Contract analysis

Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "Agreement" means this Tax Protection Agreement, including all Schedules and Exhibits attached hereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof. "Applicable Tax Rate" means, with respect to any Protected Partner, the highest com

Section 1.2 Rules of Construction. Unless the context otherwise requires: (a) References to any section of the Code shall include the corresponding Treasury Regulations promulgated thereunder and any successor provisions, as in effect at the relevant time. (b) References to any entity shall include such entity's successors, assigns, and any successor entity resulting from a merger, conversion, reorganization, or simi

ARTICLE II MINIMUM HOLDING PERIOD COVENANTS

Section 2.1 General 36-Month Holding Covenant. (a) The CV GP hereby covenants and agrees, for the benefit of the Protected Partners, that PCV shall not effect, cause to be effected, or permit to occur any Disposition of any Contributed Interest during the General Protection Period (i.e., the thirty-six (36) month period commencing on the Closing Date and ending on October 31, 2028, assuming the Closing Date is Octobe

Section 2.2 Vectral Cloud Special Holding Covenant for QSBS Preservation. (a) In addition to, and without limiting, the General Protection Period applicable to all Contributed Interests under Section 2.1, the CV GP hereby specifically covenants and agrees, for the benefit of the Protected Partners, that PCV shall not effect, cause to be effected, or permit to occur any Disposition of the shares of Vectral Cloud Inc.

Section 2.3 Exceptions to Holding Covenants (Permitted Dispositions). Notwithstanding the covenants set forth in Sections 2.1 and 2.2, a Disposition of Contributed Interests during an applicable Protection Period shall constitute a "Permitted Disposition" and shall not be subject to the indemnification provisions of Article III if, and only if, such Disposition satisfies one or more of the following conditions: (a) S

Section 2.4 Covenant Not to Take Certain Actions. (a) During any Protection Period, the CV GP covenants and agrees that PCV shall not, and the CV GP shall cause PCV not to, directly or indirectly: (i) cause, request, consent to, or otherwise facilitate any redemption by any Portfolio Company of shares held by PCV (or by any blocker Entity through which PCV holds Contributed Interests), whether for cash, property, or

ARTICLE III MAKE-WHOLE AND INDEMNIFICATION PROVISIONS

Section 3.1 Tax Indemnification for Prohibited Dispositions. (a) If a Prohibited Disposition occurs (i.e., a Disposition of one or more Contributed Interests during an applicable Protection Period that does not constitute a Permitted Disposition under Section 2.3), the Partnership shall indemnify, defend, and hold harmless each Protected Partner from and against such Protected Partner's Incremental Tax Liability aris

Section 3.2 Gross-Up. Any indemnification payment made to a Protected Partner under Section 3.1 shall be "grossed up" to account for the income tax consequences to such Protected Partner of receiving the indemnification payment itself, so that after payment of all taxes on the indemnification amount (including any taxes on the gross-up amount), the Protected Partner is made whole on a full after-tax basis. The gross-

Section 3.3 Timing of Indemnification Payments. (a) Any indemnification payment due to a Protected Partner under this Article III shall be paid by the Partnership within thirty (30) days after the later of: (i) the date on which the Protected Partner files (or is required to file) its federal income tax return for the taxable year in which the Prohibited Disposition occurs (including any applicable extension period);

Section 3.4 Cap on Indemnification. (a) The aggregate indemnification obligation of the Partnership under this Article III with respect to any Prohibited Disposition shall not exceed the lesser of: (i) the net proceeds received by the Partnership from such Prohibited Disposition (after deduction of transaction costs and expenses directly attributable thereto); and (ii) the aggregate Incremental Tax Liability of all P

Section 3.5 No Double Recovery. A Protected Partner shall not be entitled to indemnification under this Agreement with respect to any Incremental Tax Liability to the extent that such Protected Partner has received a distribution from the Partnership (whether a tax distribution, a liquidating distribution, or otherwise) that compensates such Protected Partner for the same tax liability that is the subject of the inde

ARTICLE IV SECTION 752 DEBT ALLOCATION AND DISGUISED SALE PROTECTION

Section 4.1 Mandatory Allocation of Partnership Liabilities. (a) To provide a minimum adjusted outside basis for the Protected Partners' partnership interests in PCV and to support the determination that the Contribution of Contributed Interests to PCV is not a Disguised Sale under Section 707(a)(2)(B) of the Code, the CV GP shall allocate partnership liabilities of PCV to the Protected Partners in accordance with th

Section 4.2 Limitations on Distributions Within Two-Year Window. (a) The CV GP covenants and agrees that PCV shall not make any distribution (other than a Tax Distribution as described below) to any Protected Partner within twenty-four (24) months of the Closing Date if such distribution, when aggregated with such Protected Partner's share of partnership liabilities and all prior distributions to such Protected Partn

Section 4.3 Qualified Liability Safe Harbor. (a) The CV GP shall take all actions necessary to ensure that any partnership liabilities incurred by PCV that are allocated to the Protected Partners qualify as "qualified liabilities" within the meaning of Treasury Regulation Section 1.707-5(a)(6). Qualified liabilities include liabilities that were incurred by the partnership in the ordinary course of its trade or busin

Section 4.4 Cooperation on Section 707 Analysis. (a) Each Protected Partner shall cooperate with the CV GP and the Tax Matters Advisor in providing such information as may be reasonably necessary to complete the Disguised Sale analysis under Section 707 of the Code, including information regarding such Protected Partner's investment history, the timing and amount of distributions received from Fund II, and such Prote

ARTICLE V QSBS REPRESENTATIONS AND COVENANTS

Section 5.1 Representations of the CV GP Regarding QSBS Status. The CV GP hereby represents and warrants to the Protected Partners, to the best of the CV GP's knowledge after due inquiry, as follows: (a) Luminos Systems Inc. The shares of Luminos Systems Inc. (EIN 47-8823156) held by Fund II and being contributed to PCV constitute QSBS within the meaning of Section 1202 of the Code. Such shares were acquired by Fund

Section 5.2 Ongoing QSBS Covenants. The CV GP shall use commercially reasonable efforts to preserve the QSBS status of the Contributed Interests throughout the term of PCV, including by undertaking the following: (a) Active Business Requirement. The CV GP shall monitor compliance by each Portfolio Company with the active business requirement under Section 1202(e)(1) of the Code, which requires that during substantial

Section 5.3 Limitation on QSBS Representations. (a) The representations set forth in Section 5.1 are based upon the CV GP's knowledge and upon information provided by the Portfolio Companies and their respective officers, directors, and advisors. The CV GP does not guarantee that the Internal Revenue Service will not challenge the QSBS status of any Contributed Interest, and the CV GP makes no representation or warra

Section 5.4 Tacking of Holding Period Under Section 1202(h). (a) The Parties acknowledge and agree that the contribution of the Portfolio Company shares from Fund II to PCV via the Section 721 Contribution is intended to preserve tacking of the QSBS holding period under Section 1202(h) of the Code. Specifically, the Parties intend that: (i) the holding period of the QSBS in the hands of PCV (and, through PCV, in the

ARTICLE VI SECTION 704(c) ALLOCATION PROTECTIONS

Section 6.1 Remedial Allocation Method. (a) The CV LPA provides, and the CV GP hereby confirms, that PCV shall adopt and apply the remedial allocation method under Treasury Regulation Section 1.704-3(d) (the "Remedial Method") with respect to the allocation of tax items attributable to the One Billion Two Hundred Two Million Dollars ($1,202,000,000) of aggregate built-in gain inherent in the Contributed Interests at

Section 6.2 Consistency Covenant. The CV GP covenants and agrees that PCV shall consistently apply the Remedial Method under Treasury Regulation Section 1.704-3(d) throughout the entire term of PCV, including any extension periods, and shall not change, modify, or abandon the Section 704(c) allocation method without the prior written consent of Protected Partners holding at least sixty-six and two-thirds percent (66⅔

Section 6.3 Interaction with blocker Entities. (a) To the extent that certain Contributed Interests are held through the blocker Entities, the Section 704(c) allocations shall flow through the blocker Entities in a manner consistent with the protections provided in this Article VI. Specifically: (i) PCV Domestic blocker Inc. (a Delaware C-corporation to be formed) will hold Contributed Interests on behalf of tax-exem

ARTICLE VII ADDITIONAL COVENANTS

Section 7.1 Tax Distributions. (a) The CV GP shall cause PCV to make quarterly tax distributions to all partners of PCV (including the Protected Partners) in amounts sufficient to cover each partner's estimated income tax liability attributable to such partner's allocable share of PCV income for the applicable quarter, calculated at the Applicable Tax Rate. (b) Tax distributions shall be calculated on a quarterly bas

Section 7.2 Withholding. (a) PCV shall withhold and remit taxes as required under Section 1446 of the Code (withholding on foreign partners' allocable shares of effectively connected taxable income), Section 1445 of the Code (withholding on dispositions of U.S. real property interests, if applicable), and any other applicable provisions of the Code or the Treasury Regulations. (b) PCV shall also withhold and remit ta

Section 7.3 Partnership Representative / Tax Matt