Exhibit 10.1

STOCKHOLDERS AGREEMENT

This STOCKHOLDERS AGREEMENT (this “Agreement”) is made as of February 16, 2021 by and among:

 

(i)

loanDepot, Inc., a Delaware corporation (the “Company”);

 

(ii)

Parthenon Investors III, L.P., PCap Associates, Parthenon Capital Partners Fund, L.P., Parthenon Investors IV, L.P., Parthenon Capital Partners Fund II, L.P. and PCP Managers, L.P. (collectively, together with their Permitted Transferees, the “Parthenon Stockholders”);

 

(iii)

The JLSSAA Trust, established September 4, 2014, JLSA, LLC, Trilogy Mortgage Holdings, Inc., Trilogy Management Investors Six, LLC, Trilogy Management Investors Seven, LLC and Trilogy Management Investors Eight, LLC (collectively, together with their Permitted Transferees, the “Hsieh Stockholders” and, together with the Parthenon Stockholders, the “Stockholders”).

RECITALS

 

A.	WHEREAS the Company is contemplating an underwritten initial public offering of shares of its Class A common stock, par value $0.001 per share (“Class A Common Stock”), registered on Form S-1 under the Securities Act (the “IPO”);

 

B.	WHEREAS, in connection with the IPO:

 

(i)

The parties to that certain Third Amended and Restated Limited Liability Company Agreement of LD Holdings Group, LLC, a Delaware limited liability company (“LD Holdings”), dated as of October 1, 2020 (as amended and/or restated from time to time, the “Holdings LLC Agreement”) have agreed to amend the Holdings LLC Agreement to, among other things, modify its capital structure by replacing the different classes of interests with a single new class of units (the “Holdco Units”);

 

(ii)

The Company will issue to the Continuing LLC Members (as defined below) a number of shares of the Company’s Class B common stock, par value $0.001 per share (“Class B Common Stock”) or Class C common stock, par value $0.001 per share (“Class C Common Stock”) equal to the number of Holdco Units held by such Continuing LLC Members, as applicable; and

 

(iii)

WHEREAS, the Company and LD Investment Holdings, Inc., a Delaware corporation (“Parthenon Blocker”), will undertake a series of transactions pursuant to which Parthenon Blocker will merge into the Company, with the Company remaining as the surviving corporation (the “Merger”) and, as a result of such Merger, the Parthenon Stockholders will exchange all of the equity interests of Parthenon Blocker in return for shares of Class D common stock, par value $0.001 per share, of the Company (“Class D Common Stock”); and

 

C.	WHEREAS, conditioned upon the closing of the IPO, the parties hereto desire to enter into this Agreement to set forth their agreements on certain matters.

NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.	EFFECTIVENESS; DEFINITIONS.

1.1    Effective Date. This Agreement is being executed on the date hereof and shall automatically become effective upon, and only upon, the consummation of the closing of the IPO (the “Effective Date”).

1.2    Definitions. Certain capitalized terms used in this Agreement shall have the respective meanings set forth in Section 5.2 hereof.

 

2.	BOARD REPRESENTATION.

2.1    Right to Designate. From and after the Effective Date hereof until the relevant provision of this Section 2.1 ceases to be effective in accordance with Section 2.10, (a) the Parthenon Stockholders shall be entitled to designate two (2) persons for election to the Board and (b) the Hsieh Stockholders shall be entitled to designate two (2) persons for election to the Board; provided, that from and after the date in which the Parthenon Stockholders are, pursuant to Section 2.10, entitled to designate one (1) person or less for election to the Board, the Hsieh Stockholders shall also be entitled to designate an additional person for election to the Board, provided (x) such person is independent under the applicable rules of the U.S. securities exchange on which the Class A Common Stock is listed and (y) the Hsieh Stockholders collectively Beneficially Own Common Stock representing at least 25% of the total voting power of the then outstanding Common Stock (each such designated person, a “Nominee”). In addition, solely for purposes of filling the Class I Board seat that will remain vacant as of the Effective Date, the Hsieh Stockholders shall be entitled to recommend to the Board the person who shall fill such Board seat (which, for the avoidance of doubt, shall be a one-time right that shall lapse after such initial Board seat is filled) and, provided such person is (i) independent under the applicable rules of the U.S. securities exchange on which the Class A Common Stock is listed, (ii) qualified to serve in such capacity and (iii) approved by the majority of the members of the Board, which approval shall include each of the independent directors, the Parthenon Stockholders shall take all Necessary Action to cause such Board seat to be filled by such person.

2.2    Classification; Initial Designees of the Parthenon Stockholders and Hsieh Stockholders. At the Effective Date, the Company, and, if applicable, the Stockholders shall take all Necessary Action, to cause the total number of directors constituting the Board to fixed at seven (7) members, initially consisting of (a) the initial Nominees of the Parthenon Stockholders, who shall be Brian P. Golson (Class III) and Andrew C. Dodson (Class II), (b) the initial Nominees of the Hsieh Stockholders, who shall initially be only Anthony Hsieh (Class III), and (c) John C. Dorman (Class III) and Dawn Lepore (Class I). Two (2) seats shall initially be vacant, one (1) of which is a Class I Board seat and one (1) of which is a Class II Board seat. The Parthenon Stockholders shall not be obligated to designate all (or any) of the directors they are entitled to designate pursuant to this Agreement, but the failure to do so shall not constitute a waiver of its rights hereunder. The Hsieh Stockholders shall not be obligated to designate all (or any) of the directors they are entitled to designate pursuant to this Agreement, but the failure to do so shall not constitute a waiver of his or its rights hereunder.

2.3    Subsequent Nomination of Persons Designated by the Parthenon Stockholders or Hsieh Stockholders. The Company’s Governance and Nominating Committee shall recommend to the Board that any Nominee be nominated and recommended by the Board to stockholders for election as a director of the Company at each meeting of stockholders at which directors of the class in which such Nominee was or is to be placed are to be elected, and the Board shall recommend any such Nominee to the stockholders for election as a director of the Company at each meeting of stockholders at which directors of the class in which such person was or is to be placed are to be elected. The Company shall use its best efforts to cause the election of each such Nominee designated by the Parthenon Stockholders or Hsieh Stockholders, as applicable, including by including each such Nominee in the proxy statement prepared by the Company in connection with soliciting proxies for every meeting of stockholders in which the election of such Nominee’s class of directors is to take place, and at every postponement or adjournment thereof, and on every action or approval by written consent of the stockholders of the Company or the Board with respect to the election of such Nominee’s class of directors. For so long as each Stockholder party hereto Beneficially Owns (directly or indirectly) any shares of Common Stock, such Stockholder hereby agrees to take all Necessary Action to cause the election of such Nominee to the Board (any such Nominee so elected to the Board, a “Designated Director”).

2.4    Replacement of Directors Designated by the Parthenon Stockholders or Hsieh Stockholders. Each Designated Director (and, for the avoidance of doubt, each other director of the Company) may be removed only for cause. In the event that any Designated Director shall cease to serve as a director of the Company for any reason, any vacancy resulting therefrom shall be filled by the directors then in office in accordance with the Certificate of Incorporation of the Company; provided that the parties who originally designated such Designated Director shall be entitled to propose to the Board the person who shall fill such Board seat and, provided such person is qualified to serve in such capacity, as determined by the Board in its reasonable discretion, the Stockholders shall take all Necessary Action to cause such Board seat to be filled by such person.

 

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2.5    Voting Agreement. Each Stockholder agrees (i) to take all Necessary Action reasonably available within its power, including casting all votes to which such Stockholder is entitled in respect of the Common Stock Beneficially Owned by such Stockholder, whether at any annual or special meeting of the Company’s stockholders, by written consent or otherwise, so as to effect the intent of this Section 2 and (ii) not to grant, or enter into a binding agreement with respect to, any proxy to any Person in respect of such Common Stock that would prohibit such Stockholder from casting such votes in accordance with the preceding clause (i).

2.6    Subsidiary Boards. The composition of the board of directors or board of managers, if and as applicable, of each of the Company’s subsidiaries shall be the same as that of the Board unless the Parthenon Stockholders and the Hsieh Stockholders otherwise agree or as may be required by law.

2.7    Expenses; Insurance. The Company shall reimburse each Designated Director for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the Board and any committees thereof, including travel, lodging and meal expenses. The Company shall obtain customary director and officer liability insurance on commercially reasonable terms. The Company shall provide each Designated Director with exculpation, indemnification and advancement of expenses that are not less favorable to any such Designated Director than those it provides to any other non-employee directors serving on the Board.

2.8    Chairman of the Board. For so long as the Hsieh Stockholders have the right to designate at least one (1) director for nomination under this Agreement, the Company and the Stockholders will take all Necessary Action to ensure that Anthony Hsieh shall be the Chairman of the Board of the Company.

2.9    Committee Participation. Subject to applicable laws and stock exchange regulations,

 

(a)

for so long as the Hsieh Stockholders have the right to designate at least one (1) director for nomination under this Agreement, the Hsieh Stockholders shall have the right to have a representative (i) on the Compensation Committee, provided that such representative shall not be Anthony Hsieh, a director serving as the Chairman of the Board or the Chief Executive Officer of the Company, and (ii) on the Governance and Nomination Committee, provided that such representative shall not be Anthony Hsieh, a director serving as the Chairman of the Board or the Chief Executive Officer of the Company and, for the avoidance of doubt, that a majority of the directors on such committee shall be independent under the applicable rules of the U.S. securities exchange on which the Class A Common Stock is listed; and

 

(b)

for so long as the Parthenon Stockholders have the right to designate at least one (1) director for nomination under this Agreement, the Parthenon Stockholders shall have the right to have a representative on any mergers and acquisition, capital markets or similar committee (if any).

2.10    Termination of the Parthenon Stockholders’ and Hsieh Stockholders’ Right to Designate Directors.

 

(a)

At such time as the Parthenon Stockholders cease to collectively Beneficially Own (i) Common Stock representing at least 15% of the total voting power of the then outstanding Common Stock, the Parthenon Stockholders shall only be entitled to designate one (1) person for election to the Board and (ii) Common Stock representing at least 5% of the total voting power of the then outstanding Common Stock, the Parthenon Stockholders shall not be entitled to designate any persons for election to the Board.

 

(b)

At such time as the Hsieh Stockholders cease to collectively Beneficially Own Common Stock representing at least 5% of the total voting power of the then outstanding Common Stock, the Hsieh Stockholders shall not be entitled to designate any persons for election to the Board.

2.11    Controlled Company. For so long as the Stockholders collectively Beneficially Own Common Stock representing a majority of the total voting power, the Company shall take all Necessary Action to avail itself of all available “controlled company” exceptions to the corporate governance listing standards of any U.S. securities exchange on which shares of Class A Common Stock are listed, unless waived in writing by the Stockholders.

 

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3.	REPRESENTATIONS AND WARRANTIES.

3.1    Representations and Warranties. Each Stockholder represents and warrants that (a) this Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the valid and binding obligation of such Stockholder, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability, and (b) such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with, conflicts with, or violates any provision of this Agreement.

 

4.	AMENDMENT, TERMINATION, ETC.

4.1    Written Modifications. This Agreement may not be orally amended or modified and no oral waiver of any of its terms shall be effective. This Agreement may be amended or modified and the provisions hereof may be waived, only by an agreement in writing signed by the Hsieh Stockholders and the Parthenon Stockholders. Each such amendment, modification or waiver shall be binding upon each party hereto.

4.2    Termination. This Agreement will terminate on the earlier to occur of (a) the Parthenon Stockholders and the Hsieh Stockholders jointly electing, by giving written notice of withdrawal to the Company and (b) delivery to the Company by the Hsieh Stockholders (or the Parthenon Stockholders, as applicable) of a written notice of withdrawal following the date on which the Parthenon Stockholders (or the Hsieh Stockholders, as applicable) no longer have the right to designate an individual for nomination to the Board (at which time, for the avoidance of doubt the Parthenon Stockholders (or the Hsieh Stockholders, as applicable) shall cease to be a party to this Agreement and shall no longer be subject to the obligations of this Agreement or have rights under this Agreement). From the date of delivery of any such withdrawal notice, the Parthenon Stockholders and/or the Hsieh Stockholders, as applicable, shall cease to be a party to this Agreement and shall no longer be subject to the obligations of this Agreement or have rights under this Agreement.

4.3    Effect of Termination. No termination under this Agreement shall relieve any Person of liability for a material breach hereof prior to such termination.

 

5.	MATTERS OF CONSTRUCTION; DEFINITIONS.

5.1    Certain Matters of Construction.

 

(a)

The words “hereof’, “herein”, “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement shall include all subsections thereof;

 

(b)

The word “including” shall mean “including, without limitation”;

 

(c)

Definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined.

 

(d)

The masculine, feminine and neuter genders shall each include the other; and

 

(e)

Wherever any particular Section or provision of this Agreement provides for an act (including any approval or consent, including pursuant to Section 4.1 hereof) to be taken by the Parthenon Stockholders or the Hsieh Stockholders, as applicable, such act may be taken if approved by the Parthenon Stockholders or the Hsieh Stockholders, as applicable, that Beneficially Own a majority of the total voting power of the Common Stock that is collectively Beneficially Owned by all Parthenon Stockholders or the Hsieh Stockholders, as applicable.

 

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5.2    Definitions. The following terms shall have the following meanings:

“Agreement” shall have the meaning set forth in the preamble.

“Affiliate” shall mean, respect to any Person, any other Person that controls, is controlled by, or is under common control with, such Person; the term “control” as used in this definition, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and “controlled” and “controlling” shall have meanings correlative to the foregoing.

“Beneficially Own” shall mean that a specified Person has or shares the right, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to vote shares of Capital Stock of the Company, and “Beneficially Owned” and “Beneficial Owner” shall have correlative meanings.

“Board” shall mean the board of directors of the Company.

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests or equivalents in capital stock of such corporation (whether voting or nonvoting and whether common or preferred) and (ii) with respect to any Person that is not a corporation, individual or governmental entity, any and all partnership, membership, limited liability company or other equity interests of such Person that confer on the holder thereof the right to receive a share of the profits and losses of, or the distribution of assets of, the issuing Person, including in each case any and all warrants, rights (including conversion and exchange rights) and options to purchase any of the foregoing.

“Class A Common Stock” shall have the meaning set forth in the Recitals.

“Class B Common Stock” shall have the meaning set forth in the Recitals.

“Class C Common Stock” shall have the meaning set forth in the Recitals.

“Class D Common Stock” shall have the meaning set forth in the Recitals.

“Common Stock” shall mean, collectively, the Class A Common Stock, Class B Common Stock, the Class C Common Stock and the Class D Common Stock.

“Company” shall have the meaning set forth in the preamble.

“Continuing LLC Members” shall mean the members of LD Holdings (excluding Parthenon Blocker) immediately prior to the IPO.

“Designated Director” shall have the meaning set forth in Section 2.3.

“Effective Date” shall have the meaning set forth in Section 1.1.

“Family Group” shall mean, as to any particular Person who is an individual, (i) such individual’s spouse, domestic partner, parent, sibling and descendants (whether natural or adopted) (collectively, for purposes of this definition, “relatives”), (ii) such individual’s executor or personal representative, (iii) any trust, or other entity formed for estate planning purposes, the trustee (or an equivalent thereof) of which is such individual or such individual’s executor or personal representative and which at all times is and remains solely for the benefit of such individual and/or such individual’s relatives, (iv) any corporation, limited partnership, limited liability company or other tax flow-through entity the governing instruments of which provide that such individual or such individual’s executor or personal representative shall have the exclusive, nontransferable power to direct the management and policies of such entity and of which the sole owners of stock, partnership interests, membership interests or any other equity interests are limited to such individual, such individual’s relatives and/or the trusts (or other entities) described in clause (iii) above, and (v) any retirement plan for such individual or such individual’s relatives.

 

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“Holdco Units” shall have the meaning set forth in the Recitals.

“Holdings LLC Agreement” shall have the meaning set forth in the Recitals.

“Hsieh Stockholders” shall have the meaning set forth in the preamble.

“IPO” shall have the meaning set forth in the Recitals.

“LD Holdings” shall have the meaning set forth in the Recitals.

“Merger” shall have the meaning set forth in the Recitals.

“Necessary Action” shall mean, with respect to a specified result, all actions (to the extent such actions are permitted by applicable law and, in the case of any action by the Company that requires a vote or other action on the part of the Board, to the extent such action is consistent with the fiduciary duties that the Company’s directors have in such capacity) necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to shares of Common Stock or other securities entitled to vote with respect to such specified result, (ii) causing the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) causing members of the Board (to the extent such members were designated by the Person obligated to undertake the Necessary Action) to act (subject to any applicable fiduciary duties) in a certain manner or causing them to be removed in the event they do not act in such a manner, (iv) executing agreements and instruments and (v) making or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“Nominee” shall have the meaning set forth in Section 2.1.

“Parthenon Blocker” shall have the meaning set forth in the Recitals.

“Parthenon Stockholders” shall have the meaning set forth in the preamble.

“Permitted Transferees” means, with respect to any Stockholder, any of (i) any Parthenon Stockholder or any Affiliate of a Parthenon Stockholder, (ii) any Hsieh Stockholder or any Affiliate of a Hsieh Stockholder or (iii) Anthony Hsieh or any of his Affiliates or member of his Family Group, in each case, provided that prior to any transfer of Common Stock such Person shall have executed and delivered to the Company a Joinder Agreement agreeing to be bound by the terms of this Agreement in the form of Annex A attached hereto.

“Person” shall mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.

“SEC” shall mean the U.S. Securities and Exchange Commission or any successor agency.

“Securities Act” shall mean the Securities Act of 1933, as in effect from time to time.

“Stockholders” shall have the meaning set forth in the preamble.

 

6.	MISCELLANEOUS.

6.1    Authority; Effect. Each party hereto represents and warrants to and agrees with each other party that (a) to the extent that such party is an individual, such party has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (b) to the extent that such party is an entity, such party has the full limited liability company or other entity power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution and delivery by such party of this Agreement and the consummation by such party of the transactions contemplated hereby have been duly authorized by all necessary limited liability company or other entity action on the part of such party and no other proceedings on

 

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the part of such party are necessary to approve this Agreement and to consummate the transactions contemplated hereby, and (c) neither the execution nor the delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate any material agreement or other instrument applicable to such party or by which its assets are bound. This Agreement does not, and shall not be construed to, give rise to the creation of a partnership among any of the parties hereto, or to constitute any of such parties members of a joint venture or other association.

6.2    Notices. Any notices and other communications required or permitted in this Agreement shall be effective if in writing and (a) delivered personally, (b) sent by facsimile, or (c) sent by overnight courier, in each case, addressed as follows:

If to the Company, to:

loanDepot, Inc.

26642 Towne Centre Drive

Foothill Ranch, CA 92610

Attn: General Counsel

Facsimile: (949) 470-6237

with copies to:

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attn: Joshua N. Korff, P.C. and Michael Kim

Facsimile: (212) 446-4900

and

Sheppard, Mullin, Richter & Hampton LLP

333 South Hope Street, 43rd floor

Los Angeles, California 90071

Attn: David H. Sands

Facsimile: (213) 443-2743

If to a Parthenon Stockholder, to:

Parthenon Capital Partners

Four Embarcadero Center, Suite 3610

San Francisco, CA 94111

Facsimile: (415) 913-3913

Attention: Brian P. Golson

and Andrew C. Dodson

with copies to:

Kirkland & Ellis LLP

300 N. LaSalle

Chicago, IL 60654

Facsimile: (312) 862-2200

Attention: Jeffrey Seifman, P.C.

and Shelly M. Hirschtritt, P.C.

and Tana M. Ryan, P.C.

If to a Hsieh Stockholder, to:

 

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with copies to:

Gibson Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071

Attn: Kevin S. Masuda

Facsimile: (213) 229-7872

Notice to the holder of record of any shares of Capital Stock shall be deemed to be notice to the holder of such shares for all purposes hereof.

Unless otherwise specified herein, such notices or other communications shall be deemed effective (x) on the date received, if personally delivered, (y) on the date received if delivered by facsimile on a business day, or if not delivered on a business day, on the first business day thereafter, and (z) two business days after being sent by overnight courier. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.

6.3    Binding Effect, Etc. This Agreement constitutes the entire agreement of the parties with respect to the subject matter, supersedes in its entirety all prior or contemporaneous oral or written agreements or discussions with respect to its subject matter and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Other than to a Permitted Transferee, none of the parties hereto may assign any of its respective rights or delegate any of its respective obligations under this Agreement without the prior written consent of the other parties hereto, and any attempted assignment or delegation in violation of the foregoing shall be null and void.

6.4    Descriptive Heading. The descriptive headings of this Agreement are for convenience of reference only, are not to be considered a part hereof and shall not be construed to define or limit any of the terms or provisions hereof.

6.5    Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one instrument.

6.6    Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof.

6.7    No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, the parties hereto covenant, agree and acknowledge that no recourse under this Agreement shall be had against any current or future director, officer, employee, general or limited partner or member of any Stockholder or of any Affiliate thereof, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, general or limited partner or member of any Stockholder or any Affiliate thereof, as such, for any obligation of such Stockholder under this Agreement.

6.8    No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

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6.9    Specific Performance. The parties hereto shall have all remedies available at law, in equity or otherwise in the event of any breach or violation of this Agreement or any default hereunder. The parties acknowledge and agree that in the event of any breach of this Agreement, in addition to any other remedies which may be available, each party hereto shall be entitled to specific performance of the obligations of the other party hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances.

6.10    Governing Law. This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

6.11    Consent to Jurisdiction. Each party to this Agreement, by its execution hereof, (a) hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the purpose of any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, and agrees not to allow any of its subsidiaries to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such proceeding brought in one of the above-named courts is improper, or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court and (c) hereby agrees not to commence or maintain any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise. Notwithstanding the foregoing, any party to this Agreement may commence and maintain an action to enforce a judgment of any of the above-named courts in any court of competent jurisdiction. Each party hereto hereby consents to service of process in any such proceeding in any manner permitted by Delaware law, and agrees that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 6.2 hereof is reasonably calculated to give actual notice.

6.12    WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 6.12 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. EITHER PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 6.12 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

6.13    Exercise of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by the other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

*        *        *         *        *

 

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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement on the day and year first written above.

 

 

[Signature Page to Stockholders Agreement]

 

[Signature Page to Stockholders Agreement]

 

[Signature Page to Stockholders Agreement]

 

[Signature Page to Stockholders Agreement]

ANNEX A

JOINDER AGREEMENT TO

STOCKHOLDERS AGREEMENT

This Joinder Agreement (this “Joinder Agreement”) is made by the undersigned (the “Joining Party”) in accordance with that certain Stockholders Agreement, dated as of February 16, 2021, by and among loanDepot, Inc., a Delaware corporation (the “Company”) and the stockholders party thereto (as may be amended, the “Stockholders Agreement”), in favor of and for the benefit of the Company and such stockholders. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Stockholders Agreement.

The Joining Party hereby acknowledges, agrees and confirms that, by his, her or its execution of this Joinder Agreement, the Joining Party will be deemed to be a party to the Stockholders Agreement and shall have all of the obligations under the Stockholders Agreement as a Parthenon Stockholder or Hsieh Stockholder, as applicable, as if he, she or it had been an original signatory to the Stockholders Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Stockholders Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date written below.

 

Date:						Name:

Exhibit 10.2

FORM OF TAX RECEIVABLE AGREEMENT

by and among

loanDepot, Inc.,

LD Holdings Group LLC,

and

the Recipients that are parties hereto

dated as of February 11, 2021

TAX RECEIVABLE AGREEMENT

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of February 11, 2021, is hereby entered into by and among loanDepot, Inc., a Delaware corporation (the “Corporation”), LD Holdings Group LLC, a Delaware limited liability company (“loanDepot”), and the initial Recipients identified below. Capitalized terms used and not otherwise defined herein have the meanings set forth in Article I.

RECITALS

WHEREAS, existing members of loanDepot (collectively, the “Members”) held or continue to hold membership interests (the “Units”) in loanDepot, which is classified as a partnership for United States federal income tax purposes;

WHEREAS, the income, gain, loss, expense, and other Tax items of the Corporation will be affected by: (i) the Exchange Basis Adjustments, and (ii) any interest imputed under Section 1272, 1274, 483 or other provision of the Code and any similar provision of state and local tax law with respect to the Corporation’s payment obligations under this Agreement (the “Imputed Interest”); and

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the actual or deemed effect of the Exchange Basis Adjustments and Imputed Interest.

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

ARTICLE I

DEFINITIONS

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

“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 for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such month (or portion thereof), or, in the absence of such rate, the Secured Overnight Financing Rate (“SOFR”), plus 100 basis points.

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

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

“Board” means the Board of Directors of the Corporation.

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

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

(i) any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto, excluding (i) a group of Persons which includes a Recipient and/or one or more Affiliates thereof and (ii) any entity owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock in the Corporation, 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;

(ii) there is consummated a merger or consolidation of the Corporation with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, the voting securities of the Corporation immediately prior to such merger or consolidation 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 merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or

(iii) the adopting of a plan of complete liquidation or dissolution of the Corporation by the stockholders of the Corporation or an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Corporation of all or substantially all of the Corporation’s assets, other than such sale or other disposition by the Corporation of all or substantially all of the Corporation’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale.

Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns, either directly or through a Subsidiary, all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions. In addition, for the avoidance of doubt, a rollover or exchange of securities of the Corporation held by a Person is not taken into account for purposes of determining whether a “Change of Control” has occurred.

“Class A Shares” means Class A common stock in the Corporation.

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

“Combined SALT Rate” means five percent (5%).

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

 

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

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

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount (but not less than zero) of Realized Tax Benefits for all Taxable Years of the Corporation, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

“Default Rate” means the Agreed Rate plus 400 basis points.

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state or local tax 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.

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

“Early Termination Rate” means the Agreed Rate, compounded annually.

“Exchange” means an exchange of a Unit and a non-economic voting share of the Corporation in exchange for cash or a Class A Share pursuant to the terms of the loanDepot LLC Agreement.

“Exchange Asset” means an asset that is held by loanDepot or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity for purposes of the applicable Tax at the time of an Exchange. An Exchange Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to an Exchange Asset.

“Exchange Basis Adjustment” means the adjustment to the tax basis of an Exchange Asset under Sections 732 and 1012 of the Code (in situations where, as a result of one or more Exchanges, loanDepot or an applicable Subsidiary becomes an entity that is disregarded as separate from its owner for tax purposes) or under Sections 734(b), 743(b) and 754 of the Code (in situations where, following an Exchange, loanDepot remains in existence as an entity for U.S. federal income tax purposes) and, in each case, comparable sections of state and local tax laws, as a result of an Exchange with respect to Units held by the Members, and as a result of the payments made to the Recipient pursuant to this Agreement. The amount of any Exchange 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.

“Exchange Date” means the date of any Exchange.

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Corporation and, without duplication, loanDepot, but only with respect to Taxes imposed on taxable income of loanDepot allocable to the Corporation or to the other members of the consolidated, combined, or unitary group of which the Corporation is a member, in each case using the same methods, elections, conventions and similar practices used on the relevant Corporation Return, but (i) using the Non-Stepped Up Tax Basis as reflected on the Exchange Basis Adjustment Schedule for Exchange Basis Adjustments, including amendments, (ii) excluding any deduction attributable to Imputed Interest for the Taxable Year, and (iii) applying the Combined SALT Rate for determining state and local income Taxes. For the avoidance of doubt, Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to the Exchange Basis Adjustments or Imputed Interest.

 

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“Independent Director” means any member of the Board who is not affiliated with any of the principal stockholders of the Corporation and who is neither a current officer nor a former officer of the Corporation or any of its Subsidiaries.

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

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

“IRS” means the United States Internal Revenue Service.

“loanDepot LLC Agreement” means that certain Fourth Amended and Restated Limited Liability Company Agreement of loanDepot, dated as of February 11, 2021.

“Majority Recipients” shall mean Recipients holding aggregate Recipient Percentages of at least 50.01%.

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

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

“Parthenon Shareholders” mean Parthenon Investors III, L.P., Parthenon Capital Partners Fund, L.P., Pcap Associates, Parthenon Investors IV, L.P. and Parthenon Capital Partners Fund II, L.P., and their respective permitted successors or assigns to this Agreement.

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

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

“Pre-Exchange Transfer” means any transfer or distribution in respect of one or more Units (i) that occurs prior to an Exchange of such Units, and (ii) to which Section 743(b) or 734(b) of the Code applies.

 

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“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the actual liability for federal income Taxes, and the liability for state and local income Taxes by applying the Combined State Tax Rate, of (i) the Corporation and (ii) without duplication, loanDepot, but only with respect to Taxes imposed on taxable income of loanDepot allocable to the Corporation or to the other members of the consolidated, combined or unitary group of which the Corporation is a member for such Taxable Year. If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the actual liability for federal income Taxes, and the liability for state and local income Taxes by applying the Combined State Tax Rate, of (i) the Corporation and (ii) without duplication, loanDepot, but only with respect to Taxes imposed on taxable income of loanDepot allocable to the Corporation or to the other members of the consolidated, combined or unitary group of which the Corporation is a member for such Taxable Year, over the Hypothetical Tax Liability for such Taxable Year. 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.

“Recipient” shall mean each of the Parthenon Shareholders, PCP Managers, L.P., Anthony Hsieh (or the trust listed on Schedule A), and their respective permitted successors or assigns to this Agreement.

“Recipient Percentage” of a Recipient shall mean, as of any time of determination, the percentage interest of such Recipient as of such time in the right to receive payments to be made to Recipients under this Agreement, as set forth on Schedule A.

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

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

“Subsidiary Stock” means any stock or other equity interest in any subsidiary entity of loanDepot that is treated as a corporation for United States federal income tax purposes.

“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, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

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

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

 

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

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

“Valuation Assumptions” shall mean, as of an Early Termination Date or following a Change of Control, as applicable, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporation will have taxable income sufficient to fully utilize the deductions arising from the Exchange Basis Adjustments and the Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Exchange Basis Adjustments and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available, (2) the United States federal income tax rates and state and local income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss carryovers generated by any Exchange Basis Adjustment or Imputed Interest and available as of the Early Termination Date will be utilized by the Corporation, subject to any restrictions imposed by law (including but not limited to Section 382 of the Code) in the earliest possible year permitted by law, including the Taxable Year that includes the Early Termination Date, (4) any non-amortizable assets (other than any Subsidiary Stock) will be disposed of on the fifteenth (15th) anniversary of the Early Termination Date, and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit and (if applicable) accompanying Noneconomic Share shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

ARTICLE II

DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

Section 2.1 Exchange Basis Adjustments and Schedule. Within 90 calendar days after the filing of the United States federal income tax return of the Corporation for each Taxable Year in which any Exchange has been effected, the Corporation shall deliver or cause to be delivered to the Recipients a schedule that shows, in reasonable detail necessary to perform the calculations required by this Agreement, for purposes of Taxes, (i) the Non-Stepped Up Tax Basis of the Exchange Assets as of each applicable Exchange Date, (ii) the Exchange Basis Adjustment with respect to the Exchange Assets as a result of the Exchanges effected in such Taxable Year, calculated in the aggregate, and (iii) the period (or periods) over which the Exchange Assets are amortizable and/or depreciable (the “Exchange Basis Adjustment Schedule”).

Section 2.2 Tax Benefit Schedule.

(a) Tax Benefit Schedule. Within 90 calendar days after the filing of the United States federal income tax return of the Corporation for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, and at the request of any Recipient with respect to each separate Exchange, the Corporation shall provide to the Recipients a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year (a “Tax Benefit Schedule”). The 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)).

 

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(b) Applicable Principles. The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for Taxes of the Corporation for such Taxable Year attributable to the Exchange Basis Adjustments and Imputed Interest, determined using a “with and without” methodology. For the avoidance of doubt, the actual liability for Taxes will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under the Code based upon the characterization of Tax Benefit Payments as additional consideration payable by the Corporation. Carryovers or carrybacks of any Tax item attributable to the Exchange Basis Adjustments and Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. The parties agree that (i) all Tax Benefit Payments attributable to the Exchange Basis Adjustments, other than (x) amounts accounted for as Imputed Interest or (y) Tax Benefit Payments payable to the Parthenon Shareholders, will (A) be treated as subsequent upward purchase price adjustments that give rise to further Exchange Basis Adjustments to Exchange Assets for the Corporation and (B) have the effect of creating additional Exchange Basis Adjustments to Exchange Assets for the Corporation in the year of payment, and (ii) as a result, such additional Exchange Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.

Section 2.3 Procedures, Amendments.

(a) Procedure. Every time the Corporation delivers to a Recipient an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.3(b), but excluding any Early Termination Schedule or amended Early Termination Schedule, the Corporation shall also (x) deliver to the Recipient schedules and work papers, as determined by the Corporation or requested by the Recipient, providing reasonable detail regarding the preparation of the Schedule and (y) allow the Recipient reasonable access at no cost to the appropriate representatives at the Corporation, as determined by the Corporation or requested by the Majority Recipients, in connection with a review of such Schedule. Without limiting the application of the preceding sentence, each time the Corporation delivers to a Recipient a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporation shall deliver to the Recipient the reasonably detailed calculation by the Corporation of the Hypothetical Tax Liability and the actual Tax liability. An applicable Schedule or amendment thereto shall become final and binding on all parties 30 calendar days from the first date on which the Recipients have received the applicable Schedule or amendment thereto unless the Majority Recipients (i) within 30 calendar days after receiving an applicable Schedule or amendment thereto, provides the Corporation with notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporation. If the parties, for any reason, are unable to successfully resolve the issues raised in any Objection Notice within 30 calendar days after receipt by the Corporation of an Objection Notice, the Corporation and the Majority Recipients shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the “Reconciliation Procedures”).

(b) Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the Recipients, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this

 

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Agreement (any such Schedule, an “Amended Schedule”). For the avoidance of doubt, in the event a Schedule is amended after such Schedule becomes final pursuant to Section 2.3(b), the Amended Schedule shall not be taken into account in calculating any Tax Benefit Payment in the Taxable Year to which the amendment relates but instead shall be taken into account in calculating the Cumulative Net Realized Tax Benefit for the Taxable Year in which the amendment actually occurs.

ARTICLE III

TAX BENEFIT PAYMENTS

Section 3.1 Payments.

(a) Payments. Within five (5) Business Days after a Tax Benefit Schedule delivered to the Recipients becomes final and binding in accordance with Section 2.3(a), the Corporation shall pay the Tax Benefit Payment to the Recipients in the percentages set forth on Schedule A, which such schedule may be updated by the Corporation after the day hereof. Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by the Recipients to the Corporation or as otherwise agreed by the Corporation and the Recipients. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal estimated income tax payments.

(b) Tax Benefit Payment. A “Tax Benefit Payment” means an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Interest Amount. For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of Units, except in the case of Tax Benefit Payments payable to the Parthenon Shareholders, in which case such consideration shall be treated as additional “boot” in the reorganization preceding the IPO. Subject to Section 3.3(a), the “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of (i) 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over (ii) the total amount of payments previously made under this Section 3.1 (excluding payments attributable to Interest Amounts); provided, for the avoidance of doubt, that the Recipients shall not be required to return any portion of any previously made Tax Benefit Payment. The “Interest Amount” shall equal the interest on the Net Tax Benefit calculated at the Agreed Rate from the due date (without extensions) for filing the Corporate Return with respect to Taxes for such Taxable Year until the Payment Date.

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

Section 3.3 Pro Rata Payments.

(a) If for any reason the Corporation does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year, then (i) the Corporation will pay the same proportion of each Tax Benefit Payment due to each Recipient to whom a payment is due under this Agreement in respect of such Taxable Year, without favoring one obligation over the other, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.

 

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(b) To the extent the Corporation makes a payment to a Recipient in respect of a particular Taxable Year under Section 3.1(a) of this Agreement (taking into account Section 3.3(a), but excluding payments attributable to Imputed Interest) in an amount in excess of the amount of such payment that should have been made to such Recipient in respect of such Taxable Year, then such Recipient shall not receive further payments under Section 3.1(a) until such Recipient has foregone an amount of payments equal to such excess.

ARTICLE IV

TERMINATION

Section 4.1 Early Termination by Election and Breach of Agreement.

(a) With the written approval of a majority of the Independent Directors, the Corporation may terminate this Agreement with respect to all amounts payable to the Recipients at any time by paying to the Recipients the Early Termination Payment; provided, however, that this Agreement shall only terminate pursuant to this Section 4.1(a) upon the receipt of the Early Termination Payment by the Recipients; and provided, further, that 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. Upon payment of the Early Termination Payment by the Corporation, neither the Recipients nor the Corporation shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporation and the Recipients as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment). If an Exchange occurs after the Corporation exercises its termination rights under this Section 4.1(a) and such exercise is not subsequently withdrawn, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement in such case shall be its obligations to the Recipients under Section 4.3.

(b) In the event that the Corporation breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder, or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then, following notice in writing by the Majority Recipients and a thirty (30) day period for Corporation to cure the breach, if not cured all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment agreed to by the Corporation and the Majority Recipients as due and payable but unpaid as of the date of a breach, and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a breach (except to the extent that the amount described in clause (3) is included in the Early Termination Payment). Notwithstanding the foregoing, in addition to any other rights or remedies available at law, in the event that the Corporation breaches any of its material obligations under this Agreement, the Recipients shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within nine (9) months after the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within nine (9) months after the date such payment is due so long as the Corporation has used good faith efforts to diligently make such payment prior to such time. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement (and Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate) 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 as a result of applicable limitations imposed by existing credit agreements in respect

 

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of indebtedness for borrowed money to which loanDepot (or any of its Subsidiaries) is a party (including, without limitation, limitations on the ability of loanDepot and its direct or indirect Subsidiaries to make distributions or payments to the Corporation) or the Board determines reasonably and in good faith that making any such distribution or payment would result in a default under any such existing credit agreement in respect of indebtedness for borrowed money to which loanDepot (or any of its Subsidiaries) is a party. The Corporation shall use commercially reasonable efforts to maintain sufficient available funds for the purpose of making required payments under this Agreement.

(c) In the event of a Change of Control, then, unless otherwise waived in writing by the Majority Recipients, 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 Change of Control and shall include, but not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a Change of Control, (2) any Tax Benefit Payment agreed to by the Corporation and the Majority Recipients as due and payable but unpaid as of the date of a Change of Control, and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a Change of Control (except to the extent that the amount described in clause (3) is included in the Early Termination Payment). In the event of a Change of Control, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions, substituting “the date of the Change of Control” for “Early Termination Date,” where applicable.

Section 4.2 Early Termination Notice. If the Corporation chooses to exercise its right of early termination under Section 4.1 above, the Corporation shall deliver to the Recipients notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Corporation’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment for the Recipients. The Early Termination Schedule shall become final and binding on all parties 30 calendar days from the first date on which the Recipients have received such Schedule or amendment thereto unless the Majority Recipients (i) within 30 calendar days after receiving the Early Termination Schedule, provide the Corporation with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporation (the “Early Termination Effective Date”). If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Majority Recipients shall employ the Reconciliation Procedures.

Section 4.3 Payment upon Early Termination.

(a) Within three calendar days after the Early Termination Effective Date, the Corporation shall pay the Early Termination Payment to the Recipients in the percentages set forth on Schedule A. Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by the Recipients or as otherwise agreed by the Corporation and the Recipients.

(b) The “Early Termination Payment” shall equal the present value, discounted at the Early Termination Rate as of the Early Termination Effective Date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Recipients beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

 

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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 to the Recipients under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporation and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future unsecured trade creditors of the Corporation that are not Senior Obligations.

Section 5.2 Late Payments by the Corporation. The amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to the Recipients 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 or Early Termination Payment was due and payable.

ARTICLE VI

NO DISPUTES; CONSISTENCY; COOPERATION

Section 6.1 Participation in the Other Parties’ Tax Matters. Except as otherwise provided herein, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation and loanDepot, including without limitation the preparation, filing, or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Corporation shall notify the Recipients of, and keep the Recipients reasonably informed with respect to, the portion of any audit of the Corporation and loanDepot by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of the Recipients under this Agreement, and shall provide the Recipients reasonable opportunity to provide information and other input to the Corporation and loanDepot and their respective advisors concerning the conduct of any such portion of such audit.

Section 6.2 Consistency. Subject to the other relevant terms of this Agreement and the loanDepot LLC Agreement, the Corporation and the Recipients agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including, without limitation, the Exchange Basis Adjustments, Imputed Interest, and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation under this Agreement unless otherwise required by law.

Section 6.3 Cooperation. The Recipients shall (a) furnish to the Corporation in a timely manner such information, documents, and other materials as the Corporation may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination, or controversy with any Taxing Authority, (b) make itself available to the Corporation to provide explanations of documents and materials and such other information as the Corporation 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 the Recipients for any reasonable third-party costs and expenses incurred pursuant to this Section 6.3.

 

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ARTICLE VII

MISCELLANEOUS

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

If to the Corporation, to:

loanDepot, Inc.

26642 Towne Centre Drive

Foothills Ranch, California 92610

Attn: Peter A. L. Macdonald

Facsimile: (949) 470-6237

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

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attn: Joshua N. Korff and Michael Kim

Facsimile: (212) 446-4900

If to loanDepot, to:

LD Holdings, LLC

26642 Towne Centre Drive

Foothills Ranch, California 92610

Attn: Peter A. L. Macdonald

Facsimile: (949) 470-6237

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

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attn: Joshua N. Korff and Michael Kim

Facsimile: (212) 446-4900

and

Sheppard Mullin Richter & Hampton

333 South Hope Street, 42nd floor

Los Angeles, California 90071

Attn: David Sands

Facsimile: (213) 443-2743

 

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If to the Recipients, to:

Parthenon Capital Partners

Four Embarcadero Center, Suite 3160

San Francisco, California 94111

Attn: Brian P. Golson and Andrew C. Dodson

Facsimile: (415) 913-3913

and

Anthony Hsieh

5 Oceancrest

Newport Coast, California 92657

Attn: Anthony Hsieh

with copies (which shall not constitute notice to the Recipients) to:

Kirkland & Ellis LLP

2409 Century Park East

Los Angeles, California 90067

Attn: Tana Ryan, P.C. and Bryan Ikegami

Facsimile: (213) 680-8500

and

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071

Attn: Kevin Masuda

Facsimile: (213) 229-6872

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

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

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

 

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

Section 7.6 Successors; Assignment; Amendments; Waivers.

(a) The Recipients may assign any of their rights under this Agreement to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to assume all rights and obligations of the Recipients under this Agreement. This Agreement shall not be assignable by loanDepot or the Corporation without the prior written consent of the Majority Recipients.

(b) No provision of this Agreement may be amended unless such amendment is approved in writing by the Corporation and the Majority Recipients. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

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

Section 7.7 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, 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) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in Delaware 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) days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of Delaware. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

(b) Notwithstanding the provisions of paragraph (a), any party hereto may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award. For the purposes of this paragraph (b), each party (i) expressly consents to the application of paragraph (c) of this Section 7.8 to any such action or proceeding, and (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.

 

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(c) (i) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN DELAWARE FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action, or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the forums designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

(ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.8 and such parties agree not to plead or claim the same.

Section 7.9 Reconciliation. In the event that the Majority Recipients, on the one hand, and the Corporation or loanDepot, on the other hand, are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 4.2 and 6.2 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to the Majority Recipients and the Corporation. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the parties to the Reconciliation Dispute agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the parties to the Reconciliation Dispute or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be a partner in an accounting firm or a law firm nationally recognized as being expert in Tax matters and that is reasonably acceptable to the Corporation and the Majority Recipients. The Expert shall resolve any matter relating to the Exchange Basis Adjustment Schedule or an amendment thereto, or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. The Expert shall resolve any such dispute based upon the terms and provisions of this Agreement and the submissions of the parties made in support thereof in such dispute and shall not conduct an independent review, not shall the Expert assign any value to any item in dispute which is higher or lower than the highest value or lowest value, as applicable, ascribed to such item by any disputing party. 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 parties shall bear their own costs and expenses of such proceeding, provided that the Corporation shall bear the cost of the Expert. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert, unless the Expert substantially adopts the Corporation’s or loanDepot’s position, in which case such Recipient shall reimburse the Corporation for the cost of the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the parties to this Agreement and may be entered and enforced in any court having jurisdiction.

Section 7.10 Withholding. The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local, or foreign tax law, provided that the Corporation (i) gives 10 days advance written notice of its intention to

 

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make such withholding to the applicable Recipients, (ii) identifies the legal basis requiring such withholding and (iii) gives the applicable Recipients an opportunity to establish that such withholding is not legally required. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Recipients.

Section 7.11 Treatment of a Consolidated Group; Transfers of Corporate Assets.

(a) To the extent that the Corporation is or becomes a member of a consolidated, combined or unitary group of corporations that files a consolidated, combined or unitary income tax return pursuant to Sections 1501 et seq. of the Code or any provisions of state or local law, or would be eligible to become a member of such a group at the election of one or members of that group, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments, and other applicable items hereunder shall be computed with reference to the group as a whole.

(b) If any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder transfers one or more assets to a corporation (or a Person classified as a corporation for U.S. income tax purposes) with which such entity does not file a consolidated tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit or Realized Tax Detriment of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution. The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset. Thus, for example, in determining the Hypothetical Tax Liability of the entity, the taxable income of the entity shall be determined by treating the entity as having sold the asset for its fair market value, recovering any basis applicable to such asset by using the Non-Stepped Up Tax Basis, while the actual Tax liability of the entity would be determined by recovering the actual Tax basis of the asset that reflects any Exchange Basis Adjustments.. For purposes of this Section 7.11, a transfer of a partnership interest shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership. If any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder transfers one or more assets to a partnership (or a Person classified as a partnership for U.S. income tax purposes), the principles of this Section 7.11(b) and this Agreement shall govern the treatment of such transfer and any subsequent allocations of income, gain, loss or deductions from such partnership to such entity.

Section 7.12 Confidentiality.

(a) The Recipients acknowledge and agrees that the information of the Corporation and its Affiliates and successors 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, acquired pursuant to this Agreement, of the Corporation and its Affiliates and successors, concerning loanDepot and its Affiliates and successors, learned by the Recipients heretofore or hereafter. This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates or successors, becomes public knowledge (except as a result of an act of the Recipients in violation of this Agreement), or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the Recipients to prepare and file their Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority, or to prosecute or defend any action, proceeding or audit pursuant to this Agreement or by any Taxing Authority with respect to such Tax Returns. Notwithstanding anything to the contrary herein, the Recipients (and each employee, equityholder, representative or other agent of the Recipients, as applicable) may disclose to any and all

 

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Persons, without limitation of any kind, the tax treatment and tax structure of the Corporation, loanDepot and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the Recipients relating to such tax treatment and tax structure.

(b) If the Recipients commit a breach, or threaten to commit a breach, of any of the provisions of this Section 7.12, the Corporation or any of its Affiliates shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Affiliates and the accounts and funds managed by the Corporation or any of its Affiliates, 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.

*     *     *     *     *

 

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IN WITNESS WHEREOF, the Corporation, loanDepot and the Recipients have duly executed this Agreement as of the date first written above.

 

 

 

 

 

 

 

Exhibit 10.3

 

 

 

 

 

 

LD HOLDINGS GROUP LLC

 

 

FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

Dated as of February 11, 2021

THE UNITS REPRESENTED BY THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS, OR AN EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

CERTAIN OF THE UNITS REPRESENTED BY THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND THE OTHER RESTRICTIONS SET FORTH HEREIN AND/OR IN A SEPARATE AGREEMENT WITH THE INITIAL HOLDER OF SUCH UNITS. A COPY OF SUCH AGREEMENT(S) MAY BE OBTAINED BY THE HOLDER OF SUCH UNITS UPON WRITTEN REQUEST AND WITHOUT CHARGE.

 

 

 

 

TABLE OF CONTENTS

 

				Page
ARTICLE I DEFINITIONS					1
ARTICLE II ORGANIZATIONAL MATTERS					14
2.1		Formation of the Company			14
2.2		Limited Liability Company Agreement			14
2.3		Name			14
2.4		Purpose			14
2.5		Principal Office; Registered Office			14
2.6		Term			15
2.7		No State-Law Partnership			15
ARTICLE III CAPITAL CONTRIBUTIONS					15
3.1		Unitholders			15
3.2		Negative Capital Accounts			18
3.3		No Withdrawal			18
3.4		Loans From Unitholders			18
3.5		Distributions In-Kind			19
3.6		Transfer of Capital Accounts			19
ARTICLE IV DISTRIBUTIONS, ALLOCATIONS AND REDEMPTIONS					19
4.1		Distributions			19
4.2		Allocations			21
4.3		Special Allocations			21
4.4		Offsetting Allocations			22
4.5		Tax Allocations			22
4.6		Indemnification and Reimbursement for Payments on Behalf of a Unitholder			23
4.7		Compensation of a Unitholder for Services			24
ARTICLE V MANAGEMENT					24
5.1		Authority of Board			24
5.2		Composition of the Board			25
5.3		Board Actions; Meetings			25
5.4		Delegation of Authority			26
5.5		Purchase of Units			26
5.6		Limitation of Liability			26
5.7		Officers			27
ARTICLE VI RIGHTS AND OBLIGATIONS OF UNITHOLDERS AND MEMBERS					27

 

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6.1		Limitation of Liability			27
6.2		Lack of Authority			28
6.3		No Right of Partition			28
6.4		Indemnification			28
6.5		Members Right to Act			32
6.6		Investment Opportunities and Conflicts of Interest			33
6.7		Interested Transactions			34
6.8		Confidentiality			34
ARTICLE VII BOOKS, RECORDS, ACCOUNTING AND REPORTS					34
7.1		Records and Accounting			34
7.2		Tax Reports			34
7.3		Transmission of Communications			35
ARTICLE VIII TAX MATTERS					35
8.1		Preparation of Tax Returns			35
8.2		Tax Elections			35
8.3		Tax Controversies			35
ARTICLE IX TRANSFER OF UNITS					36
9.1		Required Consent			36
9.2		Approved Sale			37
9.3		Effect of Assignment			38
9.4		Additional Restrictions on Transfer			39
9.5		Legend			39
9.6		Transfer Fees and Expenses			40
9.7		Void Transfers			40
9.8		Vesting, Forfeiture and Repurchase of Units			40
9.9		Exchange of Combined Units for Class A Common Stock			41
9.10		Adjustment of Exchange Rate.			45
9.11		Class A Common Stock to be Delivered upon Exchange.			47
9.12		Withholding; Certification of Non-Foreign Status.			48
9.13		No Transfer of Class B Common Stock			49
9.14		Tender Offers and Other Events with Respect to the Public Offering Entity			49
ARTICLE X ADMISSION OF MEMBERS					50
10.1		Substituted Members			50
10.2		Additional Members			50
ARTICLE XI WITHDRAWAL AND RESIGNATION OF UNITHOLDERS					50
11.1		Withdrawal and Resignation of Unitholders			50

 

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ARTICLE XII DISSOLUTION AND LIQUIDATION					50
12.1		Dissolution			50
12.2		Liquidation and Termination			51
12.3		Securityholders Agreement			51
12.4		Cancellation of Certificate			52
12.5		Reasonable Time for Winding Up			52
12.6		Return of Capital			52
12.7		Hart-Scott-Rodino			52
ARTICLE XIII VALUATION					52
13.1		Valuation of Subsidiary Securities			52
13.2		Valuation of Other Assets and Company Securities			53
13.3		Valuation of Other Securities			53
ARTICLE XIV GENERAL PROVISIONS					53
14.1		Power of Attorney			53
14.2		Amendments			53
14.3		Title to Company Assets			54
14.4		Successors and Assigns			54
14.5		Severability			54
14.6		Counterparts; Binding Agreement			54
14.7		Descriptive Headings; Interpretation			54
14.8		Applicable Law; Venue; Jury Trial Waiver			55
14.9		Addresses and Notices			55
14.10		Creditors			55
14.11		Waiver			55
14.12		Further Action			55
14.13		Entire Agreement			56
14.14		Opt-in to Article 8 of the Uniform Commercial Code			56
14.15		Delivery by Facsimile or PDF			56
14.16		Survival			56
14.17		Tax and Other Advice			56
14.18		Acknowledgments			57

 

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EXHIBITS

Exhibit A – Incremental Excess Tax Distributions

 

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SCHEDULES

Schedule of Unitholders

 

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LD HOLDINGS GROUP LLC

FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of February 11, 2021, is adopted, executed and agreed to, for good and valuable consideration, by and among the Company and the Members.

RECITALS

A. The Members previously exchanged their equity interests of loanDepot.com, LLC, a Delaware limited liability company (“loanDepot.com”), for substantially equivalent equity interests of the Company.

B. Certain of the Members entered into an Amended and Restated Limited Liability Company Agreement of the Company on December 31, 2017 (the “Original Date”), which was amended and restated in its entirety pursuant to the terms of a Second Amended and Restated Limited Liability Company Agreement of the Company, dated December 31, 2018, which was further amended and restated in its entirety pursuant to the terms of a certain Third Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 1, 2020 (the “Prior Agreement”).

C. The Company has recapitalized all of its Units into a single class of Class A Common Units of the Company.

D. In connection with the exchange of certain classes of equity for Class A Common Units of the Company pursuant to one or more Exchange Agreements, of even date herewith, by and between the holders thereof and the Company, the Members now desire to amend and restate the Prior Agreement in its entirety, and wish to set forth the rights, powers and interests of the Members with respect to the Company and their respective interests therein and to provide for the management of the business and operations of the Company, all as more fully set forth herein.

AGREEMENT

ARTICLE I

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the following meanings:

“Additional Member” has the meaning set forth in Section 10.2.

“Adjusted Capital Account Balance” means, with respect to any Person’s Capital Account as of the end of any Taxable Year, the balance of such Person’s Capital Account (a) reduced for any items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6), and (b) increased for any amount such Person is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Sections 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to Minimum Gain).

 

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“Affiliate” means, with respect to any particular Person, (a) any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise and (b) if such Person is a partnership, any partner thereof.

“Agreement” means this Fourth Amended and Restated Limited Liability Company Agreement, as amended, restated, modified or waived from time to time in accordance with the terms hereof.

“Approved Sale” has the meaning set forth in Section 9.2(a).

“Assignee” means a Person to whom Units have been Transferred in accordance with the terms of this Agreement and the other agreements contemplated hereby, but who has not become a Member pursuant to Article X.

“Assumed Tax Rate” means, for any Taxable Year, in each case as reasonably determined by the Board in good faith based on the information reasonably available to it, the greater of: (a) the highest marginal combined federal, state and local income tax rate applicable to an individual Unitholder, or (b) the highest marginal combined federal, state and local income tax rate applicable to a corporation, taking into account, in each case, any available deduction against federal income for state and local taxes paid and the character of income generated. For purposes of the preceding sentence, the applicable state and local income tax rate shall be determined on a weighted average basis determined by reference to the amount of Company taxable income, gain, deduction or loss allocable to the Unitholders for such Taxable Year for purposes of all relevant state and local taxing jurisdictions.

“Base Rate” means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the “prime rate” at large U.S. money center banks.

“Beneficial Owner” means, with respect to a security, any Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security and/or (b) investment power, which includes the power to dispose of, or to direct the disposition of, such security.

“Board” means the Board of Directors of the Company established pursuant to Section 5.2.

“Book Value” means, with respect to any Company property, the Company’s adjusted basis for federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted, in the case of permitted adjustments (to the extent the Company makes such permitted adjustments), by Treasury Regulation Sections 1.704-1(b)(2)(iv)(d)-(g) and (s).

 

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“Business Day” means any day, other than a Saturday, Sunday or any other day on which commercial banks located in the State of California are authorized or obligated by law or executive order to close.

“Capital Account” means the capital account maintained for a Member pursuant to Section 3.1(d).

“Capital Contributions” means any cash, cash equivalents, promissory obligations or the Fair Market Value of other property that a Unitholder contributes (including any units of the Company that existed prior to the date hereof) with respect to any Unit pursuant to Section 3.1, net of any liabilities assumed by the Company for such Unitholder in connection with such contribution and net of any liabilities to which the assets contributed by such Unitholder are subject.

“Cash Settlement” has the meaning set forth in Section 9.9(a)(i).

“Cause” means, with respect to a Person’s employment with any Group Company, “Cause” as defined and set forth in such Person’s corresponding Employment Agreement or other Equity Agreement with such Group Company, or if no such definition is provided in such Person’s Employment Agreement or other Equity Agreement with such Group Company, then “Cause” will mean any of the following: (a) such Person’s failure to perform work or other employment duties to the standards required by such Group Company as determined in such Group Company’s sole discretion, which failure remains uncured (if capable of cure) for ten (10) Business Days following written notice thereof by such Group Company to such Person; provided, however, that no such cure period will apply if (i) such failure is not reasonably capable of cure without material cost or liability to such Group Company or (ii) such Group Company has previously provided such a notice to the effect that such Person is failing to perform or neglecting his or her duties (whether with respect to the same act or a different act); (b) such Person’s willful misconduct, failure to comply with such Group Company’s policies or gross insubordination, which act remains uncured (if capable of cure) for ten (10) Business Days following written notice thereof by such Group Company to such Person; provided, however, that no such cure period will apply if (i) such failure is not reasonably capable of cure without material cost or liability to such Group Company or (ii) such Group Company has previously provided such a notice to the effect that such Person is engaging in willful misconduct, failure to comply with such Group Company’s policies or gross insubordination (whether with respect to the same or a different act); (c) such Person’s engagement in any illegal act, substance abuse or any act or omission that has an adverse effect on such Group Company’s reputation or business operations, assets, prospects, properties, results of operation or financial condition, as reasonably determined by such Group Company; (d) such Person’s commission of an act involving personal dishonesty, fraud embezzlement or theft; (e) such Person’s disclosure of any Confidential Information or trade secrets of any Group Company; or (f) the charging of such Person with a felony involving moral turpitude.

“Certificate” means the Company’s Certificate of Formation as filed with the Secretary of State of Delaware.

“Certificated Units” has the meaning set forth in Section 3.1(a).

 

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

(a) any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act, or any successor provisions thereto, excluding (i) a group of Persons which includes one or more Parthenon Stockholders or Hsieh Stockholders and/or one or more Affiliates thereof and (ii) any entity owned, directly or indirectly, by the stockholders of the Public Offering Entity in substantially the same proportions as their ownership of stock in the Public Offering Entity, is or becomes the Beneficial Owner, directly or indirectly, of securities of the Public Offering Entity representing more than fifty percent (50%) of the combined voting power of the Public Offering Entity’s then outstanding Voting Securities;

(b) there is consummated a merger or consolidation of the Public Offering Entity with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, the Voting Securities of the Public Offering Entity immediately prior to such merger or consolidation do not continue to represent or are not converted into more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or

(c) the adopting of a plan of complete liquidation or dissolution of the Public Offering Entity by the stockholders of the Public Offering Entity or an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Public Offering Entity of all or substantially all of the Public Offering Entity’s assets, other than such sale or other disposition by the Public Offering Entity of all or substantially all of the Public Offering Entity’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 Public Offering Entity in substantially the same proportions as their ownership of the Public Offering Entity immediately prior to such sale.

Notwithstanding the foregoing, except with respect to clause (b) and clause (c) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Public Offering Entity immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns, either directly or through a Subsidiary, all or substantially all of the assets of the Public Offering Entity immediately following such transaction or series of transactions. In addition, for the avoidance of doubt, a rollover or exchange of securities of the Company held by a Person is not taken into account for purposes of determining whether a “Change of Control” has occurred.

“Class A Common Stock” means the Class A Common Stock, par value $0.001 per share, of the Public Offering Entity.

“Class A Common Unit” means a unit representing a fractional part of the interest of a Unitholder in Distributions and the rights and obligations specified with respect to the Class A Common Units in this Agreement. Class A Common Units shall have one (1) vote per Class A Common Unit if such Class A Common Unit is held by the Public Offering Entity. All Class A Common Units not held by the Public Offering Entity shall have no voting rights.

 

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“Class A Unitholder” means any holder of Class A Common Units other than the Public Offering Entity.

“Class B Common Stock” means the Class B Common Stock, par value $0.001 per share, of the Public Offering Entity.

“Class C Common Stock” means the Class C Common Stock, par value $0.001 per share, of the Public Offering Entity.

“Code” means the United States Internal Revenue Code of 1986, as amended, and any successor statute.

“Combined Unit” means, collectively, (i) a Class A Common Unit or other interest in the Company that may be issued by the Company in the future or for which a Class A Common Unit has been converted or exchanged, excluding in each case any unvested Class A Common Unit, and (ii) a share of Noneconomic Stock. For the avoidance of doubt, upon becoming vested, an unvested Class A Common Unit, or other interest in the Company that may be issued by the Company in the future or for which a Class A Common Unit has been converted or exchanged, shall become a Combined Unit.

“Company” means LD Holdings Group LLC, a Delaware limited liability company, and any successor thereto (whether by merger, conversion, consolidation, recapitalization, reorganization or otherwise).

“Confidential Information” means confidential and proprietary information and trade secrets of any Group Company, including, but not limited to, confidential information of any Group Company regarding identifiable, specific and discrete business opportunities being pursued by any Group Company.

“Core Business” is a business in which the Company engages in a material respect and any business in which a Group Company is actively contemplating, at a senior executive level, engaging in a material respect, in each case, at the time of determination.

“Current Distribution” means any Distribution other than a Tax Distribution, including any Distributions pursuant to Section 4.1(b), but excluding any Distributions made by reference to Section 4.1(b) under Sections 9.2 or 12.2, and, in each case, without double-counting any Distributions. For the avoidance of doubt, and notwithstanding anything herein to the contrary, (i) no Liquidating Distribution or Tax Distribution shall be or be deemed to be a Current Distribution, and (ii) no Distributions made in contemplation of a Change of Control, or after a Change of Control is approved by the Board, shall be or be deemed to be Current Distributions.

“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq., as it may be amended from time to time, and any successor thereto.

 

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“DGCL” means the Delaware General Corporation Law, and any successor thereto. Any reference herein to a specific section, rule or regulation of the DGCL shall be deemed to include any corresponding provisions of future law.

“Direct Exchange” has the meaning set forth in Section 9.9(a)(iv).

“Director” means a current director on the Board, who, for purposes of the Delaware Act, will be deemed a “manager” (as defined in the Delaware Act) but will be subject to the rights, obligations, limitations and duties set forth in this Agreement.

“Disability” has the meaning set forth in the applicable Person’s corresponding Employment Agreement or other Equity Agreement with any Group Company, or if no such definition is provided in such Person’s Employment Agreement or other Equity Agreement with any Group Company, then “Disability” means a permanent and total disability as determined under such Group Company’s long-term disability plan applicable to such Group Company’s employees, interpreted and applied in a manner consistent with all applicable laws, including laws regarding workers’ compensation, disability, and family and medical leave laws.

“Distribution” means each distribution made by the Company to a Unitholder, whether in cash, property or securities of the Company and whether by liquidating distribution, redemption or repurchase; provided, that none of the following shall be a Distribution: (a) any redemption or repurchase by the Company of any securities of the Company in connection with the termination of employment of an employee of any Group Company or their Affiliates, and (b) any recapitalization, exchange or conversion of Units, or any subdivision (by unit split or otherwise) or any combination (by reverse unit split or otherwise) of any outstanding Units.

“Employment Agreement” means any employment agreement entered into from time to time among any Group Company and one of their executives, as the same may be amended from time to time pursuant to its terms.

“Equity Agreement” means any unit grant agreement, subscription agreement, securities purchase agreement, senior management agreement, Employment Agreement and any other agreement, document or instrument evidencing or effecting the issuance or other Transfer of any Equity Securities or otherwise governing the terms and conditions with respect to any Equity Securities, in each case as the same may be amended or otherwise modified from time to time.

“Equity Securities” means (a) units or other equity interests in the Company (including other classes, groups or series thereof having such relative rights, powers, and/or obligations as may from time to time be established by the Board, including rights, powers, and/or duties different from, senior to or more favorable than existing classes, groups and series of units and other equity interests in the Company), (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into units or other equity interests in the Company, and (c) warrants, options or other rights to purchase or otherwise acquire units or other equity interests in the Company.

“Event of Withdrawal” means the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company.

 

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“Excess Preferred Contribution Amount” has the meaning set forth in Exhibit A.

“Excess Tax Distribution Amount” means the excess, if any, of: (a) the cumulative amount of Tax Distributions made to the Public Offering Entity pursuant to Section 4.1(a) for Taxable Years including or beginning on or after February 1, 2021 over (b) the Public Offering Entity’s cumulative federal, state and local income tax liability for all Taxable Years including or beginning on or after February 1, 2021.

“Exchange” has meaning set forth in Section 9.9(a)(i).

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

“Exchange Date” has the meaning set forth in Section 9.9(a)(ii).

“Exchange Notice” has the meaning set forth in Section 9.9(a)(ii).

“Exchange Rate” means, at any time, the number of shares of Class A Common Stock for which one (1) Combined Unit is entitled to be Exchanged at such time. On the date of this Agreement, the Exchange Rate shall be one (1), subject to adjustment pursuant to Section 9.10.

“Expenses” means all reasonable costs, expenses, fees and charges, including, without limitation, attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include, without limitation, (a) expenses incurred in connection with any appeal resulting from, incurred by an Indemnified Person in connection with, arising out of, in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (b) any federal, state, local or foreign taxes imposed on an Indemnified Person as a result of the actual or deemed receipt of any payments under this Agreement (on a grossed up basis), and (c) any interest, assessments or other charges in respect of the foregoing.

“Fair Market Value” means, with respect to any asset or equity interest, its fair market value determined according to Article XIII.

“Family Group” means, as to any particular Person, (a) such Person’s spouse and descendants (whether natural or adopted), (b) any trust or other estate planning vehicle controlled solely by such Person and created solely for the benefit of such Person and/or such Person’s spouse and/or descendants, and (c) with respect to Hsieh, the charitable entities identified by him from time to time; provided, that the portion of any gift, grant or bequest that purports to Transfer voting control of any of Hsieh’s Units shall require the prior approval of the Board, which approval shall not be unreasonably withheld, delayed or conditioned.

“Fiscal Period” means any interim accounting period within a Taxable Year established by the Board and which is permitted or required by Code Section 706.

 

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“Fiscal Year” means the calendar year ending on December 31, or such other annual accounting period as may be established by the Board.

“Forfeiture Allocations” has the meaning set forth in Section 4.3(g).

“Good Reason” means, with respect to a Person’s employment with any Group Company, “Good Reason” as defined and set forth in such Person’s corresponding Employment Agreement or other Equity Agreement with such Group Company. If no such definition is provided in such Person’s Employment Agreement or other Equity Agreement with any Group Company, then no resignation or termination shall be deemed to be for “Good Reason” under this Agreement.

“Governmental Entity” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Group Company” means the Company, the Public Offering Entity and their respective direct and indirect Subsidiaries.

“Hsieh” means Anthony Hsieh.

“Hsieh Stockholders” means, collectively, The JLSSAA Trust, established September 4, 2014, JLSA, LLC, Trilogy Mortgage Holdings, Inc., M6 LLC, M7 LLC and M8 LLC.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Incremental Excess Tax Distribution Amount” has the meaning set forth in Section 4.1(a).

“Indemnified Person” has the meaning set forth in Section 6.4(a).

“Investor” has the meaning set forth in Section 6.6(a).

“Liabilities” means all claims, liabilities, damages, losses, judgments, orders, fines, penalties and other amounts payable in connection with, arising out of, in respect of or relating to or occurring as a direct or indirect consequence of any Proceeding, including, without limitation, amounts paid in whole or partial settlement of any Proceeding, all Expenses in complying with any judgment, order or decree issued or entered in connection with any Proceeding or any settlement agreement, stipulation or consent decree entered into or issued in settlement of any Proceeding, and any consequential damages resulting from any Proceeding or the settlement, judgment, or result thereof.

“Liquidation Assets” has the meaning set forth in Section 12.2(b).

 

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“Liquidating Distribution” means any Distribution other than a Tax Distribution, excluding any Distributions pursuant to Section 4.1(b), but including any Distributions made by reference to Section 4.1(b) under Sections 9.2 or 12.2, and, in each case, without double-counting any Distributions. For the avoidance of doubt, and notwithstanding anything herein to the contrary, (i) no Current Distribution or Tax Distribution shall be or be deemed to be a Liquidating Distribution, and (ii) Distributions made in contemplation of a Change of Control, or after a Change of Control is approved by the Board, shall be deemed to be Liquidating Distributions.

“loanDepot.com” has the meaning set forth in the Recitals.

“Losses” means items of Company loss and deduction determined according to Section 3.1(e).

“M6 LLC” means Trilogy Management Investors Six, LLC, a Delaware limited liability company, holding Class A Common Units on behalf of certain members of management of a Group Company.

“M7 LLC” means Trilogy Management Investors Seven, LLC, a Delaware limited liability company, holding Class A Common Units on behalf of certain members of management of a Group Company.

“M8 LLC” means Trilogy Management Investors Eight, LLC, a Delaware limited liability company, holding Class A Common Units on behalf of certain members of management of a Group Company.

“Management Investor” means (a) if an individual, any Person who acquires or is otherwise issued Equity Securities (including any Person who is a member of M6 LLC, M7 LLC or M8 LLC) while such Person is an employee of any Group Company (including Hsieh), or (b) if an entity, any Person that acquires or is otherwise issued Equity Securities while it is controlled by an employee (including Hsieh) or employees of any Group Company (including M6 LLC, M7 LLC or M8 LLC).

“Mandatory Exchange Acknowledgement” has the meaning set forth in Section 9.9(b)(iv).

“Mandatory Exchange Date” has the meaning set forth in Section 9.9(b)(iii).

“Mandatory Exchange Notice” has the meaning set forth in Section 9.9(b)(iii).

“Marketable Securities” means securities that are, or within six (6) months after receipt thereof will be, freely transferable by the holder thereof.

“Member” means each of the Persons listed on the Schedule of Unitholders attached hereto, and any Person admitted to the Company as a Substituted Member or Additional Member; but only for so long as such Person continues to own Units.

“Minimum Gain” means the partnership minimum gain determined pursuant to Treasury Regulation Section 1.704-2(d).

 

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“Noneconomic Stock” means Class B Common Stock or Class C Common Stock or any other interest in the Public Offering Entity that may be issued by the Public Offering Entity in the future or for which Class B Common Stock or Class C Common Stock has been converted or exchanged, excluding in each case any unvested Class B Common Stock or Class C Common Stock.

“Notice” means Internal Revenue Service Notice 2005-43.

“Offer” has the meaning set forth in Section 9.14.

“Original Date” has the meaning set forth in the Recitals.

“Parthenon” means (a) any Parthenon Stockholder and (b) any investment fund managed by PCap Directors, LLC (or one of its Affiliates) that acquires Units.

“Parthenon Stockholders” means, collectively, Parthenon Investors III, L.P., PCap Associates, Parthenon Capital Partners Fund, L.P., Parthenon Investors IV, L.P., Parthenon Capital Partners Fund II, L.P. and PCP Managers, L.P.

“Partnership Representative” means the “partnership representative” of the Company for purposes of the Partnership Tax Audit Rules.

“Partnership Tax Audit Rules” means Sections 6221 through 6241 of the Code, together with any guidance issued thereunder, successor provisions and any similar provisions of state or local tax laws.

“pdf” has the meaning set forth in Section 14.15.

“Permitted Transferee” means (a) with respect to any Person who is a Management Investor, a member of such Person’s (or the individuals controlling such Person, as applicable) Family Group; (b) with respect to any Person who is Parthenon, any of such Person’s Affiliates, and (c) in the case of transfers by Hsieh of up to an aggregate of 6,233,262 Class A Common Units to any Management Investor; provided, that in no event shall any Transfer be made to a competitor of any Group Company without the consent of the Board.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.

“Preferred Contribution Amount” has the meaning set forth in Exhibit A.

“Preferred Unit” has the meaning set forth in Exhibit A.

“Prior Agreement” has the meaning set forth in the Recitals.

“Proceeding” means any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, formal or informal hearing, inquiry or investigation, litigation, administrative hearing or any other actual, threatened or completed judicial, administrative or arbitration proceeding (including, without limitation, any such proceeding under the Securities Act or the Exchange Act or any other federal law, state law, statute

 

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or regulation), whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature, in which such Indemnified Person was, is or will be, or is threatened to be, involved as a party or witness or otherwise involved, affected or injured (i) by reason of the fact that such Indemnified Person is or was a Representative of a Group Company, (ii) by reason of any actual or alleged action taken by such Indemnified Person or of any action on such Indemnified Person’s part while acting as Representative of a Group Company or (iii) by reason of the fact that such Indemnified Person is or was serving at the request of the Company as a Representative of another Person, whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement.

“Profits” means items of Company income and gain determined according to Section 3.1(e).

“Public Offering Entity” means loanDepot, Inc., a Delaware corporation.

“Regulatory Allocations” has the meaning set forth in Section 4.3(e).

“Representative” means, with respect to any Person, any director, manager, officer and employee, controlling person, member, managing member, principal, fiduciary or other agent of such Person.

“Restricted Business” means any business that, at the applicable time of determination, operates in any line of business that any Group Company is then actively conducting or in which it then actively proposes to conduct; provided, that, with respect to Hsieh, a business shall only constitute a Restricted Business to the extent that such business is a Core Business.

“Restricted Period” means:

(a) in the case of a Management Investor (other than Hsieh, M6 LLC, M7 LLC or M8 LLC), for so long as such Management Investor is employed by any Group Company; provided, that such period may be extended pursuant to the terms of such Management Investor’s Equity Agreement;

(b) in the case of Hsieh, during the period that Hsieh remains a fiduciary of the Company by virtue of, among other things, his status as an executive, as an indirect and substantial owner of voting equity, and as a Director of the Company; provided, however, Hsieh’s Restricted Period may terminate earlier than his status as a fiduciary in the following circumstances: (i) if Hsieh’s employment with any Group Company is terminated without Cause or he leaves for Good Reason (as defined in his Employment Agreement), then his Restricted Period shall end one (1) year from the later of (A) the date of employment termination and (B) the date Hsieh resigns from the Board, or (ii) if Hsieh’s employment is otherwise terminated, then one (1) year from the delivery of a notice to the Company from Hsieh setting forth his intent to compete (which, if Hsieh also a Director at the time of delivering such notice, must include his resignation from the Board), but in no event (under either clauses (i) or (ii)) longer than three (3) years following the date of termination; and

 

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(c) in the case of each of M6 LLC, M7 LLC or M8 LLC, for so long as such entity owns Class A Common Units.

“Restricted Territory” means the geographic territory comprised of twenty-five (25) miles around each location at which any Group Company is then actively conducting business or in which it then actively proposes to conduct business.

“Securities Act” means the Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future law.

“Share Settlement” has the meaning set forth in Section 9.9(a)(i).

“SMRH” means Sheppard, Mullin, Richter & Hampton LLP.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

“Substituted Member” means a Person that is admitted as a Member to the Company pursuant to Section 10.1.

“Takeover Law” means any moratorium, control share acquisition, business combination, fair price or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to any Exchange or the transactions contemplated thereby.

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, franchise, estimated, intangibles, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any transferee liability and any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

 

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“Tax Distribution” has the meaning set forth in Section 4.1(a).

“Tax Receivable Agreement” means that certain Tax Receivable Agreement, dated as of the date hereof, by and among the Public Offering Entity, the Company and the Recipients party thereto (the “TRA Recipients”), as it may be amended from time to time in accordance with its terms.

“Tax Returns” means any reports, filings, tax returns or other disclosures in any form or manner with respect to federal, state, local or foreign income.

“Taxable Year” means the Company’s accounting period for federal income tax purposes determined pursuant to Section 8.2.

“Third Party” means any Person who is not a party to this Agreement, or an Affiliate of any party to this Agreement.

“Transfer” means any sale, transfer, assignment, pledge, mortgage, exchange, hypothecation, grant of a security interest or other direct or indirect disposition or encumbrance of an interest (whether with or without consideration, whether voluntarily or involuntarily or by operation of law) or the acts thereof, but excluding conversions and redemptions of Units by the Company made in accordance with this Agreement. The terms “Transferee”, “Transferor”, “Transferred” and other forms of the word “Transfer” shall have the correlative meanings.

“Treasury Regulations” means the income tax regulations promulgated under the Code and effective as of the date hereof. Such term shall be deemed to include any future amendments to such regulations and any corresponding provisions of succeeding regulations.

“Unit” means a unit in the Company representing a fractional part of the interests in any Profits, Losses, and Distributions and shall include Class A Common Units; provided, that any class, group or series of Units issued shall have the relative rights, powers and duties set forth in this Agreement.

“Unitholder” means any owner of one or more Units as reflected on the Company’s books and records.

“Unsatisfied Tax Distribution Entitlement” means, with respect to each Unitholder, the excess of (a) the cumulative amount of Tax Distributions to which such Unitholder has become entitled (whether or not actually distributed and whether or not funds are available therefor) pursuant to the first sentence of Section 4.1(a) for Taxable Years including or beginning on or after February 1, 2021 over (b) the cumulative amount of Tax Distributions made to such Unitholder pursuant to Section 4.1(a) for Taxable Years including or beginning on or after February 1, 2021.

“Voting Securities” shall mean any securities of the Public Offering Entity which are entitled to vote generally in matters submitted for a vote of the Public Offering Entity’s stockholders or generally in the election of the Public Offering Entity’s Board of Directors.

 

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“Warehouse Facilities” means any funding arrangement pursuant to which one or more lenders, conduit or special purpose vehicles and other financial institutions provide the Company or one of its Subsidiaries debt financing to purchase, originate, sell, securitize, carry, service or maintain mortgage loans or other financial assets or servicing rights.

ARTICLE II

ORGANIZATIONAL MATTERS

2.1 Formation of the Company. The Company was formed as loanDepot Holdings, LLC, a Delaware limited liability company, on October 16, 2015, with the filing of a Certificate of Formation with the Secretary of State of the State of Delaware, and a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on November 2, 2017, to change the name of the Company to “LD Holdings Group LLC”.

2.2 Limited Liability Company Agreement. The Members hereby agree that during the term of the Company set forth in Section 2.6, the rights, powers and obligations of the Unitholders with respect to the Company will be determined in accordance with the terms and conditions of this Agreement and, except where the Delaware Act provides that such rights, powers and obligations specified in the Delaware Act shall apply “unless otherwise provided in a limited liability company agreement” or words of similar effect and such rights, powers and obligations are set forth in this Agreement, the Delaware Act; provided, that notwithstanding the foregoing, Section 18-210 of the Delaware Act (entitled “Contractual Appraisal Rights”) and Section 18-305 of the Delaware Act (entitled “Access to and Confidentiality of Information; Records”) shall not apply or be incorporated into this Agreement (but with it being understood that this proviso shall not affect the obligations of the Company under Article VII). To the extent that the rights or obligations of any Unitholder are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Delaware Act, control.

2.3 Name. The name of the Company shall be “LD Holdings Group LLC”. The Board may change the name of the Company at any time and from time to time. Notification of any such change shall be given to all Unitholders. The Company’s business may be conducted under its name and/or any other name or names deemed advisable by the Board.

2.4 Purpose. The nature of the business or purposes to be conducted or promoted by the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Delaware Act. The Company may engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing. Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company organized pursuant to the Delaware Act.

2.5 Principal Office; Registered Office. The principal office of the Company shall be at such place as the Board may from time to time designate. The Company may maintain offices at such other place or places as the Board deems advisable. The address of the registered office of the Company in the State of Delaware shall be the office of the initial registered agent named in the Certificate or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by applicable law, and the registered agent for service of process on the Company in the State of Delaware at such registered office shall be the registered agent named in the Certificate or such Person or Persons as the Board may designate from time to time in the manner provided by applicable law.

 

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2.6 Term. The term of the Company commenced upon the filing of the Certificate in accordance with the Delaware Act and shall continue in existence until termination and dissolution thereof in accordance with the provisions of Article XII.

2.7 No State-Law Partnership. The Unitholders intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Unitholder be a partner or joint venturer of any other Unitholder by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2.7, and neither this Agreement nor any other document entered into by the Company or any Unitholder relating to the subject matter hereof shall be construed to suggest otherwise. The Unitholders intend that the Company shall be treated as a partnership for federal and, if applicable, state or local income tax purposes, and that each Unitholder and the Company shall file all Tax returns and shall otherwise take all Tax and financial reporting positions in a manner consistent with such treatment.

ARTICLE III

CAPITAL CONTRIBUTIONS

3.1 Unitholders.

(a) Capital Contributions; Schedule of Unitholders. Each Unitholder named on the Schedule of Unitholders attached hereto has made Capital Contributions to the Company as set forth on the Schedule of Unitholders in exchange for the Units specified thereon. Any reference in this Agreement to the Schedule of Unitholders shall be deemed a reference to the Schedule of Unitholders as amended and in effect from time to time. The Company may (but need not) issue certificates representing the Units (such Units then being “Certificated Units”). The Company may issue fractional Units. The ownership by a Member of Units shall entitle such Member to allocations of Profits and Losses and Distributions of cash and other property as set forth in Article IV.

(b) Issuance of Additional Units. The Board shall have the right, subject to approval of the Board of Directors of the Public Offering Entity, to authorize and cause the Company to create and/or issue additional Units or other Equity Securities, in which event, the Board shall have the power to amend this Agreement and/or the Schedule of Unitholders to reflect such additional issuances and dilution and to make any such other amendments as it deems necessary or desirable to reflect such additional issuances (including amending this Agreement to create and authorize a new class, group or series of Equity Securities and to add the terms of such new class, group or series, including economic and governance rights which may be different from, senior to or more favorable than the other existing Equity Securities), in each case without the approval or consent of any other Person, other than the Board of Directors of the Public Offering Entity. Any Person who acquires Equity Securities may be admitted to the Company as a Member pursuant to the terms of Section 10.2. In connection with any issuance of Equity Securities, the Person who acquires such Equity Securities shall execute a counterpart or acceptable joinder to this Agreement, accepting and agreeing to be bound by all terms and conditions hereof, and shall enter into such Equity Agreements and other documents, instruments and agreements to effect such purchase as are required by the Board. Each Person who acquires Equity Securities shall, in exchange for such Equity Securities, make a Capital Contribution to the Company in an amount to be determined by the Board in its sole discretion.

 

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(c) Certain Representations and Warranties by Unitholders. By executing this Agreement (or, after the date hereof, any counterpart or joinder to this Agreement) and in connection with the issuance of Equity Securities to such Unitholder, each Unitholder represents and warrants to the Company as follows:

(i) Such Unitholder has, in the case of an entity, all of the necessary corporate or other entity power and authority, or, in the case of an individual, the legal capacity, to execute and deliver this Agreement and each of the other agreements contemplated hereby to be executed by such Unitholder, and to perform its obligations hereunder and thereunder.

(ii) The Equity Securities being acquired by such Unitholder pursuant to this Agreement or otherwise will be acquired for such Unitholder’s own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act or any applicable state securities laws, and such Equity Securities will not be disposed of in contravention of the Securities Act or any applicable state securities laws.

(iii) Such Unitholder is an “accredited investor” as such term is defined under the Securities Act and the rules and regulations promulgated thereunder and/or such Unitholder has such knowledge and experience in financial, tax and business matters as to enable such Member to evaluate the merits and risks of such Unitholder’s investment in the Company and to make an informed investment decision with respect thereto.

(iv) Such Unitholder has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of such Equity Securities and has had full access to such other information concerning any Group Company as he, she or it has requested.

(v) Such Unitholder is able to bear the economic risk of his, her or its investment in the Equity Securities for an indefinite period of time because the Equity Securities have not been registered under the Securities Act or applicable state securities laws and are subject to substantial restrictions on Transfer set forth herein and, therefore, cannot be sold unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available and in compliance with such restrictions on Transfer.

(vi) Such Unitholder has received and carefully read a copy of this Agreement. This Agreement and each of the other agreements contemplated hereby to be executed by such Unitholder (including any Equity Agreement) constitute the legal, valid and binding obligation of such Unitholder, enforceable in accordance with their terms (subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general equity principles), and the execution, delivery and performance of this Agreement and such other agreements do

 

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not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which such Unitholder is a party or any judgment, order or decree to which such Unitholder is subject or create any conflict of interest with any Group Company, or any of their respective Affiliates, or any of their present or former customers or other business relations.

(vii) Such Unitholder is a resident of the state, or has its principal place of business in the state, set forth under his, her or its name on the Schedule of Unitholders.

(viii) Such Unitholder has not committed any act, or been the subject of any claim, demand, action or proceeding that could threaten, impair or result in the revocation of any Group Company’s state mortgage lending licenses (or those of any of its Subsidiaries).

(ix) Such Unitholder has been given the opportunity to consult with independent legal counsel regarding his, her or its rights and obligations under this Agreement and has consulted with such independent legal counsel regarding the foregoing (or, after carefully reviewing this Agreement, has freely decided not to consult with independent legal counsel), fully understands the terms and conditions contained herein and therein and intends for such terms to be binding upon and enforceable against him, her or it.

(d) Maintenance of Capital Accounts. The Company shall maintain a separate Capital Account for each Unitholder according to the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). In accordance with such Treasury Regulations, the Capital Account of each Unitholder shall equal, as of the date hereof, the Capital Contributions made by such Unitholder as of the date hereof as reflected on the Schedule of Unitholders. For this purpose, the Company may, in the Board’s discretion, upon the occurrence of the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company property and shall adjust them as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(s).

Without limiting the foregoing, each Unitholder’s Capital Account shall be adjusted:

(i) by adding any additional Capital Contributions made by such Unitholder in consideration for the issuance of Units;

(ii) by deducting any amounts paid to such Unitholder in connection with the redemption or other repurchase by the Company of Units;

(iii) by adding Profits allocated in favor of such Unitholder and subtracting any Losses of deduction and allocated in favor of such Unitholder; and

(iv) by deducting any Distributions paid in cash or other assets to such Unitholder by the Company.

 

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(e) Computation of Income, Gain, Loss and Deduction Items. For purposes of computing the amount of any item of Company income, gain, loss or deduction to be allocated pursuant to Article IV and to be reflected in the Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose); provided, that:

(i) The computation of all items of income, gain, loss and deduction shall include those items described in Code Section 705(a)(1)(B) or Code Section 705(a)(2)(B) and Treasury Regulation Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not includable in gross income or are not deductible for federal income tax purposes.

(ii) If the Book Value of any Company property is adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e), (f) or (s), then the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property.

(iii) Items of income, gain, loss or deduction attributable to the disposition of Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property.

(iv) Items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the property’s Book Value in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g).

(v) To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).

(vi) Items of income, gain, loss and deduction allocated pursuant to Section 4.3 shall be excluded.

3.2 Negative Capital Accounts. No Unitholder shall be required to pay to any other Unitholder or the Company any deficit or negative balance that may exist from time to time in such Unitholder’s Capital Account (including upon and after dissolution of the Company).

3.3 No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or Capital Account or to receive any Distribution from the Company, except as expressly provided herein.

3.4 Loans From Unitholders. Loans by Unitholders to the Company shall not be considered Capital Contributions. If (with the consent of the Board) any Unitholder loans funds to the Company, then the making of such loan shall not result in any increase in the amount of the Capital Account of such Unitholder. The amount of any such loan shall be a debt of the Company to such Unitholder and shall be payable or collectible in accordance with the terms and conditions upon which such loan is made.

 

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3.5 Distributions In-Kind. To the extent that the Company distributes property in-kind to the Members, the Company shall be treated as making a Distribution equal to the Fair Market Value of such property for purposes of Section 4.1 and such property shall be treated as if it were sold for an amount equal to its Fair Market Value and any resulting gain or loss shall be allocated to the Members’ Capital Accounts in accordance with Sections 4.2 through 4.4. Any Distribution of property-in kind shall be made to each Member in proportion to the number of Units held by each Unitholder, as determined by the Board in good faith.

3.6 Transfer of Capital Accounts. The original Capital Account established for each Substituted Member shall be in the same amount as the Capital Account of the Member (or portion thereof) to which such Substituted Member succeeds, at the time such Substituted Member is admitted to the Company. The Capital Account of any Member whose interest in the Company shall be increased or decreased by means of the Transfer to it of all or part of the Units of another Member shall be appropriately adjusted to reflect such transfer or repurchase. Any reference in this Agreement to a Capital Contribution of or Distribution to a Member that has succeeded any other Member shall include any Capital Contributions or Distributions previously made by or to the former Member on account of the Units of such former Member transferred to such Member.

ARTICLE IV

DISTRIBUTIONS, ALLOCATIONS AND REDEMPTIONS

4.1 Distributions.

(a) Tax Distributions. So long as the Company is treated as a partnership for federal income tax purposes, to the extent that funds of the Company are or may be available for distribution by the Company without violation of applicable law or Warehouse Facilities to which the Company is subject, in each Taxable Year, the Board shall cause the Company to make Distributions to each Unitholder in an amount of cash (each, a “Tax Distribution”) that equals (x) + (y), where (x) equals (i) the amount of taxable income allocable by the Company to such Unitholder in respect of such Taxable Year (excluding the effects of any adjustments under Section 734(b) or Section 743(b) of the Code), and net of taxable losses allocated by the Company to the Unitholder in respect of prior Taxable Years beginning on or after February 1, 2021 and not previously taken into account under this clause to the extent that such loss would be available under the Code to offset income of the Unitholder (or, as appropriate, the direct or indirect partners, members or shareholders of the Unitholder) determined as if income and loss from the Company was the only income and loss of the Unitholder (or, as appropriate, the direct or indirect partners, members or shareholders of the Unitholders) in such Taxable Year and all prior Taxable Years beginning on or after February 1, 2021), multiplied by (ii) the applicable Assumed Tax Rate, and (y) equals the Unsatisfied Tax Distribution Entitlement with respect to the Unitholder determined as of the end of the immediately preceding Taxable Year (for the avoidance of doubt, the value of (y) may be negative if the Tax Distributions in an earlier year exceeded the amount described in (x) for such earlier year). The Tax Distributions required to be made pursuant to the previous sentence shall be made at least quarterly and shall be made no later than April 1, June 1, September 1 and December 1 of each calendar year unless otherwise determined by the Board. The portion

 

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of the Tax Distributions for a Taxable Year paid out to a Unitholder on any Tax Distribution payment date shall be a portion of the total Tax Distributions for such Taxable Year that is at least equal to such Unitholder’s next estimated income tax payment required solely as a result of such Unitholder’s ownership of Units. For the avoidance of doubt, following the filing of the Company’s Schedule K-1 for a Taxable Year, each Unitholder’s Unsatisfied Tax Distribution Entitlement (including for the year with respect to which the Schedule K-1 was filed) shall be revised to reflect the difference, if any, between the cumulative amount of Tax Distributions actually made to such Unitholder for the Taxable Year to which such Schedule K-1 relates and the amount described in the first sentence of this Section 4.1(a) for such year. To the extent that a Unitholder otherwise would be entitled to receive less than its pro rata share (based on the number of Class A Common Units held by such Unitholder) of the aggregate Tax Distributions to be paid pursuant to this Section 4.1(a) on any given date, the Tax Distributions to such Member shall be increased to ensure that all Distributions made pursuant to this Section 4.1(a) are made pro rata to the Unitholders in accordance with the Unitholders’ respective pro rata share of the total Tax Distributions paid (based on the number of Class A Common Units held by each Unitholder). For any Taxable Year with respect to which the amount of Tax Distributions payable to the Public Offering Entity pursuant to this Section 4.1(a) results in an increase to the Excess Tax Distribution Amount, the amount of such increase (the “Incremental Excess Tax Distribution Amount”) shall be treated in accordance with Exhibit A attached hereto.

(b) Other Distributions. Subject to Section 4.1(a), the Board may (but shall not be obligated to), with the consent of the Board of Directors of the Public Offering Entity, cause the Company to make Current Distributions or Liquidating Distributions at any time or from time to time. Each Current Distribution and Liquidating Distribution shall be made to the holders of Class A Common Units (ratably among such holders based on the number of such Units held by each such holder immediately prior to the Distribution). For the avoidance of doubt, (X) Current Distributions and Liquidating Distributions under this Section 4.1(b) shall exclude any fees or remuneration paid to any holder pursuant to Employment Agreements or otherwise in the form of compensation to a provider of services to a Group Company; and (Y) if property (i.e., other than cash, cash equivalents or Marketable Securities) is distributed or paid subject to contingencies or restrictions that affect its Fair Market Value (e.g., non-publicly traded stock, publicly traded stock subject to long term restrictions or limitations or a right to receive future consideration pursuant to an earn out), then such distribution or payment shall not be considered a Current Distribution or Liquidating Distribution under this Section 4.1(b) until the (1) earlier of the date such Distributed property is first sold by such holder in a bona fide Third Party transaction for cash, cash equivalents or Marketable Securities (and such Fair Market Value shall be determined as of such time), (2) the date such contingencies or restrictions lapse and such property is immediately saleable for cash, or (3) the date determined by the Board.

(c) Exceptions. Notwithstanding anything to the contrary in this Section 4.1, neither the Company nor the Board shall be obligated to make any Distribution if Section 18-607 of the Delaware Act (or, if such Delaware Act is amended, any successor provision) prevents the Company from making such Distribution.

 

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4.2 Allocations. Except as otherwise provided in Sections 4.3 and 4.5, Profits and Losses for each Fiscal Year shall be allocated among the Unitholders in proportion to the number of Units held by each such Unitholder. For purposes of allocating all Profits and Losses, pursuant to this Section 4.2 (and any allocations made pursuant to Sections 4.3 and 4.4, to the extent applicable), all outstanding Class A Common Units shall be treated as vested; provided, that in the event that a Unitholder’s unvested Class A Common Units are forfeited or repurchased, Forfeiture Allocations as described in Section 4.3(g) will be made.

4.3 Special Allocations. The following special allocations shall be applied prior to any allocations under Section 4.2.

(a) Unitholder Nonrecourse Debt Minimum Gain Chargeback. Losses attributable to partner nonrecourse debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner required by Treasury Regulation Section 1.704-2(i). If there is a net decrease during a Taxable Year in partner nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(3)), then Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the Unitholders in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(i)(4). This Section 4.3(a) is intended to be a “partner nonrecourse debt minimum gain chargeback” provision that complies with the requirements of Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted in a manner consistent therewith.

(b) Minimum Gain Chargeback. Except as otherwise provided in Section 4.3(a), if there is a net decrease in the Minimum Gain during any Taxable Year, then each Unitholder shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(f). This Section 4.3(b) is intended to be a Minimum Gain chargeback provision that complies with the requirements of Treasury Regulation Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.

(c) Qualified Income Offset. If any Unitholder that unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) has a negative Adjusted Capital Account Balance as of the end of any Taxable Year, computed after the application of Sections 4.3(a) and 4.3(b) but before the application of any other provision of this Article IV, then Profits for such Taxable Year shall be allocated to such Unitholder in proportion to, and to the extent of, such negative Adjusted Capital Account Balance. This Section 4.3(c) is intended to be a qualified income offset provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.

(d) Nonrecourse Deductions. Nonrecourse deductions (as determined according to Treasury Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated among the Unitholders in proportion to the number of Units held by each Unitholder.

(e) Regulatory Allocations. The allocations set forth in Sections 4.3(a) through 4.3(d) (the “Regulatory Allocations”) are intended to comply with certain requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory Allocations may not be consistent with the manner in which the Unitholders intend to allocate Profit and Loss of the Company or make Distributions. Accordingly, notwithstanding the other provisions of this Article IV, but subject to the Regulatory Allocations, income, gain, deduction, and loss shall be

 

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reallocated among the Unitholders so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Accounts of the Unitholders to be in the amounts (or as close thereto as possible) they would have been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without reference to the Regulatory Allocations. In general, the Unitholders anticipate that this will be accomplished by specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the Unitholders so that the net amount of the Regulatory Allocations and such special allocations to each such Unitholder is zero. In addition, if in any Taxable Year or portion thereof there is a decrease in partnership Minimum Gain, or in partner nonrecourse debt Minimum Gain, and application of the Minimum Gain chargeback requirements set forth in Section 4.3(a) or Section 4.3(b) would cause a distortion in the economic arrangement among the Unitholders, then the Unitholders may, if they do not expect that the Company will have sufficient other income to correct such distortion, request the Internal Revenue Service to waive either or both of such Minimum Gain chargeback requirements. If such request is granted, then this Agreement shall be applied in such instance as if it did not contain such Minimum Gain chargeback requirement.

(f) Company Loss Allocations. Company Losses shall not be allocated to a Member if such allocation of Losses would cause the Member to have a negative Adjusted Capital Account Balance. Company Losses that cannot be allocated to a Member shall be allocated to the other Members; provided, however, that if no Member may be allocated Company Losses due to the limitations of this Section 4.3(f), then Company Losses shall be allocated to all Members in accordance with their respective outstanding Units.

(g) Forfeiture Allocations. The parties hereto acknowledge that allocations like those described in Proposed Treasury Regulation Section 1.704-1(b)(4)(xii)(c) (“Forfeiture Allocations”) may result from the allocations of Profits provided for in this Agreement. For the avoidance of doubt, the Board is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of Profits and Losses will be made in accordance with Proposed Treasury Regulation Section 1.704-1(b)(4)(xii)(c) or any successor provision or guidance or any applicable Internal Revenue Service guidance with respect to safe harbor elections.

4.4 Offsetting Allocations. If, and to the extent that, any Member is deemed to recognize any item of income, gain, deduction or loss as a result of any transaction between such Member and the Company pursuant to Sections 83, 482, 483, 1272-1274 or 7872 of the Code or any similar provision now or hereafter in effect, then the Board shall use its reasonable best efforts to allocate any corresponding Profits or Losses to the Member who recognizes such item in order to reflect the Members’ economic interest in the Company.

4.5 Tax Allocations.

(a) Allocations Generally. The income, gains, losses, deductions and credits of the Company will be allocated for federal, state and local income tax purposes among the Unitholders in accordance with the allocation of such income, gains, losses, deductions and credits among the Unitholders for computing their Capital Accounts; provided, that if any such allocation is not permitted by the Code or other applicable law, then the Company’s subsequent income, gains, losses, deductions and credits will be allocated among the Unitholders so as to reflect as

 

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nearly as possible the allocation set forth herein in computing their Capital Accounts. The Company shall, to the extent necessary, effect the “corrective allocations” described in Treasury Regulation Section 1.704-1(b)(2)(iv)(s)(4), and this Agreement shall be interpreted and applied in a manner consistent therewith.

(b) Code Section 704(c) Allocations. Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Unitholders in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to Company for federal income tax purposes and its Book Value. In addition, if the Book Value of any Company asset is adjusted pursuant to the requirements of Treasury Regulation Sections 1.704-1(b)(2)(iv)(e), (f) or (s), then subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c). The Company shall determine all allocations pursuant to this Section 4.5(b) using a method that is reasonable under Treasury Regulation Section 1.704-3(b).

(c) Allocation of Tax Credits, Tax Credit Recapture, Etc. Allocations of Tax credits, Tax credit recapture, and any items related thereto shall be allocated to the Unitholders according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulation Section 1.704-1(b)(4)(ii).

(d) Allocation of Certain Tax Items. Profits and Losses described in Section 3.1(e)(v) shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury Regulation Sections 1.704-1(b)(2)(iv)(j), (k) and (m).

(e) Effect of Allocations. Allocations pursuant to Section 4.5(b) are solely for purposes of federal, state and local Taxes and shall not affect, or in any way be taken into account in computing, any Unitholder’s Capital Account or share of Profits and Losses, Distributions or other Company items pursuant to any provision of this Agreement.

4.6 Indemnification and Reimbursement for Payments on Behalf of a Unitholder. Except as otherwise provided in Section 6.1, if the Company is required by law to make any payment to a Governmental Entity that is specifically attributable to a Unitholder or a Unitholder’s status as such (including federal withholding taxes, state personal property taxes, and state unincorporated business taxes), then such Unitholder shall indemnify and contribute to the Company in full for the entire amount paid (including interest, penalties and related expenses); provided, however, that this Section 4.6 shall not apply to any such Taxes relating to amounts paid or payable by the Company with respect to compensation of or benefits provided to individuals who are Unitholders on the date hereof in connection with their employment by any Group Company. The Board may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company under this Section 4.6. A Unitholder’s obligation to indemnify and make contributions to the Company under this Section 4.6 shall survive the termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 4.6, the Company shall be treated as continuing in existence. The Company may pursue and enforce all rights and remedies it may have against each Unitholder under this Section 4.6, including instituting a lawsuit to collect such indemnification and contribution, with interest calculated at a rate equal to the Base Rate plus three percent (3%) per annum (but not in excess of the highest rate per annum permitted by law), compounded on the last day of each Fiscal Period.

 

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4.7 Compensation of a Unitholder for Services. If and to the extent that an individual who is a Unitholder as of the date hereof is treated or required to be treated as a partner for a Tax purpose with respect to compensation or benefits paid or payable or provided or required to be provided by the Company to or on behalf of a Unitholder (including salary, bonuses, health and welfare benefits, and other perquisites), then the Company shall pay (or allocate and make corresponding Distributions) to such Unitholder such that he or she is in the same after-Tax position as would have applied if such Unitholder were treated as an employee for such Tax purpose (and the other provisions of this Agreement regarding Distributions and allocations shall be applied after taking such payments (or allocations and corresponding Distributions) into account without increasing or decreasing the Distributions and allocations to which such holders would be entitled under this Agreement without regard to such compensation and benefits).

ARTICLE V

MANAGEMENT

5.1 Authority of Board.

(a) Sole Authority. Except for situations in which the approval of one or more of the Members is expressly and specifically required by the terms of this Agreement, (i) the Board shall conduct, direct and exercise full control over all activities of the Company (including all decisions relating to the issuance of additional Equity Securities and the voting and sale of, and the exercise of other rights with respect to, the equity securities of its Subsidiaries), (ii) all management powers over the business and affairs of the Company shall be exclusively vested in the Board, and (iii) the Board shall have the sole power to bind or take any action on behalf of the Company, or to exercise any rights and powers (including the rights and powers to take certain actions, give or withhold certain consents or approvals, or make certain determinations, opinions, judgments, or other decisions) granted to the Company under this Agreement or any other agreement, instrument, or other document to which the Company is a party.

(b) Certain Actions. Without limiting the generality of the foregoing:

(i) except as contemplated by Section 9.2, the Board shall have sole discretion and right to enter into any agreement regarding, and have sole authority to approve on behalf of the Company and each of the Members, a Change of Control or any merger, consolidation or other transaction involving the Company or any of its Subsidiaries; and

(ii) the Board shall have the right to determine the timing and amount of any equity investment in the Company and to effect amendments to this Agreement in order to effectuate such equity investments.

 

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5.2 Composition of the Board.

(a) Number and Appointment. The Board shall initially consist of a number of Directors equal to the number of members of the Board of Directors of the Public Offering Entity, who shall be designated by the Public Offering Entity from time to time in its sole discretion.

(b) Term. Each Director appointed shall serve until a successor is appointed in accordance with the terms hereof or his or her earlier resignation, death or removal. Any Director will be removed from the Board, with or without Cause, at the written request of the Public Offering Entity and under no other circumstances. A Director may resign at any time upon written notice to the Company. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

(c) Vacancies. A vacancy in the Board because of resignation, death or removal of a Director will be filled by the Public Offering Entity pursuant to the terms of this Section 5.2. If the Persons entitled to fill a Board vacancy pursuant to this Section 5.2 fail to appoint a Director pursuant to the terms of this Section 5.2, then such position in the Board shall remain vacant until such Persons exercise their right to appoint a Director as provided hereunder. Newly created directorships resulting from any increase in the authorized number of Directors may be filled by the Board.

(d) Reimbursement. The Company shall reimburse all reasonable and necessary out-of-pocket costs and expenses incurred by each Director incurred in the course of their service hereunder, including in connection with attending regular and special meetings of the Board or any committee thereof.

(e) Compensation. Except as approved by the Board, no Director shall receive any compensation for serving in such capacity.

5.3 Board Actions; Meetings. Unless another percentage is set forth herein or required by applicable law, any determination or action required to be taken by the Board shall be taken by a majority of the Directors then in office (through meetings of the Board or written consents pursuant to this Section 5.3). A majority of the Directors shall constitute a quorum sufficient for conducting meetings and making decisions; provided, that in furtherance of the foregoing, all Directors shall work in good faith to make themselves available to attend meetings or to designate a proxy for such meetings in accordance with this Section 5.3. Regular meetings of the Board may be held on such date and at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called from time to time by any Director. Notice of each special meeting of the Board stating the date, place and time of such meeting shall be given to each Director by hand, telephone, telecopy, overnight courier, e-mail or the U.S. mail at least twenty-four (24) hours prior to any meeting of the Board. Notice may be waived before or after a meeting or by attendance without protest at such meeting. Any action to be taken by the Board may be taken at a meeting of the Board or by a written consent executed by the Directors having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting. Directors may participate in a meeting of the Board by means of telephone conference or similar communications equipment by which all Persons participating in the meeting can communicate with each other, and such participation in a meeting shall constitute presence in person at the meeting. Any Director unable to attend a meeting of the Board may designate another Director as his or her proxy. The Board may adopt such other procedures governing meetings and the conduct of business at such meetings as it shall deem appropriate.

 

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5.4 Delegation of Authority. The Board may, from time to time, delegate to one or more Persons (including any Member and including through the creation and establishment of one or more other committees) such authority and duties as the Board may deem advisable. Any delegation pursuant to this Section 5.4 may be revoked at any time by the Board.

5.5 Purchase of Units. Subject to the other provisions of this Agreement, the Board may cause the Company to purchase or otherwise acquire Units; provided, that this provision shall not in and of itself obligate any Unitholder to sell any Units to the Company. So long as any such Units are owned by the Company, such Units will not be considered outstanding for any purpose.

5.6 Limitation of Liability.

(a) Waiver of Liability. Except as otherwise provided herein, including as provided in Section 5.6(c), or in any agreement entered into by such Person and any Group Company and to the maximum extent permitted by the Delaware Act, no present or former Director or officer nor any such Person’s Affiliates, employees, agents or representatives shall be liable to the Company or to any Member for any act or omission performed or omitted by such Person in his or her capacity as Director or officer; provided, that except as otherwise provided herein, such limitation of liability shall not apply to the extent that the act or omission was attributable to such Person’s willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected). Each Director and officer shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, and any act of or failure to act by such Person in good faith reliance on such advice shall in no event subject such Person or any of such Person’s Affiliates, employees, agents or representatives to liability to the Company or any Member.

(b) Board Discretion. Whenever in this Agreement or any other agreement contemplated herein the Board is permitted or required to take any action or to make a decision or determination, the Board shall take such action or make such decision or determination in its sole discretion, unless another standard is expressly set forth herein or therein. Whenever in this Agreement or any other agreement contemplated herein the Board is permitted or required to take any action or to make a decision or determination in its “sole discretion” or “discretion”, with “complete discretion” or under a grant of similar authority or latitude, each Director shall be entitled to consider such interests and factors as such Director desires (including the interests of such Director’s Affiliates or employers as Unitholders).

(c) Fiduciary Duties. To the maximum extent permitted by applicable law, each Director, in their capacity as Director, shall owe substantially the same fiduciary duties to the Members of the Company as if the Company were a corporation organized under and subject to the DGCL, and such Director was a director under the DGCL and the Members were stockholders under the DGCL.

 

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(d) Effect on Other Agreements. This Section 5.6 shall not in any way affect, limit or modify any Person’s liabilities or obligations under any Employment Agreement, consulting agreement, management services agreement, confidentiality agreement, noncompete agreement, nonsolicit agreement or any similar agreement with any Group Company.

5.7 Officers.

(a) Officers Generally. The Board may, from time to time, employ and retain Persons as may be necessary or appropriate for the conduct of the Company’s business, including employees, agents and other Persons (any of whom may be a Member) who may be designated as officers of the Company, with titles including but not limited to “chief executive officer”, “chairman”, “president”, “vice president”, “treasurer”, “secretary”, “assistant secretary”, “director” and “chief financial officer”, as and to the extent authorized by the Board. Any number of offices may be held by the same person. In its discretion, the Board may choose not to fill any office for any period as it may deem advisable. Officers need not be residents of the State of Delaware or Members. Any officers so designated shall have such authority and perform such duties as the Board may, from time to time, delegate to them; provided, that in the absence of an express delegation of authority and duties, such persons shall have the authority and duties normally associated with such offices in respect of corporations formed pursuant to the laws of the State of Delaware. Notwithstanding the foregoing, no officer shall have the authority to approve any actions of any Subsidiary of the Company that requires the approval of the Company in its capacity as a shareholder of such Subsidiary without the express authorization of the Board. The Board may assign titles to particular officers. Each officer shall hold office until his successor shall be duly designated qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. The salaries or other compensation, if any, of the officers of the Company shall be fixed from time to time by the Board.

(b) Officer Resignation. Any officer may resign as such at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Board or any Director. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Any officer may be removed as such, either with or without cause, by the Board in its sole discretion; provided, however, that such removal shall be without prejudice to the contract rights, if any, of the individual so removed. Designation of an officer shall not of itself create contractual or employment rights. Any vacancy occurring in any office of the Company may be filled by the Board.

ARTICLE VI

RIGHTS AND OBLIGATIONS OF UNITHOLDERS AND MEMBERS

6.1 Limitation of Liability. Except as otherwise provided by the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Unitholder, Member or Director shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Unitholder or acting as a Member or Director of the Company. A Unitholder’s liability (in its capacity as such) for debts, liabilities and losses of the Company shall be limited to such Unitholder’s share of the Company’s assets; provided, that a Unitholder shall

 

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be required to return to the Company any Distribution made to it in clear and manifest accounting or similar error. The immediately preceding sentence shall constitute a compromise to which all Unitholders have consented within the meaning of the Delaware Act. Notwithstanding anything herein to the contrary, except as required by applicable law, the failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business and affairs under this Agreement or the Delaware Act shall not be grounds for imposing personal liability on the Unitholders, Members or Directors for liabilities of the Company.

6.2 Lack of Authority. No Unitholder or Member, in its capacity as such, has the authority or power to act for or on behalf of the Company in any manner or way, to bind the Company, or do any act that would be (or could be construed as) binding on the Company, in any manner or way, or to make any expenditures on behalf of the Company, unless such specific authority has been expressly granted to and not revoked from such Member by the Board, and the Unitholders and Members hereby consent to the exercise by the Board of the powers conferred on it by law and this Agreement.

6.3 No Right of Partition. No Unitholder or Member shall have the right to seek or obtain partition by court decree or operation of law of any the Company property, or the right to own or use particular or individual assets of the Company.

6.4 Indemnification.

(a) Indemnity in Third-Party Proceedings. Subject to Section 4.6, the Company hereby agrees to indemnify and hold harmless any Person (each, an “Indemnified Person”) to the fullest extent permitted under the Delaware Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Company is providing immediately prior to such amendment), against all Expenses and Liabilities reasonably incurred or suffered by such Person (or one or more of such Person’s Affiliates) in connection with or as a consequence of any Proceeding (other than any Proceeding brought by or in the right of the Company to procure a judgment in its favor, which shall be governed by the provisions set forth in Section 6.4(b)), or any claim, issue or matter therein, by reason of the fact that such Person is or was a Unitholder or Member (including, without limitation, M6 LLC, M7 LLC and M8 LLC) or is or was serving as a Representative of any Group Company or is or was serving at the request of any Group Company as a Representative of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (including, without limitation, M6 LLC, M7 LLC and M8 LLC) so long as such Indemnified Person acted in good faith and in a manner he/she reasonably believed to be in, or not opposed to, the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his/her conduct was unlawful. For the avoidance of doubt, a finding, admission or stipulation that an Indemnified Person has acted with gross negligence or recklessness shall not, of itself, create a presumption that such Indemnified Person has failed to meet the standard or conduct required for indemnification in this Section 6.4. For the avoidance of doubt, “Indemnified Persons” shall include the current and former manager of each of M6 LLC, M7 LLC and M8 LLC.

 

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(b) Indemnity in Proceedings by or in the Right of the Company. Subject to Section 4.6, the Company shall indemnify and hold harmless each Indemnified Person, to the fullest extent permitted by the Delaware Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Company is providing immediately prior to such amendment), from and against all Liabilities and Expenses suffered or incurred by such Indemnified Person or on such Indemnified Person’s behalf in connection with or as a consequence of any Proceeding brought by or in the right of the Company to procure a judgment in its favor, or any claim, issue or matter therein, if such Indemnified Person acted in good faith and in a manner he/she reasonably believed to be in, or not opposed, to the best interests of the Company. No indemnification for Liabilities and Expenses shall be made under this Section 6.4(b) in respect of any claim, issue or matter as to which such Indemnified Person shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such Indemnified Person is fairly and reasonably entitled to indemnification. For the avoidance of doubt, a finding, admission or stipulation that an Indemnified Person has acted with gross negligence or recklessness shall not, of itself, create a presumption that such Indemnified Person has failed to meet the standard or conduct required for indemnification in this Section 6.4(b).

(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Without limiting the rights of any Indemnified Person under any other provision hereof, to the extent that (i) such Indemnified Person is a party to (or a participant in) any Proceeding, (ii) the Company is not permitted by applicable law to indemnify such Indemnified Person with respect to any claim brought in such Proceeding if such claim is asserted successfully against such Indemnified Person, and (iii) such Indemnified Person is not wholly successful in such Proceeding, but is successful, on the merits or otherwise (including, without limitation, settlement thereof), as to one or more but less than all claims, issues or matters in such Proceeding, then the Company shall indemnify such Indemnified Person, to the fullest extent permitted by applicable law, against all Liabilities and Expenses actually and reasonably incurred by such Indemnified Person or on such Indemnified Person’s behalf, in connection with or as a consequence of each successfully resolved claim, issue or matter. For purposes of this Section 6.4(c) and without limitation, the termination of any claim, issue or matter in such a Proceeding by settlement, entry of a plea of nolo contendere or by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(d) Indemnification for Expenses of a Witness. To the extent that an Indemnified Person is, by reason of such Indemnified Person’s status as a Representative of the Company or any of its Affiliates, a witness in any Proceeding to which such Indemnified Person is not a party, such Indemnified Person shall be indemnified to the fullest extent permitted by applicable law against all Liabilities and Expenses suffered or incurred by him/her or on his/her behalf in connection therewith

 

 

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(e) Additional Indemnification. Notwithstanding any limitation in Sections 6.4(a), 6.4(b) or 6.4(c), the Company shall indemnify each Indemnified Person to the fullest extent permitted by applicable law if such Indemnified Person is a party to, or threatened to be made a party to, any Proceeding (including, without limitation, a Proceeding by or in the right of the Company to procure a judgment in its favor), against all Liabilities and Expenses suffered or incurred by such Indemnified Person in connection with such Proceeding: (i) to the fullest extent permitted by the provision of the Delaware Act that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to, or replacement of, the Delaware Act (but, in the case of any such amendment or replacement, only to the extent that such amendment or replacement permits the Company to provide broader indemnification rights than the Company is providing immediately prior to such amendment), and (ii) to the fullest extent authorized or permitted by any amendments to, or replacements of, the Delaware Act adopted after the date of this Agreement that increase the extent to which a limited liability may indemnify its officers, directors and managers.

(f) Exclusions. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement to make any indemnity in connection with any Proceeding (or any part of any Proceeding):

(i) for which payment has actually been made to or on behalf of such Indemnified Person under any statute, insurance policy procured by the Company, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act or similar provisions of federal, state or local statutory law or common law, if such Indemnified Person is held liable therefor (including pursuant to any settlement arrangements to which such Indemnified Person has consented);

(iii) for any reimbursement of the Company by such Indemnified Person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such Indemnified Person from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 or Section 954 of the Dodd–Frank Wall Street Reform and Consumer Protection Act, or the payment to the Company of profits arising from the purchase and sale by such Indemnified Person of securities in violation of Section 306 of the Sarbanes-Oxley Act of 2002), if such Indemnified Person is held liable therefor (including pursuant to any settlement arrangements to which such Indemnified Person has consented);

(iv) initiated by such Indemnified Person, including any Proceeding (or any part of any Proceeding) initiated by such Indemnified Person against the Company or its directors, officers, employees, agents or other indemnitees (not by way of defense), unless (A) the Board authorized the Proceeding (or the relevant part of the Proceeding), (B) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (C) with respect to proceedings brought to establish or enforce a right to indemnification or advancement under this Agreement or under any other agreement or applicable law, or (D) otherwise required by applicable law; or

 

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(v) if a court of competent jurisdiction determines that such indemnification is prohibited by applicable law in a final judgment from which there is no further right of appeal.

(g) Advancement of Expenses. The Company shall advance, to the fullest extent permitted by law, Expenses incurred by an Indemnified Person in connection with any Proceeding, and such advancement shall be made within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time (which shall include invoices received by such Indemnified Person in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause such Indemnified Person to waive any privilege accorded by applicable law shall not be included with the invoice), whether prior to, or after, final disposition of any Proceeding (including any appeal). Advances shall be unsecured and interest free. Advances shall be made without regard to such Indemnified Person’s ability to repay Expenses and without regard to such Indemnified Person’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses incurred pursuing an action to enforce this right of advancement, including, without limitation, Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Each Indemnified Person shall undertake to repay the advance to the extent that it is ultimately determined that such Indemnified Person is not entitled to be indemnified by the Company. To obtain indemnification, an Indemnified Person shall submit to the Company a written request, including therein documentation and information as is reasonably available to such Indemnified Person and is reasonably necessary to determine whether and to what extent such Indemnified Person is entitled to indemnification, and shall request payment thereof. The Company shall (i) pay Expenses on behalf of such Indemnified Person, (ii) advance to such Indemnified Person funds in an amount sufficient to pay such Expense, or (iii) reimburse such Indemnified Person for such Expenses.

(h) Nonexclusivity of Rights. The right to indemnification conferred in this Section 6.4 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, agreement, law, vote of the Board or otherwise. In addition, the Company hereby acknowledges that certain directors and officers affiliated with the Public Offering Entity may have certain rights to indemnification, advancement of expenses and/or insurance provided by the Public Offering Entity or certain of its Affiliates (collectively, the “Investor Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to the Indemnified Person are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by the Indemnified Person are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by the Indemnified Person in accordance with this Section 6.4 without regard to any rights the Indemnified Person may have against the Investor Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Investor Indemnitors from any and all claims against the Investor Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Investor Indemnitors on behalf of the Indemnified Person with respect to any claim for which the Indemnified Person has sought indemnification from the Company shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Indemnified Person against the Company.

 

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(i) Insurance. The Company may maintain insurance, at its expense, to protect any Indemnified Person against any expense, liability or loss described in this Section 6.4 whether or not the Company would have the power to indemnify such Indemnified Person against such Expense or Liability under the provisions of this Section 6.4.

(j) Limitation. Notwithstanding anything herein to the contrary (including in this Section 6.4), any indemnity by the Company relating to the matters covered in this Section 6.4 shall be provided out of and to the extent of Company assets only, and no Unitholder (unless such Unitholder otherwise agrees in writing or is found in a final decision by a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity of the Company (except as expressly provided herein).

(k) Savings Clause. If this Section 6.4 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Indemnified Person pursuant to this Section 6.4 to the fullest extent permitted by any applicable portion of this Section 6.4 that shall not have been invalidated and to the fullest extent permitted by applicable law.

6.5 Members Right to Act. Except as expressly provided in this Agreement or by non-waivable provisions of the Delaware Act, the Unitholders shall not have any voting or consent rights under this Agreement or the Delaware Act with respect to the Units held by such Person, including with respect to any matters to be decided by the Company or any other governance matters described in this Agreement, and each Unitholder, by its acceptance of Units, expressly waives any consent or voting rights (except to the extent expressly provided in this Agreement) or other rights to participate in the governance of the Company, whether such rights may be provided under the Delaware Act or otherwise. Except as expressly provided in this Agreement or non-waivable provisions of the Delaware Act, on all matters (if any) submitted to the Members for a vote, the Public Offering Entity shall be entitled to one (1) vote per Class A Common Unit held by such holder, and all other holders of Class A Common Units shall be entitled to vote only to the extent described in this Agreement, including as described in Section 14.2. The actions by the Members permitted hereunder may be taken at a meeting called by the Board or by Members holding a majority of the Units entitled to vote or consent on the matter on at least twenty-four (24) hours’ prior written notice to the other Members entitled to vote or consent thereon, which notice shall state the purpose or purposes for which such meeting is being called. Each Member entitled to vote shall be allowed to participate in any such meeting of the Members by means of telephone. The actions taken by the Members entitled to vote or consent at any meeting (as opposed to by written consent), however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until), the Members entitled to vote or consent as to whom it was improperly held appears at such meeting without protest, or either before, at or after the meeting, signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. The actions by the Members entitled to vote or consent may be taken by vote of the Members entitled to vote or consent at a meeting or by written consent (without a meeting and without a vote) so long as such consent is signed by the Members

 

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having not less than the minimum number of Units that would be necessary to authorize or take such action at a meeting at which all Members entitled to vote thereon were present and voted. Prompt notice of the action so taken without a meeting shall be given to those Members entitled to vote or consent who have not consented in writing. Any action taken pursuant to such written consent of the Members shall have the same force and effect as if taken by the Members at a meeting thereof.

6.6 Investment Opportunities and Conflicts of Interest.

(a) The Public Offering Entity and its Affiliates (other than any Group Company) and each of their respective stockholders, directors, officers, controlling Persons, partners, members and employees (each, an “Investor”) may have business interests and engage in business activities in addition to those relating to any Group Company. Neither the Company nor any Member or Unitholder shall have any rights by virtue of this Agreement in any business ventures of any such Investor and the involvement by any Investor in such business ventures shall not constitute a conflict of interest by such Persons with respect to any Group Company or Unitholder.

(b) During the Restricted Period, each Management Investor shall bring all investment or business opportunities to the Company that such Person reasonably believes fit all of the following criteria: (i) are a Restricted Business or within any other active line of business of any Group Company and (ii) any Group Company would reasonably be expected to have an interest or expectancy in (i.e., the opportunity would further an established business policy or goal of any Group Company). During the Restricted Period, or such lesser period to the maximum extent provided by applicable law, no Management Investor shall, directly or indirectly, or on behalf of any other Person (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, employee, partner, participant, or in any other capacity), in the Restricted Territory, engage in a Restricted Business or any other business relating to or competing with any business then actively conducted by any Group Company; provided, however, that beneficial ownership of not more than five percent (5%) of the securities of an entity traded on a national securities exchange or national trading market shall not constitute competition that is prohibited by this Section 6.6. Notwithstanding anything to the contrary in this Section 6.6, no Management Investor shall be deemed to have violated this Section 6.6 by virtue of such Person’s ownership interest in, or participation in, entities disclosed in such Person’s Employment Agreement. Notwithstanding anything to the contrary herein, if at any time all Group Companies are no longer active in any particular business or any portion thereof (or, in the case of Hsieh, to the extent that such business no longer constitutes a Core Business), then this Section 6.6(b) shall, effective thirty (30) days following such time, no longer be applicable to any Management Investor with respect to such particular business or portion thereof that the Group Companies are no longer active in (but, for the avoidance of doubt, will still be bound by this provision with respect to any other business then actively conducted by any Group Company). The duties and obligations of a Management Investor provided by this Section 6.6(b) shall be strictly in addition to (and shall in no way limit or otherwise modify) any duties or obligations regarding non-competition, non-solicitation, no-hire, non-disparagement, business or investment opportunities or other similar duties or obligations applicable to such Management Investor and set forth in any Equity Agreement or Employment Agreement that is in effect as of the Original Date or any time thereafter.

 

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6.7 Interested Transactions. The Board may cause any Group Company to enter into any contracts or transactions with the Investors, the other Members and their respective Affiliates as the Board may determine in its sole discretion and no member of the Board shall be deemed to have breached any fiduciary duty, duty of loyalty or other duty to the Company, the Unitholders or any other Person with respect to any action or inaction in connection with or relating to any such transaction.

6.8 Confidentiality. Each Unitholder recognizes and acknowledges that it has and may in the future receive certain Confidential Information. Each Unitholder, on behalf of itself and, to the extent that such Unitholder would be responsible for the acts of the following Persons under principles of agency law, its directors, officers, shareholders, partners, employees, agents and members, agrees that it will not, during or after the term of this Agreement, whether directly or indirectly through an Affiliate or otherwise, disclose Confidential Information to any Person for any reason or purpose whatsoever, except (a) to authorized directors, officers, representatives, agents and employees of any Group Company and as otherwise may be proper in the course of performing such Unitholder’s obligations, or enforcing such Unitholder’s rights, under this Agreement and the agreements expressly contemplated hereby; or (b) as is required to be disclosed by order of a Governmental Entity, or by subpoena, summons or legal process, or by law, rule or regulation; provided, that to the extent permitted by law, the Unitholder required to make such disclosure shall provide to the Board prompt notice of such disclosure. For purposes of this Section 6.8, Confidential Information shall not include any information that was or has become generally available to the public other than as a result of disclosure by any Group Company to the public. Nothing in this Section 6.8 shall in any way limit or otherwise modify any confidentiality covenants entered into between any Unitholder and any Group Company. Notwithstanding anything to the contrary in this Section 6.8, the Public Offering Entity may disclose any Confidential Information pursuant to any disclosure obligation under any applicable law or stock exchange rule with no obligation to provide written notice to the Company or any other Member to whom such Confidential Information relates.

ARTICLE VII

BOOKS, RECORDS, ACCOUNTING AND REPORTS

7.1 Records and Accounting. The Company shall keep, or cause to be kept, appropriate books and records with respect to the Company’s business, including all books and records necessary to provide any information, lists and copies of documents required to be provided pursuant to Section 7.2 or pursuant to applicable laws. All matters concerning (a) the determination of the relative amount of allocations and Distributions among the Unitholders pursuant to Article III and Article IV and (b) accounting procedures and determinations, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the Board, whose determination shall be final and conclusive as to all of the Unitholders absent manifest error.

7.2 Tax Reports. The Company shall use commercially reasonable efforts to deliver or cause to be delivered, within one hundred twenty (120) days after the end of each Fiscal Year, to each Person who was a Unitholder at any time during such Fiscal Year all information necessary for the preparation of such Person’s United States federal and state income tax returns. Except as otherwise provided in this Agreement, only holders of Class A Common Units who are not employed by, providing services to or otherwise partnered with any Person that is or is reasonably likely to become competitive with any Group Company shall be entitled to inspect, review, obtain or receive any information about the Group Companies under Section 18-305 of the Delaware Act, under this Agreement or otherwise, other than as set forth in this Section 7.2 and Section 8.2.

 

 

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7.3 Transmission of Communications. Each Person that owns or controls Units on behalf of, or for the benefit of, another Person or Persons shall be responsible for conveying any report, notice or other communication received from the Company to such other Person or Persons.

ARTICLE VIII

TAX MATTERS

8.1 Preparation of Tax Returns. The Company shall arrange for the preparation and timely filing of all Tax returns required to be filed by the Company.

8.2 Tax Elections. The Taxable Year shall be the Fiscal Year unless the Board shall determine otherwise and, in any event, shall be as permitted or required by the Code. The Board shall determine whether to make or revoke any available election pursuant to the Code, except as otherwise provided herein. Each Unitholder will upon request supply any information necessary to give proper effect to such election.

8.3 Tax Controversies.

(a) Any Member from time to time designated by the Board (with such Member’s consent) shall be the Partnership Representative, and shall be authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services reasonably incurred in connection therewith. The Partnership Representative shall appoint a “designated individual” in accordance with the requirements of Proposed Treasury Regulation Section 301.6223-1(b), as applicable. Each Unitholder agrees to cooperate with the Company and to do or refrain from doing any or all things reasonably requested by the Company with respect to the conduct of such proceedings. The Partnership Representative shall keep the Board informed on a current basis with respect to the status of all such examinations and proceedings, and the Partnership Representative as such shall not, without the prior approval of the Board, (i) commence any judicial proceeding (including a petition in the United States Tax Court or corresponding administrative body of a state, local or foreign jurisdiction), (ii) settle or consent to a final determination (within the meaning of Section 1313(a) of the Code and any corresponding state, local or foreign Tax law) with respect to Taxes, (iii) consent to an extension of, or waive, any statute of limitations for the assessment of any Tax, or (iv) take any other action binding on the Company or its Members that could reasonably be expected to have a material adverse effect on the Company or any Member or its constituents.

 

 

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(b) Subject to Section 4.5 hereof, but notwithstanding any other provision to the contrary in this Agreement, (i) with respect to any “imputed underpayment” pertaining to the Company within the meaning of Section 6225 of the Code, the Partnership Representative shall make a timely election under Section 6226(a) of the Code, and (ii) each Unitholder shall be liable for and, promptly upon demand by the Partnership Representative, pay to the Company such Unitholder’s share of any imputed underpayment of tax imposed on Unitholders in their capacities as such and any interest and penalties relating thereto imposed on the Company as a result of any partnership adjustment or other proceeding with substantially similar effect under the Partnership Tax Audit Rules; for the avoidance of doubt, the immediately preceding clause (ii) applies only to U.S. federal income taxes and related interest and penalties imposed under the Partnership Tax Audit Rules and state and local income taxes and related interest and penalties imposed under state and local tax laws or regulations that conform to or operate in substantially the same manner as the Partnership Tax Audit Rules with respect to any imputed underpayment and related interest and penalties.

(c) Promptly following the written request of the Partnership Representative, the Company shall, to the fullest extent permitted by law, reimburse and indemnify the Partnership Representative for all reasonable expenses, including reasonable legal and accounting fees, claims, liabilities, losses and damages incurred by the Partnership Representative in connection with any administrative or judicial proceeding (i) with respect to the Tax liability of the Company and/or (ii) with respect to the Tax liability of the Unitholders in connection with the operations of the Company. The provisions of this Section 8.3 shall survive the termination of the Company or the termination of any Unitholder’s interest in the Company and shall remain binding on the Unitholders for as long a period of time as is necessary to resolve with the Internal Revenue Service (or similar state or local governmental authority) any and all matters regarding the taxation of the Company or the Unitholders.

ARTICLE IX

TRANSFER OF UNITS

9.1 Required Consent. No Unitholder shall Transfer (or offer or agree to Transfer) all or any part of any interest in any Equity Securities except in compliance with this Article IX and any other agreement binding upon such Unitholder that restricts the Transfer of Equity Securities (including any Equity Agreement and any underwriter lock-up agreement applicable to such Unitholder). In addition to complying with any other provisions regarding Transfer of Equity Securities set forth herein or in any applicable Equity Agreement, no Unitholder shall (directly or indirectly through a transfer of such Unitholder’s equity interests) Transfer (or offer or agree to Transfer) all or any part of any interest in any Equity Securities without first obtaining the prior written consent of the Board, which consent may be withheld in the Board’s sole discretion; provided, that such Unitholder may Transfer Equity Securities (without the Board’s prior written consent, but subject to the other provisions of this Agreement or any applicable Equity Agreement) (i) pursuant to an Approved Sale, (ii) pursuant to any forfeiture or repurchase provisions set forth in any applicable Employment Agreement or Equity Agreement, (iii) pursuant to an Exchange effected pursuant to Section 9.9, or (iv) to such Unitholder’s Permitted Transferees so long as such Unitholder retains voting control of such Equity Securities; provided, however, that if such Unitholder Transfers any interests in any Units to a Permitted Transferee and such Person ceases to be a Permitted Transferee of such Unitholder, then such Person shall, upon ceasing to be a Permitted Transferee, Transfer such interest back to the Unitholder making such initial Transfer. M6 LLC, M7 LLC or M8 LLC shall each only hold Class A Common Units and shall each cause their respective members, and their respective members agree by joinder to this Agreement, to comply with the provisions of this Agreement, including the application of the following sentence

 

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