Delaware | | | 4924 | | | 87-2878691 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
| | With copies to: | | | ||
Andrew L. Fabens Hillary H. Holmes Gibson, Dunn & Crutcher LLP 811 Main Street, Suite 3000 Houston, TX 77002 (346) 718-6600 | | | Alisa Newman Hood Executive Vice President, General Counsel and Secretary Excelerate Energy, Inc. 2445 Technology Forest Blvd., Level 6 The Woodlands, TX 77381 (832) 813-7100 | | | Michael Kaplan Pedro Bermeo Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10022 (212) 450-4000 |
Large accelerated filer ☐ | | | Accelerated filer ☐ |
Non-accelerated filer ☒ | | | Smaller reporting company ☐ |
| | Emerging growth company ☒ |
Title of Each Class of Securities to be Registered | | | Proposed Maximum Aggregate Offering Price(1)(2) | | | Amount of Registration Fee(3) |
Class A common stock, par value $0.001 per share | | | $100,000,000 | | | $9,270 |
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933. |
(2) | Includes shares subject to the underwriters’ option to purchase additional shares, if any. See “Underwriting.” |
(3) | Previously paid in connection with the prior filing of this Registration Statement. |
PROSPECTUS | | |
| | Per Share | | | Total | |
Initial public offering price | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ |
(1) | See “Underwriting” for a description of all underwriting compensation payable in connection with this offering. |
Barclays | | | J.P. Morgan | | | Morgan Stanley |
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• | LNG-to-power developers. In many of our markets, we compete with other LNG-to-power companies, including New Fortress Energy and AES. Our investment strategy is focused on leveraging our FSRU expertise and local operational experience and relationship development to drive the expansion of incremental |
• | Large LNG producers. We believe we can capture higher returns than major LNG producers such as Qatargas, Shell, ExxonMobil, BP and Total Energies by focusing on integrating the business downstream of LNG production. Our focus is on helping LNG producers expand the reach of their LNG supply beyond their traditional markets, resulting in less price pressure and better portfolio diversification. In close collaboration with Qatargas, we succeeded in bringing regasified LNG to Pakistan and Bangladesh, which triggered a dramatic displacement of coal fired plants from the government’s energy plans. Additionally, we are collaborating with ExxonMobil on a feasibility study in Albania of an opportunity for them to provide LNG and for us to develop the LNG terminal, power generation facilities and pipeline interconnections necessary to make the importation of LNG viable, illustrating how we can provide value to LNG producers while capturing integrated markets downstream. |
• | FSRU / LNG carrier owners. As the owner and operator of the largest FSRU fleet employed for regasification in the industry, we compete with FSRU and LNG carrier (“LNGC”) owners such as New Fortress Energy (following its acquisition of Hygo Energy Transition and Golar LNG Partners), Hoegh LNG and GasLog. We distinguish ourselves by providing customers the ability to expand our service as their energy demands increase. This flexible approach, focused on optimizing services by swapping smaller FSRUs for larger ones, performing technical upgrades and offering seasonal service when required, fosters trust and long-term relationships with our customers. We believe the fundamentals supporting the FSRU business model require operators to focus on reliability, value and service, combined with disciplined expansion and growth. |
• | Experienced LNG Leader and Proven Ability to Execute. We are an admired player within the LNG industry with significant experience across the value chain. Our experienced team and proven LNG solutions, including the industry's largest FSRU fleet employed for regasification, more than 2,000 STS transfers of LNG with over 40 LNG operators and the development or operation of 13 LNG import terminals, make us a market leader and a trusted partner for countries who seek to improve their access to energy. We have nearly two decades of development, construction and operational experience, making us one of the most accomplished, reliable and capable LNG companies in the industry. Our team’s in-depth experience and local presence enable us to support energy hubs by sourcing and aggregating LNG from the global market for delivery downstream, ensuring the long-term stability, reliability, and independence of customers’ energy supply. |
• | Positioned to Meet Growing Global Demand for Cleaner Energy. According to the International Energy Agency’s (“IEA”) most recent semi-annual Electricity Market Report, global electricity demand is expected to rebound strongly over the next two years, growing by close to 5% in 2021 and by 4% in 2022. With the demand for power generation growing worldwide, direct access to diverse, affordable and reliable energy sources such as LNG has become a critical enabler for economic growth and improving the quality of life across the globe. LNG provides an abundant, competitive and cleaner energy source to meet the world’s growing demand for power. It is also an efficient means to displace coal, which is a higher carbon intensity fuel compared to natural gas. Despite its advantages, LNG access is not readily available in many emerging markets due to the complexity of LNG import projects. We have an established reputation for developing and operating complex LNG solutions and are a trusted operator with a strong track record of bringing reliability, resiliency and flexibility to energy systems. |
• | Full-Service, Integrated LNG Business Model Provides Competitive Advantage. As market dynamics and the energy needs of customers have evolved over time, we embraced the opportunity to expand beyond our FSRU business. Today, we are addressing the need for increased access to LNG with our fully integrated business model that manages the LNG supply chain from procurement until final delivery to end users. We plan to help our customers meet their growing energy demand by providing an array of products, including LNG terminal services, natural gas supply procurement and distribution, LNG-to-power projects |
• | Well-Established FSRU Business Supported by Dependable Revenue Base. We own and operate the largest FSRU fleet employed for regasification in the industry. The success of our well established FSRU business is highlighted by our ability to secure long-term, take-or-pay contracts that generate consistent revenue and cash flow with minimal exposure to commodity price volatility. Our ability to swap FSRUs between projects makes our baseline revenue more predictable and minimizes redeployment risk. Further, we minimize the initial commitments for integrated offers through the initial use of existing, smaller capacity FSRUs while our customers’ markets evolve. Most of our existing customers have benefited from this scalability, which has resulted in better project returns and higher customer loyalty. This strength has allowed us to capture downstream markets such as Brazil, where our successful FSRU services with Petrobras opened the door to accessing gas sales through the lease of the Bahia Regasification Terminal from Petrobras. Our profitable FSRU and LNG marketing and supply businesses also provide us with valuable connectivity to global downstream markets. With our expansive global presence, we are well positioned to deliver integrated natural gas and power solutions, giving our customers access to cleaner, reliable and affordable energy. |
• | Understanding of LNG Market Dynamics Allows for Portfolio Optimization. We leverage our expertise and understanding of LNG market dynamics to create significant value though our LNG marketing and supply business. Our worldwide market access and ability to buy LNG from major LNG producers and traders gives us the chance to capture additional value via portfolio optimization and provides incremental cash flow. Even more importantly, our access to diverse, uncorrelated markets, including New England and Brazil, generates valuable arbitrage opportunities. We are structuring our business to be able to maximize this extra value from LNG supply to gas sales agreements (“GSA”) and power purchase agreements (“PPA”). Our strategy of integrating LNG supply, natural gas sales and terminal operations, gives us the ability to optimize our FSRU fleet utilization. |
• | Proven Management Team. Our management team has experience in all aspects of the LNG value chain and a strong balance of technical, commercial, operational, financial, legal and management skills. Steven Kobos, our President and Chief Executive Officer, has over 27 years of experience working on complex energy and infrastructure development projects and general maritime operations, specifically LNG shipping, FSRUs, chartering of vessels, shipbuilding contracts, operational agreements and related project finance and tax matters, and he has helped establish Excelerate as a growing and profitable international energy company. Daniel Bustos, our Executive Vice President and Chief Commercial Officer, has over 24 years of experience leading commercial development of oil and gas projects across the globe, with a particular focus on LNG, and is responsible for the commercial development of our LNG import projects, expansion of our customer base and the buildout of our global network of regional offices. Dana Armstrong, our Executive Vice President and Chief Financial Officer, provides oversight of all global financial reporting, financial planning and analysis, accounting, treasury, tax, financial systems and internal controls and has led both public and private multinational companies within the energy and biotechnology industries over her 25-year career. Calvin Bancroft, our Executive Vice President and Chief Operating Officer, has over 40 years of experience in the shipping industry, with recognized expertise in maritime security, chartering, supply chain management and operational logistics. Alisa Newman Hood, our Executive Vice President and General Counsel, has 20 years of worldwide legal, government relations and energy policy experience. Amy Thompson, our Executive Vice President and Chief Human Resources Officer, has over 22 years of human resources experience in global oil field services organizations and has held various leadership roles in the United States and the Middle East. |
• | Continue to develop our existing, diversified regasification business, supported by our large purpose-built FSRU fleet. Our current markets are essential to maintaining our solid foundation of revenues and providing new opportunities for downstream growth. Our persistent market presence helps |
• | Pursue opportunities downstream of existing markets. With established terminals, existing markets provide opportunities for us to structure end-to-end natural gas supply products and cleaner power solutions for our customers. We expect the organic growth of our business to be accompanied by strategic acquisitions for new or existing projects, in order to enhance our growth trajectory. As we integrate new infrastructure assets downstream of our floating LNG terminals, we will be required to make investments in new products and technologies to ensure that we are positioned for success in a lower-carbon energy future. We anticipate that increasing global demand for electricity generation, more efficient access to natural gas and decarbonization initiatives will be the primary drivers of opportunity, and we intend to diversify our product portfolio responsibly and in a manner that reinforces our broader goals of improving access to cleaner, more affordable and reliable energy, creating sustainable growth and combatting climate change. Our local teams will be key to expanding and diversifying our commercial, technical and financial expertise in our existing markets. |
• | Leverage our global presence to enter new, growing markets. We plan to use our existing markets as a springboard into new countries and regions. Our ability to cultivate meaningful partnerships and successfully acquire equity interests in projects will be a determining factor in how quickly we are able to achieve critical mass in new markets. We currently have approximately $1 billion of projects in advanced development, including projects in Albania, the Philippines and Bangladesh, and we are evaluating over $6 billion of early stage projects with opportunities in the Middle East, Africa, South America and South and Southeast Asia. |
• | Create a sizable, diversified LNG procurement portfolio. Our expansion downstream will offer us the opportunity to establish valuable access to a worldwide network of natural gas markets. Our network of supply and charter contracts and reputation with major LNG producers provide us with ample opportunities to grow our LNG portfolio on competitive terms. This diversified portfolio will give us the opportunity to better manage the typical uncertainties of local demand (weather seasonality, economic cycles, availability of renewables, etc.), while capturing arbitrage opportunities. For example, we have already demonstrated the value of accessing the New England market in a flexible way. With the addition of new market access points in Asia, Europe, Africa and South America, we can capture value from our LNG procurement portfolio, above the margins generated in individual markets. Finally, this LNG portfolio will help further enhance our competitive edge for new opportunities, allowing us to offer more flexible and cost-effective products to new customers. |
• | Maintain our disciplined investment philosophy. As we grow our business, we are committed to maintaining our disciplined investment philosophy and prudent approach to project development. We have established a proven track record of investing in the right projects which has resulted in higher project returns and consistent earnings results. It is our aim to have an industry leading portfolio of high-return growth opportunities that will support sustainable and profitable growth for years to come. We expect our contract portfolio to evolve over time to include long-term contracts as well as shorter-term agreements that will create opportunities to capture additional upside. |
• | our ability to enter into contracts with customers and our customers’ failure to perform their contractual obligations; |
• | customer termination rights in our contracts; |
• | the risks inherent in operating our FSRUs, LNGCs and other LNG infrastructure assets; |
• | the technical complexity of our FSRUs and LNG import terminals and related operational problems; |
• | cancellations, time delays, unforeseen expenses and other complications while developing our projects; |
• | our inability to develop a project successfully and our customers’ failure to fulfill their payment obligations to us following our capital investment in a project; |
• | the failure of our regasification terminals and other facilities to operate as expected or be completed; |
• | our need for substantial capital expenditures to maintain and replace the operating capacity of our fleet; |
• | our reliance on our engineering, procurement and construction (“EPC”) contractors and other contractors for the successful completion of our energy-related infrastructure; |
• | shortages of qualified officers and crew impairing our ability to operate or increasing the cost of crewing our vessels; |
• | uncertainty related to construction costs, development timelines, third-party subcontractors and equipment manufacturers required to perform our development services; |
• | our ability to obtain and maintain approvals and permits from governmental and regulatory agencies with respect to the design, construction and operation of our facilities and provision of our services; |
• | our ability to maintain relationships with our customers and existing suppliers, source new suppliers for LNG and critical components of our projects and complete building out our supply chain; |
• | our ability to connect with third-party pipelines, power plants and other facilities that provide gas receipt and delivery downstream of our integrated terminals; |
• | our ability to purchase or receive physical delivery of LNG in sufficient quantities to satisfy our delivery obligations under GSAs or at attractive prices; |
• | changes in the demand for and price of LNG and natural gas and LNG regasification capacity; |
• | the competitive market for LNG regasification services; |
• | fluctuations in hire rates for FSRUs; |
• | infrastructure constraints and community and political group resistance to existing and new LNG and natural gas infrastructure over concerns about the environment, safety and terrorism; |
• | outbreaks of epidemic and pandemic diseases and governmental responses thereto; |
• | our ability to access financing sources on favorable terms; |
• | our debt level and finance lease liabilities, which may limit our flexibility in obtaining additional financing, refinancing credit facilities upon maturity; |
• | volatility of the global financial markets and uncertain economic conditions; |
• | our financing agreements, which include financial restrictions and covenants and are secured by certain of our vessels; |
• | compliance with various international treaties and conventions and national and local environmental, health, safety and maritime conduct laws that affect our operations; |
• | our dependence upon distributions from our subsidiaries to pay dividends, if any, taxes and other expenses and make payments under the Tax Receivable Agreement; |
• | the requirement that we pay over to continuing members of EE Holdings most of the tax benefits we receive; |
• | payments under the Tax Receivable Agreement being accelerated and/or significantly exceeding the tax benefits, if any, that we actually realize; |
• | the possibility that EELP will be required to make distributions to us and the existing members of EE Holdings; |
• | the material weaknesses identified in our internal control over financial reporting; |
• | Kaiser having the ability to direct the voting of a majority of the voting power of our common stock, and his interests may conflict with those of our other stockholders; and |
• | our ability to pay dividends on our Class A common stock. |
(1) | At the closing of this offering, EE Holdings will own Class B interests of EELP and shares of Class B common stock of Excelerate. |
(2) | Each share of Class A common stock of Excelerate will be entitled to one vote and will vote together with the Class B common stock as a single class, except as provided in our amended and restated certificate of incorporation or required by law. See “Description of Capital Stock—Common Stock—Class A Common Stock.” |
(3) | Each share of Class B common stock is entitled to one vote and will vote together with the Class A common stock as a single class, except as provided in our amended and restated certificate of incorporation or required by law. The Class B common stock will have no economic rights in Excelerate. See “Description of Capital Stock—Common Stock—Class B Common Stock.” |
(4) | Excelerate will, directly or indirectly, own all of the Class A interests of EELP after the Reorganization, which upon the completion of this offering will represent the right to receive approximately % of the distributions made by EELP. While this interest represents a minority of economic interests in EELP, it represents 100% of the voting interests, and Excelerate (or its subsidiary) will be admitted as the general partner of EELP in connection with the Reorganization. As a result, Excelerate will operate and control all of EELP’s business and affairs and will be able to consolidate its financial results into Excelerate’s financial statements. |
(5) | At the closing of the offering, EE Holdings will own all of the outstanding shares of Class B common stock and all of the outstanding Class B interests of EELP, which upon the completion of this offering will represent the right to receive approximately % of the distributions made by EELP. No person will have any voting rights in EELP on account of the Class B interests, except for the right to approve amendments to the EELP Limited Partnership Agreement (as defined herein) that adversely affect the rights of holders of Class B interests. However, through ownership of shares of Class B common stock, the Class B stockholder will control a majority of the voting power of the common stock of Excelerate, the general partner (or sole owner of the general partner) of EELP, and will therefore have indirect control over EELP. Class B interests of EELP may be exchanged for shares of our Class A common stock or, at our election, for cash, subject to certain restrictions pursuant to the EELP Limited Partnership Agreement described in “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc.—EELP Limited Partnership Agreement.” When a Class B interest is exchanged for a share of our Class A common stock or, at our election, for cash, it will result in the automatic cancellation of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of our Class B stockholder. Any beneficial holder exchanging Class B interests must ensure that the applicable corresponding number of shares of Class B common stock are delivered to us for cancellation as a condition of exercising its right to exchange Class B interests for shares of our Class A common stock or, at our election, for cash. After a Class B interest is surrendered for exchange, it will not be available for reissuance. |
• | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; |
• | not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, for up to five years or until we no longer qualify as an emerging growth company; |
• | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; |
• | reduced disclosure obligations regarding executive compensation pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosures regarding our executive compensation; and |
• | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved. |
• | approximately $ million of the net proceeds of this offering to fund our growth strategy, including our projects in Brazil at the Bahia Regasification Terminal, Albania at the Vlora LNG Terminal, the Philippines at the Filipinas LNG Gateway, and Bangladesh at the Payra LNG Terminal; |
• | approximately $ million of the net proceeds of this offering to fund in part EELP's purchase of the Foundation Vessels in connection with the Reorganization; |
• | approximately $ million of the net proceeds of this offering to pay the expenses incurred by us in connection with this offering and the Reorganization; and |
• | other than as set forth below, the remainder for working capital and other general corporate purposes. |
• | shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares; |
• | shares of Class A common stock issuable under our Excelerate Energy, Inc. Long-Term Incentive Plan (the “LTI Plan”), including: |
(i) | shares of Class A common stock underlying restricted stock units and stock options to be granted to certain employees and our independent directors pursuant to the LTI Plan in connection with this offering, which restricted stock units will vest ratably over a three-year period and which stock options will have an exercise price per share equal to the public offering price in this offering; and |
(ii) | additional shares of Class A common stock to be reserved for future issuance of awards under the LTI Plan; and |
• | shares of Class A common stock reserved for issuance upon exchange of the Class B interests of EELP (and the cancellation of the corresponding shares of Class B common stock) that will be outstanding immediately after this offering. |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands) | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | ||||||||
Statements of Operations Data: | | | | | | | | | ||||
Revenues | | | | | | | | | ||||
FSRU and terminal services | | | $352,299 | | | $322,977 | | | $430,843 | | | $422,485 |
Gas sales | | | 197,453 | | | — | | | — | | | 121,918 |
Total revenues | | | 549,752 | | | 322,977 | | | 430,843 | | | 544,403 |
Operating expenses | | | | | | | | | ||||
Cost of revenue and vessel operating expenses | | | 132,415 | | | 112,074 | | | 150,478 | | | 143,536 |
Direct cost of gas sales | | | 179,950 | | | — | | | — | | | 89,197 |
Depreciation and amortization | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Selling, general and administrative | | | 34,113 | | | 31,583 | | | 42,942 | | | 35,509 |
Restructuring, transition and transaction expenses | | | 8,613 | | | — | | | — | | | 13,284 |
Total operating expenses | | | 433,411 | | | 225,180 | | | 297,587 | | | 383,722 |
Operating income | | | 116,341 | | | 97,797 | | | 133,256 | | | 160,681 |
Other income (expense) | | | | | | | | | ||||
Interest expense | | | (24,558) | | | (28,834) | | | (37,460) | | | (44,319) |
Interest expense – related party | | | (37,475) | | | (39,252) | | | (51,970) | | | (57,551) |
Earnings from equity-method investment | | | 2,431 | | | 2,276 | | | 3,094 | | | 2,428 |
Other income, net | | | 371 | | | 458 | | | (92) | | | 728 |
Income before income taxes | | | 57,110 | | | 32,445 | | | 46,828 | | | 61,967 |
Provision for income taxes – foreign | | | (14,133) | | | (8,257) | | | (13,937) | | | (13,717) |
Net income | | | 42,977 | | | 24,188 | | | 32,891 | | | 48,250 |
Less net income attributable to non-controlling interests | | | 2,152 | | | 1,735 | | | 2,622 | | | 3,423 |
Less net income attributable to non-controlling interests – ENE Onshore | | | (5,348) | | | (6,535) | | | (8,484) | | | (9,999) |
Net income attributable to EELP | | | $46,173 | | | $28,988 | | | $38,753 | | | $54,826 |
Additional financial data: | | | | | | | | | ||||
Gross Margin | | | $159,067 | | | $129,380 | | | $176,198 | | | $209,474 |
Adjusted Gross Margin | | | 237,387 | | | 210,903 | | | 280,365 | | | 311,670 |
Adjusted EBITDA | | | 206,076 | | | 182,054 | | | 240,425 | | | 279,317 |
Adjusted EBITDAR | | | 227,369 | | | 190,729 | | | 256,197 | | | 279,317 |
Capital expenditures | | | 30,837 | | | 29,744 | | | 41,258 | | | 47,468 |
| | As of September 30, | | | As of December 31, | ||||
(In thousands) | | | 2021 | | | 2020 | | | 2019 |
| | (unaudited) | | | |||||
Balance Sheets Data: | | | | | | | |||
Property and equipment, net | | | $1,447,334 | | | $1,501,528 | | | $1,555,409 |
Total assets | | | 2,168,089 | | | 2,255,724 | | | 2,134,219 |
Long-term debt (includes current portion) | | | 242,402 | | | 262,424 | | | 288,214 |
Long-term debt (includes current portion) – related party | | | 315,896 | | | 427,193 | | | 380,723 |
Total liabilities | | | 1,293,099 | | | 1,484,563 | | | 1,388,926 |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands) | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | ||||||||
Statements of Cash Flow Data: | | | | | | | | | ||||
Net cash provided by (used in): | | | | | | | | | ||||
Operating activities | | | $130,576 | | | $73,816 | | | $108,964 | | | $153,201 |
Investing activities | | | (30,837) | | | (29,744) | | | (41,258) | | | (47,468) |
Financing activities | | | (114,133) | | | (18,912) | | | (31,438) | | | (126,551) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands) | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | ||||||||
FSRU and terminal services revenues | | | $352,299 | | | $322,977 | | | $430,843 | | | $422,485 |
Gas sales revenues | | | 197,453 | | | — | | | — | | | 121,918 |
Cost of revenue and vessel operating expenses | | | 132,415 | | | 112,074 | | | 150,478 | | | 143,536 |
Direct cost of gas sales | | | 179,950 | | | — | | | — | | | 89,197 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Gross Margin | | | 159,067 | | | 129,380 | | | 176,198 | | | 209,474 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Adjusted Gross Margin | | | $237,387 | | | $210,903 | | | $280,365 | | | $311,670 |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands) | | | 2021 | | | 2020 | | | 2020 | | | 2019 |
| | (unaudited) | | | ||||||||
Net income | | | $42,977 | | | $24,188 | | | $32,891 | | | $48,250 |
Interest expense | | | 62,033 | | | 68,086 | | | 89,430 | | | 101,870 |
Provision for income taxes - foreign | | | 14,133 | | | 8,257 | | | 13,937 | | | 13,717 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Restructuring, transition and transaction expenses | | | 8,613 | | | — | | | — | | | 13,284 |
Adjusted EBITDA | | | 206,076 | | | 182,054 | | | 240,425 | | | 279,317 |
Vessel and infrastructure rent expense | | | 21,293 | | | 8,675 | | | 15,772 | | | — |
Adjusted EBITDAR | | | $227,369 | | | $190,729 | | | $256,197 | | | $279,317 |
| | Preliminary Estimated Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |||||||
(In thousands) | | | Low | | | High | | | ||||
Total revenues | | | $ | | | $ | | | $ | | | 430,843 |
Income before income taxes | | | | | | | | | 46,828 | |||
Adjusted EBITDA | | | | | | | | | 240,425 | |||
Adjusted EBITDAR | | | $ | | | $ | | | $ | | | 256,197 |
| | Preliminary Estimated Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |||||||
(In thousands) | | | Low | | | High | | | ||||
Income before income taxes | | | $ | | | $ | | | $ | | | 46,828 |
Interest expense | | | | | | | | | 89,430 | |||
Depreciation and amortization expense | | | | | | | | | 104,167 | |||
Restructuring, transition and transaction expenses | | | | | | | | | — | |||
Adjusted EBITDA | | | | | | | | | 240,425 | |||
Vessel and infrastructure rent expense | | | | | | | | | 15,772 | |||
Adjusted EBITDAR | | | $ | | | $ | | | $ | | | 256,197 |
• | at the end of a specified time period following certain events of force majeure or the outbreak of war; |
• | extended unexcused service interruptions or deficiencies; |
• | loss of or requisition of the FSRU; |
• | the occurrence of an insolvency event; and |
• | the occurrence of certain uncured, material breaches. |
• | marine disasters; |
• | piracy; |
• | environmental incidents; |
• | bad weather; |
• | mechanical failures; |
• | grounding, fire, explosions and collisions; |
• | human error; and |
• | war and terrorism. |
• | death or injury to persons, loss of property or damage to the environment, natural resources or protected species, and associated costs; |
• | delays in taking delivery of an LNG cargo or discharging regasified LNG, as applicable; |
• | suspension or termination of customer contracts, and resulting loss of revenues; |
• | governmental fines, penalties or restrictions on conducting business; |
• | higher insurance rates; and |
• | damage to our reputation and customer relationships generally. |
• | the cost of labor and materials; |
• | customer requirements; |
• | fleet size; |
• | the cost of replacement vessels; |
• | length of charters; |
• | governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and |
• | competitive standards. |
• | design and engineer each of our facilities to operate in accordance with specifications; |
• | engage and retain third-party subcontractors and procure equipment and supplies; |
• | respond to difficulties such as equipment failure, delivery delays, schedule changes and failures to perform by subcontractors, some of which are beyond their control; |
• | attract, develop and retain skilled personnel, including engineers; |
• | post required construction bonds and comply with the terms thereof; |
• | manage the construction process generally, including coordinating with other contractors and regulatory agencies; and |
• | maintain their own financial condition, including adequate working capital. |
• | additions to competitive regasification capacity in North America, Europe, Asia and other markets; |
• | insufficient or oversupply of natural gas liquefaction or export capacity worldwide; |
• | insufficient LNG tanker capacity; |
• | weather conditions and natural disasters; |
• | reduced demand and lower prices for natural gas over an extended period; |
• | higher LNG prices, which could make other fuels more competitive in the markets where we operate; |
• | increased natural gas production deliverable by pipelines in the markets where we operate, which could suppress demand for LNG; |
• | decreased oil and natural gas exploration activities, including shut-ins and possible proration, which have begun and may continue to decrease the production of natural gas available for liquefaction; |
• | cost improvements that allow competitors to offer LNG regasification services at reduced prices; |
• | changes in supplies of, and prices for, alternative energy sources, such as coal, oil, nuclear, hydroelectric, wind and solar energy, which may reduce the demand for natural gas; |
• | changes in regulatory, tax or other governmental policies regarding imported or exported LNG, natural gas or alternative energy sources, which may reduce the demand for imported LNG or natural gas in the markets where we operate; |
• | political conditions in natural gas producing regions; |
• | adverse relative demand for LNG compared to other markets; |
• | changes in economic conditions of countries where we operate or sell natural gas; and |
• | cyclical trends in general business and economic conditions that cause changes in the demand for natural gas. |
• | FSRU experience and quality of ship operations; |
• | shipping industry relationships and reputation for customer service and safety; |
• | technical ability and reputation for operation of highly specialized vessels, including FSRUs; |
• | quality and experience of seafaring crew; |
• | financial stability; |
• | construction management experience, including (i) relationships with shipyards and the ability to secure suitable berths and (ii) the ability to obtain on-time delivery of new FSRUs according to customer specifications; |
• | willingness to accept operational and other risks, such as allowing customer termination rights for extended operational failures and force majeure events; |
• | the ability to commence operations quickly; and |
• | price competitiveness. |
• | limited downstream infrastructure limiting the development of new or expanded import terminals; |
• | local community resistance to proposed or existing LNG facilities based on safety, environmental or security concerns; |
• | any significant explosion, spill or similar incident involving an LNG facility or vessel involved in the LNG transportation, storage and regasification industry, including an FSRU or LNGC; and |
• | labor or political unrest affecting existing or proposed sites for LNG regasification terminals. |
• | inability to achieve our target costs or our target pricing for long-term contracts; |
• | failure to develop cost-effective logistics solutions; |
• | failure to manage expanding operations in the projected time frame; |
• | failure to win new bids or contracts on the terms, size and within the time frame we need to execute our business strategy; |
• | inability to attract and retain personnel in a timely and cost-effective manner; |
• | failure of investments in technology and machinery, such as regasification technology, to perform as expected; |
• | increases in competition which could increase our costs and undermine our profits; |
• | inability to source LNG in sufficient quantities and/or at economically attractive prices; |
• | failure to anticipate and adapt to new trends in the energy sector of the countries where we operate; |
• | increases in operating costs, including the need for capital improvements, insurance premiums, general taxes, real estate taxes and utilities, affecting our profit margins; |
• | inability to raise significant additional debt and equity capital in the future to implement our strategy as well as to operate and expand our business; |
• | general economic, political and business conditions in the United States, Argentina, Bangladesh, Brazil, Israel, Pakistan, the UAE and in the other geographic areas in which we operate or intend to operate; |
• | inflation, depreciation of the currencies of the countries in which we operate and fluctuations in interest rates; |
• | failure to obtain approvals from governmental regulators and relevant local authorities for the construction and operation of potential future projects and other relevant approvals; |
• | existing and future governmental laws and regulations; |
• | inability, or failure, of any customer or contract counterparty to perform their contractual obligations to us; or |
• | uncertainty regarding the timing, pace and extent of an economic recovery in the United States, the other jurisdictions in which we operate and elsewhere, which in turn will likely affect demand for crude oil and natural gas. |
• | crew changes have been canceled or delayed due to port authorities denying or delaying disembarkation, a high potential of infection in countries where crew changes may otherwise have taken place, and the inability to repatriate crew members due to lack of international air transport or denial of re-entry by crew members’ home countries that have closed their borders; |
• | the inability to complete scheduled engine overhauls, routine maintenance work and management of equipment malfunctions; |
• | shortages or a lack of access to required spare parts for our vessels, and delays in repairs to, or scheduled or unscheduled maintenance or modifications or dry docking of, our vessels, as a result of a lack of berths available at shipyards from a shortage in labor at shipyards or contractors or due to other business disruptions; |
• | necessity to find new, remote means to complete vessel inspections and related certifications by class societies, customers or government agencies; and |
• | disruptions to our business from, or additional costs related to, new regulations, directives or practices implemented in response to the pandemic, such as travel restrictions, increased inspection regimes, hygiene measures (such as quarantining and physical distancing) or increased implementation of remote working arrangements. |
• | managing crew rotations depending on the duration and severity of Covid-19 in countries from which our crews are sourced as well as any restrictions in place at ports in which our vessels call; |
• | providing financial support to Excelerate Technical Management (“ETM”) employees while on shore leave; |
• | under maritime standards and the Maritime Labour Convention, on a case-by-case basis, providing financial assistance to seafarers on shore as necessary; |
• | arranging to accept delivery of additional spare parts and critical supplies where possible in our supply chains; |
• | postponing or cancelling planned engine overhaul and routine maintenance services where possible, and arranging for remote servicing of equipment when possible; |
• | cancelling non-critical boardings, limiting visits to vettings inspectors, pilots, critical service engineers and port officials where allowed and implementing procedures on board to limit the risk of human-to-human transmission from visiting personnel; |
• | more extensively using remote ship visits by our management and support functions; |
• | monitoring applicable local legislation and social distancing guidelines related to minimizing human-to-human transmission, IT systems and network capacity and financial reporting systems and internal controls over financial reporting; |
• | providing mental health support for our seafarers and global workforce through membership in organizations providing hotline support and introducing a forum for virtual sharing and collaboration on mental health concerns; and |
• | permitting flexible working arrangements for our people, and postponing non-critical projects. |
• | prevailing economic conditions in the LNG, natural gas and energy markets; |
• | a substantial or extended decline or increase in demand for LNG; |
• | increases in the supply of vessel capacity; |
• | the size and age of a vessel; |
• | the remaining term on existing time charters; and |
• | the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, customer requirements or otherwise. |
• | general market conditions; |
• | the duration and effects of the Covid-19 pandemic; |
• | the market’s perception of our growth potential; |
• | our current debt levels; |
• | our current and expected future earnings; |
• | restrictions in our customer contracts to pledge or place debt on our assets; |
• | risk allocation requirements for limited recourse financing vehicles; |
• | creditworthiness of potential customers; |
• | our cash flow; and |
• | the market price per share of our Class A common stock. |
• | our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be limited, or such financing may not be available on favorable terms; |
• | we will need a substantial portion of our cash flows to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations and future business opportunities; |
• | our debt level may make us vulnerable to competitive pressures or a downturn in our business or the economy generally; and |
• | our debt level may limit our flexibility in responding to changing business and economic conditions. |
• | merge into, or consolidate with, any other entity or sell, or otherwise dispose of, all or substantially all of our assets; |
• | make or pay dividends; |
• | incur additional indebtedness; |
• | incur or make any capital expenditures; or |
• | materially amend or terminate our customer contract for the vessel that secures the financing. |
• | the likelihood that an active trading market for shares of our Class A common stock will develop or be sustained; |
• | the liquidity of any such market; |
• | the ability of our stockholders to sell their shares of Class A common stock; or |
• | the price that our stockholders may obtain for their Class A common stock. |
• | institute a more comprehensive compliance function, including for financial reporting and disclosures; |
• | continue to prepare and distribute periodic public reports in compliance with our obligations under federal securities laws; |
• | comply with rules promulgated by the NYSE; |
• | continue to prepare and distribute periodic public reports in compliance with our obligations under federal securities laws; |
• | enhance our investor relations function; |
• | establish new internal policies, such as those relating to insider trading; and |
• | involve and retain to a greater degree outside counsel and accountants in the above activities. |
• | we did not design and maintain effective controls over period end financial reporting processes and procedures, controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and controls related to the preparation and review of journal entries. Additionally, we did not design and maintain effective controls to identify and account for the elimination of certain intercompany revenue and expenses; |
• | we did not design and maintain effective controls over the proper timing of revenue recognition for dry-dock revenue contracts; |
• | we did not design and maintain effective controls to analyze compliance with non-financial debt covenants and conditions; and |
• | we did not design and maintain effective controls to verify the completeness and accuracy of our income tax provision. |
• | our operating and financial performance; |
• | quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues; |
• | the public reaction to our press releases, our other public announcements and our filings with the SEC; |
• | strategic actions by our competitors; |
• | changes in revenue or earnings estimates, or changes in recommendations or withdrawals of research coverage, by equity research analysts; |
• | market and industry perception of our success, or lack thereof, in pursuing our growth strategies; |
• | introductions or announcements of new products offered by us or significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors and the timing of such introductions or announcements; |
• | our ability to effectively manage our growth; |
• | the impact of pandemics on us and the national and global economies; |
• | speculation in the press or investment community; |
• | the failure of research analysts to cover our Class A common stock; |
• | whether investors or securities analysts view our stock structure unfavorably, particularly the significant voting control of our executive officers, directors and their affiliates; |
• | our ability or inability to raise additional capital through the issuance of equity or debt or other arrangements and the terms on which we raise it; |
• | additional shares of our Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if existing stockholders sell shares into the market when applicable “lock-up” periods end; |
• | changes in accounting principles, policies, guidance, interpretations or standards; |
• | additions or departures of key management personnel; |
• | actions by our stockholders; |
• | changes in operating performance and stock market valuations of companies in our industry, including our vendors and competitors; |
• | trading volume of our Class A common stock; |
• | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole and those resulting from natural disasters, severe weather events, terrorist attacks and responses to such events; |
• | lawsuits threatened or filed against us; |
• | domestic and international economic, legal and regulatory factors unrelated to our performance; |
• | privacy or cybersecurity breaches, data theft or other security incidents or failure to comply with applicable data privacy laws, rules and regulations; |
• | our ability to obtain, maintain, protect, defend and enforce our intellectual property; and |
• | the realization of any risks described under this “Risk Factors” section. |
• | providing for two classes of stock; |
• | authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; |
• | from and after such time as EE Holdings (including its permitted transferees) ceases to beneficially own at least 40% of the combined voting power of our then-outstanding capital stock entitled to vote generally in director elections (the “Trigger Date”), establishing a classified board of directors, with each class serving three-year staggered terms, so that not all members of our board of directors are elected at one time; |
• | from and after such time as our board is classified, providing that directors can be removed only for cause and only by the affirmative vote of at least 662∕3% of the voting power of the stock outstanding and entitled to vote on the election of directors, voting together as a single class; |
• | prohibiting the use of cumulative voting for the election of directors; |
• | from and after the Trigger Date, eliminating the ability of stockholders to call special meetings and prohibiting stockholder action by written consent and instead requiring stockholder actions to be taken at a meeting of our stockholders; |
• | from and after the Trigger Date, providing that only the board can fill vacancies on the board of directors; |
• | from and after the Trigger Date, requiring the approval of the holders of at least 662∕3% of voting power of the stock outstanding and entitled to vote thereon, voting together as a single class, to amend or repeal our bylaws and certain provisions of our certificate of incorporation; |
• | establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; and |
• | providing that the board of directors is expressly authorized to adopt, or to alter or repeal, our bylaws. |
• | a majority of such company’s board of directors consist of independent directors; |
• | such company have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities; |
• | such company have a compensation committee that is composed entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities; and |
• | such company conduct an annual performance evaluation of the nominating and governance and compensation committees. |
• | prevailing economic and market conditions in the natural gas and energy markets; |
• | negative global or regional economic or political conditions, particularly in LNG-consuming regions, which could reduce energy consumption or its growth; |
• | declines in demand for LNG or the services of LNGCs or FSRUs or; |
• | increases in the supply of LNGC capacity operating in the spot market or the supply of FSRUs; |
• | marine disasters; war, piracy or terrorism; environmental accidents; or inclement weather conditions; |
• | mechanical failures or accidents involving any of our vessels; and |
• | drydock scheduling and capital expenditures. |
• | our ability to enter into contracts with customers and our customers’ failure to perform their contractual obligations; |
• | customer termination rights in our contracts; |
• | the risks inherent in operating our FSRUs, LNGCs and other LNG infrastructure assets; |
• | the technical complexity of our FSRUs and LNG import terminals and related operational problems; |
• | cancellations, time delays, unforeseen expenses and other complications while developing our projects; |
• | our inability to develop a project successfully and our customers’ failure to fulfill their payment obligations to us following our capital investment in a project; |
• | the failure of our regasification terminals and other facilities to operate as expected or be completed; |
• | our need for substantial capital expenditures to maintain and replace the operating capacity of our fleet; |
• | our reliance on our EPC contractors and other contractors for the successful completion of our energy-related infrastructure; |
• | shortages of qualified officers and crew impairing our ability to operate or increasing the cost of crewing our vessels; |
• | uncertainty related to construction costs, development timelines, third-party subcontractors and equipment manufacturers required to perform our development services; |
• | our ability to obtain and maintain approvals and permits from governmental and regulatory agencies with respect to the design, construction and operation of our facilities and provision of our services; |
• | our ability to maintain relationships with our customers and existing suppliers, source new suppliers for LNG and critical components of our projects and complete building out our supply chain; |
• | our ability to connect with third-party pipelines, power plants and other facilities that provide gas receipt and delivery downstream of our integrated terminals; |
• | our ability to purchase or receive physical delivery of LNG in sufficient quantities to satisfy our delivery obligations under GSAs or at attractive prices; |
• | changes in the demand for and price of LNG and natural gas and LNG regasification capacity; |
• | the competitive market for LNG regasification services; |
• | fluctuations in hire rates for FSRUs; |
• | infrastructure constraints and community and political group resistance to existing and new LNG and natural gas infrastructure over concerns about the environment, safety and terrorism; |
• | outbreaks of epidemic and pandemic diseases and governmental responses thereto; |
• | our ability to access financing sources on favorable terms; |
• | our debt level and finance lease liabilities, which may limit our flexibility in obtaining additional financing, refinancing credit facilities upon maturity; |
• | volatility of the global financial markets and uncertain economic conditions; |
• | our financing agreements, which include financial restrictions and covenants and are secured by certain of our vessels; |
• | compliance with various international treaties and conventions and national and local environmental, health, safety and maritime conduct laws that affect our operations; |
• | our dependence upon distributions from our subsidiaries to pay dividends, if any, taxes and other expenses and make payments under the Tax Receivable Agreement; |
• | the requirement that we pay over to continuing members of EE Holdings most of the tax benefits we receive; |
• | payments under the Tax Receivable Agreement being accelerated and/or significantly exceeding the tax benefits, if any, that we actually realize; |
• | the possibility that EELP will be required to make distributions to us and the existing members of EE Holdings; |
• | Kaiser having the ability to direct the voting of a majority of the voting power of our common stock, and his interests may conflict with those of our other stockholders; |
• | the material weaknesses identified in our internal control over financial reporting; |
• | our ability to pay dividends on our Class A common stock; |
• | our status as an emerging growth company; |
• | other risks and uncertainties inherent in our business; and |
• | other risks, uncertainties and factors set forth in this prospectus, including those set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” |
• | EE Holdings will amend and restate the limited partnership agreement of EELP (the “EELP Limited Partnership Agreement”) whereby, all of the outstanding interests of EELP will be recapitalized into Class B interests and EELP will be authorized to issue Class A interests. Subject to certain limitations, the EELP Limited Partnership Agreement will permit Class B interests to be exchanged for shares of Class A common stock on a one-for-one basis or, at Excelerate’s election, for cash. See “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc.—The EELP Limited Partnership Agreement.” |
• | Excelerate will amend and restate its certificate of incorporation to, among other things, provide for Class A common stock and Class B common stock. See “Description of Capital Stock.” |
• | Excelerate will contribute shares of Class A common stock with a fair market value of $ to EELP in exchange for Class A Interests in EELP. |
• | In exchange for (i) shares of Class A common stock with a fair market value (based on the public offering price) of $ (which is equal to shares of Class A common stock assuming a public offering price equal to the midpoint of the price range set forth on the cover of this prospectus), (ii) a cash payment of $ , and (iii) $ of deemed value for future payments under the Tax Receivable Agreement, EELP will purchase from Maya Maritime LLC, a wholly owned subsidiary of the Foundation, the Foundation Vessels pursuant to a securities purchase agreement. Each $1.00 increase or decrease in the assumed initial public offering price of $ per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) would increase or decrease the number of shares of Class A common stock exchanged for the Foundation Vessels by approximately shares, which would increase or decrease the Foundation’s indirect ownership percentage of our Class A common stock by approximately %. |
• | Excelerate will sell to the underwriters in this offering shares of our Class A common stock (assuming no exercise of the underwriters’ option to purchase additional shares). |
• | Excelerate will issue to EE Holdings and Excelerate Energy, LLC, in the aggregate, all of our outstanding shares of Class B common stock. In connection with the issuance of Class B common stock to EELP, Excelerate (or a wholly owned subsidiary of Excelerate) will be admitted as the general partner of EELP. Excelerate Energy, LLC will distribute to EE Holdings, all of its Class B common stock and Class B Interests. |
• | EE Holdings will contribute Excelerate Energy, LLC to EELP and Excelerate Energy, LLC will be dissolved. |
• | Excelerate will enter into the Tax Receivable Agreement for the benefit of the TRA Beneficiaries, pursuant to which Excelerate will pay 85% of the amount of the net cash tax savings, if any, that Excelerate is |
• | We will enter into the Registration Rights Agreement to provide for certain rights and restrictions after the offering. See “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc.—Registration Rights Agreement.” |
• | approximately $ million of the net proceeds of this offering to fund our growth strategy, including our projects in Brazil at the Bahia Regasification Terminal, Albania at the Vlora LNG Terminal, the Philippines at the Filipinas LNG Gateway and Bangladesh at the Payra LNG Terminal; |
• | approximately $ million of the net proceeds of this offering to fund in part EELP's purchase of the Foundation Vessels in connection with the Reorganization; |
• | approximately $ million to pay the expenses incurred by us in connection with this offering and the Reorganization; and |
• | other than as set forth below, the remainder for working capital and other general corporate purposes. |
| | As of September 30, 2021 | ||||
(in thousands, except per share amounts and interest data) | | | Historical EELP | | | Pro Forma Excelerate |
Cash and cash equivalents: | | | $74,201 | | | $ |
Debt and finance leases: | | | | | ||
Debt facilities | | | 242,402 | | | |
Debt facilities – related party | | | 315,896 | | | |
Finance lease liabilities | | | 264,885 | | | |
Finance lease liabilities – related party | | | 231,606 | | | |
New credit facility | | | — | | | |
Total debt and finance leases: | | | $1,054,789 | | | $ |
Partners’ / stockholders’ equity: | | | | | ||
Equity interest | | | 1,021,818 | | | |
Related party note receivable | | | (16,659) | | | |
Accumulated other comprehensive loss | | | (10,996) | | | |
Non-controlling interest | | | 13,493 | | | |
Non-controlling interest – ENE Onshore | | | (132,666) | | | |
Class A common stock (no shares authorized, issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma) | | | — | | | |
Class B common stock (no shares authorized, issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma) | | | — | | | |
Additional paid-in capital | | | — | | | |
Total consolidated partners’ / stockholders’ equity: | | | $874,990 | | | $ |
Total capitalization: | | | $1,929,779 | | | $ |
(in thousands) | | | |
Pro forma assets | | | $ |
Pro forma liabilities | | | |
Pro forma book value | | | $ |
Less: | | | |
Goodwill | | | |
Intangible assets, net | | | |
Pro forma net tangible book value after this offering | | | $ |
Less: | | | |
Proceeds from offering net of underwriting discounts | | | |
Offering expenses | | | |
Pro forma net tangible book value as of September 30, 2021 | | | $ |
Assumed initial public offering price per share | | | | | $ | |
Pro forma net tangible book value per share of Class A common stock as of September 30, 2021 | | | $ | | | |
Increase in pro forma net tangible book value per share attributable to new investors | | | $ | | | |
Pro forma net tangible book value per share after the offering | | | | | $ | |
Dilution in pro forma net tangible book value per share to new investors | | | | | $ |
| | Shares purchased(1) | | | Total consideration(2) | | | Average price per share | |||||||
| | Number | | | % | | | Number | | | % | | |||
Existing stockholders | | | | | % | | | | | % | | | $ | ||
New investors(3) | | | | | % | | | | | % | | | $ | ||
Total | | | | | 100% | | | | | 100% | | | $ |
(1) | If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own approximately % and our new investors would own approximately % of the total number of shares of our Class A common stock outstanding after this offering. |
(2) | If the underwriters exercise their option to purchase additional shares in full, the total consideration paid by our new investors would be approximately $ (or %). |
(3) | Reflects the issuance to Maya Maritime LLC of shares of Class A common stock, which serves as a portion of the consideration for EELP's acquisition of the Foundation Vessels. |
• | the Reorganization as described in “Organizational Structure”; |
• | the acquisition of the Foundation Vessels; |
• | the intended use of proceeds from this offering as described in “Use of Proceeds”; |
• | the Tax Receivable Agreement as described in the “Organizational Structure” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate—Tax Receivable Agreement” sections in this prospectus; |
• | the issuance of shares of our Class A common stock to the investors in this offering in exchange for net proceeds of approximately $ (based on an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions but before offering expenses; |
• | the payment of fees and expenses related to this offering and the application of the net proceeds from the sale of Class A common stock in this offering to purchase Class A interests directly from EELP, at a purchase price per Class A interest equal to the initial public offering price per share of Class A common stock less the underwriting discount, with such Class A interests representing % of the outstanding interests of EELP; and |
• | the provision for corporate income taxes on the balance sheet and income statement of Excelerate that will be taxable as a corporation for U.S. federal and state income tax purposes. |
| | | | Transaction Adjustments | | | |||||||||
| | EELP Historical Consolidated | | | Vessel Acquisition Adjustments | | | Reorganization Adjustments | | | Offering Adjustments | | | Excelerate Pro Forma Condensed Consolidated | |
Assets | | | | | | | | | | | |||||
Current assets | | | | | | | | | | | |||||
Cash and cash equivalents | | | $74,201 | | | (2) | | | | | (9) | | | $ | |
Current portion of restricted cash | | | 3,335 | | | | | | | | | ||||
Accounts receivable, net | | | 24,522 | | | | | | | | | ||||
Accounts receivable, net – related-party | | | 10,235 | | | | | | | | | ||||
Inventories | | | 6,826 | | | | | | | | | ||||
Current portion of net investments in sales-type leases | | | 11,688 | | | | | | | | | ||||
Other current assets | | | 20,386 | | | (1) | | | | | (11) | | | ||
Total current assets | | | 151,193 | | | | | | | | | ||||
Restricted cash | | | 17,609 | | | | | | | | | ||||
Property and equipment, net | | | 1,447,334 | | | (2) | | | | | | | |||
Operating lease right-of-use assets | | | 98,014 | | | | | | | | | ||||
Net investments in sales-type leases | | | 416,197 | | | | | | | | | ||||
Investment in equity method investee | | | 20,567 | | | | | | | | | ||||
Deferred tax assets | | | — | | | (3) | | | (7)(10) | | | | | ||
Other assets | | | 17,175 | | | (1) | | | | | | | |||
Total assets | | | $2,168,089 | | | | | | | | | ||||
Liabilities and Stockholders’ Equity | | | | | | | | | | | |||||
Current liabilities | | | | | | | | | | | |||||
Accounts payable | | | $3,596 | | | | | | | | | ||||
Accounts payable to related party | | | 12,126 | | | | | | | | | ||||
Accrued liabilities and other liabilities | | | 58,002 | | | | | | | | | ||||
Deferred revenue | | | 11,921 | | | (1) | | | | | | | |||
Current portion of long-term debt | | | 27,296 | | | | | | | | | ||||
Current portion of long-term debt – related party | | | 7,578 | | | | | | | | | ||||
Current portion of operating lease liabilities | | | 22,975 | | | | | | | | | ||||
Current portion of finance lease liabilities | | | 29,534 | | | | | | | | | ||||
Current portion of finance lease liabilities – related party | | | 16,485 | | | (4) | | | | | | | |||
Total current liabilities | | | 189,513 | | | | | | | | | ||||
Derivative liabilities | | | 4,042 | | | | | | | | | ||||
Long-term debt, net | | | 215,106 | | | | | | | | | ||||
Long-term debt, net – related party | | | 308,318 | | | | | | | | | ||||
Operating lease liabilities | | | 76,658 | | | | | | | | | ||||
Finance lease liabilities | | | 235,351 | | | | | | | | | ||||
Finance lease liabilities – related party | | | 215,121 | | | (4) | | | | | | | |||
TRA liability | | | — | | | (3) | | | (7)(10) | | | | | ||
Asset retirement obligations | | | 34,566 | | | | | | | | | ||||
Other long-term liabilities | | | 14,424 | | | | | | | | | ||||
Total liabilities | | | 1,293,099 | | | | | | | | | ||||
Partners’ / stockholders’ equity | | | | | | | | | | | |||||
Class A common stock, $0.0001 par value | | | — | | | | | (7) | | | | | |||
| | | | (5) | | | (8) | | | (9) | | | |||
Class B common stock, $0.0001 par value | | | — | | | | | | | | | ||||
Additional paid in capital | | | | | | | | | | | |||||
| | — | | | (3) | | | (6) | | | (9) | | | ||
| | | | (5) | | | (7) | | | | | ||||
| | | | (6) | | | | | (11) | | | ||||
Equity interest | | | 1,021,818 | | | | | (8) | | | | | |||
Related party note receviable | | | (16,659) | | | | | | | | | ||||
Accumulated other comprehensive loss | | | (10,996) | | | | | | | | | ||||
Retained Earnings | | | | | (2) | | | | | | | ||||
Non-controlling interest | | | 13,493 | | | | | (8) | | | | | |||
| | | | | | | | | | ||||||
Non-controlling interest – ENE Onshore | | | (132,666) | | | | | | | | | ||||
Total equity | | | 874,990 | | | | | | | | | ||||
Total liabilities and equity | | | $2,168,089 | | | | | | | | |
| | | | Transaction Adjustments | | | |||||||||
| | EELP Historical Consolidated | | | Vessel Acquisition Adjustments | | | Reorganization Adjustments | | | Offering Adjustments | | | Excelerate Pro Forma Condensed Consolidated | |
Revenues | | | | | | | | | | | |||||
FSRU and terminal services | | | $352,299 | | | | | | | | | ||||
Gas Sales | | | 197,453 | | | | | | | | | ||||
Total revenues | | | 549,752 | | | | | | | | | ||||
Operating expenses | | | | | | | | | | | |||||
Cost of revenue and vessel operating expense | | | 132,415 | | | (1) | | | | | | | |||
Direct cost of gas sales | | | 179,950 | | | | | | | | | ||||
Depreciation and amortization | | | 78,320 | | | (2) | | | | | | | |||
Selling, general, and administrative expenses | | | 34,113 | | | | | | | | | ||||
Restructuring, transition and transaction expenses | | | 8,613 | | | | | | | | | ||||
Total operating expenses | | | 433,411 | | | | | | | | | ||||
Operating income | | | 116,341 | | | | | | | | | ||||
Other income (expense) | | | | | | | | | | | |||||
Interest expense, net | | | (24,558) | | | | | | | | | ||||
Interest expense – related party | | | (37,475) | | | (3) | | | | | | | |||
Earnings from equity-method investment | | | 2,431 | | | | | | | | | ||||
Other income, net | | | 371 | | | | | | | | | ||||
Income before income taxes | | | 57,110 | | | | | | | | | ||||
Provision for income taxes – foreign | | | (14,133) | | | | | (4) | | | | | |||
Net income | | | 42,977 | | | | | | | | | ||||
Less net income attributable to non-controlling interest | | | 2,152 | | | (5) | | | (5) | | | | | ||
Less net income attributable to non-controlling interest – ENE Onshore | | | (5,348) | | | | | | | | | ||||
Net income attributable to partners | | | $46,173 | | | | | | | | | ||||
Pro forma earnings per share (basic and diluted) | | | | | | | | | (7) | | | ||||
Pro forma weighted-average shares outstanding (basic and diluted) | | | | | | | | | (7) | | |
| | | | Transaction Adjustments | | | |||||||||
| | EELP Historical Consolidated | | | Vessel Acquisition Adjustments | | | Reorganization Adjustments | | | Offering Adjustments | | | Excelerate Pro Forma Condensed Consolidated | |
Revenues | | | | | | | | | | | |||||
FSRU and terminal services | | | $430,843 | | | | | | | | | ||||
Total Revenues | | | 430,843 | | | | | | | | | ||||
Operating expenses | | | | | | | | | | | |||||
Cost of revenue and vessel operating expense | | | 150,478 | | | (1) | | | | | | | |||
Depreciation and amortization | | | 104,167 | | | (2) | | | | | | | |||
Selling, general, and administrative expenses | | | 42,942 | | | | | | | | | ||||
Total operating expenses | | | 297,587 | | | | | | | | | ||||
Operating income | | | 133,256 | | | | | | | | | ||||
Other income (expense) | | | | | | | | | | | |||||
Interest expense, net | | | (37,460) | | | | | | | | | ||||
Interest expense – related party | | | (51,970) | | | (3) | | | | | | | |||
Earnings from equity-method investment | | | 3,094 | | | | | | | | | ||||
Early extinguishment of lease liability on vessel acquisition | | | | | (6) | | | | | | | ||||
Other income, net | | | (92) | | | | | | | | | ||||
Income before income taxes | | | 46,828 | | | | | | | | | ||||
Provision for income taxes – foreign | | | (13,937) | | | | | (4) | | | | | |||
Net income | | | 32,891 | | | | | | | | | ||||
Net income attributable to noncontrolling interest | | | 2,622 | | | (5) | | | (5) | | | | | ||
Net income attributable to noncontrolling interest – ENE Onshore | | | (8,484) | | | | | | | | | ||||
Net income attributable to EELP | | | $38,753 | | | | | | | | | ||||
Pro forma earnings per share (basic and diluted) | | | | | | | | | (7) | | | ||||
Pro forma weighted-average shares outstanding (basic and diluted) | | | | | | | | | (7) | | |
(1) | This reflects the elimination of accounts receivable and accounts payable between the Foundation and EELP as it relates to the Foundation Vessels. Upon acquisition of these vessels, these receivables and payables are settled and cease to exist. |
(2) | Reflects the net impact to property and equipment, net for the acquisition of the Excelsior vessel. This includes the removal of the historical right-of-use asset and related accumulated amortization, and recognizes the new basis of $ million as an owned vessel. The new basis for the owned asset represents the preliminary fair value of all consideration transferred for acquisition. The pro forma adjustments included in this unaudited pro forma condensed consolidated financial information are subject to modification as additional information becomes available and as additional analyses are performed depending on changes in the final fair value determination of the assets acquired and liabilities assumed as part of the Vessel Acquisition. The final allocation of the total consideration transferred will be determined as of the Vessel Acquisition date. The total consideration includes approximately $ million of cash, $ million of Class A Common Stock, and $ million of contingent consideration related to the Tax Receivable Agreement. |
(3) | As described in greater detail under “Organizational Structure” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate—Tax Receivable Agreement,” in connection with the completion of this offering, we will enter into the Tax Receivable Agreement for the benefit of the Foundation and EE Holdings, collectively referred to as the “TRA Beneficiaries.” As it relates to the purchase of the Foundation Vessels, the increases in tax basis are expected to increase Excelerate’s depreciation and amortization deductions for tax purposes. The Tax Receivable Agreement will provide for payment by Excelerate to the Foundation for 85% of the amount of the net cash tax savings, if any, that Excelerate realizes as a result of the increases in tax basis related to the vessels purchased from the Foundation. |
(4) | In relation to the acquisition of the Foundation Vessels, which are expected to be completed in connection with this offering, these adjustments reflect the removal of the related current and non-current finance lease liabilities as reported in the historical consolidated financial statements of EELP. |
(5) | Reflects the issuance of $ million of Class A Common Stock, which serves as a portion of the consideration for the acquisition of the Foundation Vessels. This consideration represents $ million for the acquisition of Excellence, and $ million for the acquisition of Excelsior. |
(6) | The computation of pro forma additional paid-in capital is set forth below: |
($ in thousands) | | | Vessel Acquisition Adjustments | | | Reorganization Adjustments | | | Offering Adjustments |
Reclassification of members’ equity | | | $ | | | $ | | | $ |
Proceeds from offering net of underwriting discounts | | | | | | | |||
Payment of estimated offering costs | | | | | | | |||
Transaction costs incurred prior to this offering deferred as prepaid expenses and other current assets | | | | | | | |||
Par value of Class A common stock | | | | | | | |||
Par value of Class B common stock | | | | | | | |||
Non-controlling interests | | | | | | | |||
Additional paid-in capital | | | $ | | | | |
(7) | The Tax Receivable Agreement will provide for the payment by Excelerate to EE Holdings of 85% of the amount of the net cash tax savings, if any, that Excelerate realizes, or under certain circumstances is deemed to realize, resulting from (i) certain increases in the tax basis of assets of EELP and its subsidiaries resulting from exchanges of EELP partnership interests in the future, (ii) certain tax attributes of EELP and subsidiaries of EELP that exist as of the time of this offering or may exist at the time when Class B interests of EELP are exchanged for shares of Class A common stock and (iii) certain other tax benefits related to Excelerate entering into the Tax Receivable Agreement, including tax benefits attributable to payments that Excelerate makes under the Tax Receivable Agreement. |
(8) | Upon completion of the Transactions, we will become (or wholly own) the general partner of EELP. Although initially we will have a minority economic interest in EELP, we will have the majority voting interest in, and control of the management of, EELP. As a result, we will consolidate the financial results of EELP and will report non-controlling interests related to the interests in EELP held by the continuing members on our consolidated balance sheet. Immediately following the Transactions, the economic interests held by the non-controlling interests will be approximately %. If the underwriters were to exercise their option to purchase additional shares of our Class A common stock in full, the economic interests held by the non-controlling interests would be approximately %. Through their ownership of shares of Class B common stock, the Class B stockholder will control a majority of the voting power of the common stock of Excelerate, the general partner of EELP (or the sole owner of the general partner of EELP), and will therefore have indirect control over EELP. |
(9) | Reflects the net effect on cash of the receipt of offering proceeds to us of $ , based on the sale of shares of Class A common stock at an assumed initial public offering price of $ per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
(10) | Due to the uncertainty in the amount and timing of future exchanges of EELP Class B interests into shares of our Class A common stock by the continuing members of EE Holdings, and the uncertainty of when those exchanges will ultimately result in tax savings, the unaudited pro forma condensed consolidated financial information assumes that no exchanges of EELP interests have occurred and therefore no increases in tax basis in Excelerate’s assets or other tax benefits that may be realized thereunder have been assumed in the unaudited pro forma condensed consolidated financial information. However, if all of the continuing members were to exchange all of their EELP interests, we would recognize a deferred tax asset of approximately $ and a liability of approximately $ , assuming (i) that the continuing members redeemed or exchanged all of their EELP interests immediately after the completion of this offering at an assumed initial public offering price of $ per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), (ii) no material changes in relevant tax law, (iii) a constant combined effective income tax rate of % and (iv) that we have sufficient taxable income in each year to realize on a current basis the increased depreciation, amortization and other tax benefits that are the subject of the Tax Receivable Agreement. These amounts are |
(11) | Reflects deferred costs associated with this offering, including certain legal, accounting and other related costs, which have been recorded in prepaid expenses and other current assets on the consolidated balance sheet. Upon completion of this offering, these deferred costs will be charged against the proceeds from this offering with a corresponding reduction to additional paid-in capital. |
(1) | This amount reflects the incremental operating costs associated with owning the Foundation Vessels during the nine months ended September 30, 2021 and the year ended December 31, 2020, as if the vessels had been acquired on January 1, 2020. |
(2) | Reflects the net impact to depreciation expense as it relates to the acquisition of Excelsior. The unaudited pro forma condensed consolidated statement of income gives effect to the acquisition of Excelsior as if it had occurred as of January 1, 2020. The amortization expense previously recorded for Excelsior for the nine months ended September 30, 2021 and the year ended December 31, 2020 was approximately $3.7 million and $4.9 million, respectively, based on the historical carrying value of the right of use asset. As an owned asset, the new depreciation amount of $ is based on the purchase price of Excelsior. |
(3) | Reflects the removal of the interest expense incurred during the nine months ended September 30, 2021 and the year ended December 31, 2020 related to the Foundation Vessels which were historically accounted for as finance leases. The unaudited pro forma condensed consolidated statement of income gives effect to the acquisition of Excelsior as if it had occurred as of January 1, 2020 and therefore no interest expense would have been incurred during these periods in relation to these assets. |
(4) | Following the Transactions, we will be subject to U.S. federal income taxes, in addition to state and local taxes, with respect to our allocable share of any net taxable income of EELP. As a result, the unaudited pro forma condensed consolidated statements of income reflect adjustments to our income tax expense of $ for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. |
(5) | Following the Transactions, we will become (or our wholly owned subsidiary will become) the general partner of EELP. We will own % of the economic interest in EELP but will have % of the voting interest in and control the management of EELP. EE Holdings will own the remaining % of the economic interest in EELP, which will be accounted for as non-controlling interests in our future consolidated financial results. Through their ownership of shares of Class B common stock, the Class B stockholder will control a majority of the voting power of the common stock of Excelerate, the general partner of EELP, and will therefore have indirect control over EELP. |
(6) | This amount reflects the difference between the consideration given to acquire the Excellence vessel and the historical finance lease liability recorded for that vessel. The finance lease liability at September 30, 2021 for the Excellence was approximately $ million and the consideration provided to acquire the Excellence |
(7) | Pro forma basic and diluted earnings per share is computed by dividing the net income attributable to holders of Class A common stock by the weighted-average shares of Class A common stock outstanding during the period. |
| | Nine Months Ended September 30, 2021 | | | Year Ended December 31, 2020 | |
Numerator | | | | | ||
Pro forma net income | | | $ | | | $ |
Less: Pro forma net income attributable to non-controlling interests | | | | | ||
Pro forma net income attributable to Excelerate | | | $ | | | $ |
Denominator | | | | | ||
Shares of Class A common stock issued in connection with this offering | | | | | ||
Pro forma weighted-average shares of Class A common stock outstanding—basic | | | | | ||
Effect of dilutive securities | | | | | ||
Pro forma weighted-average shares of Class A common stock outstanding—diluted | | | | | ||
Pro forma earnings per share of Class A common stock—basic | | | $ | | | $ |
Pro forma earnings per share of Class A common stock—diluted | | | $ | | | $ |
Anti-dilutive shares excluded from pro forma earnings per shares of Class A common stock—diluted: | | | | | ||
Shares of Class B common stock issued in connection with this offering | | | | | ||
Total shares excluded from pro forma earnings per share of Class A common stock—diluted | | | | | ||
| | | |
• | in Bangladesh, where we already operate two LNG terminals, we are developing Payra LNG, a fully integrated project including LNG supply, an LNG terminal and pipelines to supply a power plant and provide natural gas distribution to areas of the country with acute natural gas deficits; |
• | in Albania, we signed a MOU in March 2021 with ExxonMobil and the Ministry of Infrastructure and Energy to conduct a feasibility study for the development of an LNG-to-power project at the port of Vlora. Under a second MOU signed in July 2021 with Albgaz and Snam, we will explore solutions to connect the Vlora LNG Terminal with other natural gas infrastructure, including existing pipelines and underground storage. Recently, we submitted an expression of interest to the Albanian government to lease power barges to them on an emergency basis; |
• | in the Philippines, we received a Notice to Proceed from the Department of Energy to develop the country’s first open-access LNG terminal in Batangas Bay and are also developing an additional opportunity to accompany the gateway to deliver natural gas to downstream users regardless of location or size using technology solutions, including small-scale LNGCs and shipping containers loaded onto LNG trucks; |
• | in Vietnam, we are in active discussions and have signed MOUs with potential project partners to bring our LNG know-how and technical expertise to this market; and |
• | in Brazil, we successfully leased the Bahia Terminal from Petrobras, where in December 2021 we deployed one of our existing FSRUs and started to import LNG and sell regasified natural gas. |
| | Nine months ended September 30, | | | Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (In thousands) | ||||||||||
FSRU and terminal services revenues | | | $352,299 | | | $322,977 | | | $ 430,843 | | | $ 422,485 |
Gas sales revenues | | | 197,453 | | | — | | | — | | | 121,918 |
Cost of revenue and vessel operating expenses | | | 132,415 | | | 112,074 | | | 150,478 | | | 143,536 |
Direct cost of gas sales | | | 179,950 | | | — | | | — | | | 89,197 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Gross Margin | | | 159,067 | | | 129,380 | | | 176,198 | | | 209,474 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Adjusted Gross Margin | | | $237,387 | | | $210,903 | | | $280,365 | | | $311,670 |
| | Nine months ended September 30, | | | Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2020 | | | 2019 | |
| | (in thousands) | ||||||||||
Net income | | | $42,977 | | | $24,188 | | | $32,891 | | | $48,250 |
Interest expense | | | 62,033 | | | 68,086 | | | 89,430 | | | 101,870 |
Provision for income taxes - foreign | | | 14,133 | | | 8,257 | | | 13,937 | | | 13,717 |
Depreciation and amortization expense | | | 78,320 | | | 81,523 | | | 104,167 | | | 102,196 |
Restructuring, transition and transaction expenses | | | 8,613 | | | — | | | — | | | 13,284 |
Adjusted EBITDA | | | 206,076 | | | 182,054 | | | 240,425 | | | 279,317 |
Vessel and infrastructure rent expense | | | 21,293 | | | 8,675 | | | 15,772 | | | — |
Adjusted EBITDAR | | | $227,369 | | | $190,729 | | | $256,197 | | | $279,317 |
| | Nine months ended September 30, | | |||||||||
| | 2021 | | | 2020 | | | Change | ||||
| | (In thousands) | ||||||||||
Revenues | | | | | | | | | ||||
FSRU and terminal services | | | $ 352,299 | | | $ 322,977 | | | $29,322 | | | 9% |
Gas sales | | | 197,453 | | | — | | | 197,453 | | | — |
Total revenues | | | 549,752 | | | 322,977 | | | 226,775 | | | 70% |
Operating expenses | | | | | | | | | ||||
Cost of revenue and vessel operating expenses | | | 132,415 | | | 112,074 | | | 20,341 | | | 18% |
| | Nine months ended September 30, | | |||||||||
| | 2021 | | | 2020 | | | Change | ||||
| | (In thousands) | ||||||||||
Direct cost of gas sales | | | 179,950 | | | — | | | 179,950 | | | — |
Depreciation and amortization | | | 78,320 | | | 81,523 | | | (3,203) | | | (4%) |
Selling, general and administrative | | | 34,113 | | | 31,583 | | | 2,530 | | | 8% |
Restructuring, transition and transaction expenses | | | 8,613 | | | — | | | 8,613 | | | — |
Total operating expenses | | | 433,411 | | | 225,180 | | | 208,231 | | | 92% |
Operating income | | | 116,341 | | | 97,797 | | | 18,544 | | | 19% |
Other income (expense) | | | | | | | | | ||||
Interest expense | | | (24,558) | | | (28,834) | | | 4,276 | | | (15%) |
Interest expense – related party | | | (37,475) | | | (39,252) | | | 1,777 | | | (5%) |
Earnings from equity-method investment | | | 2,431 | | | 2,276 | | | 155 | | | 7% |
Other income, net | | | 371 | | | 458 | | | (87) | | | (19%) |
Income before income taxes | | | 57,110 | | | 32,445 | | | 24,665 | | | 76% |
Provision for income taxes - foreign | | | (14,133) | | | (8,257) | | | 5,876 | | | 71% |
Net income | | | 42,977 | | | 24,188 | | | 18,789 | | | 78% |
Less net income attributable to noncontrolling interests | | | 2,152 | | | 1,735 | | | 417 | | | 24% |
Less net income attributable to noncontrolling interests – ENE Onshore | | | (5,348) | | | (6,535) | | | 1,187 | | | 18% |
Net income attributable to EELP | | | $46,173 | | | $28,988 | | | $17,185 | | | 59% |
Additional financial data: | | | | | | | | | ||||
Gross Margin | | | $159,067 | | | $129,380 | | | $29,687 | | | 23% |
Adjusted Gross Margin | | | 237,387 | | | 210,903 | | | 26,484 | | | 13% |
Adjusted EBITDA | | | 206,076 | | | 182,054 | | | 24,022 | | | 13% |
Adjusted EBITDAR | | | 227,369 | | | 190,729 | | | 36,640 | | | 19% |
Capital Expenditures | | | 30,837 | | | 29,744 | | | 1,093 | | | 4% |
| | Year Ended December 31, | | | | | ||||||
| | 2020 | | | 2019 | | | Change | ||||
| | (In thousands) | ||||||||||
Revenues | | | | | | | | | ||||
FSRU and terminal services | | | $ 430,843 | | | $ 422,485 | | | $8,358 | | | 2% |
Gas sales | | | — | | | 121,918 | | | (121,918) | | | (100%) |
Total revenues | | | 430,843 | | | 544,403 | | | (113,560) | | | (21%) |
Operating expenses | | | | | | | | | ||||
Cost of revenue and vessel operating expenses | | | 150,478 | | | 143,536 | | | 6,942 | | | 5% |
Direct cost of gas sales | | | — | | | 89,197 | | | (89,197) | | | (100%) |
Depreciation and amortization | | | 104,167 | | | 102,196 | | | 1,971 | | | 2% |
Selling, general and administrative | | | 42,942 | | | 35,509 | | | 7,433 | | | 21% |
Restructuring | | | — | | | 13,284 | | | (13,284) | | | (100%) |
Total operating expenses | | | 297,587 | | | 383,722 | | | (86,135) | | | (22%) |
Operating income | | | 133,256 | | | 160,681 | | | (27,425) | | | (17%) |
Other income (expense) | | | | | | | | | ||||
Interest expense | | | (37,460) | | | (44,322) | | | 6,862 | | | (15%) |
Interest expense – related party | | | (51,970) | | | (57,548) | | | 5,578 | | | (10%) |
Earnings from equity-method investment | | | 3,094 | | | 2,428 | | | 666 | | | 27% |
Other income, net | | | (92) | | | 728 | | | (820) | | | (113%) |
Income before income taxes | | | 46,828 | | | 61,967 | | | (15,139) | | | (24%) |
Provision for income taxes – foreign | | | (13,937) | | | (13,717) | | | (220) | | | 2% |
Net income | | | 32,891 | | | 48,250 | | | (15,359) | | | (32%) |
Less net income attributable to non-controlling interests | | | 2,622 | | | 3,423 | | | (801) | | | (23%) |
Less net income attributable to non-controlling interests – ENE Onshore | | | (8,484) | | | (9,999) | | | 1,515 | | | 15% |
Net income attributable to EELP | | | $38,753 | | | $54,826 | | | $(16,073) | | | (29%) |
Additional financial data: | | | | | | | | | ||||
Gross Margin | | | $176,198 | | | $209,474 | | | $(33,276) | | | (16%) |
Adjusted Gross Margin | | | 280,365 | | | 311,670 | | | (31,305) | | | (10%) |
Adjusted EBITDA | | | 240,425 | | | 279,317 | | | (38,892) | | | (14%) |
Adjusted EBITDAR | | | 256,197 | | | 279,317 | | | (23,120) | | | (8%) |
Capital expenditures | | | 41,258 | | | 47,468 | | | (6,210) | | | (13%) |
| | Nine months ended September 30, | | | |||||
| | 2021 | | | 2020 | | | Change | |
| | (In thousands) | |||||||
Net cash provided by (used in): | | | | | | | |||
Operating activities | | | $130,576 | | | $73,816 | | | $56,760 |
Investing activities | | | (30,837) | | | (29,744) | | | (1,093) |
Financing activities | | | (114,133) | | | (18,912) | | | (95,221) |
Net increase (decrease) in cash, cash equivalents, and restricted cash | | | $(14,394) | | | $25,160 | | | $ (39,554) |
• | an $18.8 million increase in net income, as described in “—Consolidated Results of Operations”; |
• | a $14.8 million decrease in the change in inventories, primarily due to a December 2020 LNG cargo purchase made in preparation for a January 2021 cargo sale as compared to no LNG cargo purchases made in the nine months ended September 30, 2020; and |
• | a $29.0 million decrease in the change in accounts payable and accrued liabilities, primarily due to payment of ship management termination fees in the nine months ended September 30, 2020 and invoice timing differences. |
• | $88.5 million loaned under a related party note receivable in the nine months ended September 30, 2021; and |
• | a $6.0 million contribution in the nine months ended September 30, 2020, compared to none in the nine months ended September 30, 2021. |
| | Year Ended December 31, | | | |||||
| | 2020 | | | 2019 | | | Change | |
Net cash provided by (used in): | | | | | | | |||
Operating activities | | | $108,964 | | | $153,201 | | | $(44,237) |
Investing activities | | | (41,258) | | | (47,468) | | | 6,210 |
Financing activities | | | (31,438) | | | (126,551) | | | 95,113 |
Net increase (decrease) in cash, cash equivalents, and restricted cash | | | $36,268 | | | $(20,818) | | | $57,086 |
• | a $15.4 million decrease in net income, as described in “—Consolidated Results of Operations”; |
• | a $17.1 million increase in inventories due to a December 2020 LNG cargo purchase made in preparation for a January 2021 cargo sale; and |
• | a $18.3 million increase in other current assets and other assets, primarily due to an increase in charter prepaid expenses, but partially offset by a $15.8 million increase in accounts payable and accrued liabilities, primarily due to the December 2020 LNG cargo purchase. |
• | a $113.3 million pay-off of a related party promissory note in 2019; |
• | increased payments of $40.8 million on the KFMC Note in 2019 as compared to 2020; and |
• | partially offset by borrowings of $60.0 million in 2019 on the KFMC Note. |
• | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; |
• | not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under the Sarbanes-Oxley Act, for up to five years or until we no longer qualify as an emerging growth company; |
• | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; |
• | reduced disclosure obligations regarding executive compensation pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosures regarding our executive compensation; and |
• | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved. |
• | we did not design and maintain effective controls over period end financial reporting processes and procedures, controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and controls related to the preparation and review of journal entries. Additionally, we did not design and maintain effective controls to identify and account for the elimination of certain intercompany revenue and expenses; |
• | we did not design and maintain effective controls over the proper timing of revenue recognition for dry-dock revenue contracts; |
• | we did not design and maintain effective controls to analyze compliance with non-financial debt covenants and conditions; and |
• | we did not design and maintain effective controls to verify the completeness and accuracy of our income tax provision. |
• | Commonality: Our FSRUs are designed to allow almost seamless substitutions, resulting in a lower risk of failure and a greater ability to upgrade services to existing customers. |
• | Operation conditions: Most of our FSRUs are equipped with dual connection mode (buoy or alongside a jetty) and reinforced membrane containment. This allows us to operate in a wide array of weather and locations. Additionally, we can operate on both warm or cold seawater environments. |
• | Conventional LNG shipping capabilities: All our FSRUs are capable of operating as conventional LNGCs without any modifications or extra preparations. |
• | Reduced implementation risk – Simplified structure allows for the alignment of interest amongst all stakeholders to the project (e.g., engineering, procurement, construction, installation, commissioning, contractors, ship owners, creditors and regulators), thereby reducing the risk of delay or failure during the implementation of the project. |
• | Reduced interface risk – During construction, the concurrent delivery of FSRU with the mechanical completion of all necessary marine infrastructure of the terminal. During operations, commissioning and operating the entire terminal seamlessly to regasify LNG and deliver natural gas to at a custody transfer point onshore. |
• | Streamlined administration – Customers benefit from a single point of responsibility for all contractual obligations reducing the complexity and risk of prolonged disputes with multiple counterparties for potential performance failures. |
• | Cost synergies – Integrated structures allow companies to capture potential cost synergies during project development, which can in turn can be passed through to the customer. |
• | LNG-to-power developers. In many of our markets, we compete with other LNG-to-power companies, including New Fortress Energy and AES. Our investment strategy is focused on leveraging our FSRU expertise and local operational experience and relationship development to drive the expansion of incremental infrastructure projects downstream of our terminals. Our focus on the LNG-to-power value chain allows us to develop higher quality projects and enhances our ability to compete for new opportunities, as our host governments consider incremental investments to meet their growing energy demand needs. |
• | Large LNG producers. We believe we can capture higher returns than major LNG producers such as Qatargas, Shell, ExxonMobil, BP and Total Energies by focusing on integrating the business downstream of LNG production. Our focus is on helping LNG producers expand the reach of their LNG supply beyond their traditional markets, resulting in less price pressure and better portfolio diversification. In close |
• | FSRU / LNGC owners. As the owner and operator of the largest FSRU fleet employed for regasification in the industry, we compete with FSRU and LNGC owners such as New Fortress Energy (following its acquisition of Hygo Energy Transition and Golar LNG Partners), Hoegh LNG and GasLog. We distinguish ourselves by providing customers the ability to expand our service as their energy demands increase. This flexible approach, focused on optimizing services by swapping smaller FSRUs for larger ones, performing technical upgrades and offering seasonal service when required, fosters trust and long-term relationships with our customers. We believe the fundamentals supporting the FSRU business model require operators to focus on reliability, value and service, combined with disciplined expansion and growth. |
• | Experienced LNG Leader and Proven Ability to Execute. We are an admired player within the LNG industry with significant experience across the value chain. Our experienced team and proven LNG solutions, including the industry's largest FSRU fleet employed for regasification, more than 2,000 STS transfers of LNG with over 40 LNG operators and the development or operation of 13 LNG import terminals, make us a market leader and a trusted partner for countries who seek to improve their access to energy. We have nearly two decades of development, construction and operational experience, making us one of the most accomplished, reliable and capable LNG companies in the industry. Our team’s in-depth experience and local presence enable us to support energy hubs by sourcing and aggregating LNG from the global market for delivery downstream, ensuring the long-term stability, reliability, and independence of customers’ energy supply. |
• | Positioned to Meet Growing Global Demand for Cleaner Energy. According to the IEA’s most recent semi-annual Electricity Market Report, global electricity demand is expected to rebound strongly over the next two years, growing by close to 5% in 2021 and by 4% in 2022. With the demand for power generation growing worldwide, direct access to diverse, affordable and reliable energy sources such as LNG has become a critical enabler for economic growth and improving the quality of life across the globe. LNG provides an abundant, competitive and cleaner energy source to meet the world’s growing demand for power. It is also an efficient means to displace coal, which is a higher carbon intensity fuel compared to natural gas. Despite its advantages, LNG access is not readily available in many emerging markets due to the complexity of LNG import projects. We have an established reputation for developing and operating complex LNG solutions and are a trusted operator with a strong track record of bringing reliability, resiliency and flexibility to energy systems. |
• | Full-Service, Integrated LNG Business Model Provides Competitive Advantage. As market dynamics and the energy needs of customers have evolved over time, we embraced the opportunity to expand beyond our FSRU business. Today, we are addressing the need for increased access to LNG with our fully integrated business model that manages the LNG supply chain from procurement until final delivery to end users. We plan to help our customers meet their growing energy demand by providing an array of products, including LNG terminal services, natural gas supply procurement and distribution, LNG-to-power projects and a suite of smaller-scale gas distribution solutions. By offering our customers flexible, fully integrated and tailored LNG solutions, we are able to increase the financial value of these opportunities while enabling our customers to safely and efficiently access the energy they need. |
• | Well-Established FSRU Business Supported by Dependable Revenue Base. We own and operate the largest FSRU fleet employed for regasification in the industry. The success of our well established FSRU business is highlighted by our ability to secure long-term, take-or-pay contracts that generate consistent revenue and cash flow with minimal exposure to commodity price volatility. Our ability to swap FSRUs between projects makes our baseline revenue more predictable and minimizes redeployment risk. Further, |
• | Understanding of LNG Market Dynamics Allows for Portfolio Optimization. We leverage our expertise and understanding of LNG market dynamics to create significant value though our LNG marketing and supply business. Our worldwide market access and ability to buy LNG from major LNG producers and traders gives us the chance to capture additional value via portfolio optimization and provides incremental cash flow. Even more importantly, our access to diverse, uncorrelated markets, including New England and Brazil, generates valuable arbitrage opportunities. We are structuring our business to be able to maximize this extra value from LNG supply to GSAs and PPAs. Our strategy of integrating LNG supply, natural gas sales and terminal operations, gives us the ability to optimize our FSRU fleet utilization. |
• | Proven Management Team. Our management team has experience in all aspects of the LNG value chain and a strong balance of technical, commercial, operational, financial, legal and management skills. Steven Kobos, our President and Chief Executive Officer, has over 27 years of experience working on complex energy and infrastructure development projects and general maritime operations, specifically LNG shipping, FSRUs, chartering of vessels, shipbuilding contracts, operational agreements and related project finance and tax matters, and he has helped establish Excelerate as a growing and profitable international energy company. Daniel Bustos, our Executive Vice President and Chief Commercial Officer, has over 24 years of experience leading commercial development of oil and gas projects across the globe, with a particular focus on LNG, and is responsible for the commercial development of our LNG import projects, expansion of our customer base and the buildout of our global network of regional offices. Dana Armstrong, our Executive Vice President and Chief Financial Officer, provides oversight of all global financial reporting, financial planning and analysis, accounting, treasury, tax, financial systems and internal controls and has led both public and private multinational companies within the energy and biotechnology industries over her 25-year career. Calvin Bancroft, our Executive Vice President and Chief Operating Officer, has over 40 years of experience in the shipping industry, with recognized expertise in maritime security, chartering, supply chain management and operational logistics. Alisa Newman Hood, our Executive Vice President and General Counsel, has 20 years of worldwide legal, government relations and energy policy experience. Amy Thompson, our Executive Vice President and Chief Human Resources Officer, has over 22 years of human resources experience in global oil field services organizations and has held various leadership roles in the United States and the Middle East. |
• | Continue to develop our existing, diversified regasification business, supported by our large purpose- built FSRU fleet. Our current markets are essential to maintaining our solid foundation of revenues and providing new opportunities for downstream growth. Our persistent market presence helps ensure that we will be well positioned to compete for new growth opportunities as our host governments seek new investment to meet their growing energy needs. In order to continue to develop our existing, diversified regasification business, we plan to leverage our stellar reputation, brand recognition and strategic commercial actions to develop a reputation as more than an FSRU provider. Maintaining a strong presence will require that our teams continue to place a high priority on operational excellence, active management of technical obsolescence, operation and maintenance improvements and fleet optimization. |
• | Pursue opportunities downstream of existing markets. With established terminals, existing markets provide opportunities for us to structure end-to-end natural gas supply products and cleaner power solutions for our customers. We expect the organic growth of our business to be accompanied by strategic acquisitions for new or existing projects, in order to enhance our growth trajectory. As we integrate new infrastructure assets downstream of our floating LNG terminals, we will be required to make investments in new products and technologies to ensure that we are positioned for success in a lower-carbon energy future. We anticipate that increasing global demand for electricity generation, more efficient access to natural gas and decarbonization initiatives will be the primary drivers of opportunity, and we intend to diversify our product portfolio responsibly and in a manner that reinforces our broader goals of improving access to cleaner, more affordable and reliable energy, creating sustainable growth and combatting climate change. Our local teams will be key to expanding and diversifying our commercial, technical and financial expertise in our existing markets. |
• | Leverage our global presence to enter new, growing markets. We plan to use our existing markets as a springboard into new countries and regions. Our ability to cultivate meaningful partnerships and successfully acquire equity interests in projects will be a determining factor in how quickly we are able to achieve critical mass in new markets. We currently have approximately $1 billion of projects in advanced development, including projects in Albania, the Philippines and Bangladesh, and we are evaluating over $6 billion of early stage projects with opportunities in the Middle East, Africa, South America and South and Southeast Asia. |
• | Create a sizable, diversified LNG procurement portfolio. Our expansion downstream will offer us the opportunity to establish valuable access to a worldwide network of natural gas markets. Our network of supply and charter contracts and reputation with major LNG producers provide us with ample opportunities to grow our LNG portfolio on competitive terms. This diversified portfolio will give us the opportunity to better manage the typical uncertainties of local demand (weather seasonality, economic cycles, availability of renewables, etc.), while capturing arbitrage opportunities. For example, we have already demonstrated the value of accessing the New England market in a flexible way. With the addition of new market access points in Asia, Europe, Africa and South America, we can capture value from our LNG procurement portfolio, above the margins generated in individual markets. Finally, this LNG portfolio will help further enhance our competitive edge for new opportunities, allowing us to offer more flexible and cost-effective products to new customers. |
• | Maintain our disciplined investment philosophy. As we grow our business, we are committed to maintaining our disciplined investment philosophy and prudent approach to project development. We have established a proven track record of investing in the right projects which has resulted in higher project returns and consistent earnings results. It is our aim to have an industry leading portfolio of high-return growth opportunities that will support sustainable and profitable growth for years to come. We expect our contract portfolio to evolve over time to include long-term contracts as well as shorter-term agreements that will create opportunities to capture additional upside. |
1. | Peak send-out capacity dependent on local conditions, including operating pressure and seawater temperature. |
2. | Represents the number of ports where each vessel has provided regasification services throughout its lifetime. |
• | port services – providing tugboats, supply boats and crew boats; |
• | LNG procurement support – supporting STS transfers dockside or offshore; |
• | LNG regasification – providing FSRUs, floating storage with onshore regasification, onshore storage or a combination thereof; |
• | permitting services – obtaining environmental, construction and operating permits; |
• | EPCIC services – providing engineering, procurement, construction, installation and commissioning services; and |
• | operations and management services – supporting vessels and terminals. |
Name | | | Age | | | Position |
Steven M. Kobos | | | 57 | | | President, Chief Executive Officer and Director |
Dana A. Armstrong | | | 50 | | | Executive Vice President and Chief Financial Officer |
Calvin (Cal) A. Bancroft | | | 70 | | | Executive Vice President and Chief Operating Officer |
Daniel H. Bustos | | | 50 | | | Executive Vice President and Chief Commercial Officer |
Alisa Newman Hood | | | 47 | | | Executive Vice President, General Counsel and Secretary |
Amy Thompson Broussard | | | 45 | | | Executive Vice President and Chief Human Resources Officer |
Michael A. Bent | | | 54 | | | Vice President, Controller and Chief Accounting Officer |
Carolyn J. Burke | | | 54 | | | Director Nominee |
Paul T. Hanrahan | | | 64 | | | Director Nominee |
Henry G. Kleemeier | | | 77 | | | Director Nominee |
Don P. Millican | | | 68 | | | Director Nominee and Chairperson |
Robert A. Waldo | | | 46 | | | Director Nominee |
• | a majority of such company’s board of directors consist of independent directors; |
• | such company have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities; |
• | such company have a compensation committee that is composed entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities; and |
• | such company conduct an annual performance evaluation of the nominating and governance and compensation committees. |
• | Steven M. Kobos, our President and Chief Executive Officer; |
• | Daniel H. Bustos, our Executive Vice President & Chief Commercial Officer; and |
• | Alisa Newman Hood, our Executive Vice President & General Counsel. |
Name and Principal Position | | | Year | | | Salary ($) | | | Bonus ($)(1)(2) | | | Non-Equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) |
Steven A. Kobos | | | 2021 | | | 900,000 | | | — | | | | | 71,687 | | | 971,687 | |
President and Chief Executive Officer | | | 2020 | | | 900,000 | | | — | | | 400,000 | | | 82,026 | | | 1,382,026 |
Daniel H. Bustos | | | 2021 | | | 656,200 | | | 80,000 | | | | | 14,354 | | | 750,554 | |
Chief Commercial Officer | | | 2020 | | | 656,258 | | | 110,000 | | | 217,000 | | | 11,850 | | | 995,108 |
Alisa Newman Hood | | | 2021 | | | 437,500 | | | 300,000 | | | | | 494 | | | 737,994 | |
General Counsel | | | | | | | | | | | | |
(1) | Mr. Bustos was granted a retention bonus in an aggregate amount of $320,000 in March 2020, $80,000 of which was paid to Mr. Bustos in March of 2020, $80,000 was paid in March of 2021 and the remainder of which will become payable in two equal annual installments subject to Mr. Bustos continued employment through each applicable payment date. In addition, for 2020, Mr. Bustos received a discretionary bonus of $30,000 in addition to the annual bonus earned under the Company’s Short Term Incentive Plan. |
(2) | Ms. Newman Hood received a guaranteed bonus in March of 2021 in connection with her commencement of employment in accordance with the terms of her offer letter. |
(3) | We have not yet determined 2021 annual bonus amounts. These are expected to be finalized by the board of directors in February 2022. Once determined, such amounts for the NEOs will be disclosed in an amendment to this registration statement or, if such occurs following this offering, in a current report on Form 8-K. |
(4) | Amounts in this column for 2021 represent for Mr. Kobos, life and AD&D premiums paid on his behalf ($1,290), a tax gross-up ($64) provided with respect to a work-from-home COVID stipend that was provided to all employees, matching contributions made to the executive’s account under our 401(k) plan ($11,600) and certain housing expenses paid for by us ($58,733); for Mr. Bustos, life and AD&D premiums paid on his behalf ($690), a tax gross-up ($64) provided with respect to a work-from-home COVID stipend that was provided to all employees, matching contributions made to the executive’s account under our 401(k) plan ($11,600) as well as certain gym membership fees, and for Ms. Newman Hood, life AD&D premiums paid on her behalf ($415) and a tax gross-up ($79) provided with respect to a work-from-home COVID stipend that was provided to all employees. |
• | EBITDA (weighted 45%); |
• | Operating and G&A Expenses (weighted 10%); |
• | Capital Expenditures (weighted 10%); and |
• | Safety (weighted 15%). |
• | a lump sum cash severance payment equal to a specified multiple of the executive’s base salary and target annual bonus amount (under the executive severance plan this will be 2.0X for our CEO, 1.5X for the other NEOs and under the change in control severance plan this will increase to 2.99X for our CEO and 2.0X for the other NEOs); |
• | a pro rata target annual bonus payment for the year of termination; |
• | continued coverage (or a cash payment in lieu of such continued coverage) for the participant and his or her covered eligible dependents to continue medical, dental and vision coverage for 24 months for the CEO and 18 months for the other NEOs (increasing to 30 months and 24 months, respectively, under the change in control severance plan); and |
• | certain outplacement services. |
• | an annual cash retainer of $60,000; |
• | an annual equity retainer in the form of restricted stock units that vests on the one-year anniversary of the date of grant with a grant date value of $125,000; and |
• | additional annual cash retainers of $20,000, $15,000, and $12,000, respectively, for serving as the chairperson of the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee. |
| | Before the Offering | | | After the Offering if Underwriters’ Option is Not Exercised | |||||||||||||
Name of Beneficial Owner | | | Class A Common Stock Number | | | Class B Common Stock Number | | | Total Voting Power % | | | Class A Common Stock Owned Number | | | Class B Common Stock Owned Number | | | Total Voting Power % |
Named Executive Officers, Directors and Director Nominees: | | | | | | | | | | | | | ||||||
Steven M. Kobos | | | | | | | | | | | | | ||||||
Dana A. Armstrong | | | | | | | | | | | | | ||||||
Calvin (Cal) Bancroft | | | | | | | | | | | | | ||||||
Daniel H. Bustos | | | | | | | | | | | | | ||||||
Alisa Newman Hood | | | | | | | | | | | | | ||||||
Amy Thompson Broussard | | | | | | | | | | | | | ||||||
Michael A. Bent | | | | | | | | | | | | | ||||||
Henry G. Kleemeier | | | | | | | | | | | | | ||||||
Carolyn J. Burke | | | | | | | | | | | | | ||||||
Paul T. Hanrahan | | | | | | | | | | | | | ||||||
Don P. Millican | | | | | | | | | | | | | ||||||
Robert A. Waldo | | | | | | | | | | | | | ||||||
All executive officers and directors as a group (12 persons) | | | | | | | | | | | | | ||||||
Other 5% Beneficial Owners: | | | | | | | | | | | | | ||||||
Excelerate Energy Holdings, LLC(1) | | | | | | | | | | | | | ||||||
Maya Maritime LLC(2) | | | | | | | | | | | | |
(1) | Represents shares of our Class B common stock held by EE Holdings. EE Holdings is owned 49.5% by Excelerate Holdings, LLC, an Oklahoma limited liability company (“Excelerate Holdings”), and 50.5% by George B. Kaiser. Excelerate Holdings is majority owned by |
(2) | Represents shares of our Class A common stock held by Maya Maritime LLC, a wholly owned subsidiary of the Foundation. Mr. Frederic Dorwart, Mr. Phil Frohlich and Mr. Phil Lakin, Jr. are trustees of the Foundation (the “Trustees”) and by virtue of such position may be deemed to (a) share voting and investment control over and (b) may be deemed to have a beneficial ownership in the shares held by the Foundation. Each of the Trustees disclaims beneficial ownership of the reported securities. The principal business address of the Foundation is 7030 South Yale Ave, Suite 600, Tulsa, Oklahoma 74136. Each $1.00 increase or decrease in the assumed initial public offering price of $ per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) would increase or decrease the number of shares of Class A common stock exchanged for the Foundation Vessels by approximately shares, which would increase or decrease the Foundation's indirect ownership percentage of our Class A common stock by approximately %. |
• | the timing of purchases or future exchanges—for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable or amortizable assets of EELP at the time of each purchase of interests from the TRA Beneficiaries in this offering or each future exchange; |
• | the price of shares of our Class A common stock at the time of the purchase or exchange—the tax basis increase in the assets of EELP is directly related to the price of shares of our Class A common stock at the time of the purchase or exchange; |
• | the extent to which such purchases or exchanges are taxable—if the purchase of interests from a TRA Beneficiary in connection with this offering or any future exchange is not taxable for any reason, increased tax deductions will not be available; |
• | the tax basis of the Foundation Vessels and the depreciation deductions resulting from such tax basis; |
• | the amount, timing and character of Excelerate’s income—we expect that the Tax Receivable Agreement will require Excelerate to pay 85% of the net cash tax savings as and when deemed realized. If Excelerate does not have taxable income during a taxable year, Excelerate generally will not be required (absent a change in control or other circumstances requiring an early termination payment) to make payments under the Tax Receivable Agreement for that taxable year because no benefit will have been realized. However, any tax benefits that do not result in net cash tax savings in a given tax year may generate tax attributes that may be used to generate net cash tax savings in previous or future taxable years. The use of any such tax attributes will generate net cash tax savings that will result in payments under the Tax Receivable Agreement; and |
• | U.S. federal, state and local tax rates in effect at the time that we are deemed to realize the relevant tax benefits. |
• | liquidation, dissolution or winding up of our company; |
• | any material change in the nature of the business or operations of our company and our subsidiaries, taken as a whole, as of the date of the Stockholder’s Agreement; |
• | authorizing or issuing any equity securities having rights, preferences or privileges superior or senior to the outstanding shares of Class A common stock or Class B common stock (or any securities convertible or exchangeable therefor pursuant to their terms); |
• | any increase or decrease in the size of (x) our board of directors from the initial number of directors set at the time of this offering or (y) any board of a subsidiary of our company; |
• | adopting or implementing any stockholder rights plan or similar takeover defense measure; and |
• | amendments to, or modification or repeal of, organizational documents (such as our amended and restated certificate of incorporation and our amended and restated bylaws or equivalent organizational documents of our subsidiaries) that adversely affect the EE Holdings (including its permitted transferees) or its affiliates. |
• | hiring or terminating the Chief Executive Officer of our company and his or her successors; |
• | any change in the size of (x) any committee of our board of directors (as compared to the size approved in connection with this offering) or (y) any committee of any board of our subsidiaries; |
• | forming any new committee of our board of directors (other than committees formed in connection with this offering); |
• | any mergers or other transaction that, if consummated, would constitute a “change in control” (as defined in the Stockholder’s Agreement) or entering into any definitive agreement or series of related agreements that govern any transaction or series of related transactions that, if consummated, would result in a “change in control”; |
• | entering into any agreement providing for the acquisition or divestiture of assets or persons, in each such case, involving consideration payable or receivable by our company or any of our subsidiaries in excess of $100 million in the aggregate in any single transaction or series of related transactions during any 12-month period; |
• | any incurrence by our company or any of our subsidiaries of indebtedness for borrowed money (including through capital leases, the issuance of debt securities or the guarantee of indebtedness of another person) in excess of $100 million in the aggregate in any single transaction or series of related transactions during any 12-month period, other than indebtedness incurred under an existing (prior to the closing of this offering) and previously approved revolving credit facility; |
• | any issuance or series of related issuances of equity securities by our company or any of our subsidiaries, other than grants of equity securities under any equity compensation plan, including an employee stock purchase plan, approved by our board of directors or a committee thereof; and |
• | any payment or declaration of any dividend or other distribution of any shares of Class A common stock or Class B common stock or entering into any similar recapitalization transaction the primary purpose of which is to pay a dividend of shares of Class A common stock or Class B common stock. |
• | Kaiser issued guarantees dated December 1, 2015 in favor of all creditors and obligees of ENE Onshore and ENE Lateral under their third-party contracts. The Kaiser guarantees issued in favor of ENE Lateral and ENE Onshore were terminated in connection with the Northeast Gateway Contribution. |
• | Kaiser issued a guarantee dated September 11, 2013 (and reaffirmed on December 1, 2015) in favor of Algonquin Gas Transmission, LLC (“AGT”) and Maritimes & Northeast Pipeline, L.L.C. (each a wholly owned subsidiary of Enbridge, Inc.), in respect of all payment obligations owed by ENE Onshore and ENE Lateral (the “AGT Guarantee”). In addition, Kaiser obtained a letter of credit on behalf of ENE Onshore and ENE Lateral (the “AGT LOC”). The amount available for drawing under the AGT LOC reduces monthly and was approximately $16.5 million as of December 31, 2021. In connection with the Northeast Gateway Contribution, EELP agreed to (i) indemnify Kaiser in respect of Kaiser’s obligations related to ENE Lateral under the AGT Guarantee and AGT LOC, (ii) pay an annual fee in the amount of $1.2 million (pro-rated based on the number of days such guarantee remains outstanding in any year (beginning September 17, 2021)) to Kaiser to maintain such AGT Guarantee and (iii) reimburse Kaiser for any fees actually incurred under the AGT LOC. |
• | Kaiser issued an uncapped construction and operational guarantee dated May 14, 2007 in favor of the Secretary of Transportation, United States of America, as represented by the Maritime Administrator (“MARAD”), in respect of Northeast Gateway Energy Bridge, LP’s obligations related to design, construction, operations and decommissioning under the deepwater port license issued by MARAD (the “Kaiser – MARAD Guarantee”). In addition, Kaiser obtained a letter of credit in favor of MARAD to cover decommissioning costs in the amount of approximately $15.4 million (the “Kaiser – MARAD LOC”), which Kaiser – MARAD LOC was amended and increased to $16.3 million in December 2021. In connection with the Northeast Gateway Contribution, EELP agreed to (i) indemnify Kaiser in respect of Kaiser’s obligations under the Kaiser-MARAD Guarantee and the Kaiser – MARAD LOC, (ii) pay a nominal fee to Kaiser to maintain such Kaiser-MARAD Guarantee and (iii) reimburse Kaiser for any fees actually incurred under the MARAD LOC. |
• | tax consequences to holders who may be subject to special tax treatment, such as brokers and dealers in securities, currencies or commodities, banks and financial institutions, regulated investment companies, real estate investment trusts, insurance companies, tax-exempt entities, governmental organizations, qualified foreign pension funds, traders in securities that elect to use a mark-to-market method of accounting for their securities, certain former citizens or long-term residents of the United States, “controlled foreign corporations” and “passive foreign investment companies”; |
• | tax consequences to persons holding shares of our Class A common stock as part of a hedging, integrated, or conversion transaction or a straddle or persons deemed to sell shares of our Class A common stock under the constructive sale provisions of the Code; |
• | tax consequences available to persons that will hold our Class A common stock in an individual retirement account, 401(k) plan or similar tax-favored account; |
• | persons who hold or receive our Class A common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
• | tax consequences to partnerships or other pass-through entities for U.S. federal income tax purposes and investors in such entities; |
• | unless otherwise specifically stated, tax consequences to holders who own or have owned, actually or constructively, more than five percent of our Class A Common Stock; or |
• | alternative minimum tax consequences, if any. |
• | an individual who is a citizen or resident of the United States; |
• | a corporation created or organized in or under the laws of the United States or any State thereof (including the District of Columbia); |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust, the administration of which is subject to the primary supervision of a court within the United States and for which one or more U.S. persons have the authority to control all substantial decisions, or that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person. |
• | such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States and, if the Non-U.S. Holder is entitled to claim treaty benefits (and the Non-U.S. Holder complies with applicable certification and other requirements), is attributable to a permanent establishment maintained by the Non-U.S. Holder within the United States; |
• | such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or |
• | we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes (which we refer to as a “USRPHC”) at any time within the shorter of the five-year period ending on the date of disposition or the period that such Non-U.S. Holder held shares of our Class A common |
Underwriters | | | Number of Shares |
Barclays Capital Inc. | | | |
J.P. Morgan Securities LLC | | | |
Morgan Stanley & Co. LLC | | | |
Total | | |
• | the obligation to purchase all of the shares of Class A common stock offered hereby (other than those shares of Class A common stock covered by their option to purchase additional shares as described below), if any of the Class A shares are purchased; |
• | the representations and warranties made by us to the underwriters are true; |
• | there is no material change in our business or the financial markets; and |
• | we deliver customary closing documents to the underwriters. |
| | Us | ||||
| | No Exercise | | | Full Exercise | |
Per Share | | | $ | | | $ |
Total | | | $ | | | $ |
• | the history and prospects for the industry in which we compete; |
• | our financial information; |
• | the ability of our management and our business potential and earning prospects; |
• | the prevailing securities markets at the time of this offering; and |
• | the recent market prices of, and the demand for, publicly traded shares of generally comparable companies. |
• | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
• | A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
• | Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. |
• | Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
• | to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation; |
• | to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
• | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
• | to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; |
• | to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
• | in any other circumstances falling within Section 86 of the FSMA. |
• | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
• | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
• | to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
• | where no consideration is or will be given for the transfer; |
• | where the transfer is by operation of law; |
• | as specified in Section 276(7) of the SFA; or |
• | as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
• | to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money; or |
• | to persons who in all the circumstances can properly be regarded as having been selected otherwise than as members of the public; or |
• | to persons who are each required to pay a minimum subscription price of at least NZ$500,000 for the shares before the allotment of those shares (disregarding any amounts payable, or paid, out of money lent by the issuer or any associated person of the issuer); or |
• | in other circumstances where there is no contravention of the Securities Act 1978 of New Zealand (or any statutory modification or re-enactment of, or statutory substitution for, the Securities Act 1978 of New Zealand). |
| | Page(s) | |
Audited Balance Sheet of Excelerate Energy, Inc. | | | |
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Audited Consolidated Financial Statements of Excelerate Energy Limited Partnership | | | |
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Consolidated Financial Statements: | | | |
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Unaudited Consolidated Financial Statements of Excelerate Energy Limited Partnership | | | |
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Consolidated Financial Statements: | | | |
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1. | Organization and Nature of the Business |
2. | Summary of Significant Accounting Policies |
3. | Subsequent Events |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
| | (In thousands) | ||||
ASSETS | | | | | ||
Current assets | | | | | ||
Cash and cash equivalents | | | $90,240 | | | $53,771 |
Current portion of restricted cash | | | 2,456 | | | 2,550 |
Accounts receivable, net | | | 18,524 | | | 20,668 |
Accounts receivable, net - related-party | | | 5,977 | | | 1,380 |
Inventories | | | 22,354 | | | 5,240 |
Current portion of net investments in sales-type leases | | | 10,229 | | | 8,777 |
Other current assets | | | 17,993 | | | 7,231 |
Total current assets | | | 167,773 | | | 99,617 |
Restricted cash | | | 16,843 | | | 16,950 |
Property and equipment, net | | | 1,501,528 | | | 1,555,409 |
Operating lease right-of-use assets | | | 114,617 | | | 5,424 |
Net investments in sales-type leases | | | 425,133 | | | 435,362 |
Investment in equity method investee | | | 16,330 | | | 15,483 |
Other assets | | | 13,500 | | | 5,974 |
Total assets | | | $2,255,724 | | | $2,134,219 |
LIABILITIES AND EQUITY | | | | | ||
Current liabilities | | | | | ||
Accounts payable | | | 4,768 | | | 4,560 |
Accounts payable to related party | | | 2,349 | | | 1,599 |
Accrued liabilities and other liabilities | | | 65,249 | | | 50,444 |
Deferred revenue | | | 11,982 | | | 9,932 |
Current portion of long-term debt | | | 26,776 | | | 26,390 |
Current portion of long-term debt - related party | | | 7,153 | | | 16,279 |
Current portion of operating lease liabilities | | | 22,021 | | | 680 |
Current portion of finance lease liabilities | | | 36,269 | | | 34,143 |
Current portion of finance lease liabilities - related party | | | 15,608 | | | 14,558 |
Total current liabilities | | | 192,175 | | | 158,585 |
Derivative liabilities | | | 5,880 | | | 3,296 |
Long-term debt, net | | | 235,648 | | | 261,824 |
Long-term debt, net - related party | | | 420,040 | | | 364,444 |
Operating lease liabilities | | | 93,462 | | | 5,141 |
Finance lease liabilities | | | 255,609 | | | 291,878 |
Finance lease liabilities - related party | | | 227,609 | | | 243,217 |
Asset retirement obligations | | | 33,499 | | | 32,129 |
Other long-term liabilities | | | 20,641 | | | 28,412 |
Total liabilities | | | 1,484,563 | | | 1,388,926 |
Commitment and contingencies (Note 19) | | | | | ||
Equity interest | | | 902,099 | | | 863,750 |
Accumulated other comprehensive loss | | | (14,961) | | | (9,528) |
Non-controlling interest | | | 11,341 | | | 9,905 |
Non-controlling interest – ENE Onshore | | | (127,318) | | | (118,834) |
Total equity | | | 771,161 | | | 745,293 |
Total liabilities and equity | | | $2,255,724 | | | $2,134,219 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
| | (In thousands) | ||||
Revenues | | | | | ||
FSRU and terminal services | | | $ 430,843 | | | $ 422,485 |
Gas sales | | | — | | | 121,918 |
Total revenue | | | 430,843 | | | 544,403 |
Operating expenses | | | | | ||
Cost of revenue and vessel operating expenses | | | 150,478 | | | 143,536 |
Direct cost of gas sales | | | — | | | 89,197 |
Depreciation and amortization | | | 104,167 | | | 102,196 |
Selling, general and administrative expenses | | | 42,942 | | | 35,509 |
Restructuring | | | — | | | 13,284 |
Total operating expenses | | | 297,587 | | | 383,722 |
Operating income | | | 133,256 | | | 160,681 |
Other income (expense) | | | | | ||
Interest expense | | | (37,460) | | | (44,319) |
Interest expense- related party | | | (51,970) | | | (57,551) |
Earnings from equity method investment | | | 3,094 | | | 2,428 |
Other income, net | | | (92) | | | 728 |
Income before income taxes | | | 46,828 | | | 61,967 |
Provision for income taxes - foreign | | | (13,937) | | | (13,717) |
Net income | | | 32,891 | | | 48,250 |
Less net income attributable to non-controlling interest | | | 2,622 | | | 3,423 |
Less net loss attributable to non-controlling interest – ENE Onshore | | | (8,484) | | | (9,999) |
Net income attributable to partners | | | $38,753 | | | $54,826 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
| | (In thousands) | ||||
Net income | | | $32,891 | | | $48,250 |
Other comprehensive income (loss) | | | | | ||
Share of comprehensive loss of equity method investee | | | (2,247) | | | (2,263) |
Change in unrealized losses on cash flow hedges | | | (3,186) | | | (2,545) |
Comprehensive income | | | 27,458 | | | 43,442 |
Less comprehensive income attributable to non-controlling interest | | | 2,622 | | | 3,423 |
Less comprehensive loss attributable to non-controlling interest – ENE Onshore | | | (8,484) | | | (9,999) |
Comprehensive income attributable to partners | | | $33,320 | | | $50,018 |
| | Equity interest | | | Accumulated other comprehensive loss | | | Non- controlling interest | | | Non- controlling interest- ENE Onshore | | | Total equity | |
| | (In thousands) | |||||||||||||
Balance at January 1, 2019 | | | $801,274 | | | $(4,720) | | | $7,132 | | | $(108,835) | | | $694,851 |
Net income (loss) | | | 54,826 | | | — | | | 3,423 | | | (9,999) | | | 48,250 |
Other comprehensive loss | | | — | | | (4,808) | | | — | | | — | | | (4,808) |
Share-based compensation | | | 950 | | | — | | | — | | | — | | | 950 |
Contribution | | | 6,700 | | | — | | | — | | | — | | | 6,700 |
Distributions | | | — | | | — | | | (650) | | | — | | | (650) |
Balance at December 31, 2019 | | | $863,750 | | | $(9,528) | | | $9,905 | | | $(118,834) | | | $745,293 |
Net income (loss) | | | 38,753 | | | — | | | 2,622 | | | (8,484) | | | 32,891 |
Other comprehensive loss | | | — | | | (5,433) | | | — | | | — | | | (5,433) |
Contribution | | | 6,000 | | | — | | | — | | | — | | | 6,000 |
Distributions | | | (6,404) | | | — | | | (1,186) | | | — | | | (7,590) |
Balance at December 31, 2020 | | | $902,099 | | | $(14,961) | | | $11,341 | | | $(127,318) | | | $771,161 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
| | (In thousands) | ||||
Cash flows from operating activities | | | | | ||
Net income | | | $32,891 | | | $48,250 |
Adjustments to reconcile net income to net cash from operating activities: | | | | | ||
Depreciation and amortization | | | 104,167 | | | 102,196 |
Amortization of operating lease right-of-use assets | | | 12,381 | | | 472 |
Accretion expense | | | 1,370 | | | 1,315 |
Provision for doubtful accounts | | | — | | | 454 |
Amortization of debt issuance costs | | | 1,827 | | | 1,302 |
Profit from sales-type lease commencement | | | — | | | (1,872) |
Change in unrealized losses on cash flow hedges | | | (3,186) | | | (2,545) |
Share of net earnings in equity method investee | | | (3,094) | | | (2,428) |
Share-based compensation expense | | | — | | | 950 |
Changes in operating assets and liabilities: | | | | | ||
Accounts receivable | | | (2,453) | | | 4,306 |
Inventories | | | (17,114) | | | 35,135 |
Other current assets and other assets | | | (18,871) | | | 2,656 |
Accounts payable and accrued liabilities | | | 7,318 | | | (35,769) |
Derivative liabilities | | | 2,584 | | | 2,114 |
Deferred revenue- current | | | 2,050 | | | (1,441) |
Net investments in sales-type leases | | | 8,777 | | | 6,396 |
Operating lease assets and liabilities | | | (11,912) | | | (346) |
Other long-term liabilities | | | (7,771) | | | (7,944) |
Net cash provided by operating activities | | | $108,964 | | | $153,201 |
| | | | |||
Cash flows from investing activities | | | | | ||
Purchases of property and equipment | | | (41,258) | | | (47,468) |
Net cash used in investing activities | | | $(41,258) | | | $(47,468) |
| | | | |||
Cash flows from financing activities | | | | | ||
Proceeds from long-term debt - related party | | | 62,750 | | | 117,850 |
Repayments of long-term debt- related party | | | (16,280) | | | (169,769) |
Repayments of long-term debt | | | (27,617) | | | (34,931) |
Principal payments under finance lease liabilities | | | (34,143) | | | (32,117) |
Principal payments under finance lease liabilities - related party | | | (14,558) | | | (13,634) |
Contribution | | | 6,000 | | | 6,700 |
Distributions | | | (7,590) | | | (650) |
Net cash used in financing activities | | | $(31,438) | | | $(126,551) |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | 36,268 | | | (20,818) |
Cash, cash equivalents and restricted cash | | | | | ||
Beginning of year | | | $73,271 | | | $94,089 |
End of year | | | $109,539 | | | $73,271 |
General business information |
2. | Summary of significant accounting policies |
Vessels | | | 30 years |
Vessel related equipment | | | 5-30 years |
Buoy and pipeline | | | 20 years |
Finance lease right-of-use assets | | | Lesser of useful life or lease team |
Other equipment | | | 3-7 years |
3. | Fair value of financial instruments |
| | | | As of December 31, | |||||
| | | | 2020 | | | 2019 | ||
Financial liabilities | | | | | | | |||
Derivative financial instruments | | | Level 2 | | | $7,506 | | | $4,069 |
4. | Accounts receivable, net |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Trade receivables | | | $ 14,242 | | | $28,056 |
Accrued revenue | | | 5,161 | | | 5,566 |
Allowance for doubtful accounts | | | (879) | | | (12,954) |
Accounts receivable, net | | | $ 18,524 | | | $20,668 |
5. | Derivative financial instruments |
| | December 31, 2020 | |
Interest rate swap(1) | | | $ 76,178 |
(1) | Number of open positions and gross notional values do not measure the Company’s risk of loss, quantify risk or represent assets or liabilities of the Company, but rather indicate the relative size of the derivative instruments and are used in the calculation of the amounts to be exchanged between counterparties upon settlements. |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Current liabilities | | | | | ||
Interest rate swaps - cash flow hedges | | | $1,626 | | | $773 |
Noncurrent liabilities | | | | | ||
Interest rate swaps - cash flow hedges | | | 5,880 | | | 3,296 |
Derivative liabilities | | | $7,506 | | | $4,069 |
• | In 2018, the Company entered into two long-term interest rate swap agreements with a major financial institution. The swaps, which became effective in October 2018 and expires in April 2030, are used to hedge approximately 70% of the variability in interest payments/interest risk on the loans bank loans dated June 23, 2017 due to changes in the three month and six month LIBOR swap curve with respect to (i) $92.8 million of three month LIBOR based borrowings on the credit facility at a fixed rate of 3.1% and (ii) $32.8 million of six month LIBOR based borrowings on the credit facility at a fixed rate of 3.2%. |
Derivatives Designated in Cash Flow Hedging Relationship | | | Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion) | | | Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) | | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) | ||||||
| | 2020 | | | 2019 | | | | | 2020 | | | 2019 | ||
Interest Rate Swaps | | | $ (4,837) | | | $ (3,147) | | | Interest expense | | | $ 1,651 | | | $ 602 |
6. | Inventories |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
LNG cargo | | | $ 17,883 | | | $513 |
Bunker fuel | | | 4,471 | | | 4,727 |
Inventories | | | $ 22,354 | | | $5,240 |
7. | Other current assets |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Prepaid expenses | | | $5,557 | | | $4,611 |
Prepaid expenses - related party | | | 6,877 | | | — |
Tax receivables | | | 4,230 | | | 662 |
Other receivables | | | 1,329 | | | 1,958 |
Other current assets | | | $ 17,993 | | | $ 7,231 |
8. | Property and equipment |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Vessels | | | $1,683,989 | | | $1,666,043 |
Vessel related equipment | | | 424,485 | | | 403,038 |
Buoy and pipeline | | | 11,806 | | | 11,806 |
Finance lease right-of-use assets | | | 383,892 | | | 383,892 |
Other equipment | | | 24,462 | | | 18,581 |
Assets in progress | | | 21,936 | | | 17,507 |
Less accumulated depreciation | | | (1,049,042) | | | (945,458) |
Property and equipment, net | | | $1,501,528 | | | $1,555,409 |
9. | Accrued liabilities |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Accrued vessel and cargo expenses | | | $ 30,771 | | | $ 14,501 |
Payroll and related liabilities | | | 9,343 | | | 5,475 |
Accrued interest | | | 2,275 | | | 2,839 |
Current portion of derivative liability | | | 1,626 | | | 773 |
Off-market capacity liability – ENE Onshore | | | 14,103 | | | 13,407 |
Other accrued liabilities | | | 7,131 | | | 13,449 |
Accrued liabilities | | | $ 65,249 | | | $ 50,444 |
10. | Long-term debt |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Experience Vessel Financing | | | $ 168,300 | | | $ 188,100 |
2017 Bank Loans | | | 100,984 | | | 108,801 |
Total debt | | | 269,284 | | | 296,901 |
Less unamortized debt issuance costs | | | (6,860) | | | (8,687) |
Total debt, net | | | 262,424 | | | 288,214 |
Less current portion | | | (26,776) | | | (26,390) |
Total long-term debt | | | $ 235,648 | | | $ 261,824 |
2021 | | | $26,776 |
2022 | | | 28,774 |
2023 | | | 29,427 |
2023 | | | 30,118 |
2025 | | | 30,860 |
Thereafter | | | 123,329 |
Total debt, net | | | $ 269,284 |
11. | Long-term debt – related party |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Exquisite Vessel Financing | | | $ 203,996 | | | $ 210,679 |
KFMC Note | | | — | | | 9,597 |
ENE Lateral Facility | | | 223,197 | | | 160,447 |
Total related party debt | | | 427,193 | | | 380,723 |
Less current portion | | | (7,153) | | | (16,279) |
Long-term related party debt | | | $ 420,040 | | | $ 364,444 |
2021 | | | $7,153 |
2022 | | | 7,726 |
2023 | | | 231,543 |
2023 | | | 9,078 |
2025 | | | 9,741 |
Thereafter | | | 101,952 |
Total payments | | | 367,193 |
Residual value for Exquisite vessel financing | | | 60,000 |
Total debt - related party | | | $ 427,193 |
12. | Other long-term liabilities |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Deferred revenue | | | $9,569 | | | $4,755 |
Off-market capacity liability – ENE Onshore | | | 11,072 | | | 23,657 |
Other long-term liabilities | | | $ 20,641 | | | $ 28,412 |
13. | Leases |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Related party leases: | | | | | ||
Finance lease liabilities | | | $ 243,217 | | | $ 257,775 |
Less current portion of finance lease liabilities | | | (15,608) | | | (14,558) |
Finance lease liabilities, long-term | | | $ 227,609 | | | $ 243,217 |
| | | | |||
External leases: | | | | | ||
Finance lease liabilities | | | $ 291,878 | | | $ 326,021 |
Less current portion of finance lease liabilities | | | (36,269) | | | (34,143) |
Finance lease liabilities, long-term | | | $ 255,609 | | | $ 291,878 |
| | Operating | | | Finance | |
2021 | | | $28,309 | | | $95,664 |
2022 | | | 28,237 | | | 83,237 |
2023 | | | 28,139 | | | 75,399 |
2024 | | | 28,226 | | | 75,412 |
2025 | | | 17,780 | | | 63,999 |
Thereafter | | | 2,490 | | | 491,896 |
Total lease payments | | | 133,181 | | | 885,607 |
Less: imputed interest | | | (17,698) | | | (350,512) |
Carrying value of lease liabilities | | | 115,483 | | | 535,095 |
Less: current portion | | | (22,021) | | | (51,877) |
Carrying value of long-term lease liabilities | | | $93,462 | | | $483,218 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Amortization of finance lease right-of-use assets - related party | | | $4,906 | | | $4,906 |
Amortization of finance lease right-of-use assets - external | | | 13,345 | | | 13,345 |
Interest on finance lease liabilities - related party | | | 30,619 | | | 31,977 |
Interest on finance lease liabilities - external | | | 19,370 | | | 21,383 |
Operating lease expense | | | 16,919 | | | 800 |
Short-term lease expense | | | 681 | | | 745 |
Total lease costs | | | $ 85,840 | | | $ 73,156 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Cash paid for amounts included in measurement of finance lease liabilities - related party | | | $30,619 | | | $ 31,977 |
Cash paid for amounts included in measurement of finance lease liabilities - external | | | $19,370 | | | $ 21,383 |
Cash paid for amounts included in measurement of operating lease liabilities | | | $11,912 | | | $346 |
Financing cash flows related to finance leases - related party | | | $14,558 | | | $ 13,634 |
Financing cash flows related to finance leases - external | | | $34,143 | | | $32,117 |
Right-of-use assets obtained in exchange for new operating lease liabilities | | | $ 121,575 | | | $5,896 |
14. | Revenue |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Revenue from leases | | | $ 331,726 | | | $ 325,376 |
Revenue from contracts with customers | | | | | ||
Time charter, regasification and other services | | | 99,117 | | | 97,109 |
Gas sales | | | — | | | 121,918 |
Total revenue | | | $ 430,843 | | | $ 544,403 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Operating lease income | | | $ 252,651 | | | $ 252,972 |
Sales-type lease income | | | 79,075 | | | 72,404 |
Total revenue from leases | | | $ 331,726 | | | $ 325,376 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Property and equipment | | | $1,635,050 | | | $1,632,220 |
Accumulated depreciation | | | (623,513) | | | (570,143) |
Property and equipment, net | | | $1,011,537 | | | $1,062,077 |
| | Sales-type | | | Operating | |
2021 | | | $87,612 | | | $223,384 |
2022 | | | 87,612 | | | 198,280 |
2023 | | | 80,449 | | | 167,190 |
2024 | | | 84,214 | | | 132,753 |
2025 | | | 87,612 | | | 121,510 |
Thereafter | | | 667,099 | | | 352,045 |
Total undiscounted | | | 1,094,598 | | | $ 1,195,162 |
Less: imputed interest | | | (659,236) | | | |
Net investment in sales-type leases | | | 435,362 | | | |
Less: current portion | | | (10,229) | | | |
Non-current net investment in sales-type leases | | | $425,133 | | |
| | Year ended December 31, 2020 | ||||||||||
| | Revenue from leases | | | Revenue from contracts with customers | | | Total revenue | ||||
| | TCP, Regas and other | | | Gas sales | | ||||||
Bangladesh | | | $79,076 | | | $ 38,664 | | | $— | | | $117,740 |
UAE | | | 62,857 | | | 19,342 | | | — | | | 82,199 |
Pakistan | | | 43,268 | | | 10,367 | | | — | | | 53,635 |
Argentina | | | 45,063 | | | 6,530 | | | — | | | 51,593 |
Brazil | | | 42,451 | | | 5,850 | | | — | | | 48,301 |
Israel | | | 38,185 | | | 6,637 | | | — | | | 44,822 |
US | | | — | | | — | | | — | | | — |
Other | | | 20,826 | | | 11,727 | | | — | | | 32,553 |
Total revenue | | | $ 331,726 | | | $99,117 | | | $ — | | | $ 430,843 |
| | Year ended December 31, 2019 | ||||||||||
| | Revenue from leases | | | Revenue from contracts with customers | | | Total revenue | ||||
| | TCP, Regas and other | | | Gas sales | | ||||||
Bangladesh | | | $72,409 | | | $ 36,223 | | | $— | | | $ 108,632 |
UAE | | | 59,923 | | | 20,908 | | | — | | | 80,831 |
Pakistan | | | 39,984 | | | 10,071 | | | — | | | 50,055 |
Argentina | | | 48,609 | | | 5,882 | | | — | | | 54,491 |
Brazil | | | 46,413 | | | 6,589 | | | 19,114 | | | 72,116 |
Israel | | | 38,080 | | | 6,450 | | | — | | | 44,530 |
US | | | — | | | — | | | 99,027 | | | 99,027 |
Other | | | 19,958 | | | 10,986 | | | 3,777 | | | 34,721 |
Total revenue | | | $ 325,376 | | | $ 97,109 | | | $ 121,918 | | | $ 544,403 |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Deferred revenues, beginning of period | | | $ 4,755 | | | $807 |
Cash received but not yet recognized | | | 4,814 | | | 3,948 |
Revenue recognized from prior period deferral | | | — | | | — |
Deferred revenues, end of period | | | $ 9,569 | | | $ 4,755 |
2021 | | | $50,796 |
2022 | | | 45,826 |
2023 | | | 43,558 |
2024 | | | 44,845 |
2025 | | | 44,071 |
Thereafter | | | 250,209 |
| | $ 479,305 |
15. | Income taxes |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Domestic | | | $ (144,412) | | | $ (142,989) |
Foreign | | | 191,240 | | | 204,956 |
Total | | | $46,828 | | | $61,967 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Current: | | | | | ||
Domestic | | | $— | | | $— |
Foreign | | | 13,529 | | | 13,820 |
Total current | | | 13,529 | | | 13,820 |
Deferred: | | | | | ||
Domestic | | | — | | | — |
Foreign | | | 408 | | | (103) |
Total deferred | | | 408 | | | (103) |
Income tax expense | | | $ 13,937 | | | $ 13,717 |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Statutory rate applied to pre-tax income | | | 21.00% | | | 21.00% |
Non-taxable/(deductible) income/(loss) | | | 0.72% | | | (0.21)% |
Permanent items | | | (0.11)% | | | 0.32% |
Withholding taxes | | | 28.37% | | | 21.36% |
Foreign rate differential | | | (21.14)% | | | (20.97)% |
Valuation allowance | | | 0.86% | | | 0.74% |
Other discrete adjustments | | | (0.07)% | | | (0.71)% |
Other | | | 0.13% | | | 0.61% |
Effective Tax Rate | | | 29.76% | | | 22.14% |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Deferred tax assets: | | | | | ||
Fixed assets | | | $— | | | $313 |
Net operating losses | | | 1,058 | | | 707 |
Other | | | — | | | 49 |
Deferred tax assets | | | 1,058 | | | 1,069 |
Valuation allowance | | | (1,044) | | | (643) |
Net deferred tax assets | | | 14 | | | 426 |
Deferred tax liabilities: | | | | | ||
Misc. Accruals | | | 14 | | | 14 |
Net deferred tax liabilities: | | | 14 | | | 14 |
Net deferred tax asset/(liability) | | | $— | | | $412 |
16. | Related party transactions |
| | For the years ended December 31, | ||||
| | 2020 | | | 2019 | |
Management fees and other expenses with Kaiser | | | $ 2,345 | | | $ 1,950 |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Amounts due from related parties | | | $ 5,977 | | | $ 1,380 |
Amounts due to related parties | | | $ 2,349 | | | $ 1,599 |
Prepaid expenses - related party | | | $ 6,877 | | | $— |
• | Kaiser issued guarantees dated December 1, 2015 in favor of all creditors and obligees of ENE Onshore and ENE Lateral under their third-party contracts. The Kaiser guarantees issued in favor of ENE Lateral and ENE Onshore were terminated on September 17, 2021 in connection with the reorganization. |
• | Kaiser issued a guarantee dated September 11, 2013 (and reaffirmed on December 1, 2015) in favor of Algonquin Gas Transmission, LLC (“AGT”) and Maritimes & Northeast Pipeline, L.L.C. (each a wholly owned subsidiary of Enbridge, Inc.), in respect of all payment obligations owed by ENE Onshore and ENE Lateral (the “AGT Guarantee”). In addition, Kaiser obtained a letter of credit on behalf of ENE Onshore and ENE Lateral with an outstanding amount of approximately $42.7 million as of December 31, 2020 (the “AGT LOC”). Pursuant to that certain Undertaking, Fee and Indemnity Agreement (Algonquin), dated as of September 17, 2021, EELP will indemnify Kaiser in respect of Kaiser’s obligations related to ENE Lateral under the AGT Guarantee and AGT LOC, pay an annual fee in the amount of $1.2 million to Kaiser to maintain such AGT Guarantee and reimburse Kaiser for any fees actually incurred under the AGT LOC. |
• | Kaiser issued an uncapped construction and operational guarantee dated May 14, 2007 in favor of the Secretary of Transportation, United States of America, as represented by the Maritime Administrator |
17. | Defined contribution plan |
18. | Concentration risk |
| | Percentage of Total Revenues | ||||
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Customer A | | | 19% | | | 15% |
Customer B | | | 12% | | | 9% |
Customer C | | | 12% | | | 10% |
Customer D | | | 11% | | | 13% |
Customer E | | | 10% | | | 8% |
Customer F | | | 10% | | | 8% |
Customer G | | | 0% | | | 18% |
19. | Commitments and contingencies |
20. | Asset retirement obligations |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Asset retirement obligations, beginning of period | | | $ 32,129 | | | $ 30,814 |
Accretion expense | | | 1,370 | | | 1,315 |
Asset retirement obligations, end of period | | | $ 33,499 | | | $ 32,129 |
21. | Supplemental noncash disclosures for consolidated statement of cash flows |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Supplemental cash flow information: | | | | | ||
Cash paid for taxes - foreign | | | $14,328 | | | $12,851 |
Cash paid for interest | | | $88,167 | | | $101,378 |
Right-of-use assets obtained in exchange for lease obligations | | | $ 121,575 | | | $5,896 |
Capital expenditures included in accounts payable | | | $8,445 | | | $(10,620) |
Net investment in leases | | | $— | | | $ (160,000) |
| | As of December 31, | ||||
| | 2020 | | | 2019 | |
Cash and cash equivalents | | | $90,240 | | | $ 53,771 |
Restricted cash - current | | | 2,456 | | | 2,550 |
Restricted cash - non-current | | | 16,843 | | | 16,950 |
Cash, cash equivalents, and restricted cash | | | $ 109,539 | | | $ 73,271 |
22. | Accumulated other comprehensive (income) loss |
| | Cumulative translation adjustment | | | Qualifying cash flow hedges | | | Share of OCI in equity method investee | | | Total | |
At January 1, 2019 | | | $ 2,167 | | | $1,296 | | | $ 1,257 | | | $4,720 |
Other comprehensive (income) loss | | | — | | | 3,147 | | | (165) | | | 2,982 |
Reclassification to income | | | — | | | (602) | | | 2,428 | | | 1,826 |
At December 31, 2019 | | | 2,167 | | | 3,841 | | | 3,520 | | | 9,528 |
Other comprehensive (income) loss | | | — | | | 4,837 | | | (847) | | | 3,990 |
Reclassification to income | | | — | | | (1,651) | | | 3,094 | | | 1,443 |
At December 31, 2020 | | | $ 2,167 | | | $7,027 | | | $ 5,767 | | | $ 14,961 |
| | September 30, 2021 | | | December 31, 2020 | |
| | (unaudited) | | | ||
| | (In thousands) | ||||
Cash and cash equivalents | | | $74,201 | | | $90,240 |
Current portion of restricted cash | | | 3,335 | | | 2,456 |
Accounts receivable, net | | | 24,522 | | | 18,524 |
Accounts receivable, net - related-party | | | 10,235 | | | 5,977 |
Inventories | | | 6,826 | | | 22,354 |
Current portion of net investments in sales-type leases | | | 11,688 | | | 10,229 |
Other current assets | | | 20,386 | | | 17,993 |
Total current assets | | | 151,193 | | | 167,773 |
Restricted cash | | | 17,609 | | | 16,843 |
Property and equipment, net | | | 1,447,334 | | | 1,501,528 |
Operating lease right-of-use assets | | | 98,014 | | | 114,617 |
Net investments in sales-type leases | | | 416,197 | | | 425,133 |
Investment in equity method investee | | | 20,567 | | | 16,330 |
Other assets | | | 17,175 | | | 13,500 |
Total assets | | | $ 2,168,089 | | | $ 2,255,724 |
| | | | |||
Accounts payable | | | 3,596 | | | 4,768 |
Accounts payable to related party | | | 12,126 | | | 2,349 |
Accrued liabilities and other liabilities | | | 58,002 | | | 65,249 |
Deferred revenue | | | 11,921 | | | 11,982 |
Current portion of long-term debt | | | 27,296 | | | 26,776 |
Current portion of long-term debt - related party | | | 7,578 | | | 7,153 |
Current portion of operating lease liabilities | | | 22,975 | | | 22,021 |
Current portion of finance lease liabilities | | | 29,534 | | | 36,269 |
Current portion of finance lease liabilities - related party | | | 16,485 | | | 15,608 |
Total current liabilities | | | 189,513 | | | 192,175 |
Derivative liabilities | | | 4,042 | | | 5,880 |
Long-term debt, net | | | 215,106 | | | 235,648 |
Long-term debt, net - related party | | | 308,318 | | | 420,040 |
Operating lease liabilities | | | 76,658 | | | 93,462 |
Finance lease liabilities | | | 235,351 | | | 255,609 |
Finance lease liabilities - related party | | | 215,121 | | | 227,609 |
Asset retirement obligations | | | 34,566 | | | 33,499 |
Other long-term liabilities | | | 14,424 | | | 20,641 |
Total liabilities | | | 1,293,099 | | | 1,484,563 |
Commitment and contingencies (Note 18) | | | | | ||
Equity interest | | | 1,021,818 | | | 902,099 |
Related party note receivable | | | (16,659) | | | — |
Accumulated other comprehensive loss | | | (10,996) | | | (14,961) |
Non-controlling interest | | | 13,493 | | | 11,341 |
Non-controlling interest- ENE Onshore | | | (132,666) | | | (127,318) |
Total equity | | | 874,990 | | | 771,161 |
Total liabilities and equity | | | $ 2,168,089 | | | $ 2,255,724 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
| | (In thousands) | ||||
Revenues | | | | | ||
FSRU and terminal services | | | $ 352,299 | | | $322,977 |
Gas sales | | | 197,453 | | | — |
Total revenue | | | 549,752 | | | 322,977 |
Operating expenses | | | | | ||
Cost of revenue and vessel operating expenses | | | 132,415 | | | 112,074 |
Direct cost of gas sales | | | 179,950 | | | — |
Depreciation and amortization | | | 78,320 | | | 81,523 |
Selling, general and administrative expenses | | | 34,113 | | | 31,583 |
Restructuring, transition and transaction expenses | | | 8,613 | | | — |
Total operating expenses | | | 433,411 | | | 225,180 |
Operating income | | | 116,341 | | | 97,797 |
Other income (expense) | | | | | ||
Interest expense | | | (24,558) | | | (28,834) |
Interest expense- related party | | | (37,475) | | | (39,252) |
Earnings from equity method investment | | | 2,431 | | | 2,276 |
Other income, net | | | 371 | | | 458 |
Income before income taxes | | | 57,110 | | | 32,445 |
Provision for income taxes - foreign | | | (14,133) | | | (8,257) |
Net income | | | 42,977 | | | 24,188 |
Less net income attributable to non-controlling interest | | | 2,152 | | | 1,735 |
Less net loss attributable to non-controlling interest- ENE Onshore | | | (5,348) | | | (6,535) |
Net income attributable to partners | | | $46,173 | | | $28,988 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
| | (In thousands) | ||||
Net income | | | $ 42,977 | | | $ 24,188 |
Other comprehensive income (loss) | | | | | ||
Share of comprehensive-income (loss) of equity method investee | | | 1,805 | | | (2,836) |
Change in unrealized gain (loss) on cash flow hedges | | | 2,160 | | | (2,933) |
Comprehensive income | | | 46,942 | | | 18,419 |
Less comprehensive income attributable to non-controlling interest | | | 2,152 | | | 1,735 |
Less comprehensive loss attributable to non-controlling interest- ENE Onshore | | | (5,348) | | | (6,535) |
Comprehensive income attributable to partners | | | $ 50,138 | | | $ 23,219 |
| | Equity interest | | | Related party note receivable | | | Accumulated other comprehensive loss | | | Non- controlling interest | | | Non- controlling interest- ENE Onshore | | | Total equity | |
| | (In thousands) | ||||||||||||||||
Balance at January 1, 2021 | | | $902,099 | | | $— | | | $(14,961) | | | $11,341 | | | $(127,318) | | | $771,161 |
Net income (loss) | | | 46,173 | | | — | | | — | | | 2,152 | | | (5,348) | | | 42,977 |
Related party note receivable | | | — | | | (16,659) | | | — | | | — | | | — | | | (16,659) |
Other comprehensive income | | | — | | | — | | | 3,965 | | | — | | | — | | | 3,965 |
Contribution | | | 73,659 | | | — | | | — | | | — | | | — | | | 73,659 |
Distributions | | | (113) | | | — | | | — | | | — | | | — | | | (113) |
Balance at September 30, 2021 | | | $1,021,818 | | | $(16,659) | | | $(10,996) | | | $13,493 | | | $(132,666) | | | $874,990 |
| | Equity interest | | | Related party note receivable | | | Accumulated other comprehensive loss | | | Non- controlling interest | | | Non- controlling interest- ENE Onshore | | | Total equity | |
| | (In thousands) | ||||||||||||||||
Balance at January 1, 2020 | | | $863,750 | | | $— | | | $(9,528) | | | $9,904 | | | $(118,833) | | | $745,293 |
Net income (loss) | | | 28,988 | | | — | | | — | | | 1,735 | | | (6,535) | | | 24,188 |
Related party note receivable | | | — | | | — | | | — | | | — | | | — | | | — |
Other comprehensive loss | | | — | | | — | | | (5,769) | | | — | | | — | | | (5,769) |
Contribution | | | 6,000 | | | — | | | — | | | — | | | — | | | 6,000 |
Distributions | | | (1,405) | | | — | | | — | | | (1,186) | | | — | | | (2,591) |
Balance at September 30, 2020 | | | $897,334 | | | $— | | | $(15,297) | | | $10,453 | | | $(125,368) | | | $767,122 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
| | (In thousands) | ||||
Cash flows from operating activities | | | | | ||
Net income | | | $42,977 | | | $24,188 |
Adjustments to reconcile net income to net cash from operating activities: | | | | | ||
Depreciation and amortization | | | 78,320 | | | 81,523 |
Amortization of operating lease right-of-use assets | | | 17,123 | | | 6,806 |
Accretion expense | | | 1,067 | | | 1,022 |
Amortization of debt issuance costs | | | 1,096 | | | 1,414 |
Share of net earnings in equity method investee | | | (2,431) | | | (2,276) |
Changes in operating assets and liabilities: | | | | | ||
Accounts receivable | | | (10,255) | | | 1,532 |
Inventories | | | 15,528 | | | 734 |
Other current assets and other assets | | | (7,256) | | | (15,144) |
Accounts payable and accrued liabilities | | | 9,202 | | | (19,820) |
Derivative liabilities | | | 322 | | | (386) |
Deferred revenue- current | | | (61) | | | 94 |
Net investments in sales-type leases | | | 7,477 | | | 6,422 |
Operating lease assets and liabilities | | | (16,316) | | | (6,554) |
Other long-term liabilities | | | (6,217) | | | (5,739) |
Net cash provided by operating activities | | | $130,576 | | | $73,816 |
| | | | |||
Cash flows from investing activities | | | | | ||
Purchases of property and equipment | | | (30,837) | | | (29,744) |
Net cash used in investing activities | | | $(30,837) | | | $(29,744) |
| | | | |||
Cash flows from financing activities | | | | | ||
Proceeds from long-term debt - related party | | | 39,500 | | | 48,600 |
Repayments of long-term debt- related party | | | (5,298) | | | (14,550) |
Repayments of long-term debt | | | (21,118) | | | (20,140) |
Related party note receivable | | | (88,500) | | | — |
Principal payments under finance lease liabilities | | | (26,993) | | | (25,406) |
Principal payments under finance lease liabilities - related party | | | (11,611) | | | (10,825) |
Contribution | | | — | | | 6,000 |
Distributions | | | (113) | | | (2,591) |
Net cash used in financing activities | | | $(114,133) | | | $(18,912) |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | (14,394) | | | 25,160 |
Cash, cash equivalents and restricted cash | | | | | ||
Beginning of period | | | $109,539 | | | $73,271 |
End of period | | | $95,145 | | | $98,431 |
Summary of significant accounting policies |
2. | Summary of significant accounting policies |
3. | Fair value of financial instruments |
| | | | September 30, 2021 | | | December 31, 2020 | ||
Financial liabilities | | | | | | | |||
Derivative financial instruments | | | Level 2 | | | $5,482 | | | $7,506 |
4. | Accounts receivable, net |
| | September 30, 2021 | | | December 31, 2020 | |
Trade receivables | | | $ 12,740 | | | $ 14,242 |
Accrued revenue | | | 12,661 | | | 5,161 |
Allowance for doubtful accounts | | | (879) | | | (879) |
Accounts receivable, net | | | $ 24,522 | | | $ 18,524 |
5. | Derivative financial instruments |
| | September 30, 2021 | |
Interest rate swap(1) | | | $ 74,053 |
(1) | Number of open positions and gross notional values do not measure the Company’s risk of loss, quantify risk or represent assets or liabilities of the Company, but rather indicate the relative size of the derivative instruments and are used in the calculation of the amounts to be exchanged between counterparties upon settlements. |
| | September 30, 2021 | | | December 31, 2020 | |
Current liabilities | | | | | ||
Interest rate swaps - cash flow hedges | | | $ 1,440 | | | $ 1,626 |
Noncurrent liabilities | | | | | ||
Interest rate swaps - cash flow hedges | | | 4,042 | | | 5,880 |
Derivative liabilities | | | $ 5,482 | | | $ 7,506 |
• | In 2018, the Company entered into two long-term interest rate swap agreements with a major financial institution. The swaps, which became effective in October 2018 and expires in April 2030, are used to hedge approximately 70% of the variability in interest payments/interest risk on the loans bank loans dated June 23, 2017. |
Derivatives Designated in Cash Flow Hedging Relationship | | | Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion) | | | Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) | | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) | ||||||
| | September 30, | | | | | September 30, | ||||||||
| | 2021 | | | 2020 | | | | | 2021 | | | 2020 | ||
Interest Rate Swaps | | | $902 | | | $(4,026) | | | Interest expense | | | $1,258 | | | $1,093 |
6. | Inventories |
| | September 30, 2021 | | | December 31, 2020 | |
LNG cargo | | | $631 | | | $17,883 |
Bunker fuel | | | 6,195 | | | 4,471 |
Inventories | | | $6,826 | | | $22,354 |
7. | Other current assets |
| | September 30, 2021 | | | December 31, 2020 | |
Prepaid expenses | | | $8,562 | | | $5,557 |
Prepaid expenses - related party | | | 4,927 | | | 6,877 |
Tax receivables | | | 5,345 | | | 4,230 |
Other receivables | | | 1,552 | | | 1,329 |
Other current assets | | | $ 20,386 | | | $ 17,993 |
8. | Property and equipment |
| | September 30, 2021 | | | December 31, 2020 | |
Vessels | | | $1,696,798 | | | $1,683,989 |
Vessel related equipment | | | 434,748 | | | 424,485 |
Buoy and pipeline | | | 11,955 | | | 11,806 |
Finance lease right-of-use assets | | | 383,892 | | | 383,892 |
Other equipment | | | 24,893 | | | 24,462 |
Assets in progress | | | 21,277 | | | 21,936 |
Less accumulated depreciation | | | (1,126,229) | | | (1,049,042) |
Property and equipment, net | | | $1,447,334 | | | $1,501,528 |
9. | Accrued liabilities |
| | September 30, 2021 | | | December 31, 2020 | |
Accrued vessel and cargo expenses | | | $28,326 | | | $30,771 |
Payroll and related liabilities | | | 8,145 | | | 9,343 |
Accrued interest | | | 1,787 | | | 2,275 |
Current portion of derivative liability | | | 1,440 | | | 1,626 |
Off-market capacity liability- ENE Onshore | | | 13,163 | | | 14,103 |
Other accrued liabilities | | | 5,141 | | | 7,131 |
| | $58,002 | | | $65,249 |
10. | Long-term debt |
| | September 30, 2021 | | | December 31, 2020 | |
Experience vessel financing | | | $153,450 | | | $168,300 |
2017 Bank loan | | | 94,716 | | | 100,984 |
Total debt | | | 248,166 | | | 269,284 |
Less unamortized debt issuance costs | | | (5,764) | | | (6,860) |
Total debt, net | | | 242,402 | | | 262,424 |
Less current portion | | | (27,296) | | | (26,776) |
Total long-term debt | | | $215,106 | | | $235,648 |
Due remainder of 2021 | | | $5,658 |
2022 | | | 28,774 |
2023 | | | 29,427 |
2023 | | | 30,118 |
2025 | | | 30,860 |
Thereafter | | | 123,329 |
Total debt, net | | | $ 248,166 |
11. | Long-term debt – related party |
| | September 30, 2021 | | | December 31, 2020 | |
Exquisite Vessel Financing | | | $ 198,698 | | | $ 203,996 |
ENE Lateral Facility | | | — | | | 223,197 |
KFMC-ENE Onshore Note | | | 117,198 | | | — |
Total related-party debt | | | 315,896 | | | 427,193 |
Less current portion | | | (7,578) | | | (7,153) |
Long-term related-party debt | | | $ 308,318 | | | $ 420,040 |
Due remainder of 2021 | | | $1,855 |
2022 | | | 7,726 |
2023 | | | 8,345 |
2023 | | | 9,078 |
2025 | | | 9,741 |
Thereafter | | | 101,953 |
Total payments | | | 138,698 |
Residual value for Exquisite vessel financing | | | 60,000 |
Settlement of KFMC-ENE Onshore Note | | | 117,198 |
Total debt - related party | | | $ 315,896 |
12. | Other long-term liabilities |
| | September 30, 2021 | | | December 31, 2020 | |
Deferred revenue | | | $13,213 | | | $9,569 |
Off-market capacity liability- ENE Onshore | | | 1,155 | | | 11,072 |
Other accruals | | | 56 | | | — |
Other long-term liabilities | | | $14,424 | | | $20,641 |
13. | Leases |
| | September 30, 2021 | | | December 31, 2020 | |
Related-party leases: | | | | | ||
Finance lease liabilities | | | $ 231,606 | | | $ 243,217 |
Less current portion of finance lease liabilities | | | (16,485) | | | (15,608) |
Finance lease liabilities, long-term | | | $ 215,121 | | | $ 227,609 |
| | | | |||
External leases: | | | | | ||
Finance lease liabilities | | | $ 264,885 | | | $ 291,878 |
Less current portion of finance lease liabilities | | | (29,534) | | | (36,269) |
Finance lease liabilities, long-term | | | $ 235,351 | | | $ 255,609 |
| | Operating | | | Finance | |
Due remainder of 2021 | | | $7,092 | | | $21,973 |
2022 | | | 28,237 | | | 83,237 |
2023 | | | 28,139 | | | 75,399 |
2024 | | | 28,226 | | | 75,412 |
2025 | | | 17,780 | | | 63,999 |
Thereafter | | | 2,490 | | | 491,896 |
Total lease payments | | | 111,964 | | | 811,916 |
Less: imputed interest | | | (12,331) | | | (315,425) |
Carrying value of lease liabilities | | | 99,633 | | | 496,491 |
Less: current portion | | | (22,975) | | | (46,019) |
Carrying value of long-term lease liabilities | | | $76,658 | | | $450,472 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Amortization of finance lease right-of-use assets - related party | | | $3,679 | | | $3,679 |
Amortization of finance lease right-of-use assets - external | | | 10,008 | | | 10,008 |
Interest on finance lease liabilities - related party | | | 21,965 | | | 23,101 |
Interest on finance lease liabilities - external | | | 13,131 | | | 14,723 |
Operating lease expense | | | 22,095 | | | 9,462 |
Short-term lease expense | | | 911 | | | 457 |
Total lease costs | | | $71,789 | | | $61,430 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Cash paid for amounts included in finance lease liabilities - related party | | | $ 21,965 | | | $23,101 |
Cash paid for amounts included in finance lease liabilities – external | | | $ 13,131 | | | $14,723 |
Cash paid for amounts included in operating lease liabilities | | | $ 16,316 | | | $6,555 |
Financing cash flows related to finance leases - related party | | | $11,611 | | | $10,825 |
Financing cash flows related to finance leases – external | | | $ 26,993 | | | $25,406 |
Right-of-use assets obtained in exchange for new operating lease liabilities | | | $520 | | | $ 121,575 |
14. | Revenue |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Revenue from leases | | | $ 272,830 | | | $ 243,225 |
Revenue from contracts with customers | | | | | ||
Time charter, regasification and other services | | | 79,469 | | | 79,752 |
Gas sales | | | 197,453 | | | — |
Total revenue | | | $ 549,752 | | | $ 322,977 |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Operating lease income | | | $ 214,777 | | | $ 183,877 |
Sales-type lease income | | | 58,053 | | | 59,348 |
Total revenue from leases | | | $272,830 | | | $243,225 |
| | September 30, 2021 | | | December 31, 2020 | |
Property and equipment | | | $ 1,647,231 | | | $ 1,635,050 |
Accumulated depreciation | | | (664,042) | | | (623,513) |
Property and equipment, net | | | $983,189 | | | $1,011,537 |
| | Sales-type | | | Operating | |
Due remainder of 2021 | | | $21,843 | | | $50,185 |
2022 | | | 87,612 | | | 198,280 |
2023 | | | 80,449 | | | 167,190 |
2024 | | | 84,214 | | | 132,753 |
2025 | | | 87,612 | | | 121,510 |
Thereafter | | | 667,099 | | | 568,755 |
Total undiscounted | | | 1,028,829 | | | $ 1,238,673 |
Less: imputed interest | | | (600,944) | | | |
Net investment in sales-type leases | | | 427,885 | | | |
Less: current portion | | | (11,688) | | | |
Non-current net investment in sales-type leases | | | $416,197 | | |
| | Nine months ended September 30, 2021 | ||||||||||
| | Revenue from leases | | | Revenue from contracts with customers | | | Total revenue | ||||
| | | | TCP, Regas and other | | | Gas sales | | | |||
Bangladesh | | | $56,870 | | | $29,939 | | | $158,503 | | | $245,312 |
UAE | | | 48,683 | | | 17,479 | | | — | | | 66,162 |
Argentina | | | 43,743 | | | 7,166 | | | — | | | 50,909 |
Brazil | | | 36,795 | | | 5,135 | | | — | | | 41,930 |
Pakistan | | | 33,008 | | | 7,753 | | | — | | | 40,761 |
China | | | — | | | — | | | 38,950 | | | 38,950 |
Israel | | | 28,482 | | | 4,857 | | | — | | | 33,339 |
United States | | | 9,100 | | | 1,962 | | | — | | | 11,062 |
Other | | | 16,149 | | | 5,178 | | | — | | | 21,327 |
| | $272,830 | | | $79,469 | | | $197,453 | | | $549,752 |
| | Nine months ended September 30, 2020 | ||||||||||
| | Revenue from leases | | | Revenue from contracts with customers | | | Total revenue | ||||
| | | | TCP, Regas and other | | | Gas sales | | | |||
Bangladesh | | | $59,348 | | | $28,842 | | | — | | | $88,190 |
UAE | | | 50,654 | | | 15,581 | | | — | | | 66,235 |
Pakistan | | | 32,142 | | | 7,695 | | | — | | | 39,837 |
Argentina | | | 29,013 | | | 9,756 | | | — | | | 38,769 |
Brazil | | | 30,051 | | | 4,263 | | | — | | | 34,314 |
Israel | | | 28,586 | | | 4,886 | | | — | | | 33,472 |
US | | | — | | | — | | | — | | | — |
Other | | | 13,431 | | | 8,729 | | | — | | | 22,160 |
| | $243,225 | | | $79,752 | | | — | | | $322,977 |
| | September 30, 2021 | | | December 31, 2020 | |
Deferred revenues, beginning of period | | | $9,569 | | | $4,755 |
Cash received but not yet recognized | | | 3,644 | | | 4,814 |
Deferred revenues, end of period | | | $13,213 | | | $9,569 |
Due remainder of 2021 | | | $11,412 |
2022 | | | 45,826 |
2023 | | | 43,558 |
2024 | | | 44,845 |
2025 | | | 44,071 |
Thereafter | | | 250,209 |
| | $439,921 |
15. | Income taxes |
16. | Related party transactions |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Management fees and other expenses with GBK | | | $1,231 | | | $1,940 |
| | September 30, 2021 | | | December 31, 2020 | |
Amounts due from related parties | | | $10,235 | | | $5,977 |
Amounts due to related parties | | | $12,126 | | | $2,349 |
Prepaid expenses - related party | | | $4,927 | | | $6,877 |
Note receivable from related party | | | $16,659 | | | — |
• | Kaiser issued guarantees dated December 1, 2015 in favor of all creditors and obligees of ENE Onshore and ENE Lateral under their third-party contracts. The Kaiser guarantees issued in favor of ENE Lateral and ENE Onshore were terminated on September 17, 2021 in connection with the reorganization. |
• | Kaiser issued a guarantee dated September 11, 2013 (and reaffirmed on December 1, 2015) in favor of Algonquin Gas Transmission, LLC (“AGT”) and Maritimes & Northeast Pipeline, L.L.C. (each a wholly owned subsidiary of Enbridge, Inc.), in respect of all payment obligations owed by ENE Onshore and ENE Lateral (the “AGT Guarantee”). In addition, Kaiser obtained a letter of credit on behalf of ENE Onshore and ENE Lateral with an outstanding amount of approximately $42.7 million as of December 31, 2020 (the “AGT LOC”). Pursuant to that certain Undertaking, Fee and Indemnity Agreement (Algonquin), dated as of September 17, 2021, EELP will indemnify Kaiser in respect of Kaiser’s obligations related to ENE Lateral under the AGT Guarantee and AGT LOC, pay an annual fee in the amount of $1.2 million to Kaiser to maintain such AGT Guarantee and reimburse Kaiser for any fees actually incurred under the AGT LOC. |
• | Kaiser issued an uncapped construction and operational guarantee dated May 14, 2007 in favor of the Secretary of Transportation, United States of America, as represented by the Maritime Administrator (“MARAD”), in respect of Northeast Gateway Energy Bridge, LP’s obligations related to design, construction, operations and decommissioning under the deepwater port license issued by MARAD (the “Kaiser – MARAD Guarantee”). In addition, Kaiser obtained a letter of credit in favor of MARAD to cover decommissioning costs in the amount of approximately $15 million (the “Kaiser – MARAD LOC”). Pursuant to that certain Undertaking, Fee and Indemnity Agreement (MARAD), dated as of September 17, 2021, EELP will indemnify Kaiser in respect of Kaiser’s obligations under the Kaiser-MARAD Guarantee and the Kaiser – MARAD LOC, pay a nominal fee to Kaiser to maintain such Kaiser-MARAD Guarantee and reimburse Kaiser for any fees actually incurred under the MARAD LOC. |
17. | Concentration risk |
| | Percentage of Total Revenues | ||||
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Customer A | | | 40% | | | 20% |
Customer B | | | 8% | | | 11% |
Customer C | | | 7% | | | 12% |
Customer D | | | 7% | | | 12% |
Customer E | | | 6% | | | 11% |
Customer F | | | 6% | | | 10% |
Customer G | | | 5% | | | 10% |
18. | Commitments and contingencies |
19. | Asset retirement obligations |
| | September 30, 2021 | | | December 31, 2020 | |
Asset retirement obligations, beginning of period | | | $ 33,499 | | | $ 32,129 |
Accretion expense | | | 1,067 | | | 1,370 |
Asset retirement obligations, end of period | | | $ 34,566 | | | $ 33,499 |
20. | Supplemental noncash disclosures for consolidated statement of cash flows |
| | Nine months ended September 30, | ||||
| | 2021 | | | 2020 | |
Supplemental cash flow information: | | | | | ||
Cash paid for taxes - foreign, net of refunds | | | $12,332 | | | $14,328 |
Cash paid for interest | | | $61,593 | | | $67,100 |
Right-of-use assets obtained in exchange for lease obligations | | | $520 | | | $121,575 |
Capital expenditures included in accounts payable | | | $7,844 | | | $8,445 |
KFMC note receivable netted against Lateral note payable to KFMC | | | $88,500 | | | $— |
ENE Lateral distribution of ENE Onshore note to KFMC as partial settlement of ENE Lateral note to KFMC | | | $117,038 | | | $— |
Noncash contribution received to settle note payable to KFMC | | | $57,159 | | | $— |
Noncash contribution received reflected as a note Receivable from GBK | | | $16,500 | | | $— |
| | September 30, 2021 | | | December 31, 2020 | |
Cash and cash equivalents | | | $ 74,201 | | | $90,240 |
Restricted cash - current | | | 3,335 | | | 2,456 |
Restricted cash - non-current | | | 17,609 | | | 16,843 |
Cash, cash equivalents, and restricted cash | | | $ 95,145 | | | $ 109,539 |
21. | Accumulated other comprehensive (income) loss |
| | Cumulative translation adjustment | | | Qualifying cash flow hedges | | | Share of OCI in equity method investee | | | Total | |
At January 1, 2020 | | | $ 2,167 | | | 3,841 | | | 3,520 | | | $9,528 |
Other comprehensive (income) loss | | | — | | | 4,026 | | | 560 | | | 4,586 |
Reclassification to income | | | — | | | (1,093) | | | 2,276 | | | 1,183 |
At September 30, 2020 | | | $ 2,167 | | | $6,774 | | | $ 6,356 | | | $ 15,297 |
| | Cumulative translation adjustment | | | Qualifying cash flow hedges | | | Share of OCI in equity method investee | | | Total | |
At December 31, 2020 | | | $ 2,167 | | | 7,027 | | | 5,767 | | | $ 14,961 |
Other comprehensive (income) loss | | | — | | | (902) | | | (4,236) | | | (5,138) |
Reclassification to income | | | — | | | (1,258) | | | 2,431 | | | 1,173 |
At September 30, 2021 | | | $ 2,167 | | | $4,867 | | | $3,962 | | | $ 10,996 |
Item 13. | Other Expenses of Issuance and Distribution. |
SEC Registration Fee | | | $9,270 |
FINRA Filing Fee | | | 15,500 |
Stock Exchange Listing Fee | | | * |
Printing Costs | | | * |
Legal Fees and Expenses | | | * |
Accounting Fees and Expenses | | | * |
Transfer Agent Fees and Expenses | | | * |
Miscellaneous Expenses | | | * |
Total | | | $* |
* | To be provided by amendment. |
Item 14. | Indemnification of Directors and Officers. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit No. | | | Description of Exhibit |
1.1* | | | Form of Underwriting Agreement. |
| | Form of Securities Purchase Agreement, by and between Maya Maritime, LLC and Excelerate Energy Limited Partnership. | |
| | Form of Amended and Restated Certificate of Incorporation of Excelerate Energy, Inc. to be in effect upon completion of this offering. | |
| | Form of Amended and Restated Bylaws of Excelerate Energy, Inc. to be in effect upon completion of this offering. |
Exhibit No. | | | Description of Exhibit |
| | Form of Registration Rights Agreement. | |
| | Form of Stockholder’s Agreement. | |
5.1* | | | Opinion of Gibson, Dunn & Crutcher LLP. |
| | Form of Amended and Restated Limited Partnership Agreement of Excelerate Energy Limited Partnership to be in effect upon completion of this offering. | |
| | Form of Tax Receivable Agreement. | |
| | Form of Indemnification Agreement entered into with Directors and Officers. | |
| | Form of Excelerate Energy, Inc. Long-Term Incentive Plan. | |
| | Letter Agreement dated April 3, 2020, by and between Excelerate Energy Limited Partnership and Dana Armstrong. | |
| | Letter Agreement dated October 16, 2020, by and between Excelerate Energy Limited Partnership and Alisa Newman Hood. | |
| | Written Description of the Material Terms of the Excelerate Energy 2021 Short Term Incentive Plan. | |
| | Form of Senior Secured Revolving Credit Agreement, by and between Excelerate Energy Limited Partnership, as Borrower, Excelerate Energy, Inc., as Parent, the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. | |
| | Subsidiaries of the Registrant. | |
| | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm, as to Excelerate Energy, Inc. | |
| | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm, as to EELP, Predecessor. | |
23.3* | | | Consent of Gibson, Dunn & Crutcher LLP (to be included in Exhibit 5.1). |
| | Power of Attorney (included on the signature page hereto). | |
| | Consent of Carolyn J. Burke, as director nominee. | |
| | Consent of Paul T. Hanrahan, as director nominee. | |
| | Consent of Henry G. Kleemeier, as director nominee. | |
| | Consent of Don P. Millican, as director nominee. | |
| | Consent of Robert A. Waldo, as director nominee. |
# | Previously filed. |
* | To be filed by amendment. |
† | Management contract or compensatory plan or arrangement. |
Item 17. | Undertakings. |
(i) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(ii) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| | EXCELERATE ENERGY, INC. | ||||
| | | | |||
| | By: | | | /s/ Steven Kobos | |
| | Name: | | | Steven Kobos | |
| | Title: | | | President and Chief Executive Officer |
* | | | Director and President and Chief Executive Officer (Principal Executive Officer) | | | January 21, 2022 |
Steven Kobos | | |||||
| | | | |||
* | | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | January 21, 2022 |
Dana Armstrong | | |||||
| | | | |||
* | | | Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) | | | January 21, 2022 |
Michael A. Bent | |
*By: | | | /s/ Steven Kobos | | | |
| | Steven Kobos | | | ||
| | As Attorney-in-Fact | | |
Contents
|
|||
TABLE OF CONTENTS
|
i
|
||
ARTICLE I
|
1
|
||
Section 1.01
|
Definitions.
|
1
|
|
Section 1.02
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Construction.
|
4
|
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ARTICLE II
|
4
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||
Section 2.01
|
Purchase and Sale
|
4
|
|
Section 2.02
|
Purchase Price
|
4
|
|
Section 2.03
|
Closing
|
5
|
|
Section 2.04
|
Deliveries at Closing
|
5
|
|
Section 2.05
|
Withholding
|
6
|
|
ARTICLE III
|
7
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||
Section 3.01
|
Seller’s Representations and Warranties
|
7
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|
Section 3.02
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Buyer’s Representations and Warranties
|
9
|
|
ARTICLE IV
|
10
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||
Section 4.01
|
General
|
10
|
|
Section 4.02
|
Litigation Support.
|
10
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|
Section 4.03
|
Unpaid Operating Expenses
|
11
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|
Section 4.04
|
Hire Payments
|
11
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|
Section 4.05
|
Confidentiality
|
11
|
|
ARTICLE V
|
12
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||
Section 5.01
|
Conditions to the Obligations of the Parties
|
12
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|
Section 5.02
|
Termination
|
12
|
|
ARTICLE VI
|
13
|
||
Section 6.01
|
No Third-Party Beneficiaries.
|
13
|
|
Section 6.02
|
Tax Matters
|
13
|
|
Section 6.03
|
Entire Agreement
|
13
|
|
Section 6.04
|
Succession and Assignment
|
13
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|
Section 6.05
|
Specific Performance
|
13
|
|
Section 6.06
|
Counterparts
|
13
|
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Section 6.07
|
Headings
|
14
|
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Section 6.08
|
Notices
|
14
|
|
Section 6.09
|
Governing Law
|
14
|
|
Section 6.10
|
Waiver of Jury Trial
|
14
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|
Section 6.11
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Consent to Jurisdiction; Venue
|
14
|
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Section 6.12
|
Amendments; Waiver
|
15
|
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Section 6.13
|
Severability
|
15
|
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Section 6.14
|
Expenses
|
15
|
|
Section 6.15
|
Incorporation of Exhibits and Schedules
|
15
|
(a) |
Purchase Price:
|
(i) |
Cash in the amount of $ (which shall be allocated $ to each of the Excelsior Interests and the Excellence Interests) (the “Cash Consideration”); plus
|
(ii) |
that number of Class A Shares equal to $ divided by the Class A Issuance Price (which shall be allocated $ to the Excelsior Interests and $ to the Excellence Interests) (the “Stock Consideration”); plus
|
(iii) |
in respect of the Excelsior Interests, $ deemed value for future payments under the Tax Receivables Agreement (the “TRA Consideration”).
|
(b) |
The Purchase Price will be paid, caused to be paid or deemed paid in the case of the TRA Consideration, from Buyer to Seller at Closing, using proceeds in the form of cash and Class A Shares received by Buyer from EE Inc. in connection
with the closing of the IPO.
|
(c) |
The number of Class A Shares payable as Stock Consideration will be rounded up or down, as appropriate to the nearest whole number to eliminate fractional shares, and any eliminated or added fractional share shall be added to or deducted
from the Cash Consideration, respectively, based on the Class A Issuance Price.
|
(a) |
Seller’s Deliveries: At Closing, Seller shall deliver, or cause to be delivered to Buyer:
|
(b) |
Buyer’s Deliveries: At Closing, Buyer shall deliver, or cause to be delivered to Seller:
|
(a) |
Organization and Qualification. Seller and each Acquired Company is a Marshall Islands limited liability company duly organized, validly existing, and in good standing under the laws of the Marshall
Islands and is duly qualified or registered and in good standing to transact business under the Laws of each jurisdiction where the character of its activities or the location of the properties and assets owned or leased by it requires such
qualification or registration, except where the lack of such qualification would not have a Material Adverse Effect on Seller or the Acquired Companies.
|
(b) |
Authorization of Transaction. Seller has full limited liability company power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, and to
perform its obligations hereunder and thereunder. This Agreement and each Transaction Document to which Seller is a party constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with their
respective terms and conditions, except to the extent enforceability may be affected by bankruptcy, reorganization, insolvency or similar Laws affecting creditors’ rights generally. The execution, delivery and performance of this Agreement,
the other Transaction Documents to which Seller is a party, all other agreements contemplated hereby and thereby and the transactions contemplated hereby and thereby have been duly authorized by Seller.
|
(c) |
Governmental Authorization. Neither Seller nor either Acquired Company need give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Entity in
order to consummate the transactions contemplated by this Agreement or any other Transaction Document.
|
(d) |
Non-contravention. Neither the execution and delivery of this Agreement, any other Transaction Document to which Seller is a party, nor the consummation of the transactions contemplated hereby or
thereby, will (i) to Seller’s Knowledge, violate any Law to which Seller or either Acquired Company is subject, (ii) violate any provision of Seller’s or either Acquired Company’s Organizational Documents, or (iii) conflict with, result in a
material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material contract to which Seller or either
Acquired Company is a party or by which Seller or either Acquired Company is bound or to which any of Seller’s or either Acquired Company’s assets is subject, except where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a material effect on Seller or either Acquired Company.
|
(e) |
Brokers’ Fees. No Person acting on behalf of Seller or either Acquired Company or under the authority of Seller or either Acquired Company is entitled to any broker’s, finder’s, agent’s or similar
fee or commission with respect to the transactions contemplated by this Agreement for which Buyer is or could become liable.
|
(f) |
Proceedings. There are no actions, suits, proceedings, hearings or investigations pending or threatened against or affecting Seller or either Acquired Company before or by any Governmental Entity
that would (i) question the validity of this Agreement or any of the other Transaction Documents, or (ii) seek to prohibit, enjoin or otherwise challenge or otherwise prevent the consummation of the Agreement or any of the other Transaction
Documents. There are no outstanding orders, judgments, injunctions, stipulations, awards or decrees of any Governmental Entity against Seller or any of its assets or properties (including the Acquired Companies) which prohibit or enjoin the
consummation of the Agreement or any of the other Transaction Documents. There is no suit, action, proceeding, or investigation presently pending or, to the Knowledge of Seller, threatened against or affecting the Seller or either Acquired
Company that has had or could reasonably be expected to result in a Material Adverse Effect with respect to Seller or either Acquired Company or prevent, hinder or materially delay the ability of Seller to consummate the Agreement or any of
the other Transaction Documents.
|
(g) |
Acquired Company Interests. The Interests (i) comprise 100% of the authorized, issued and outstanding limited liability company interests of each Acquired Company, (ii) were not issued in violation
of any preemptive or similar rights, (iii) have been duly authorized, are validly issued, fully paid, and non-assessable, (iv) were issued in compliance with applicable Laws, (v) were not issued in violation of any agreement, arrangement or
commitment to which either Acquired Company is a party, and (vi) are owned of record and beneficially free and clear of all Liens, other than Permitted Liens, by Seller. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Seller or either Acquired Company to issue, sell, or otherwise cause to become outstanding any of its equity interests.
|
(h) |
Investment. Seller is not acquiring the Class A Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. Seller is a knowledgeable
investor and acknowledges that it has had access to all information concerning EE Inc., including EE Inc.’s Form S-1 registration statement for EE Inc.’s Class A Shares, that is required to make such investment decision and has had the
ability to evaluate all such information. In making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Seller has relied on its own independent due diligence investigation of EE Inc. and has been
advised by and has relied solely on its own expertise and professional counsel concerning this transaction, the Class A Shares to be acquired pursuant to this Agreement and the value thereof. Seller is able to bear the economic risk of
holding the Class A Shares for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its
investment in the Class A Shares. Seller is an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act.
|
(i) |
Restricted Securities. Seller understands that the Class A Shares have not been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Buyer’s representations as expressed herein. Buyer understands that the Class A Shares are “restricted securities”
under applicable U.S. federal and state securities laws and that, pursuant to these laws, Buyer must hold the Class A Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Buyer acknowledges that EE Inc. has no obligation to register or
qualify the Class A Shares into which it may be converted, for resale except as set forth in the registration rights agreement to be entered into by and between Seller and EE Inc.
|
(j) |
Legend. The Seller acknowledges that, if certificated, the Class A Shares may contain legends substantially as
follows:
|
(k) |
Taxes. All Tax Returns required to be filed by or on behalf of the Acquired Companies on or prior to the Closing Date
have been timely and properly filed and all such Tax Returns are correct and complete in all material respects. All Taxes due and payable by or with respect to the Acquired Companies, including all installments on account of Taxes for the
current year, have been timely paid. Each Acquired Company has duly and timely collected all amounts on account of any sales or transfer Taxes, including goods and services, value added, harmonized sales, and state, local, provincial, or
territorial sales Taxes required to be collected by it and has duly and timely remitted such amounts to the appropriate Governmental Entity or has been furnished properly completed exemption certificates. There is no audit, examination, or
other administrative or judicial proceeding, deficiency, or proposed adjustment pending, that remains unpaid or that has been threatened in writing, in each case, with respect to any Tax Returns filed or Taxes due and owing by an Acquired
Company. There is no lien for Taxes upon the business, assets, or properties of any Acquired Company (except for Permitted Liens) that arose in connection with any failure (or alleged failure) to pay Taxes. Each of the Acquired Companies
is, and has been since the date of its formation, classified as an entity disregarded as separate from its owner for U.S. federal income tax purposes.
|
(a) |
Organization of Buyer. Buyer is a Delaware limited partnership duly organized, validly existing, and in good standing under the laws of Delaware and is duly qualified or registered and in good
standing to transact business under the Laws of each jurisdiction where the character of its activities or the location of the properties and assets owned or leased by it requires such qualification or registration, except where the lack of
such qualification would not have a Material Adverse Effect on Seller.
|
(b) |
Authorization of Transaction. Buyer has full organizational power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, and to perform its
obligations hereunder and thereunder. This Agreement and each Transaction Document to which Buyer is a party constitute the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms and
conditions, except to the extent enforceability may be affected by bankruptcy, reorganization, insolvency or similar Laws affecting creditors’ rights generally. The execution, delivery and performance of this Agreement, the other Transaction
Documents to which Buyer is a party, all other agreements contemplated hereby and thereby and the transactions contemplated hereby and thereby have been duly authorized by Buyer.
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(c) |
Governmental Authorization. Buyer need not give any notice to, make any filing with, nor obtain any authorization, consent, or approval of any Governmental Entity in order to consummate the
transactions contemplated by this Agreement or any other Transaction Document.
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(d) |
Non-contravention. Neither the execution and delivery of this Agreement, any other Transaction Document to which Buyer is a party, nor the consummation of the transactions contemplated hereby or
thereby, will (i) to Buyer’s Knowledge, violate any Law to which Buyer is subject, (ii) violate any provision of its Organizational Documents, or (iii) result in the imposition or creation of a Lien, other than a Permitted Lien, upon or with
respect to the Interests.
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(e) |
Brokers’ Fees. No Person acting on behalf of Buyer or under the authority of Buyer is entitled to any broker’s, finder’s, agent’s or similar fee or commission with respect to the transactions
contemplated by this Agreement for which Seller is or could become liable.
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(f) |
Proceedings. There are no actions, suits, proceedings, hearings or investigations pending or threatened against or affecting Buyer before or by any Governmental Entity that would (i) question the
validity of this Agreement or any of the other Transaction Documents, or (ii) seek to prohibit, enjoin or otherwise challenge or otherwise prevent the consummation of the Agreement or any of the other Transaction Documents.
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(g) |
Investment. Buyer is not acquiring the Interests with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. Buyer is a knowledgeable investor
and acknowledges that it has had access to all information concerning each Acquired Company that it required to make such investment decision and has had the ability to evaluate (and in fact has evaluated) all such information. In making the
decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer has relied on its own independent due diligence investigation of each Acquired Company and has been advised by and has relied solely on its own
expertise and professional counsel concerning this transaction, the Interests to be acquired pursuant to this Agreement and the value thereof. Buyer is able to bear the economic risk of holding the Interests for an indefinite period
(including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment in the Interests. Buyer is an “accredited
investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act.
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(a) |
consummation of the EE Inc. IPO and receipt by Buyer from EE Inc. of (i) cash sufficient to pay the Cash Consideration and (ii) Class A Shares sufficient to transfer the Stock Consideration;
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(b) |
execution of the Tax Receivable Agreement among EE, Inc., Buyer, Seller and Excelerate Energy Holdings, LLC;
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(c) |
all Cash has been distributed from each Acquired Company to Seller;
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(d) |
all Indebtedness for each Acquired Company has been repaid in full;
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(e) |
no provision of any applicable Law will be in effect prohibiting the consummation of the Closing, and no Governmental Authority of competent jurisdiction will have enacted, issued, promulgated, or entered any order that is in effect and
restrains, enjoins, or otherwise prohibits the consummation of the Transactions;
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(f) |
the representations and warranties set forth in Section 3.01 and Section 3.02 shall be true and correct in all respects as of the Effective Date and as of
the Closing Date (other than representations and warranties that by their terms address matters only as of another specified time, which shall be true and correct in all respects only as of such time);
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(g) |
the Parties shall have performed in all material respects all of the covenants and agreements required to be performed by such Party hereunder prior to the Closing;
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(h) |
Seller shall have delivered to Buyer a certificate signed by a duly authorized officer of Seller stating that the conditions specified in Sections 5.01(b)-(d) and, with respect to Seller, Sections (e)-(g) shall have been satisfied as of the Closing; and
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(i) |
Buyer shall have delivered to Seller a certificate signed by a duly authorized officer of Buyer stating that the conditions specified in Section 5.01(a) and, with respect to Buyer, Sections 5.01(b), and (e) - (g) shall have been satisfied as of the Closing.
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(a)
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Transfer Taxes. In the event any Transfer Taxes are payable in connection with the purchase and sale of the Interests, each of Buyer and Seller shall be liable for 50%
of such Transfer Taxes. Seller agrees to execute and deliver all instruments and certificates reasonably necessary to remit and/or minimize the amount of any such Transfer Taxes. If Buyer is required by Law to pay any such Transfer Taxes,
Seller shall promptly reimburse Buyer within 10 days of receipt of written request from Buyer for its payment of such Transfer Taxes. If Seller is required by Law to pay any such Transfer Taxes, Buyer shall promptly reimburse Seller within
10 days of receipt of written request from Seller for Buyer’s portion of such Transfer Taxes.
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(b) |
Post-Closing Limitations. Except as would not reasonably be expected to result in an increase in Taxes for which Seller would be liable or as otherwise required by applicable Law, without the prior
written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed), Buyer shall not and shall not cause or permit any Acquired Company to (i) file, or permit to be filed, any amended Tax Return of either Acquired
Company for a taxable period ending on or before the Closing Date, (ii) apply to any Tax authority for any binding or non-binding opinion, ruling, or other determination that relates to either Acquired Company for any taxable period ending on
or before the Closing Date, (iii) make or change any Tax election with respect to either Acquired Company for a taxable period ending on or before the Closing Date, or (iv) elect to carryback any Tax item of either Acquired Company to a
taxable period ending on or before the Closing Date.
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If to Buyer:
Excelerate Energy Limited Partnership
2445 Technology Forest Blvd., Level 6
The Woodlands, TX 77381
Attn: Alisa Newman Hood
Email: [●]
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Copy to:
Frederic Dorwart, Lawyers
125 E. 4th Street
Tulsa, Oklahoma 74103
Attn: Amanda Lovelace
Email: alovelace@fdlaw.com
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If to Seller:
Maya Maritime, LLC
c/o George Kaiser Family Foundation
7030 South Yale Avenue, Suite 600
Tulsa, Oklahoma 74136
Attn: Robert Thomas
Email: [●]
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Copy to:
Frederic Dorwart, Lawyers
125 E. 4th Street
Tulsa, Oklahoma 74103
Attn: Frederic Dorwart
Email: fdorwart@fdlaw.com
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BUYER
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||
EXCELERATE ENERGY
LIMITED PARTNERSHIP
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By:
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Name:
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Steven Kobos
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Title:
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Chief Executive Officer
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SELLER
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MAYA MARITIME, LLC
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By:
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Name:
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Frederic Dorwart
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Title:
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President
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Excelerate Energy, Inc.
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By:
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Name:
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Title:
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Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
EXCELERATE ENERGY, Inc.
AND
certain stockholders
DATED AS OF , 2022
This REGISTRATION RIGHTS AGREEMENT (as it may be amended from time to time in accordance with the terms hereof, the “Agreement”), dated as of [●], 2022, is made by and among:
i. Excelerate Energy, Inc., a Delaware corporation (together with any predecessor entities, the “Company”);
ii. Excelerate Energy Holdings, LLC, a Delaware limited liability company (“Holdings”);
iii. Maya Maritime LLC, a Marshall Islands limited liability company (“Maya Maritime” and, together with Holdings and their respective Permitted Transferees, the “Holders”).
RECITALS
WHEREAS, the Company, Excelerate Energy Limited Partnership, a Delaware limited partnership (the “Partnership”), and the Holders have effected, or will effect in connection with the closing of the initial public offering (the “IPO”) of the Company’s Class A common stock, par value $0.001 per share (the “Class A Common Stock”), a series of reorganization transactions (collectively, the “Reorganization Transactions”);
WHEREAS, after giving effect to the Reorganization Transactions and upon completion of the IPO, (a) Holdings will Beneficially Own shares of the Company’s Class B common stock, par value $0.001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), and Class B interests in the Partnership (“Class B Interests”), which Class B Interests, subject to certain restrictions, are exchangeable from time to time at the option of the Beneficial Owner thereof for shares of Class A Common Stock pursuant to the terms of the Amended and Restated Limited Partnership Agreement of the Partnership (as may be amended from time to time, the “Partnership Agreement”), and (b) Maya Maritime will directly hold shares of Class A Common Stock; and
WHEREAS, the Holders have requested, and the Company has agreed to provide, registration rights with respect to the Registrable Securities (as defined below) as set forth in this agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Article I
EFFECTIVENESS
1.1 Effectiveness. This Agreement shall become effective upon the Closing.
Article II
DEFINITIONS
2.1 Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Adverse Disclosure” means public disclosure of material non-public information that, in the good faith judgment of the Board of Directors: (i) would be required to be made in any Registration Statement filed with the SEC by the Company so that such Registration Statement, from and after its effective date, does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading when the Company has a bona fide business purpose for preserving such information as confidential; (ii) would reasonably be expected to adversely affect or interfere with any material financing or other material transaction under consideration by the Company; or (iii) would not be required to be made at such time but for the filing, effectiveness or continued use of such Registration Statement when the Company has a bona fide business purpose for preserving such information as confidential.
“Affiliate” means, with respect to any specified Person, (a) any Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person or (b) a Permitted Transferee of such Person. For purposes hereof, (x) the Company, the Partnership and their respective subsidiaries shall not be deemed to be Affiliates of the Holders or any of their respective Affiliates, and (y) neither the George Kaiser Family Foundation, an Oklahoma non-profit corporation, nor Maya Maritime, shall be considered to be an Affiliate of Holdings. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in the preamble.
“Beneficial Owner” means, with respect to any 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 or (b) investment power, which includes the power to dispose, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any calendar day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to close.
“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 B Interests” shall have the meaning set forth in the recitals.
“Closing” means the closing of the IPO.
“Common Stock” shall have the meaning set forth in the recitals.
“Company” shall have the meaning set forth in the preamble.
“Demand Notice” shall have the meaning set forth in Section 3.1(c).
“Demand Registration” shall have the meaning set forth in Section 3.1(a)(i).
“Demand Registration Request” shall have the meaning set forth in Section 3.1(a)(i).
“Exchange” means the exchange of Class B Interests, together with an equal number of shares of Class B Common Stock, for shares of Class A Common Stock or cash consideration, as applicable, pursuant to the terms of the Partnership Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto, and the rules and regulations promulgated thereunder.
“FINRA” means the Financial Industry Regulatory Authority.
“Holders” shall have the meaning set forth in the preamble.
“Holdings” shall have the meaning set forth in the preamble.
“IPO” shall have the meaning set forth in the recitals.
“Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of the Registrable Securities.
“Loss” shall have the meaning set forth in Section 3.9(a).
“Participation Conditions” shall have the meaning set forth Section 3.2(b).
“Partnership” shall have the meaning set forth in the recitals.
“Partnership Agreement” shall have the meaning set forth in the recitals.
“Permitted Transferee” means, (a) with respect to Holdings, any Person to whom Holdings has validly transferred Class B Interests in accordance with, and not in contravention of, the Partnership Agreement, and (b) with respect to Maya Maritime, (i) any Affiliate or successor entity of Maya Maritime or (ii) any Person established for the benefit of, and Beneficially Owned solely by, Maya Maritime or the direct or indirect owner(s) of Maya Maritime.
“Person” means and includes an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof, or any entity similar to any of the foregoing.
“Piggyback Notice” shall have the meaning set forth in Section 3.3(a).
“Piggyback Registration” shall have the meaning set forth in Section 3.3(a).
“Potential Takedown Participant” shall have the meaning set forth in Section 3.2(b).
“Pro Rata Portion” means, with respect to each Holder requesting that its shares be registered or sold, a number of such shares equal to the aggregate number of Registrable Securities requested to be registered (excluding any shares to be registered or sold for the account of the Company) multiplied by a fraction, the numerator of which is the aggregate number of Registrable Securities then held by such Holder, and the denominator of which is the aggregate number of Registrable Securities then held by all Holders requesting that their Registrable Securities be registered or sold.
“Prospectus” means (i) the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including post-effective amendments and supplements, and all other material incorporated by reference in such prospectus, and (ii) any Issuer Free Writing Prospectus.
“Public Offering” means the offer and sale of Registrable Securities for cash pursuant to an effective Registration Statement under the Securities Act (other than a Registration Statement on Form S-4 or Form S-8 or any successor form).
“Registrable Securities” shall mean any Class A Common Stock currently owned or hereafter acquired by a party hereto, including any Class A Common Stock that may be issued in connection with an Exchange. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (w) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (x) such securities shall have been transferred pursuant to Rule 144, (y) such Holder is able to immediately sell such securities (including all shares of Class A Common Stock issuable upon Exchange, subject to the limitations on Exchange set forth in the Partnership Agreement) under Rule 144 without any volume or manner of sale restrictions thereunder, as determined in the reasonable opinion of the Company (it being understood that a written opinion of the Company’s outside legal counsel to the effect that such securities may be so offered and sold, and that any restrictive legends on the securities may be removed, shall be conclusive evidence this clause has been satisfied) or (z) such securities shall have ceased to be outstanding.
“Registration” means registration under the Securities Act of the offer and sale of shares of Class A Common Stock under a Registration Statement. The terms “register,” “registered” and “registering” shall have correlative meanings.
“Registration Expenses” shall have the meaning set forth in Section 3.8.
“Registration Statement” means any registration statement of the Company filed with, or to be filed with, the SEC under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement other than a registration statement (and related Prospectus) filed on Form S-4 or Form S-8 or any successor forms thereto.
“Reorganization Transactions” shall have the meaning set forth in the recitals.
“Representatives” means, with respect to any Person, any of such Person’s officers, directors, employees, agents, attorneys, accountants, actuaries, consultants, equity financing partners, advisors or other Person associated with, or acting on behalf of, such Person.
“Rule 144” means Rule 144 under the Securities Act (or any successor rule).
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and any successor thereto, and the rules or regulations promulgated thereunder.
“Selling Stockholder Information” shall have the meaning set forth in Section 3.9(a).
“Shelf Registration” means any Registration pursuant to Rule 415 under the Securities Act.
“Shelf Registration Request” shall have the meaning set forth in Section 3.1(a)(ii).
“Shelf Registration Statement” means a Registration Statement filed with the SEC pursuant to Rule 415 under the Securities Act.
“Shelf Takedown Notice” shall have the meaning set forth in Section 3.2(b).
“Shelf Takedown Request” shall have the meaning set forth in Section 3.2.
“Stockholder’s Agreement” means the Stockholder’s Agreement, dated the date hereof, by and among (i) the Company and (ii) Holdings.
“Suspension” shall have the meaning set forth in Section 3.1(f).
“Trading Day” means a day on which the principal U.S. securities exchange on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day) or, if the Class A Common Stock is not listed or admitted to trading on such an exchange, Trading Day shall mean a Business Day.
“Transfer” means, with respect to any Registrable Security, any interest therein, or any other securities or equity interests relating thereto, a direct or indirect transfer, sale, exchange, assignment, pledge, hypothecation or other encumbrance or other disposition thereof, including the grant of an option or other right, whether directly or indirectly, whether voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise. “Transferred” shall have a correlative meaning.
“Underwritten Offering” means an underwritten offering, including any bought deal or block sale to a financial institution conducted as an Underwritten Offering.
“Underwritten Shelf Takedown” means an Underwritten Offering pursuant to an effective Shelf Registration Statement.
“WKSI” means any Securities Act registrant that is a well-known seasoned issuer as defined in Rule 405 under the Securities Act at the most recent eligibility determination date specified in paragraph (2) of that definition.
2.2 Other Interpretive Provisions.
(i) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(ii) The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and any subsection and Section references are to this Agreement unless otherwise specified.
(iii) The term “including” is not limiting and means “including without limitation.”
(iv) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.
(v) Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.
Article III
REGISTRATION RIGHTS
The Company shall perform and comply, and cause each of its subsidiaries to perform and comply, with such of the following provisions as are applicable to them. Each Holder shall perform and comply with such of the following provisions as are applicable to such Holder.
3.1 | Demand Registration. |
(a) Request for Demand Registration.
(i) Following the occurrence of the IPO, subject to Section 3.4, any Holder shall have the right, for itself or together with one or more other Holders, to make a written request from time to time (a “Demand Registration Request”) to the Company for Registration of all or part of the Registrable Securities held by such Holder (a “Demand Registration”).
(ii) Each Demand Registration Request shall specify (x) the aggregate amount of Registrable Securities proposed to be registered, (y) the intended method or methods of disposition thereof and (z) whether the Demand Registration Request is for an Underwritten Offering or a Shelf Registration (a “Shelf Registration Request”).
(iii) If a Demand Registration Request is for a Shelf Registration, and the Company is eligible to file a Registration Statement on Form S-3, the Company shall promptly file with the SEC a Shelf Registration Statement on Form S-3 pursuant to Rule 415 under the Securities Act relating to the offer and sale of Registrable Securities by the initiating Holders from time to time in accordance with the methods of distribution elected by such Holders, subject to all applicable provisions of this Agreement.
(iv) If the Demand Registration Request is for a Shelf Registration and the Company is not eligible to file a Registration Statement on Form S-3, the Company shall promptly file with the SEC a Shelf Registration Statement on Form S-1 or any other form that the Company is then permitted to use pursuant to Rule 415 under the Securities Act (or such other Registration Statement as the Board of Directors may determine to be appropriate) relating to the offer and sale of Registrable Securities by the initiating Holders from time to time in accordance with the methods of distribution elected by such Holders.
(v) If on the date of the Shelf Registration Request the Company is a WKSI, then any Shelf Registration Statement may (if the Board of Directors determines it to be appropriate to do so) include an unspecified amount of Registrable Securities to be sold by unspecified Holders; if on the date of the Shelf Registration Request the Company is not a WKSI, then the Shelf Registration Request shall specify the aggregate amount of Registrable Securities to be registered.
(b) Limitation on Registrations. The Company shall not be obligated to take any action to effect any Demand Registration if: (i) a Demand Registration or Piggyback Registration was declared effective or an Underwritten Offering was consummated by either the Company or the Holders within the preceding 90 days; (ii) the Company has filed another Registration Statement (other than on Form S-8 or Form S-4 or any successor thereto) that has not yet become effective; (iii) the value of the Registrable Securities proposed to be sold by the initiating Holders is not reasonably expected (in the good faith judgment of the Board of Directors) to yield net proceeds of at least $25 million, in the case of a Shelf Registration on Form S-3, or in the case of an Underwritten Offering, of at least $50 million; provided that, for the purposes of clauses (i) and (ii), any Registration Statement withdrawn pursuant to Section 3.1(d) shall not affect the Company’s obligation to effect any Demand Registration.
(c) Demand Notice. Promptly upon receipt of a Demand Registration Request pursuant to Section 3.1(a) (but in no event more than 10 Business Days thereafter), the Company shall deliver a written notice of the Demand Registration Request to all other Holders offering each such Holder the opportunity to include in the Demand Registration that number of Registrable Securities as the Holder may request in writing (the “Demand Notice”). Subject to Sections 3.1(g) and (h), the Company shall include in the Demand Registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within five Business Days after the date that the Demand Notice was delivered.
(d) Demand Withdrawal. Each Holder that has requested the inclusion of Registrable Securities in a Registration (other than a Registration in connection with a Public Offering) pursuant to Sections 3.1(a) or (c) may withdraw all or any portion of its Registrable Securities from that registration at any time prior to the effectiveness of the applicable Registration Statement by delivering written notice to the Company. Upon receipt of a notice or notices withdrawing (i) all of the Registrable Securities included in that Registration Statement by the initiating Holder or (ii) a number of such Registrable Securities so as to cause the expected net proceeds to fall below the applicable threshold set forth in Section 3.1(b), the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement.
(e) Effectiveness.
(i) The Company shall use commercially reasonable efforts to cause any Registration Statement filed by it pursuant to this Agreement to become effective as promptly as practicable, subject to all applicable provisions of this Agreement.
(ii) The Company shall use commercially reasonable efforts to keep any Shelf Registration Statement filed on Form S-3 continuously effective under the Securities Act to permit the Prospectus forming a part of it to be usable by Holders until the earlier of: (A) the date as of which all Registrable Securities have been sold pursuant to that Shelf Registration Statement or another Registration Statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder); (B) the date as of which no Holder whose Registrable Securities are registered on such Form S-3 holds Registrable Securities; (C) any date reasonably determined by the Board of Directors to be appropriate, excluding any date that is fewer than 180 days after the effectiveness of the Registration Statement; and (D) the third anniversary of the effectiveness of the Registration Statement.
(iii) If the Registration Statement filed is a Shelf Registration Statement on any form other than Form S-3 and such Registration Statement was not filed in connection with an Underwritten Offering, the Company shall use commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act until such time as the Company is eligible to file a Shelf Registration Statement on Form S-3 covering the Registrable Securities thereon or such shorter period during which all Registrable Securities included in the Registration Statement have actually been sold.
(iv) If the Registration Statement filed is a Shelf Registration Statement on any form other than Form S-3 and such Registration Statement was filed in connection with an Underwritten Offering, the Company shall use commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act, for a period of at least 180 days after the effective date thereof or such other period as the underwriters for any Underwritten Offering may determine to be appropriate, or such shorter period during which all Registrable Securities included in the Registration Statement have actually been sold; provided that such period shall be extended for a period of time equal to the period the Holders of Registrable Securities may be required to refrain from selling any securities included in the Registration Statement at either the request of the Company or an underwriter of the Company pursuant to the provisions of this Agreement.
(f) Delay in Filing; Suspension of Registration. If the filing, initial effectiveness or continued use of a Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, the Registration Statement (a “Suspension”); provided, however, that the Company shall use its commercially reasonable efforts to avoid exercising a Suspension (i) for a period exceeding 60 days on any one occasion or (ii) for an aggregate of more than 120 days in any 12-month period. In the case of a Suspension, the Holders agree to suspend use of the applicable Prospectus in connection with any sale or purchase, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above. The Company shall immediately notify the Holders in writing upon the termination of any Suspension. The Company shall, if necessary, amend or supplement the Prospectus so it does not contain any untrue statement or omission and furnish to the Holders such numbers of copies of the Prospectus as so amended or supplemented as the Holders may reasonably request. The Company shall, if necessary, supplement or amend the Registration Statement, if required by the registration form used by the Company for the Registration Statement or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Holders of a majority of Registrable Securities that are included in such Registration Statement.
(g) Priority of Securities Registered Pursuant to Shelf Registrations. If the Board of Directors concludes in good faith that the number of securities requested to be included in a Shelf Registration exceeds the number that can be sold without being likely to have an adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Registration shall be, (x) first, allocated to each Holder that has requested to participate in such Registration an amount equal to the lesser of (i) the number of such Registrable Securities requested to be registered or sold by such Holder and (ii) a number of such shares equal to such Holder’s Pro Rata Portion, and (y) second, and only if all the securities referred to in clause (x) have been included, the number of other securities that, in the opinion of such managing underwriter or underwriters can be sold without having such adverse effect. If a cutback pursuant to this Section 3.1(g) or Section 3.1(h) would cause an applicable dollar threshold set forth in Section 3.1(b)(iii) not to be met with respect to the Demand Registration, Section 3.1(b)(iii) shall not apply to that Demand Registration.
(h) Priority of Securities in Underwritten Offerings. If the managing underwriter or underwriters of any proposed Underwritten Offering advise the Company in writing that, in its or their opinion, the number of securities requested to be included in the proposed offering exceeds the number that can be sold in that offering without being likely to have an adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, the number of Registrable Securities to be included shall be, (x) first, allocated to each Holder that has requested to participate in such Underwritten Offering an amount equal to the lesser of (i) the number of such Registrable Securities requested to be registered or sold by such Holder, and (ii) a number of such shares equal to such Holder’s Pro Rata Portion, and (y) second, and only if all securities referred to in clause (x) have been included, the number of other securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect.
(i) Participation in Underwritten Offerings. No Person may participate in any Underwritten Offering hereunder unless that Person agrees to sell the Registrable Securities it desires to have covered by the applicable Registration Statement on the basis provided in any underwriting arrangements in customary form and completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents required under the terms of the underwriting arrangements; provided that no Person shall be required to make representations and warranties other than those related to title and ownership of their shares and as to the accuracy and completeness of statements made in a Registration Statement, prospectus, offering circular, or other document in reliance upon and conformity with written information furnished to the Company or the managing underwriter by such Person.
(j) Resale Rights. In the event that a Holder that is a partnership, limited liability company, trust or similar entity requests to participate in a Registration pursuant to this Section 3.1 in connection with a distribution of Registrable Securities to its partners, members or beneficiaries, the Registration shall provide for resale by such partners, members or beneficiaries, if approved by the Board of Directors.
3.2 | Shelf Takedowns. |
(a) At any time the Company has an effective Shelf Registration Statement with respect to Registrable Securities, a Holder, by notice to the Company specifying the intended method or methods of disposition thereof, may make a written request (a “Shelf Takedown Request”) that the Company effect an Underwritten Shelf Takedown of all or a portion of such Holder’s Registrable Securities that are registered on such Shelf Registration Statement, and as soon as practicable thereafter, the Company shall amend or supplement the Shelf Registration Statement as necessary for such purpose, subject to all applicable provisions of this Agreement.
(b) Promptly upon receipt of a Shelf Takedown Request (but in no event more than two Business Days thereafter (or such shorter period as may be reasonably requested in connection with an underwritten “block trade”)) for any Underwritten Shelf Takedown, the Company shall deliver a notice (a “Shelf Takedown Notice”) to each other Holder with Registrable Securities covered by the applicable Registration Statement, or to all other Holders if such Registration Statement is undesignated (each a “Potential Takedown Participant”). The Shelf Takedown Notice shall offer each such Potential Takedown Participant the opportunity to include in any Underwritten Shelf Takedown such number of Registrable Securities as each such Potential Takedown Participant may request in writing. The Company shall include in the Underwritten Shelf Takedown all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within three Business Days (or such shorter period as may be reasonably requested in connection with an underwritten “block trade”) after the date that the Shelf Takedown Notice has been delivered. Any Potential Takedown Participant’s request to participate in an Underwritten Shelf Takedown shall be binding on the Potential Takedown Participant; provided that each such Potential Takedown Participant that elects to participate may condition its participation on the Underwritten Shelf Takedown being completed within 10 Business Days of its acceptance at a price per share (after giving effect to any underwriters’ discounts or commissions) to such Potential Takedown Participant of not less than ninety percent (90%) (or such lesser percentage specified by such Potential Takedown Participant) of the closing price for the shares on their principal trading market on the Business Day immediately prior to such Potential Takedown Participant’s election to participate (the “Participation Conditions”). Notwithstanding the delivery of any Shelf Takedown Notice, but subject to the Participation Conditions (to the extent applicable), all determinations as to whether to complete any Underwritten Shelf Takedown and as to the timing, manner, price and other terms of any Underwritten Shelf Takedown contemplated by this Section 3.2 shall be determined by the initiating Holders.
3.3 | Piggyback Registration. |
(a) Participation. If the Company at any time proposes to file a Registration Statement under the Securities Act or to conduct a Public Offering with respect to any offering of its equity securities for its own account or for the account of any other Persons (other than (i) a Registration under Sections 3.1 or 3.2, (ii) a Registration on Form S-4 or Form S-8 or any successor form to such forms, (iii) a Registration of securities solely relating to an offering and sale to employees or directors of the Company or its subsidiaries pursuant to any employee stock plan, employee stock purchase plan, or other employee benefit plan arrangement, (iv) a Registration solely for the registration of securities issuable upon the conversion, exchange or exercise of any then-outstanding security of the Company or (v) a Registration relating to a dividend reinvestment plan), then as soon as practicable (but in no event less than 10 Business Days prior to the proposed date of filing of such Registration Statement or, in the case of a Public Offering under a Shelf Registration Statement, the anticipated pricing or trade date), the Company shall give written notice (a “Piggyback Notice”) of such proposed filing or Public Offering to all Holders, and such Piggyback Notice shall offer the Holders the opportunity to register under such Registration Statement, or to sell in such Public Offering, such number of Registrable Securities as each such Holder may request in writing (a “Piggyback Registration”). The Company shall not be required to provide a Piggyback Notice to Holders of any Registrable Securities that are already registered pursuant to an effective registration statement. Subject to Section 3.1(b), the Company shall include in such Registration Statement or in such Public Offering as applicable, all such Registrable Securities that are requested to be included therein within five Business Days after the receipt by such Holder of any such notice; provided, however, that if at any time after giving written notice of its intention to register or sell any securities and prior to the effective date of the Registration Statement filed in connection with such Registration, or the pricing or trade date of a Public Offering under a Shelf Registration Statement, the Company determines for any reason not to register or sell or to delay Registration or the sale of such securities, the Company shall give written notice of such determination to each Holder and, thereupon, (i) in the case of a determination not to register or sell, shall be relieved of its obligation to register or sell any Registrable Securities in connection with such Registration or Public Offering (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holders entitled to request that such Registration or sale be effected as a Demand Registration under Section 3.1 or an Underwritten Shelf Takedown, as the case may be, and (ii) in the case of a determination to delay Registration or sale, in the absence of a request for a Demand Registration or an Underwritten Shelf Takedown, as the case may be, shall also be permitted to delay registering or selling any Registrable Securities. Any Holder shall have the right to withdraw all or part of its request for inclusion of its Registrable Securities in a Piggyback Registration by giving written notice to the Company of its request to withdraw prior to such Registration the securities being registered in such Piggyback Registration.
(b) Priority of Piggyback Registration. If the managing underwriter or underwriters of any proposed offering of Registrable Securities included in a Piggyback Registration informs the Company and the participating Holders in writing that, in its or their opinion, the number of securities that such Holders and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Registration shall be, (x) first, one hundred percent (100%) of the securities that the Company proposes to sell, (y) second, and only if all the securities referred to in clause (x) have been included, the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect, with such number to be allocated among the Holders that have requested to participate in such Registration based on an amount equal to the lesser of (i) the number of such Registrable Securities requested to be sold by such Holder, and (ii) a number of such shares equal to such Holder’s Pro Rata Portion, and (z) third, and only if all of the Registrable Securities referred to in clause (ii) have been included in such Registration, any other securities eligible for inclusion in such Registration.
(c) No Effect on Other Registrations. No Registration of Registrable Securities effected pursuant to a request under this Section 3.3 shall be deemed to have been effected pursuant to Section 3.1 or shall relieve the Company of its obligations under Section 3.1.
3.4 Lock-Up Agreements. In connection with each Registration or sale of Registrable Securities pursuant to Sections 3.1 or 3.3 conducted as an Underwritten Offering, each Holder, to the extent required by the applicable managing underwriter, agrees hereby not to, and agrees to execute and deliver a lock-up agreement with the underwriter(s) of such Public Offering restricting such Holder’s right to, (a) Transfer, directly or indirectly, any equity securities of the Company held by such Holder, or (b) enter into any swap or other arrangement that transfers to another any of the economic consequences of ownership of such securities during the period commencing on the date of the final Prospectus relating to such Public Offering and ending on the date specified by the underwriters (such period not to exceed 90 days plus such additional period as may be requested by the Company or an underwriter due to regulatory restrictions on the publication or other distribution of research reports and analyst recommendations and opinions, if applicable), in each case, excluding transfers pursuant to any carve-outs in the applicable lock-up agreement. The terms of such lock-up agreements shall be negotiated among the Holders, the Company and the underwriters and shall include customary carve-outs from the restrictions on Transfer set forth therein.
3.5 | Registration Procedures. |
(a) Requirements. In connection with the Company’s obligations under Sections 3.1 and 3.3, the Company shall use its commercially reasonable efforts to effect such Registration and to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall use its commercially reasonable efforts to:
(i) as promptly as practicable, prepare the required Registration Statement, including all exhibits and financial statements required under the Securities Act to be filed therewith and Prospectus, and, before filing a Registration Statement or Prospectus or any amendments or supplements thereto, (x) furnish to the underwriters, if any, and to the Holders of the Registrable Securities covered by such Registration Statement, copies of all documents prepared to be filed, which documents shall be subject to the review of such underwriters and such Holders and their respective counsel, (y) make such changes in such documents concerning the Holders prior to the filing thereof as such Holders, or their counsel, may reasonably request and (z) except in the case of a Registration under Section 3.3, not file any Registration Statement or Prospectus or amendments or supplements thereto to which participating Holders, in such capacity, or the underwriters, if any, shall reasonably object;
(ii) prepare and file with the SEC such amendments and post-effective amendments to such Registration Statement and supplements to the Prospectus as may be (x) reasonably requested by any participating Holder with Registrable Securities covered by such Registration Statement, (y) reasonably requested by any participating Holder (to the extent such request relates to information relating to such Holder) or (z) necessary to keep such Registration Statement effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;
(iii) notify the participating Holders and the managing underwriter or underwriters, if any, and (if requested) confirm such notice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company (a) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable Prospectus or any amendment or supplement thereto has been filed, (b) of any written comments by the SEC, or any request by the SEC or other federal or state governmental authority for amendments or supplements to such Registration Statement or such Prospectus, or for additional information (whether before or after the effective date of the Registration Statement) or any other correspondence with the SEC relating to, or which may affect, the Registration, (c) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final Prospectus or the initiation or threatening of any proceedings for such purposes, (d) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in all material respects and (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;
(iv) promptly notify each selling Holder and the managing underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement or the Prospectus included in such Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such Prospectus or any preliminary Prospectus, in light of the circumstances under which they were made) not misleading, when any Issuer Free Writing Prospectus includes information that may conflict with the information contained in the Registration Statement, or, if for any other reason it shall be necessary during such time period to amend or supplement such Registration Statement or Prospectus in order to comply with the Securities Act and, as promptly as reasonably practicable thereafter, prepare and file with the SEC, and furnish without charge to the selling Holders and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement or Prospectus, which shall correct such misstatement or omission or effect such compliance;
(v) to the extent the Company is eligible under the relevant provisions of Rule 430B under the Securities Act, if the Company files any Shelf Registration Statement, the Company shall include in such Shelf Registration Statement such disclosures as may be required by Rule 430B under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders) in order to ensure that the Holders may be added to such Shelf Registration Statement at a later time through the filing of a Prospectus supplement rather than a post-effective amendment;
(vi) prevent, or obtain the withdrawal of, any stop order or other order or notice preventing or suspending the use of any preliminary or final Prospectus;
(vii) promptly incorporate in a Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment such information as the managing underwriter or underwriters and the participating Holders agree should be included therein relating to the plan of distribution with respect to such Registrable Securities; and make all required filings of such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment;
(viii) furnish to each selling Holder and each underwriter, if any, without charge, as many conformed copies as such Holder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment or supplement thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);
(ix) deliver to each selling Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder or underwriter (it being understood that the Company shall consent to the use of such Prospectus or any amendment or supplement thereto by each of the selling Holders and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto);
(x) on or prior to the date on which the applicable Registration Statement becomes effective, use its commercially reasonable efforts to register or qualify, and cooperate with the selling Holders, the managing underwriter or underwriters, if any, and their respective counsel, in connection with the Registration or qualification of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction as any such selling Holder or managing underwriter or underwriters, if any, or their respective counsel reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such Registration or qualification in effect for such period as required by Section 3.1, as applicable; provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject;
(xi) cooperate with the selling Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request prior to any sale of Registrable Securities to the underwriters;
(xii) cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other U.S. governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;
(xiii) make such representations and warranties to the Holders being registered, and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in public offerings similar to the offering then being undertaken;
(xiv) enter into such customary agreements (including underwriting and indemnification agreements) and take all such other actions as the participating Holders or the managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the Registration and disposition of such Registrable Securities;
(xv) in the case of an Underwritten Offering, obtain for delivery to the underwriter or underwriters, if any, an opinion or opinions from counsel for the Company dated the date of the closing under the underwriting agreement, in customary form, scope and substance, which opinions shall be reasonably satisfactory to such underwriters and their counsel;
(xvi) in the case of an Underwritten Offering, obtain for delivery to the Company and the managing underwriter or underwriters, with copies to the Holders included in such Registration or sale, a comfort letter from the Company’s independent certified public accountants or independent auditors (and, if necessary, any other independent certified public accountants or independent auditors of any subsidiary of the Company or any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) in customary form and covering such matters of the type customarily covered by comfort letters as the managing underwriter or underwriters reasonably request, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement;
(xvii) cooperate with each seller of Registrable Securities and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;
(xviii) comply with all applicable securities laws and, if a Registration Statement was filed, make available to its security holders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;
(xix) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement;
(xx) to cause all Registrable Securities covered by the applicable Registration Statement to be listed on each securities exchange on which any of the Company’s equity securities are then listed or quoted and on each inter-dealer quotation system on which any of the Company’s equity securities are then quoted;
(xxi) make available upon reasonable notice at reasonable times and for reasonable periods for inspection by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by any such underwriter, all pertinent financial and other records and pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees and the independent public accountants who have certified its financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such Person in connection with such Registration Statement;
(xxii) in the case of an Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter or underwriters in any such offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto;
(xxiii) take no direct or indirect action prohibited by Regulation M under the Exchange Act; and
(xxiv) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the terms of this Agreement.
(b) Company Information Requests. The Company may require each seller of Registrable Securities as to which any Registration or sale is being effected to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Holder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing and the Company may exclude from such Registration or sale the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each Holder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.
(c) Discontinuing Registration. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.5(a)(iv), such Holder shall discontinue disposition of Registrable Securities pursuant to such Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3.5(a)(iv), or until such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus, or any amendments or supplements thereto, and if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period during which the applicable Registration Statement is required to be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus contemplated by Section 3.5(a)(iv) or is advised in writing by the Company that the use of the Prospectus may be resumed.
3.6 | Underwritten Offerings. |
(a) Shelf and Demand Registrations. If requested by the underwriters for any Underwritten Offering, pursuant to a Registration or sale under Section 3.1, the Company shall enter into an underwriting agreement with such underwriters, such agreement to be reasonably satisfactory in substance and form to each of the Company, the participating Holders and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including indemnities no less favorable to the recipient thereof than those provided in Section 3.9. The Holders of the Registrable Securities proposed to be distributed by such underwriters shall cooperate with the Company in the negotiation of the underwriting agreement and shall give consideration to the reasonable suggestions of the Company regarding the form thereof, and such Holders shall complete and execute all questionnaires, powers of attorney and other documents reasonably requested by the underwriters and required under the terms of such underwriting arrangements. Any such Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s title to the Registrable Securities, such Holder’s intended method of distribution and any other representations to be made by the Holder as are generally prevailing in agreements of that type, and the aggregate amount of the liability of such Holder under such agreement shall not exceed such Holder’s proceeds from the sale of its Registrable Securities in the offering, net of underwriting discounts and commissions but before expenses.
(b) Piggyback Registrations. If the Company proposes to register or sell any of its securities under the Securities Act as contemplated by Section 3.3 and such securities are to be distributed through one or more underwriters, the Company shall, if requested by any Holder pursuant to Section 3.3, and subject to the provisions of Section 3.3(b), use its commercially reasonable efforts to arrange for such underwriters to include on the same terms and conditions that apply to the other sellers in such Registration or sale all the Registrable Securities to be offered and sold by such Holder among the securities of the Company to be distributed by such underwriters in such Registration or sale. The Holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and shall complete and execute all questionnaires, powers of attorney and other documents reasonably requested by the underwriters and required under the terms of such underwriting arrangements. Any such Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s title to the Registrable Securities, such Holder’s intended method of distribution and any other representations to be made by the Holder as are generally prevailing in agreements of that type, and the aggregate amount of the liability of such Holder shall not exceed such Holder’s proceeds from the sale of its Registrable Securities in the offering, net of underwriting discounts and commissions but before expenses.
(c) Selection of Underwriters; Selection of Counsel. In the case of an Underwritten Offering under Sections 3.1 or 3.2, the managing underwriter or underwriters to administer the offering shall be determined by the Holders holding a majority of the Registrable Securities being sold; provided that such underwriter or underwriters shall be reasonably acceptable to the Company.
3.7 No Inconsistent Agreements. Neither the Company nor any of its subsidiaries shall hereafter enter into, and neither the Company nor any of its subsidiaries is currently a party to, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders by this Agreement.
3.8 Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Agreement shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC or FINRA, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws (including reasonable fees and disbursements of counsel for the underwriters in connection with Blue Sky qualifications of the Registrable Securities), (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses), (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants or independent auditors of the Company and any subsidiaries of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance), (v) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or quotation of the Registrable Securities on any inter-dealer quotation system, (vi) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration or sale, (vii) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties) and (viii) all expenses related to the “road show” for any Underwritten Offering (including the reasonable out-of-pocket expenses of the Holders and underwriters, if so requested). All such expenses are referred to herein as “Registration Expenses.” The Company shall not be required to pay any fees and disbursements to underwriters not customarily paid by the issuers of securities in an offering similar to the applicable offering, including underwriting discounts and commissions and transfer taxes, if any, attributable to the sale of Registrable Securities.
3.9 | Indemnification. |
(a) Indemnification by the Company. The Company shall indemnify and hold harmless, to the full extent permitted by law, each Holder, each shareholder, member, limited or general partner of such Holder, each shareholder, member, limited or general partner of each such shareholder, member, limited or general partner, each of their respective Affiliates, officers, directors, shareholders, employees, advisors, and agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively “Losses”) arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities are registered or sold under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading; provided that no selling Holder shall be entitled to indemnification pursuant to this Section 3.9(a) in respect of any untrue statement or omission contained in any information relating to such selling Holder furnished in writing by such selling Holder to the Company specifically for inclusion in a Registration Statement and used by the Company in conformity therewith (such information, “Selling Stockholder Information”). This indemnity shall be in addition to any liability the Company may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any indemnified party and shall survive the Transfer of such securities by such Holder and regardless of any indemnity agreed to in the underwriting agreement that is less favorable to the Holders. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above (with appropriate modification) with respect to the indemnification of the indemnified parties.
(b) Indemnification by the Selling Holders. Each selling Holder agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) from and against any Losses resulting from (i) any untrue statement of a material fact in any Registration Statement under which such Registrable Securities were registered or sold under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein) or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission is contained in such selling Holder’s Selling Stockholder Information. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds from the sale of its Registrable Securities in the offering giving rise to such indemnification obligation, net of underwriting discounts and commissions but before expenses, less any amounts paid by such Holder pursuant to Section 3.9(d) and any amounts paid by such Holder as a result of liabilities incurred under the underwriting agreement, if any, related to such sale.
(c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (w) the indemnifying party has agreed in writing to pay such fees or expenses, (x) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person, (y) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (z) in the reasonable judgment of any such Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If the indemnifying party assumes the defense, then no indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. If such defense is not assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld. It is understood that the indemnifying party or parties shall not, except as specifically set forth in this Section 3.9(c), in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties or (z) a conflict or potential conflict exists or may exist (based upon advice of counsel to an indemnified party) between such indemnified party and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification provided for in Sections 3.9(a) and (b) is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein (other than as a result of exceptions or limitations on indemnification contained in Sections 3.9(a) and (b)), then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. In connection with any Registration Statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 3.9(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 3.9(d). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The amount paid or payable by an indemnified party as a result of the Losses referred to in Sections 3.9(a) and (b) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 3.9(d), in connection with any Registration Statement filed by the Company, a selling Holder shall not be required to contribute any amount in excess of the dollar amount of the proceeds from the sale of its Registrable Securities in the offering giving rise to such contribution obligation, net of underwriting discounts and commissions but before expenses, less any amounts paid by such Holder pursuant to Section 3.9(b) and any amounts paid by such Holder as a result of liabilities incurred under the underwriting agreement, if any, related to such sale. If indemnification is available under this Section 3.9, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 3.9(a) and (b) hereof without regard to the provisions of this Section 3.9(d). The remedies provided for in this Section 3.9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
3.10 Rules 144 and 144A and Regulation S. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it shall, upon the request of any Holder, make publicly available such necessary information for so long as necessary to permit sales that would otherwise be permitted by this Agreement pursuant to Rule 144, Rule 144A or Regulation S under the Securities Act, as such rules may be amended from time to time or any similar rule or regulation hereafter adopted by the SEC), and it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without Registration under the Securities Act in transactions that would otherwise be permitted by this Agreement and within the limitation of the exemptions provided by (i) Rule 144, Rule 144A or Regulation S under the Securities Act, as such rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.
3.11 Existing Registration Statements. Notwithstanding anything herein to the contrary and subject to applicable law and regulation, the Company may satisfy any obligation hereunder to file a Registration Statement or to have a Registration Statement become effective by a specified date by designating, by notice to the Holders, a Registration Statement that previously has been filed with the SEC or become effective, as the case may be, as the relevant Registration Statement for purposes of satisfying such obligation, and all references to any such obligation shall be construed accordingly; provided that such previously filed Registration Statement may be, and is, amended or, subject to applicable securities laws, supplemented to add the number of Registrable Securities, and, to the extent necessary, to identify as selling stockholders those Holders demanding the filing of a Registration Statement pursuant to the terms of this Agreement. To the extent this Agreement refers to the filing or effectiveness of other Registration Statements, by or at a specified time and the Company has, in lieu of then filing such Registration Statements or having such Registration Statements become effective, designated a previously filed or effective Registration Statement as the relevant Registration Statement for such purposes, in accordance with the preceding sentence, such references shall be construed to refer to such designated Registration Statement, as amended or supplemented in the manner contemplated by the immediately preceding sentence.
Article IV
MISCELLANEOUS
4.1 Authority; Effect. Each party hereto represents and warrants to and agrees with each other party that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such party and do not violate any 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. The Company and its subsidiaries shall be jointly and severally liable for all obligations of each such party pursuant to this Agreement.
4.2 Notices. Any notices, requests, demands and other communications required or permitted in this Agreement shall be effective if in writing and (i) delivered personally, (ii) sent by facsimile or e-mail, or (iii) sent by overnight courier, in each case, addressed as follows:
If to the Company to:
Excelerate Energy, Inc.
2445 Technology Forest Blvd., Level 6
The Woodlands, TX 77381
Telephone: (832) 813-7100
Attention: General Counsel and Secretary
E-mail: [●]
with copies (not constituting notice) to:
Gibson, Dunn & Crutcher LLP
811 Main Street, Suite 3000
Houston, TX 77002
Attention: Andrew L. Fabens
Hillary H. Holmes
E-mail: AFabens@gibsondunn.com
HHolmes@gibsondunn.com
and
Frederic Dorwart, Lawyers PLLC
Old City Hall
124 East Fourth Street
Tulsa, OK 74103
Attention: Amanda D. Lovelace
E-mail: alovelace@fdlaw.com
If to a Holder, to the address on file in the Company’s records.
Notice to the holder of record of any Registrable Securities shall be deemed to be notice to the holder of such securities for all purposes hereof.
Unless otherwise specified herein, such notices or other communications shall be deemed effective (i) on the date received, if personally delivered, (ii) on the date received if delivered by facsimile or e-mail on a Business Day, or if not delivered on a Business Day, on the first Business Day thereafter and (iii) 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.
4.3 Termination and Effect of Termination. This Agreement shall terminate upon the date on which no Holder holds any Registrable Securities, except for the provisions of Sections 3.9 and 3.10, which shall survive any such termination. No termination under this Agreement shall relieve any Person of liability for breach or Registration Expenses incurred prior to termination. In the event this Agreement is terminated, each Person entitled to indemnification rights pursuant to Section 3.9 hereof shall retain such indemnification rights with respect to any matter that (i) may be an indemnified liability thereunder and (ii) occurred prior to such termination.
4.4 Permitted Transferees. The rights of a Holder hereunder may be assigned (but only with all related obligations as set forth below) in connection with a Transfer of Registrable Securities to a Permitted Transferee of that Holder. Without prejudice to any other or similar conditions imposed hereunder with respect to any such Transfer, no assignment permitted under the terms of this Section 4.4 shall be effective unless the Permitted Transferee to which the assignment is being made, if not a Holder, has delivered to the Company a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company that the Permitted Transferee shall be bound by, and shall be a party to, this Agreement. A Permitted Transferee to whom rights are transferred pursuant to this Section 4.4 may not again transfer those rights to any other Permitted Transferee, other than as provided in this Section 4.4.
4.5 Remedies. The parties to this Agreement 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 that may be available, each of the parties hereto shall be entitled to specific performance of the obligations of the other parties hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances. 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 any 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.
4.6 Amendments. This Agreement may not be orally amended, modified, extended or terminated, nor shall any oral waiver of any of its terms be effective. This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by the Company and the Holders of a majority of the Registrable Securities under this Agreement; provided, however, that any amendment, modification, extension or termination that disproportionately and adversely affects any Holder shall require the prior written consent of such Holder. Each such amendment, modification, extension or termination shall be binding upon each party hereto. In addition, each party hereto may waive any right hereunder by an instrument in writing signed by such party.
4.7 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.
4.8 Consent to Jurisdiction. Each party to this Agreement, by its execution hereof, (i) hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware and the County of New Castle 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, (ii) 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 (iii) 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 or thereof 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, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this Agreement, the court in which such litigation is being heard shall be deemed to be included in clause (i) above. 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 4.2 hereof is reasonably calculated to give actual notice.
4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT SHALL 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 4.9 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND SHALL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
4.10 Merger; Binding Effect, Etc. This Agreement constitutes the entire agreement of the parties with respect to its subject matter, supersedes all prior or contemporaneous oral or written agreements or discussions with respect to such subject matter, and shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective heirs, representatives, successors and permitted assigns. Except as otherwise expressly provided herein, no Holder or other party 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.
4.11 Counterparts. This Agreement may be signed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by telecopier, facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart thereof. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.
4.12 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.
[Signature pages follow.]
IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement as of the date first above written.
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Excelerate Energy, Inc. |
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Signature Page to Registration Rights Agreement
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Excelerate Energy Holdings, LLC |
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By: |
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Maya Maritime LLC |
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(a) |
If to the Company or the Partnership, to: |
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Excelerate Energy, Inc. or |
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Excelerate Energy Limited Partnership, as appliacble |
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2445 Technology Forest Blvd., Level 6 |
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The Woodlands, TX 77381 |
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Telephone: (832) 813-7100 |
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Attention: General Counsel and Secretary |
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E-mail: [●] |
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with copies (not constituting notice) to: |
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Gibson, Dunn & Crutcher LLP |
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811 Main Street, Suite 3000 |
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Houston, TX 77002 |
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Attention: Andrew L. Fabens |
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Hillary H. Holmes
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E-mail: AFabens@gibsondunn.com |
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HHolmes@gibsondunn.com
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Frederic Dorwart, Lawyers PLLC | ||
Old City Hall | ||
124 East Fourth Street | ||
Tulsa, OK 74103 | ||
Attention: [●] | ||
E-mail: [●] | ||
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Excelerate Energy Holdings, LLC | ||
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Attention: [●]
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Attention: [●] | ||
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COMPANY:
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Excelerate Energy, Inc.
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By:
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Name:
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Title:
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PARTNERSHIP:
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Excelerate Energy Limited Partnership
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By: Excelerate Energy, Inc., its general partner
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By:
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KAISER INVESTOR:
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Excelerate Energy Holdings, LLC
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Number of Shares of
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Class A Common Stock
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__________________
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Number of Shares of
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Class B Common Stock
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[NAME OF TRANSFEROR]
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Name:
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Title:
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[NAME OF TRANSFEREE]
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EXCELERATE ENERGY, INC.
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Exhibit 10.1
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
Excelerate energy limited partnership
a Delaware limited partnership
dated as of [●], 2022
TABLE OF CONTENTS
Page
Article I GENERAL PROVISIONS | 1 |
Section 1.01. Formation and Continuation | 1 |
Section 1.02. Name | 1 |
Section 1.03. Principal Place of Business; Other Places of Business | 2 |
Section 1.04. Designated Agent for Service of Process | 2 |
Section 1.05. Term | 2 |
Section 1.06. Business Purpose | 2 |
Section 1.07. Powers | 2 |
Section 1.08. Certificates; Filings | 2 |
Section 1.09. Representations and Warranties by the Partners | 3 |
Section 1.10. Liability of the Partners Generally | 4 |
Section 1.11. Admission of General Partner | 4 |
Section 1.12. Withdrawal of the General Partner | 4 |
Section 1.13. Election of a Successor General Partner | 5 |
Article II INTERESTS; CAPITAL CONTRIBUTIONS | 5 |
Section 2.01. Interests | 5 |
Section 2.02. Capital Contributions of the Partners; No Deficit Restoration Obligation | 5 |
Section 2.03. No Interest; No Return | 6 |
Section 2.04. Issuances of Additional Interests | 6 |
Section 2.05. Additional Funds and Additional Capital Contributions | 7 |
Article III DISTRIBUTIONS | 8 |
Section 3.01. Distributions Generally | 9 |
Section 3.02. Tax Distributions | 9 |
Section 3.03. Distributions in Kind | 10 |
Section 3.04. Distributions to Reflect Additional Interests | 10 |
Section 3.05. Other Distribution Rules | 10 |
Article IV Management and OPERATIONS | 11 |
Section 4.01. Management | 11 |
Section 4.02. Tax Actions | 14 |
Section 4.03. Compensation and Reimbursement of General Partner | 14 |
Section 4.04. Outside Activities | 15 |
Section 4.05. Transactions with Affiliates | 16 |
Section 4.06. Limitation on Liability | 16 |
Section 4.07. Indemnification | 17 |
Article V BOOKS AND RECORDS | 17 |
Section 5.01. Books and Records | 17 |
Section 5.02. Financial Accounts | 18 |
Section 5.03. Inspection; Confidentiality | 18 |
Section 5.04. Information to Be Provided by General Partner to Partners | 18 |
Article VI Tax Matters, ACCOUNTING, AND REPORTING | 18 |
Section 6.01. Tax Matters | 18 |
Section 6.02. Accounting and Fiscal Year | 19 |
Article VII INTEREST TRANSFERS AND Partner WITHDRAWALS | 19 |
Section 7.01. Transfer Generally Prohibited | 19 |
Section 7.02. Conditions Generally Applicable to All Transfers | 19 |
Section 7.03. Substituted Partners | 21 |
Section 7.04. Drag-Along and Tag-Along Rights | 21 |
Section 7.05. Partnership Right to Call Interests | 25 |
Section 7.06. Withdrawal | 25 |
Section 7.07. Restrictions on Termination Transactions | 25 |
Section 7.08. Incapacity | 26 |
Article VIII ADMISSION OF ADDITIONAL PARTNERS | 26 |
Section 8.01. Admission of Additional Partners | 26 |
Section 8.02. Limit on Number of Partners | 27 |
Article IX DISSOLUTION, LIQUIDATION AND TERMINATION | 27 |
Section 9.01. Dissolution Generally | 27 |
Section 9.02. Events Causing Dissolution | 27 |
Section 9.03. Distribution upon Dissolution | 28 |
Section 9.04. Rights of Partners | 29 |
Section 9.05. Termination | 29 |
Article X PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS; MEETINGS | 29 |
Section 10.01. Actions and Consents of Partners | 29 |
Section 10.02. Amendments | 30 |
Section 10.03. Procedures for Meetings and Actions of the Partners | 30 |
Article XI EXCHANGE RIGHTS | 31 |
Section 11.01. Elective and Mandatory Exchanges | 31 |
Section 11.02. Additional Terms Applying to Exchanges | 32 |
Section 11.03. Exchange Consideration; Settlement | 33 |
Section 11.04. Adjustment | 34 |
Section 11.05. Class A Common Stock to Be Issued in Connection with an Exchange | 34 |
Section 11.06. Withholding | 35 |
Section 11.07. Tax Treatment | 35 |
Section 11.08. Contribution by the General Partner | 35 |
Article XII MISCELLANEOUS | 35 |
Section 12.01. Conclusive Nature of Determinations | 35 |
Section 12.02. Partnership Counsel | 36 |
Section 12.03. Appointment of General Partner as Attorney-in-Fact | 36 |
Section 12.04. Entire Agreement | 37 |
Section 12.05. Further Assurances | 37 |
Section 12.06. Notices | 37 |
Section 12.07. Governing Law | 38 |
Section 12.08. Jurisdiction and Venue | 38 |
Section 12.09. Equitable Remedies | 38 |
Section 12.10. Construction | 39 |
Section 12.11. Counterparts | 39 |
Section 12.12. Third-Party Beneficiaries | 39 |
Section 12.13. Binding Effect | 39 |
Section 12.14. Severability | 39 |
Section 12.15. Survival | 39 |
Article XIII DEFINED TERMS | 39 |
Section 13.01. Definitions | 39 |
Section 13.02. Interpretation | 48 |
Annexes
ANNEX A – INITIAL INTERESTS
ANNEX B – TAX MATTERS
ANNEX C – SCHEDULE OF OFFICERS
ANNEX D – POLICY REGARDING EXCHANGES
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF EXCELERATE ENERGY LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT of EXCELERATE ENERGY LIMITED PARTNERSHIP, a Delaware Limited Partnership (the “Partnership”), dated as of [●], 2022, is entered into by and between Excelerate Energy Holdings, LLC, a Delaware limited liability company (“Holdings”) and Excelerate Energy, Inc., a Delaware corporation (the “General Partner”).
WHEREAS, since March 1, 2018, the Partnership has been governed by the Fifth Amended and Restated Limited Partnership Agreement (the “Existing Agreement”); and
WHEREAS, the parties to this Agreement desire to amend and restate the Existing Agreement in its entirety as set forth herein; and
WHEREAS, the parties to this Agreement wish to enter into this Agreement to, among other things, (a) admit additional Partners, (b) provide for the management of the Partnership and (c) set forth their respective rights and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be legally bound, agree as follows:
Article I
GENERAL PROVISIONS
Section 1.01. Formation and Continuation. The Partnership is a Limited Partnership previously formed and continued pursuant to the provisions of the Act and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided in this Agreement to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Certificate of Limited Partnership and all actions taken or to be taken by any person who executed and filed or who executes and files, after the date of this Agreement, the Certificate of Limited Partnership or any amendment thereto are hereby adopted and ratified, or authorized, as the case may be.
Section 1.02. Name. The name of the Partnership is “Excelerate Energy Limited Partnership.” The Partnership may also conduct business at the same time under one or more fictitious names if the General Partner determines that such is in the best interests of the Partnership. The Partnership may change its name, from time to time, in accordance with Law.
Section 1.03. Principal Place of Business; Other Places of Business. The principal business office of the Partnership is located at 2445 Technology Forest Blvd, Level 6, the Woodlands, Texas 77381, or such other place within or outside the State of Delaware as the General Partner may from time to time designate. The Partnership may maintain offices and places of business at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
Section 1.04. Designated Agent for Service of Process. So long as required by the Act, the Partnership shall continuously maintain a registered office and a designated and duly qualified agent for service of process on the Partnership in the State of Delaware. The address of the registered office of the Partnership in the State of Delaware shall be as set forth in the Certificate of Limited Partnership. The Partnership’s registered agent for service of process at such address shall also be as set forth in the Certificate of Limited Partnership.
Section 1.05. Term. The term of the Partnership commenced at the time the Certificate of Limited Partnership of the Partnership was filed with the office of the Secretary of State of the State of Delaware and shall continue until the Partnership is dissolved in accordance with the Act or this Agreement. Notwithstanding the dissolution of the Partnership, the existence of the Partnership shall continue until its termination pursuant to this Agreement or as otherwise provided in the Act.
Section 1.06. Business Purpose. The Partnership may carry on any Lawful business, purpose or activity in which a Limited Partnership may be engaged under Law.
Section 1.07. Powers. Subject to the limitations set forth in this Agreement, the Partnership will possess and may exercise all of the powers and privileges granted to it by the Act, any other Law, or this Agreement, together with all powers incidental thereto, so far as such powers are necessary or convenient to the conduct, promotion or attainment of the purposes of the Partnership set forth in Section 1.06.
Section 1.08. Certificates; Filings. The Certificate of Limited Partnership was previously filed on behalf of the Partnership in the office of the Secretary of State of the State of Delaware as required by the Act. The General Partner may execute and file any duly authorized amendments to the Certificate of Limited Partnership from time to time in a form prescribed by the Act. The General Partner shall also cause to be made, on behalf of the Partnership, such additional filings and recordings as the General Partner shall deem necessary or advisable. If requested by the General Partner, the Partners shall promptly execute all certificates and other documents consistent with the terms of this Agreement necessary for the General Partner to accomplish all filing, recording, publishing, and other acts as may be appropriate to comply with all requirements for (a) the formation and operation of a Limited Partnership under the Laws of the State of Delaware, (b) if the General Partner deems it advisable, the operation of the Partnership as a Limited Partnership, in all jurisdictions in which the Partnership proposes to operate, and (c) all other filings required (or determined by the General Partner to be necessary or appropriate) to be made by the Partnership.
Section 1.09. Representations and Warranties by the Partners.
(a) Individual-Partner-Specific Representations. Each Partner that is an individual (including each Additional Partner or Substituted Partner as a condition to becoming an Additional Partner or a Substituted Partner) represents and warrants to, and covenants with, each other Partner that (i) the execution of this Agreement and the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any material agreement by which such Partner or any of such Partner’s property is bound, or any statute, regulation, order or other Law to which such Partner is subject and (ii) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
(b) Non-Individual-Partner-Specific Representations. Each Partner that is not an individual (including each Additional Partner or Substituted Partner as a condition to becoming an Additional Partner or a Substituted Partner) represents and warrants to, and covenants with, each other Partner that (i) the execution of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including that of its general partner(s), managing members(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s) (as the case may be) as required, (ii) the execution of this Agreement and consummation of such transactions will not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws (as the case may be), any material agreement by which such Partner or any of such Partner’s properties or any of its partners, members, beneficiaries, trustees or stockholders (as the case may be) is or are bound, or any statute, regulation, order or other Law to which such Partner or any of its partners, members, trustees, beneficiaries or stockholders (as the case may be) is or are subject, and (iii) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
(c) Securities Laws. Each Partner (including each Additional Partner or Substituted Partner as a condition to becoming an Additional Partner or Substituted Partner) represents and warrants that it is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act and represents, warrants, and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment purposes only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, and not with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Partnership in what it understands to be a speculative and illiquid investment.
(d) Survival of Representations and Warranties. The representations and warranties contained in Sections 1.09(a), 1.09(b), and 1.09(c) shall survive the execution and delivery of this Agreement by each Partner (and, in the case of an Additional Partner or a Substituted Partner, the admission of such Additional Partner or Substituted Partner as a Partner in the Partnership), and the dissolution, liquidation, and termination of the Partnership.
(e) No Representations as to Performance. Each Partner (including each Additional Partner or Substituted Partner as a condition to becoming an Additional Partner or Substituted Partner) hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by the Partnership or any Partner or any employee or representative or Affiliate of the Partnership or any Partner, and that projections and any other information, including financial and descriptive information and documentation, that may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.
(f) Modification of Representations and Warranties. The General Partner may permit the modification of any of the representations and warranties contained in Sections 1.09(a), 1.09(b), and 1.09(c), as applicable, to any Partner (including any Additional Partner or Substituted Partner or any transferee of either); provided, that such representations and warranties, as modified, shall be set forth in either (i) an Interest Designation applicable to the Interests held by such Partner or (ii) a separate writing addressed to the Partnership.
Section 1.10. Liability of the Partners Generally.
(a) Except as otherwise provided in the Act, the General Partner shall have the liabilities of a partner in a partnership without limited partners to Persons other than the Partnership and the Limited Partners.
(b) Except as expressly provided in this Agreement and the Act, no Limited Partner (or former Limited Partner) shall be obligated to make any contribution of capital to the Partnership or have any liability for the debts and obligations of the Partnership. To the fullest extent permitted by applicable law, no Limited Partner (in its capacity as Limited Partner) shall owe a fiduciary duty to the Partnership or any of the other Partners.
Section 1.11. Admission of General Partner. The General Partner is hereby admitted as the sole general partner of the Partnership. If the General Partner ceases to be the General Partner for any reason, then a successor General Partner shall be designated by the General Partner pursuant to Section 1.13. Other than a successor General Partner, no other Persons may be admitted as a general partner of the Partnership. Each Partner hereby forever releases and discharges each, and agrees that it will make no claims against any, direct or indirect member, partner or holder of equity interests in the General Partner based upon any claims against the General Partner (other than claims arising in respect of knowing and intentional fraud, willful misconduct or bad faith) arising under or in connection with this Agreement, including under any “veil piercing” or similar theory, and whether due to claims of undercapitalization of the General Partner or otherwise. Each of the direct and indirect members, partners, and holders of equity interests in the General Partner is an express third-party beneficiary of the foregoing.
Section 1.12. Withdrawal of the General Partner. The General Partner may withdraw as the Partnership’s general partner only by delivering a notice of withdrawal to the Partnership. Such notice shall state the effective date of the General Partner’s withdrawal. Unless such notice is earlier revoked, the General Partner shall be deemed to have withdrawn as the Partnership’s general partner upon the earlier of (a) the effective date stated in such notice and (b) the date a successor General Partner is admitted to the Partnership pursuant to Section 1.13.
Section 1.13. Election of a Successor General Partner. If the General Partner ceases to be the Partnership’s general partner for any reason, the General Partner shall, within 90 days thereafter, elect a successor General Partner. Any Person so elected to be successor General Partner shall be admitted to the Partnership as the General Partner effective upon the date the former General Partner ceased to be the Partnership’s General Partner only upon the Partnership’s receipt of a written assumption by such Person of all of the General Partner’s rights, obligations and agreements hereunder, and the business of the Partnership shall continue without the commencement of the winding-up of the Partnership.
Article II
INTERESTS; CAPITAL CONTRIBUTIONS
Section 2.01. Interests.
(a) Generally. The interests of the Partners in the Partnership are divided into, and represented by, the Interests, each having the rights and obligations specified in this Agreement.
(b) Classes. The Interests are initially divided into:
(i) “Class A Interests,” which are issuable to the General Partner and such other persons as the General Partner shall determine;
(ii) “Class B Interests,” which are issuable to Holdings and as otherwise provided in this Agreement; and
Other Classes of Interests. The Partnership may issue additional Interests or create additional classes, series, subclasses, or sub-series of Interests in accordance with this Agreement.
(c) Recapitalization. Immediately upon the execution of this Agreement and without any action required on part of the Partnership or any Partner, the outstanding Interests (as defined in the Existing Agreement) issued and outstanding immediately before the effective time of this Agreement shall be recapitalized into Class B Interests of the Partnership in the amount set forth opposite the name of the Partner on the Register (the “Recapitalization”).
Section 2.02. Capital Contributions of the Partners; No Deficit Restoration Obligation.
(a) Capital Contributions. The Partners made, shall be treated as having made, or have agreed to make, Capital Contributions to the Partnership and were issued the Interests indicated on the Register. Except as provided by Law or in this Agreement, the Partners shall have no obligation or, except as otherwise provided in this Agreement or with the prior written consent of the General Partner, right to make any other Capital Contributions or any loans to the Partnership.
(b) No Deficit Restoration Obligation. No Limited Partner shall have an obligation to make any contribution to the capital of the Partnership as the result of a deficit balance in its Capital Account, and any such deficit shall not be considered a Debt owed to the Partnership or to any other Person for any purpose whatsoever.
Section 2.03. No Interest; No Return. No Partner shall be entitled to interest on its Capital Contribution or on such Partner’s Capital Account balance. Except as provided by this Agreement, any Interest Designation, or by Law, no Partner shall have any right to demand or receive a withdrawal or the return of its Capital Contribution from the Partnership. Except to the extent provided in this Agreement or in any Interest Designation, no Partner shall have priority over any other Partner as to distributions or the return of Capital Contributions.
Section 2.04. Issuances of Additional Interests. Subject to the rights of any Partner set forth in an Interest Designation:
(a) General. The Partnership may issue additional Interests for any Partnership purpose at any time or from time to time to the Partners (including, subject to Section 2.04(b), the General Partner) or any other Person and may admit any such Person as an Additional Partner for such consideration and on such terms and conditions as shall be established by the General Partner. Any additional Interests may be issued in one or more classes or one or more series of any of such classes with such designations, preferences, conversion or other rights, voting powers, restrictions, rights to distributions, qualifications and terms and conditions of redemption (including rights that may be senior or otherwise entitled to preference over existing Interests) as shall be determined by the Partnership (each, an “Interest Designation”). Upon the issuance of any additional Interest, the General Partner shall amend the Register and the books and records of the Partnership as appropriate to reflect such issuance. Except to the extent specifically set forth in any Interest Designation, an Interest of any class or series other than a Common Interest shall not entitle the holder thereof to vote on, or consent to, any matter.
(b) Issuances to the General Partner. No additional Interests shall be issued to the General Partner unless at least one of the following conditions is satisfied:
(i) Additional Interests are also issued to all Partners holding Common Interests in proportion to their respective Percentage Interests in the Common Interests;
(ii) The additional Interests issued to the General Partner are Class A Interests issued in connection with an issuance of Class A Common Stock or issued with appropriate adjustments to the Exchange Rate in accordance with Section 11.04, and the General Partner contributes to the Partnership the net proceeds received in connection with the issuance by the General Partner of such Class A Common Stock;
(iii) The additional Interests issued to the General Partner are Equivalent Interests (other than Common Interests) issued in connection with an issuance by the General Partner of Preferred Stock, New Securities, or other interests in the General Partner (other than Common Stock), and the General Partner contributes to the Partnership the net proceeds received in connection with the issuance by the General Partner of such Preferred Stock, New Securities, or other interests in the General Partner;
(iv) There is a recapitalization of the Capital Stock of the General Partner, including any stock split, stock dividend, reclassification, or similar transaction
(v) The additional Interests are issued upon the conversion, redemption or exchange of Debt, Interests or other securities issued by the Partnership and held by the General Partner; and
(vi) The additional Interests are issued in accordance with the express terms of the other provisions of this Article II.
(c) Issuance of Class B Interests. No additional Class B Interests shall be issued except in the event of a recapitalization of the Capital Stock of the General Partner, including any stock split, stock dividend, reclassification, or similar transaction.
(d) No Preemptive Rights. Except as expressly provided in this Agreement or in any Interest Designation, no Person shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Interest.
Section 2.05. Additional Funds and Additional Capital Contributions
(a) General. The Partnership may, at any time and from time to time, determine that it requires additional funds (“Additional Funds”) for the acquisition or development of additional Assets, for the redemption of Interests, or for such other purposes as the Partnership may determine. The Partnership may obtain Additional Funds in any manner provided in, and in accordance with, the terms of this Section 2.05 without the approval of any Partner or any other Person.
(b) Additional Capital Contributions. The Partnership may obtain any Additional Funds by accepting Capital Contributions from any Partners or other Persons. In connection with any such Capital Contribution, the Partnership is hereby authorized from time to time to issue additional Interests (as set forth in Section 2.04) in consideration for such Capital Contribution.
(c) Loans by Third Parties. The Partnership may obtain any Additional Funds by incurring Debt payable to any Person upon such terms as the Partnership determines appropriate, including making such Debt convertible, redeemable, or exchangeable for Interests; provided, however, that the Partnership shall not incur any such Debt if any Partner would be personally liable for the repayment of all or any portion of such Debt unless that Partner otherwise agrees in writing.
(d) Issuance of Securities by the General Partner.
(i) Unless otherwise agreed to by the Partners (or except as otherwise permitted by Section 2.04(c)), except in the case of a Liquidity Offering for purposes of a Cash Settlement, the General Partner shall not issue any additional Capital Stock or New Securities unless the General Partner contributes the net proceeds received from the issuance of such additional Capital Stock or New Securities (and from the exercise of the rights contained in any such additional Capital Stock or New Securities) to the Partnership in exchange for (i) in the case of an issuance of Class A Common Stock by the General Partner, Class A Interests of the Partnership or (ii) in the case of an issuance of Preferred Stock or New Securities by the General Partner, Equivalent Interests of the Partnership. If at any time any Preferred Stock or New Securities are issued by the General Partner that are convertible into or exercisable for Class A Common Stock or another security of the General Partner, then upon any such conversion or exercise, the corresponding Equivalent Interest of the Partnership shall be similarly exercised or converted, as applicable, and an equivalent number of Class A Interests or other Equivalent Interests of the Partnership shall be issued. It is the intent of the parties that the General Partner will always own Interests equivalent to its outstanding Capital Stock (other than Class B Common Stock), except as provided pursuant to Section 11.04, and the parties hereby acknowledge that the General Partner may make reasonable adjustments to its own capitalization, subject to applicable Law and the terms of any such outstanding Capital Stock, in order to effect such parity.
(ii) New Securities that are derivative securities issued under any Incentive Compensation Plan of the General Partner shall not require issuance of Equivalent Interests by the Partnership until such time as such derivative securities are exercised for Capital Stock of the General Partner.
(e) Reimbursement of Issuance Expenses. If the General Partner issues additional Capital Stock or New Securities and contributes the net proceeds received from such issuance to the Partnership pursuant to this Section 2.5, the Partnership shall reimburse or assume (on an after-tax basis) the General Partner’s expenses associated with such issuance not paid by the General Partner out of proceeds of such issuance of additional Capital Stock.
(f) Repurchase or Redemption of Capital Stock. If any shares of Capital Stock, or New Securities of the General Partner are repurchased, redeemed or otherwise retired (whether by exercise of a put or call, automatically or by means of another arrangement) by the General Partner, then the General Partner shall cause the Partnership, immediately before such repurchase, redemption or retirement of such Capital Stock or New Securities, to redeem, repurchase or otherwise retire a corresponding equivalency of Class A Interests, Class B Interests or Equivalent Interests held by the General Partner, upon the same terms and for the same consideration as the Capital Stock or New Securities to be repurchased, redeemed, or retired.
Article III
DISTRIBUTIONS
Section 3.01. Distributions Generally. Except as otherwise provided in this Article III or in Section 4.03, and subject to the terms of any Interest Designation, the Partnership shall distribute an amount of Available Cash if, when, and as determined by the General Partner, to the Partners pro rata in accordance with their Interests. For purposes of this Section 3.01, a non-pro rata redemption or repurchase of Interests by the Partnership shall not be deemed a distribution.
Section 3.02. Tax Distributions.
(a) Generally. If the amount distributed to a Partner pursuant to Section 3.01 in respect of a Fiscal Year is less than that Partner’s Assumed Tax Liability, the Partnership shall distribute an amount of Available Cash to the Partners such that each Partner receives distributions of Available Cash in respect of each Fiscal Year in an amount at least equal to the Partner’s Assumed Tax Liability for such Fiscal Year (each such distribution, a “Tax Distribution”). Any Tax Distribution made to a Partner shall be treated as an advance against, and shall reduce, future amounts otherwise distributable to such Partner under Section 3.01 or Section 9.03(a). Except as provided in Section 3.02(d) and subject to any Interest Designation, all Tax Distributions shall be made pro rata in accordance with Interests.
(b) Calculation of Assumed Tax Liability. For purposes of calculating the amount of each Partner’s Tax Distributions under Section 3.02(a), a Partner’s “Assumed Tax Liability” means an amount equal to the product of:
(i) the sum of (A) the net taxable income and gain allocated to that Partner for U.S. federal income tax purposes in the Fiscal Year and (B) to the extent (x) determined by the Partnership in its sole discretion and (y) attributable to the Partnership, the amount the Partner is required to include in income by reason of Code sections 707(c) (but not including guaranteed payments for services within the meaning of Code section 707(c)), 951(a), and 951A(a) (or any analogous or successor provisions of the Code); multiplied by
(ii) the Assumed Tax Rate.
The calculation required by this Section 3.02(b) shall be made by (i) taking into account (x) the character of the income or gain and (y) any limitations on the use of deductions or credits allocable with respect to the Fiscal Year and (ii) disregarding the effect of any special basis adjustments under Code section 743(b). In addition, the Partnership shall increase a Partner’s Assumed Tax Liability to the extent the Partnership reasonably determines is necessary or appropriate as a result of any differences between U.S. federal income tax law and the tax laws of other jurisdictions in which the Partnership has a taxable presence. The Partnership shall calculate the amount of any increase described in the preceding sentence by applying the principles of Section 3.2(b)(i) and (ii) replacing the words “U.S. federal” with a reference to the applicable jurisdiction.
(c) Timing of Tax Distributions. If reasonably practicable, the Partnership shall make distributions of the estimated Tax Distributions in respect of a Fiscal Year on a quarterly basis to facilitate the payment of quarterly estimated income taxes, taking into account amounts previously distributed by reason of this Section 3.02. Not later than sixty (60) Business Days after the end of the Fiscal Year, the Partnership shall make a final Tax Distribution in an amount sufficient to fulfill the Partnership’s obligations under Section 3.02(a).
(d) Impact of Insufficient Available Cash. If the amount of Tax Distributions to be made exceeds the amount of the Available Cash, the Tax Distribution to which each Partner is entitled shall be reduced in accordance with the provisions of this Section 3.02(d) (the amount of the reduction in each Partner’s share, the “Tax Distribution Shortfall Amount”), and Available Cash shall be distributed in the following order of priority:
(i) First, to the General Partner in an amount equal to the full amount of its Tax Distribution, but calculated by substituting the words “a corporation doing business in Houston, Texas” for “an individual resident in Tulsa, Oklahoma” in the definition of “Assumed Tax Rate”;
(ii) Second, to the Partners other than the General Partner pro rata in accordance with their Interests until each Partner has received an amount equal to the full amount of its Tax Distribution, but calculated by substituting the words “a corporation doing business in Houston, Texas” for “an individual resident in Tulsa Oklahoma” in the definition of “Assumed Tax Rate”; and
(iii) Third, to the Partners (including the General Partner) pro rata in accordance with their Interests until each Partner has received the full amount of its Tax Distribution calculated in accordance with Section 3.02(b).
Any Tax Distribution Shortfall Amounts will be carried forward to subsequent Fiscal Years and will be distributed when and to the extent that the Partnership has sufficient Available Cash. The distribution of any Tax Distribution Shortfall Amounts to a Partner shall for all purposes of this Agreement be a Tax Distribution and shall be treated as an advance against, and shall reduce, future amounts otherwise distributable to such Partner under Section 3.01 or Section 9.03(a).
(e) No Tax Distributions on Liquidation. No Tax Distributions shall be made in connection with the liquidation of the Partnership or a Partner’s Interests in the Partnership.
Section 3.03. Distributions in Kind. No Partner may demand to receive property other than cash as provided in this Agreement. The Partnership may make a distribution in kind of Assets to the Partners, and if a distribution is made both in cash and in kind, such distribution shall be made so that, to the fullest extent practical, the percentage of the cash and any other Assets distributed to each Partner entitled to such distribution is identical.
Section 3.04. Distributions to Reflect Additional Interests. If the Partnership issues additional Interests pursuant to the provisions of Article II, subject to the provisions of any Interest Designation, the General Partner is authorized to make such revisions to this Article III and to 0 as it determines are reasonably necessary or desirable to reflect the issuance of such additional Interests, including making preferential distributions to certain classes of Interests.
Section 3.05. Other Distribution Rules.
(a) Transfers. From and after the Transfer of an Interest, for purposes of determining the rights to distributions (including Tax Distributions) under this Agreement, distributions (including Tax Distributions) made to the transferor Partner, along with any withholding or deduction in respect of any such distribution, shall be treated as having been made to the transferee unless otherwise determined by the Partnership.
(b) Record Date for Distributions. The Partnership may designate a Record Date for purposes of calculating and giving effect to distributions. All distributions shall be made to the holders of record as of the applicable Record Date.
(c) Over-Distributions. If the amount of any distribution to a Partner under the Agreement exceeds the amount to which the Partner in entitled (e.g., by reason of an accounting error), the Partner shall, upon written notice of the over-distribution delivered to the Partner within one year of the over-distribution, promptly return the over-distribution to the Partnership.
(d) Reimbursements of Preformation Capital Expenditures. To the extent a distribution (or deemed distribution resulting from a reduction in a Partner’s share of Partnership liabilities for federal tax purposes) otherwise would be treated as proceeds in a sale under Code section 707(a)(2)(B), the Partners intend such actual or deemed distribution to reimburse preformation capital expenditures under Treas. Reg. § 1.707-4(d) to the maximum extent permitted by Law.
(e) Limitation on Distributions. Notwithstanding any provision of this Agreement to the contrary, the Partnership shall not make a distribution to any Partner to the extent such distribution would violate the Act or other Law or would result in the Partnership or any of its Subsidiaries being in default under any material agreement.
Article IV
Management and OPERATIONS
Section 4.01. Management.
(a) Authority of General Partner.
(i) Except as otherwise provided in this Agreement, the General Partner shall have full, exclusive, and complete discretion to manage and control the business and affairs of the Partnership, to make all decisions affecting the business and affairs of the Partnership and to do or cause to be done any and all acts, at the expense of the Partnership, as the General Partner deems necessary or appropriate to accomplish the purposes and direct the affairs of the Partnership. Without limiting the generality of the preceding sentence, the General Partner may cause the Partnership, without the consent or approval of any other Partner, to enter into any of the following in one or a series of related transactions: (i) any merger, (ii) any acquisition, (iii) any consolidation, (iv) any sale, lease or other transfer or conveyance of Assets, (v) any recapitalization or reorganization of outstanding securities, (vi) any merger, sale, lease, spin-off, exchange, transfer or other disposition of a Subsidiary, division or other business, (vii) any issuance of Debt or equity securities (subject to any limitations expressly provided for in this Agreement), or (viii) any incurrence of Debt.
(ii) The General Partner shall have the exclusive power and authority to bind the Partnership and shall be an agent of the Partnership’s business. The actions of the General Partner taken in such capacity and in accordance with this Agreement shall bind the Partnership. Except to the extent expressly delegated in writing by the General Partner, no Partner or Person other than the General Partner shall be an agent for the Partnership or have any right, power, or authority to transact any business in the name of the Partnership or act for or on behalf of or to bind the Partnership.
(iii) Subject to the rights of any Partner set forth in Section 4.01(f), any determinations to be made by the Partnership pursuant to this Agreement shall be made by the General Partner, and such determinations shall be final, conclusive and binding upon the Partnership and every Partner.
(iv) The General Partner shall at all times be a Partner of the Partnership and may not be removed by the Partners, with or without cause, except with the consent of the General Partner. Subject to the rights of any Partner set forth in Section 4.01(f), any determinations to be made by the Partnership pursuant to this Agreement shall be made by the General Partner, and such determinations shall be final, conclusive and binding upon the Partnership and every Partner.
(b) Appointment of Officers. The General Partner may, from time to time, appoint such officers and establish such management and/or advisory boards or committees of the Partnership as the General Partner deems necessary or advisable, each of which shall have such powers, authority, and responsibilities as are delegated in writing by the General Partner from time to time. Each such officer and/or board or committee Partner shall serve at the pleasure of the General Partner. The initial officers of the Partnership are set forth on 0 attached to this Agreement.
(c) No Participation by Partners Other than General Partner. Except as otherwise expressly provided in this Agreement or required by any non-waivable provision of the Act or other Law, no Partner (acting in such capacity) other than the General Partner shall (x) have any right to vote on or consent to any other matter, act, decision or document involving the Partnership or its business or any other matter, or (y) take part in the day-to-day management, or the operation or control, of the business and affairs of the Partnership.
(d) Bankruptcy. Only the General Partner may commence a voluntary case on behalf of, or an involuntary case against, the Partnership under a chapter of Title 11 U.S.C. by the filing of a “petition” (as defined in 11 U.S.C. 101(42)) with the United States Bankruptcy Court. Any such petition filed by any other Partner, to the fullest extent permitted by Law, shall be deemed an unauthorized and bad faith filing, and all parties to this Agreement shall use their best efforts to cause such petition to be dismissed.
(e) Amendment of Agreement. Subject to the rights of any Partner set forth in an Interest Designation and Section 4.01(f), the General Partner shall have the power, without the consent or approval of any Partner, to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(i) To add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Partners;
(ii) To reflect a change that is of an inconsequential nature or does not adversely affect the Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with Law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with Law or with the provisions of this Agreement;
(iii) To satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency, or in federal or state Law;
(iv) To reflect the admission, substitution, or withdrawal of Partners, the Transfer of any Interests, the issuance of additional Interests, or the termination of the Partnership in accordance with this Agreement, and to amend the Register in connection with such admission, substitution, withdrawal, or Transfer;
(v) To set forth or amend the designations, preferences, conversion, or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any additional Interests issued pursuant to Article II;
(vi) If the Partnership is the Surviving Company in any Termination Transaction, to modify Section 11.01 or any related definitions to provide the holders of interests in the Surviving Company rights that are consistent with Section 7.07(b)(iii); and
(vii) To reflect any other modification to this Agreement as is reasonably necessary or appropriate for the business or operations of the Partnership or the General Partner and that does not violate Section 4.01(f).
(f) Certain Actions Requiring Partner Consent. Notwithstanding anything in Section 4.1(e) or Article X to the contrary, this Agreement shall not be amended, and no action may be taken by the General Partner without the consent of any Partner holding Common Interests that would be adversely affected by such amendment or action if such amendment or action would:
(i) Modify the limited liability of a Partner or increase the obligation of a Partner to make a Capital Contribution to the Partnership;
(ii) Adversely alter the rights of any Partner to receive the distributions to which such Partner is entitled pursuant to Article III or Section 9.03(a)(iii);
(iii) Convert the Partnership into a corporation or would cause the Partnership to be classified as a corporation for federal income tax purposes (other than in connection with a Termination Transaction); or
(iv) Amend this Section 4.01(f);
provided, however, that, with respect to clauses (ii), (iii), and (iv), the consent of any Partner holding Common Interests that would be adversely affected shall not be required for any amendment or action that affects all Partners holding the same class or series of Interests on a uniform or pro rata basis if such amendment or action is approved by a Majority-in-Interest of the Partners of such class or series. If some, but not all, of the Partners consent to an amendment or action, the Partnership may, in its discretion, make such amendment or action effective only as to the Partners that consented to it, to the extent it is practicable to do so.
Section 4.02. Tax Actions. All tax-related action, decision, or determination (or failure to take an available tax-related action, decision, or determination) by or with respect to the Partnership or any Subsidiary of the Partnership not expressly reserved for the Partners shall be made, taken, or determined by the General Partner.
Section 4.03. Compensation and Reimbursement of General Partner; Expenses.
(a) General. The General Partner shall not receive any fees from the Partnership for its services in administering the Partnership, except as otherwise provided in this Agreement.
(b) Reimbursement of General Partner. The Partnership shall be liable for, and shall reimburse the General Partner on an after-tax basis at such intervals as the General Partner may determine, all:
(i) overhead, administrative expenses, insurance and reasonable legal, accounting, and other professional fees and expenses of the General Partner;
(ii) expenses of the General Partner incidental to being a public reporting company;
(iii) reasonable fees and expenses related to the IPO or any subsequent public offering of equity securities of the General Partner (without duplicating any provisions of Section 2.05(e)) or private placement of equity securities of the General Partner (including any reasonable fees and expenses related to the registration for resale of any such securities), whether or not consummated;
(iv) franchise and similar taxes of the General Partner and other fees and expenses in connection with the maintenance of the existence of the General Partner; and
(v) customary compensation and benefits payable by the General Partner, and indemnities provided by the General Partner on behalf of, the officers, directors, and employees of the General Partner; and
(vi) reasonable expenses paid by General Partner on behalf of the Partnership; provided, however, that the amount of any reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership as permitted pursuant to Section 4.04. Such reimbursements shall be in addition to any reimbursement of the General Partner as a result of indemnification pursuant to Section 4.07.
(c) Partnership TRA Payments. the General Partner shall be liable for, and shall reimburse the Partnership for, any payments made by the Partnership pursuant to the Tax Receivable Agreement; provided, unless otherwise agreed to by the General Partner, rather than the General Partner being required to make a cash payment to reimburse the Partnership for any payments made pursuant to the Tax Receivable Agreement, amounts that the Partnership would have otherwise distributed to the General Partner shall be retained by the Partnership in an amount equal to the unreimbursed payments made by the Partnership pursuant to the Tax Receivable Agreement (but such retained amounts shall be deemed, including for purposes of calculating the General Partner’s entitlement to receive future distributions, to have been distributed to the General Partner).
Section 4.04. Outside Activities.
(a) Limitation on Outside Activities of the General Partner. The General Partner shall not directly or indirectly enter into or conduct any business, other than in connection with (i) the ownership, acquisition, and disposition of Interests, (ii) maintaining its legal existence (including the ability to incur and pay, as applicable, fees, costs, expenses and taxes relating to that maintenance and to maintain insurance, including directors’ and officers’ insurance on its behalf and on behalf of its Subsidiaries), (iii) the management of the business of the Partnership and its Subsidiaries, (iv) its operation as a reporting company with a class (or classes) of securities registered under the Exchange Act, (v) the offering, sale, syndication, private placement, or public offering of stock, bonds, securities, or other interests of the General Partner, (vi) the financing or refinancing of any type related to the Partnership or its Assets or activities, (vii) receiving and paying dividends and distributions or making contributions to the capital of its Subsidiaries, (viii) filing tax reports and tax returns and paying taxes and other customary obligations in the ordinary course (and contesting any taxes), (ix) participating in tax, accounting, and other administrative matters with respect to its Subsidiaries and providing administrative and advisory services (including treasury and insurance services) to its Subsidiaries, (x) holding any cash or property (but not operating any property), (xi) indemnifying officers, directors, Partners of management, managers, employees, consultants, or independent contractors of the General Partner or its Subsidiaries, (xii) entering into any Termination Transaction or similar transaction in accordance with this Agreement, (xiii) preparing reports to governmental authorities and to its shareholders, (xiv) holding director and shareholder meetings, preparing organizational records, and other organizational activities required to maintain its separate organizational structure, (xv) complying with applicable Law, (xvi) engaging in activities relating to any management equity plan, stock option plan or any other management or employee benefit plan of the General Partner or its Subsidiaries, and (xvii) engaging in activities that are incidental to clauses (i) through (xvi). The provisions of this Section 4.04 shall restrict only the General Partner and its Subsidiaries (other than the Partnership and its Subsidiaries) and shall not restrict the other Partners or any Affiliate of the other Partners (other than the General Partner).
(b) Outside Activities of Partners (other than the General Partner). Subject to (w) Article XIII of the Amended and Restated Certificate of Incorporation of the General Partner, (x) the Stockholder’s Agreement, (y) any agreements entered into pursuant to Section 4.05, and (z) any other agreements (including any employment agreements) entered into by a Partner (other than the General Partner) or any of its Affiliates with the General Partner, the Partnership or a Subsidiary, (i) any Partner (other than the General Partner) or any officer, director, employee, agent, trustee, Affiliate, Partner or stockholder of such Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct or indirect competition with the Partnership or that are enhanced by the activities of the Partnership; (ii) no Partner (other than the General Partner) or any officer, director, employee, agent, trustee, Affiliate, Partner or stockholder of such Partner shall have any obligation pursuant to this Agreement to offer any interest in any business ventures of such Partner or Person to the Partnership, any other Partner, or any other Person; and (iii) none of the Partners, the Partnership or any other Person shall have any rights by virtue of this Agreement or the relationship established hereby in any business ventures of any other Partner or Person.
Section 4.05. Transactions with Affiliates. Subject to the provisions of Section 4.04, the Partnership may enter into any transaction or arrangement with the General Partner or Subsidiaries of the Partnership or other Persons in which the Partnership has an equity investment on terms and conditions determined by the General Partner. Without limiting the foregoing, but subject to Section 4.04, (a) the Partnership may (i) lend funds to, or borrow funds from, the General Partner or to Subsidiaries of the Partnership or other Persons in which the Partnership has an equity investment, (ii) transfer Assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which the General Partner, the Partnership, any of the Partnership’s Subsidiaries or any other Person in which the Partnership has an equity investment is or thereby becomes a participant, and (iii) sell, transfer or convey any property to the General Partner, the Partnership, any of the Partnership’s Subsidiaries or any other Person in which the Partnership has an equity investment the Partnership and (b) the General Partner may propose and adopt, on behalf of the Partnership, employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership or Subsidiaries of the Partnership in respect of services performed, directly or indirectly, to or for the benefit of the General Partner, the Partnership or any of the Partnership’s Subsidiaries.
Section 4.06. Limitation on Liability.
(a) General. To the fullest extent permitted by Law, no Indemnitee, in such capacity, shall be liable to the Partnership, any Partner or any of their respective Affiliates, for any losses sustained or liabilities incurred as a result of any act or omission of such Person if (i) either (A) the Indemnitee, at the time of such act or omission, determined in good faith that its, his or her course of conduct was in, or not opposed to, the best interests of the Partnership or (B) in the case of omission by the Indemnitee, the Indemnitee did not intend its, his or her inaction to be harmful or opposed to the best interests of the Partnership and (ii) the act or omission did not constitute fraud or willful misconduct by the Indemnitee.
(b) Action in Good Faith. An Indemnitee acting under this Agreement shall not be liable to the Partnership for its, his, or her good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand, restrict, or eliminate the duties and liabilities of such Persons otherwise existing at Law or in equity, are agreed by the Partners to replace fully and completely such other duties and liabilities of such Persons. Whenever the General Partner or the Partnership is permitted or required to make a decision or take an action under this Agreement (i) in making such decisions, such Person shall be entitled to take into account its own interests as well as the interests of the Partners as a whole or (ii) in its “good faith” or under another expressed standard, such Person shall act under such express standard and shall not be subject to any other or different standards.
(c) Outside Counsel. The General Partner may consult with legal counsel, accountants and financial or other advisors, and any act or omission suffered or taken by the General Partner on behalf of the Partnership or in furtherance of the interests of the Partnership in good faith in reliance upon and in accordance with the advice of such counsel, accountants or financial or other advisors will be full justification for any such act or omission, and the General Partner will be fully protected in so acting or omitting to act so long as such counsel or accountants or financial or other advisors were selected with reasonable care.
Section 4.07. Indemnification.
(a) General. The Partnership shall indemnify and hold harmless each Indemnitee (and such Person’s heirs, successors, assigns, executors or administrators) to the full extent permitted by Law and to the same extent and in the same manner provided by the provisions of Article VI of the Amended and Restated Bylaws of the General Partner applicable to officers and directors and the applicable provisions of the Stockholder’s Agreement as if such provisions were set forth herein, mutatis mutandis, and applied to each such Indemnitee.
(b) Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section 4.07 shall not be exclusive of any other right that any person may have or hereafter acquire under any law, agreement, vote of stockholders or disinterested directors, provisions of a certificate of incorporation or bylaws, or otherwise.
(c) Nature of Rights. The rights conferred upon Indemnitees in this Section 4.07 shall be contract rights and shall continue as to an Indemnitee who has ceased to be the General Partner, an Affiliate of the General Partner, the Tax Representative, the Designated Individual, or an officer or director of the General Partner, the Partnership, or their respective Affiliates. Any amendment, alteration or repeal of this Section 4.07 or of Article VI of the Amended and Restated Bylaws of the General Partner or the Stockholder’s Agreement that would adversely affect any right of an Indemnitee or its successors shall apply prospectively only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place before such amendment, alteration or repeal.
Article V
BOOKS AND RECORDS
Section 5.01. Books and Records.
(a) General. The Partnership shall maintain in its principal business office, or any other place as may be determined by the Partnership, the books and records of the Partnership.
(b) Specific Records. In particular, the Partnership shall maintain:
(i) A register containing the name, address, and number and class of Interests (including Equivalent Interests) of each Partner, and such other information as the General Partner may deem necessary or desirable and attached to this Agreement as 0 (as may be amended or updated from time to time, the “Register”). The General Partner shall from time to time update the Register as necessary to ensure the Register is accurate, including as a result of any sales, exchanges, or other Transfers, or any redemptions, issuances, or similar events involving Interests. Except as required by Law, no Partner shall be entitled to receive a copy of the Register or of the information set forth in the Register relating to any Partner other than itself.
(ii) A copy of the Certificate of Limited Partnership and this Agreement and all amendments thereto.
Section 5.02. Financial Accounts. At all times during the continuance of the Partnership, the Partnership shall prepare and maintain separate books of account for the Partnership for financial reporting purposes, on an accrual basis, in accordance with United States generally accepted accounting principles, consistently applied.
Section 5.03. Inspection; Confidentiality. The General Partner may keep confidential from the Partners (or any of them) for such period of time as the General Partner determines to be reasonable, any information (a) that the General Partner believes to be in the nature of trade secrets, (b) the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or the General Partner, or (c) that the Partnership or the General Partner is required by Law, agreement, or customary commercial practice to keep confidential. Subject to the provisions of the previous sentence, the Partners (personally or through an authorized representative) may, for purposes reasonably related to their respective interests in the Partnership, examine and copy (at their own cost and expense) the books and records of the Partnership at all reasonable business hours upon reasonable prior notice.
Section 5.04. Information to Be Provided by General Partner to Partners. The Partnership shall deliver or otherwise make accessible (whether through SEC’s Electronic Data Gathering Analysis (“EDGAR”) system or otherwise) to each Partner a copy of any information mailed or delivered electronically to all of the common stockholders of the General Partner as soon as practicable after such mailing or electronic delivery.
Article VI
Tax Matters, ACCOUNTING, AND REPORTING
Section 6.01. Tax Matters.
(a) Tax Returns. The Partnership shall use reasonable best efforts to cause to be prepared and timely filed (taking into account available extensions) all federal, state, and local, and non-U.S. tax returns of the Partnership for each year for which such returns are required to be filed and shall determine the appropriate treatment of each tax item of the Partnership and make all other determinations with respect to such tax returns.
(b) Other Tax Matters. Each of the provisions of 0, which address various tax matters, is incorporated into, and shall constitute a part of, this Agreement.
Section 6.02. Accounting and Fiscal Year. Unless otherwise determined by the Partnership or required by Code section 706, the fiscal year of the Partnership (the “Fiscal Year”) shall be the calendar year, or, in the case of the last Fiscal Year of the Partnership, the fraction thereof ending on the date on which the winding up of the Partnership is completed.
Article VII
INTEREST TRANSFERS AND Partner WITHDRAWALS
Section 7.01. Transfer Generally Prohibited. No Interests shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article VII and Article XI. Any Transfer or purported Transfer of an Interest not made in accordance with this Article VII or Article XI shall be null and void ab initio. Interests shall not be subject to the claims of any creditor, spouse for alimony or support, or legal process and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided in this Agreement.
Section 7.02. Conditions Generally Applicable to All Transfers. All Transfers are subject to the satisfaction of the following conditions:
(a) Transfers by Partners other than the General Partner.
(i) Consent of General Partner. No Partner other than the General Partner shall Transfer any portion of its Interests to any transferee without the consent of the General Partner unless the Transfer is a Related-Party Transfer or a GKFF Transfer.
(ii) Assumption of Obligations; No Relief from Obligations. Any transferee of all or a portion of an Interest (whether or not admitted as a Substituted Partner) shall take subject to and assume, by operation of Law or express agreement, all of the obligations of the transferor Partner under this Agreement with respect to such Transferred Interest. No Transfer (other than pursuant to a statutory merger or consolidation pursuant to which all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of Law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner.
(iii) No Rights as Partner. No transferee, whether by a voluntary Transfer, by operation of Law or otherwise, shall have any rights under this Agreement unless admitted as a Substituted Partner.
(b) Transfers by the General Partner.
(i) Consent of Partners. The General Partner may not Transfer any of its Interests without the consent of a Majority-in-Interest of the Partners, except in connection with an Applicable Sale or Termination Transaction or to a wholly owned subsidiary in accordance with Section 7.02(b)(ii).
(ii) Transfer to Subsidiary. Subject to compliance with the other provisions of this Article VII, the General Partner may Transfer all of its Interests at any time to any Person that is, at the time of such Transfer, a direct or indirect wholly owned Subsidiary of the General Partner without the consent of any Partner and may designate the transferee to become the new General Partner for all purposes of this Agreement.
(c) Withholding with Respect to a Transfer of Interests. A Partner making a Transfer permitted by this Agreement shall comply with Section 4.10(b) of Annex B.
(d) Other Restrictions on Transfer. In addition to any other restrictions on Transfer in this Agreement, no Partner may Transfer an Interest (including by way of acquisition of Interests by the General Partner or any other acquisition of Interests by the Partnership) if the Partnership determines:
(i) Based on the advice of nationally recognized tax counsel, such Transfer would create a material risk of the Partnership being classified as an association taxable as a corporation for U.S. federal, state, or local income tax purposes;
(ii) That the Transfer would be to any Person or entity that lacks the legal right, power or capacity to own an Interest;
(iii) That the Transfer would be in violation of Law;
(iv) That the Transfer would be of any fractional or component portion of an Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of an Interest;
(v) That the Transfer would create a material risk that the Partnership would become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA Section 3(14)) or a “disqualified person” (as defined in Code section 4975(c));
(vi) Based on the advice of counsel, that the Transfer would create a material risk that any portion of the Assets would constitute assets of any employee benefit plan pursuant to Department of Labor Reg. § 2510.2-101;
(vii) That the Transfer would require the registration of such Interest pursuant to any applicable federal or state securities Laws;
(viii) Based on advice of counsel, that such Transfer would create a material risk that the Partnership would become a reporting company under the Exchange Act; or
(ix) Based on the advice of counsel, that the Transfer would subject the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended.
Section 7.03. Substituted Partners.
(a) Admission as Partner. A transferee of Interests of a Partner, other than a Related-Party Transferee or a GKFF Transferee, may be admitted as a Substituted Partner only with the consent of the Partnership. A Related-Party Transferee and a GKFF Transferee shall be admitted as a Substituted Partner without the consent of the Partnership, subject to compliance with Section 7.03(b). The failure or refusal by the Partnership to permit a transferee of Interests to become a Substituted Partner shall not give rise to any cause of action against the Partnership or the General Partner. A transferee who has been admitted as a Substituted Partner in accordance with this Article VII shall have all the rights and powers and be subject to all the restrictions and liabilities of a Partner under this Agreement.
(b) Documents to Be Provided by Transferee. No transferee shall be admitted as a Substituted Partner until and unless it furnishes to the Partnership (i) evidence of acceptance, in form and substance satisfactory to the Partnership, of all the terms, conditions and applicable obligations of this Agreement, including the representations and warranties set forth in Section 1.09 (ii) a counterpart signature page to this Agreement executed by such transferee and (iii) such other documents and instruments as the Partnership may require to effect such transferee’s admission as a Substituted Partner, including a certification from the transferee or an opinion of counsel reasonably acceptable to the Partnership in respect of any of the restrictions on transfer set forth in Section 7.02(d) (which certification or opinion may be waived, in whole or in part in the sole discretion of the Partnership).
(c) Amendment of Books and Records. In connection with, and as evidence of, the admission of a Substituted Partner, the General Partner or the Partnership shall amend the Register and the books and records of the Partnership to reflect the name, address and number of Interests of such Substituted Partner and to eliminate or adjust, if necessary, the name, address and number of Interests of the predecessor of such Substituted Partner.
Section 7.04. Drag-Along and Tag-Along Rights.
(a) Drag-Along Rights.
(i) If at any time the General Partner and/or its Affiliates (excluding, for purposes of this Section 7.04(a), the Partnership and its Subsidiaries) desire to Transfer in one or more transactions a sufficient portion of its and/or their Interests (or any beneficial interest therein) to constitute a Change of Control to a bona fide third party that is not an Affiliate of the General Partner (an “Applicable Sale”), the General Partner may require each other Partner either (i) to sell the same ratable share of its Interests as is being sold by the General Partner and such Affiliates (based upon the total Interests held by the General Partner and its Affiliates at such time) on the same terms and conditions and/or (ii) to exchange its Interests pursuant to Section 11.01(b) (each, a “Drag-Along Right”). The General Partner may in its sole discretion elect to cause the General Partner and/or the Partnership to structure the Applicable Sale as a merger or consolidation or as a sale of the Partnership’s Assets.
(ii) No Partner shall have any dissenters’ rights, appraisal rights or similar rights in connection with any Applicable Sale, and no Partner may object to any subsequent liquidation or other distribution of the proceeds from an Applicable Sale that is a sale of Assets. Each Partner agrees to consent to, and raise no objections against, an Applicable Sale. In the event of the exercise by the General Partner of its Drag-Along Right pursuant to this Section 7.04(a), each Partner shall take all reasonably necessary and desirable actions approved by the General Partner in connection with the consummation of the Applicable Sale, including the execution of such agreements and such instruments and other actions reasonably necessary to provide customary and reasonable representations, warranties, indemnities, covenants, conditions and other agreements relating to such Applicable Sale and to otherwise effect the transaction; provided, however, that (A) such Partners shall not be required to give disproportionately greater or more onerous representations, warranties, indemnities, or covenants than the General Partner or its Affiliates, (B) such Partners shall not be obligated to bear any share of the out-of-pocket expenses, costs, or fees (including attorneys’ fees) incurred by the Partnership or its Affiliates in connection with such Applicable Sale unless and to the extent that such expenses, costs, and fees were incurred for the benefit of the Partnership or all of its Partners, (C) such Partners shall not be obligated or otherwise responsible for more than their proportionate shares of any indemnities or other liabilities incurred by the Partnership and the Partners as sellers in respect of such Applicable Sale, and (D) any indemnities or other liabilities approved by the General Partner shall be limited, in respect of each Partner, to such Partner’s share of the proceeds from the Applicable Sale.
(iii) At least five (5) Business Days before consummation of an Applicable Sale, the General Partner shall (i) provide the Partners written notice (the “Applicable Sale Notice”) of the Applicable Sale, which notice shall contain (A) the name and address of the third-party purchaser, (B) the proposed purchase price, terms of payment, and other material terms and conditions of the purchaser’s offer, together with a copy of any binding agreement with respect to the Applicable Sale and (C) notification of whether the General Partner has elected to exercise its Drag-Along Right and (ii) promptly notify the Partners of all proposed changes to the material terms and keep the Partners reasonably informed as to all material terms relating to the Applicable Sale or contribution, and promptly deliver to the Partners copies of all final material agreements relating to the Applicable Sale not already provided in accordance with this Section 7.4(a)(iii) or otherwise. The General Partner shall provide the Partners written notice of the termination of an Applicable Sale within five (5) Business Days following such termination, which notice shall state that the Applicable Sale Notice served with respect to such Applicable Sale is rescinded.
(b) Tag-Along Rights.
(i) Except in connection with an Applicable Sale or Termination Transaction or a Transfer to a wholly owned subsidiary in accordance with Section 7.02(b)(ii), if the General Partner and/or its Affiliates proposes to Transfer Common Interests (a “Tag-Along Sale”) to a bona fide third party that is not an Affiliate of the General Partner, then each other Partner holding Common Interests shall have the right and option (the “Tag-Along Right”), but not the obligation, to sell its Common Interests up to the Tag-Along Amount (as defined below) applicable to the Tag-Along Seller in that Tag-Along Sale, at the same price, for the same form of consideration, and on the same terms and conditions as the General Partner and/or its Affiliates (including customary representations, covenants, indemnities, and agreements), subject to the provisions of this Section 7.4(b) (those Partners that exercise the Tag-Along Right, the “Tag-Along Sellers”). Each Tag-Along Seller shall pay its pro rata share of the expenses incurred by all Persons participating as sellers in the Tag-Along Sale. As used in this Section 7.4(b), “Tag-Along Amount” means, with respect to any Tag-Along Seller, the number of Common Interests equal to the product of (x) the total number of Common Interests then owned by that Tag-Along Seller, multiplied by (y) a fraction, the numerator of which is the total number of Common Interests to be acquired by the bona fide third party that is not an Affiliate of the General Partner in the Tag-Along Sale, and the denominator of which is the total number of Common Interests outstanding at that time.
(ii) At least fifteen (15) Business Days prior to any Tag-Along Sale, the General Partner shall cause the Partnership to deliver a written notice (the “Tag-Along Sale Notice”) to each other Partner holding Common Interests, specifying in reasonable detail (A) the identity of the proposed transferee, (B) the proposed purchase price per Common Interest (including form of consideration), (C) a summary of the other proposed material terms and conditions of the Tag-Along Sale, and (D) that the acquiror has been informed of the participation rights under this Section 7.4(b) and has agreed to purchase Common Interests from each Tag-Along Seller up to such Tag-Along Seller’s Tag-Along Amount. Each Tag-Along Seller may elect to participate in the Tag-Along Sale by delivering irrevocable written notice (a “Tag-Along Participation Notice”) to the Partnership within seven (7) Business Days after delivery of the Tag-Along Sale Notice. The Tag-Along Participation Notice shall state either (x) that the Tag-Along Seller elects to include in the Tag-Along Sale its full Tag-Along Amount or (y) if such Tag-Along Seller elects to include in the Tag-Along Sale a lesser number of Common Interests, that lesser number of Common Interests (that amount, in either case, the “Included Interests”). Any failure by a Tag-Along Seller to deliver a Tag-Along Participation Notice to the Partnership within the seven (7)-Business Day period shall be deemed an irrevocable election by such Tag-Along Seller not to participate in the Tag-Along Sale with respect to the Common Interests held by that Tag-Along Seller, and the General Partner shall have the right to sell to the acquiror Common Interests representing the non-participating Tag-Along Seller’s Tag-Along Amount, on terms and conditions no more favorable in any material respect to the General Partner and/or its Affiliates than those stated in the Tag-Along Sale Notice.
(iii) The Tag-Along Participation Notice shall constitute a binding agreement by the applicable Tag-Along Seller to sell the Included Interests in the Tag-Along Sale on the terms and conditions specified in the Tag-Along Sale Notice if the Tag-Along Sale is consummated upon those terms. In addition, by delivering the Tag-Along Participation Notice, a Tag-Along Seller agrees to the following: (A) prior to the closing of any Tag-Along Sale, to execute and deliver (or cause to be executed and delivered) any purchase agreement or other documentation required by the acquiror to consummate the Tag-Along Sale, which purchase agreement and other documentation shall be on terms no less favorable in any material respect to that Tag-Along Seller than those executed by the General Partner and/or its Affiliates participating in the Tag-Along Sale; and (B) at the closing of any such transaction, to take all other actions reasonably necessary or desirable to cause the consummation of the Tag-Along Sale. In connection with a Tag-Along Sale pursuant to this Section 7.4(b), each Tag-Along Seller shall make the same representations and warranties as required by the General Partner and/or its Affiliates participating in the Tag-Along Sale and shall be obligated to join on a pro rata basis in any indemnification or other obligations that the General Partner and/or its Affiliates agree to provide in connection with that Tag-Along Sale (other than any indemnification obligations with respect to representations and warranties given by a Person as to that Person and not as to any other Person). Each Tag-Along Seller hereby constitutes and appoints the General Partner, with full power of substitution and resubstitution, as the true and lawful attorneys-in-fact for that Tag-Along Seller and in that Tag-Along Seller’s name, place, and stead and for that Tag-Along Seller’s use and benefit, to sign, execute, certify, acknowledge, swear to, file, deliver, and record any and all agreements, certificates, consents, instruments, and other documents which the General Partner and/or its Affiliates may deem reasonably necessary, desirable, or appropriate, and to take any other action reasonably necessary or advisable, for the purposes of effecting any Tag-Along Sale and the transfer of the Tag-Along Seller’s Common Interests in connection with that Tag-Along Sale. This power of attorney is a special power of attorney coupled with an interest and is irrevocable, may be exercised by any such attorney-in-fact by listing the Tag-Along Seller executing any agreement, certificate, instrument or other document with the single signature of any such attorney-in-fact acting as attorney-in-fact for that Tag-Along Seller, shall survive the death, disability, legal incapacity, bankruptcy, insolvency, dissolution, or cessation of existence of that Tag-Along Seller and shall survive the Transfer by a Tag-Along Seller of all or any portion of that Tag-Along Seller’s Common Interests.
(iv) The closing of the Tag-Along Sale shall be held at the place and on the date as determined by the General Partner and/or its Affiliates and the acquiror, but in no event later than one hundred and thirty-five (135) days (or longer, if reasonably necessary to comply with applicable Law) after delivery of the Tag-Along Participation Notice. Upon the consummation of the Tag-Along Sale, each Tag-Along Seller shall be entitled to receive the consideration for that Tag-Along Seller’s Common Interests sold pursuant to this Section 7.4(b) less that Tag-Along Seller’s pro rata share of the expenses of the transaction including, without limitation, legal, accounting, and investment banking fees and expenses, the determination of expenses to be determined by the General Partner. If the Tag-Along Sale is not consummated within such one hundred and thirty-five (135)-day period, the General Partner and/or its Affiliates initiating the Tag-Along Sale may not sell any Common Interests unless it has again complied in full with this Section 7.4(b).
(v) Nothing in this Agreement shall constitute an obligation on the part of the General Partner and/or its Affiliates proposing to engage in a Tag-Along Sale to consummate a transaction.
Section 7.05. Partnership Right to Call Interests. Beginning on the date on which the aggregate Percentage Interests of the Partners (other than the General Partner and its Subsidiaries) are less than five (5) percent, the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem all (but not less than all) outstanding Exchangeable Interests by treating each Partner as an Exchangeable Interest Partner who has delivered an Elective Exchange Notice pursuant to Section 3.1(a) of Annex D in respect of all of such Exchangeable Interest Partner’s Exchangeable Interests. The Partnership shall exercise this right by giving notice to an Exchangeable Interest Partner stating that the Partnership has elected to exercise its rights under this Section 7.05. The notice given by the Partnership to an Exchangeable Interest Partner pursuant to this Section 7.05 shall be treated as if it were an Elective Exchange Notice delivered to the Partnership by such Exchangeable Interest Partner. For purposes of this Section 7.05, the provisions of Annex B shall apply except to the extent otherwise determined by the Partnership.
Section 7.06. Withdrawal.
(a) Permissible Withdrawals. Subject to any Interest Designation, no Partner may withdraw from the Partnership other than:
(i) As a result of a Transfer of all of such Partner’s Interests in accordance with this Article VII or Article XI with respect to which the transferee becomes a Substituted Partner;
(ii) Pursuant to an acquisition by the General Partner or Subsidiary of the General Partner of all of its Interests; or
(iii) With the consent of the Partnership.
(b) Consequences of Withdrawal. Any Partner who Transfers all of its Interests in a Transfer (i) permitted pursuant to this Article VII where such transferee was admitted as a Substituted Partner or (ii) to the General Partner, whether or not pursuant to Section 11.01, shall cease to be a Partner but shall continue to have the obligations of a former Partner that are expressly set forth in this Agreement.
Section 7.07. Restrictions on Termination Transactions.
(a) General. Except as provided in Section 7.07(b), neither the Partnership nor the General Partner shall engage in, or cause or permit, a Termination Transaction.
(b) Consent. The Partnership or General Partner may engage in, cause, or permit a Termination Transaction only if at least one of the following conditions is satisfied:
(i) A Majority-in-Interest of the Partners give Consent;
(ii) In connection with any such Termination Transaction, each holder of Common Interests (other than the General Partner and its wholly owned Subsidiaries) will receive, or will have the right to elect to receive, for each Common Interest an amount of cash, securities or other property equal to the greatest amount of cash, securities or other property that the holder of Common Interests would have received had it exercised its right to Exchange pursuant to Article XI and received Class A Common Stock in exchange for its Common Interests immediately before such Termination Transaction; or
(iii) All of the following conditions are met: (1) substantially all of the Assets directly or indirectly owned by the Partnership before the announcement of the Termination Transaction are, immediately after the Termination Transaction, owned directly or indirectly by the Partnership or another limited partnership or Limited Partnership that is the survivor of a merger, consolidation or combination of assets with the Partnership (in each case, the “Surviving Company”); (2) the Surviving Company is classified as a partnership for U.S. federal income tax purposes and each of its Subsidiaries has the same classification for U.S. federal, state, and local tax purposes immediately after the Termination Transaction that each Subsidiary had immediately before the Termination Transaction; (3) the rights of such Partners with respect to the Surviving Company (including pursuant to a Tax Receivable Agreement) are at least as favorable as those of Partners holding Interests immediately before the consummation of such transaction (except to the extent that any such rights are consistent with clause (4) of this Section 7.07(b)(iii)) and as those applicable to any other limited partners or non-General Partners of the Surviving Company; and (4) such rights include the right to cause their interests in the Surviving Company to be redeemed at any time or times for cash in an amount equal to the Fair Market Value of such interest at the time of redemption, as determined at least once every calendar quarter by an independent appraisal firm of recognized national standing retained by the Surviving Company.
Section 7.08. Incapacity. If a Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator, or receiver of such Partner’s estate shall have the same rights as the Incapacitated Partner possessed to Transfer its Interests. The Incapacity of a Partner, in and of itself, shall not dissolve or terminate the Partnership.
Article VIII
ADMISSION OF ADDITIONAL PARTNERS
Section 8.01. Admission of Additional Partners.
(a) Requirements for Admission. A Person (other than a then-existing Partner) who makes a Capital Contribution to the Partnership in exchange for Interests and in accordance with this Agreement shall be admitted to the Partnership as an Additional Partner only upon furnishing to the General Partner (i) evidence of acceptance, in form and substance satisfactory to the General Partner, of all of the terms and conditions of this Agreement, including the power of attorney granted in Section 12.01, (ii) a counterpart signature page to this Agreement executed by such Person, and (iii) such other documents or instruments as may be required by the General Partner in order to effect such Person’s admission as an Additional Partner. In connection with, and as evidence of, the admission of an Additional Partner, the General Partner shall amend the Register and the books and records of the Partnership to reflect the name, address, number and type of Interests of such Additional Partner.
(b) Consent of Partnership Required. Notwithstanding anything to the contrary in this Section 8.01, no Person shall be admitted as an Additional Partner without the consent of the Partnership, provided, however, Transfers allowed under Section 7.02(a)(i) shall be deemed approved by the Partners. The admission of any Person as an Additional Partner shall become effective on the date determined by the Partnership (but in no case earlier than the satisfaction of all the conditions set forth in Section 8.01(a)).
Section 8.02. Limit on Number of Partners. Unless otherwise permitted by the General Partner, no Person shall be admitted to the Partnership after the date of this Agreement as an Additional Partner if the effect of such admission would be to cause the Partnership to have a number of Partners (including as Partners for this purpose those Persons indirectly owning an interest in the Partnership through another partnership, a Limited Partnership, a subchapter S corporation or a grantor trust) that would (i) cause the Partnership to become a reporting company under the Exchange Act or (ii) result in the Partnership at any time during its taxable year having more than 100 Partners (as determined under Treas. Reg. § 1.7704-1(h)(1)(ii), taking into account the provisions of Treas. Reg. § 1.7704-1(h)(3)).
Article IX
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 9.01. Dissolution Generally.
(a) Dissolution Only in Accordance with This Agreement. The Partnership shall not be dissolved by the substitution of Partners or the admission of Additional Partners in accordance with the terms of this Agreement. The Partnership may be dissolved, liquidated and terminated only pursuant to the provisions of this Article IX, and the Partners hereby irrevocably waive any and all other rights they may have to cause a dissolution of the Partnership or a sale or partition of any or all of the Partnership’s Assets.
(b) Termination of Partners. The death, retirement, resignation, expulsion, Bankruptcy, insolvency or dissolution of a Partner or the occurrence of any other event that terminates the continued Partnership of a Partner in the Partnership shall not in and of itself cause dissolution of the Partnership.
Section 9.02. Events Causing Dissolution.
(a) Actions by Partners. No Partner shall take any action to dissolve, terminate or liquidate the Partnership, or require apportionment, appraisal or partition of the Partnership or any of its Assets, or file a bill for an accounting, except as specifically provided in this Agreement, and each Partner, to the fullest extent permitted by Law, waives any rights to take any such actions under Law, including any right to petition a court for judicial dissolution under Section 18-802 of the Act.
(b) Liquidating Events. The Partnership shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events (each, a “Liquidating Event”):
(i) an election to dissolve the Partnership made by the General Partner, with the Consent of a Majority-in-Interest of the Partners;
(ii) the expiration of forty-five (45) days after the sale or other disposition of all or substantially all Assets; or
(iii) any other event that results in a mandatory dissolution under the Act.
Section 9.03. Distribution upon Dissolution.
(a) Order of Distributions. Upon the dissolution of the Partnership pursuant to Section 9.02, the General Partner (or, in the event that the General Partner has dissolved, become Bankrupt or ceased to operate, any Person elected by a Majority-in-Interest of the Partners (the General Partner or such other Person, the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s Assets and liabilities, and the Partnership’s Assets shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order:
(i) First, to the satisfaction of all of the Partnership’s Debts and liabilities to creditors, including Partners who are creditors (other than with respect to liabilities owed to Partners in satisfaction of liabilities for previously declared distributions), whether by payment or the making of reasonable provision for payment thereof;
(ii) Second, to the satisfaction of all of the Partnership’s liabilities to the Partners in satisfaction of liabilities for previously declared distributions, whether by payment or the making of reasonable provision for payment thereof; and
(iii) The balance, if any, to the Partners, in the same order of priorities provided for in Article III.
(b) Discretion of Liquidator and General Partner.
(i) Notwithstanding the provisions of Section 9.03(a) that require liquidation of the Assets, but subject to the order of priorities set forth therein, if before or upon dissolution of the Partnership, the Liquidator determines that an immediate sale of part or all of the Partnership’s Assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole discretion, defer for a reasonable time the liquidation of any Assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants-in-common and in accordance with the provisions of Section 9.03(a), undivided interests in such Partnership Assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and any agreements governing the operation of such properties at such time. The Liquidator shall determine the Fair Market Value of any property distributed in kind using such reasonable method of valuation as it may adopt.
(ii) In the sole discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to this Article IX may be:
(a) Distributed to a trust established for the benefit of the General Partner and the Partners for the purpose of liquidating Partnership Assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership and/or Partnership activities. The assets of any such trust shall be distributed to the Partners, from time to time, in the reasonable discretion of the General Partner, in the same proportions and amounts as would otherwise have been distributed to the Partners pursuant to this Agreement; or
(b) Withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided, that such withheld or escrowed amounts shall be distributed to the Partners in the manner and order of priority set forth in Section 9.03(a) as soon as practicable.
Section 9.04. Rights of Partners. Except as otherwise provided in this Agreement and subject to the rights of any Partner set forth in an Interest Designation, (a) each Partner shall look solely to the Assets for the return of its Capital Contribution, (b) no Partner shall have the right or power to demand or receive property other than cash from the Partnership, and (c) no Partner shall have priority over any other Partner as to the return of its Capital Contributions or distributions.
Section 9.05. Termination. The Partnership shall terminate when all of the Assets, after payment of or due provision for all Debts, liabilities, and obligations of the Partnership, have been distributed to the Partners in the manner provided for in this Article IX and the Certificate of Limited Partnership shall have been cancelled in the manner required by the Act.
Article X
PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; AMENDMENTS; MEETINGS
Section 10.01. Actions and Consents of Partners. The actions requiring Consent of any Partner pursuant to this Agreement or otherwise pursuant to Law are subject to the procedures set forth in this Article X.
Section 10.02. Amendments. Except as otherwise required or permitted by this Agreement (including Section 4.1(e) and Section 4.01(f)), amendments to this Agreement must be approved by the General Partner; provided, that no amendment may be made without the consent of any Partner holding Common Interests that would be adversely affected by that amendment; provided, further, that the consent of any Partner holding Common Interests that would be adversely affected shall not be required for any amendment or action that affects all Partners holding the same class or series of Interests on a uniform or pro rata basis if that amendment or action is approved by a Majority-in-Interest of the Partners of that class or series. Additionally, Article XI of this Agreement shall not be amended without the prior written consent of Holdings. Upon obtaining any such Consent, or any other Consent required by this Agreement, and without further action or execution by any other Person, including any Partner, (i) any amendment to this Agreement may be implemented and reflected in a writing executed solely by the General Partner, and (ii) the Partners shall be deemed a party to and bound by that amendment of this Agreement.
Section 10.03. Procedures for Meetings and Actions of the Partners.
(a) Time; Quorum; Consent. Meetings of the Partners may be called only by the General Partner and shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners entitled to act at the meeting not less than two (2) Business Days nor more than ninety (90) days before the date of such meeting. Partners may vote in Person or by proxy at such meeting. Unless approval by a different number or proportion of the Partners is required by this Agreement or any Interest Designation, the affirmative vote of a Majority-in-Interest of the Partners shall be sufficient to approve such proposal at a meeting of the Partners. Whenever the Consent of any Partners is permitted or required under this Agreement, such Consent may be given at a meeting of Partners or in accordance with the procedure prescribed in Section 10.03(b).
(b) Written Consents. Any action requiring the Consent of any Partner or a group of Partners pursuant to this Agreement or that is required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a Consent in writing or by electronic transmission and filed with the General Partner setting forth the action so taken or consented to is given by Partners whose affirmative vote would be sufficient to approve such action or provide such Consent at a meeting of the Partners. Such Consent may be in one or several instruments and shall have the same force and effect as the affirmative vote of such Partners at a meeting of the Partners. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. For purposes of obtaining a Consent in writing or by electronic transmission, the General Partner may require a response within a reasonable specified time, and failure to respond in such time period shall constitute a Consent that is consistent with the General Partner’s recommendation with respect to the proposal.
(c) Proxy. Each Partner entitled to act at a meeting of Partners may authorize any Person or Persons to act for it by proxy on all matters in which a Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Each proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Partner executing it, such revocation to be effective upon the Partnership’s receipt of written notice of such revocation from the Partner executing such proxy, unless such proxy states that it is irrevocable and is coupled with an interest.
(d) Record Date for Meetings and Other Purposes.
(i) The General Partner may set, in advance, a Record Date (x) for the purpose of determining the identities of the Partners entitled to Consent to any action or entitled to receive notice of or vote at any meeting of the Partners or (y) to make a determination of Partners for any other proper purpose. Any such date shall not be before the close of business on the day the Record Date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of the Partners, not less than two (2) Business Days, before the date on which the meeting is to be held.
(ii) If no Record Date is set, the Record Date for the determination of Partners entitled to notice of or vote at a meeting of the Partners shall be at the close of business on the day on which the notice of the meeting is sent, and the Record Date for any other determination of Partners shall be the effective date of such Partner action, distribution or other event. When a determination of the Partners entitled to vote at any meeting of the Partners has been made as provided in this Section 10.03(d), such determination shall apply to any adjournment thereof.
(e) Conduct of Meetings. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.
(f) Waivers. Any time period for notice with respect to meetings or consents of the Partners may be waived by a Partner as to such Partner.
Article XI
EXCHANGE RIGHTS
Section 11.01. Elective and Mandatory Exchanges.
(a) Elective Exchanges. Subject to the policy regarding Exchanges set forth in 0, as amended from time to time by the Partnership (the “Policy Regarding Exchanges”), an Exchangeable Interest Partner shall have the right, from time to time, to surrender Exchangeable Interests (free and clear of all liens, encumbrances, rights of first refusal and similar restrictions, except for those arising under this Agreement) to the Partnership or the General Partner and to thereby cause the Partnership or the General Partner to deliver to that Exchangeable Interest Partner (or its designee) the Exchange Consideration as set forth in Section 11.03 (an “Elective Exchange”).
(b) Mandatory Exchange Events. Interests are subject to Mandatory Exchange in each of the following circumstances:
(i) pursuant to Section 7.04, if an Applicable Sale is determined to be a Mandatory Exchange event in the sole discretion of the General Partner;
(ii) pursuant to Section 7.05; or
(iii) in the discretion of the General Partner, with the consent of Partners whose Class B Interests represent fifty percent (50%) of the Class B Interests of all Partners in the aggregate, all Partners will be required to exchange all Exchangeable Interests then held by the Partners.
(c) Mandatory Exchange Notices and Dates. Upon the occurrence of any of the circumstances set out in Section 11.01(b), the General Partner may exercise its right to cause a mandatory exchange of a Partner’s Exchangeable Interests (a “Mandatory Exchange”) by delivering to each Partner a written notice pursuant to the notice provisions in Section 12.06 (a “Mandatory Exchange Notice”). A Mandatory Exchange Notice will specify the basis for the Mandatory Exchange, the Exchangeable Interests of the Partnership to which the Mandatory Exchange applies, and the effective date of such Mandatory Exchange (the “Mandatory Exchange Date”), which shall be no earlier than ten (10) Business Days after delivery of the Mandatory Exchange Notice. The Partner receiving the Mandatory Exchange Notice shall use its best efforts to deliver the Certificates, as applicable, representing the applicable Exchangeable Interests (free and clear of all liens, encumbrances, rights of first refusal and similar restrictions, except for those arising under this Agreement) no later than one (1) Business Day prior to the Mandatory Exchange Date. Upon the Mandatory Exchange Date, the Partnership will effect the Mandatory Exchange.
Section 11.02. Additional Terms Applying to Exchanges.
(a) Rights of Exchangeable Interest Partner. On an Exchange Date, all rights of the Exchangeable Interest Partner as a holder of the Exchangeable Interests shall cease, and, unless the Partnership or General Partner, as applicable, has elected Cash Settlement as to all Exchangeable Interests tendered, the General Partner shall cause the transfer agent or registrar of the General Partner to update the stock register of the General Partner such that the Exchangeable Interest Partner (or its designee) is a record holder of the shares of Class A Common Stock to be received by the Exchangeable Interest Partner (or its designee) in respect of such Exchange. For the avoidance of doubt, if the Exchangeable Interests are Class B Interests, upon such Exchange, the Exchangeable Interest Partner shall surrender to the Corporation the number of shares of Class B Common Stock held by such Class B Interest Partner equal to the number of Exchangeable Interests subject to such Exchange.
(b) Right of the General Partner to Acquire Exchangeable Interests. The General Partner shall have the right but not the obligation to have the General Partner (in lieu of the Partnership) acquire Exchangeable Interests directly from an Exchangeable Interest Partner in exchange for the elected Exchange Consideration.
(c) Expenses. Except as otherwise agreed by the Partnership or the General Partner, the Partnership and each Exchangeable Interest Partner shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated. Notwithstanding the foregoing sentence, the Partnership or the General Partner shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, however, that if any shares of Class A Common Stock are to be delivered pursuant to an Elective Exchange in a name other than that of the Exchangeable Interest Partner that requested the Exchange (or The Depository Trust Company or its nominee for the account of a participant of The Depository Trust Company that will hold the shares for the account of such Partner) or the Cash Settlement is to be paid to a Person other than the Exchangeable Interest Partner that requested the Exchange, then such Partner or the Person in whose name such shares are to be delivered or to whom the Cash Settlement is to be paid shall pay to the General Partner (or the Partnership at the General Partner’s direction) the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the General Partner that such tax has been paid or is not payable.
Section 11.03. Exchange Consideration; Settlement.
(a) Generally. the General Partner has the right, in its sole discretion, to elect the form of Exchange Consideration with respect to any Exchange. On an Exchange Date, provided the Exchangeable Interest Partner has satisfied its obligations under Annex D and not validly retracted such proposed Exchange, the General Partner shall deliver or cause to be delivered the Exchange Consideration to such Exchangeable Interest Partner (or its designee), at the address set forth on the applicable Exchange Notice. If the General Partner elects a Cash Settlement, the General Partner shall only be obligated to contribute to the Partnership (or, if the General Partner elects to settle directly pursuant to Section 11.02(b), settle directly for an amount equal to) an amount in respect of such Cash Settlement equal to the net proceeds (after deduction of any underwriters’ discounts and commissions) from the sale by the General Partner of a number of shares of Class A Common Stock equal to the number of Exchangeable Interests being Exchanged for such Cash Settlement. Except as otherwise required by Law, the General Partner shall, for U.S. federal income tax purposes, be treated as paying an appropriate portion of the selling expenses described in the previous sentence as agent for and on behalf of the Exchangeable Interest Partner.
(b) Notice of Intended Exchange Consideration. On the later of (i) at least two (2) Business Days before the Exchange Date and (ii) one (1) Business Day after receiving an Elective Exchange Notice, the General Partner shall give written notice to the Partnership (with a copy to the Exchangeable Interest Partner) of its intended Exchange Consideration. If the General Partner does not timely deliver such written notice, the General Partner shall be deemed to have elected to settle the Exchange with shares of Class A Common Stock.
(c) Settlement through Depository Trust Company. To the extent the Class A Common Stock is settled through the facilities of The Depository Trust Company, the General Partner or the Partnership will, upon the written instruction of an Exchangeable Interest Partner, deliver the shares of Class A Common Stock deliverable to such Exchangeable Interest Partner through the facilities of The Depository Trust Company to the account of the participant of The Depository Trust Company designated by such Exchangeable Interest Partner in the Exchange Notice.
(d) Obligations of the General Partner and the Partnership. Upon any Exchange, the General Partner or the Partnership, as applicable, shall take such actions as (i) may be required to ensure that such Partner receives the shares of Class A Common Stock and/or the Cash Settlement that such Exchangeable Interest Partner is entitled to receive in connection with such Exchange pursuant to Section 11.03(a), and (ii) may be reasonably within its control that would cause such Exchange to be treated as a direct exchange between the General Partner and the Partner for U.S. federal and applicable state and local income tax purposes.
Section 11.04. Adjustment. To the extent not reflected in an adjustment to the Exchange Rate, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock is converted or changed or exchanged into or for another security, securities or other property, then, upon any subsequent Exchange, an Exchangeable Interest Partner shall be entitled to receive the amount of such security, securities or other property that such Exchangeable Interest Partner would have received if such Exchange had occurred immediately before the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock is converted or changed or exchanged into or for another security, securities or other property, this Section 11.04 shall continue to be applicable, mutatis mutandis, with respect to such security or other property.
Section 11.05. Class A Common Stock to Be Issued in Connection with an Exchange.
(a) Class A Common Stock Reserve. The General Partner shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, such number of shares of Class A Common Stock as shall be deliverable under this Agreement upon all such Exchanges; provided, however, that the General Partner may satisfy its obligations in respect of any such Exchange by delivery of unencumbered purchased shares of Class A Common Stock (which may or may not be held in the treasury of the General Partner or any subsidiary thereof).
(b) Rule 16(b) Exemption. The General Partner has taken and will take all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the General Partner (including derivative securities with respect thereto) and any securities that may be deemed to be equity securities or derivative securities of the General Partner for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the General Partner (including directors-by-deputization) who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the General Partner upon the registration of any class of equity security of the General Partner pursuant to Section 12 of the Exchange Act.
(c) Validity of Class A Common Stock. The General Partner covenants that all shares of Class A Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the General Partner or any right of first refusal or other right in favor of any Person.
Section 11.06. Withholding. Each Partner acknowledges and agrees that the Partnership may be required by Law to deduct and withhold any amounts by reason of any federal, state, local, or non-U.S. tax laws or regulations in respect of any Exchange, as provided in Section 4.10(c) of Annex B.
Section 11.07. Tax Treatment. Unless otherwise agreed to in writing by the Exchangeable Interest Partner and the General Partner, it is intended that, for U.S. federal and applicable state and local income tax purposes, each Exchange be treated as direct exchange between the General Partner and the Exchangeable Interest Partner that is a taxable transaction to the Exchangeable Interest Partner. All applicable parties shall treat each Exchange consistently with the intended treatment for all U.S. federal and applicable state and local tax purposes unless otherwise required by Law.
Section 11.08. Contribution by the General Partner. On the Exchange Date (i) the General Partner shall contribute to the Partnership the shares of Class A Common Stock and/or Cash Settlement that the General Partner has elected to deliver and that the Partner is entitled to receive in the applicable Exchange and (ii) the Partnership shall issue to the General Partner a number of Class A Interests equal to the number of Exchangeable Interests surrendered by the Partner.
Article XII
MISCELLANEOUS
Section 12.01. Conclusive Nature of Determinations. All determinations, interpretations, calculations, adjustments and other actions of the General Partner, the Partnership, the Board of Directors (or a committee to which the Board of Directors has delegated such authority), or a designee of any of the foregoing that are within such Person’s authority under this Agreement shall be binding and conclusive on a Partner absent manifest error. In connection with any such determination, interpretation, calculation, adjustment, or other action, the General Partner, the Partnership, the Board of Directors (or a committee to which the Board of Directors has delegated such authority), or the designee of any of the foregoing shall be entitled to resolve any ambiguity with respect to the manner in which such determination, interpretation, calculation, adjustment or other action is to be made or taken, and shall be entitled to interpret the provisions of this Agreement in such a manner as such Person determines to be fair and equitable, and such resolution or interpretation shall be binding and conclusive on a Partner absent manifest error.
Section 12.02. Partnership Counsel. THE PARTNERSHIP, THE GENERAL PARTNER AND AFFILIATED ENTITIES MAY BE REPRESENTED BY THE SAME COUNSEL. THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS WHO PERFORM SERVICES FOR THE PARTNERSHIP MAY ALSO PERFORM SERVICES FOR THE GENERAL PARTNER AND AFFILIATES THEREOF. THE GENERAL PARTNER MAY, WITHOUT THE CONSENT OF THE PARTNERS, EXECUTE ON BEHALF OF THE PARTNERSHIP ANY CONSENT TO THE REPRESENTATION OF THE PARTNERSHIP THAT COUNSEL MAY REQUEST PURSUANT TO THE NEW YORK RULES OF PROFESSIONAL CONDUCT OR SIMILAR RULES IN ANY OTHER JURISDICTION. THE PARTNERSHIP HAS INITIALLY SELECTED FREDERIC DORWART, LAWYERS PLLC (“PARTNERSHIP COUNSEL”) AND GIBSON, DUNN & CRUTCHER LLP (“PARTNERSHIP TAX COUNSEL”) AS LEGAL COUNSEL TO THE PARTNERSHIP (COLLECTIVELY, “LEGAL COUNSEL”). EACH PARTNER ACKNOWLEDGES THAT LEGAL COUNSEL DOES NOT REPRESENT ANY PARTNER IN ITS CAPACITY AS SUCH IN THE ABSENCE OF A CLEAR AND EXPLICIT WRITTEN AGREEMENT TO SUCH EFFECT BETWEEN SUCH PARTNER AND PARTNERSHIP COUNSEL (AND THEN ONLY TO THE EXTENT SPECIALLY SET FORTH IN SUCH AGREEMENT), AND THAT IN THE ABSENCE OF ANY SUCH AGREEMENT LEGAL COUNSEL SHALL OWE NO DUTIES TO ANY PARTNER. EACH PARTNER FURTHER ACKNOWLEDGES THAT, WHETHER OR NOT LEGAL COUNSEL HAS IN THE PAST REPRESENTED OR IS CURRENTLY REPRESENTING SUCH PARTNER WITH RESPECT TO OTHER MATTERS, UNLESS OTHERWISE EXPRESSLY AGREED BY LEGAL COUNSEL, LEGAL COUNSEL HAS NOT REPRESENTED THE INTERESTS OF ANY PARTNER IN THE PREPARATION AND/OR NEGOTIATION OF THIS AGREEMENT. EACH PARTNER HEREBY AGGREES TO SUCH MULTIPLE REPRESENTATIONS BY LEGAL COUNSEL AND THE CONFLICTS OF INTERERST THAT MAY BE INHERENT IN SUCH REPRESENTATIONS.
Section 12.03. Appointment of General Partner as Attorney-in-Fact.
(a) Execution of Documents. Each Partner, including each Additional Partner and Substituted Partner that is a Partner, irrevocably makes, constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and Lawful attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to carry out the provisions of this Agreement, including:
(i) All certificates and other instruments (including counterparts of this Agreement), and all amendments thereto, that the General Partner deems appropriate to form, qualify, continue or otherwise operate the Partnership as a Limited Partnership (or other entity in which the Partners will have limited liability comparable to that provided in the Act) in the jurisdictions in which the Partnership may conduct business or in which such formation, qualification or continuation is, in the opinion of the General Partner, necessary or desirable to protect the limited liability of the Partners.
(ii) All amendments to this Agreement adopted in accordance with the terms of this Agreement, and all instruments that the General Partner deems appropriate in accordance with the terms of this Agreement.
(iii) All conveyances of Partnership Assets and other instruments that the General Partner reasonably deems necessary in order to complete a dissolution and termination of the Partnership pursuant to this Agreement.
(b) Power and Interest. The appointment by all Partners of the General Partner as attorney-in-fact shall be deemed to be a power coupled with an interest in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing and other action by it on behalf of the Partnership, shall survive the Incapacity of any Person hereby giving such power and the Transfer of all or any portion of such Person’s Interests, and shall not be affected by the subsequent Incapacity of the principal.
Section 12.04. Entire Agreement. This Agreement, together with the Tax Receivable Agreement, the Registration Rights Agreement, and the Stockholder Agreement, in each case, as amended, supplemented or restated in accordance with its terms, and the other documents contemplated hereby and thereby, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersede any and all prior or contemporaneous agreements or understandings between the parties to this Agreement pertaining to the subject matter hereof, including the Existing Agreement.
Section 12.05. Further Assurances. Each of the parties to this Agreement does hereby covenant and agree on behalf of itself, its successors, and its assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish, and deliver such other instruments, documents and statements, and to take such other action as may be required by Law or reasonably necessary to effectively carry out the intent and purposes of this Agreement.
Section 12.06. Notices. Any notice, consent, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be (a) delivered personally to the Person or an officer of the Person to whom the same is directed, (b) sent by facsimile, overnight mail or registered or certified mail, return receipt requested, postage prepaid, or (c) (except with respect to notice to the Partnership or the General Partner) sent by email, with electronic, written or oral confirmation of receipt, in each case addressed as follows:
(i) if to the Partnership or the General Partner:
c/o Excelerate Energy Limited Partnership
2445 Technology Forest Blvd, Level 6
The Woodlands, TX 77381
[Attention: [●]
Email: [●]]
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Attention: | [●] |
Email: | [●]@gibsondunn.com |
Frederic Dorwart, Lawyers PLLC
124 East 4th Street
Tulsa, Oklahoma 74114
Attention: [●]
Email: [●]@fdlaw.com
or to such other address as the Partnership may from time to time specify by notice to the Partners;
(ii) if to any Partner, to:
the address, email, or facsimile number of such Partner set forth in the records of the Partnership.
Any such notice shall be deemed to be delivered, given and received for all purposes as of: (A) the date so delivered, if delivered personally, (B) upon receipt, if sent by facsimile or email, or (C) on the date of receipt or refusal indicated on the return receipt, if sent by registered or certified mail, return receipt requested, postage and charges prepaid and properly addressed.
Section 12.07. Governing Law. This Agreement, including its existence, validity, construction, and operating effect, and the rights of each of the parties to this Agreement, shall be governed by and construed in accordance with the Laws of the State of Delaware without regard to otherwise governing principles of conflicts of Law.
Section 12.08. Jurisdiction and Venue. The parties to this Agreement agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court (the “Selected Courts”), and each of the parties hereby irrevocably consents to the jurisdiction of the Selected Courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any Selected Court. Without limiting the foregoing, each party agrees that service of process on such party in the manner provided for notice in Section 12.06 shall be deemed effective service of process on such party.
Section 12.09. Equitable Remedies. The parties to this Agreement agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions and other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any of the Selected Courts, this being in addition to any other remedy to which they are entitled at Law or in equity. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties to this Agreement. Each party further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at Law would be adequate.
Section 12.10. Construction. This Agreement shall be construed as if all parties to this Agreement prepared this Agreement.
Section 12.11. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall for all purposes be deemed an original, and all such counterparts shall together constitute but one and the same agreement.
Section 12.12. Third-Party Beneficiaries. Except as provided in Section 4.07, nothing in this Agreement, express or implied, is intended or shall be construed to give any Person other than the parties to this Agreement (or their respective legal representatives, successors, heirs and distributees) any legal or equitable right, remedy or claim under or in respect of any agreement or provision contained herein, it being the intention of the parties to this Agreement that this Agreement is for the sole and exclusive benefit of such parties (or such legal representatives, successors, heirs and distributees) and for the benefit of no other Person.
Section 12.13. Binding Effect. Except as otherwise expressly provided herein, all of the terms and provisions of this Agreement shall be binding on, shall inure to the benefit of and shall be enforceable by the Partners, their heirs, executors, administrators, successors and all other Persons hereafter holding, having or receiving an interest in the Partnership, whether as Substituted Partners or otherwise.
Section 12.14. Severability. If any provision of this Agreement as applied to any party or any circumstance shall be adjudged by a court to be void, unenforceable or inoperative as a matter of Law, then the same shall in no way affect any other provision in this Agreement, the application of such provision in any other circumstance or with respect to any other party, or the validity or enforceability of the Agreement as a whole.
Section 12.15. Survival. The provisions of Section 4.06 (Limitation on Liability), Section 4.07 (Indemnification), Section 12.01 (Conclusive Nature of Determinations), Section 12.03 (Appointment of General Partner as Attorney-in-Fact), Section 12.04 (Entire Agreement), Section 12.05 (Further Assurances), Section 12.06 (Notices), Section 12.07 (Governing Law), Section 12.08 (Jurisdiction and Venue), Section 4.8 (Survival of Obligations) of Annex B and this Section 12.15 (Survival) (and any other provisions of this Agreement necessary for the effectiveness of the enumerated sections) shall survive the termination of the Partnership and/or the termination of this Agreement.
Article XIII
DEFINED TERMS
Section 13.01. Definitions. Unless otherwise indicated to the contrary, the following definitions shall be applied to the terms used in this Agreement:
“Act” means the Delaware Revised Uniform Partnership Act, 6 Del. C. §§ 15-101, et seq. (as it may be amended from time to time), and any successor to such statute.
“Additional Funds” is defined in Section 2.05(a).
“Additional Partner” means a Person who is admitted to the Partnership as a Partner pursuant to the Act and Section 8.01, who is shown as such on the books and records of the Partnership, and who has not ceased to be a Partner pursuant to the Act and this Agreement.
“Affiliate” means, with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that (i) none of the Partners or their parent companies or Affiliates shall be deemed to be an Affiliate of any other Partner or its parent company or Affiliates and (ii) none of the Partners or their parent companies or Affiliates shall be deemed to be an Affiliate of the Partnership or any of its Affiliates. With respect to any Person who is an individual, “Affiliate” shall also include, without limitation, any Family Member of such Person.
“Agreement” means this Amended and Restated Limited Partnership Agreement of Excelerate Energy Limited Partnership, together with the Schedules and Exhibits to this Agreement, as now or hereafter amended, restated, modified, supplemented, or replaced.
“Applicable Sale” is defined in Section 7.04(a)(i).
“Applicable Sale Notice” is defined in Section 7.04(a)(iii).
“Assets” means any assets and property of the Partnership.
“Assumed Tax Liability” is defined in Section 3.02(b).
“Assumed Tax Rate” means (a) the highest combined effective U.S. federal, state, and local marginal rate of income tax applicable to an individual resident in Tulsa, Oklahoma for the Fiscal Year or (b) such lesser rate, determined by the General Partner with the prior consent of a Majority-in-Interest of the Partners, provided that in no Fiscal Year shall the Assumed Tax Rate be less than the highest combined effective U.S. federal, state, and local marginal rate of income tax applicable to a corporation doing business in Houston, Texas for the Fiscal Year.
“Available Cash” means, after taking into account amounts determined by the General Partner to be reasonably necessary or advisable to be retained by the Partnership to meet actual or anticipated, direct or indirect, expenses, capital investments, working capital needs or liabilities (actual, contingent or otherwise) of the Partnership, including the payment of any Imputed Underpayment or for the operation of the business of the Partnership, or to create reasonable reserves for any of the foregoing, cash (in United States dollars) of the Partnership that the General Partner determines is available for distribution to the Partners.
“Bankruptcy” means, with respect to any Person, the occurrence of any event specified in Section 18-304 of the Act with respect to such Person, and the term “Bankrupt” has a correlative meaning.
“Board of Directors” means the Board of Directors of the General Partner.
“Business Day” means any weekday, excluding any legal holiday observed pursuant to United States federal or California State Law or regulation.
“Capital Account” is defined in Annex B.
“Capital Contribution” means, with respect to any Partner, the aggregate amount of money and the initial Asset Value of property (other than money) in such form as may be permitted by the Act that the Partner contributes (or is treated as contributing) to the Partnership.
“Capital Stock” means a share of any class or series of stock of the General Partner now or hereafter authorized.
“Capital Transaction Proceeds” means the proceeds of the sale, exchange, or other disposition in a single transaction or series of related transactions of all or substantially all of the assets of the Partnership followed by a liquidation of the Partnership. For the avoidance of doubt, Capital Transaction Proceeds shall not include Operating Cash Flow.
“Cash Settlement” means immediately available funds in U.S. dollars in an amount equal to the product of (x) the number of shares of Class A Common Stock that would otherwise be delivered to a Partner in an Exchange, multiplied by (y) the price per share, net of underwriting discounts and commissions, at which Class A Common Stock is issued by the General Partner in an underwritten offering or block trade commenced in anticipation of the applicable Exchange (a “Liquidity Offering”); or (z) if no such Liquidity Offering occurs prior to the applicable Exchange, the arithmetic average of the volume-weighted average prices for a share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation system on which the Class A Common Stock trades, as reported by The Wall Street Journal or its successor, for each of the three (3) consecutive full Business Days ending on and including the last full Business Day immediately before the Exchange Date, in each case subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. If the Class A Common Stock no longer trades on a securities exchange or automated or electronic quotation system, then the amount specified in clause (y) shall be determined in good faith by a committee of the Board of Directors composed of a majority of the directors of the General Partner that do not have an interest in the Exchangeable Interests and, if the applicable Exchangeable Interests are Class B Interests, shares of Class B Common Stock being Exchanged.
“Certificate of Limited Partnership” is defined in the recitals of this Agreement.
“Certificates” means (A) if certificated, any certificates representing Exchangeable Interests, (B) if certificated, any stock certificates representing the shares of Class B Common Stock required to be surrendered in connection with an Exchange of Class B Interests, and (C) such other information, documents or instruments as either the General Partner (or the General Partner’s transfer agent) or the Partnership may reasonably require in connection with an Exchange. If any certificate or other document referenced in the immediately preceding sentence is alleged to be lost, stolen or destroyed, the Exchangeable Interest Partner shall cooperate with and respond to the reasonable requests of the General Partner (or the General Partner’s transfer agent) and the Partnership and, if required by the General Partner or the Partnership, furnish an affidavit of loss and/or an indemnity against any claim that may be made against the General Partner or the Partnership on account of the alleged loss, theft or destruction of such certificate or other document.
“Change of Control” means, as of any date of determination, in one transaction or a series of related transactions, the Transfer of Interests (or any beneficial interest therein) of the Partnership representing more than fifty (50) percent of the outstanding Common Interests as of such date of determination.
“Class A Common Stock” means the Class A common stock of the General Partner, $0.001 par value per share.
“Class A Interest” is defined in Section 2.01(b)(i).
“Class B Common Stock” means the Class B Common Stock of the General Partner, $0.001 par value per share.
“Class B Interest” is defined in Section 2.01(b)(ii).
“Code” means the Internal Revenue Code of 1986, as amended. All references in this Agreement to sections of the Code shall include any corresponding provision or provisions of succeeding Law.
“Common Stock” means the Class A Common Stock or the Class B Common Stock (and shall not include any additional series or class of the General Partner’s common stock created after the date of this Agreement).
“Common Interest” means a Class A Interest, a Class B Interest, and any other Interest designated as a Common Interest by the Partnership.
“Consent” means the consent to, approval of, or vote in favor of a proposed action by a Partner given in accordance with Article X.
“control,” including the terms “controlled by” and “under common control with,” means with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, as trustee or executor, as general partner or General Partner, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the Board of Directors or similar body governing the affairs of such Person.
“de minimis” shall mean an amount small enough as to make not accounting for it commercially reasonable or accounting for it administratively impractical, in each case as determined by the General Partner.
“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; and (iii) obligations of such Person as lessee under capital leases.
“Drag-Along Right” is defined in Section 7.04(a).
“Elective Exchange” is defined in Section 11.01(a).
“Elective Exchange Date” means the effective date of an Elective Exchange.
“Elective Exchange Notice” is defined in Section 3.1(a) of Annex D.
“Equivalent Interests” means Interests with preferences, conversion and other rights (other than voting rights), restrictions, limitations as to dividends and other distributions, qualifications, terms and conditions of redemption (the “Terms”) that are (a) relative to the Common Interests and the other classes and series of Interests that correspond to classes and series of Capital Stock, and (b) substantially the same as (or corresponding to) the Terms that any new Capital Stock or New Securities have relative to the Common Stock and other classes and series of Capital Stock or New Securities. The foregoing shall not apply to matters such as voting for Partners of the Board of Directors that are not applicable to the Partnership. In comparing the economic rights of any Preferred Stock with the economic rights of any Interests, the effect of taxes may be taken into account.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange” means any Elective Exchange or Mandatory Exchange.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
“Exchange Consideration” shall mean, in the case of any Exchange, (x) the number of shares of Class A Common Stock that is equal to the product of the number of Exchangeable Interests surrendered in the Exchange multiplied by the Exchange Rate (the “Stock Consideration”), (y) the Cash Settlement, or (z) a combination of the Stock Consideration and the Cash Settlement.
“Exchange Date” means an Elective Exchange Date or Mandatory Exchange Date.
“Exchange Rate” means, in respect of any Exchange, subject to Section 11.04, a ratio, expressed as a fraction, the numerator of which shall be the number of shares of Class A Common Stock outstanding immediately before the Exchange and the denominator of which shall be the number of Class A Interests owned by the General Partner immediately before the Exchange. On the date of this Agreement, the Exchange Rate shall be 1.
“Exchangeable Interest” means each Class B Interest and any other Interest designated as an Exchangeable Interest by the Partnership.
“Exchangeable Interest Partner” means each Partner, other than the General Partner and any of its wholly owned Subsidiaries, that holds an Exchangeable Interest.
“Existing Agreement” is defined in the recitals of this Agreement.
“Fair Market Value” of Interests or other property, means the cash price that a third party would pay to acquire all of such Interests (computed on a fully diluted basis after giving effect to the exercise of any and all outstanding conversion rights, exchange rights, warrants and options) or other property, as the case may be, in an arm’s-length transaction. Unless otherwise determined by the Partnership, the following assumptions will be made when determining the Fair Market Value of Interests:
(a) that the Partnership was being sold in a manner reasonably designed to solicit all possible participants and permit all interested Persons an opportunity to participate and achieve the best value reasonably available to the Partners at the time; and
(b) that all existing circumstances are taken into account, including the terms and conditions of all agreements (including this Agreement) to which the Partnership is then a party or by which it is otherwise benefited or affected, determined.
“Family Members” means, as to a Person that is an individual, such Person’s spouse, ancestors (whether by blood or by adoption), descendants (whether by blood or by adoption), brothers and sisters (whether by blood or by adoption) and inter vivos or testamentary trusts of which only such Person and his spouse, ancestors (whether by blood or by adoption), descendants (whether by blood or by adoption), brothers and sisters (whether by blood or adoption) are beneficiaries.
“Fiscal Year” is defined in Section 6.02.
“General Partner” is defined in the preamble to this Agreement.
“GKFF Transfer” means a Transfer by a Holdings of all or part of its Interests to a GKFF Transferee.
“GKFF Transferee” means the George Kaiser Family Foundation or any Affiliate or subsidiary thereof.
“Incapacity” or “Incapacitated” means, (i) as to any Partner who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her Person or his or her estate; (ii) as to any Partner that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any Partner that is a partnership, the dissolution and commencement of the winding up of the partnership; (iv) as to any Partner that is an estate, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust that is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the Bankruptcy of such Partner.
“Incentive Compensation Plan” means any plan, agreement or other arrangement that provides for the grant or issuance of equity or equity-based awards and that is now in effect or is hereafter adopted by the Partnership or the General Partner for the benefit of any of their respective employees or other service providers (including directors, advisers and consultants), or the employees or other services providers (including directors, advisers and consultants) of any of their respective Affiliates or Subsidiaries.
“Included Interests” is defined in Section 7.04(b)(ii).
“Indemnitee” means each Partner, each Affiliate of such Partner, the Tax Representative, the Designated Individual and each officer, director, member, or manager (and any person acting in an officer capacity on behalf of such manager) of each Partner, the Partnership or their respective Affiliates, in all cases in such capacity.
“Interest” means a fractional share of the Limited Partnership interest in the Partnership, which may be a Class A Interest or Class B Interest, and shall be deemed to include any equity security received in connection with any recapitalization, merger, consolidation, or other reorganization, or by way of any distribution in respect of Interests, in any such case, after the date of this Agreement.
“Interest Designation” is defined in Section 2.04(a).
“IPO” means the General Partner’s initial public offering of shares of its Class A Common Stock.
“IRS” means the United States Internal Revenue Service, or, if applicable, a state or local taxing agency.
“Law” means any applicable statute, Law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or order of any governmental authority. The term “Lawful” has a correlative meaning.
“Legal Counsel” is defined in Section 12.02.
“Liquidating Event” is defined in Section 9.02(b).
“Liquidator” is defined in Section 9.03(a).
“Majority-in-Interest of the Partners” means Partners (excluding the General Partner and any of its wholly owned Subsidiaries) entitled to vote on or consent to any matter holding more than fifty percent (50%) of all outstanding Common Interests held by all Partners (excluding the General Partner and any of its wholly owned Subsidiaries) entitled to vote on or consent to such matter.
“Mandatory Exchange” is defined in Section 11.01(c).
“Mandatory Exchange Date” is defined in Section 11.01(c).
“Mandatory Exchange Notice” is defined in Section 11.01(c).
“New Securities” means any equity security as defined in Rule 3a11-1 under the Securities Exchange Act of 1934, as amended, excluding grants under the Incentive Compensation Plans, including (i) rights, options, warrants, or convertible or exchangeable securities that entitle the holder thereof to subscribe for or purchase, convert such securities into, or exchange such securities for, Common Stock or Preferred Stock and (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).
“Operating Cash Flow” means all cash from the operation of the business of the Partnership (and not from an event or series of events that would give rise to Capital Transaction Proceeds), including retained earnings from or attributable to Operating Cash Flow, whether held in cash or otherwise, as reasonably determined by the Partnership.
“Partner” means any Person named as a Partner of the Partnership on the Register of this Agreement (as amended from time to time) and any Person admitted as an Additional Partner of the Partnership or a Substituted Partner of the Partnership, in each case, in such Person’s capacity as a Partner of the Partnership, until such time as such Person has ceased to be a Partner.
“Partnership” is defined in the preamble to this Agreement.
“Partnership Counsel” is defined in Section 12.02.
“Partnership Tax Counsel” is defined in Section 12.02.
“Percentage Interest” means, with respect to each Partner, as to any class or series of relevant Interests, the fraction, expressed as a percentage, the numerator of which is the aggregate number of Interests of such class or series held by such Partner and the denominator of which is the total number of Interests of such class or series held by all Partners, in each case determined as of the date of determination. If not otherwise specified, “Percentage Interest” shall be deemed to refer to Common Interests.
“Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, joint venture, syndicate, person, trust, association, organization or other entity, including any governmental authority, and including any successor, by merger or otherwise, of any of the foregoing.
“Policies” means the policies set by the General Partner from time to time, including, but not limited to, the Insider Trading Policy, the Related Party Transactions Policy and the Guidelines for Public Disclosures and Communications With the Investment Community adopted by the Board of Directors and such other policies intended to ensure (a) administrative management matters, (b) orderly liquidity for Exchangeable Interest Partners, and (c) compliance with tax Laws and Regulations.
“Policy Regarding Exchanges” is defined in Section 11.01(a).
“Preferred Stock” means shares of preferred stock of the General Partner now or hereafter authorized or reclassified that has dividend rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the Common Stock.
“Record Date” means the record date established by the Partnership for the purpose of determining the Partners entitled to notice of or vote at any meeting of Partners or to consent to any matter, or to receive any distribution or the allotment of any other rights, or in order to make a determination of Partners for any other proper purpose, which, in the case of a record date fixed for the determination of Partners entitled to receive any distribution, shall (unless otherwise determined by the Partnership) generally be the same as the record date established by the General Partner for a distribution to the Partners of its Capital Stock of some or all of its portion of such distribution.
“Register” is defined in Section 5.01(b)(i).
“Registration Rights Agreement” means the Registration Rights Agreement, effective on or about the date hereof, among the General Partner and the other persons party thereto, as the same may be amended, modified, supplemented or restated from time to time.
“Regulations” means the income tax regulations, including temporary regulations and, to the extent taxpayers are permitted to rely on them, proposed regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). References to “Treas. Reg. §” are to the sections of the Regulations.
“Related-Party Transfer” means a Transfer by a Partner of all or part of its Interests to any Related-Party Transferee.
“Related-Party Transferee” means, with respect to a Partner, (i) any Family Member of that Partner, (ii) any direct or indirect Partner or equityholder of that Partner or any Affiliate of that Partner, (iii) any Family Member of that Partner or any direct or indirect Partner or equityholder described in (ii), or (iv) the General Partner or Subsidiary of the General Partner.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Selected Courts” is defined in Section 12.08.
“Stockholder’s Agreement” means that certain Stockholder’s Agreement dated [●], 2022 by and among the General Partner and the stockholders of the General Partner party thereto.
“Subsidiary” means, with respect to any Person, any corporation or other entity if a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.
“Substituted Partner” means a Person who is admitted as a Partner to the Partnership pursuant to Section 7.03.
“Surviving Company” is defined Section 7.07(b)(iii).
“Tag-Along Amount” is defined in Section 7.04(b)(i).
“Tag-Along Participation Notice” is defined in Section 7.04(b)(ii).
“Tag-Along Right” is defined in Section 7.04(b)(i).
“Tag-Along Sale” is defined in Section 7.04(b)(i).
“Tag-Along Sale Notice” is defined in Section 7.04(b)(ii).
“Tag-Along Sellers” is defined in Section 7.04(b)(i).
“Tax Distribution” is defined in Section 3.02(a).
“Tax Distribution Shortfall Amount” is defined in Section 3.02(d).
“Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of [●], 2022, entered into by and among the General Partner, the Partnership, each of the parties thereto identified as a “TRA Holder” or the “TRA Representative” and each of the successors and assigns thereto, and any other similar tax receivable (or comparable) agreements entered after the date of this Agreement.
“Termination Transaction” means any direct or indirect Transfer of all or any portion of the General Partner’s Interests in connection with, or the other occurrence of, (a) a merger, consolidation or other combination involving the General Partner, on the one hand, and any other Person, on the other, (b) a sale, lease, exchange or other transfer of all or substantially all of the assets of the General Partner not in the ordinary course of its business, whether in a single transaction or a series of related transactions, (c) a reclassification, recapitalization or change of the outstanding Class A Common Stock (other than a change in par value, or from par value to no par value, or as a result of a stock split or reverse stock split, stock dividend or similar subdivision), (d) the adoption of any plan of liquidation or dissolution of the General Partner, or (e) a Transfer of all or any portion of the General Partner’s Interests (other than to a wholly owned Affiliate).
“Terms” is defined in the definition of “Equivalent Interests.”
“Transfer” means, in respect of any Interests, property or other assets, any sale, assignment, hypothecation, lien, encumbrance, transfer, distribution or other disposition thereof or of a participation therein, or other conveyance of legal or beneficial interest therein, including rights to vote and receive dividends or other income with respect thereto, or any short position in a security or any other action or position otherwise reducing risk related to ownership through hedging or other derivative instruments, whether voluntarily or by operation of Law, or any agreement or commitment to do any of the foregoing. An Exchange shall not constitute a Transfer under this Agreement.
Section 13.02. Interpretation. In this Agreement and in the exhibits to this Agreement, except to the extent that the context otherwise requires:
(a) the headings are for convenience of reference only and shall not affect the interpretation of this Agreement;
(b) defined terms include the plural as well as the singular and vice versa;
(c) words importing gender include all genders;
(d) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been or may from time to time be amended, extended, re-enacted or consolidated and all statutory instruments or orders made under it;
(e) any reference to a “day” or “Business Day” means the whole of such day, being the period of 24 hours running from midnight to midnight;
(f) references to Articles, Sections, subsections, clauses and Exhibits are references to Articles, Sections, subsections, clauses and Exhibits to this Agreement;
(g) the words “including” and “include” and other words of similar import shall be deemed to be followed by the phrase “without limitation”; and
(h) unless otherwise specified, references to any party to this Agreement or any other document or agreement shall include its successors and permitted assigns.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
EXCELERATE ENERGY, INC. | ||
By: | ||
Name: | ||
Title: |
EXCELERATE ENERGY HOLDINGS, LLC | ||
By: | ||
Name: | ||
Title: |
ANNEX A: INITIAL INTERESTS
Partner | Interests |
Excelerate Energy, Inc. c/o Excelerate Energy Limited Partnership The Woodlands, TX 77381 Attention: [●] Email: [●]
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP 200 Park Avenue New York, NY 10166 Attention: [●] Email: [●] @gibsondunn.com
|
[______] Class A Interests |
Excelerate Energy Holdings, LLC c/o [●]
Attention: [●] E-mail: [●]
with a copy (which shall not constitute notice) to:
[●] Attention: [●]
E-mail: [●]
|
[______] Class B Interests |
ANNEX B: TAX MATTERS
Article I
Definitions
“Asset Value” means, with respect to any Asset, the adjusted basis of such Asset for federal income tax purposes; provided, however, that:
(i) the initial Asset Value of any Asset (other than cash) contributed or deemed contributed by a Partner to the Partnership shall be the gross Fair Market Value of such Asset as determined by the Partnership;
(ii) the Asset Values of all Assets shall be adjusted to equal their respective gross Fair Market Values as determined by the Partnership as of the following times: (A) the acquisition of an additional interest in the Partnership by any new or existing Partner, in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; (C) the liquidation of the Partnership within the meaning of Treas. Reg. § 1.704-1(b)(2)(ii)(g); (D) the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to the benefit of the Partnership by an existing Partner acting in a Partner capacity or by a new Partner acting in a Partner capacity or in anticipation of becoming a Partner; or (E) any other instance in which such adjustment is permitted under Treas. Reg. § 1.704-1(b)(2)(iv); provided, however, that any adjustment pursuant to clause (A), (B), (D), or (E) above shall be made only if the Partnership determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;
(iii) the Asset Value of any Asset distributed to any Partner shall be the gross Fair Market Value of such Asset on the date of distribution, as determined by the Partnership; and
(iv) the Asset Values of all Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such Assets pursuant to Code section 734(b) or Code section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(m); provided, however, that Asset Values shall not be adjusted pursuant to this paragraph (iv) to the extent that the Partnership determines that an adjustment pursuant to paragraph (ii) of this definition of Asset Value is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (iv).
If the Asset Value of an Asset has been determined or adjusted to paragraph (i), (ii), or (iv) of this definition of Asset Value, then such Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such Asset for purposes of computing Net Profits and Net Losses.
“Partnership Minimum Gain” has the meaning set forth as “partnership minimum gain” in Treas. Reg. § 1.704-2(b)(2) and is computed in accordance with Treas. Reg. § 1.704-2(d).
“Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Fiscal Year or other period; provided, however, that if the Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other period, Depreciation shall be determined in accordance with Treas. Reg. § 1.704-1(b)(2)(iv)(g)(3) or Treas. Reg. § 1.704-3(d)(2), as appropriate.
“Designated Individual” is defined in Section 4.3(a)(ii) of this Annex B.
“Imputed Underpayment” is defined in Section 4.4(b) of this Annex B.
“Imputed Underpayment Share” is defined in Section 4.4(c)(i) of this Annex B.
“Net Profits” and “Net Losses” mean, for each Fiscal Year or other period, an amount equal to the Partnership’s taxable income or loss for such Fiscal Year or other period, determined in accordance with Code section 703(a) and, where appropriate (but including in taxable income or loss, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code section 703(a)(1)), with the following adjustments:
(i) any income of the Partnership exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in Code section 705(a)(2)(B) (or treated as expenditures described in Code section 705(a)(2)(B) pursuant to Treas. Reg. § 1.704 1(b)(2)(iv)(i)) and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be subtracted from such taxable income or loss;
(iii) in the event the Asset Value of any Asset of the Partnership is adjusted in accordance with paragraph (ii) or paragraph (iii) of the definition of “Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such Asset for purposes of computing Net Profits or Net Losses;
(iv) gain or loss resulting from any disposition of any Asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Asset Value of the Asset disposed of, notwithstanding that the adjusted tax basis of such Asset differs from its Asset Value;
(v) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;
(vi) to the extent an adjustment to the adjusted tax basis of any Asset pursuant to Code section 734(b) is required pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the Asset) or loss (if the adjustment decreases the basis of the Asset) from the disposition of the Asset and shall be taken into account for purposes of computing Net Profits and Net Losses;
(vii) notwithstanding any other provision of this definition of Net Profits and Net Losses, any items that are specially allocated pursuant to Section 3.2 and Section 3.3 of this Annex B shall not be taken into account in computing Net Profits or Net Losses, but shall be determined by applying rules analogous to those set forth in paragraphs (i) through (vi) above; and
(viii) where appropriate, references to Net Profits and Net Losses shall refer to specific items of income, gain, loss, deduction, and credit comprising or otherwise comprising Net Profits or Net Losses.
“Nonrecourse Deductions” has the meaning set forth in Treas. Reg. § 1.704-2(b)(1).
“Nonrecourse Liability” has the meaning set forth in Treas. Reg. § 1.752-1(a)(2).
“Partner Nonrecourse Debt” has the meaning given to the term “partner nonrecourse debt” in Treas. Reg. § 1.704-2(b)(4).
“Partner Nonrecourse Debt Minimum Gain” means, with respect to each Partner Nonrecourse Debt, an amount equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treas. Reg. § 1.704-2(i)(3).
“Partner Nonrecourse Deductions” has the meaning given to the term “partner nonrecourse deduction” in Treas. Reg. §§ 1.704-2(i)(l) and 1.704-2(i)(2).
“Push Out Election” means the election under Code section 6226 or Code section 6227 (or, in each case, any similar provision under the Bipartisan Budget Act of 2015 or other applicable federal, state, or local law) to “push out” an adjustment to the Partners or former Partners, including filing IRS Form 8988 (Election for Alternative to Payment of the Imputed Underpayment), or any successor or similar form, and taking any other action necessary to give effect to such election.
“Tax Representative” means, as applicable, and including the Designated Individual as the context requires, (a) for U.S. federal income tax purposes, with respect to each taxable year beginning after December 31, 2017, the Partner or other Person (including the Partnership) designated as the “partnership representative” of the Partnership under Code section 6223 for such taxable year, (b) for U.S. federal income tax purposes, with respect to each taxable year beginning before December 31, 2017, the Partner designated as the “tax matters partner” for the Partnership under Code section 6231(a)(7) (as in effect before 2018 and before amendment by Title XI of the Bipartisan Budget Act of 2015, H.R. 1314, Public Law No. 114-74), and/or (c) for state, local, or non-U.S. tax purposes, with respect to each applicable taxable period, the Partner or other Person serving in a similar capacity under any similar provisions of state, local or non-U.S. Laws, in each case, acting solely at the direction of the Partnership to the maximum extent permitted under Law.
Article II
Partner’s Capital Accounts.
The Partnership or General Partner shall establish and maintain a capital account for each Partner in accordance with Treas. Reg. § 1.704-1(b)(2)(iv) (each, a “Capital Account”). The Partnership may maintain Capital Account subaccounts for different classes of Interests, and any provisions of this Agreement pertaining to Capital Account maintenance shall apply, mutatis mutandis, to those subaccounts.
Article III
Allocations
Section 3.1 Allocations Generally. Each Fiscal Year, after adjusting each Partner’s Capital Account for all contributions and distributions with respect to such Fiscal Year and after giving effect to the allocations under Section 3.2 of this Annex B for the Fiscal Year, Net Profits and Net Losses shall be allocated among the Partners in a manner such that, after such allocations have been made, each Partner’s Capital Account balance (which may be a positive, negative, or zero balance) will equal (proportionately) (a) the amount that would be distributed to each such Partner, determined as if the Partnership were to (i) sell all of its Assets for their Asset Values, (ii) satisfy all of its liabilities in accordance with their terms with the proceeds from such sale (limited, with respect to Nonrecourse Liabilities, to the Asset Values of the Assets securing such liabilities), and (iii) distribute the remaining proceeds pursuant to the applicable provision of this Agreement, minus (b) the sum of (x) such Partner’s share of the Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain and (y) the amount, if any (without duplication of any amount included under clause (x)), that such Partner is obligated (or is deemed for U.S. tax purposes to be obligated) to contribute, in its capacity as a Partner, to the capital of the Partnership as of the last day of such Fiscal Year.
Section 3.2 Priority Allocations.
(a) Minimum Gain Chargeback, Qualified Income Offset, and Stop Loss Provisions. Each of (i) the “minimum gain chargeback” provision of Treas. Reg. § 1.704-2(f), (ii) the “chargeback of partner nonrecourse debt minimum gain” provision of Treas. Reg. § 1.704-2(i)(4), (iii) the “qualified income offset” provision in Treas. Reg. § 1.704-1(b)(2)(ii)(d)(3), and (iv) the requirement in the flush language immediately following Treas. Reg. § 1.704-1(b)(2)(ii)(d)(3) that an allocation “not cause or increase a deficit balance” in a Partner’s Capital Account is hereby incorporated by reference as a part of this Agreement. The Partnership shall make such allocations as are necessary to comply with those provisions and shall make any determinations with respect to such allocations (to the extent consistent with clauses (i) – (iv) of the preceding sentence).
(b) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be allocated to the Partners pro rata in accordance with their Interests, unless otherwise determined by the Partnership.
(c) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Partner who bears the economic risk of loss (within the meaning of Treas. Reg. § 1.752-2) with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treas. Reg. § 1.704-2(i)(l).
(d) Special Basis Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership Asset, pursuant to Code section 734(b) or Code section 743(b) is required, pursuant to Treas. Reg. §§ 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Partner in complete liquidation of such Partner’s interest in the Partnership, the amount of such adjustment to 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) and such gain or loss shall be specially allocated to the Partners in accordance with their interests in the Partnership in the event Treas. Reg. § 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made in the event Treas. Reg. § 1.704-1(b)(2)(iv)(m)(4) applies.
(e) Ameliorative Allocations. Any allocations made (as well as anticipated reversing or offsetting regulatory allocations to be made) pursuant to Section 3.2(a)-(d) of this Annex B shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Partner pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Partner pursuant to the provisions of this Agreement if those allocations had not occurred.
Section 3.3 Other Allocation Rules.
(a) In General. Except as otherwise provided in this Section 3.3 of this Annex B, for income tax purposes under the Code and the Regulations, each Partnership item of income, gain, loss, deduction, and credit shall be allocated among the Partners in the same manner as its correlative item of income, gain, loss, deduction, and credit (as calculated for purposes of allocating Net Profits or Net Loss) is allocated pursuant to Section 3.1 and Section 3.2 of this Annex B.
(b) Section 704(c) Allocations. Notwithstanding the provisions of Section 3.3(a) of this Annex B to the contrary, in accordance with Code section 704(c)(1)(A) (and the principles of those provisions) and Treas. Reg. § 1.704-3, Partnership items of income, gain, loss, deduction, and credit with respect to any property contributed to the capital of the Partnership, or after Partnership property has been revalued under Treas. Reg. § 1.704-1(b)(2)(iv)(f) or (s), shall, solely for U.S. federal, state and local tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted basis of such Partnership property to the Partnership for U.S. federal income tax purposes and its value as so determined at the time of the contribution or revaluation of Partnership property. Unless otherwise determined by the General Partner (with the consent of Holdings), the Partnership shall use the “traditional method” with respect to (i) any property contributed to the Partnership before the IPO and (ii) “reverse section 704(c) allocations” (within the meaning of Treas. Reg. § 1.704-3(a)(6)) arising before or in connection with the IPO. With respect to property contributed or section 704(c) amounts arising from revaluations made after the IPO, the Partnership may use any method permitted under Treas. Reg. § 1.704-3. Allocations pursuant to Section 3.3(a) and this Section 3.3(b) of this Annex B are solely for U.S. federal, state, and local tax purposes and shall not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of profit, loss, or other items, pursuant to any provision of this Agreement.
(c) Allocations in Respect of Varying Interests. If any Partner’s interest in the Partnership varies (within the meaning of Code section 706(d)) within a Fiscal Year, whether by reason of a Transfer of an Interest, redemption of an Interest by the Partnership, or otherwise, Net Profits and Net Losses for that Fiscal Year will be allocated so as to take into account such varying interests in accordance with Code section 706(d) using the daily proration method and/or such other permissible method, methods, or conventions selected by the Partnership.
(d) Timing and Amount of Allocations of Net Profits and Net Loss. Net Profits and Net Loss of the Partnership shall be determined and allocated with respect to each Fiscal Year as of the end of each such year, or at such other time or times determined by the Partnership.
(e) Modification of Allocations. The allocations set forth in Section 3.1 and Section 3.2 of this Annex B are intended to comply with certain requirements of the Regulations. The Partnership shall be authorized to make, in its reasonable discretion, appropriate modifications to the allocations of Net Profits and Net Losses pursuant to this Agreement in order to comply with Code section 704 or applicable Regulations. Notwithstanding any provision of this Agreement to the contrary, if the Partnership reasonably determines an allocation other than the allocations that would otherwise be made pursuant to this Agreement would more appropriately reflect the Partners’ interests in the Partnership, the Partnership may in its discretion make appropriate adjustments to such allocations.
(f) Allocation of Liabilities under Code Section 752. Notwithstanding anything in this Agreement to the contrary, no Partner will take, or permit any Affiliate to take, any action that would change the allocation of liabilities for purposes of Code section 752 without the consent of the Partnership.
Article IV
Certain Tax Matters
Section 4.1 Provision of Information.
(a) Information to Be Provided by the Partnership to Partners. No later than thirty (30) days after the filing by the Partnership of the Partnership’s federal tax return (Federal Form 1065), the Partnership shall provide to each Partner a copy of Schedule K-1 of Federal Form 1065 reporting that Partner’s allocable share of items of income, gain, loss, deduction, or credit for such Fiscal Year, and such additional information as is required to be provided on Schedule K-1 or as such Partner may reasonably request for tax purposes, each as determined by the Partnership. The Partner hereby consents to receive each Schedule K-1 in respect of the Partner’s LLC Interest in the Partnership through electronic delivery.
(b) Information to Be Provided by Partners to the Partnership.
(i) Notice of Audit or Tax Examination. Each Partner shall notify the Partnership within five (5) days after receipt of any notice regarding an audit or tax examination of the Partnership and upon any request for material information related to the Partnership by U.S. federal, state, local, or other tax authorities.
(ii) Other Relevant Tax Information. Each Partner shall provide to the Partnership upon request tax basis information about Assets contributed by it to the Partnership and such other tax information as reasonably requested by the Partnership and necessary for it to prepare its financial reports or any tax returns and such other information and/or tax forms as the Partnership reasonably requests.
(c) No Right to Partner Tax Returns. Notwithstanding anything to the contrary in this Agreement or any right to information under the Act, with respect to the financial statements or tax returns of a Partner or its Affiliates, none of the Partnership, the other Partners, such other Partner’s Affiliates or any of their respective representatives, will be entitled to review such financial statements or tax returns for any purpose, including in connection with any proceeding or other dispute (whether involving the Partnership, between the Partners, or involving any other Persons).
Section 4.2 Tax Elections. The Partnership shall have in effect (and shall cause each Subsidiary that is classified as a partnership for U.S. federal income tax purposes to have in effect) an election pursuant to Code section 754 (and any similar provisions of applicable U.S. state or local law) for the Partnership for the Fiscal Year that includes the date of the IPO and each Fiscal Year in which a sale or exchange (whether partial or complete) occurs. The Partnership shall determine whether to make any other available election pursuant to the Code or Regulations that is not otherwise expressly provided for in this Agreement, and the Partners hereby consent to all such elections.
Section 4.3 Tax Representative.
(a) Appointment and Replacement of Tax Representative.
(i) Tax Representative. For each taxable year, including Fiscal Years before the date of this Agreement, the Partnership shall act as the Tax Representative, but the Partnership may designate another Person to act as the Tax Representative and may remove, replace, or revoke the designation of any Person serving as the Tax Representative, or require that Person to resign. For any jurisdiction with respect to which the Partnership cannot serve as the Tax Representative, however, the General Partner shall act as the Tax Representative, unless otherwise determined by the Partnership.
(ii) Designated Individual. If the Tax Representative is not an individual, the Partnership shall appoint a “designated individual” for each taxable year (as described in Treas. Reg. § 301.6223-1(b)(3)(ii)) (a “Designated Individual”).
(iii) Approval by Partners. For each taxable year since the formation of the Partnership, each Partner agrees to execute, certify, acknowledge, deliver, swear to, file, and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence the appointments described in Section 4.3(a)(i) and Section 4.3(a)(ii) of this Annex B, including statements required to be filed with the tax returns of the Partnership in order to effect the designation of the Tax Representative or Designated Individual (and any successor).
(b) Authority of the Tax Representative; Delegation of Authority. The Tax Representative shall have all of the rights, duties, powers, and obligations provided for under the Code, Regulations, or other applicable guidance; provided, that, if a Person other than the Partnership is the Tax Representative, the Tax Representative shall in all cases act solely at the direction of the Partnership. The Tax Representative may delegate its authority under this Section 4.3(b) of this Annex B to a Designated Individual who shall in all cases act solely at the direction of the Partnership.
(c) Costs and Indemnification of Tax Representative and Designated Individual. Without duplication of the provisions of Section 4.3(b) of this Annex B, the Partnership shall pay, or to the extent the Tax Representative or Designated Individual pays, indemnify and reimburse, to the fullest extent permitted by Law, the Tax Representative or Designated Individual for all costs and expenses, including legal and accounting fees (as such fees are incurred) and any claims incurred in connection with any tax audit or judicial review proceeding with respect to the tax liability of the Partnership.
Section 4.4 Tax Audits.
(a) Determinations with Respect to Audits and Other Tax Controversies. Except to the extent otherwise required by applicable tax Law (including Code section 6241(11)), the Partnership (acting directly and/or through the Tax Representative or Designated Individual) shall have the sole authority to make all decisions and determinations with respect to, and shall have sole authority with respect to the conduct of, tax audits or other tax controversies with respect to the Partnership, and any action taken by the Partnership (acting directly and/or through the Tax Representative or Designated Individual) in connection with any such audits or controversies shall be binding upon the Partnership and the Partners and former Partners.
(b) Determinations with Respect to Elections. The Partnership may make the election “out” under Code section 6221(b) if such an election is available, unless otherwise determined by the Partnership. If the Partnership does not make the election described in the preceding sentence, the Partnership (acting directly and/or through the Tax Representative or Designated Individual) shall have the sole authority to determine whether to cause the Partnership to make a Push Out Election with respect to any adjustment that could result in an imputed underpayment (within the meaning of Code section 6225) (an “Imputed Underpayment”).
(c) Responsibility for Payment of Tax; Former Partners.
(i) Imputed Underpayment Share. To the extent the Partnership is liable for any Imputed Underpayment, the Partnership shall determine the liability of the Partners for a share of such Imputed Underpayment, taking into account the Partners’ Interests and the status and actions of the Partners (including those described in Code section 6225(c)) (such share, an “Imputed Underpayment Share”).
(ii) Payment of Imputed Underpayment Share. The Partnership may (A) require a Partner who is liable for an Imputed Underpayment Share to pay the amount of its Imputed Underpayment Share to the Partnership within ten (10) days after the date on which the Partnership notifies the Partner (and in the manner required by the notice) and/or (B) reduce future distributions to the Partner, such that the amount determined under clauses (A) and (B) equals the Partner’s Imputed Underpayment Share, provided, however, that no Partner shall have an obligation to make any contribution to the capital of the Partnership with respect to any Imputed Underpayment. If a Partner fails to pay any amount that it is required to pay the Partnership in respect of an Imputed Underpayment Share within such ten (10) day period, that amount shall be treated as a loan to the Partner, bearing interest at ten (10) percent annually (which interest shall increase the Partner’s Imputed Underpayment Share). Such loan shall be repayable upon demand by the Partnership. If the Partner fails to repay the loan upon demand, the full balance of the loan shall be immediately due (including accrued but unpaid interest) and the Partnership shall have the right to collect the balance in any manner it determines, including by reducing future distributions to that Partner; provided, however, that no Partner may have any Imputed Underpayment Share treated as a loan to the extent it would violate Section 402 of the Sarbanes-Oxley Act of 2002. Any Partner not permitted to treat its Imputed Underpayment Share as a loan due to the provisions of the previous sentence shall pay any Imputed Underpayment Share within ten (10) days after the date of the notice referred to in the first sentence of this Section 4.4(c)(ii) of this Annex B.
Section 4.5 No Independent Actions or Inconsistent Positions. Except as required by Law or previously authorized in writing by the Partnership (which authorization may be withheld in the sole discretion of the Partnership), no Partner shall (i) independently act with respect to tax matters (including, but not limited to, audits, litigation and controversies) affecting or arising from the Partnership, or (ii) treat any Partnership item inconsistently on such Partner’s income tax return with the treatment of the item on the Partnership’s tax return and/or the Schedule K-1 (or other written information statement) provided to such Partner. Solely to the extent required by Law, this Section 4.5 of this Annex B shall not apply with respect to any “special enforcement matter” described in Code section 6241(11).
Section 4.6 United States Person. Except as permitted by the Partnership, each Partner represents and covenants that, for U.S. federal income tax purposes, it is and will at all times remain a “United States person,” within the meaning of Code section 7701, or is a disregarded entity the assets of which are treated as owned by a United States person under Treas. Reg. §§ 301.7701-1, 301.7701-2, and 301.7701-3.
Section 4.7 State, Local, and Non-U.S. Tax Law. The provisions of this Agreement with respect to U.S. federal income tax shall apply, mutatis mutandis, with respect to any similar provisions of state, local, or non-U.S. tax law as determined by the Partnership.
Section 4.8 Survival of Obligations. For purposes of this Article IV of this Annex B, the term “Partner” shall include a former Partner to the extent determined by the Partnership. The rights and obligations of each Partner and former Partner under this Article IV of this Annex B shall survive the Transfer by such Partner of its Interests (or withdrawal by a Partner or redemption of a Partner’s Interests) and the dissolution of the Partnership until ninety (90) days after the applicable statute of limitations. Section 4.3 (Tax Representative), Section 4.4 (Tax Audits), and this Section 4.8 (Survival of Obligations) of this Annex B shall not be amended without the prior written consent of any Partner or former Partner that would be adversely impacted by such amendment.
Section 4.9 Tax Classification. The parties intend that the Partnership shall be classified as a partnership for United States federal, state, and local tax purposes. The parties intend that the Subsidiaries of the Partnership currently classified either as disregarded entities or as partnerships for United States federal, state, and local tax purposes as of the date of this Agreement shall remain classified either as disregarded entities or as partnerships for United States federal, state, and local tax purposes. No Person shall take any action inconsistent with such classifications.
Section 4.10 Withholding.
(a) Withholding Generally. Each Partner acknowledges and agrees that the Partnership may be required by Law to deduct and withhold taxes or to fulfill other similar obligations of such Partner on any amount paid, distributed, disbursed, or allocated by the Partnership to that Partner, including upon liquidation, and any transferee of a Partner’s interest or a Substituted Partner shall, by reason of such Transfer or substitution, acknowledge, and agree to any such withholding by the Partnership, including withholding to discharge obligations of the Partnership with respect to prior distributions, allocations, or an Imputed Underpayment Share (to the extent not otherwise borne by the transferor Partner pursuant to Section 4.4 of this Annex B). All amounts withheld pursuant to this Section 4.10 of this Annex B shall, except as otherwise determined by the Partnership pursuant to Section 4.4(c)(ii) of this Annex B, be treated as amounts distributed to such Person pursuant to the provision of this Agreement that would have applied if such amount had actually been distributed.
(b) Additional Provisions with Respect to a Transfer of Interests. A Partner transferring Interests permitted by this Agreement shall, unless otherwise determined by the Partnership, (i) deliver to the Partnership, between ten (10) days and thirty (30) days before the Transfer, an affidavit of non-foreign status with respect to such transferor Partner that satisfies the requirements of Code section 1446(f)(2) or other documentation establishing a valid exemption from withholding pursuant to Code section 1446(f) or (ii) ensure that, contemporaneously with the Transfer, the transferee of such interest properly withholds and remits to the IRS the amount of tax required to be withheld upon the Transfer by Code section 1446(f) (and promptly provide evidence to the Partnership of such withholding and remittance). If a Partner transferring Interests will not satisfy clause (i) in connection with any such Transfer, the transferor Partner and transferee of such interest shall agree to jointly and severally indemnify and hold harmless the Partnership against any loss (including taxes, interest, penalties, and any related expenses) arising out of any failure to comply with the provisions of this Section 4.10(b) of this Annex B.
(c) Additional Provisions with Respect to an Exchange of Interests.
(i) Withholding of Cash or Class A Common Stock Permitted. If (x) the Partnership or the General Partner shall be required to withhold any amounts by reason of any federal, state, local, or non-U.S. tax laws or regulations in respect of any Exchange or (y) the applicable Partner has unpaid amounts described in Section 4.4(c) of this Annex B, the Partnership, or the General Partner, as the case may be, shall be entitled to take such action as it deems appropriate in order to ensure compliance with such withholding requirements or satisfy such payment obligations, including, at its option, withholding cash from the Cash Settlement or shares of Class A Common Stock with a Fair Market Value equal to the amount of any taxes that the Partnership or the General Partner, as the case may be, may be required to withhold or the Partner may be required to pay with respect to such Exchange. To the extent that amounts are (or property is) so withheld and paid over to the appropriate taxing authority, such withheld amounts (or property) shall be treated for all purposes of this Agreement as having been paid (or delivered) to the applicable Partner.
(ii) Notice of Withholding. If the Partnership or the General Partner determines that any amounts by reason of any federal, state, local, or non-U.S. tax laws or regulations are required to be withheld in respect of any Exchange, the Partnership or the General Partner, as the case may be, shall use commercially reasonable efforts to promptly notify the Exchangeable Interest Partner and shall consider in good faith any positions or alternative arrangements that such Partner raises (reasonably in advance of the date on which the Partnership or the General Partner believes withholding is required) as to why withholding is not required or that may avoid the need for such withholding, provided, that neither the Partnership nor the General Partner is required to incur additional costs as a result of such obligation, and this Section 4.10(c)(ii) of this Annex B shall not in any manner limit the authority of the Partnership or the General Partner to withhold taxes with respect to an Exchangeable Interest Partner pursuant to Section 4.10(c)(i) of this Annex B.
(iii) Reimbursement of Taxes by Exchangeable Interest Partner. If, within the two-year period beginning at the start of the date of an Exchange, (i) the General Partner withholds or otherwise pays any amount on account of taxes in respect of exchanged Interests, which amount is attributable to the two-year period ending at the end of the date of such Exchange, and (ii) the General Partner or any Person other than the Exchangeable Interest Partner otherwise would bear the economic burden of such withholding or other payment (including by reason of such amount being treated as having been distributed to the General Partner in respect of the Exchangeable Interests pursuant to Section 4.10 of this Annex B), the Exchangeable Interest Partner shall, upon notice by the Partnership and/or the General Partner, promptly reimburse the Partnership and/or the General Partner for such amount; provided, however, that the Exchangeable Interest Partner’s reimbursement obligation under this Section 4.10(c)(iii) of this Annex B shall not exceed the amount of cash and Fair Market Value (determined as of the date of receipt) of other consideration received by the Exchangeable Interest Partner in connection with such Exchange. Unless otherwise required by Law, any amount paid by an Exchangeable Interest Partner pursuant to this Section 4.10(c)(iii) of this Annex B shall be treated as an adjustment to the proceeds received by the Exchangeable Interest Partner in respect of the applicable Exchange. The Partnership and the General Partner shall have the right to reduce any amounts due to such Exchangeable Interest Partner from the General Partner or any of its Affiliates by the amount owed by such Exchangeable Interest Partner under this Section 4.10(c)(iii) of this Annex B.
ANNEX C: SCHEDULE OF OFFICERS
ANNEX D: POLICY REGARDING EXCHANGES
This Policy Regarding Exchanges (the “Policy”) is made pursuant to, and supplements the provisions of, Article XI of the Agreement. Capitalized terms that are not defined in this Policy have the meanings given to them in the Agreement. Except as otherwise specified, article and section references herein refer to Articles and Sections of this Policy.
Article I
ELECTIVE EXCHANGES; NOTICE
Section 1.1 Elective Exchanges.
(a) Elective Exchange Notice. Subject to the provisions of this Policy and Article XI of the Agreement, each Exchangeable Interest Partner may request an Elective Exchange of some or all of its Exchangeable Interests by delivering to the Partnership, with a copy to the General Partner, in a form reasonably acceptable to the Partnership, a written election of exchange in respect of the Elective Exchange (an “Elective Exchange Notice”) at least two Business Days before the requested Elective Exchange Date (it being understood that the Elective Exchange Date may be delayed by the Exchangeable Interest Partner giving the Elective Exchange Notice by written notice, which may be by e-mail, to the Partnership).
(b) Acceptance of Elective Exchange Notice. Unless the Partnership or the General Partner, as applicable, has refused to honor the request or has modified one or more terms in the Elective Exchange Notice pursuant to this Policy, the Partnership or General Partner, as applicable, will effect the Elective Exchange (either in full or as modified) on the applicable Elective Exchange Date in accordance with this Policy; provided that if the Partnership and the General Partner receive an Elective Exchange Notice less than five (5) Business Days before the requested Elective Exchange Date, they shall use their commercially reasonable efforts to effect the requested Elective Exchange on the requested Elective Exchange Date, and in any event effect such Elective Exchange Date within five (5) Business Days of their receipt of such Elective Exchange Notice.
Section 1.2 Retraction of Elective Exchange Notice.
(a) Ability to Retract; Retraction Deadline. Holdings shall, in its sole and absolute discretion, at any time between the date of delivery of its Elective Exchange Notice and (i) 8:00 p.m. Eastern time on the Business Day before the applicable Exchange Date (in respect of any portion of the Exchange for which the Partnership or the General Partner has elected Stock Consideration) and (ii) 8:00 p.m. Eastern time on the day pricing information regarding a Liquidity Offering is delivered to Holdings (in respect of any portion of the Exchange for which the Partnership or the General Partner, as applicable, has elected Cash Settlement) (such time, as applicable, the “Retraction Deadline”) to retract or amend its Elective Exchange Notice by delivering a Retraction Notice pursuant to Section 1.2(b). Except as provided in the immediately preceding sentence, no Exchangeable Interest Partner shall have a right to deliver a Retraction Notice.
(b) Retraction Notice. Holdings may retract its Elective Exchange Notice, in whole or in part, by delivering written notice no later than the Retraction Deadline (a “Retraction Notice”) to the Partnership (with a copy to the General Partner). Holdings’ delivery of a Retraction Notice shall be irrevocable and, to the extent specified in such Retraction Notice, shall terminate Holdings’, the Partnership’s, and the General Partner’s rights and obligations with respect to the Exchangeable Interests being withdrawn from the applicable Elective Exchange, and all actions taken to effect the Elective Exchange contemplated by that retracted Elective Exchange Notice with respect to such Exchangeable Interests being withdrawn from the applicable Elective Exchange shall be deemed rescinded and void.
Article II
OTHER RESTRICTIONS
Section 2.1 Additional Restrictions. Notwithstanding any provision of this Policy to the contrary, the Partnership may prohibit an Exchange by one or more Exchangeable Interest Partners under any of the following conditions and determinations made by the Partnership based on the advice of counsel (which may be external or internal counsel):
(a) If an Exchange is (or is reasonably likely to be) prohibited under applicable law, regulation, or agreement to which the Partnership or an affiliate is a party or could reasonably be expected to result in a bona fide legal or regulatory proceeding against the Partnership, the General Partner or its Affiliates;
(b) If the Partnership possesses material non-public information that would reasonably be expected to affect the trading price of the Class A Common Stock that is not known to the Exchangeable Interest Partner;
(c) If such Exchange would create a material risk that the Partnership would be classified as an association taxable as a corporation for U.S. federal, state, or local income tax purposes; or
(d) If an Exchangeable Interest Partner would be prohibited from holding Common Stock under the Agreement, such Exchangeable Interest Partner shall not be permitted to Exchange its Exchangeable Interests except to the extent the General Partner determines to settle the Exchange in cash pursuant to Section 11.03 of the Agreement.
Article III
MISCELLANEOUS
Section 3.1 Continuing Application of Partnership’s Policies and Securities Laws. Nothing in this Policy shall affect, and each Exchangeable Interest Partner shall remain subject to, the Partnership’s Policies. All Exchangeable Interest Partners shall comply with all applicable securities laws and rules.
Section 3.2 Mandatory Exchanges. This Policy shall not apply to any Exchange of Exchangeable Interests pursuant to a Mandatory Exchange, as described in, and pursuant to, the Agreement.
Section 3.3 Modification of Policy. The Partnership may modify this Policy at any time without notice, provided, that this Policy shall not be modified without the prior written consent of Holdings if Holdings would be adversely impacted by that modification. No revised Policy will be effective until the Partnership has delivered or made available a copy of such revised Policy to the Exchangeable Interest Partners.
Section 3.4 Exemption and other Requests by an Exchangeable Interest Partner. The Partnership may, in its discretion and based on the advice of counsel (which may be external or internal counsel), consider and grant requests from Exchangeable Interest Partners, including, for an Exchange to be subject to one or more contingencies relating to the Partnership or the General Partner, or any other matter with respect to Exchanges (to the extent permitted by the Agreement and applicable law). An Exchangeable Interest Partner may request an exemption from this Policy by submitting a written request to the Partnership and following the delivery requirements set forth in Article I as if the written request were an Elective Exchange Notice.
* * *
E-3
Exhibit 10.2
TAX RECEIVABLE AGREEMENT
dated as of
February [•], 2022
Table of Contents
Page
ARTICLE I DETERMINATION OF REALIZED TAX BENEFIT | 2 | |
Section 1.01 | Realized Tax Benefit and Realized Tax Detriment | 2 |
Section 1.02 | Assumptions, Conventions, and Principles for Calculations | 2 |
Section 1.03 | Procedures Relating to Calculation of Tax Benefits | 3 |
ARTICLE II TAX BENEFIT PAYMENTS | 5 | |
Section 2.01 | Payments | 5 |
Section 2.02 | No Duplicative Payments | 6 |
Section 2.03 | Order of Payments | 6 |
Section 2.04 | No Escrow or Clawback; Reduction of Future Payments | 6 |
Section 2.05 | Limits on Aggregate Tax Benefit Payment | 7 |
ARTICLE III EARLY TERMINATIONS | 7 | |
Section 3.01 | Early Termination Events | 7 |
Section 3.02 | Early Termination Notice and Early Termination Schedule | 8 |
Section 3.03 | Early Termination Payment | 9 |
Section 3.04 | Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets | 10 |
ARTICLE IV SUBORDINATION AND LATE PAYMENTS | 11 | |
Section 4.01 | Subordination | 11 |
Section 4.02 | Late Payments by | 11 |
Section 4.03 | Manner of Payment | 11 |
ARTICLE V PREPARATION OF TAX RETURNS; COVENANTS; TRA Representative | 11 | |
Section 5.01 | No Participation by TRA Holder in the Corporation’s and the Company’s Tax Matters | 11 |
Section 5.02 | Consistency | 12 |
Section 5.03 | Cooperation | 12 |
Section 5.04 | Section 754 Election | 12 |
Section 5.05 | Available Cash | 12 |
Section 5.06 | TRA Representative. | 12 |
ARTICLE VI MISCELLANEOUS | 13 | |
Section 6.01 | Notices | 13 |
Section 6.02 | Counterparts | 15 |
Section 6.03 | Entire Agreement | 15 |
Section 6.04 | Governing Law | 15 |
Section 6.05 | Severability | 15 |
Section 6.06 | Assignment; Amendments; Waiver of Compliance; Successors | 15 |
Section 6.07 | Titles and Subtitles | 17 |
Section 6.08 | Dispute Resolution | 17 |
Section 6.09 | Bank Account Information | 19 |
Section 6.10 | Withholding | 19 |
Section 6.11 | Confidentiality | 19 |
Section 6.12 | Limited Partnership Agreement | 20 |
Section 6.13 | Joinder | 20 |
Section 6.14 | Survival | 20 |
ARTICLE VII DEFINITIONS | 20 |
TAX RECEIVABLE AGREEMENT
This TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of February [•], 2022, is entered into by and among Excelerate Energy, Inc., a Delaware corporation (Excelerate Energy, Inc. and each of its Subsidiaries that is classified as a corporation for U.S. federal income tax purposes (other than any such Subsidiary that is a Subsidiary of the Company), and each successor thereto, the “Corporation”), Excelerate Energy Limited Partnership, a Delaware limited partnership that is classified as a partnership for U.S. federal income tax purposes (the “Company”), each of the TRA Holders, and the TRA Representative.
RECITALS
WHEREAS, the partnership interests in the Company (“Interests”) are held in part by certain of the TRA Holders;
WHEREAS, Maya Maritime LLC, a wholly owned Subsidiary of the George Kaiser Family Foundation, holds, and will continue to hold until the Foundation Asset Purchase, the Foundation Assets (Maya Maritime LLC together with the George Kaiser Family Foundation, the “Foundation”);
WHEREAS, the Corporation is the general partner of the Company;
WHEREAS, the Company and the Corporation have determined to offer Class A common stock of the Corporation (“Class A Shares”) in an initial public offering (the “IPO”) and, in connection with the execution of this Agreement, have undertaken or committed to undertake the transactions described in the registration statement on Form S-1 publicly filed with the Securities and Exchange Commission on [•], 2022 (Registration No. 333-262065), as amended before the date of this Agreement, including the IPO;
WHEREAS, pursuant to the Purchase Agreement, the Company will purchase certain assets from the Foundation (the “Foundation Assets”) in exchange for Class A Shares and rights under this Agreement (the “Foundation Asset Purchase”);
WHEREAS, the Interests held by the LP TRA Holders are exchangeable with the Company or the Corporation in certain circumstances for Class A Shares and/or cash pursuant to the exchange provisions of the Amended and Restated Limited Partnership Agreement of the Company (the “Limited Partnership Agreement”);
WHEREAS, each of the Company and any of its direct or indirect Subsidiaries classified as partnerships for U.S. federal income tax purposes shall have in effect an election under section 754 of the Code for the Taxable Year (as defined below) that includes the IPO Date and each Taxable Year in which an Exchange occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Company and such Subsidiaries, solely with respect to the Corporation;
WHEREAS, the liability of the Corporation in respect of Taxes may be reduced by the Tax Assets; and
WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the benefits attributable to the effect of the Tax Assets on the liability for Taxes of the Corporation.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the undersigned parties agree as follows:
ARTICLE I
DETERMINATION OF REALIZED TAX BENEFIT
Section 1.01 Realized Tax Benefit and Realized Tax Detriment. Except as otherwise expressly provided in this Agreement, the parties intend that, for a Taxable Year, the excess, if any, of (a) the Hypothetical Tax Liability over the Actual Tax Liability (such excess, the “Realized Tax Benefit”) or (b) the Actual Tax Liability over the Hypothetical Tax Liability (such excess, the “Realized Tax Detriment”) shall measure the decrease or increase (respectively) in the Actual Tax Liability for such Taxable Year that is attributable to the Tax Assets, determined using a “with and without” methodology (that is, treating the Tax Assets as the last tax attributes used in such Taxable Year). If all or a portion of the Actual Tax Liability 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 or Realized Tax Detriment unless and until there has been a Determination with respect to that portion of the Actual Tax Liability.
Section 1.02 Assumptions, Conventions, and Principles for Calculations. The Actual Tax Liability shall be the liability for Taxes of the Corporation as reflected on the relevant Corporate Tax Return (using such reasonable methods as the Corporation determines), modified as necessary to take into account the following assumptions, conventions, principles, and adjustments:
(a) Treatment of Tax Benefit Payments. Tax Benefit Payments paid to the Foundation shall be treated in part as Imputed Interest and in part as additional purchase price for the Foundation Assets. Tax Benefits Payments paid to any LP TRA Holder shall be treated (i) if such payment is being made before an Exchange, as a guaranteed payment described in section 707(c) of the Code, and (ii) if such payment is being made following an Exchange by such LP TRA Holder (or its predecessor in interest), in part as Imputed Interest and in part as additional purchase price for the Interests. Tax Benefit Payments (other than amounts accounted for as Imputed Interest) arising as a result of an Exchange or a payment in respect of the Foundation Assets shall be treated as upward purchase price adjustments that give rise to further Tax Assets that shall be incorporated into the current year calculation and into future year calculations, as appropriate.
(b) Imputed Interest. The Actual Tax Liability shall take into account the deduction of the portion of each Tax Benefit Payment (if any) that is accounted for as Imputed Interest under the Code due to the characterization of such Tax Benefit Payments as additional consideration payable by the Corporation for the Interests acquired in connection with an Exchange or the Foundation Asset Purchase, as applicable.
(c) Carryovers and Carrybacks. Carryovers or carrybacks of any Tax Items attributable to the Tax Assets shall be considered to be subject to the rules of the Code and the Treasury Regulations governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax Item includes a portion that is attributable to a Tax Asset and another portion that is not, the portion attributable to the Tax Asset shall be considered to be used in accordance with the “with and without” methodology (that is, treating the Tax Assets as the last Tax attributes used in such Taxable Year).
(d) Treatment of State and Local and Non-United States Taxes. The provisions of this Agreement, including the assumptions, conventions, and principles with respect to the determination of income and gain, shall apply to state and local and non-United States tax matters mutatis mutandis.
(e) Non-Stepped-Up Tax Basis. The Actual Tax Liability for each Taxable Year shall be calculated by assuming that each Adjusted Asset had a tax basis equal to its Non-Stepped Up Tax Basis as of immediately before each applicable Exchange (for purposes of measuring the Basis Adjustment resulting from such Exchange).
(f) Subsidiaries. If the Corporation holds any Interests indirectly through one or more Subsidiaries, the Actual Tax Liability for each Taxable Year shall be calculated by assuming that (x) such Subsidiary did not exist and (y) the Corporation held all such Interests directly.
Section 1.03 Procedures Relating to Calculation of Tax Benefits.
(a) Preparation and Delivery of Schedules.
(i) Basis Schedule. Within 120 days after the filing of the U.S. federal income Tax Return of the Company for its first Taxable Year and each Taxable Year in which any Exchange has occurred, the Corporation shall deliver to the TRA Representative a schedule (the “Basis Schedule”) that shows, in reasonable detail (as applicable), (v) the actual IPO Basis of each asset of the Company and any of its direct or indirect Subsidiaries immediately following the end of such Taxable Year and each prior Taxable Year ending after the date of this Agreement (w) the actual Common Basis of the Adjusted Assets as of each Exchange Date, (x) the Basis Adjustment with respect to the Adjusted Assets as a result of the Exchanges effected in such Taxable Year and all prior Taxable Years ending after the date of this Agreement, calculated (1) in the aggregate and (2) with respect to Exchanges by each TRA Holder, (y) the period or periods, if any, over which the Common Basis of the Adjusted Assets is amortizable and/or depreciable, and (z) the period or periods, if any, over which each Basis Adjustment is amortizable and/or depreciable. The calculations required by this Agreement, shall be made in accordance with the Basis Schedule. If any calculation is required to be made before the Basis Schedule is agreed upon, reasonable estimates shall be used.
(ii) Tax Benefit Schedule. Within 120 days after the filing of the U.S. federal income Tax Return of the Corporation for any Taxable Year ending after the date of this Agreement, the Corporation shall provide to the TRA Representative a schedule showing, in reasonable detail, the calculation, for such Taxable Year, of (A) the Hypothetical Tax Liability, (B) the Actual Tax Liability, and (C) the Realized Tax Benefit or Realized Tax Detriment, if any ((A)-(C) collectively, a “Tax Benefit Schedule”).
(iii) Supporting Material; Review Right. Each time the Corporation delivers to a TRA Representative a Basis Schedule or a Tax Benefit Schedule, including any Amended Schedule delivered pursuant to Section 1.03(c), the Corporation shall also deliver to the TRA Representative schedules and work papers providing reasonable detail regarding the preparation of the schedule and a Supporting Letter confirming the calculations and allow the TRA Representative reasonable access, at no cost to the TRA Representative, to the appropriate representatives at the Corporation and, if applicable, the Advisory Firm in connection with a review of such schedules or workpapers. Without limiting the generality of the preceding sentence, the Corporation shall ensure than any schedule that is delivered to the TRA Representative identifies any material assumptions or operating procedures or principles that were used for purposes of preparing such schedule.
(iv) Provision of Information to TRA Holders. Upon the reasonable request of a TRA Holder, the TRA Representative shall provide to that TRA Holder, in a reasonably prompt manner, such information that the TRA Representative receives pursuant to this Agreement (including the schedules described in this Section 1.03), but only to the extent that the TRA Representative determines that such information is material, relevant, and relates to that TRA Holder.
(b) Objection to, and Finalization of, Schedules. Each Basis Schedule and Tax Benefit Schedule, including any Amended Schedule delivered pursuant to Section 1.03(c), shall become final and binding on all parties unless the TRA Representative, within 30 days after receiving a Basis Schedule or a Tax Benefit Schedule, provides the Corporation with notice of a material objection to such schedule made in good faith (an “Objection Notice”). If the Corporation and the TRA Representative are unable to successfully resolve the issues raised in the Objection Notice within 30 days after receipt by the Corporation of the Objection Notice, the Corporation and the TRA Representative shall employ the dispute resolution procedures as described in Section 6.08 of this Agreement (the “Dispute Resolution Procedures”).
(c) Amendment of Schedules. After finalization of a Basis Schedule or a Tax Benefit Schedule in accordance with Section 1.03(b), any Basis Schedule or Tax Benefit Schedule may be amended from time to time by the Corporation (i) to correct material inaccuracies in any such schedule, (ii) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to either a carryback or carryforward of a Tax Item to such Taxable Year or to an amended Tax Return filed with respect to such Taxable Year, (iii) to adjust the Basis Schedule to take into account payments made pursuant to this Agreement, (iv) to reflect the cumulative use of Tax Assets through the end of such Taxable Year, (v) to comply with the Arbitrators’ determination under the Dispute Resolution Procedures, or (vi) in connection with a Determination affecting such schedule (such schedule, an “Amended Schedule”). Any Amended Schedule shall be subject to the finalization procedures set forth in Section 1.03(b) and the Dispute Resolution Procedures set forth in Section 6.08.
ARTICLE II
TAX BENEFIT PAYMENTS
Section 2.01 Payments.
(a) General Rule. Each TRA Benefit Payor shall pay to each TRA Holder for each Taxable Year the applicable portion (determined in accordance with (b)Section 2.01(b)) of the Tax Benefit Payment that is attributable to that TRA Holder and is required to be paid by such TRA Benefit Payor. These payments shall be made at the times set forth in Section 2.01(d) and the amount of such payments shall be, for the avoidance of doubt, subject to the limitation described in Section 2.05Error! Reference source not found.. For purposes of this Section 2.01(a):
(i) the amount of a Tax Benefit Payment in each Taxable Year that is attributable to the Foundation shall equal the lesser of (A) the Foundation Depreciation Payment for such Taxable Year and (B) the aggregate Tax Benefit Payment for such Taxable Year; and
(ii) the amount of a Tax Benefit Payment in each Taxable Year that is attributable to the LP TRA Holders shall equal an amount equal to the excess of (A) the aggregate Tax Benefit Payment for such Taxable Year over (B) the Tax Benefit Payment attributable to the Foundation pursuant to Section 2.01(a)(i) for such Taxable Year.
(b) TRA Benefit Payors. In each Taxable Year (i) the Company shall make each payment being made under (a)(i)Section 2.01(a)(i) and each payment that is being made to an LP TRA Holder before an Exchange and (ii) the Corporation shall make all other payments.
(c) Determination of Tax Assets. The Tax Assets shall be determined separately with respect to each separate Exchange, on an Interest-by-Interest basis by reference to the Exchange of an Interest.
(d) Timing of Tax Benefit Payments. Each TRA Benefit Payor shall make each Tax Benefit Payment that it is required to make not later than 10 days after a Tax Benefit Schedule delivered to the TRA Representative becomes final in accordance with Section 1.03(b). Each TRA Benefit Payor may, but is not required to, make one or more estimated payments at other times during the Taxable Year and reduce future payments so that the total amount paid to a TRA Holder in respect of a Taxable Year equals the amount calculated with respect to such Taxable Year pursuant to Section 2.01(a).
(e) Optional Cap on Payments. Notwithstanding any provision of this Agreement to the contrary, any TRA Holder may elect with respect to any Exchange to limit the aggregate Tax Benefit Payments made to such TRA Holder in respect of that Exchange to a specified dollar amount, a specified percentage of the amount realized by the TRA Holder with respect to the Exchange, or a specified portion of the Basis Adjustment with respect to the Adjusted Assets as a result of the Exchange. The TRA Holder shall exercise its rights under the preceding sentence by including a notice of its desire to impose such a limit and the specified limitation and such other details as may be reasonably necessary (including whether such limitation includes the Additional Amounts in respect of any such Exchange) in the Exchange Notice delivered in accordance with the Policy.
Section 2.02 No Duplicative Payments. The provisions of this Agreement are not intended to, and shall not be construed to, result in duplicative payment of any amount (including interest) required under this Agreement.
Section 2.03 Order of Payments. If for any reason (including, but not limited to, the lack of sufficient Available Cash to satisfy a TRA Benefit Payor’s obligations to make its Tax Benefit Payments due in a particular Taxable Year under this Agreement) the TRA Benefit Payors do not fully satisfy their obligations to make all payments due under this Agreement in a particular Taxable Year, then (a) any Tax Benefit Payments due to the Foundation under Section 2.01(a) shall be paid first and (b) if the Foundation has received all Tax Benefit Payments due to it under Section 2.01(a), then the LP TRA Holders shall receive any other payments due under this Agreement in respect of such Taxable Year pro rata in accordance with the amounts otherwise due to the LP TRA Holders for such Taxable Year. Except as provided in clause (a) of this Section 2.03, no payment under this Agreement shall be made in respect of any subsequent Taxable Year until all such payments under this Agreement in respect of the current and all prior Taxable Years have been made in full (including for the avoidance of doubt, any payment owed to a TRA Holder pursuant to Section 2.05); provided, that this sentence shall not be applied in a manner that reduces the payment that would (in the absence of this sentence) be made to the Foundation.
Section 2.04 No Escrow or Clawback; Reduction of Future Payments. No amounts due to a TRA Holder under this Agreement shall be escrowed, and no TRA Holder shall be required to return any portion of any Tax Benefit Payment previously made to it. No TRA Holder shall be required to make a payment to the Corporation on account of any Realized Tax Detriment. If a TRA Holder receives amounts in excess of its entitlements under this Agreement (including as a result of an audit adjustment or Realized Tax Detriment), future payments under this Agreement shall be reduced until the amount received by the TRA Holder equals the amount the TRA Holder would have received had it not received the amount in excess of such entitlements.
Section 2.05 Limits on Aggregate Tax Benefit Payment
(a) Calculation of Tax Benefit Payment Reduction Amount. If, but for the application of this Section 2.05, this Agreement would require the Corporation to make Tax Benefit Payments with respect to any Taxable Year that would cause the Total Tax and TRA Burden to exceed the Hypothetical Tax Liability for such Taxable Year, then the Tax Benefit Payments for that Taxable Year shall be reduced so that the aggregate Tax Benefit Payments for that Taxable Year do not result in any such excess (the amount of that reduction, if any, the “Tax Benefit Payment Reduction Amount”).
(b) Impact of Tax Benefit Payment Reduction Amount. Any reduction to Tax Benefit Payments required by Section 2.05(a) shall be made in accordance with Section 2.03 (Order of Payments) such that Tax Benefit Payments otherwise due to the LP TRA Holders will be reduced to zero before any Tax Benefit Payments due to the Foundation are reduced. The Corporation shall pay the Tax Benefit Payment Reduction Amount as a Tax Benefit Payment in subsequent years to the TRA Holders whose Tax Benefit Payments were reduced by reason of this Section 2.05, with the limitation contained in this Section 2.05 being applied to each such payment.
ARTICLE III
EARLY TERMINATIONS
Section 3.01 Early Termination Events.
(a) Early Termination Election by Corporation. The Corporation may terminate all or a portion of the Benefit Rights at any time by (i) delivering an Early Termination Notice as provided in Section 3.02(a) and (ii) paying, or causing to be paid, the Early Termination Payment as provided in Section 3.03(a). If the Corporation terminates less than all of the Benefit Rights, such termination shall be made among the TRA Holders in such manner that it results in each TRA Holder receiving the same proportion of the Early Termination Payment made at that time as each TRA Holder would have received had the Corporation terminated all of Benefit Rights at that time.
(b) Deemed Early Termination.
(i) Deemed Early Termination Event. Upon a Material Uncured Breach of this Agreement with respect to a TRA Holder and as soon as reasonably practicable before a Change of Control (each, a “Deemed Early Termination Event”), (A) the Corporation (or the TRA Representative (with a copy to the Corporation)) shall deliver to each of the Affected TRA Holders an Early Termination Notice, and (B) all obligations under this Agreement with respect to each Affected TRA Holder shall be accelerated.
(ii) Payment upon Deemed Early Termination Event. Upon a Deemed Early Termination Event, the amount payable to each Affected TRA Holder shall equal the sum of:
(A) an Early Termination Payment calculated with respect to the Affected TRA Holder pursuant to this ARTICLE III as if an Early Termination Notice had been delivered on the date of the Deemed Early Termination Event using the Valuation Assumptions but substituting the phrase “the date of the Deemed Early Termination Event” in each place where the phrase “Early Termination Date” appears;
(B) any Tax Benefit Payment agreed to by the Corporation and the Affected TRA Holder as due and payable but unpaid as of the date of the Deemed Early Termination Event; and
(C) any Tax Benefit Payment due to the Affected TRA Holder for the Taxable Year ending with or including the date of a Deemed Early Termination Event (except to the extent that any amounts described in clauses (B) or (C) are included in the amount payable upon early termination).
(iii) Waiver of Deemed Early Termination. A TRA Holder may elect to waive the acceleration of obligations under this Agreement triggered by a Deemed Early Termination Event by submitting a waiver in writing to the Corporation within 30 days after the date of the Early Termination Notice. If a TRA Holder elects to waive the acceleration of obligations pursuant to the preceding sentence, this Agreement shall continue to apply with respect to that TRA Holder as though no Deemed Early Termination Event had occurred, and, if there are any due and unpaid amounts with respect to that TRA Holder, the applicable TRA Benefit Payor shall pay those amounts to the TRA Holder in the manner provided in this Agreement.
Section 3.02 Early Termination Notice and Early Termination Schedule.
(a) Notice; Schedule.
(i) Delivery of Early Termination Notice and Early Termination Schedule. If the Corporation chooses to exercise its right of early termination under Section 3.01(a) above, or if there is a Deemed Early Termination Event under Section 3.01(b) above, the Corporation shall deliver to each TRA Holder whose rights are being terminated (A) a notice (an “Early Termination Notice”) specifying (x) such early termination and (y) the date on which the termination of rights is to be effective (the “Early Termination Date”), which date shall be not less than 30 days and not more than 120 days after the date of the Early Termination Notice, and (B) a schedule showing in reasonable detail the calculation of the Early Termination Payment with respect to each TRA Holder whose rights are being terminated (the “Early Termination Schedule”). The Early Termination Notice shall be delivered within 30 days after the Corporation elects to terminate this Agreement or there is a Deemed Early Termination Event.
(ii) Finalization of Early Termination Schedule; Disputes. An Early Termination Schedule shall become final and binding on the Corporation, the Company, and such TRA Holder unless the TRA Representative, within 30 days after receiving the Early Termination Schedule, provides the Corporation with notice of a material objection to such schedule made in good faith (“Material Objection Notice”). If the Corporation and the TRA Representative are unable to successfully resolve the issues raised in the Material Objection Notice within 30 days after receipt by the Corporation of the Material Objection Notice, the Corporation and the TRA Representative shall employ the Dispute Resolution Procedures set forth in Section 6.08.
(iii) Withdrawal of Early Termination Notice. The Corporation may withdraw an Early Termination Notice before the Early Termination Payment is due and payable to any applicable TRA Holder(s).
(b) Amendment of Early Termination Schedule. After finalization of an Early Termination Schedule in accordance with Section 3.02(a)(ii), any Early Termination Schedule may be amended by the Corporation before the Early Termination Payment is made (i) in connection with a Determination affecting such schedule, (ii) to correct material inaccuracies in any such schedule, or (iii) to comply with the Arbitrators’ determinations under Section 6.08. Any amendment shall be subject to the procedures of Section 3.02(a)(ii) and the Dispute Resolution Procedures set forth in Section 6.08.
Section 3.03 Early Termination Payment.
(a) Amount and Timing of Early Termination Payment. The payment due to a TRA Holder in connection with an early termination described in Section 3.01 (the “Early Termination Payment”) shall be an amount equal to the present value, discounted at the Early Termination Rate as of the Early Termination Date, of all Tax Benefit Payments that the TRA Benefit Payors would be required to pay to the TRA Holder beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied. Not later than 10 days after an Early Termination Schedule delivered to a TRA Holder becomes final in accordance with Section 3.02(a)(ii), the TRA Benefit Payors shall pay to the TRA Holder the Early Termination Payment due to that TRA Holder.
(b) Effect of Early Termination Payment. Upon payment of the Early Termination Payment by the TRA Benefit Payors under this Section 3.03, neither the TRA Holder nor the TRA Benefit Payors shall have any further rights or obligations under this Agreement in respect of the payments that otherwise would be due pursuant to this Agreement or with respect to the Benefit Rights that have been terminated in accordance with Section 3.01, other than for any (i) payment under this Agreement that is due and payable but has not been paid as of the Early Termination Date and (ii) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Date (except to the extent that the amount described in clause (ii) is included in the Early Termination Payment). For the avoidance of doubt, if an Exchange occurs after a TRA Benefit Payor has made an Early Termination Payment with respect to all Benefit Rights, such TRA Benefit Payor shall have no obligations under this Agreement with respect to such Exchange other than any obligations described in clause (i) or clause (ii) of the preceding sentence.
Section 3.04 Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets.
(a) Admission of the Corporation into a Consolidated Group. If the Corporation is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to sections 1501 et seq. of the Code or any corresponding provisions of state, local or non-U.S. law (a “Consolidated Group”), then: (i) the provisions of this Agreement shall be applied with respect to the Consolidated Group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items in this Agreement shall be computed with reference to the consolidated taxable income of the Consolidated Group as a whole. Nothing in this Section 3.04(a) shall be interpreted to alter the circumstances that give rise to an early termination as described in Section 3.01.
(b) Transfers of Assets by Corporation.
(i) General Rule. If the Company or any of its Subsidiaries or the Corporation transfers one or more assets to a corporation with which the transferor does not file a consolidated Tax Return pursuant to section 1501 et seq. of the Code, then, for purposes of calculating the amount of any payment due under this Agreement, the transferor shall be treated as having disposed of such asset(s) in a fully taxable transaction on the date of the transfer.
(ii) Rules of Application. For purposes of this Section 3.04(b):
(A) Except as provided in Section 3.04(b)(ii)(B), the consideration deemed to be received by the transferor in the transaction shall be deemed to equal the fair market value of the transferred asset(s) (taking into account the principles of section 7701(g) of the Code);
(B) The consideration deemed to be received by the transferor in exchange for a partnership interest shall be deemed to equal the fair market value of the partnership interest increased by any liabilities (as defined in Treasury Regulation § 1.752-1(a)(4)) of the partnership allocated to the transferor with regard to such transferred interest under section 752 of the Code immediately after the transfer; and
(C) A transfer to a “corporation” (other than the Corporation) includes a transfer to any entity or arrangement classified as a corporation for U.S. federal income tax purposes, and “partnership” includes any entity or arrangement classified as a partnership for U.S. federal income tax purposes.
ARTICLE IV
SUBORDINATION AND LATE PAYMENTS
Section 4.01 Subordination; Priority. Any Tax Benefit Payment or Early Termination Payment required to be paid by a TRA Benefit Payor 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 current or future obligations in respect of indebtedness for borrowed money of such TRA Benefit Payor and its Subsidiaries and shall, except as otherwise provided in this Agreement, rank pari passu with all current or future unsecured obligations of such TRA Benefit Payor that are not principal, interest or other amounts due and payable in respect of any current or future obligations in respect of indebtedness for borrowed money of such TRA Benefit Payor and its Subsidiaries and shall be senior to equity interests in the TRA Benefit Payor.
Section 4.02 Late Payments by a TRA Benefit Payor. The amount of all or any portion of any amount due under the terms of this Agreement that is not paid to any TRA Holder when due shall be payable, together with any interest thereon computed at the Default Rate commencing from the date on which such payment was due and payable. Notwithstanding the preceding sentence, the Default Rate shall not apply (and the Agreed Rate shall apply) to any late payment that is late solely as a result of (a) a prohibition, restriction or covenant under any credit agreement, loan agreement, note, indenture or other agreement governing indebtedness of the Company or any of its Subsidiaries or the Corporation or (b) restrictions under applicable law.
Section 4.03 Manner of Payment. All payments required to be made to a TRA Holder pursuant to this Agreement will be made by electronic payment of immediately available funds to a bank account previously designated and owned by such TRA Holder or, if no such account has been designated, by check payable to such TRA Holder.
ARTICLE V
PREPARATION OF TAX RETURNS; COVENANTS; TRA Representative
Section 5.01 No Participation by TRA Holder in the Corporation’s and the Company’s Tax Matters.
(a) General Rule. Except as otherwise provided in this ARTICLE V, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation and the Company, including, without limitation, the preparation, filing and amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.
(b) Notification of TRA Representative. The Corporation shall notify the TRA Representative of, and keep the TRA Representative reasonably informed with respect to, the portion of any audit of the Corporation and the Company by a Taxing Authority the outcome of which is reasonably expected to affect any TRA Holder’s rights and obligations under this Agreement.
Section 5.02 Consistency. The TRA Benefit Payors and the TRA Holders agree to report and cause to be reported for all purposes, including U.S. federal, state, local and non-U.S. tax purposes and financial reporting purposes, all tax-related items (including without limitation the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any schedule provided by or on behalf of the Corporation under this Agreement unless any of the TRA Benefit Payors or a TRA Holder receives a written opinion from an Advisory Firm that reporting in such manner should result in an imposition of penalties pursuant to the Code. Any Dispute concerning such written opinion shall be subject to the Dispute Resolution Procedures set forth in Section 6.08.
Section 5.03 Cooperation. Each TRA Holder shall (a) furnish to the TRA Benefit Payors in a timely manner such information, documents and other materials, not to include such TRA Holder’s personal Tax Returns, as any of the TRA Benefit Payors 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 reasonably available to the TRA Benefit Payors and their representatives to provide explanations of documents and materials and such other information as the TRA Benefit Payors or its representatives may reasonably request in connection with any of the matters described in clause (a) of this Section 5.03, and (c) reasonably cooperate in connection with any such matter. The TRA Benefit Payors shall reimburse each TRA Holder for any reasonable and documented third-party costs and expenses incurred by the TRA Holder in complying with this Section 5.03.
Section 5.04 Section 754 Election. The Corporation shall (a) ensure that, for the Taxable Year of the Company that includes the date of this Agreement and continuing throughout the term of this Agreement, the Company and each of its Subsidiaries that is classified as a partnership for U.S. federal income tax purposes shall have in effect an election pursuant to section 754 of the Code (and any similar provisions of applicable U.S. state or local law) and (b) use commercially reasonable efforts to ensure that, on and after the date of this Agreement and continuing throughout the term of this Agreement, any entity in which the Company holds a direct or indirect interest that is classified as a partnership for U.S. federal income tax purposes that is not a “Subsidiary” as defined in this Agreement will have in effect an election pursuant to section 754 of the Code (and any similar provisions of applicable U.S. state or local law).
Section 5.05 Available Cash. The TRA Benefit Payors shall use reasonable best efforts to ensure that they have sufficient Available Cash to make all payments due under this Agreement, including using reasonable best efforts to determine that there is Available Cash and, in the case of the Corporation, to cause the Company to make distributions to the Corporation to make any payments required to be made by the Corporation so long as such distributions do not violate (a) a prohibition, restriction or covenant under any credit agreement, loan agreement, note, indenture or other agreement governing indebtedness of the Company or any of its Subsidiaries or the Corporation or (b) restrictions under applicable law.
Section 5.06 TRA Representative.
(a) Power of the TRA Representative; Reliance by Corporation. A decision, act, consent, or instruction of the TRA Representative shall constitute a decision of all TRA Holders and shall be final, binding, and conclusive upon each TRA Holder. The Corporation may rely upon any decision, act, consent, or instruction of the TRA Representative as being the decision, act, consent, or instruction of each TRA Holder.
(b) Scope of Liability. The TRA Representative shall not be liable to any TRA Party for any act of the TRA Representative arising out of, or in connection with, the reasonable and good faith administration of its rights and duties under this Agreement.
(c) Expenses and Indemnification of the TRA Representative. To the fullest extent permitted by law, the Corporation shall pay, or to the extent the TRA Representative pays, indemnify and reimburse, the TRA Representative for all liability and loss and all reasonable and contemporaneously documented costs and expenses, including legal and accounting fees, in connection with the TRA Representative’s reasonable and good faith exercise of its rights and duties under this Agreement.
(d) Successor TRA Representative. If at any time the TRA Representative is unable or unwilling to serve in such capacity, the person or entity then-serving as the TRA Representative shall be entitled to appoint its successor. If the TRA Representative fails to appoint a successor that will serve as of the effective date of the termination of the then-serving TRA Representative’s tenure, the Corporation shall be entitled to appoint the successor. In either case, such successor shall be subject to the approval of the TRA Holders who would be entitled to receive at least fifty percent (50%) of the total amount of the Early Termination Payments that would be payable to all TRA Holders if the Corporation had exercised its right of early termination under Section 3.01(a) on the date of the most recent Exchange as of the effective date of the resignation of the then-serving TRA Representative. If such successor does not receive the requisite approval, the Corporation and the TRA Holders shall attempt to resolve the matter in good faith. If no such resolution has occurred by the earlier of (i) 90 days following the termination of tenure and (ii) five (5) days before a TRA Representative will be required to take an action or make a decision under this Agreement, the Corporation shall be entitled to appoint the successor, who shall serve as the TRA Representative.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. All notices, requests, claims, demands and other communications with respect to this Agreement shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by e-mail if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a nationally recognized next-day courier service. All notices under this Agreement 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:
c/o Excelerate Energy, Inc.
2445 Technology Forest Blvd, Level 6
The Woodlands, TX 77381
Phone: [•]
Attention: [•]
E-mail: [•]
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Phone: +1.212.351.2340
Fax: +1.212.351.5220
Attention: Jeffrey M. Trinklein and Eric Sloan
E-mail: jtrinklein@gibsondunn.com and
esloan@gibsondunn.com
if to the Company, to:
c/o Excelerate Energy Limited Partnership
2445 Technology Forest Blvd, Level 6
The Woodlands, TX 77381
Phone: [•]
Attention: [•]
E-mail: [•]
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Phone: +1.212.351.2340
Fax: +1.212.351.5220
Attention: Jeffrey M. Trinklein and Eric Sloan
E-mail: jtrinklein@gibsondunn.com and
esloan@gibsondunn.com
if to the TRA Representative, to:
the address provided to the Corporation at the time of the TRA Representative’s appointment in accordance with the definition of “TRA Representative.”
if to the TRA Holder(s), to:
the address set forth for such TRA Holder in the records of the Company.
Any party may change its address by giving the other party written notice of its new address, fax number, or e-mail address in the manner set forth in this Section 6.01.
Section 6.02 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. This Agreement may be executed in two or more counterparts by manual, electronic or facsimile signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed signature page to this Agreement by electronic transmission or facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 6.03 Entire Agreement. The provisions of this Agreement, the Limited Partnership Agreement, the Purchase Agreement, and the other writings referred to in this Agreement or delivered pursuant to this Agreement which form a part of this Agreement contain the entire agreement among the parties hereto with respect to the subject matter of this Agreement and supersede all prior oral and written agreements and memoranda and undertakings among the parties to this Agreement with regard to such subject matter. Except as expressly provided herein, this Agreement does not create any rights, claims or benefits inuring to any person that is not a party to this Agreement nor create or establish any third party beneficiary hereto.
Section 6.04 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the state of Delaware (and, to the extent applicable, federal law), without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.
Section 6.05 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance or in any jurisdiction, shall be held to be invalid or unenforceable to any extent, (a) the remainder of this Agreement shall not be affected thereby, and each other provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law, (b) as to such Person or circumstance or in such jurisdiction such provision shall be reformed to be valid and enforceable to the fullest extent permitted by law and (c) the application of such provision to other Persons or circumstances or in other jurisdictions shall not be affected thereby. In addition, if any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable as written, each Person party hereto shall take all necessary action to cause this Agreement to be amended so as to provide, to the maximum extent reasonably possible, that the purposes of the Agreement can be realized, and to modify this Agreement to the minimum extent reasonably possible.
Section 6.06 Assignment; Amendments; Waiver of Compliance; Successors and Assigns.
(a) Assignment.
(i) In General. Except as otherwise provided in this Agreement (including, without limitation, the remainder of this Section 6.06(a)(i)), no TRA Holder may, directly or indirectly, assign or otherwise transfer its rights under this Agreement to any person without the express prior written consent of the Corporation, such consent not to be unreasonably withheld, conditioned, or delayed; provided, however, that, the Corporation may withhold, condition, or delay its consent in its sole discretion to any transfer by a TRA Holder (i) if the TRA Holder seeks to transfer a portion of its rights, in the aggregate, to more than three transferees, or (ii) if the TRA Holder seeks to transfer less than all of its rights.
(ii) Original Signatories. Each TRA Holder that is an original signatory to this Agreement may, directly or indirectly, assign or otherwise transfer its rights under this Agreement without limitation (A) to the Foundation, any Affiliate of the Foundation, or any Affiliate of such transferring TRA Holder or (B) by bequest.
(iii) Transfer of Interests. To the extent Interests are transferred in accordance with the terms of the Limited Partnership Agreement, the transferring TRA Holder may assign to the transferee all, but not less than all, of that TRA Holder’s rights under this Agreement with respect to such transferred Interests.
(iv) Joinder. If any TRA Holder directly or indirectly assigns or otherwise transfers its rights under this Agreement to any person, the transferring TRA Holder shall require the transferee to execute and deliver a joinder to this Agreement agreeing to become a “TRA Holder” for all purposes of this Agreement (except as otherwise provided in such joinder), with such joinder being, in form and substance, reasonably satisfactory to the Corporation.
(b) Amendments.
(i) General Rule. No provision of this Agreement may be amended unless the amendment is approved in writing by the Corporation, the Company, and the TRA Holders who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all TRA Holders (as determined by the Corporation) if the Corporation had exercised its right of early termination under Section 3.01(a) on the date of the most recent Exchange before that amendment (excluding, for purposes of this sentence, all payments made to any TRA Holder pursuant to this Agreement since the date of the most recent Exchange).
(ii) Amendments with Disproportionate Adverse Effect. Notwithstanding the provisions of Section 6.06(b)(i), if a proposed amendment would have a disproportionate adverse effect on the payments one or more TRA Holders will or may receive under this Agreement, the amendment shall not be effective unless at least two-thirds of the TRA Holders who would be disproportionately adversely affected (measured in accordance with Section 6.06(b)(i)) consent in writing to that amendment.
(c) Waiver of Compliance. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting the waiver, but no waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
(d) Successors and Assigns. Except as otherwise provided herein, 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 respective successors and permitted assigns of the parties hereto. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation, division, conversion 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 6.07 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
Section 6.08 Dispute Resolution.
(a) Disputes as to Interpretation and Calculations. The Corporation shall, in its sole discretion, resolve any Dispute as to the interpretation of, or calculations required by, this Agreement. Notwithstanding the previous sentence, any resolution by the Corporation pursuant to this Section 6.08(a) shall reflect a reasonable interpretation of the provisions of this Agreement, consistent with the goal that the provisions of this Agreement result in the TRA Holders receiving eighty-five percent (85%) of the Cumulative Net Realized Tax Benefit and the Additional Amount thereon.
(b) Dispute Resolution; Arbitration. Except for the matters in Section 6.08(a), the parties shall negotiate in good faith to resolve any dispute, controversy, or claim arising out of or in connection with this Agreement, or the interpretation, breach, termination or validity thereof (“Dispute”). To the extent any Dispute is not resolved through good faith negotiations, Disputes shall be finally resolved by arbitration before a panel of three independent tax lawyers at major law firms who are resident in New York, New York and are mutually acceptable to the parties (the “Arbitrators”). The Arbitrators, with the consent of the parties, may, or, at the direction of the parties, shall, delegate some or all of the issues under dispute (including Disputes under Section 1.03, Section 3.02 or Section 5.02) to a nationally recognized accounting firm selected by the Arbitrators and agreed to by the parties. Notwithstanding anything to the contrary in this Agreement, the TRA Representative shall represent the interests of any TRA Holder(s) in any Dispute and no TRA Holder shall individually have the right to participate in any proceeding.
(c) Selection of Arbitrators; Timing. There shall be three Arbitrators who shall be appointed by the parties within 20 days of receipt by a party of a copy of the demand for arbitration. The Corporation shall appoint one arbitrator and the TRA Representative shall appoint one arbitrator (with the appointment being subject, in each case, to the reasonable objection of the other party), and the parties shall jointly appoint the third arbitrator. Unless the parties have agreed to extend the 20-day time period, any Arbitrators that have not been appointed within 20 days of a party’s receipt of a copy of the demand for arbitration shall be appointed by JAMS in accordance with the listing, striking and ranking procedure in the JAMS Comprehensive Arbitration Rules and Procedures, with each party being given a limited number of strikes, except for cause. Any arbitrator appointed by JAMS shall be a retired judge or a practicing attorney with no less than fifteen years of experience with corporate and partnership tax matters and an experienced arbitrator. In rendering an award, the Arbitrators shall be required to follow the laws of the state of Delaware, notwithstanding any Delaware choice-of-law rules. The costs of arbitration shall be split equally between the parties participating in the arbitration.
(d) Arbitration Award; Damages; Attorney Fees. The arbitral award shall be in writing and shall state the findings of fact and conclusions of law on which it is based. The Arbitrators shall not be permitted to award punitive, non-economic, or any non-compensatory damages. The award shall be final and binding upon the parties and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the Arbitrators. Judgment upon the award may be entered in any court having jurisdiction over any party or any of its assets. Any costs or fees (including all attorneys’ fees and expenses) incident to enforcing the award shall be charged against the party resisting the enforcement. Each party shall bear its own attorney’s fees incurred in the underlying arbitration.
(e) Confidentiality. All Disputes shall be resolved in a confidential manner. The Arbitrators shall agree to hold any information received during the arbitration in the strictest of confidence and shall not disclose to any non-party the existence, contents or results of the arbitration or any other information about the arbitration. The parties to the arbitration shall not disclose any information about the evidence adduced or the documents produced by the other party in the arbitration proceedings or about the existence, contents or results of the proceeding except as may be required by law, regulatory or governmental authority or as may be necessary in an action in aid of arbitration or for enforcement of an arbitral award. Any party intending to make a disclosure permitted by the preceding sentence (other than private disclosure to financial regulatory authorities), shall use reasonable efforts to give the other party reasonable advance written notice of the intended disclosure and afford the other party a reasonable opportunity to protect its interests.
(f) Discovery. Barring extraordinary circumstances (as determined in the sole discretion of the Arbitrators), discovery shall be limited to pre-hearing disclosure of documents that each side shall present in support of its case, and non-privileged documents essential to a matter of import in the proceeding for which a party has demonstrated a substantial need. The parties agree that they shall produce to each other all such requested non-privileged documents, except documents objected to and with respect to which a ruling has been or shall be sought from the Arbitrators. The parties agree that information from the Corporate Tax Return (including by way of a redacted Corporate Tax Return) shall be sufficient, and that the Corporation shall not be compelled to produce any unredacted Tax Returns. There will be no depositions or live witness testimony.
Section 6.09 Bank Account Information. A TRA Benefit Payor may require each TRA Holder to provide its bank account information to facilitate wire transfers and shall be entitled to rely on the bank account information so provided absent actual knowledge that the bank account information is incorrect.
Section 6.10 Withholding. Each TRA Benefit Payor shall be entitled to deduct and withhold from any payment payable by it pursuant to this Agreement such amounts, if any, as the TRA Benefit Payor is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or non-U.S. tax law. To the extent that amounts are so withheld and are (or, when due, will be) paid over to the appropriate Taxing Authority by the applicable TRA Benefit Payor, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the applicable TRA Holder. Each TRA Holder shall promptly provide the TRA Benefit Payors or other applicable withholding agent with any necessary tax forms, in form and substance reasonably acceptable to the TRA Benefit Payors, as any TRA Benefit Payor may request from time to time in determining whether any such deductions and withholdings are required under any applicable law, including Internal Revenue Service Form W-9 or the appropriate Internal Revenue Service Form W-8, as applicable. Before any withholding is made pursuant to this Section 6.10, the TRA Benefit Payor shall use commercially reasonable efforts to (a) notify the applicable TRA Holder and (b) cooperate in good faith with such TRA Holder to avoid such withholding, unless the TRA Holder has failed to comply with the provisions of the preceding sentence.
Section 6.11 Confidentiality.
(a) General Rule. Each TRA Holder and each of their assignees acknowledges and agrees that the information of the TRA Benefit Payors is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters or information of the Corporation or the Company, or the Affiliates or successors of the Corporation and the Company, or the other TRA Holders acquired pursuant to this Agreement, including marketing, investment, performance data, credit and financial information and other business affairs of the Corporation or the Company, or the Affiliates or successors of the Corporation and the Company, or the other TRA Holders.
(b) Exceptions. This Section 6.11 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Holder in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a TRA Holder to prepare and file its Tax Returns, to respond to any inquiries regarding its Tax Returns from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to those Tax Returns. Notwithstanding anything to the contrary in this Section 6.11, each TRA Holder and assignee (and each employee, representative or other agent of a TRA Holder or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of (x) the Corporation, the Company, the TRA Holders and their Affiliates and (y) any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the TRA Holders relating to that tax treatment and tax structure.
(c) Enforcement. If a TRA Holder or assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 6.11, the Corporation shall have the right and remedy to have the provisions of this Section 6.11 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Affiliates or the other TRA Holders and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
Section 6.12 Limited Partnership Agreement. For U.S. federal income tax purposes, to the extent this Agreement imposes obligations upon the Company or a member of the Company, this Agreement shall be treated as part of the Limited Partnership Agreement as described in section 761(c) of the Code and sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.
Section 6.13 Joinder. The Company shall have the power and authority (but not the obligation) to permit any Person who becomes a member of the Company to execute and deliver a joinder to this Agreement promptly upon acquisition of membership interests in the Company by such Person, and such Person shall be treated as a “TRA Holder” for all purposes of this Agreement.
Section 6.14 Survival. If this Agreement is terminated pursuant to ARTICLE III, this Agreement shall become void and of no further force and effect, except for the provisions set forth in Section 6.04 (Governing Law), Section 6.08 (Dispute Resolution), Section 6.11 (Confidentiality), and this Section 6.14.
ARTICLE VII
DEFINITIONS
As used in this Agreement, the terms set forth in this ARTICLE VII shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).
“Actual Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Corporation for such Taxable Year, determined in accordance with Section 1.02.
“Additional Amount” for a given Taxable Year shall be the additional amount (calculated in the same manner as interest) payable on the Net Tax Benefit for such Taxable Year, reduced by the Tax Benefit Payment Reduction Amount for such Taxable Year (if any), calculated at the Agreed Rate from the due date (without extensions) for filing the Corporate Tax Return with respect to Taxes for the most recently ended Taxable Year until the date on which the payment is required to be made. In the case of a Tax Benefit Payment made in respect of an Amended Schedule, the “Additional Amount” shall equal the additional amount (calculated in the same manner as interest) payable on the Net Tax Benefit for such Taxable Year, reduced by the Tax Benefit Payment Reduction Amount for such Taxable Year (if any), calculated at the Agreed Rate from the date of such Amended Schedule becoming final in accordance with Section 1.03(b) until the date on which the payment is required to be made, reduced to account for any payment of Additional Amount made in respect of the original Tax Benefit Schedule. Except to the extent that it is treated as Imputed Interest (or with respect to amounts treated as guaranteed payments, as described in Section 1.02(a)), the Additional Amount shall be treated as additional consideration for tax purposes.
“Adjusted Asset” means any asset with respect to which a Basis Adjustment is made in respect of an Exchange.
“Advisory Firm” means any accounting firm or any law firm, in each case, that is nationally recognized as being expert in tax matters and that is selected by the Board.
“Affected TRA Holder” means, with respect to a Deemed Early Termination Event, each TRA Holder whose rights are being terminated.
“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 the LIBOR plus 300 basis points.
“Agreement” is defined in the preamble.
“Amended Schedule” is defined in Section 1.03(c).
“Arbitrators” is defined in Section 6.08(b).
“Available Cash” means all cash and cash equivalents of the TRA Benefit Payor on hand, less (i) the amount of cash reserves reasonably established in good faith by the TRA Benefit Payor to provide for the proper conduct of business of the TRA Benefit Payor (including paying creditors) and (ii) any amount the TRA Benefit Payor cannot pay to a TRA Holder by reason of (A) a prohibition, restriction or covenant under any credit agreement, loan agreement, note, indenture or other agreement governing indebtedness of the Company or any of its Subsidiaries or the Corporation or (B) restrictions under applicable law.
“Basis Adjustment” means any adjustment under sections 732, 734, 743, or 1012 of the Code (as applicable) as a result of an Exchange by a TRA Holder.
“Basis Schedule” is defined in Section 1.03(a)(i)(B).
“Beneficial Ownership” (including correlative terms) shall have the meaning ascribed to that term in Rule 13d-3 promulgated under the Securities Exchange Act of 1934.
“Benefit Rights” means the TRA Holders’ rights under this Agreement with respect to (i) the Interests (if any) held (including those previously Exchanged) by all TRA Holders and (ii) the Foundation Assets.
“Board” means the board of directors of the Corporation.
“Business Day” means any day other than a Saturday, Sunday or any other day on which commercial banks located in New York City, New York are authorized or required to close.
“Change of Control” means the occurrence of any of the following events:
(a) any Third Party Stakeholder becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing more than fifty percent (50%) of the combined voting power of the Corporation’s then outstanding voting securities; or
(b) the following individuals cease for any reason to constitute a majority of the directors of the Corporation then serving: (i) individuals who, on the IPO Date, constitute the Board, and (ii) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation) whose appointment by the Board or nomination for election by the Corporation’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or
(c) there is consummated a merger or consolidation of the Corporation or any direct or indirect Subsidiary of the Corporation with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (i) the members of the Board immediately before the merger or consolidation do not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (ii) all of the Persons who were the respective Beneficial Owners of the voting securities of the Corporation immediately before such merger or consolidation do not Beneficially Own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then-outstanding voting securities of the Person resulting from such merger or consolidation; or
(d) the shareholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation, or there is consummated an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Corporation of all or substantially all of the Corporation’s assets, other than the sale or other disposition by the Corporation of all or substantially all of the Corporation’s assets to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Beneficially Owned by shareholders of the Corporation in substantially the same proportions as their Beneficial Ownership of such securities of the Corporation immediately before such sale.
“Class A Shares” is defined in the recitals.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor or replacement statute.
“Common Basis” means the tax basis of the Adjusted Assets that is depreciable or amortizable for United States federal income tax purposes “attributable” to Interests acquired by the Corporation or the Company upon an Exchange, excluding any IPO Basis to the extent necessary to avoid double counting. For purposes of determining the Common Basis that is “attributable” to any such Interests, reasonable methods for tracking such Common Basis shall be utilized to determine the Common Basis relating to those Interests (determined without regard to any dilutive or antidilutive effect of any contribution to or distribution from the Company after the date of an applicable Exchange, and taking into account (x) section 704(c) of the Code and (y) any adjustment under section 734(b) or section 743(b) of the Code). For the avoidance of doubt, Common Basis shall not include any Basis Adjustment.
“Company” is defined in the preamble to this Agreement.
“Consolidated Group” is defined in Section 3.04(a).
“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Corporate Tax Return” means a Tax Return of the Corporation.
“Corporation” is defined in the preamble.
“Cumulative Net Realized Tax Benefit” for a Taxable Year means the excess, if any, of (a) the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporation, including such Taxable Year over (b) the cumulative amount of Realized Tax Detriments, if any, 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.
“day” means a calendar day.
“Deemed Early Termination Event” is defined in Section 3.01(b)(i).
“Default Rate” means LIBOR plus 500 basis points.
“Depreciation” means depreciation, amortization, or other similar deductions for recovery of cost or basis.
“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 a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.
“Dispute” is defined in Section 6.08(b).
“Dispute Resolution Procedures” is defined in Section 1.03(b).
“Early Termination Date” is defined in Section 3.02(a)(i).
“Early Termination Notice” is defined in Section 3.02(a)(i).
“Early Termination Payment” is defined in Section 3.03(a).
“Early Termination Rate” means the lesser of (i) 6.5% and (ii) LIBOR plus 400 basis points.
“Early Termination Schedule” is defined in Section 3.02(a)(i).
“Exchange” means an exchange by a TRA Holder pursuant to the Limited Partnership Agreement, and any other transfer of Interests for cash or otherwise (excluding, for the avoidance of doubt, the issuance of the IPO Interests), and “Exchanged” shall have a correlative meaning.
“Exchange Consideration” is defined in the Limited Partnership Agreement.
“Exchange Date” is, with respect to any Exchange, the date of such Exchange.
“Exchange Notice” is defined in the Limited Partnership Agreement.
“Exchangeable Interest” is defined in the Limited Partnership Agreement.
“Foundation” is defined in the recitals to this Agreement.
“Foundation Asset Purchase” is defined in the recitals to this Agreement.
“Foundation Assets” is defined in the recitals to this Agreement.
“Foundation Depreciation Benefit” for each Taxable Year, means the product of (1) the amount of Depreciation attributable to the Foundation Assets and available to the Company for such Taxable Year (ignoring, for this purpose, any adjustment to the tax basis of the Foundation Assets in respect of an Exchange), and (2) the same, combined tax rate utilized to calculate the Actual Tax Liability for such Taxable Year.
“Foundation Depreciation Payment” means, an amount equal to (1) the cumulative amount of Foundation Depreciation Benefit for all Taxable Years ending after the date of this Agreement over (2) the cumulative amounts that have previously been paid to the Foundation pursuant to Section 2.01(a).
“Hypothetical Tax Liability” means, with respect to any Taxable Year, the Actual Tax Liability for such Taxable Year, as further adjusted by (i) ignoring Section 1.02(e) and (ii) disregarding all Tax Assets (i.e., treating all Tax Assets as if they do not exist). For the avoidance of doubt, the Hypothetical Tax Liability shall be determined by using the Non-Stepped Up Tax Basis of each Adjusted Asset.
“Imputed Interest” means any interest imputed under sections 1272, 1274, or 483 or other provision of the Code with respect to the Corporation’s payment obligations under this Agreement.
“Interests” is defined in the recitals.
“IPO” is defined in the recitals.
“IPO Basis” means the tax basis of the assets of the Company and any of its direct or indirect Subsidiaries that are amortizable under section 197 of the Code, depreciable under section 168 of the Code, or that are otherwise reported as depreciable or amortizable on IRS Form 4562 for U.S. federal income Tax purposes, in each case, to the extent allocable to the Corporation in respect of its acquisition or ownership of IPO Interests (which, for the avoidance of doubt, includes any such deductions the Corporation is entitled to receive as a result of the application of the rules of section 704(c) of the Code).
“IPO Date” means the date of the IPO.
“IPO Interests” means the Interests acquired by the Corporation with the net proceeds from the IPO (including, for the avoidance of doubt, the Interests acquired in connection with the contribution of the consideration utilized by the Company to purchase the Foundation Assets).
“LIBOR” means during any period, the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market or such other commercially available source providing quotations of such rates as may be designated by Corporation from time to time), or the rate which is quoted by another source selected by the Corporation as an authorized information vendor for the purpose of displaying rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market (an “LIBOR Alternate Source”), at approximately 11:00 a.m., London time, two (2) Business Days before the first day of such period as the London interbank offered rate for U.S. dollars having a borrowing date and a maturity comparable to such period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any LIBOR Alternate Source, a comparable replacement rate determined by the Corporation and the TRA Representative at such time, which determination shall be conclusive absent manifest error); provided, that at no time shall LIBOR be less than zero percent (0%). If the Corporation has made the determination (such determination to be conclusive absent manifest error) that (i) LIBOR is no longer a widely recognized benchmark rate for newly originated loans in the U.S. loan market in U.S. dollars or (ii) the applicable supervisor or administrator (if any) of LIBOR has made a public statement identifying a specific date after which LIBOR shall no longer be used for determining interest rates for loans in the U.S. loan market in U.S. dollars, then the Corporation and the TRA Representative shall (as determined by the Corporation and the TRA Representative to be consistent with market practice generally), establish a replacement interest rate (the “Replacement Rate”), in which case, the Replacement Rate shall, subject to the next two sentences, replace LIBOR for all purposes under this Agreement. In connection with the establishment and application of the Replacement Rate, this Agreement shall be amended solely with the consent of the Corporation, the Company, and the TRA Representative, as may be necessary or appropriate, in the reasonable judgment of the Corporation and the TRA Representative, to effect the provisions of this section. The Replacement Rate shall be applied in a manner consistent with market practice; provided, that in each case, to the extent such market practice is not administratively feasible for the Corporation, such Replacement Rate shall be applied as otherwise reasonably determined by the Corporation and the TRA Representative.
“Limited Partnership Agreement” is defined in the recitals.
“LP TRA Holder” means any TRA Holder other than the Foundation.
“Market Value” means the closing price of the Class A Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which the 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” means 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 the 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” means the cash consideration paid for Class A Shares, or the fair market value of the other property delivered for Class A Shares, as determined by the Board in good faith.
“Material Objection Notice” is defined in Section 3.02.
“Material Uncured Breach” means the occurrence of any of the following events:
(a) the Corporation fails to make any payment required by this Agreement within 180 days after the due date for that payment (except for a failure to make any payment due pursuant to this Agreement as a result of a lack of Available Cash);
(b) this Agreement is rejected in a case commenced under the Bankruptcy Code and the Corporation does not cure the rejection within 90 days after such rejection; or
(c) the Corporation breaches any of its material obligations under this Agreement other than an event described in clause (a) or (b) with respect to one or more TRA Holders and the Corporation does not cure such breach within 90 days after receipt of notice of such breach from such TRA Holder(s).
“Net Tax Benefit” means, for each Taxable Year, the amount equal to the excess, if any, of eighty-five percent (85%) of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the total amount of payments previously made under Section 2.01, excluding payments attributable to any Additional Amount.
“NOLs” means net operating losses, capital losses, or other loss carrybacks and carryforwards.
“Non-Stepped Up Tax Basis” means, with respect to any Adjusted Asset, the tax basis that such property would have had at such time if no Basis Adjustments had been made and if the Common Basis was equal to zero.
“Objection Notice” is defined in Section 1.03(b).
“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity, or other entity.
“Policy” is defined in Annex D of the Limited Partnership Agreement.
“Purchase Agreement” means that certain Securities Purchase and Sale Agreement, dated [•], 2022, by and between the Company and the Foundation.
“Realized Tax Benefit” is defined in Section 1.01
“Realized Tax Detriment” is defined in Section 1.01.
“Subsidiary” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise Controls more than 50% of the voting shares or other similar interests or the sole general partner interest or managing member or similar interest of such Person.
“Supporting Letter” means a letter prepared by (i) the Corporation and certified by the Corporation’s chief financial officer, or (ii) an Advisory Firm, in either case, that states that the relevant schedules to be provided to the TRA Representative pursuant to Section 1.03(a)(iii) or Section 3.02(a) were prepared in a manner that is consistent with the terms of this Agreement and, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedules were delivered by the Corporation to the TRA Representative.
“Tax Assets” means (a) the Basis Adjustments, (b) Imputed Interest, (c) the Common Basis, (d) the IPO Basis, (e) any payment described in Section 1.02(a)(i), and (f) any other item of loss, deduction, or credit, including carrybacks and carryforwards, attributable to any item described in clauses (a) through (e) of this definition.
“Tax Benefit Payment” means, for each Taxable Year, an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Additional Amount.
“Tax Benefit Payment Reduction Amount” has the meaning given to it in Section 2.05(a).
“Tax Benefit Schedule” is defined in Section 1.03(a)(ii).
“Tax Item” means any item of income, gain, loss, deduction, or credit.
“Tax Return” means any return, declaration, report, or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Taxes.
“Taxable Year” means, for the Corporation or the Company, as the case may be, a taxable year as defined in section 441(b) of the Code or comparable section of state or local tax law, as applicable, ending on or after the closing date of the IPO.
“Taxes” means any and all non-U.S., U.S. federal, state, and local taxes, assessments, or similar charges that are based on or measured with respect to net income or profits (including any franchise taxes based on or measured with respect to net income or profits), and any interest, penalties, or additions related to such amounts imposed in respect thereof under applicable law.
“Taxes of the Corporation” means the Taxes of the Corporation and/or the Company, but only with respect to Taxes imposed on the Company and allocable to the Corporation for such Taxable Year.
“Taxing Authority” means any U.S. or non-U.S., federal, national, state, county, or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising tax regulatory authority.
“Third Party Stakeholder” means any Person or any group of Persons, the acting together of which would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, or any successor provisions thereto, excluding each TRA Party and its Affiliates. For purposes of this definition, the Affiliates of a TRA Party shall include the estate of a TRA Party and any Person who is a successor of a TRA Party as a direct result of a gift, bequest, or similar transfer.
“Total Tax and TRA Burden” means, for a Taxable Year, the sum of (i) all Tax Benefit Payments and (ii) the aggregate Tax liability shown as due on the Corporate Tax Returns filed for such Taxable Year and actually paid by the Corporation.
“TRA Benefit Payor” means, the Company, with respect to the portion of any Tax Benefit Payment the Company is required to pay under Section 2.01, and (ii) the Corporation with respect to the portion of any Tax Benefit Payment the Corporation is required to pay under Section 2.01.
“TRA Holder” means any Person (other than the Corporation, its Subsidiaries, and the TRA Representative, solely in its capacity as TRA Representative) that is a party to this Agreement. For purposes of Section 1.03(a)(iv), the term “TRA Holder” shall not include any person (other than the Foundation) that holds less than five (5) percent of the total Interests immediately before the IPO.
“TRA Party” means the Corporation, the Company, each of the TRA Holders, the TRA Representative, and any person who becomes a party to this Agreement from time to time.
“TRA Representative” means or, if it is unable or unwilling to serve as the TRA Representative, the person or entity designated to serve as the successor TRA Representative pursuant to Section 5.06(d).
“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” means, as of an Early Termination Date, the assumptions that
(a) in each Taxable Year ending on or after such Early Termination Date, the Corporation will have sufficient taxable income such that the Corporation would be obligated to make a Tax Benefit Payment in respect of all available Tax Assets in such Taxable Year;
(a) any NOLs and items of loss, deduction, or credit generated by a Basis Adjustment or Imputed Interest arising in a Taxable Year preceding the Taxable Year that includes an Early Termination Date will be used by the Corporation ratably from such Taxable Year through the earlier of (i) the scheduled expiration of such Tax Item or (ii) 15 years; provided that in any year in which the Corporation is unable to use the full amount of an NOL because of sections 382, 383, or 384 of the Code (or any successor provision or other similar limitation) that it otherwise would be deemed to use under this clause (b), the amount deemed to be used for purposes of this clause (b) shall equal the amount permitted to be used in such year under sections 382, 383, or 384 of the Code (or any successor provision or other similar limitation);
(b) if, at the Early Termination Date, there are Exchangeable Interests that have not been Exchanged, then each such Interest shall be deemed to be Exchanged for the Exchange Consideration that would be received if the Exchange occurred on the Early Termination Date;
(c) any non-amortizable assets are deemed to be disposed of in a fully taxable transaction for U.S. federal income tax purposes on the fifteenth anniversary of the earlier of the Basis Adjustment and the Early Termination Date; and
(d) the 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, taking into account any scheduled or imminent tax rate increases. For the avoidance of doubt, an “imminent” tax rate increase is one for which both the amount and the effective time can be determined with reasonable accuracy.
[Signature page follows]
In witness whereof, the undersigned have executed this Agreement as of the date first set forth above.
THE CORPORATION | ||
Excelerate Energy, Inc. | ||
By: | ||
Name: Steven Kobos | ||
Title: President and CEO | ||
THE COMPANY | ||
Excelerate Energy | ||
Limited Partnership | ||
By: | ||
Name: Steven Kobos | ||
Title: President and CEO |
TRA HOLDERS | ||
Excelerate Energy Holdings, LLC | ||
By: Kaiser Frances Management Company LLC, its manager | ||
By: | ||
Name: Don Millican | ||
Title: President | ||
Maya Maritime LLC | ||
By: | ||
Name: Frederic Dorwart | ||
Title: President | ||
TRA REPRESENTATIVE | ||
Excelerate Energy Holdings, LLC | ||
By: Kaiser Frances Management Company LLC, its manager | ||
By: | ||
Name: Don Millican | ||
Title: President |
Excelerate Energy, Inc.
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By:
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Name:
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||
Title:
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Indemnitee
|
Exhibit 10.7
Written Description of the Material Terms of the
Excelerate Energy 2021 Short Term Incentive Plan
Bonus-eligible employees of Excelerate Energy Limited Partnership, including each of Excelerate Energy, Inc.’s executive officers, are eligible to receive a cash incentive bonus payment during the 2022 calendar year based upon the achievement of annual company and individual performance goals for the 2021 calendar year. Each executive has a target bonus opportunity as a specified percentage of the executive’s base salary for the year and may earn a bonus above or below that target level based on final performance achievements.
In February 2022, the Excelerate Energy, Inc. board of directors (the “Board”) intends to evaluate the individual performance of each executive officer against certain individual and strategic goals (weighted 20%) and the company’s performance against enterprise-wide performance goals (weighted 80%) in the areas of:
• | EBITDA (weighted 45%); | |
• | Operating and G&A Expenses (weighted 10%); | |
• | Capital Expenditures (weighted 10%); and | |
• | Safety (weighted 15%). |
Any final earned annual bonus amounts will be paid in a cash lump sum, less applicable taxes and withholdings, as soon as practicable thereafter.
Page
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ARTICLE I DEFINITIONS
|
1
|
|
Section 1.01
|
Defined Terms
|
1
|
Section 1.02
|
Classification of Loans and Borrowings
|
40
|
Section 1.03
|
Terms Generally
|
40
|
Section 1.04
|
Accounting Terms; GAAP; Sequoia Lease
|
40
|
Section 1.05
|
Interest Rates; Benchmark Notification
|
41
|
Section 1.06
|
Letter of Credit Amounts
|
41
|
Section 1.07
|
Divisions
|
41
|
ARTICLE II THE CREDITS
|
42
|
|
Section 2.01
|
Commitments
|
42
|
Section 2.02
|
Loans and Borrowings
|
42
|
Section 2.03
|
Requests for Borrowings
|
42
|
Section 2.04
|
Increase in Commitments
|
43
|
Section 2.05
|
[Reserved]
|
44
|
Section 2.06
|
Letters of Credit
|
44
|
Section 2.07
|
Funding of Borrowings
|
49
|
Section 2.08
|
Interest Elections
|
50
|
Section 2.09
|
Termination and Reduction of Commitments
|
51
|
Section 2.10
|
Repayment of Loans; Evidence of Indebtedness
|
52
|
Section 2.11
|
Optional Prepayments
|
52
|
Section 2.12
|
Mandatory Prepayments
|
53
|
Section 2.13
|
Fees
|
54
|
Section 2.14
|
Interest
|
54
|
Section 2.15
|
Alternate Rate of Interest
|
55
|
Section 2.16
|
Increased Costs
|
57
|
Section 2.17
|
Break Funding Payments
|
58
|
Section 2.18
|
Withholding of Taxes; Gross-Up
|
59
|
Section 2.19
|
Payments Generally; Pro Rata Treatment; Sharing of Setoffs
|
62
|
Section 2.20
|
Mitigation Obligations; Replacement of Lenders
|
64
|
Section 2.21
|
Defaulting Lenders
|
64
|
ARTICLE III REPRESENTATIONS AND WARRANTIES
|
66
|
|
Section 3.01
|
Organization; Powers
|
67
|
Section 3.02
|
Authorization; Enforceability
|
67
|
Section 3.03
|
Governmental Approvals; No Conflicts
|
67
|
Section 3.04
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Financial Condition; No Material Adverse Change
|
67
|
Section 3.05
|
Properties
|
67
|
Section 3.06
|
Litigation and Environmental Matters
|
68
|
Section 3.07
|
Compliance with Laws and Agreements; No Default
|
68
|
Section 3.08
|
Investment Company Status
|
68
|
Section 3.09
|
Taxes
|
69
|
Section 3.10
|
ERISA
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69
|
Section 3.11
|
Disclosure
|
69
|
Section 3.12
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Anti-Corruption Laws and Sanctions
|
69
|
Section 3.13
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Affected Financial Institutions
|
69
|
Section 3.14
|
Plan Assets; Prohibited Transactions
|
69
|
Section 3.15
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Use of Proceeds; Margin Regulations
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70
|
Section 3.16
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Solvency
|
70
|
Section 3.17
|
Insurance
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70
|
Section 3.18
|
Subsidiaries
|
70
|
Section 3.19
|
Vessels
|
70
|
Section 3.20
|
Collateral Documents
|
71
|
Section 3.21
|
Pari Passu or Priority Status
|
71
|
Section 3.22
|
No Immunity
|
71
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ARTICLE IV CONDITIONS PRECEDENT
|
72
|
|
Section 4.01
|
Effective Date
|
72
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Section 4.02
|
Each Credit Event
|
74
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ARTICLE V AFFIRMATIVE COVENANTS
|
74
|
|
Section 5.01
|
Financial Statements; Other Information
|
75
|
Section 5.02
|
Notices of Material Events
|
77
|
Section 5.03
|
Existence; Conduct of Business
|
78
|
Section 5.04
|
Payment of Taxes
|
78
|
Section 5.05
|
Maintenance of Properties; Vessel Contracts
|
78
|
Section 5.06
|
Insurance
|
79
|
Section 5.07
|
Books and Records; Inspection Rights
|
82
|
Section 5.08
|
Compliance with Laws
|
83
|
Section 5.09
|
Use of Proceeds and Letters of Credit
|
83
|
Section 5.10
|
[Reserved]
|
83
|
Section 5.11
|
Environmental Matters
|
83
|
Section 5.12
|
Further Assurances; Additional Collateral and Additional Guarantors
|
84
|
Section 5.13
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Change of Ownership; Registry; Management; Legal Names; Type of Organization (and whether a Registered Organization); Jurisdiction of Organization; etc
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86
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Section 5.14
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Unrestricted Subsidiaries
|
86
|
Section 5.15
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Commodity Exchange Act Keepwell Provisions
|
87
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ARTICLE VI NEGATIVE COVENANTS
|
88
|
|
Section 6.01
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Indebtedness
|
88
|
Section 6.02
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Liens
|
89
|
Section 6.03
|
Fundamental Changes
|
90
|
Section 6.04
|
Limitation on Asset Sales
|
91
|
Section 6.05
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Investments, Loans, Advances, Guarantees and Acquisitions
|
91
|
Section 6.06
|
Swap Agreements
|
93
|
Section 6.07
|
Restricted Payments
|
93
|
Section 6.08
|
Transactions with Affiliates
|
94
|
Section 6.09
|
Restrictive Agreements
|
94
|
Section 6.10
|
Financial Covenants
|
95
|
Section 6.11
|
Tax Status of the Borrower
|
96
|
Section 6.12
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Sale-Leaseback Transactions
|
96
|
Section 6.13
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Amendment of Material Documents
|
96
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Section 6.14
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Flag and Registry
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96
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Section 6.15
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Status of Parent
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97
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ARTICLE VII EVENTS OF DEFAULT
|
97
|
|
Section 7.01
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Events of Default
|
97
|
Section 7.02
|
Remedies Upon an Event of Default
|
99
|
Section 7.03
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Application of Payments
|
100
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ARTICLE VIII THE ADMINISTRATIVE AGENT
|
102
|
|
Section 8.01
|
Authorization and Action
|
102
|
Section 8.02
|
Administrative Agent’s Reliance, Limitation of Liability, Etc
|
105
|
Section 8.03
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Posting of Communications
|
106
|
Section 8.04
|
The Administrative Agent Individually
|
107
|
Section 8.05
|
Successor Administrative Agent
|
107
|
Section 8.06
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Acknowledgements of Lenders and Issuing Banks
|
108
|
Section 8.07
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Collateral Matters
|
110
|
Section 8.08
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Credit Bidding
|
111
|
Section 8.09
|
Certain ERISA Matters
|
111
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ARTICLE IX MISCELLANEOUS
|
113
|
|
Section 9.01
|
Notices
|
113
|
Section 9.02
|
Waivers; Amendments
|
114
|
Section 9.03
|
Expenses; Limitation of Liability; Indemnity, Etc
|
115
|
Section 9.04
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Successors and Assigns
|
117
|
Section 9.05
|
Survival
|
121
|
Section 9.06
|
Counterparts; Integration; Effectiveness; Electronic Execution
|
121
|
Section 9.07
|
Severability
|
122
|
Section 9.08
|
Right of Setoff
|
123
|
Section 9.09
|
Governing Law; Jurisdiction; Consent to Service of Process
|
123
|
Section 9.10
|
WAIVER OF JURY TRIAL
|
124
|
Section 9.11
|
Headings
|
124
|
Section 9.12
|
Confidentiality
|
124
|
Section 9.13
|
Material Non-Public Information
|
125
|
Section 9.14
|
Interest Rate Limitation
|
125
|
Section 9.15
|
No Fiduciary Duty, etc
|
126
|
Section 9.16
|
USA PATRIOT Act
|
126
|
Section 9.17
|
Acknowledgement and Consent to Bail-In of Affected Financial Institutions
|
126
|
Section 9.18
|
Acknowledgement Regarding Any Supported QFCs
|
127
|
Section 9.19
|
Judgment Currency
|
127
|
Section 9.20
|
Release of Collateral and Guarantors
|
128
|
Section 9.21
|
Currency Conversion.
|
129
|
Section 9.22
|
Exchange Rates.
|
129
|
Annex I
|
Commitments
|
Annex II
|
Letter of Credit Commitments
|
Exhibit A
|
Form of Assignment and Assumption
|
Exhibit B
|
Form of Borrowing Request
|
Exhibit C
|
Form of Interest Election Request
|
Exhibit D
|
Form of Note
|
Exhibit E-1
|
U.S. Tax Compliance Certificate (For Non-U.S. Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
|
Exhibit E-2
|
U.S. Tax Compliance Certificate (For Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes)
|
Exhibit E-3
|
U.S. Tax Compliance Certificate (For Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes)
|
Exhibit E-4
|
U.S. Tax Compliance Certificate (For Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax Purposes)
|
Exhibit F
|
Form of Collateral Vessel Mortgage
|
Exhibit G-1
|
Form of Increasing Lender Certificate
|
Exhibit G-2
|
Form of Additional Lender Certificate
|
Exhibit H
|
Form of Fleet Status Certificate
|
Schedule 2.06
|
Existing Letters of Credit
|
Schedule 3.06
|
Disclosed Matters
|
Schedule 3.18
|
Subsidiaries
|
Schedule 3.19
|
Effective Date Collateral Vessels and Specified Vessels
|
Schedule 4.01(m)
|
Effective Date Collateral Documents
|
Schedule 5.01
|
Approved Appraisers
|
Schedule 5.14
|
Unrestricted Subsidiaries
|
Schedule 6.01
|
Existing Indebtedness
|
Schedule 6.02
|
Existing Liens
|
Schedule 6.05
|
Existing Investments
|
Schedule 6.08
|
Existing Transactions with Affiliates
|
Schedule 6.09
|
Existing Restrictions
|
Schedule 6.14
|
Acceptable Flag Jurisdictions
|
Consolidated Total Leverage Ratio
|
Term Benchmark Margin
|
ABR Margin
|
≤ 1.50:1.00
|
3.00%
|
2.00%
|
> 1.50:1.00 but
< 2.50:1.00
|
3.25%
|
2.25%
|
≥ 2.50:1.00
|
3.50%
|
2.50%
|
Consolidated Total Leverage Ratio
|
Commitment Fee Rate
|
≤ 1.50:1.00
|
0.375%
|
> 1.50:1.00 but
< 2.50:1.00
|
0.375%
|
≥ 2.50:1.00
|
0.50%
|
EXCELERATE ENERGY, INC., as Parent
|
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By:
|
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Name:
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Title:
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EXCELERATE ENERGY LIMITED
PARTNERSHIP, as Borrower
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By:
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Name:
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Title:
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JPMORGAN CHASE BANK, N.A., as Lender,
Issuing Bank and Administrative Agent
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By:
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Name:
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Title:
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[NAME], as Lender and Issuing Bank
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By:
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Name:
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Title:
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[NAME], as Lender
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By:
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Name:
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Title:
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Entity Name
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Jurisdiction of Formation
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Bangla LNG Terminal Limited
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Bangladesh
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Excelerate Energy Asia Pacific Pte. Ltd
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Singapore
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Excelerate Energy Bangladesh DMCC
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UAE
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Excelerate Energy Bangladesh Global DMCC
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UAE
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Excelerate Energy Bangladesh Holdings, LLC
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Delaware
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Excelerate Energy Bangladesh Ltd
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Bangladesh
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Excelerate Energy Bangladesh PCG, LLC
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Delaware
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Excelerate Energy Bangladesh TopCo LLC
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Delaware
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Excelerate Energy Bangladesh, LLC
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Delaware
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Excelerate Energy Brazil, LLC
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Delaware
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Excelerate Energy Comercializadora de Gas Natural Ltda.
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Brazil
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Excelerate Energy Development DMCC
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Dubai, UAE
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Excelerate Energy LatAm Holdings, LLC
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Delaware
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Excelerate Energy Marketing Mexico LLC
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Delaware
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Excelerate Energy Marshall Islands, LLC
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Delaware
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Excelerate Energy Mexico LLC
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Delaware
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Excelerate Energy Middle East, LLC
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Delaware
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Excelerate Energy QFC LLC
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Qatar
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Excelerate Energy Regas UAE, LLC
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Delaware
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Excelerate Energy Regasification Holdings, LLC
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Delaware
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Excelerate Energy Services, LLC
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Delaware
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Excelerate Energy Serviços de Regaseificação Ltda.
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Brazil
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Excelerate Energy South America, LLC
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Delaware
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Excelerate Energy SRL
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Argentina
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Excelerate Gas Marketing, LP
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Delaware
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Excelerate Global Operations LLC
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Delaware
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Excelerate LLC
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Marshall Islands
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Excelerate LNG Development UAE, LLC
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Delaware
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Excelerate New England GP, LLC
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Delaware
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Excelerate New England Lateral, LLC
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Delaware
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Excelerate Philippines Holdco, LLC
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Delaware
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Excelerate Ship Management Holdco, LLC
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Delaware
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Excelerate Technical Management BV
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Belgium
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Excelerate Vessel Holdings ApS
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Denmark
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Exemplar LLC
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Marshall Islands
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Expedient LLC
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Marshall Islands
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Explorer LLC
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Marshall Islands
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Express LLC
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Marshall Islands
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Exquisite LLC
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Marshall Islands
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Exquisite Services Company, LLC
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Delaware
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Floating Solutions, LLC
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Delaware
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GBK Hull 2402, LLC
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Delaware
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Hadera Gateway, LLC
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Delaware
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Luzon LNG Terminal Inc.
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The Philippines
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Nakilat Excelerate LLC
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Marshall Islands
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Northeast Gateway Energy Bridge, LP
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Delaware
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