parties, other than as expressly provided herein, including, without limitation, the Loan Parties’ obligations to repay the Loans in accordance with the terms of the Credit Agreement or the obligations of the Loan Parties under the other Loan Documents to which they are a party, all of which obligations, as amended hereby, shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document.
6.    No Novation. Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Credit Agreement or instruments securing the same, which shall remain in full force and effect, except as modified hereby.
7.    No Representations by Administrative Agent or Lenders. Each Loan Party hereby acknowledges that it has not relied on any representation, written or oral, express or implied, by Administrative Agent or any Lender, other than those expressly contained herein, in entering into this Amendment.
8.    Further Assurances. The Loan Parties shall execute any and all further documents, agreements and instruments, and take all further actions, as may be required under any applicable Law or as Administrative Agent may reasonably request, in order to effect the purposes of this Amendment.
9.    Miscellaneous.
(a)    This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart of this Amendment.
(b)    Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
(c)    UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS AMENDMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES THAT WOULD SELECT THE LAWS OF A DIFFERENT STATE EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.
(d)    Each Loan Party hereby acknowledges and agrees that this Amendment constitutes a “Loan Document” under the Credit Agreement.
(e)    Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
(f)    By the execution of this Amendment, the Lenders party hereto hereby authorize Administrative Agent to enter into the Second Lien Intercreditor Agreement.
[Remainder of page intentionally left blank.]

 

Exhibit 10.3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered as of the date set forth on the first page hereof.

						
	BORROWER:	
		
	BASIC ENERGY SERVICES, INC.	
		
	By:	/s/ Keith L. Schilling
	Name:	Keith L. Schilling 
	Title:	President and Chief Executive Office
		
		Notice Information:

		
		801 Cherry Street, Suite 2100
		Fort Worth, TX 76102
		

 

  

 

Exhibit 10.3

						
	GUARANTORS	
		
		BASIC ENERGY SERVICES GP, LLC
		BASIC ENERGY SERVICES LP, LLC
		BASIC ESA, INC.
		SCH Disposal, L.L.C.
		TAYLOR INDUSTRIES, LLC
		AGUA LIBRE HOLDCO LLC
		AGUA LIBRE ASSET CO LLC
		AGUA LIBRE MIDSTREAM LLC
		C&J WELL SERVICES, INC.
		INDIGO INJECTION #3, LLC
		KVS TRANSPORTATION, INC.
		
	By:	/s/ Keith L. Schilling
	Name:	Keith L. Schilling
	Title:	President and Chief Executive Office
		
	BASIC ENERGY SERVICES, L.P.	
		
	By:	Basic Energy Services GP, LLC,
		Its General Partner
		
	By:	/s/ Keith L. Schilling
	Name:	Keith L. Schilling
	Title:	President and Chief Executive Office

Exhibit 10.3

						
	ADMINISTRATIVE AGENT AND LENDERS:	
		
	BANK OF AMERICA, N.A., as Administrative 
	
	Agent, a Lender, an L/C Issuer and Swing Line	
	Lender	
		
	By:	/s/ Tanner J. Pump
	Name:	Tanner J. Pump
	Title:	Senior Vice President

Exhibit 10.3

						
	UBS AG, STAMFORD BRANCH, as a Lender
	
	and a L/C Issuer	
		
	By:	/s/ Houssem Daly
	Name:	Houssem Daly
	Title:	Associate Director
		
	By:	/s/ Anthony Joseph
	Name:	Anthony Joseph
	Title:	Associate Director

Exhibit 10.3

						
	TEXAS CAPITAL BANK, NATIONAL	
	ASSOCIATION, as a Lender
	
		
	By:	/s/ Dan Clubb
	Name:	Dan Clubb
	Title:	SVP

Exhibit 10.3

						
	SIEMENS FINANCIAL SERVICES, INC., as a 
	
	Lender	
		
	By:	/s/ John Finore
	Name:	John Finore
	Title:	Vice President
		
	By:	/s/ Richard Holston
	Name:	Richard Holston
	Title:	Vice PresidentExhibit 10.3

 

TAX RECEIVABLE AGREEMENT

 

among

 

AMERIHOME, INC.,

 

and

 

THE PERSONS NAMED HEREIN

 

Dated as of [·]

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   DEFINITIONS
    	
5
    
	
 
    	
 
    	
 
    
	
Section 1.1
    	
Definitions
    	
5
    
	
 
    	
 
    	
 
    
	
ARTICLE II   DETERMINATION OF CERTAIN REALIZED TAX BENEFIT
    	
12
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
Basis Adjustment
    	
12
    
	
 
    	
 
    	
 
    
	
Section 2.2
    	
Tax Benefit Schedule
    	
12
    
	
 
    	
 
    	
 
    
	
Section 2.3
    	
Procedures, Amendments
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE III   TAX BENEFIT PAYMENTS
    	
14
    
	
 
    	
 
    	
 
    
	
Section 3.1
    	
Payments
    	
14
    
	
 
    	
 
    	
 
    
	
Section 3.2
    	
No Duplicative Payments
    	
15
    
	
 
    	
 
    	
 
    
	
Section 3.3
    	
Pro Rata Payments;   Limited Taxable Income; Excess Payments
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   TERMINATION
    	
16
    
	
 
    	
 
    	
 
    
	
Section 4.1
    	
Early Termination and   Breach of Agreement
    	
16
    
	
 
    	
 
    	
 
    
	
Section 4.2
    	
Early Termination   Notice
    	
17
    
	
 
    	
 
    	
 
    
	
Section 4.3
    	
Payment upon Early   Termination
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE V   SUBORDINATION AND LATE PAYMENTS
    	
18
    
	
 
    	
 
    	
 
    
	
Section 5.1
    	
Subordination
    	
18
    
	
 
    	
 
    	
 
    
	
Section 5.2
    	
Late Payments by the   Corporate Taxpayer
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   NO DISPUTES; CONSISTENCY; COOPERATION
    	
19
    
	
 
    	
 
    	
 
    
	
Section 6.1
    	
Participation in the   Corporate Taxpayer’s and Aris LLC’s Tax Matters
    	
19
    
	
 
    	
 
    	
 
    
	
Section 6.2
    	
Consistency
    	
19
    
	
 
    	
 
    	
 
    
	
Section 6.3
    	
Cooperation
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   MISCELLANEOUS
    	
20
    
	
 
    	
 
    	
 
    
	
Section 7.1
    	
Notices
    	
20
    
	
 
    	
 
    	
 
    
	
Section 7.2
    	
Counterparts
    	
20
    
	
 
    	
 
    	
 
    
	
Section 7.3
    	
Entire Agreement; No   Third Party Beneficiaries
    	
20
    
	
 
    	
 
    	
 
    
	
Section 7.4
    	
Governing Law
    	
20
    
	
 
    	
 
    	
 
    
	
Section 7.5
    	
Severability
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.6
    	
Successors; Assignment;   Amendments; Waivers
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.7
    	
Titles and Subtitles
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.8
    	
Resolution of Disputes
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.9
    	
Reconciliation
    	
22
    

 

 

	
Section 7.10
    	
Withholding
    	
23
    
	
 
    	
 
    	
 
    
	
Section 7.11
    	
Admission of the   Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets
    	
23
    
	
 
    	
 
    	
 
    
	
Section 7.12
    	
Confidentiality
    	
24
    
	
 
    	
 
    	
 
    
	
Section 7.13
    	
LLC Agreement
    	
24
    
	
 
    	
 
    	
 
    
	
Section 7.14
    	
Change in Law
    	
24
    

 

3

 

TAX RECEIVABLE AGREEMENT

 

This TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of [•], 2020, is hereby entered into by and among AmeriHome, Inc., a Delaware corporation (the “Corporate Taxpayer”), and each of the persons from time to time party hereto (the “TRA Parties”).

 

RECITALS

 

WHEREAS, the TRA Parties hold member interests (the “LLC Interests”) in Aris Mortgage Holding Company, LLC, a Delaware limited liability company (“Aris LLC”), which is classified as a partnership for United States federal income tax purposes;

 

WHEREAS, the Corporate Taxpayer, which is classified as an association taxable as a corporation for United States federal income tax purposes, is the managing member of Aris LLC, and will hold LLC Interests;

 

WHEREAS, in connection with the IPO (as defined below) the Corporate Taxpayer will use the net proceeds from the IPO to purchase LLC Interests in Aris LLC from certain holders of such LLC Interests pursuant to those certain unit purchase agreements, dated and effective as of [·], by and between such holders (the “Sellers”) and the Corporate Taxpayer (the “Unit Purchase Agreements”);

 

WHEREAS, the LLC Interests together with corresponding shares of Class B common stock of the Corporate Taxpayer held or to be held from time to time by the TRA Parties may be exchanged from time to time for Class A common stock of the Corporate Taxpayer (the “Class A Shares”), or, at the election of the Corporate Taxpayer, a cash payment, in each case subject to the provisions of the LLC Agreement and the Exchange Agreement (each transfer of LLC Interests described in this Recital and the immediately preceding Recital, an “Exchange”);

 

WHEREAS, Aris LLC and each of its direct and indirect Subsidiaries treated as a partnership for United States federal income tax purposes currently have and will have in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year in which an Exchange occurs;

 

WHEREAS, the income, gain, loss, expense, deduction and other Tax items of the Corporate Taxpayer may be affected by (i) Basis Adjustments, (ii) Section 704(c) Benefits and (iii) Imputed Interest; and

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments, Section 704(c) Benefits and Imputed Interest on the liability for Taxes of the Corporate Taxpayer.

 

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

 

4

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1            Definitions.  As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

“Actual Tax Liability” means, with respect to any Taxable Year, the actual liability for U.S. federal income Taxes of (i) the Corporate Taxpayer and (ii) without duplication, Aris LLC, but only with respect to U.S. federal income Taxes imposed on Aris LLC and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent) for such Taxable Year; provided, that the actual liability for Taxes described in clauses (i) and (ii) shall be calculated assuming the deductions of (and other impacts of) state and local taxes are excluded for U.S. federal income Tax purposes.

 

“Advance Payment” is defined in Section 3.1(b) of this Agreement.

 

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

 

“Agreed Rate” means a per annum rate of LIBOR plus 100 basis points.

 

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

 

“Amended Schedule” is defined in Section 2.3(b) of this Agreement.

 

“Aris LLC” is defined in the Recitals of this Agreement.

 

“Attributable” is defined in Section 3.1(b) of this Agreement.

 

“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 734(b), 755 and 1012 of the Code, the Treasury Regulations promulgated thereunder and Rev. Rul. 99-6, 1991-1 CB 432 (in situations where, as a result of one or more Exchanges, Aris LLC becomes an entity that is disregarded as separate from its owner for United States federal income tax purposes) or under Sections 734(b), 743(b), 754 and 755 of the Code and the Treasury Regulations promulgated thereunder (in situations where, following an Exchange, Aris LLC remains in existence as an entity for United States federal income tax purposes) and, in each case, comparable sections of state and local tax laws, as a result of an Exchange and the payments made pursuant to this Agreement (to the extent permitted by law).

 

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

 

5

 

“Board” means the Board of Directors of the Corporate Taxpayer (or any committee of the Board validly authorized to act on behalf of the Board).

 

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

 

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

 

(i)                                     any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto, excluding (x) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporate Taxpayer in substantially the same proportions as their ownership of stock in the Corporate Taxpayer and (y) any TRA Party or any of their Affiliates, who is, or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporate Taxpayer representing more than 50% of the combined voting power of the Corporate Taxpayer’s then outstanding voting securities; or

 

(ii)                                  the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving:  individuals who, on the IPO Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayer’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or

 

(iii)                               there is consummated a merger or consolidation of the Corporate Taxpayer with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of the Corporate Taxpayer immediately prior to such merger or consolidation do not continue to represent or are not converted or exchanged into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or

 

(iv)                              the shareholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer or there is consummated an agreement or series of related agreements for the sale, lease or other disposition, directly or indirectly, by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets, other than such sale or other disposition by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Corporate Taxpayer in substantially the same

 

6

 

proportions as their ownership of the Corporate Taxpayer immediately prior to such sale.

 

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

 

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

 

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

 

“Combined State Tax Rate” means five (5) percent.

 

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

 

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

 

“Corporate Taxpayer Return” means the U.S. federal income Tax Return of the Corporate Taxpayer filed with respect to Taxes of any Taxable Year.

 

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

 

“Default Rate” means a per annum rate of LIBOR plus 500 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax and shall also include the acquiescence of the Corporate Taxpayer to the amount of any assessed liability for Tax.

 

“Dispute” has the meaning set forth in Section 7.8(a) of this Agreement.

 

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

 

“Early Termination Effective Date” is defined in Section 4.2 of this Agreement.

 

“Early Termination Notice” is defined in Section 4.2 of this Agreement.

 

7

 

“Early Termination Schedule” is defined in Section 4.2 of this Agreement.

 

“Early Termination Payment” is defined in Section 4.3(b) of this Agreement.

 

“Early Termination Rate” means a per annum rate of the lesser of (i) 6.5%, compounded annually, and (ii) LIBOR plus 100 basis points.

 

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

 

“Exchange Agreement” means the Exchange Agreement, dated as of [•] among the Corporate Taxpayer, Aris LLC and the holders of LLC Interests party thereto, as amended from time to time.

 

“Exchange Date” means the date of any Exchange.

 

“Exchange Notice” shall have the meaning set forth in the Exchange Agreement.

 

“Exchange Basis Schedule” is defined in Section 2.1 of this Agreement.

 

“Expert” is defined in Section 7.9 of this Agreement.

 

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for U.S. federal income Taxes of (i) the Corporate Taxpayer and (ii) without duplication, Aris LLC, but only with respect to U.S. federal income Taxes imposed on Aris LLC and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent), in each case using the same methods, elections, conventions, U.S. federal income tax rate and similar practices used on the relevant Corporate Taxpayer Return, but (i) using the Non-Stepped Up Tax Basis, (ii) without taking into account any Section 704(c) Benefits, and (iii) excluding any deduction attributable to Imputed Interest for the Taxable Year.  Hypothetical Tax Liability shall be determined (i) without taking into account the carryover or carryback of any Tax item or attribute (or portions thereof) that is available for use because of any Basis Adjustments, any Section 704(c) Benefits and any Imputed Interest, and (ii) assuming, solely for purposes of calculating the liability for U.S. federal income Taxes, in order to prevent double counting, that the deductions of (and other impacts of) state and local taxes are excluded for U.S. federal income Tax purposes.

 

“Imputed Interest” in respect of a TRA Party shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code with respect to the Corporate Taxpayer’s payment obligations in respect of such TRA Party under this Agreement.

 

“Interest Amount” is defined in Section 3.1(b) of this Agreement.

 

“IPO” means the initial public offering of Class A Shares by the Corporate Taxpayer.

 

“IPO Date” means the closing date of the IPO.

 

“IRS” means the United States Internal Revenue Service.

 

8

 

“LIBOR” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period; provided, however, that if at any time a majority of the Corporate Taxpayer’s then-outstanding repurchase or warehouse agreements or other financing arrangements providing for the financing of mortgage loans, discontinue the use of LIBOR in determining pricing or interest rates and apply an alternative benchmark rate (such agreements that have discontinued the use of LIBOR, the “discontinued agreements”), then, during any period, all references in this Agreement to LIBOR shall automatically and without further action by any party refer to the sum of (1) the alternative benchmark rate applied in such period in the majority of the discontinued agreements (the “successor benchmark”) and (2) the weighted average mathematical spread adjustment (which may be zero, negative or positive and shall be determined based on the aggregate principal amount of financing provided under each such discontinued agreement, whether utilized or unutilized at the time that successor benchmark is adopted) applied to such successor benchmark in the discontinued agreements.

 

“LLC Agreement” means the Limited Liability Company Agreement of Aris LLC, as amended from time to time.

 

“LLC Interests” is defined in the Recitals of this Agreement.

 

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

 

“Material Objection Notice” has the meaning set forth in Section 4.2 of this Agreement.

 

“Net Tax Benefit” is defined in Section 3.1(b) of this Agreement.

 

“Non-Party Member” means each Person that owns, whether directly or indirectly, LLC Interests in Aris LLC who is not a party hereto, in each case, as of the date of this Agreement.

 

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

 

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

 

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

 

“Realized Tax Benefit” means, for a Taxable Year, the sum of (i) the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability and (ii) the State Tax Benefit.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

“Realized Tax Detriment” means, for a Taxable Year, the sum of (i) the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability and (ii) the State Tax Detriment.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

 

“Reconciliation Dispute” has the meaning set forth in Section 7.9 of this Agreement.

 

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

 

“Reference Asset” means an asset that is held by Aris LLC, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity (but only if such indirect Subsidiaries are held only through Subsidiaries treated as partnerships or disregarded entities) for purposes of the applicable Tax.  A Reference Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to a Reference Asset.

 

“Schedule” means any of the following:  (i) an Exchange Basis Schedule, (ii) a Tax Benefit Schedule, or (iii) the Early Termination Schedule.

 

“Section 704(c) Benefits” means the disproportionate allocation of tax items of income, gain, deduction and loss to, or away from, the Corporate Taxpayer pursuant to Section 704(c) of the Code in respect of any difference between the fair market value and the tax basis of the Reference Assets to the extent such disproportionate allocation arises from any contribution (or deemed contribution) to Aris LLC in connection with the IPO or any future equity offering by the Corporate Taxpayer in which cash proceeds from such offering are contributed to Aris LLC.  For the avoidance of doubt, such amount would include disproportionate allocations (if any) of tax items of income and gain to a TRA Party and away from the Corporate Taxpayer.

 

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

 

“Senior Obligations” is defined in Section 5.1 of this Agreement.

 

“State Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability; provided that, for purposes of determining the State Tax Benefit, each of the Hypothetical Tax Liability and the Actual Tax Liability shall be calculated using the Combined State Tax Rate instead of the rates applicable for U.S. federal income tax purposes.

 

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“State Tax Detriment” means, for a Taxable Year, the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability; provided that, for purposes of determining the State Tax Detriment, each of the Actual Tax Liability and the Hypothetical Tax Liability shall be calculated using the Combined State Tax Rate instead of the rates applicable for U.S. federal income tax purposes.

 

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

 

“Tax Benefit Payment” is defined in Section 3.1(b) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.2 of this Agreement.

 

“Tax Receivable Agreement” shall mean this Agreement.

 

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

 

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

 

“Taxes” means any and all United States federal taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.

 

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

 

“TRA Party” is defined in the Preamble of this Agreement.

 

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

 

“Unit Purchase Agreements” is defined in the Recitals of this Agreement.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that in each Taxable Year ending on or after such Early Termination Date, (1) the Corporate Taxpayer will have taxable income sufficient to fully utilize (i) the deductions arising from the Basis Adjustments, the Section 704(c) Benefits and the Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments, the Section

 

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704(c) Benefits and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available and (ii) any net operating loss, excess interest deduction,  or credit carryovers or carrybacks (or similar items with respect to carryover or carrybacks) generated by deductions arising from Basis Adjustments, Section 704(c) Benefits or Imputed Interest that are available as of the date of such Early Termination Date, (2) the United States federal income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) all taxable income of the Corporate Taxpayer will be subject to the maximum applicable tax rate for U.S. federal income tax purposes throughout the relevant period, (4) any non-amortizable assets will be disposed of on the fifteenth anniversary of the applicable Basis Adjustment in a fully taxable transaction for U.S. federal income tax purposes; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale of the relevant asset (if earlier than such fifteenth anniversary), and (5) if, at the Early Termination Date, there are LLC Interests that have not been Exchanged, then each such LLC Interest shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

 

ARTICLE II

 

DETERMINATION OF CERTAIN REALIZED TAX BENEFIT

 

Section 2.1                                    Basis Adjustment.  Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of the Corporate Taxpayer for each Taxable Year in which any Exchange has been effected by any TRA Party (including the Taxable Year in which the IPO occurs), the Corporate Taxpayer shall deliver to such TRA Party a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement, including (i) the Non-Stepped Up Tax Basis of the Reference Assets in respect of such TRA Party as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Reference Assets in respect of such TRA Party as a result of the Exchanges effected in such Taxable Year by such TRA Party, calculated (x) in the aggregate, (y) solely with respect to Exchanges by such TRA Party, and (z) in the case of a Basis Adjustment under Section 734(b) of the Code solely with respect to the amount that is available to the Corporate Taxpayer in such Taxable Year, (iii) the period (or periods) over which the Reference Assets in respect of such TRA Party are amortizable and/or depreciable, and (iv) the period (or periods) over which each Basis Adjustment in respect of such TRA Party is amortizable and/or depreciable. Upon the request of a TRA Party, the Corporate Taxpayer shall also provide projections of the yearly amount of Section 704(c) Benefits with respect to such TRA Party.

 

Section 2.2                                    Tax Benefit Schedule.

 

(a)                                 Tax Benefit Schedule.  Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of the Corporate Taxpayer for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment a portion of which is Attributable to a TRA Party, the Corporate Taxpayer shall provide to such TRA Party a schedule showing, in reasonable detail, the calculation of the Tax Benefit Payment for such Taxable Year and the calculation of the Realized Tax Benefit and Realized Tax Detriment and components thereof (a “Tax Benefit

 

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Schedule”).  Each Tax Benefit Schedule will become final as provided in Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the procedures set forth in Section 2.3(b)).

 

(b)                                 Applicable Principles. The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for taxes of the Corporate Taxpayer for such Taxable Year attributable to the Basis Adjustments, Section 704(c) Benefits and Imputed Interest, determined using a “with and without” methodology.  For purposes of calculating the Realized Tax Benefit or Realized Tax Detriment for any period, carryovers or carrybacks of any Tax item attributable to the Basis Adjustments, Section 704(c) Benefits and Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type.  If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment, Section 704(c) Benefits or Imputed Interest and another portion that is not, such respective portions shall be considered to be used in accordance with the “with and without” methodology.  The parties agree that (i) all Tax Benefit Payments and other payments under this Agreement (to the extent permitted by law and other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase price adjustments that give rise to further Basis Adjustments to Reference Assets for the Corporate Taxpayer and (B) have the effect of creating additional Basis Adjustments to Reference Assets for the Corporate Taxpayer in the year of payment, and (ii) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.

 

Section 2.3                                    Procedures, Amendments.

 

(a)                                 Procedure.  Every time the Corporate Taxpayer delivers to a TRA Party an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.3(b), and any Early Termination Schedule or amended Early Termination Schedule, the Corporate Taxpayer shall also (x) deliver to such TRA Party schedules, valuation reports, if any, and work papers, as determined by the Corporate Taxpayer or requested by such TRA Party, providing reasonable detail regarding the preparation of the Schedule and (y) allow such TRA Party reasonable access, at no cost, to the appropriate representatives at the Corporate Taxpayer, as determined by the Corporate Taxpayer or requested by such TRA Party, in connection with a review of such Schedule.  Without limiting the application of the preceding sentence, each time the Corporate Taxpayer delivers to a TRA Party a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporate Taxpayer shall deliver to such TRA Party the Corporate Taxpayer Return, the reasonably detailed calculation by the Corporate Taxpayer of the applicable Hypothetical Tax Liability, the reasonably detailed calculation by the Corporate Taxpayer of the applicable Actual Tax Liability, as well as any other work papers as determined by the Corporate Taxpayer or requested by such TRA Party, provided that the Corporate Taxpayer shall be entitled to redact any information that it reasonably believes is unnecessary for purposes of determining the items in the applicable Schedule or amendment thereto.  An applicable Schedule or amendment thereto shall become final and binding on all parties thirty (30) calendar days after the first date on which such TRA Party has received the applicable Schedule or amendment thereto unless such TRA Party (i) within thirty (30) calendar days after receiving an applicable Schedule or amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such

 

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Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporate Taxpayer.  If the Corporate Taxpayer and any objecting TRA Party, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of an Objection Notice, the Corporate Taxpayer and such TRA Party shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the “Reconciliation Procedures”).

 

(b)                                 Amended Schedule.  The applicable Schedule for any Taxable Year may be amended from time to time by the Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified after the date the Schedule was provided to a TRA Party, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust an applicable Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an “Amended Schedule”).  The Corporate Taxpayer shall provide an Amended Schedule to each TRA Party within ninety (90) calendar days of the occurrence of an event referenced in clauses (i) through (vi) of the preceding sentence.

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.1                                    Payments.

 

(a)                                 Payments.  Within five (5) calendar days after a Tax Benefit Schedule delivered to a TRA Party becomes final in accordance with Section 2.3(a), the Corporate Taxpayer shall pay such TRA Party for such Taxable Year an amount equal to the excess, if any, of (i) the Tax Benefit Payment in respect of such TRA Party for such Taxable Year determined pursuant to Section 3.1(b) over (ii) the aggregate amount of Advance Payments previously made to such TRA Party under this Section 3.1(a) in respect of such Taxable Year.  In addition, the Corporate Taxpayer may, at its sole election, make Advance Payments to the TRA Parties in respect of a Taxable Year; provided that, if the Corporate Taxpayer makes Advance Payments, it shall make Advance Payments to all parties eligible to receive payments under this Agreement in proportion to their respective amount of anticipated remaining payments under this Agreement in respect of such Taxable Year.  Each such Tax Benefit Payment or such Advance Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by such TRA Party to the Corporate Taxpayer or as otherwise agreed by the Corporate Taxpayer and such TRA Party.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal estimated income tax payments.

 

(b)                                 A “Tax Benefit Payment” in respect of a TRA Party for a Taxable Year means an amount, not less than zero, equal to the sum of the portion of the Net Tax Benefit Attributable to such TRA Party and the Interest Amount with respect thereto.  A Net Tax Benefit is “Attributable” to a TRA Party to the extent that it is derived from any Basis Adjustment or any Imputed Interest that is attributable to the LLC Interests acquired by the Corporate Taxpayer in an Exchange

 

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undertaken by or with respect to such TRA Party.  The Net Tax Benefit arising out of a Section 704(c) Benefit will be “Attributable” to a TRA Party in the Taxable Year the TRA Party Exchanges LLC Interests to the extent the Section 704(c) Benefit is attributable to such LLC interests or such TRA Party.  For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of LLC Interests in Exchanges unless otherwise required by law.  The “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year, over the total amount of payments previously made under Section 3.1(a) of this Agreement (excluding payments attributable to Interest Amounts); provided, for the avoidance of doubt, that no TRA Party shall be required to return any portion of any previously made Tax Benefit Payment or Advance Payment; provided, further, for the avoidance of doubt, that any amount of Net Tax Benefit for a Taxable Year that is not Attributable to any TRA Party for such Taxable Year, shall be carried forward to future Taxable Years and be taken into account as part of the Tax Benefit Payment with respect to a TRA Party for the Taxable Year in which and to the extent such Net Tax Benefit becomes Attributable to such TRA Party.  The “Interest Amount” in respect of a TRA Party shall equal the interest on the amount of the unpaid Net Tax Benefit Attributable to such TRA Party for a Taxable Year, which interest shall accrue on any unpaid Net Tax Benefit from and after the due date (without extensions) for filing the Corporate Taxpayer Return for such Taxable Year, calculated at the Agreed Rate, until the date such unpaid amounts are paid.  “Advance Payments” in respect of a TRA Party for a Taxable Year means the payments made by the Corporate Taxpayer to such TRA Party as an advance of such TRA Party’s anticipated Tax Benefit Payment for such Taxable Year.  Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to the LLC Interests that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by utilizing Valuation Assumptions (1) and (4), substituting in each case the terms “the date of a Change of Control” for an “Early Termination Date.”  Notwithstanding anything to the contrary in this Agreement, after any lump-sum payment under Article IV of this Agreement in respect of present or future Tax attributes subject to this Tax Receivable Agreement, the Tax Benefit Payment, Net Tax Benefit and components thereof shall be calculated without taking into account any such attributes with respect to which such a lump sum payment has been made or any such lump-sum payment.

 

Section 3.2                                    No Duplicative Payments.  It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement.  The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized

 

Section 3.3                                    Pro Rata Payments; Limited Taxable Income; Excess Payments.

 

(a)                                 Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate amount of the Corporate Taxpayer’s tax benefit from the reduction in Tax liability as a result of the Basis Adjustments, Section 704(c) Benefits or Imputed Interest is limited in a particular Taxable Year because the Corporate Taxpayer does not have sufficient taxable income to fully utilize available deductions and other attributes, the limitation on the tax benefit for the Corporate Taxpayer shall be allocated among the TRA Parties eligible for payments under this Agreement in proportion to the respective amounts of Tax Benefit Payments that would have been determined under this Agreement if the Corporate Taxpayer had sufficient taxable income so that there were no such limitation.

 

(b)                                 After taking into account Section 3.3(a), if for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this

 

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Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that (i) the Corporate Taxpayer shall pay the same proportion of each Tax Benefit Payment due to each TRA Party due a payment under this Agreement in respect of such Taxable Year, without favoring one obligation over the other, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.

 

(c)                                  To the extent the Corporate Taxpayer makes a payment to a TRA Party in respect of a particular Taxable Year under Section 3.1(a) of this Agreement (taking into account Section 3.3(a) and (b), but excluding payments attributable to Interest Amounts) in an amount in excess of the amount of such payment that should have been made to such TRA Party in respect of such Taxable Year, then (i) such TRA Party shall not receive further payments under Section 3.1(a) until such TRA Party has foregone an amount of payments equal to such excess and (ii) the Corporate Taxpayer shall pay the amount of such TRA Party’s foregone payments to the other TRA Parties in a manner such that each of the other TRA Parties, to the maximum extent possible, shall have received aggregate payments under Section 3.1(a) of this Agreement (taking into account Section 3.3(a) and (b) of this Agreement but excluding payments attributable to Interest Amounts) in the amount it would have received if there had been no excess payment to such TRA Party.

 

ARTICLE IV

 

TERMINATION

 

Section 4.1                                    Early Termination and Breach of Agreement.

 

(a)                                 Unless terminated earlier pursuant to Section 4.1(b) or Section 4.1(c), this Agreement will terminate when there is no further potential for a Tax Benefit Payment pursuant to this Agreement. Tax Benefit Payments under this Agreement are not conditioned on any TRA Party retaining an interest in the Corporate Taxpayer or Aris LLC (or any successor thereto).

 

(b)                                 The Corporate Taxpayer may terminate this Agreement with respect to all amounts payable to the TRA Parties and with respect to all of the LLC Interests held by the TRA Parties at any time by paying to each TRA Party the Early Termination Payment in respect of such TRA Party; provided, however, that this Agreement shall only terminate pursuant to this Section 4.1(b) upon the receipt of the Early Termination Payment by all TRA Parties; provided, further, that the Corporate Taxpayer may terminate this Agreement pursuant to this Section 4.1(b) with respect to some or all of the amounts payable to less than all of the TRA Parties, if the Corporate Taxpayer and such TRA Parties agree in writing to do so; and provided, further that the Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.1(b) prior to the time at which an Early Termination Payment has been paid. Upon payment of the Early Termination Payment by the Corporate Taxpayer in accordance with this Section 4.1(b), the Corporate Taxpayer shall not have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporate Taxpayer, on one hand, and the TRA Party, on the other, as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the

 

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Early Termination Payment).  If an Exchange by a TRA Party occurs after the Corporate Taxpayer makes the Early Termination Payment to such TRA Party pursuant to this Section 4.1(b), the Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange.

 

(c)                                  In the event that the Corporate Taxpayer breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment within three (3) months of the date on which such payment is due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include (without duplication), but not be limited to, (1) the Early Termination Payments calculated as if an Early Termination Notice had been delivered on the date of such breach, (2) any Tax Benefit Payment in respect of a TRA Party agreed to by the Corporate Taxpayer and such TRA Party as due and payable but unpaid as of the date of such breach, and (3) any Tax Benefit Payment in respect of any TRA Party due for the Taxable Year ending with or including the date of such breach; provided that procedures similar to the procedures of Section 4.2 shall apply with respect to the determination of the amount payable by the Corporate Taxpayer pursuant to this sentence.  Notwithstanding the foregoing, in the event that the Corporate Taxpayer breaches this Agreement, each TRA Party shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three (3) months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due.  Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if the Corporate Taxpayer fails to make any Tax Benefit Payment when due to the extent that the Corporate Taxpayer has insufficient funds to make such payment despite using reasonable best efforts to obtain funds to make such payment (including by causing Aris LLC or any other Subsidiaries to distribute or lend funds for such payment and access any revolving credit facilities or other sources of available credit to fund any such amounts); provided that the interest provisions of Section 5.2 shall apply to such late payment; provided further that, solely with respect to a Tax Benefit Payment, if the Corporate Taxpayer does not have sufficient cash to make such payment as a result of limitations imposed by existing credit agreements to which Aris LLC is a party, which limitations are effective as of the date of this Agreement, Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate.

 

Section 4.2                                    Early Termination Notice.  If the Corporate Taxpayer chooses to exercise its right of early termination under Section 4.1 above, the Corporate Taxpayer shall deliver to each TRA Party with respect to whom such right of early termination is being exercised notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Corporate Taxpayer’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment(s) due to each such TRA Party.  Each Early Termination Schedule shall become final and binding on all parties thirty (30) calendar days after the first date on which the TRA Party has received such Schedule or amendment thereto unless such TRA Party (i) within thirty (30) calendar days after receiving the

 

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Early Termination Schedule or any amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporate Taxpayer (such thirty (30) calendar day date as modified, if at all by clauses (i) or (ii), the “Early Termination Effective Date”).  If the Corporate Taxpayer and a TRA Party, for any reason, are unable to successfully resolve the issues raised in such notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of the Material Objection Notice, the Corporate Taxpayer and such TRA Party shall employ the Reconciliation Procedures in which case such Schedule becomes binding ten (10) days after the conclusion of the Reconciliation Procedures.

 

Section 4.3                                    Payment upon Early Termination.

 

(a)                                 Within three (3) calendar days after an Early Termination Effective Date, the Corporate Taxpayer shall pay to each TRA Party with respect to whom such termination has just occurred an amount equal to the Early Termination Payment with respect to such TRA Party.  Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by such TRA Party or as otherwise agreed by the Corporate Taxpayer and such TRA Party.

 

(b)                                  “Early Termination Payment” in respect of a TRA Party shall equal the present value, discounted at the Early Termination Rate (using a mid-year convention) as of the applicable Early Termination Effective Date, of all Tax Benefit Payments in respect of such TRA Party that would be required to be paid by the Corporate Taxpayer to such TRA Party beginning from the Early Termination Date and assuming that the Valuation Assumptions in respect of such TRA Party are applied.  If for any reason the Corporate Taxpayer does not fully satisfy its payment obligations due under this Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that (i) no Early Termination Payment shall be made until all Tax Benefit Payments under Section 3.1 in respect of the current Taxable Year and all prior Taxable Years have been made in full, (ii) no Early Termination Payments shall be made until all Early Termination Payments made pursuant to earlier-provided Early Termination Notices have been made in full, and (iii) if the Corporate Taxpayer does not pay all Early Termination Payments in respect of Early Termination Notices given in the same calendar year, the total amount paid shall be allocated pro-rata based on the outstanding Early Termination Payments due.

 

ARTICLE V

 

SUBORDINATION AND LATE PAYMENTS

 

Section 5.1                                    Subordination.  Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment, Early Termination Payment or any other payment required to be made by the Corporate Taxpayer to the TRA Parties under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporate Taxpayer and its Subsidiaries (such obligations, “Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of the Corporate Taxpayer that are not

 

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Senior Obligations.  For the avoidance of doubt, any amounts owed by the Corporate Taxpayer under this Agreement are not Senior Obligations.

 

Section 5.2                                    Late Payments by the Corporate Taxpayer.  The amount of all or any portion of any Tax Benefit Payment, Early Termination Payment or other payment under this Agreement not made to the TRA Parties when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment, Early Termination Payment or other payment was due and payable.

 

ARTICLE VI

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.1                                    Participation in the Corporate Taxpayer’s and Aris LLC’s Tax Matters.  Except as otherwise provided herein, the Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporate Taxpayer and Aris LLC, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.  Notwithstanding the foregoing, the Corporate Taxpayer shall notify a TRA Party of, and (to the extent permitted by law or regulation) will use its best efforts to keep such TRA Party reasonably informed with respect to, the portion of any audit of the Corporate Taxpayer and Aris LLC by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of such TRA Party under this Agreement, and shall use its best efforts to provide to each such TRA Party reasonable opportunity to provide information and other input to the Corporate Taxpayer, Aris LLC and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and Aris LLC shall not be required to take any action that is inconsistent with any provision of the LLC Agreement.

 

Section 6.2                                    Consistency.  The Corporate Taxpayer and the TRA Parties agree to report and cause to be reported for all purposes, including federal, state and local tax purposes and financial reporting purposes, all tax-related items (including, without limitation, the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by the Corporate Taxpayer in any Schedule required to be provided by or on behalf of the Corporate Taxpayer under this Agreement unless otherwise required by law.

 

Section 6.3                                    Cooperation.  Each of the Corporate Taxpayer and the TRA Parties shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the other party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporate Taxpayer shall reimburse each such TRA Party for any reasonable third-party costs and expenses incurred pursuant to this Section.

 

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ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1                                    Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile or email with confirmation of transmission by the transmitting equipment or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service.  All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to the Corporate Taxpayer, to:

 

[·]

 

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

 

[·]

 

If to a TRA Party, to:

 

The address, fax number and email address set forth in the joinder agreement to the Exchange Agreement.

 

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

 

Section 7.2                                    Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.  Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

Section 7.3                                    Entire Agreement; No Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement; provided, however, that each Non-Party Member and their respective successors and assigns are intended beneficiaries of Section 7.3 and Section 7.6, with the right to enforce such provisions against the Corporate Taxpayer as though such Non-Party Members (and their respective successors and assigns) were parties hereto.

 

Section 7.4                                    Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

 

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Section 7.5                                    Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

Section 7.6                                    Successors; Assignment; Amendments; Waivers.

 

(a)                                 Each TRA Party and each Non-Party Member may assign any of its rights under this Agreement in whole or in part to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in the form of Exhibit A or such other form mutually agreed by the parties, agreeing to become a TRA Party for all purposes of this Agreement, except as otherwise provided in such joinder.

 

(b)                                 No provision of this Agreement may be amended or waived unless such amendment or waiver is approved in writing by the Corporate Taxpayer and each of the TRA Parties.  Notwithstanding anything to the contrary in this Agreement (including this Section 7.6), the execution and delivery of a joinder to this Agreement pursuant to Section 7.6(a) shall not require the consent of the Corporate Taxpayer or any of the TRA Parties.

 

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

 

Section 7.7                                    Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

Section 7.8                                    Resolution of Disputes.

 

(a)                                 Any and all disputes which are not governed by Section 7.9 and 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 nonperformance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the Dispute fail to agree on the selection of an arbitrator within ten (10) calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall

 

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make the appointment.  The arbitrator shall be a lawyer admitted to the practice of law in the State of New York and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)                                 Notwithstanding the provisions of paragraph (a), the Corporate Taxpayer may bring 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, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), the TRA Party (i) expressly consents to the application of paragraph (c) of this Section 7.8 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 Corporate Taxpayer as agent of the TRA Party 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 the TRA Party of any such service of process, shall be deemed in every respect effective service of process upon the TRA Party in any such action or proceeding.

 

(c)                                  (i) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, 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 an arbitration award.  The parties acknowledge that the for a designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

 

(ii)                                  The parties 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 brought in any court referred to in the preceding paragraph of this Section 7.8 and such parties agree not to plead or claim the same.

 

Section 7.9                                    Reconciliation.  In the event that the Corporate Taxpayer and a TRA Party are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 3.1, 4.2 or 6.2 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties.  The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the Corporate Taxpayer and such TRA Party agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporate Taxpayer or such TRA Party or other actual or potential conflict of interest.  If the Corporate Taxpayer and the TRA Party are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise.  The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter

 

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relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax Return may be filed as prepared by the Corporate Taxpayer, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer except as provided in the next sentence.  The Corporate Taxpayer and the TRA Party shall bear their own costs and expenses of such proceeding, unless (i) the Expert adopts the TRA Party’s position, in which case the Corporate Taxpayer shall reimburse the TRA Party for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert adopts the Corporate Taxpayer’s position, in which case the TRA Party shall reimburse the Corporate Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Corporate Taxpayer and the TRA Party and may be entered and enforced in any court having jurisdiction.

 

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

 

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

 

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

 

(b)                                 If any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder transfers one or more assets to a corporation (or a Person classified as a corporation for United States federal income tax purposes) with which such entity does not file a consolidated Tax Return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the gross fair market value of the contributed asset.  For purposes of this Section 7.11, a

 

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transfer of a partnership interest shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership allocated to such partner.

 

Section 7.12                             Confidentiality.

 

(a)                                 Each TRA Party and each of their assignees acknowledge and agree that the information of the Corporate Taxpayer is confidential and, except in the course of performing any duties as necessary for the Corporate Taxpayer and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporate Taxpayer and its Affiliates and successors, concerning Aris LLC and its Affiliates and successors or the TRA Parties, learned by the TRA Parties heretofore or hereafter.  This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporate Taxpayer or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Party in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the TRA Party to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns.  Notwithstanding anything to the contrary herein, each TRA Party and each of their assignees (and each employee, representative or other agent of such TRA Party or its assignees, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Corporate Taxpayer, Aris LLC and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to such TRA Party relating to such tax treatment and tax structure.

 

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

 

Section 7.13                             LLC Agreement.  This Agreement shall be treated as part of the limited liability company agreement of Aris LLC as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

Section 7.14                             Change in Law.  Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, a TRA Party reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such TRA Party (or direct or indirect equity holders in such TRA Party) upon an Exchange to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or would have other material adverse tax consequences to the Corporate Taxpayer or such TRA Party or any direct or indirect owner of such TRA Party, then at the election of such TRA Party and to the extent

 

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specified by such TRA Party, this Agreement (i) shall cease to have further effect with respect to such TRA Party, (ii) shall not apply to an Exchange occurring after a date specified by such TRA Party, or (iii) shall otherwise be amended in a manner determined by such TRA Party; provided, that such amendment shall not result in an increase in payments under this Agreement to such TRA Party at any time as compared to the amounts and times of payments that would have been due to such TRA Party in the absence of such amendment.

 

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IN WITNESS WHEREOF, the Corporate Taxpayer and each of the TRA Parties have duly executed this Agreement as of the date first written above.

 

	
 
    	
AmeriHome, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ [·]
    
	
 
    	
 
    	
Name:  [·]
    
	
 
    	
 
    	
Title:  [·]
    

 

 

	
 
    	
A-A   Mortgage Opportunities, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ [·]
    
	
 
    	
 
    	
Name:  [·]
    
	
 
    	
 
    	
Title:  [·]
    

 

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Exhibit A Form of Joinder

 

This JOINDER (this “Joinder”) to the Tax Receivable Agreement (as defined below), dated as of [·], by and among AmeriHome, Inc., a Delaware corporation (together with its Subsidiaries the “Corporate Taxpayer”), and (“Permitted Transferee”).

 

WHEREAS, on [·], Permitted Transferee acquired (the “Acquisition”) [LLC Interests and the corresponding shares of Class B common stock] [the right to receive any and all payments that may become due and payable under the Tax Receivable Agreement with respect to LLC Interests that were previously Exchanged and are described in greater detail in Annex A to this Joinder] (collectively, “Interests” and, together with all other interests hereinafter acquired by the Permitted Transferee from Transferor, the “Acquired Interests”) from (“Transferor”); and

 

WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.6(a) or Section 7.6(b) of the Tax Receivable Agreement, dated as of [·], by and among the Corporate Taxpayer and the TRA Parties (as defined therein) (the “Tax Receivable Agreement”).

 

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

 

Section 1.01                             Definitions.  To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.

 

Section 1.02                             Joinder.  Permitted Transferee hereby acknowledges and agrees to become TRA Party, for all purposes, of the Tax Receivable Agreement.

 

Section 1.03                             Notice.  Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.1 of the Tax Receivable Agreement.

 

Section 1.04                             Governing Law.  This Joinder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principals thereof that would mandate the application of the laws of another jurisdiction.

 

 

IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.

 

	
 
    	
[PERMITTED   TRANSFEREE]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name: 
    
	
 
    	
 
    	
Title: 
    
	
 
    	
 
    	
 
    
	
 
    	
Address for notices:

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