TAX RECEIVABLE AGREEMENT by and among ENSEMBLE HEALTH PARTNERS, INC., ENSEMBLE HEALTH PARTNERS HOLDINGS, LLC, the several EXCHANGE TRA PARTIES (as defined herein), the several REORGANIZATION TRA PARTIES (as defined herein), and the BSMH NOMINEE (as...
Exhibit 10.8
by and among
ENSEMBLE HEALTH PARTNERS, INC.,
ENSEMBLE HEALTH PARTNERS HOLDINGS, LLC,
the several EXCHANGE TRA PARTIES (as defined herein),
the several REORGANIZATION TRA PARTIES (as defined herein),
and the BSMH NOMINEE (as defined herein)
the GOLDEN GATE NOMINEE (as defined herein),
and
OTHER PERSONS FROM TIME TO TIME PARTY HERETO
Dated as of [•]
CONTENTS
| Annex A |
— | Blocker Entity | ||||
| Annex B |
— | Exchange TRA Parties | ||||
| Annex C |
— | Reorganization TRA Parties | ||||
| Annex D |
— | GGC TRA Parties | ||||
| Exhibit A |
— | Form of Joinder Agreement |
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This TAX RECEIVABLE AGREEMENT (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”), dated [•], 2021, is hereby entered into by and among Ensemble Health Partners, Inc., a Delaware corporation (the “Corporation”, and, along with any other member of the U.S. federal income tax affiliated group filing a consolidated federal income Tax Return with the Corporation, the “Corporate Group”), Ensemble Health Partners Holdings, LLC, a Delaware limited liability company (the “LLC”), each of the Exchange TRA Parties from time to time party hereto, each of the Reorganization TRA Parties from time to time party hereto, the GGC Nominee (as defined below), and the BSMH Nominee (as defined below). Capitalized terms used but not otherwise defined herein have the respective meanings set forth in Section 1.01.
WHEREAS, the Exchange TRA Parties hold (or prior to an Exchange held or will hold) Units;
WHEREAS, the LLC is classified as a partnership for U.S. federal income tax purposes;
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ARTICLE I
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 (i) the singular and plural and (ii) the active and passive forms of the terms defined).
“Actual Tax Liability” means, with respect to any Taxable Year, the actual liability for Taxes of (i) the Corporate Group and (ii) without duplication, the LLC, but in the case of this clause (ii) only with respect to Taxes imposed on the LLC and its Subsidiaries and allocable to the Corporate Group (as reasonably determined by the Corporation); provided, that the actual liability for Taxes described in clauses (i) and (ii) shall be calculated (a) assuming that Subsequently Acquired TRA Attributes do not exist, (b) using the Assumed State and Local Tax Rate, solely for purposes of calculating the state and local Actual Tax Liability of the Corporate Group and the LLC and its Subsidiaries , and (c) assuming, solely for purposes of calculating the liability for U.S. federal income Taxes, in order to prevent double counting, that state and local income and franchise Taxes are not deductible by the Corporate Group 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 SOFR plus 100 basis points.
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“Agreement” is defined in the preamble.
“Amended Schedule” is defined in Section 2.3(b) of this Agreement.
“Assumed State and Local Tax Rate” means the tax rate equal to the sum of the product of (x) the Corporation’s income and franchise Tax apportionment rate(s) for each state and local jurisdiction in which the Corporation or LLC (or any of their Subsidiaries that are treated as partnerships or disregarded entities for U.S. federal or applicable state or local tax purposes) files income or franchise Tax Returns for the relevant Taxable Year and (y) the highest corporate income and franchise Tax rate(s) for each such state and local jurisdiction in which the Corporation, the LLC, or such applicable Subsidiaries file income or franchise Tax Returns for each relevant Taxable Year; provided, that solely in respect of the Corporate Group, to the extent, for any Taxable Year, that state and local income and franchise Taxes are deductible for U.S. federal income tax purposes by members of the Corporate Group that are treated as corporations for U.S. federal income tax purposes, the Assumed State and Local Tax Rate calculated pursuant to the foregoing shall be reduced by the assumed federal income Tax benefit received by the Corporate Group with respect to state and local jurisdiction income and franchise Taxes (with such benefit calculated as the product of (a) the Corporation’s marginal U.S. federal income tax rate for the relevant Taxable Year and (b) the Assumed State and Local Tax Rate (without regard to this proviso)).
“Attributable” is defined in Section 3.1(b) of this Agreement.
“Attribute Schedule” is defined in Section 2.1 of this Agreement.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy.”
“Basis Adjustment” means the increase or decrease to the tax basis of, or the Corporation’s share of (directly or indirectly through a wholly-owned Subsidiary of the Corporation effecting such Exchange), the tax basis of the Reference Assets (i) under Sections 743(b) and 754 of the Code and, in each case, the comparable sections of U.S. state and local law (in situations where, following an Exchange, the LLC remains a partnership for U.S. federal income tax purposes), and (ii) under Sections 732, 734(b), and 1012 of the Code and, in each case, the comparable sections of U.S. state and local tax law (in situations where, as a result of one or more Exchanges, the LLC becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes), in each case, as a result of any Exchange and any payments made under this Agreement. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units and as if any such Pre-Exchange Transfer had not occurred.
“Blocker Entity” means the entity listed on Annex A.
“Blocker Entity Straddle Period” is defined in the definition of “Blocker Pre-IPO Covered Tax Assets.”
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“Board” means the board of directors of the Corporation.
“BSMH” means Bon Secours Mercy Health, Inc., a Maryland nonprofit corporation that is a Code Section 501(c)(3) charitable organization and with supporting organization within the meaning of Code Section 509(a)(3).
“BSMH Nominee” means [•] and such other person as may be designated by BSMH.
“Business Day” means any day other than a Saturday, Sunday or any other day on which commercial banks are required or permitted to close by law in the City of New York, New York or City of San Francisco, California.
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“Change of Control” means the occurrence of any of the following events or series of related events after the date hereof: (a) any Person, or group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act (as defined in the LLC Agreement), or any successor provisions thereto, is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing more than 50% of the combined voting power of the Corporation’s then-outstanding voting securities; (b) there is consummated a merger, consolidation or similar business transaction involving the Corporation with any other Person or Persons, and, either (x) the Board of the Corporation 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, if the surviving company is a subsidiary, the ultimate parent thereof, or (y) immediately after the consummation of such transaction, the voting securities of the Corporation immediately prior to such transaction do not continue to represent or are not converted into more than 50% of the combined voting power of the then-outstanding voting securities of the Person resulting from such transaction or, if the surviving company is a subsidiary, the ultimate parent thereof; (c) the shareholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation or there is consummated an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Corporation of all or substantially all of the Corporation’s assets (including a sale of assets of the LLC), other than such sale or other disposition by the Corporation of all or substantially all of the Corporation’s assets to an entity at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by shareholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale; or (d) the following individuals cease for any reason to constitute a majority of the number of directors of the Board of the Corporation then serving: individuals who were directors of the Corporation on the IPO Date and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election to the Board of the Corporation or nomination for election by the Corporation’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors of the Corporation 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 (d). Notwithstanding the foregoing, except with respect to clause (c) above, a “Change of Control” shall not be deemed to have occurred (i) by virtue of the consummation of any transaction or series of integrated transactions immediately following which the ultimate beneficial owners of the Class A Common Stock and Class B Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in and voting control over, and own substantially all of the shares or equity of, an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions or (ii) by virtue of the consummation of any transaction or series of transactions, immediately following which, the Corporation and one or more other entities (the “Other Constituent Companies”) shall have become separate wholly-owned Subsidiaries of a holding company, and the ultimate beneficial owners of the Class A Common Stock and Class B Common Stock immediately prior to such transaction or series of transactions, together with the ultimate beneficial owners of the outstanding equity interests in the Other Constituent Companies immediately prior to such transaction or series of transactions, shall have become the equityholders of the new holding company in exchange for their respective equity interests in the Corporation and the Other Constituent Companies, and such transaction or transactions would not otherwise constitute a “Change of Control” assuming references to the Corporation are references to such holding company.
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“Class A Common Stock” means Class A common stock, $0.001 par value per share, of the Corporation.
“Class B Common Stock” means Class B common stock, $0.001 par value per share, of the Corporation.
“Code” means the U.S. Internal Revenue Code of 1986.
“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 other agreement.
“Corporation” is defined in the preamble to this Agreement.
“Cumulative Net Realized Tax Benefit” as of the end of a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporate Group (excluding, for the avoidance of doubt, the Taxable Years of the Blocker Entity ending on the date it joined the Corporate Group) and the LLC (excluding, for the avoidance of doubt, any Taxable Year or portion thereof of the LLC ending on or prior to the IPO Date), up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments of the Corporate Group and the LLC for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be 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 SOFR plus 500 basis points.
“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of law, as applicable, 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 Corporation to the amount of any assessed liability for Tax.
“Direct Exchange” is defined in the recitals to this agreement.
“Dispute” is defined in Section 7.8(a) of this Agreement.
“Early Termination Agreed Rate” means SOFR plus 100 basis points.
“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.
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“Early Termination Payment” is defined in Section 4.3(b) of this Agreement.
“Early Termination Rate” means the lesser of (i) 6.50 % per annum, compounded annually, and (ii) the Early Termination Agreed Rate.
“Early Termination Schedule” is defined in Section 4.2 of this Agreement.
“Exchange” means the Unit Contribution and any Direct Exchange or Redemption or purchase (as determined for U.S. federal income tax purposes) of Units by the Corporation or one of its wholly-owned Subsidiaries from an Exchange TRA Party, including the Unit Purchase.
“Exchange Covered Tax Assets” means, with respect to an Exchange TRA Party, (i) any basis adjustment described in Section 1.743-1(h) of the Treasury Regulations and the comparable sections of U.S. state and local tax law, including as a result of gain recognized pursuant to Section 357(c) of the Code) in the Reference Assets, determined as of immediately prior to an Exchange, that is allocable to the Units being exchanged by such Exchange TRA Party and acquired by the Corporate Group in connection with the relevant Exchange, (ii) Basis Adjustments (including, for the avoidance of doubt, as a result of gain recognized pursuant to Section 357(c) of the Code, determined as of immediately after an Exchange), and (iii) Imputed Interest; provided that, in the case of any Exchange by an Exchange TRA Party pursuant to Section 4.03 of the LLC Agreement, the Exchange Covered Tax Assets with respect to the Units that are subject to such Exchange shall be equal to zero (0). For the avoidance of doubt, Exchange Covered Tax Assets shall include any carryforwards or similar attributes that are attributable to the Tax items described in clauses (i) through (iii).
“Exchange TRA Parties” means the Persons listed on Annex B.
“Expert” is defined in Section 7.9 of this Agreement.
“GGC Nominee” means Golden Gate Private Equity, Inc. and such other Persons as may be designated by a GGC TRA Party.
“GGC TRA Parties” means the Persons listed on Annex D.
“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of (i) the Corporate Group and (ii) without duplication, the LLC, but in the case of this clause (ii) only with respect to Taxes imposed on the LLC and its Subsidiaries allocable to the Corporate Group, in each case using the same methods, elections, conventions, and practices used on the relevant Corporate Group Tax Return, but (a) calculated without taking into account the Blocker Pre-IPO Covered Tax Assets and the Exchange Covered Tax Assets (including, for the avoidance of doubt, any carryforward or carryback of any tax item attributable to the Blocker Pre-IPO Covered Tax Assets and the Exchange Covered Tax Assets), (b) using the Assumed State and Local Tax Rate, solely for purposes of calculating the state and local Hypothetical Tax Liability of the Corporate Group and the LLC, and (c) assuming, solely for purposes of calculating the liability for U.S. federal income Taxes, in order to prevent double counting, that state and local income and franchise Taxes are not deductible by the Corporate Group for U.S. federal income Tax purposes. Furthermore, the Hypothetical Tax Liability shall be calculated assuming that the Subsequently Acquired TRA Attributes do not exist.
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“Imputed Interest” in respect of a TRA Party shall mean any interest imputed under the provisions of the Code with respect to the Corporation’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 shares of Class A Common Stock by the Corporation.
“IPO Date” means the closing date of the IPO.
“IRS” means the U.S. Internal Revenue Service.
“Joinder” means a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement.
“LLC” is defined in the recitals to this Agreement.
“LLC Agreement” means that certain Limited Liability Company Agreement of the LLC, dated as of the date hereof, as such agreement may be further amended, restated, supplemented and/or otherwise modified from time to time.
“Market Value” means as of an Early Termination Date, the price for a share of Class A Common Stock (or any class of stock into which it has been converted) on the Stock Exchange (as defined in the LLC Agreement), as reported on xxxxxxxxx.xxx or such other reliable source as determined by the Managing Member (as defined in the LLC Agreement) in good faith, at the close of trading on the last full Trading Day (as defined in the LLC Agreement) immediately prior to such Early Termination Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. In the event the shares of Class A Common Stock are not publicly traded as of such Early Termination Date, then the Managing Member (as defined in the LLC Agreement) shall determine the Market Value in good faith.
“Net Tax Benefit” is defined in Section 3.1(b) of this Agreement.
“Objection Notice” is defined in Section 2.3(a) of this Agreement.
“Original Acquisition” means the purchase, for federal income tax purposes pursuant to that certain Securities Purchase Agreement dated as of May 29, 2019 (“Purchase Agreement”) pursuant to which Mercy Health Innovations LLC, an Ohio nonprofit limited liability company (“MHI”) sold and assigned to EHL Acquisition Holdings, LLC and the EHL Acquisition Holdings, LLC purchased and accepted from MHI equity interests in the LLC equal to fifty one percent (51%) of the then existing issued and outstanding equity interests of the LLC.
“Permitted Transfer” has the meaning set forth in the LLC Agreement.
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“Permitted Transferee” has the meaning set forth in the LLC Agreement.
“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.
“Pre-Exchange Transfer” means any transfer of one or more Units (including upon the death of a Member) (i) that occurs after the IPO but prior to a Redemption or Direct Exchange or other Exchange of such Units and (ii) to which Section 743(b) of the Code applies (other than such a transfer giving rise to basis adjustments described under Section 1.743-1(h) of the Treasury Regulations).
“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability. 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 until there has been a Determination.
“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability. 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” is defined in Section 7.9 of this Agreement.
“Reconciliation Procedures” is defined in Section 2.3(a) of this Agreement.
“Redemption” has the meaning in the recitals to this Agreement.
“Reference Asset” means any tangible or intangible asset (including for this purpose any items of deferred revenue and any adjustments under Section 481 of the Code) of the LLC or any of its successors or assigns, and any asset held by any entities in which the LLC owns a direct or indirect equity interest that are treated as a partnership or disregarded entity for U.S. federal income Tax purposes (but only to the extent such entities are held only through other entities treated as partnerships or disregarded entities) for purposes of the applicable Tax, as of the relevant date. 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.
“Reorganization” is defined in the Recitals to this Agreement.
“Reorganization TRA Parties” means the persons listed on Annex C.
“Schedule” means any of the following: (i) an Attribute Schedule, (ii) a Tax Benefit Schedule, or (iii) the Early Termination Schedule, and, in each case, any amendments thereto.
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“Sharing Percentage” means with respect to a GGC TRA Party that held (whether directly or indirectly through the Blocker Entity) units in the LLC prior to the IPO, a fraction expressed as a percentage equal to (x) the number of units held directly (or indirectly through the Blocker Entity) by such GGC TRA Party immediately prior to the IPO divided by (y) the sum of all units held directly (or indirectly through the Blocker Entity) by all GGC TRA Parties immediately prior to the IPO; provided that the Sharing Percentage shall be redetermined in good faith by the GGC Nominee to make appropriate adjustments as necessary to equitably administer allocations of Tax Benefit Payments among GGC TRA Parties pursuant to this Agreement.
“Senior Obligations” is defined in Section 5.1 of this Agreement.
“SOFR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two Business Days prior to the first Business Day of such month, on the applicable Bloomberg screen page (or other commercially available source providing quotations of SOFR) for the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York for such month (or portion thereof). In no event will SOFR be less than 0%. If SOFR ceases to be published or otherwise is not available, the GGC Nominee and the BSMH Nominee will work in good faith to select an alternate benchmark with similar characteristic that gives due consideration to the prevailing market conventions for determining rates of interest in the United States at such time. In no event will such alternative benchmark be less than 0%.
“Subsequently Acquired TRA Attributes” means any net operating losses or other tax attributes to which any of the Corporate Group, the LLC or any entity in which they hold a direct or indirect equity interest become entitled as a result of a transaction (other than any Exchanges) after the IPO Date to the extent such net operating losses and other tax attributes are subject to a tax receivable agreement (or comparable agreement) entered into by the Corporate Group or any of its Affiliates pursuant to which any member of the Corporate Group is obligated to pay over amounts with respect to tax benefits resulting from such net operating losses or other tax attributes.
“Subsidiary” means, with respect to any Person and as of the date of any 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(a) of this Agreement.
“Tax Return” means any return, declaration, report or similar statement filed or required to be filed with respect to Taxes (including any attached schedules), including any information return, claim for refund, amended return and declaration of estimated Tax.
“Taxable Year” means a taxable year of the Corporate Group (or any member thereof) under the Code or comparable sections of U.S. state or local or foreign tax law, as applicable (which, 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.
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“Taxes” means any and all United States federal, state, or local taxes, assessments or other charges that are based on or measured with respect to net income or profits (including alternative minimum taxes and any franchise taxes imposed in lieu of an income tax), including, in each case, any related interest, penalties or additions to tax.
“Taxing Authority” means any national, federal, state, county, municipal, or local government, or any subdivision, agency, commission or authority thereof, or any quasi-governmental body, or any other authority of any kind, exercising regulatory or other authority in relation to tax matters.
“TRA Parties” means the Exchange TRA Parties and the Reorganization TRA Parties.
“Treasury Regulations” means the final, temporary, and (to the extent they can be relied upon) proposed regulations under the Code, as promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.
“U.S.” means the United States of America.
“Units” means equity interests in the LLC.
“Valuation Assumptions” means, as of an Early Termination Date, the assumptions that:
(1) in each Taxable Year ending on or after such Early Termination Date, the Corporate Group and LLCs will have taxable income sufficient to fully use the Blocker Pre-IPO Covered Tax Assets and the Exchange Covered Tax Assets (other than any such Blocker Pre-IPO Covered Tax Assets or Exchange Covered Tax Assets that constitute or have resulted in net operating losses, disallowed interest expense carryforwards, or credit carryforwards or carryovers (determined as of the Early Termination Date), which shall be governed by paragraph 4 below) during such Taxable Year or future Taxable Years in which such deductions or other attributes would become available;
(2) the U.S. 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, except to the extent any change to such tax rates for such Taxable Year have already been enacted into law;
(3) all taxable income of the Corporate Group and LLC will be subject to the maximum applicable tax rate for U.S. federal income tax purposes throughout the relevant period, and the tax rate for U.S. state and local income taxes shall be the Assumed State and Local Tax Rate as in effect for the Taxable Year of the Early Termination Date;
(4) any net operating loss, excess interest deduction, or credit carryovers or carrybacks (or similar items with respect to carryovers or carrybacks) generated by any Pre-IPO Covered Tax Asset or Exchange Covered Tax Asset and available as of the Early Termination Date will be used by the Corporate Group and LLC ratably over a period beginning on the Early Termination Date and ending on the earlier of (i) five (5) years following the Early Termination Date, or (ii) the scheduled expiration date, if any, under applicable Tax law of such net operating losses, excess interest deductions, or credit carryovers or carrybacks (or similar items with respect to carryovers or carrybacks);
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(5) any non-amortizable assets will be disposed of in a fully taxable transaction for an amount sufficient to fully utilize the adjusted basis for such assets, including any adjustments attributable to such assets under Sections 734 and 743 of the Code (and, in each case, the comparable sections of U.S. state and local tax law), and for the avoidance of doubt including Basis Adjustments, on the fifteenth anniversary of the IPO Date; provided, that in the event of a Change of Control that includes the sale of such asset (or the sale of equity interests in a partnership or disregarded entity for U.S. federal income tax purposes that directly or indirectly owns such asset), such non-amortizable assets shall be disposed of at the time of the direct or indirect sale of the relevant asset in such Change of Control (if earlier than such fifteenth anniversary) for such price;
(6) if, on the Early Termination Date, any Exchange TRA Party has Units that have not been Exchanged, then such Units shall be deemed to be Exchanged for the Market Value that would be received by such Exchange TRA Party if such Units had been Exchanged on the Early Termination Date, and such Exchange TRA Party shall be deemed to receive the amount of cash such Exchange TRA Party would have been entitled to had such Units actually been Exchanged on the Early Termination Date; and
(7) any payment obligations pursuant to this Agreement will be satisfied on the date that any Tax Return to which such payment obligation relates is required to be filed excluding any extensions.
Section 1.2 Rules of Construction. Unless otherwise specified herein:
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Any capitalized terms used in any Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.
(b) For purposes of interpretation of this Agreement:
(i) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision thereof.
(ii) References in this Agreement to a Schedule, Article, Section, clause or sub-clause refer to the appropriate Schedule to, or Article, Section, clause or subclause in, this Agreement.
(iii) References in this Agreement to dollars or “$” refer to the lawful currency of the United States of America.
(iv) The terms “include” and “including” are by way of example and not limitation. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.
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(v) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.
(vi) References to any Person shall include the successors and permitted assigns of such Person.
(vii) The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
(viii) “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.
(ix) Unless otherwise expressly provided herein, any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified, supplemented or restated, including by waiver or consent, and references to all attachments thereto and instruments incorporated therein.
(x) References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.
(xi) Unless otherwise expressly provided herein, any statute defined or referred to herein or in any agreement or instrument that is referred to herein means such statute as from time to time amended, modified, supplemented or restated, including by succession of comparable successor statutes and any rules or regulations promulgated thereunder.
(c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”
(d) Section headings herein are included for convenience of reference only and shall not affect the interpretation of this Agreement.
(e) Unless otherwise expressly provided herein, (a) references to organization documents (including the LLC Agreement), agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted hereby; and (b) references to any law (including the Code and the Treasury Regulations) shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such law.
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ARTICLE II
DETERMINATION OF REALIZED TAX BENEFIT
Section 2.1 Attribute Schedule. Following the IPO Date, within one-hundred twenty (120) calendar days after the filing of Form 1120 (or any successor form) of the Corporate Group for a given Taxable Year, the Corporation shall deliver to the GGC Nominee and the BSMH Nominee a schedule (the “Attribute Schedule”) that shows, in reasonable detail, (i) the Blocker Pre-IPO Covered Tax Assets that are available for use by the Corporate Group and the LLC with respect to each Reorganization TRA Party with respect to such Taxable Year and the portion of the Blocker Pre-IPO Covered Tax Assets that are available for use by the Corporate Group and the LLC with respect to each Reorganization TRA Party with respect to future Taxable Years; and (ii) the Exchange Covered Tax Assets that are available for use by the Corporate Group and the LLC with respect to such Taxable Year with respect to each Exchange TRA Party that has effected an Exchange (including the Basis Adjustments with respect to the Reference Assets resulting from Exchanges effected in such Taxable Year and the periods over which such Basis Adjustments are amortizable or depreciable), and the portion of the Exchange Covered Tax Assets that are available for use by the Corporate Group and the LLC with respect to each Exchange TRA Party that has effected an Exchange in future Taxable Years. The Attribute Schedule shall also list any limitations on the ability of the Corporate Group and the LLC to utilize any Blocker Pre-IPO Covered Tax Assets or Exchange Covered Tax Assets under applicable laws (including as a result of the operation of Section 382 of the Code or Section 383 of the Code).
Section 2.2 Tax Benefit Schedule.
(a) Tax Benefit Schedule. Following the IPO Date, within one-hundred twenty (120) calendar days after the filing of the Form 1120 (or any successor form) of the Corporate Group for any Taxable Year, the Corporation shall provide to the GGC Nominee and the BSMH Nominee a schedule showing, in reasonable detail, the calculation of the Tax Benefit Payment in respect of each TRA Party for such Taxable Year and the calculation of the Realized Tax Benefit and Realized Tax Detriment and the components thereof for such Taxable Year (a “Tax Benefit 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. 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 Blocker Pre-IPO Covered Tax Assets and the Exchange Tax Assets shall be considered to be subject to the rules of the Code and the Treasury Regulations, as applicable, or other applicable law, 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 a Blocker Pre-IPO Covered Tax Asset or an Exchange Covered Tax Asset and another portion that is not, such respective portions shall be considered to be used in accordance with the “with and without” methodology.
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Section 2.3 Procedures, Amendments.
(a) Procedure. Every time the Corporation delivers to the GGC Nominee and the BSMH Nominee a 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 Corporation shall also (x) deliver to the GGC Nominee and the BSMH Nominee schedules, valuation reports, if any, and work papers, as determined by the Corporation or reasonably requested by the GGC Nominee and the BSMH Nominee, providing reasonable detail regarding the preparation of the Schedule, and (y) allow the GGC Nominee and the BSMH Nominee reasonable access at no cost to the appropriate representatives of the Corporation, as determined by the Corporation or reasonably requested by either the GGC Nominee or the BSMH Nominee, in connection with the review of such Schedule. Without limiting the application of the preceding sentence, each time the Corporation delivers to the GGC Nominee and the BSMH Nominee a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporation shall deliver to the GGC Nominee and the BSMH Nominee a reasonably detailed calculation of the applicable Hypothetical Tax Liability, a reasonably detailed calculation of the applicable Actual Tax Liability, as well as any other work papers as determined by the Corporation or requested by either the GGC Nominee or the BSMH Nominee, provided that the Corporation shall not be required to provide any information that it reasonably believes is unnecessary for purposes of determining the items in the applicable Schedule or amendment thereto. Subject to Section 2.3(b), an applicable Schedule or amendment thereto shall become final and binding on all parties thirty (30) calendar days after the first date on which the GGC Nominee and the BSMH Nominee have received the applicable Schedule or amendment thereto unless (i) the GGC Nominee or the BSMH Nominee provides the Corporation before such date with notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) each of the GGC Nominee and the BSMH Nominee provides a written waiver of such right of any Objection Notice before such date (in which case such Schedule or amendment thereto becomes binding on the date both waivers have been received by the Corporation). If the Corporation and the GGC Nominee and the BSMH Nominee, for any reason, are unable to successfully resolve the issues raised in an Objection Notice within thirty (30) calendar days after receipt by the Corporation of an Objection Notice, then the Corporation and the GGC Nominee and the BSMH Nominee shall employ the reconciliation procedures described in Section 7.9 of this Agreement (the “Reconciliation Procedures”).
(b) Amended Schedule. The applicable Attribute Schedule or Tax Benefit Schedule for any Taxable Year may be amended from time to time by the Corporation (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 the GGC Nominee and the BSMH Nominee, (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, or (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 (any such Schedule, an “Amended Schedule”). The Corporation shall provide to the GGC Nominee and the BSMH Nominee, an Amended Schedule, along with reasonable detail regarding the preparation of the applicable portion of such Amended Schedule, within one-hundred twenty (120) calendar days of the occurrence of an event referenced in clauses (i) through (v) of the first sentence of this Section 2.3(b).
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ARTICLE III
Section 3.1 Timing and Amount of Tax Benefit Payments.
(a) Within five (5) Business Days after a Tax Benefit Schedule delivered to the GGC Nominee and the BSMH Nominee becomes final in accordance with Section 2.3(a), the Corporation shall pay or cause to be paid to each 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 in respect of such Taxable Year; provided that, if the Corporation makes Advance Payments, it shall make Advance Payments to all parties eligible to receive payments under this Agreement with respect to a particular Taxable Year in proportion to their respective amount of anticipated 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 designed by such TRA Party to the Corporation or as otherwise agreed by the Corporation and such TRA Party. The Corporation shall use its commercially reasonable efforts to respond to any reasonable inquiry of a TRA Party in regard to the calculation of the amount payable to such TRA Party pursuant to any Schedule delivered under this Agreement, including the calculation of the Tax Benefit Payment in respect of such TRA Party for such Taxable Year.
(b) A “Tax Benefit Payment” in respect of a TRA Party means an amount, not less than zero, equal to the sum of the portion of the Net Tax Benefit that is Attributable to such TRA Party and the Interest Amount with respect thereto; provided that a “Tax Benefit Payment” with respect to a GGC TRA Party shall be instead calculated as an amount equal to the product of (x) the sum of the Tax Benefit Payments with respect to all the GGC TRA Parties (calculated without regard to this proviso) and (y) such GGC TRA Party’s Sharing Percentage. A Net Tax Benefit is “Attributable” to the Reorganization TRA Party to the extent that it is derived from a Blocker Pre-IPO Covered Tax Asset with respect to the Blocker Entity (or Units owned by such Blocker Entity). A Net Tax Benefit is “Attributable” to an Exchange TRA Party to the extent that it is derived from an Exchange Covered Tax Asset with respect to Units that were Exchanged by such TRA Party. 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 sum of the total amount of payments previously made under Section 3.1(a) (excluding payments attributable to Interest Amounts) and the Advance Payments previously made under Section 3.1(b) of this Agreement (excluding any portion of Advance Payments in respect of anticipated Interest Amounts); provided, for the avoidance of doubt, that a TRA Party shall not be required to return any portion of any previously made Tax Benefit Payment or Advance Payment it receives under this Agreement. The “Interest Amount” in respect of the 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 Form 1120 (or any successor form) for the Corporate Group for such Taxable Year, calculated at the Agreed Rate, until the date such unpaid amounts are paid. 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 in the Reorganization or Exchange, as
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applicable, unless otherwise required by law. “Advance Payments” in respect of a TRA Party for a Taxable Year means the payments made by the Corporation to such TRA Party as an advance of such TRA Party’s anticipated Tax Benefit Payment for such Taxable Year. The Corporation shall be entitled at its option to make Advance Payments. 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 Blocker Pre-IPO Covered Tax Assets or Exchange Covered Tax Assets, such Blocker Pre-IPO Covered Tax Assets or Exchange Covered Tax Assets shall no longer be considered Blocker Pre-IPO Covered Tax Assets or Exchange Covered Tax Assets, as applicable, for purposes of determining Tax Benefit Payments or the Net Tax Benefit.
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 consistent with such intent.
Section 3.3 Pro Rata Payments.
(a) Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate amount of the tax benefit to the Corporate Group and the LLC from the reduction in Tax Liability as a result of the Blocker Pre-IPO Covered Tax Assets and the Exchange Covered Tax Assets is limited in a particular Taxable Year because the Corporate Group and LLC do not have sufficient taxable income to fully utilize available deductions and other attributes, the aggregate Net Tax Benefit for such Taxable Year shall be deemed Attributable to each TRA Party for purposes of Section 3.1(b) in proportion to the portion of such Net Tax Benefit that would be Attributable to such TRA Party under Section 3.1(b) if the Corporate Group had sufficient taxable income so that there were no such limitation; provided, that, for the avoidance of doubt, for purposes of allocating among the TRA Parties the aggregate Net Tax Benefit with respect to any Taxable Year, the operation of this Section 3.3(a) with respect to any prior Taxable Years shall be taken into account so as to eliminate as quickly as possible, proportionately, the difference with respect to each TRA Party between (i) the aggregate Net Tax Benefit that would be Attributable to such TRA Party under Section 3.1(b) with respect to each such Taxable Year (on a cumulative basis) if the Corporate Group had sufficient taxable income so that there were no limitation under this clause (a) and (ii) the actual aggregate Net Tax Benefit deemed Attributable to such TRA Party under Section 3.1(b) with respect to each such Taxable Year (on a cumulative basis) by operation of this clause (a). Consistent with the foregoing, the Attribute Schedule for a given Taxable Year shall reflect the operation of this Section 3.3(a) in respect of previous Taxable Years, with the Blocker Pre-IPO Covered Tax Assets and Exchange Covered Tax Assets described in such Attribute Schedule that are attributable to a TRA Party being adjusted to reflect payments received in respect of such Blocker Pre-IPO Covered Tax Assets and Exchange Covered Tax Assets (the intention of the parties being to avoid duplicative payments and maintain records sufficient to allow the Corporation to allocate Tax Benefit Payments consistent with the terms of this Section 3.3(a)).
(b) After taking into account Section 3.3(a), if for any reason the Corporation does not fully satisfy its payment obligations to make Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year (for example, as a result of having insufficient cash to make the Tax Benefit Payments due hereunder), then the Corporation and the TRA Parties agree that (i) the Corporation shall make payments due hereunder to the TRA Parties in respect of a Taxable Year in the same proportion as such payments would have been made if the relevant payment had been made in full by the Corporation, 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 paid.
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(c) To the extent the Corporation 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)) in an amount in excess of the amount of such payment that should have been made to the TRA Party in respect of such Taxable Year, then (i) the TRA Party shall not receive further payments under Section 3.1(a) until the TRA Party has forgone an amount of payments equal to such excess and (ii) the Corporation shall pay the amount of the TRA Party’s forgone payments to other TRA Parties (to the extent applicable) in a manner such that each of the other TRA Parties, to the extent possible, shall have received aggregate payments under Section 3.1(a) and (b) in the amount it would have received if there had been no excess payment to the TRA Party.
ARTICLE IV
Section 4.1 Early Termination of Agreement; Breach of Agreement.
(a) With the prior written approval of the Board (or any Person(s) to whom the Board has delegated such authority), the Corporation may terminate this Agreement with respect to all amounts payable to the TRA Parties at any time by paying to each TRA Party the Early Termination Payment in respect of the TRA Party; provided, however, that (i) this Agreement shall only terminate pursuant to this Section 4.1(a) upon the receipt in full of the Early Termination Payment by the TRA Parties; (ii) the Corporation shall deliver an Early Termination Notice only if it is able to make all required Early Termination Payments under this Agreement; and (iii) the Corporation may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid.
(b) In the event that the Corporation materially breaches any of its material obligations under this Agreement, whether as a result of a failure to make any payment when due, a failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, and the Corporation fails to cure such breach within 20 Business Days of a TRA Party informing the Corporation of such breach, then, at the election of the GGC Nominee or the BSMH Nominee, subject to the following proviso, 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; provided, that the GGC Nominee and the BSMH Nominee shall be entitled to make such election on behalf of, and such election shall be binding on all TRA Parties. Procedures similar to the procedures of Section 4.2 shall apply, mutatis mutandis, with respect to the determination of the amounts payable by the Corporation pursuant to this Section 4.1(b). Notwithstanding the foregoing, in the event that the Corporation breaches any of its material obligations under this Agreement, the GGC Nominee and the BSMH Nominee shall be entitled to elect jointly on behalf of all TRA Parties, to receive the amounts referred to in this Section 4.1(b) or to seek specific performance of the terms of this Agreement. Notwithstanding anything in this Agreement to the contrary, if the Corporation fails to make any Tax Benefit Payment when due, to the extent that the Corporation has insufficient funds to make such payment despite using reasonable best efforts
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to obtain funds to make such payment (including by causing the LLC or any other Subsidiaries of the LLC to distribute or lend funds to facilitate such payment, and by accessing any revolving credit facilities or other sources of available credit to fund any such amounts), such failure shall not be a breach of this Agreement until the earlier of (i) the Corporation having sufficient cash to pay such balance and (ii) the one-year anniversary of the receipt of the notice for such payment; provided, that (x) the interest provisions of Section 5.2 shall apply to such late payment, and (y) if the Corporation does not have sufficient cash to make such payment as a result of limitations imposed by existing credit agreements to which the LLC or any of its Subsidiaries 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.
(c) In connection with a Change of Control, all obligations under this Agreement with respect to the applicable TRA Parties shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the closing date of the Change of Control or such other date agreed to by the GGC Nominee, the BSMH Nominee and the Corporation. Procedures similar to the procedures of Section 4.2 shall apply, mutatis mutandis, with respect to the determination of the amounts payable by the Corporation.
Section 4.2 Early Termination Notice. If the Corporation chooses to exercise its right of early termination under Section 4.1(a) above, the Corporation shall deliver to the GGC Nominee and the BSMH Nominee notice of such intention to exercise such right (“Early Termination Notice”). In addition, if the Corporation chooses to exercise its right of early termination under Section 4.1(a) above, or the obligations under this Agreement are accelerated under Section 4.1(b) or Section 4.1(c) above, the Corporation shall deliver to the GGC Nominee and the BSMH Nominee a schedule (the “Early Termination Schedule”) showing in reasonable detail the calculation of the Early Termination Payment due to each TRA Party. Such Early Termination Schedule shall become final and binding on all parties consistent with the procedures described in Section 2.3(a). The date on which the Early Termination Schedule becomes final shall be the “Early Termination Effective Date.”
Section 4.3 Payment upon Early Termination.
(a) Within three (3) calendar days after an Early Termination Effective Date, the Corporation shall pay to each TRA Party an amount equal to the Early Termination Payment in respect of such TRA Party; provided, however, that any amount payable pursuant to this Agreement as a result of a Change of Control shall be paid concurrently with the consummation of such Change of Control. Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by the TRA Party or as otherwise agreed by the Corporation and such TRA Party.
(b) “Early Termination Payment” in respect of a TRA Party shall equal (i) the present value, discounted at the Early Termination Rate, as of the date of the Early Termination Notice, of all Tax Benefit Payments in respect of such TRA Party that would be required to be paid by the Corporation beginning from the date of the Early Termination Notice and applying the Valuation Assumptions, plus (ii) any Tax Benefit Payment due and payable with respect to such TRA Party that is unpaid as of the date of the Early Termination Notice, plus (iii) (without duplication) interest accruing on the amounts described in clauses (i) through (ii) (which shall include interest accruing on the amount described in clause (i) from the date of the Early Termination Notice).
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(c) Upon the payment of the Early Termination Payment by the Corporation to a TRA Party, the Corporation shall not have any further payment obligations under this Agreement in respect of such TRA Party.
ARTICLE V
SUBORDINATION AND LATE PAYMENTS
Section 5.1 Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporation 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 owed in respect of secured or unsecured indebtedness for borrowed money of the Corporation and its Subsidiaries (“Senior Obligations”) and shall rank pari passu in right of payment with all current or future unsecured obligations of the Corporation that are not Senior Obligations. To the extent that any payment under this Agreement is not permitted to be made at the time payment is due as a result of this Section 5.1 and the terms of the agreements governing Senior Obligations, such payment obligation nevertheless shall accrue for the benefit of the applicable TRA Parties and the Corporation shall make such payments at the first opportunity that such payments are permitted to be made in accordance with the terms of the Senior Obligations (it being understood that interest shall accrue on the amount of such unpaid obligation in accordance with the terms hereof). Payments under any tax receivable agreement (or similar agreement) entered into by the Corporation, the LLC, or their Subsidiaries after the date hereof shall be subordinate to all payments owed pursuant to this Agreement, and no such payments shall be made for so long as the Corporation has any unpaid obligation pursuant this Agreement.
Section 5.2 Late Payments by the Corporation. 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
TAX MATTERS; CONSISTENCY; COOPERATION
Section 6.1 Participation in the Corporation’s and the LLC’s Tax Matters. Except as otherwise provided herein and the LLC Agreement, the Corporation shall have full responsibility for, and sole discretion over, all tax matters concerning the Corporation and the LLC and its Subsidiaries, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to taxes; provided, however, that the Corporation shall notify the GGC Nominee and the BSMH Nominee, and keep the GGC Nominee and the BSMH Nominee reasonably informed with respect to, and act in good faith in connection with its conduct of, the portion of any audit of the Corporation, the Corporate Group, the LLC or any of their Subsidiaries the outcome of which is reasonably expected to affect the rights or obligations of the TRA Parties under this Agreement, and shall provide to the GGC Nominee and
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the BSMH Nominee reasonable opportunity to provide information and other input to the Corporation, Corporate Group, the LLC and their Subsidiaries concerning the conduct of any such portion of such audit, which information and other input the Corporation, Corporate Group, the LLC and their Subsidiaries, as applicable, shall consider in good faith.
Section 6.2 Consistency. The Corporation, the LLC 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 in any Schedule finalized consistent with the terms of this Agreement, unless otherwise required by a contrary Determination by an applicable Taxing Authority.
Section 6.3 Cooperation. Each of the Corporation, the LLC and the TRA Parties shall (a) furnish to the other parties 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 defending any audit, examination or controversy with any Taxing Authority, (b) make itself reasonably available to the other parties and their respective representatives to provide explanations of documents and material 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 Corporation shall reimburse each TRA Party for any reasonable third-party costs and expenses incurred pursuant to this Section at the request of the Corporation or the LLC.
ARTICLE VII
Section 7.1 Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by electronic mail (delivery receipt requested) or by certified or registered mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be as specified in a notice given in accordance with this Section 7.1):
If to the Corporation, or the LLC, to:
Ensemble Health Partners Holdings, LLC
00000 Xxxx Xxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer; General Counsel
E-mail: xxxxxx.xxx@xxxxxxxxxx.xxx; xxx.xxxxxx@xxxxxxxxxx.xxx
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with a copy (which shall not constitute notice to the Corporation or the LLC) to:
Ropes & Xxxx LLP
0 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx and Xxxx Xxxxxxxx
E-mail: xxxxxx.xxxxxx@xxxxxxxxx.xxx; xxxx.xxxxxxxx@xxxxxxxxx.xxx;
If to the GGC Nominee:
Golden Gate Private Equity, Inc.
Xxx Xxxxxxxxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx and General Counsel
E-mail: xxxxxxxx@xxxxxxxxxxxxx.xxx; xxxxx@xxxxxxxxxxxxx.xxx
with a copy (which shall not constitute notice to the GGC Nominee) to:
Ropes & Xxxx LLP
0 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx and Xxxx Xxxxxxxx
E-mail: xxxxxx.xxxxxx@xxxxxxxxx.xxx; xxxx.xxxxxxxx@xxxxxxxxx.xxx;
If to the BSMH Nominee:
Bon Secours Mercy Health Innovations LLC
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx, Xx.
E:mail: XXXxxxxxxx@XXXXxxxxx.xxx
with a copy (which shall not constitute notice to the BSMH Nominee) to:
Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
E-mail: xxxxxxxx@XXXXxxxxx.xxx
Any Party may change its address or e-mail address by giving each of the other Parties written notice thereof 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. 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.
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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.
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, such term or provision is hereby deemed modified to give effect to the original written intent of the parties to the greatest extent consistent with being valid and enforceable under applicable law. No party hereto shall assert, and each party shall cause its Affiliates or related parties not to assert, that this Agreement or any part hereof is invalid, illegal or unenforceable.
Section 7.6 Assignments; Amendments; Successors; No Waiver.
(a) Assignment. No TRA Party may assign, sell, pledge, or otherwise alienate or transfer any of its interest in the Agreement, including the right to receive Tax Benefit Payments under this Agreement, to any Person, except with the prior written consent of the Board, provided that (i) the GGC TRA Parties may assign, sell, pledge or otherwise alienate or transfer all or any portion of their interests in this Agreement, including the right to receive Tax Benefit Payments under this Agreement or designate a Person as a GGC Nominee, to any Person, and (ii) BSMH may assign, sell, pledge, or otherwise alienate or transfer all or any portion of its interests in this Agreement, including the right to receive Tax Benefit Payments under this Agreement or designate a person as BSMH Nominee, to any Person. In the case of any such assignment, sale, pledge or other alienation of any such right by any TRA Party to any Person under the terms of this Section 7.6(a), such Person shall execute and deliver a Joinder agreeing to succeed to the applicable portion of such TRA Party’s interest in this Agreement and to become a Party for all purposes of this Agreement, except as otherwise provided in such Joinder. For the avoidance of doubt, if a TRA Party transfers Units in accordance with the terms of the LLC Agreement but does not assign to the transferee of such Units its rights under this Agreement with respect to such transferred Units, such TRA Party shall continue to be entitled to receive the Tax Benefit Payments arising in respect of a subsequent Exchange of such Units (and any such transferred Units shall be separately identified, so as to facilitate the determination of Tax Benefit Payments hereunder).
(b) Amendments. No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Board (or any Person(s) to whom the Board has delegated such authority) the BSMH Nominee and the GGC Nominee; provided, that any amendment that materially and adversely affects one or more TRA parties on a materially disproportionate basis relative to other similarly situated TRA parties shall require the consent of a majority (measured by Tax Benefit Payments receivable) of such similarly situated TRA parties so materially disproportionately affected.
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(c) Successors. Except as provided in Section 7.6(a), all of the terms and provisions of this Agreement shall be binding upon, and shall inure to the benefit of and be enforceable by, the Parties hereto and their respective successors, permitted assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.
(d) Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach or any other covenant, duty, agreement, or condition.
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 cannot be settled amicably after good faith negotiations, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York, New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. 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 make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.
(b) Notwithstanding the provisions of paragraph (a) of this Section 7.8, the Corporation, the GGC Nominee or the BSMH Nominee may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling another 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), each 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 Corporation as each TRA Party’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such TRA Party of any such service of process, shall be deemed in every respect effective service of process upon such TRA Party in any such action or proceeding.
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(c) (i) EACH TRA 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 PARAGRAPH (B) 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 forum designated by this paragraph (c) has a reasonable relation to this Agreement, and to the parties’ relationship with one another.
(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 paragraph (c) (i) 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 Corporation, the BSMH Nominee, and the GGC Nominee are unable to resolve a disagreement with respect to a Schedule (a “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 such parties. The Expert shall be a partner or principal in a nationally recognized accounting firm. If the Corporation, the BSMH Nominee, and the GGC Nominee 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 selection of an Expert shall be treated as a Dispute subject to Section 7.8 and an arbitration panel shall pick an Expert. The Expert shall resolve any matter relating to a Schedule or an amendment thereto as soon as reasonably practicable and in any event within thirty (30) calendar days 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 Corporation, subject to adjustment or amendment upon resolution. The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporation except as provided in the next sentence. The Corporation, the BSMH Nominee, and the GGC Nominee shall bear their own costs and expenses of such proceeding, unless (i) the Expert entirely adopts the position of the GGC Nominee and/or the BSMH Nominee, in which case the Corporation shall reimburse the GGC Nominee and/or the BSMH Nominee (as applicable) for any reasonable and documented out-of-pocket costs and expenses in such proceeding, or (ii) the Expert entirely adopts the Corporation’s position, in which case Tax Benefit Payments to the TRA Parties that would have received increased Tax Benefit Payments if the position of the GGC Nominee and/or the BSMH Nominee had been adopted shall be reduced proportionately in the aggregate by any reasonable and documented out-of-pocket costs and expenses in such proceeding. 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 Corporation and the TRA Parties and may be entered and enforced in any court having competent jurisdiction.
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Section 7.10 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER OR RELATE TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR VALIDITY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.
Section 7.11 Withholding. The Corporation and its affiliates and representatives shall be entitled to deduct and withhold from any payment that is payable to any TRA Party pursuant to this Agreement such amounts as are required to be deducted or withheld with respect to the making of such payment in accordance with the Code or any provision of U.S. state, local or foreign tax law (including for this purpose any withholding required by the Corporation or its affiliates that may be required in connection with the Reorganization, a Redemption or a Direct Exchange or other Exchange). To the extent that amounts are so deducted or withheld and paid over to the appropriate Taxing Authority, such amounts shall be treated for all purposes of this Agreement as having been paid by the Corporation to the relevant TRA Party. The Corporation shall provide evidence of such payment to each TRA Party in respect of which such deduction or withholding is required, to the extent that such evidence is available. Each TRA Party shall promptly provide the Corporation with any applicable tax forms and certifications reasonably requested by the Corporation in connection with determining whether any such deductions and withholdings are required under the Code or any provision of U.S. state, local or foreign tax law, including under Sections 1441, 1442, 1445 or 1446 of the Code. The Corporation will consider in good faith any applicable certificates, forms or documentation provided by a TRA Party that in such TRA Party’s reasonable determination reduce or eliminate any such withholding.
Section 7.12 [Reserved].
Section 7.13 Affiliated Group; Transfers of Corporate Assets.
(a) The parties acknowledge that each of the Corporation and the Blocker Entity is a member of the Corporate Group and that the provisions of this Agreement shall be applied with respect to the Corporate Group (and any other affiliated or consolidated Tax group of which the Corporation becomes a part), and that 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. Except with the consent of the GGC Nominee and the BSMH Nominee the Corporation shall hold its Units directly or indirectly through a member of the Corporate Group at all times.
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(b) If the Corporation, its successors in interest, any member of a group described in Section 7.13(a), the LLC, or any entity treated as a partnership or disregarded entity for U.S. federal income tax purposes in which any of the foregoing holds a direct or indirect interest, transfers (or is deemed to transfer) one or more assets to a corporation (or a Person classified as a corporation for U.S. income tax purposes) with which the Corporation does not file a consolidated Tax Return for U.S. federal income Tax purposes (or if any entity that holds Reference Assets transfers any Reference Asset to a corporation (or a Person classified as a corporation for U.S. federal income tax purposes) with which the Corporation does not file a consolidated Tax Return for U.S. federal income Tax purposes), such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment due hereunder, shall be treated as having disposed of such asset (or Reference Asset) in a fully taxable transaction on the date of such transfer. The consideration deemed to be received by such entity shall be equal to the fair market value of the transferred asset, which for these purposes shall be deemed to include (i) the amount of debt to which such asset is subject, in the case of a transfer of an encumbered asset, or (ii) the amount of debt allocated to such asset, in the case of a transfer of a partnership interest. For purposes of this Section 7.13, a transfer of a partnership interest or an interest in a disregarded entity shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership or disregarded entity. If any member of a group described in Section 7.13(a) that directly or indirectly owns any equity interests in the LLC deconsolidates for federal income tax purposes from that group (or the Corporation deconsolidates for federal income tax purposes from that group), then, except as otherwise agreed by each of the GGC Nominee and the BSMH Nominee, such deconsolidated members of the group shall be treated prior to deconsolidation as having disposed of their assets directly or indirectly held (including their directly or indirectly held equity of the LLC) in a fully taxable transaction for consideration calculated in a manner consistent with the provisions of the preceding sentences. Except for transfers covered by the preceding sentences of Section 7.13(b) of this Agreement or that constitute a Change of Control, if the Blocker Entity or the Corporation directly or indirectly transfers (as determined for U.S. federal income tax purposes) Units or equity interests of a member of the Corporate Group (including any transfer which results in a liquidation of the LLC for U.S. federal income tax purposes) where such transfer would impact the amounts payable pursuant to this Agreement, the calculation of payments pursuant to this Agreement shall be made as if such transfer did not occur, except as may be otherwise agreed to by the GGC Nominee and the BSMH Nominee.
Section 7.14 Confidentiality. Each TRA Party and its assignees acknowledges and agrees that the information of the Corporation and its Affiliates provided pursuant to this Agreement is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such Person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters of the Corporation and its Affiliates and successors acquired pursuant to this Agreement. This Section 7.14 shall not apply to (i) any information that has been made publicly available by the Corporation, becomes public knowledge (except as a result of an act of any TRA Party in violation of this Agreement) or is generally known to the business community, (ii) the disclosure of information to the extent necessary for a TRA Party to prosecute or defend claims arising under or relating to this Agreement, (iii) the disclosure of information to the extent necessary for a TRA Party to prepare and file its Tax Returns, to respond to any inquiries
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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 Tax Returns, (iv) the disclosure on a confidential basis to limited partners and prospective investors in private equity funds affiliated with the GGC TRA Parties of financial and other information of the type typically disclosed to such partners or prospective investors and (v) the disclosure to any potential assignee or transferee of information in connection with an assignment, sale, pledge, alienation or transfer of any interest in this Agreement pursuant to Section 7.6(a) so long as such potential assignee or transferee agrees to be subject to the provisions of this Section 7.14. Notwithstanding anything to the contrary herein, any TRA Party and each of its assignees (and each employee, representative or other agent of such TRA Party or its assignees, as applicable) may disclose at their discretion to any and all Persons, without limitation of any kind, the tax treatment and tax structure of, and tax strategies relating to, the Corporate Group, the LLC, and their direct and indirect Subsidiaries, such TRA Party and any of their transactions (including without limitation the Reorganization, the IPO, the Exchanges to which such TRA Party is party and this Agreement), and all materials of any kind (including tax opinions or other tax analyses) that are provided to such TRA Party relating to such tax treatment, tax structure or tax strategies. If a TRA Party or an assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.14, the Corporation shall have the right and remedy to have the provisions of this Section 7.14 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Subsidiaries 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 7.15 Change in Law. Notwithstanding anything herein to the contrary, if, as a result of or, in connection with an actual or proposed change in Tax law, an Exchange TRA Party reasonably believes that the existence of this Agreement could have material adverse tax consequences to such Exchange TRA Party or any direct or indirect owner of such Exchange TRA Party, then at the written election of such Exchange TRA Party in its sole discretion (in an instrument signed by such Exchange TRA Party and delivered to the Corporation) and to the extent specified therein by such Exchange TRA Party, this Agreement shall cease to have further effect and shall not apply to an Exchange with respect to such Exchange TRA Party occurring after a date specified by such Exchange TRA Party.
Section 7.16 Interest Rate Limitation. Notwithstanding anything to the contrary contained herein, the interest paid or agreed to be paid hereunder with respect to amounts due to any TRA Party hereunder shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If any TRA Party shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the Tax Benefit Payment, Advance Payment or Early Termination Payment, as applicable (but in each case exclusive of any component thereof comprising interest) or, if it exceeds such unpaid non-interest amount, refunded to the Corporation. In determining whether the interest contracted for, charged, or received by any TRA Party exceeds the Maximum Rate, such TRA Party may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the payment obligations owed by the Corporation to such TRA Party hereunder. Notwithstanding the foregoing, it is the intention of the Parties to conform strictly to any applicable usury laws.
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Section 7.17 Independent Nature of Rights and Obligations.
(a) The rights and obligations of the each TRA Party hereunder are several and not joint with the rights and obligations of any other Person. A TRA Party shall not be responsible in any way for the performance of the obligations of any other Person hereunder, nor shall a TRA Party have the right to enforce the rights or obligations of any other Person hereunder (other than the Corporation). Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any TRA Party pursuant hereto or thereto, shall be deemed to constitute the TRA Parties acting as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the TRA Parties are in any way acting in concert or as a group with respect to such rights or obligations or the transactions contemplated hereby, and the Corporation acknowledges that the TRA Parties are not acting in concert or as a group and will not assert any such claim with respect to such rights or obligations or the transactions contemplated hereby.
(b) To the fullest extent permitted by law the GGC Nominee and the BSMH Nominee shall not owe any duties (fiduciary or otherwise) to any other TRA Party or any other Person in determining to take or refrain from taking any action or decision under or in connection with this Agreement, including in connection with the actions and decisions contemplated by Section 2.3, Section 7.6(b), Section 7.8 and Section 7.9. For purposes of this Agreement, including in connection with the actions and decisions contemplated by Section 2.3, Section 7.6(b), Section 7.8 and Section 7.9, the TRA Parties acknowledge that, in taking or omitting to take any action or decision hereunder, the GGC Nominee and the BSMH Nominee and each other TRA Party shall be permitted to take into consideration solely its own interests and shall have no duty or obligation to give any consideration to any interest of or factors affecting any other TRA Party or any other Person.
Section 7.18 Tax Characterization and Elections. The parties intend that (A) each Exchange shall give rise to Basis Adjustments, (B) payments pursuant to this Agreement with respect to an Exchange TRA Party (except with respect to amounts that constitute Imputed Interest) shall be treated as consideration in respect of relevant Exchange that give rise to additional Basis Adjustments, and (C) the rights received pursuant to this Agreement by the Reorganization TRA Parties and the parties to the Unit Contribution (excluding any amount that constitutes Imputed Interest) will be treated as consideration paid under Section 351(b) of the Code in connection with the Reorganization; and the parties will not take any position on a tax return, audit, examination or other proceeding inconsistent with any of the intended tax treatment described in this Section 7.18 except upon an applicable contrary final Determination. The Corporation will ensure that, on and after the date hereof and continuing through the term of this Agreement, the LLC and each of its direct and indirect subsidiaries that they control and that is treated as a partnership for U.S. federal income tax purposes will have in effect an election under Section 754 of the Code.
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[Signature Page Follows This Page]
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THE LLC:
| Ensemble Health Partners Holdings LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
[ADDITIONAL SIGNATURE PAGES TO BE ADDED]
Exhibit A
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of _________________, 20___ (this “Joinder”), is delivered pursuant to that certain Tax Receivable Agreement, dated as of October 21, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Tax Receivable Agreement”) by and among Ensemble Health Partners, Inc., a Delaware corporation (the “Corporation”), Ensemble Health Partners Holdings, LLC, a Delaware limited liability company (“the LLC”), and the other persons time to time party thereto. Capitalized terms used but not otherwise defined herein have the respective meanings set forth in the Tax Receivable Agreement.
| 1. | Joinder to the Tax Receivable Agreement. Upon the execution of this Joinder by the undersigned and delivery hereof to the Corporation, the undersigned hereby is and hereafter will be a [Reorganization/Exchange] TRA Party under the Tax Receivable Agreement and a Party thereto, with all the rights, privileges and responsibilities of a [Reorganization/Exchange] TRA Party thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the Tax Receivable Agreement as if it had been a signatory thereto as of the date thereof. |
| 2. | Incorporation by Reference. All terms and conditions of the Tax Receivable Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full. |
| 3. | Address. All notices under the Tax Receivable Agreement to the undersigned shall be directed to: |
[Name]
[Address]
[City, State, Zip Code]
Attn:
Facsimile:
E-mail:
| [NAME OF NEW PARTY] | ||
| By: | ||
| Name: | ||
| Title: | ||
Acknowledged and agreed
as of the date first set forth above:
| ENSEMBLE HEALTH PARTNERS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Annex A
Blocker Entity
GGOF EHL Blocker, LLC
Annex B
Exchange TRA Parties
Bon Secours Mercy Health Innovations LLC
EHL Acquisition Holdings, LLC
EHL Management Investors, LLC
Annex C
Reorganization TRA Parties
[EHL Co-Investor Aggregator, L.P.]1
| 1 | NTD: Name to be confirmed. |
Annex D
EHL Acquisition Holdings, LLC
[EHL Co-Investor Aggregator, L.P.]2
| 2 | NTD: Name to be confirmed. |