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8-K/A
Sep 23, 6:40 PM ET
WaterBridge Infrastructure LLC 8-K/A
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Contents
46
ARTICLE IDefinitions
Section 1.1. Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to (i) the singular and plural, (ii) the active and passive and (iii) for defined terms that are nouns, the verified forms of the terms defined).
Section 1.2. Rules of Construction. Unless otherwise specified herein: for purposes of interpretation of this Agreement: the words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision
thereof; words in the singular, including any defined terms, include the plural and vice versa; reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; any accounting term used and not otherwise defined in this Agreement has the meaning assigned to such term in accordance with GAAP; unless specified otherwise, references to an Article, Section or clause refer to the appropriate Article, Section or clause in this Agreement; references to dollars or “$” refer to the lawful currency of the U.S; the terms “include” or “including” are by way of example and not limitation and shall be deemed followed by the words “without limitation”; the word “if” and other words of similar import when used herein shall be deemed in each case to be followed by the phrase “and only if”; the term “or”, when used in a list of two or more items, means “and/or” and may indicate any combination of the items; the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form; in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including”; section headings herein are included for convenience of reference only and shall not affect the interpretation of this Agreement; references to organizational documents (including the Operating Agreement), agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted hereby; and references to any Law (including the Code and the Treasury Regulations) include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
ARTICLE IIDetermination of Realized Tax Benefit
Section 2.1. Basis Adjustments; OpCo Section 754 Election.
Section 2.2. Attribute Schedules. Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of PubCo for each relevant Taxable Year (including the Taxable Year in which the IPO occurs), PubCo shall deliver to the TRA Representatives a schedule showing, in reasonable detail, (i) the Covered Tax Assets that are available for use by PubCo with respect to such Taxable Year with respect to each TRA Party (including the Basis Adjustments with respect to the Reference Assets resulting from Exchanges effected in such Taxable Year and the periods over which such Basis Adjustments are amortizable or depreciable), (ii) the portion of the Covered Tax Assets that are available for use by PubCo in future Taxable Years with respect to each TRA Party and (iii) any limitations on the ability of PubCo to utilize any Covered Tax Assets under applicable Laws (including as a result of the operation of Section 382 of the Code or Section 383 of the Code) (such schedule, an “Attribute Schedule”). An Attribute Schedule will become final and binding on the Parties pursuant to the procedures set forth in Section 2.4(a) and may be amended by the Parties pursuant to the procedures set forth in Section 2.4(b).
Section 2.3. Tax Benefit Schedules.
Section 2.4. Procedures; Amendments.
ARTICLE IIITax Benefit Payments
Section 3.1. Timing and Amount of Tax Benefit Payments.
Section 3.2. No Duplicative Payments. It is intended that the provisions hereunder will not result in the duplicative payment of any amount that may be required under this Agreement, and the provisions hereunder shall be consistently interpreted and applied in accordance with that intent.
Section 3.3. Pro-Ration of Payments as Between the TRA Parties.
Section 3.4. Overpayments. Subject to the procedures described in Section 2.4(a), to the extent PubCo makes a payment to a TRA Party in respect of a particular Taxable Year under Section 3.1(a) in an amount in excess of the amount of such payment that should have been made to such TRA Party in respect of such Taxable Year (taking into account Section 3.3) under the terms of this Agreement, then such TRA Party shall not receive further payments under Section 3.1(a) or Section 4.3(a) until such TRA Party has forgone an amount of payments equal to such excess; provided, that for the avoidance of doubt, no TRA Party shall be required to return any Payment or any Default Rate Interest paid by PubCo to such TRA Party.
Section 3.5. IPO Existing Basis. Notwithstanding anything to the contrary herein, no TRA Party shall be entitled to any Tax Benefit Payments with respect to any IPO Existing Basis unless and until such TRA Party has Exchanged (in one or more Exchanges) a number of Units at least equal to 5% of the Units held by such TRA Party immediately prior to the IPO that were taken into account in determining such TRA Party’s IPO Basis Percentage (such Units with respect to each TRA Party, such TRA Party’s “Threshold Exchange Units”). A TRA Party that has Exchanged at least the Threshold Exchange Units shall become entitled to receive (a) on the immediately succeeding Final Payment Date, the Tax Benefit Payments forgone as a result of the immediately preceding sentence, if any, and (b) on each subsequent Final Payment Date, the amount of Tax Benefit Payments (including with respect to IPO Existing Basis), if any, otherwise payable to such TRA Party on such Final Payment Date.
Section 3.6. Crystallization. Notwithstanding the foregoing ARTICLE III, for each Taxable Year ending on or after the date of a PubCo Change of Control, all Tax Benefit Payments shall be (a) calculated by utilizing the Valuation Assumptions, substituting in each case the term “the date of a PubCo Change of Control” for “Early Termination Effective Date” and (b) paid to each relevant TRA Party on the dates and in the amounts otherwise provided in this ARTICLE III.
ARTICLE IVTermination
Section 4.1. Early Termination of Agreement; Acceleration Events.
Section 4.2. Early Termination Notice.
Section 4.3. Payment upon Early Termination.
ARTICLE VSubordination and Late Payments
Section 5.1. Subordination. Notwithstanding any other provision of this Agreement to the contrary, any payment required to be made by PubCo to the TRA Parties under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations owed in respect of indebtedness for borrowed money of PubCo (other than, for the avoidance of doubt, any trade payables, intercompany debt or other similar obligations) (“Senior Obligations”) and shall rank pari passu in right of payment with all current or future unsecured obligations of PubCo that are not Senior Obligations. Any Tax Benefit Payment or Early Termination Payment required to be made by PubCo to the TRA Parties under this Agreement shall rank senior in right of payment to any principal, interest or other amounts due and payable in respect of any similar agreement. The effect of any other similar agreement shall not be taken into account in respect of any calculations made hereunder.
Section 5.2. Late Payments by PubCo. Subject to the second proviso in the third sentence of Section 4.1(b), the amount of any Payment not made to any TRA Party by the applicable Final Payment Date shall be payable together with “Default Rate Interest,” calculated at the Default Rate and accruing on the amount of the unpaid Payment from the applicable Final Payment Date until the date on which PubCo makes such Payment to such TRA Party.
ARTICLE VITax Matters; Consistency; Cooperation
Section 6.1. Participation in PubCo’s and OpCo’s Tax Matters. Except as otherwise provided herein or in the Operating Agreement, PubCo shall have full responsibility for, and sole discretion over, all tax matters concerning PubCo and OpCo, including preparing, filing or amending any Tax Return and defending, contesting or settling any issue pertaining to taxes; provided that PubCo shall not settle any issue pertaining to Covered Tax Assets that is reasonably expected to materially adversely affect the TRA Parties’ rights and obligations under this Agreement without the consent of the TRA Representatives, such consent not to be unreasonably withheld, conditioned or delayed. If the TRA Representatives fail to respond to any notice with respect to the settlement of any such issue within thirty (30) calendar days of its receipt of the applicable notice, the TRA Representatives shall be deemed to have consented to the proposed settlement or other disposition. Notwithstanding the foregoing, (i) PubCo shall notify the TRA Representatives of, and keep them reasonably informed with respect to, the portion of any audit by any Taxing Authority of PubCo, OpCo or any of OpCo’s Subsidiaries, the outcome of which is reasonably expected to materially and adversely affect the TRA Parties’ rights and obligations under this Agreement, including the timing of anticipated Tax Benefit Payments and (ii) the TRA Representatives shall each have the right to participate in and to monitor at their own expense (but, for the avoidance of doubt, not to control) any such issue in any such tax audit. To the extent there is a conflict between this Agreement and the Operating Agreement as it relates to tax matters concerning Covered Taxes and PubCo and OpCo, including preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to taxes, this Agreement shall control.
Section 6.2. Consistency. Except upon the written advice of the Advisory Firm, all calculations and determinations made hereunder, including any Basis Adjustments, the Schedules and the determination of any Realized Tax Benefits or Realized Tax Detriments, shall be made in accordance with the elections, methodologies and positions taken by PubCo and applicable members of the OpCo Group on their respective Tax Returns. Each TRA Party shall prepare its Tax Returns in a manner consistent with the terms of this Agreement and any related calculations or determinations made hereunder, including the terms of Section 2.1 and the Schedules provided to each such TRA Party, except as otherwise required by applicable Law. In the event that an Advisory Firm is replaced with another Advisory Firm acceptable to the Audit Committee, the TRA Parties shall cause such replacement Advisory Firm to perform its services necessitated by this Agreement using procedures and methodologies consistent with those of the previous Advisory Firm, unless otherwise required by applicable Law or unless PubCo and all of the TRA Representatives agree to the use of other procedures and methodologies.
Section 6.3. Cooperation.
ARTICLE VIIMiscellaneous
Section 7.1. Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by electronic means (including email), with affirmative confirmation of receipt, (iii) one (1) Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable Party at the following addresses (or at such other address for a Party as shall be specified by like notice):
Section 7.2. Counterparts. This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together
shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the TRA Parties and delivered to the other TRA Parties, it being understood that all TRA Parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by e-mail transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 7.3. Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the entire agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or the documents or instruments referred to herein, which collectively supersede all prior agreements and the understandings among the Parties with respect to the subject matter contained herein. This Agreement shall be binding upon and inure solely to the benefit of each Party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 7.4. Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
Section 7.5. Assignments; Amendments; Successors; No Waiver.
Section 7.6. Titles and Subtitles. The titles of the sections and subsections of this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.
Section 7.7. Resolution of Disputes; Governing Law.
Section 7.8. Reconciliation Procedures.
Section 7.9. Withholding. PubCo and its Affiliates shall be entitled to deduct and withhold from any payment that is payable to any TRA Party pursuant to this Agreement such amounts as PubCo is required to deduct and withhold with respect to the making of such payment by applicable Law. To the extent that amounts are so deducted and withheld and paid over to the appropriate Taxing Authority by PubCo, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid by PubCo to the relevant TRA Party in respect of whom the deduction and withholding was made. Each TRA Party shall promptly provide PubCo with any applicable tax forms and certifications reasonably requested by PubCo in connection with determining whether any such deductions and withholdings are required by applicable Law.
Section 7.10. Admission of PubCo into a Consolidated Group; Transfers of Corporate Assets.
Section 7.11. Confidentiality. Each TRA Party and each of its respective assignees acknowledges and agrees that the information of PubCo is confidential and, except in the course of performing any duties as necessary for PubCo and its Affiliates, as required by Law or legal process or to enforce the terms of this Agreement, such Person shall keep and retain in the strictest confidence and not disclose to any other Person any confidential information, acquired pursuant to this Agreement, of PubCo or its controlled Affiliates or their successors. This Section 7.11 shall not apply to (i) any information that has been made publicly available by PubCo or any of its controlled Affiliates, becomes public knowledge (except as a result of an act of any TRA Party in violation of this Agreement) or is generally known to the business community, (ii) the disclosure of information to the extent necessary for a TRA Party to prosecute or defend claims arising under or relating to this Agreement and (iii) the disclosure of information to the extent necessary for a TRA Party to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such Tax Returns. Notwithstanding anything to the contrary herein, the TRA Parties and each of their assignees (and each employee, representative or other agent of the TRA Parties or their assignees, as applicable) may disclose at their discretion to any and all Persons, without limitation of any kind, the tax treatment and tax structure of PubCo, the TRA Parties and any of their transactions, and all materials of any kind (including tax opinions or other tax analyses) that are provided to the TRA Parties relating to such tax treatment and tax structure. If a TRA Party or an assignee commits, or threatens to commit, a breach of any of the provisions of this Section 7.11, PubCo shall have the right and remedy to have the provisions of this Section 7.11 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 will cause irreparable injury to PubCo or any of its controlled Affiliates and that money damages alone will not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at Law or in equity.
Section 7.12. Change in Law. Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in Law, a TRA Party reasonably believes that the existence of this Agreement (i) could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such TRA Party (or direct or indirect equity holders in such TRA Party) in connection with any Exchange to be treated as ordinary income (other than with respect to assets described in Section 751(a) of the Code) rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or (ii) would have other material adverse tax consequences to such TRA Party or any direct or indirect owner of such TRA Party, then, at the written election of such TRA Party in its sole discretion (in an instrument signed by such TRA Party and delivered to PubCo) and to the extent specified therein by such TRA Party, this Agreement shall cease to have further effect with respect to such TRA Party and shall not apply to an Exchange by such TRA Party occurring after a date specified by such TRA Party; provided, for the avoidance of doubt, such voluntary termination of rights by a TRA Party shall not result in or cause a termination or acceleration event under Section 4.1 or otherwise affect the rights of other TRA Parties.
Section 7.13. Interest Rate Limitation. Notwithstanding anything to the contrary contained herein, the interest paid or agreed to be paid hereunder with respect to amounts due to any TRA Party hereunder shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum
Rate”). If any TRA Party shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the applicable payment (but in each case exclusive of any component thereof comprising interest) or, if it exceeds such unpaid non-interest amount, refunded to PubCo. In determining whether the interest contracted for, charged or received by any TRA Party exceeds the Maximum Rate, such TRA Party may, to the extent permitted by applicable Law, (i) characterize any payment that is not principal as an expense, fee or premium rather than interest, (ii) exclude voluntary prepayments and the effects thereof or (iii) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the payment obligations owed by PubCo to such TRA Party hereunder. Notwithstanding the foregoing, it is the intention of the Parties to conform strictly to any applicable usury Laws.
Section 7.14. Independent Nature of Rights and Obligations.
Section 7.15. Tax Characterization. The Parties intend that (i) each (A) Exchange, (B) payment made under this Agreement (except with respect to amounts that constitute Imputed Interest) to a TRA Party in connection with an Exchange or (C) distribution (or deemed distribution) from OpCo to a TRA Party that may reasonably be treated as a transaction between PubCo and the TRA Party pursuant to Section 707(a)(2)(B) of the Code (or any similar provisions of applicable state or local tax Law) shall give rise to Basis Adjustments, (ii) payments to TRA Parties pursuant to this Agreement with respect to IPO Existing Basis (except with respect to amounts that constitute Imputed Interest) will be treated as consideration in respect of the Threshold Exchange Units that give rise to additional Basis Adjustments, (iii) the rights to payments to TRA Parties pursuant to this Agreement with respect to WB 892 Existing Basis and WB 892 Carryovers (except, in each case, with respect to amounts that constitute Imputed Interest) will, in accordance with Treasury Regulation Section 1.368-2(m)(3)(iii), be treated as received in exchange for stock of WB 892 in connection with the WB 892 Merger and the IPO under Section 302 of the Code and (iv) the rights received and (without duplication) payments (except with respect to amounts that constitute Imputed Interest) made, in each case, in respect of the Units acquired by PubCo from the TRA Parties in any future contribution qualifying under Section 351 of the Code be treated as other property or money received for purposes of Section 351(b) of the Code; provided that no Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise and/or settle any tax audit, claim or similar proceedings
in connection with such position. To the extent this Agreement imposes obligations on OpCo or a member of OpCo, this Agreement shall be treated as part of the Operating Agreement as described in Section 761(c) of the Code and Treasury Regulations Sections 1.761-1(c) and 1.704-1(b)(2)(ii)(h).