EFTA00623298.pdf

AGREEMENT AMONG PRINCIPALS dated as of July 13, 2007 among LEON D. BLACK, MARC J. ROWAN, JOSHUA J. HARRIS, BLACK FAMILY PARTNERS, L.P., MJR FOUNDATION LLC, AP PROFESSIONAL HOLDINGS, L.P., and BRH HOLDINGS, L.P. NYI:1686459.16 EFTA00623298  TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS SECTION 1.2 GENDER 10 ARTICLE II OWNERSHIP 10 SECTION 2.1 OWNERSHIP 10 SECTION 2.2 SHARING PERCENTAGE ADJUSTMENTS 12 SECTION 2.3 HERITAGE POINTS PERCENTAGE ADJUSTMENTS 12 SECTION 2.4 TRANSFERS; REGISTRATION RIGHTS 13 SECTION 2.5 EXCLUDED ASSETS 15 SECTION 2.6 ALLOCATION OF ADJUSTMENTS 15 SECTION 2.7 DISTRIBUTION ACCOUNTS 16 SECTION 2.8 DISTRIBUTIONS 17 ARTICLE III EMPLOYMENT 18 SECTION 3.1 TERMINATION 18 SECTION 3.2 VESTING 18 SECTION 3.3 COMPENSATION; OTHER ECONOMIC BENEFITS 18 ARTICLE IV FORFEITURE 19 SECTION 4.1 FORFEITURE AMONG PRINCIPALS 19 SECTION 4.2 FORFEITURE BY OTHER PERSONS 20 ARTICLE V GOVERNANCE; CERTAIN RIGHTS; COMPETING ACTIVITIES 20 SECTION 5.1 EXECUTIVE COMMITTEE; LIMITATIONS ON HOLDINGS AND THE HOLDINGS GP 20 SECTION 5.2 AUTHORITY OF EXECUTIVE COMMITTEE 21 SECTION 5.3 FILLING VACANCIES ON EXECUTIVE COMMITTEE 22 SECTION 5.4 EXTRAORDINARY TRANSACTIONS 23 SECTION 5.5 EMPLOYMENT MATTERS 24 SECTION 5.6 ACKNOWLEDGEMENTS BY THE PRINCIPALS 25 SECTION 5.7 ACCESS TO BOOKS, RECORDS AND FINANCIAL INFORMATION 25 SECTION 5.8 CONFIDENTIAL INFORMATION 25 NYI:1686459.16 EFTA00623299  TABLE OF CONTENTS (continued) Page ARTICLE VI MISCELLANEOUS 26 SECTION 6.1 NOTICES 26 SECTION 6.2 INTERPRETATION 26 SECTION 6.3 SEVERABILITY 26 SECTION 6.4 COUNTERPARTS 27 SECTION 6.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES 27 SECTION 6.6 FURTHER ASSURANCES 27 SECTION 6.7 GOVERNING LAW; EQUITABLE REMEDIES 27 SECTION 6.8 CONSENT TO JURISDICTION 27 SECTION 6.9 ARBITRATION 28 SECTION 6.10 AMENDMENTS; WAIVERS; NO DISCRIMINATORY ACTION 30 SECTION 6.11 ASSIGNMENT 31 SECTION 6.12 SCHEDULE VI 31 NYI:1686459.16 EFTA00623300  AGREEMENT AMONG PRINCIPALS (the "Agreement"), dated as of July 13, 2007, among Leon D. Black ("LB"), Marc J. Rowan ("MR"), Joshua J. Harris ("JH", and together with LB and MR, the "Principals", and each individually, a "Principal") Black Family Partners, L.P., a Delaware limited partnership, MJR Foundation LLC, a New York limited liability company, AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership ("Intermediate Holdings"), and BRH Holdings, L.P., a Cayman Islands exempted limited partnership ("Holdings"). WHEREAS, the Principals and other members of their respective Principal Groups (as defined herein) own all of the equity interests in Holdings; WHEREAS, BRH Holdings GP, Ltd., a Cayman Islands exempted company (the "Holdings GP") is the general partner of Holdings and Intermediate Holdings; WHEREAS, the Principals are the sole members of the Holdings GP; WHEREAS, immediately prior to the effectiveness of this Agreement, the parties hereto have entered into the Principals Contribution Agreement (as defined herein) whereby the Principals and their Groups contributed certain equity interests in the Apollo Operating Group to Intermediate Holdings (as defined herein) and sold certain equity interests in the Apollo Operating Group to APO Corp. and APO LLC (each as defined herein); and WHEREAS, immediately prior to the effectiveness of this Agreement, certain Apollo senior managers entered into the Roll-up Agreements, whereby such senior managers contributed certain equity interests in the Apollo Operating Group to Intermediate Holdings and sold certain equity interests in the Apollo Operating Group to APO Corp. and APO LLC; NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "AAA" has the meaning set forth in Section 6.9. "Agreement" has the meaning set forth in the recitals to this Agreement. "AOG Unit" refers to a unit in the Apollo Operating Group, which represents one limited partnership interest in each of the limited partnerships that comprise the Apollo Operating Group and any securities issued or issuable in exchange for or with respect to such AOG Units (i) by way of a dividend, split or combination of shares or (ii) in connection with a reclassification, recapitalization, merger, consolidation or other reorganization. NYI:16116459.16 EFTA00623301  "APO Corp." means APO Corp., a Delaware corporation. "APO LLC" means APO Asset Co., LLC, a Delaware limited liability company. "Apollo" means Apollo Global Management, LLC. "Apollo Employer" means Apollo or any successor thereto. "Apollo Operating Group" means (i) Apollo Management Holdings, L.P., a Delaware limited partnership, Apollo Principal Holdings I, L.P., a Delaware limited partnership, Apollo Principal Holdings II, L.P., a Delaware limited partnership, Apollo Principal Holdings III, L.P., a Cayman Islands exempted limited partnership, Apollo Principal Holdings IV, L.P., a Cayman Islands exempted limited partnership, and any successors thereto or other entities formed to serve as holding vehicles for Apollo carry vehicles, management companies or other entities formed to engage in the asset management business (including alternative asset management) and (ii) any such Apollo carry vehicles, management companies or other entities formed to engage in the asset management business (including alternative asset management) and receiving management fees, incentive fees, fees paid by Portfolio Companies, carry or other remuneration which are not Subsidiaries of the Persons described in clause (i), excluding any Funds and any Portfolio Companies. "Base Cause Amount" has the meaning set forth in Section 3.2(a). "Base Disability Amount" has the meaning set forth in Section 3.2(a). "Board" means the board of directors of Apollo. "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day. "Cause" means (i) a final, non-appealable conviction of or plea of nolo contendere to a felony prohibiting such Principal from continuing to provide services as an investment professional to Apollo due to legal restriction or physical confinement; or (ii) ceasing to be eligible to continue performing services as an investment professional on behalf of Apollo or any of its material Subsidiaries, in each case, pursuant to a final, non-appealable legal restriction (such as a final, non-appealable injunction, but expressly excluding a preliminary injunction or other provisional restriction). "Charitable Institution" means an organization described in Section 501(c)(3) of the Code (or any corresponding provision of a future United State Internal Revenue law) which is exempt from income taxation under Section 501(a) thereof. "Class A Shares" means the Class A Shares of Apollo representing Class A limited liability company interests of Apollo and any equity securities issued or issuable in exchange for or with respect to such Class A Shares (i) by way of a dividend, split or combination of shares or (ii) in connection with a reclassification, recapitalization, merger, consolidation or other reorganization. NY1:1686459.16 2 EFTA00623302  "Class B Share" means the Class B Share of Apollo representing Class B limited liability company interests of Apollo and any equity securities issued or issuable in exchange for or with respect to such Class B Share (i) by way of a dividend, split or combination of shares or (ii) in connection with a reclassification, recapitalization, merger, consolidation or other reorganization. "Code" means the Internal Revenue Code of 1986, as amended. "Confidential Information" means information that is not generally known to the public and that is or was used, developed or obtained by Holdings or any member of the Apollo Operating Group, their respective Subsidiaries or any Fund or Portfolio Company, including but not limited to, (i) information, observations, procedures and data obtained by the Principal while employed by the Apollo Employer or while a member of Holdings, or in connection with being a partner of any business or predecessor of the Apollo Operating Group or its Subsidiaries, concerning the business or affairs of Holdings, Apollo and its Subsidiaries, any Fund or any Portfolio Companies, (ii) products or services, (iii) costs and pricing structures, (iv) analyses, (v) performance data (vi) computer software, including operating systems, applications and program listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) investors, customers, vendors, suppliers and investor, customer, vendor and supplier lists, (xii) other copyrightable works, (xiii) all production methods, processes, technology and trade secrets, (xiv) this Agreement and the governing agreements of Apollo or any of its Subsidiaries, (xv) investment memoranda and investment documentation concerning any potential, actual or aborted Investments, and (xvi) all similar and related information in whatever form. Confidential Information will not include any information that is generally available to the public prior to the date the Principal proposes to disclose or use such information. For the avoidance of doubt, Confidential Information does not include information concerning non-proprietary business or investment practices, methods or relationships customarily employed or entered into by comparable business enterprises. "Continuing Principal" shall have the meaning set forth in Section 4.1(al. "Deficit Restoration Amount" shall have the meaning set forth in Section 2.3(b). "Disability" shall refer to any physical or mental incapacity which prevents a Principal from carrying out all or substantially all of his duties under his employment agreement with the Apollo Employer in such capacity for any period of one hundred eighty (180) consecutive days or any aggregate period of eight (8) months in any 12-month period, as determined, in its sole discretion, by a majority of the members of the Board, including a majority of the Continuing Principals who are members of the Board (but for the sake of clarity not including the Principal in respect of which the determination is being made). "Dispute" has the meaning set forth in Section 6.9(a). "Distribution Account" means any of the LB Distribution Account. the MR Distribution Account and the HI Distribution Account. NV1:1686459.16 3 EFTA00623303  "Employment Fraction" means (i) with respect to a Principal who resigns, retires or is terminated for Cause, a fraction (not to exceed one), the numerator of which is the number of whole months elapsed from January I, 2007 until the date of such Principal's termination and the denominator of which is 60, if such Principal is MR or JH and 72, if such Principal is LB, and (ii) with respect to a Principal who is terminated due to death or Disability, a fraction (not to exceed one), the numerator of which is the number of whole months elapsed from January 1, 2007 until the date of such Principal's termination and the denominator of which is 60. "Equivalent Heritage Points" means, with respect to each Principal Group, the number of Heritage Points a Principal Group would own if the Heritage Points were allocated in accordance with the Sharing Percentages. Equivalent Heritage Points shall be adjusted pursuant to Section "Equivalent Heritage Points Deficit" means, with respect to a Principal Group, as of immediately prior to any Exchange, the excess (if any) of the number of Equivalent Heritage Points of such Principal Group over the Pecuniary Interest in the Heritage Points of such Principal Group. "Exchange" means (i) the exchange by Holdings of an AOG Unit for a Class A Share pursuant to the Exchange Agreement, and the subsequent sale of such Class A Share, at prevailing market prices for a Class A Share (unless the Person requesting such Exchange is willing to accept a lower price, e.g., to effect a block trade), (ii) a redemption of AOG Units initiated by Apollo or any of its Subsidiaries, solely upon Apollo's election, in which any Principal elects to participate, (iii) a sale by Intermediate Holdings of AOG Units in an LB Extraordinary Transaction or any other transaction approved by the Persons who will be selling Pecuniary Interests in AOG Units or (iv) at the option of the Executive Committee, in the event of a Pro Rata Exchange or a Non-Pm Rata Exchange, an In-Kind Exchange Distribution. "Exchange Act" means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder. "Exchange Agreement" means the Exchange Agreement, dated as of the date hereof, among Apollo, each member of the Apollo Operating Group, Intermediate Holdings and the other parties thereto. "Exchange Percentage" means a fraction, the numerator of which is the number of AOG Units transferred by a Principal Group pursuant to an Exchange and the denominator of which is the number of AOG Units in which such Principal Group had a Pecuniary Interest immediately prior to such transfer. "Excluded Assets" means any direct or indirect (i) personal investment or co-investment in any Fund or co-investment vehicle by any Principal or other member of his Principal Group (including future personal investments or co-investments and investments funded through any Apollo fee waiver program, provided, that in connection with the Apollo fee waiver program, a Principal may only waive compensation or distributions that would otherwise be paid to such Principal (directly or indirectly) from the members of the Apollo Operating Group consistent NYI:1686459.16 4 EFTA00623304 with the terms of the Reorganization Documents (as such term is defined in the Strategic Agreement)), (ii) any amounts owed to any Subsidiary of Apollo by a Fund pursuant to a fee deferral arrangement in an investment management agreement with respect to any periods ending on or prior to the date hereof (which amount includes deferred fees and earnings thereon earned anytime after such fees are deferred), which for this purpose shall include with respect to fees deferred for 2007, the portion of such fees that bears the same relationship to the total deferred fees as the number of days from January 1, 2007 through the date of this agreement bears to 365 days, (iii) interest in any of the entities set forth on Schedule II hereto (including any indirect interest in the profits, losses and returns of capital associated with a Fund's general partner making capital commitments to such Fund, as described on Schedule II) (iv) amounts owed to any Principal or other member of his Principal Group pursuant to any escrow of carried interest earned that has been escrowed to secure the clawback obligation of the general partner of any Fund pursuant to its organizational documents, (v) compensation and benefits paid or given to a Principal consistent with the terms of such Principal's Employment Agreement, (vi) director options issued prior to January 1, 2007 by any Portfolio Company, (vii) an entity formed (without any material economics) to control the investment in Harrah's Entertainment, Inc. and (viii) interest in the Gulfstream IV aircraft and any associated purchase debt. "Executive Committee" has the meaning set forth in Section 5.1(al. "Extraordinary Transaction" means (i) a sale or other disposition of the Apollo Operating Group and/or its Subsidiaries or any portion thereof, through a merger, recapitalization, stock sale, asset sale or otherwise, to an unaffiliated third party, or (ii) a borrowing to finance a direct or indirect distribution to Holdings provided, however, that (x) Non-Pro Rata Exchanges and Pro Rata Exchanges in which each seller has the option not to sell, (y) transfers by a Principal or a member of his Group to another member of such Principal's Group and (z) the issuance of bona fide equity incentives to any employee (other than the Principals) of Apollo, the Apollo Operating Group or their respective Subsidiaries shall not constitute an Extraordinary Transaction. "First Closing" means with respect to any Fund, the bona fide first closing with respect to any Fund that includes at least twenty percent (20%) of capital contributed or committed by unaffiliated third party Persons or any Fund. "Forfeited Interests" shall have the meaning set forth in Section 4.1(al. "Forfeiting Principal" shall have the meaning set forth in Section 4.1(a). "Forfeiture Date" means, as to the Forfeited Interests to be forfeited within Holdings for the benefit of the Continuing Principals, the date which is the earlier of (i) the date that is six (6) months after the applicable date of termination of employment and (ii) the date on or after such termination date that is six (6) months after the date of the latest publicly-reported disposition (or deemed disposition subject to Section 16 of the Exchange Act) of equity securities of Apollo by any of the Continuing Principals. "FRCP" has the meaning set forth in Section 6.9. NYI:1686459.16 5 EFTA00623305  "Fund" means any pooled investment vehicle or similar entity sponsored or managed by Apollo or any of its Subsidiaries. "Fund IV" means, collectively, Apollo Investment Fund IV, L.P., a Delaware limited partnership, and Apollo Overseas Partners IV, L.P., a Cayman Islands exempted limited partnership. "Fund IV GP" means Apollo Advisors IV, L.P., a Delaware limited partnership. "Fund V" means, collectively, Apollo Investment Fund V, L.P., a Delaware limited partnership, Apollo Overseas Partners V, L.P., a Cayman Islands exempted limited partnership, Apollo Netherlands Partners V(A), L.P., a Cayman Islands exempted limited partnership, Apollo Netherlands Partners V(B), L.P., a Cayman Islands exempted limited partnership, Apollo German Partners V GmbH & Co. KG, a German limited partnership, AIF V Euro Holdings, L.P., a Cayman Islands exempted limited partnership, and Apollo Investment Fund V (PLASE), L.P., a Delaware limited partnership. "Fund V GP" means, collectively, Apollo Advisors V, L.P., a Delaware limited partnership and Apollo Advisors V, (EH Cayman), L.P., a Cayman Islands exempted limited partnership. "Fund VI GP" means, collectively, Apollo Advisors VI, L.P., a Delaware limited partnership and Apollo Advisors VI, (EH), L.P., a Cayman Islands exempted limited partnership. "Group" shall mean with respect to each Principal, such Principal and (i) such Principal's spouse, (ii) a lineal descendant of such Principal's parents, the spouse of any such descendant or a lineal descendent of any such spouse, (iii) a Charitable Institution solely controlled by such Principal and other members of his Group, (iv) a trustee of a trust (whether inter vivos or testamentary), all of the current beneficiaries and presumptive remaindermen of which are one or more of such Principal and Persons described in clauses (i) through (iii) of this definition, (v) a corporation, limited liability company or partnership, of which all of the outstanding shares of capital stock or interests therein are owned by one or more of such Principal and Persons described in clauses (i) through (iv) of this definition, (vi) an individual mandated under a qualified domestic relations order, or (vii) a legal or personal representative of such Principal in the event of his death or Disability. For purposes of this definition, (x) "lineal descendants" shall not include individuals adopted after attaining the age of eighteen (18) years and such adopted Person's descendants; and (y) "presumptive remaindermen" shall refer to those Persons entitled to a share of a trust's assets if it were then to terminate. No Principal shall ever be a member of the Group of another Principal. lieritage Fund" means Fund IV and/or Fund V, as applicable. "Heritage Points" means the nominal number of "points" with respect to each Heritage Fund contributed by each Principal Group to the Apollo Operating Group, as set forth on Schedule I hereto. The general partner of each Heritage Fund has issued 2,000 "points" in the aggregate, with each "point" representing 0.05% of the carried interest paid by such Heritage Fund to its general partner. NYI:1686459.16 6 EFTA00623306  "Heritage Points Percentage" means, with respect to any Principal Group and Heritage Fund, such Principal Group's Pecuniary Interest in the Heritage Points of such Heritage Fund divided by the Pecuniary Interest of all the Principal Groups in the Heritage Points of such Heritage Fund as set forth on Schedule I hereto, as adjusted pursuant to Sections 2.3 4.1(d1 and 4.2. For the avoidance of doubt, Persons other than the Principal Groups own interests, directly or indirectly, in Fund IV and Fund V, and therefore, a Principal Group's Heritage Points Percentage will be greater than its ownership percentage in Fund IV and Fund V, respectively. "Holdings" has the meaning set forth in the recitals. "Holdings GP" has the meaning set forth in the recitals. "In-Kind Exchange Distribution" means a Pro Rata Exchange or a Non-Pro Rata Exchange accomplished by the distribution of AOG Units to all the Principals in the case of a Pro Rata Exchange or, in the case of a Non-Pm Rata Exchange, to those Principals directing such Non-Pro Rata Exchange. "Independent Board" has the meaning set forth in Section 5.3(a). "Intermediate Holdings" has the meaning set forth in the recitals. "Investment" shall mean any investment (or similar term describing the results of the deployment of capital) as defined in the governing document of any Fund managed (directly or indirectly) by a member of the Apollo Operating Group. "JH" has the meaning set forth in the recitals to this Agreement. "JH Distribution Account" has the meaning set forth in Section 2.7(aI. "JH Grout)" means JH and his Group. "La" has the meaning set forth in the recitals to this Agreement. "LB Distribution Account" has the meaning set forth in Section 2.7(al. "LB Extraordinary Transaction" has the meaning set forth in Section 5.4(b). "LB Group" means LB and his Group. "Lender Rights Agreement" means the Lender Rights Agreement, dated as of the date hereof, by and among Apollo, APOC Holdings Ltd., a Cayman Islands exempted company, the California Public Employees' Retirement System and the other parties thereto, as such agreement may be amended, supplemented, restated or otherwise modified from time to time. "mg" has the meaning set forth in the recitals to this Agreement. "MR Distribution Account" has the meaning set forth in Section 2.7(a). "MR Group" means MR and his Group. NYI:1686459.16 7 EFTA00623307  "Non-Pro Rata Exchange" means an Exchange the proceeds of which (including in the case of an In-Kind Distribution, the AOG Units) will be distributed to (or otherwise benefit) the Principal Groups within Holdings in any manner other than a Pro Rata Exchange. "Partial Vested Cause Amount" has the meaning set forth in Section 3.2(a). "Partial Vested Disability Amount" has the meaning set forth in Section 3.2(c). "Partnership Agreement" means the Amended and Restated Exempted Limited Partnership Agreement of Holdings, dated as of the date hereof, by and among the Holdings GP and each member of the Principal Groups. "Pecuniary Interest" means (i) with respect to AOG Units, the number of AOG Units that would be distributable to a Principal Group assuming that Holdings, Intermediate Holdings and any other Person that holds AOG Units in which Holdings has a direct or indirect interest were liquidated and distributed their respective assets in accordance with their respective governing agreements and (ii) with respect to Heritage Points, the number of Heritage Points that would be distributable to a Principal Group assuming that Holdings, Intermediate Holdings and any other Person that holds Heritage Points in which Holdings has a direct or indirect interest were liquidated and distributed their respective assets in accordance with their respective governing agreements (in each case, assuming the interests held by the Principal Groups were fully vested). "Permitted Transferee" means with respect to any Person who proposes to transfer an interest in Holdings, (i) another Person in the same Group as the transferee, (ii) any other Principal with respect to transactions contemplated by Sections 2.3 and 4.I of this Agreement or (iii) any Continuing Principal or any member of such Continuing Principal's Group. "Person" shall be construed broadly and includes any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity. "Portfolio Company" means any Person in which any Fund owns an Investment. "Principal Group" means with respect to any Principal, such Principal and his Group. "Principal" and "Principals" have the meaning set forth in the recitals to this Agreement. "Principals Contribution Agreement" means the Contribution, Purchase and Sale Agreement, dated the date hereof, by and among the Partnership, Black Family Partners, L.P., a Delaware limited partnership, MJR Foundation LLC, a New York limited liability company, Joshua J. Harris, Holdings, Intermediate Holdings, APO Corp., APO LLC and each member of the Apollo Operating Group. "Pro Rata Exchange" means an Exchange in which all three Principal Groups participate and transfer a number of AOG Units in proportion to their respective Sharing Percentages. "Proceeding" shall have the meaning set forth in Section 6.8. NYI:1686459.16 8 EFTA00623308  "Roll-up Agreement" means any Roll-up Agreement by and among Holdings, Intermediate Holdings, Apollo, APO LLC and APO Corp., on the one hand, and a senior manager of Apollo, on the other hand, in each case, dated as of the date hereof. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Selected Courts" shall have the meaning set forth in Section 6.8. "Senior Professional" means any executive officer of Apollo or any of the investment professionals who provide services (either as partners or employees) to Apollo or any of its Subsidiaries whose "total income" for the most recent preceding fiscal year is among the 25 highest (excluding the Principals from the 25 employees); provided, that any such individual must provide services to Apollo or any of its Subsidiaries on a substantially full-time basis; and provided, further that the Principals shall not be considered Senior Professionals. As used herein, "total income" is an amount equal to the sum of (without duplication) (i) total compensation determined pursuant to Item 402 of Regulation S-K and (ii) total income listed on the applicable K-1 from Holdings, Intermediate Holdings or any Subsidiary of Apollo (excluding Funds and co-investment vehicles that invest in Funds). "Shareholders Agreement" shall mean the shareholders agreement by and among Apollo, Holdings, Intermediate Holdings and the other parties thereto dated the date hereof. "Shares" means, collectively, the outstanding Class A Shares and Class B Share (as equitably adjusted to reflect any split, combination, reorganization, recapitalization, reclassification or other similar event involving the Class A Shares and/or Class B Share). "Sharing Percentage" means, with respect to any Principal Group, the amount, expressed as a percentage, obtained by dividing (i) the Pecuniary Interest of such Principal Group in AOG Units by (ii) the Pecuniary Interest of all the Principal Groups in AOG Units, as set forth on Schedule Ill hereto, as adjusted pursuant to Sections 2.2 and ita. For the avoidance of doubt, Persons other than the Principal Groups own interests, directly or indirectly, in the Apollo Operating Group and related management companies, and therefore, a Principal Group's Sharing Percentage will be greater than its ownership percentage in any particular entity within the Apollo Operating Group. "Strategic Agreement" means the Strategic Agreement, dated as of the date hereof, by and among Apollo, APOC Holdings Ltd., a Cayman Islands exempted company, the California Public Employees' Retirement System and the other parties thereto. "Subsidiary" or "Subsidiaries" means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or the sole general partner interest or managing member or similar interest of such Person. `fix" means all federal, foreign, state, county, local or other taxes, charges, fees or assessments based on or measured with respect to income, including, without limitation, withholding, social security, payroll, employments, franchise and unemployment, imposed by a NV1:1686459.16 9 EFTA00623309 taxing authority, and shall include all interest, penalties and additions imposed with respect to such amounts. "Tax Receivable Agreement" means the Tax Receivable Agreement, dated as of the date hereof, by and among APO Corp., a Delaware corporation, Apollo Principal Holdings II, L.P., a Delaware limited partnership, Apollo Principal Holdings IV, L.P., a Cayman Islands exempted limited partnership, Apollo Management Holdings, L.P., a Delaware limited partnership (together with all other Persons in which APO Corp. acquires a partnership interest, member interest or similar interest after the date thereof and who becomes party thereto by execution of a joinder), and the other parties thereto. "Term Sheet" means the Restructuring Term Sheet executed on March 19, 2007 among LB, MR and JH. "Transferred Equivalent Heritage Points" has the meaning set forth in Section 2.3(b). "Transferred Interests" has the meaning set forth in Section 2.2(b). SECTION 1.2 GENDER. For the purposes of this Agreement, the words "he," "his" or "himself' shall be interpreted to include the masculine, feminine and corporate, other entity or trust form. ARTICLE II OWNERSHIP SECTION 2.1 OWNERSHIP. (a) The Principal Groups own Holdings in accordance with their respective Sharing Percentages; provided however, that each Principal Group's interest in income and gains derived by Holdings from its indirect interest in the Heritage Funds shall be in accordance with such Principal Group's Pecuniary Interest in Heritage Points. (b) Other than Excluded Assets, each Principal (i) has contributed all of his interests in Intermediate Holdings, Apollo, the Apollo Operating Group and their respective Subsidiaries to Holdings and (ii) will not directly own any interests in Intermediate Holdings, the Apollo Operating Group and their respective Subsidiaries in the future; provided, however, that any future salary, compensation, equity incentives and other fringe benefits made available to any of the Principals or any member of their respective Groups by Apollo, the Apollo Operating Group or their respective Subsidiaries shall be Excluded Assets and shall not be contributed to Holdings. (c) The Executive Committee shall negotiate in good faith with potential Fund investors to provide that any future mandatory capital commitments to be made by the general partner of any Fund shall be funded by Apollo (and not directly by the Principals). Notwithstanding the foregoing, the Executive Committee shall have the authority to determine whether it is commercially advantageous to have the Principals fund such capital commitments and, in the event that the Executive Committee so determines, the Principals agree to fund such NYI:168059.16 10 EFTA00623310 capital commitments; provided however that (i) without the unanimous consent of the Executive Committee, no general partner of any Fund or any co-investment vehicle established to invest in any Fund shall commit to make a capital commitment in excess of 2.5%, in the aggregate, of the total capital commitments received by such Fund, and the portion of such capital commitment to be made by the Principals shall be reduced by the amount of such capital commitments to be made (as determined by the majority approval of the Executive Committee) by (A) Apollo and its Subsidiaries (excluding any Funds that may be Subsidiaries) and (B) the other investment professionals employed by Apollo and its Subsidiaries; (ii) without the unanimous consent of the Executive Committee, no Principal shall be required to make a capital commitment in excess of $75 million in any individual Fund; (iii) except as provided in clauses (iv) and (v) below, if the Principals are obligated to make future capital commitments to any Fund or any co-investment vehicle established to invest in any Fund, such capital commitments will be made by the Continuing Principals (or other members of their respective Groups) outside of Holdings ratably in accordance with the Sharing Percentages of their respective Groups as of the date of the First Closing of such Fund (for the avoidance of doubt, each such capital commitment by a Principal or his Group shall be an Excluded Asset); (iv) no Principal shall be required to make any future capital commitment to any Fund that has a First Closing after the date of such Principal's termination or to any co-investment vehicle established to invest in any Fund that has a First Closing after the date of such Principal's termination; and (v) any mandatory capital commitments by Holdings to a Heritage Fund will be made by the Principals in accordance with the Heritage Points Percentages in such Heritage Fund without giving effect to any adjustments thereto (for the avoidance of doubt, each such capital commitment by a Principal or his Group shall be an Excluded Asset). (d) Each Principal shall determine individually whether such Principal and his Group shall indirectly participate in the management fee waiver program with respect to such Principal Group's indirect right to receive distributions from Apollo Management Holdings, L.P. with respect to management fees that would have otherwise been payable on July 2, 2007. After July 2, 2007, the Principals and Holdings shall not indirectly participate in any management fee waiver program in effect from time to time unless the Executive Committee determines otherwise (it being understood that so long as participation by the Principals does not have an adverse impact on the financial results of Apollo and its Subsidiaries, the Executive Committee shall work diligently toward developing a plan that would allow such participation in compliance with clauses (i) through (iii) below); provided that (i) to the extent that the Principals or Holdings participate in any such management fee waiver program, the Principals shall be entitled to indirectly participate in accordance with their respective Sharing Percentages, (ii) if there is any limitation on the amount of investment pursuant to any such management fee waiver program, the amount available to the Principals shall be allocated among the Principals in accordance with their respective Sharing Percentages, and (iii) to the extent that participation by the Principals or Holdings in any such management fee waiver program has an adverse economic impact on any non-participating Principal or the unitholders of Apollo generally, the Executive Committee must approve such participation by unanimous consent. The Executive Committee shall initially determine whether any "adverse economic impact" referred to in clause (iii) above will occur, but any Principal may dispute such determination. (e) The Executive Committee will determine whether and to what extent any entity or investment professional (including the Principals) may invest in the Funds on terms NYI:1686459.16 II EFTA00623311 more favorable than those offered to third party investors. If the Executive Committee permits any Principal to invest on terms more favorable than those offered to third party investors, it will permit all Continuing Principals to do so, and if any limit is imposed upon the amounts that may be invested on more favorable terms then such amount shall be allocated among the Continuing Principals in accordance with their respective Sharing Percentages. (0 Holdings may hold interests in AOG Units, Shares, Heritage Points or other securities indirectly through Intermediate Holdings or other Persons. In such instance, this Agreement will be construed as if Holdings held such securities directly and Holdings shall cause such other Persons to take any actions necessary to carry out the transactions contemplated herein. SECTION 2.2 SHARING PERCENTAGE ADJUSTMENTS. (a) Upon the occurrence of an Exchange directed by any Principal Group pursuant to Section 2.4 hereof, such Principal Group's Pecuniary Interest in AOG Units shall be decreased by the number of AOG Units transferred. (b) Holdings shall track all transfers of AOG Units, other than (i) transfers pursuant to Sections 4.1(d) and 4.2, (ii) transfers made pursuant to an LB Extraordinary Transaction and (iii) transfers between members of the same Principal Group, in a tracking account (with sales represented as additions to the tracking account and acquisitions (other than as a result of the operation of the forfeiture provisions contained in Sections 4.1 and 42) represented as subtractions from the tracking account) and the total positive or negative sum of such transfers for each Principal Group at any given time shall be hereinafter referred to as such Principal's "Transferred Interests". (c) Upon the termination of a Principal, such Principal's Sharing Percentage shall be adjusted in accordance with Article IV. SECTION 2.3 HERITAGE POINTS PERCENTAGE ADJUSTMENTS. (a) Each Principal Group's Heritage Points shall be adjusted and reallocated in accordance with the provisions of this Section 2.3 and Sections 4.1(d1 and 42. Schedule I sets forth the Heritage Points Percentage of each Principal Group, and Schedule I shall be updated by the Principals from time to time to give effect to the provisions of this Section 2.3. (b) In the event of an Exchange by a Principal Group (whether a Pro Rata Exchange or a Non-Pro Rata Exchange), the number of Heritage Points attributable to the AOG Units transferred by such Principal Group in the Exchange shall be equal to the product of such Principal Group's Equivalent Heritage Points and the Exchange Percentage (the "Transferred Equivalent Heritage Points"); provided, that immediately prior to such Exchange, the Pecuniary Interests of all of the Principal Groups in the Heritage Points shall be adjusted and reallocated among the Principal Groups by debiting the LB Group's Pecuniary Interest in the Heritage Points and crediting the MR Group's or the JH Group's (as applicable) Pecuniary Interest in the Heritage Points by an amount equal to fifty (50) percent of the product of (1) the Equivalent Heritage Points Deficit of the MR Group and/or JH Group (as applicable) and (2) the Exchange Percentage of the MR Group and/or JH Group (as applicable) (the "Deficit Restoration NY1:1686459.16 12 EFTA00623312 Amount"); provided further, that if and to the extent the Transferred Equivalent I I eritage Points for the MR Group and/or the JH Group exceeds such Principal Group's Pecuniary Interest in the Heritage Points (after giving effect to the Deficit Restoration Amount), the LB Group's Pecuniary Interest in Heritage Points will be further debited by the amount of such excess and the amount so debited shall be reallocated to the JH Group and/or MR Group as applicable. (c) If new AOG Units or equity interests in the Apollo Operating Group are issued to any Person (e.g., issuances to Apollo to reflect the proceeds of a sale of newly issued Class A Shares or issuances to employees of Apollo or its Subsidiaries pursuant to an equity incentive plan), the economic interest of Holdings in the Heritage Funds will be diluted. In each such instance, the Heritage Points of each Principal Group will be adjusted as if Holdings sold that number of AOG Units in a Pro Rata Exchange which would result in the same reduction in Holdings' direct or indirect interest in the carried interest of the Heritage Funds. (d) The LB Group shall retain a sufficient number of Heritage Points in each Heritage Fund to honor its obligations in this Section 2.3. (e) For the avoidance of doubt, the Heritage Points Percentages may be further adjusted as set forth in Sections 4.1(d) and 4.2. SECTION 2.4 TRANSFERS; REGISTRATION RIGHTS. (a) Subject to the limitations set forth in this Section 2.4 and the Exchange Agreement, each Principal (and upon the death or Disability of such Principal, his duly appointed personal representative) individually shall have the right to cause Holdings to effect, at any time and from time to time, on one or more occasions, an Exchange with respect to all or a portion of such Principal Group's Pecuniary Interest in AOG Units. The proceeds from any such Exchange (including any payments received by Holdings pursuant to the Tax Receivable Agreement), net of all selling expenses (other than selling expenses borne by Apollo pursuant to the Shareholders Agreement), shall be distributed by Holdings to the members of such selling Principal's Group in proportion to their Pecuniary Interest in AOG Units subject to such Exchange. Upon the direction by a Principal (and upon the death or Disability of such Principal, his duly appointed personal representative) to effect an Exchange in compliance with this Agreement, Holdings shall be required to cause Intermediate Holdings to undertake an exchange, on a one-for-one basis, of an AOG Unit for a Class A Share and shall use commercially reasonable efforts to promptly consummate such Exchange (it being understood that no such transfer shall be effective unless such Principal and his Group have vested into the Pecuniary Interest in the AOG Units proposed to be transferred); provided however that each Principal acknowledges that one or more events, such as an underwriter cutback, the unavailability of a registration, the possession of material non-public information, or general market dislocation may affect the timing of a proposed sale or disposition of Class A Shares following an exchange, and accordingly, any Person that receives Class A Shares shall sell or dispose of such shares as promptly as practicable upon receipt thereof, taking into account the circumstances surrounding such proposed sale or disposition. Anything herein to the contrary notwithstanding, at the option of the Executive Committee, Holdings will cause Intermediate Holdings to make an In-Kind Exchange Distribution to Holdings, and Holdings will make an In-Kind Exchange Distribution. No In-Kind Exchange Distribution may be made unless (i) the recipient is already a party to the NYI:1686459.16 13 EFTA00623313 Exchange Agreement as an "Apollo Principal Holder" and a party to the Shareholders Agreement as a "Shareholder" (or becomes so on or substantially simultaneous with such In- Kind Exchange Distribution) and (ii) Holdings shall make such election and cause Intermediate Holdings to make such In-Kind Exchange Distribution in a manner that would permit the applicable notice provisions under the Exchange Agreement to be met in order for the Exchange to occur on the same Quarterly Exchange Date with respect to which the Principal directed such Exchange. In addition, upon an In-Kind Exchange Distribution, the recipient shall exchange the AOG Units received for Class A Shares, as soon as possible, pursuant to the Exchange Agreement by the next Quarterly Exchange Date thereafter (as defined in the Exchange Agreement). The Principal Group that directed any such Exchange shall indemnify and hold harmless Holdings and its other partners from any liabilities or expenses (other than selling expenses borne by Apollo pursuant to the Shareholders Agreement) incurred in connection with such Exchange other than with respect to any taxable income realized by such other Principal Group as a result of such Exchange. (b) Notwithstanding the foregoing, and subject to Sections 4.1(d) and Ho