Go Daddy 2015 Annual Report Download - page 50

Table of Contents
Funds used by Desert Newco to satisfy its tax distribution obligations will not be available for reinvestment in our business. Moreover, the tax distributions
Desert Newco will be required to make may be substantial, and may exceed (as a percentage of Desert Newco’s income) the overall effective tax rate applicable to
a similarly situated corporate taxpayer. In addition, because these payments will be calculated with reference to an assumed tax rate, and because of the
disproportionate allocation of net taxable income, these payments will likely significantly exceed the actual tax liability for many of the owners of Desert Newco.
As a result of potential differences in the amount of net taxable income allocable to us and to the other owners of Desert Newco, as well as the use of an
assumed tax rate in calculating Desert Newco’s distribution obligations, we may receive distributions significantly in excess of our tax liabilities and obligations to
make payments under the TRAs. To the extent, as currently expected, we do not distribute such cash balances as dividends on our Class A common stock and
instead, for example, hold such cash balances or lend them to Desert Newco, our existing shareholders would benefit from any value attributable to such
accumulated cash balances as a result of their ownership of Class A common stock.
We will not be reimbursed for any payments made to our pre-IPO owners under the TRAs in the event any tax benefits are disallowed.
If the IRS challenges the tax basis or NOLs giving rise to payments under the TRAs, and the tax basis or NOLs are subsequently disallowed, the recipients of
payments under those agreements will not reimburse us for any payments we previously made to them. Any such disallowance would be taken into account in
determining future payments under the TRAs and would, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from
the tax basis or NOLs are disallowed, our payments under the TRAs could exceed our actual tax savings, and we may not be able to recoup payments under the
TRAs that were calculated on the assumption that the disallowed tax savings were available.
GoDaddy Inc. will continue to be controlled by our pre-IPO owners, whose interests may differ from those of our public stockholders.
As of December 31, 2015 , funds affiliated with the Sponsors as well as Bob Parsons controlled approximately 80.5% of the combined voting power of our
Class A and Class B common stock. Pursuant to the New LLC Agreement, such affiliated owners will generally be required to limit transfers in order to avoid a
technical tax termination, which may have the effect of prolonging the concentration of our ownership. Additionally, GoDaddy Inc. and Desert Newco are parties
to a stockholder agreement with funds affiliated with the Sponsors as well as Bob Parsons and certain specified other holders of LLC Units from time to time,
including our executive officers. The stockholder agreement provides that our stockholders affiliated with KKR, Silver Lake and Bob Parsons are entitled to
nominate members of our board of directors. The parties to the stockholder agreement agree to vote for these nominees as well as other directors recommended by
our nominating and corporate governance committee. In addition, the stockholder agreement provides that, for so long as their affiliated funds hold specified
amounts of our stock, our board of directors will maintain an executive committee consisting of one director designated by each of KKR, Silver Lake and Bob
Parsons.
The stockholder agreement and the charter for the executive committee further provide that, for so long as their affiliated funds hold specified amounts of our
stock, in addition to the approval of our board of directors, the approvals of KKR and Silver Lake, in their capacity as stockholders, and a majority of the members
of the executive committee shall be required for corporate actions such as change in control transactions, acquisitions with a value in excess of $50 million and any
material change in the nature of the business conducted by us or our subsidiaries.
As a result, based on their ownership of our voting stock and the approval rights in the stockholder agreement, such affiliated owners have the ability to elect
all of the members of our board of directors, and thereby to control our management and affairs. In addition, they are able to determine the outcome of all matters
requiring stockholder approval, including mergers and other material transactions, and are able to cause or prevent a change in the composition of our board of
directors or a change in control of our company that could deprive our stockholders of an opportunity to receive a premium for their Class A common stock as part
of a sale of our company and might ultimately affect the market price of our Class A common stock.
In addition, as of December 31, 2015 , the Continuing LLC Owners owned approximately 57.4% of the outstanding LLC Units. Because they hold their
ownership interest in our business through Desert Newco, rather than through the public company, the Continuing LLC Owners may have conflicting interests with
our public stockholders. For example, the Continuing LLC Owners may have different tax positions from us which could influence their decisions regarding
whether and when to dispose of
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