Item 1.01 Entry into a Material Definitive Agreement.
On December 10, 2019, in connection with the closing of the business combination between Vertiv Holdings, LLC and GS Acquisition Holdings Corp, now known as Vertiv Holdings Co (the “Company”), the Company entered into a Tax Receivable Agreement (the “Prior Agreement”) with VPE Holdings, LLC (the “Stockholder”). Under the Prior Agreement, the Company generally agreed to pay the Stockholder 65% of the cash tax savings in U.S. federal, state, local and certain foreign taxes that the Company actually realized (or was deemed to realize) in periods after the closing of the business combination as a result of (i) increases in the tax basis of certain intangible assets of the Company resulting from certain pre-closing acquisitions, (ii) certain U.S. federal income tax credits for increasing research activities and (iii) tax deductions in respect of certain business combination expenses.
On December 31, 2021 (the “Effective Date”), the Company and the Stockholder entered into that certain TRA Repurchase Agreement, pursuant to which the parties agreed to amend and supplement the Prior Agreement to replace the Company’s remaining payment obligations under the Prior Agreement with an obligation to pay $100 million in cash in two equal installments. Following the Effective Date, no payments under the Prior Agreement will be made or owed by the Company to the Stockholder, except for the installment payments (and any accrued interest thereon). The first installment payment will be due on or before June 15, 2022, and the second installment payment will be due on or before September 15, 2022.
On June 15, 2022, the Company and the Stockholder entered into that certain Amendment No. 1 to TRA Repurchase Agreement (the “Amendment”), pursuant to which the parties agreed to amend the installment payment schedule to three installment payments, whereby the first installment payment of $12.5 million will be due on or before June 15, 2022, the second installment payment of $12.5 million will be due on or before September 15, 2022 and the third installment payment of $75 million will be due on or before November 30, 2022 (each, an “Installment Payment”). The parties further agreed pursuant to the Amendment that if an Installment Payment is not timely made, the Company shall immediately pay to the Stockholder, as an addition to the due and owing Installment Payment, an amount equal to ten percent (10%) of the amount of the Installment Payment not timely paid.
As of April 13, 2022, the Stockholder beneficially owned 37,955,215 shares of the Company’s Class A common stock, representing approximately 10% of the Company’s outstanding Class A common stock. In accordance with the Company’s Related Person Transactions Policy, the Amendment and the transactions contemplated thereby were reviewed and approved by the Audit Committee of the Board of Directors of the Company.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.