Exhibit 10.44 . Refer to IRS Rev. Document grant date value Profits interest - a partnership interest other than a capital interest. Profits interests may have different values for financial reporting or tax purposes. For example, say the Hurdle Amount was $1 million when a profits interest was granted that entitled an employee to a 10% share. Example Meg is an employee of DEF Partnership. Additionally, let’s say the LLC was valued at $1 million on the date you received the profits interest. A profits interest is defined by exception: Any partnership interest that is not a capital interest is a profits interest. 3. THIS PROFITS INTEREST UNITS AGREEMENT (this “Agreement”) is made and entered into as of , 2004 (the “Effective Date”), by and between Digital Realty Trust, L.P., a Maryland limited … A profits interest, as opposed to a “capital interest,” does not entitle a holder any current rights to partnership property. Your profits interest grant is a form of partnership interests that gives you the right to participate in the future profits and appreciation in value of the Partnership. If Company ABC makes $20,000,000 next year after all expenses are deducted (that is, in net profit), then John is entitled to 20% of those profits, or $4,000,000. For example: If you are granted a profits interest in an LLC equal to 5% of the LLC’s outstanding equity, you have a right to 5% of the LLC’s profits after the date on which you received the profits interest. The IRS has provided a safe harbor for the granting of a profits interest. Example 4 says a profits interest for a single specified year may be acceptable, but Example 3 indicates that an arrangement based on net profit in anyfuture tax year is not acceptable. 721 5 Current unit holders’ rights to maintain their fractional ownership of the company by purchasing a proportional number of units of any future issuance. FORM OF. Profits interests are distinguishable from capital interests, which give the holder the right to a share of the existing value of the partnership. For example, a profits interest designed to comply with the IRS … What’s a Profits Interest? As a result, consideration of the features and benefits of profits interests versus other forms of equity compensation and incentives used in C corporations may factor into the decisions on corporate structure. A profits interest only entitles the holder to future profits and appreciation of the partnership’s assets. Company ABC agrees to the deal and grants John a 20% net profits interest. Then, the LLC is liquidated in a sale worth $1.5 million. Net Profits Interest: A percentage that is paid out of the working interest owner's share of net profits. It's important to note that net profits interest is not the same as a royalty interest. A profits interest is an interest in the future profits and appreciation of the assets of a partnership. In other words, a profits interest holds no liquidation value upon date of grant. Profits interests are a form of equity compensation that are unique to LLCs (and partnerships). Without a catch-up provision, the employee would be entitled to 10 percent of the $500,000 increase that occurred after the profits interest was issued, or $50,000. PROFITS INTEREST UNITS AGREEMENT . Proc. 93-27, 1993-2 CB 343, 06/09/1993, IRC Sec(s).