As filed with the Securities and Exchange Commission on July 25, 2016

File No. 001-37774  

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1
To

Form 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

AdvanSix Inc.
(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

 

81-2525089
(I.R.S. Employer
Identification Number)

     

 

 

115 Tabor Road
Morris Plains, NJ

(Address of Principal Executive Offices)

 

07950
(Zip Code)

Registrant’s telephone number, including area code:
(973) 455-2000

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

 

 

Title of Each Class to be so Registered

 

Name of Each Exchange on
Which Each Class is to be Registered

Common Stock, par value $0.01

 

New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act:
None.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

 

 

 

 

 

 

Large accelerated filer

 

o

 

Accelerated filer

 

o

Non-accelerated filer

 

x (Do not check if a smaller reporting company)

 

Smaller reporting company

 

o

 

 


 

AdvanSix Inc.
Information Required in Registration Statement
Cross-Reference Sheet Between the Information Statement and Items of Form 10

This Registration Statement on Form 10 incorporates by reference information contained in our Information Statement filed as Exhibit 99.1 to this Form 10.

 

 

 

 

 

Item
No.

 

Caption

 

Location in Information Statement

1.

 

Business

 

See “Summary,” “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements,” “The Spin-Off,” “Capitalization,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Where You Can Find More Information”

1A.

 

Risk Factors

 

See “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements”

2.

 

Financial Information

 

See “Risk Factors,” “Capitalization,” “Selected Historical Combined Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

3.

 

Properties

 

See “Business—Properties”

4.

 

Security Ownership of Certain Beneficial Owners and Management

 

See “Security Ownership of Certain Beneficial Owners and Management”

5.

 

Directors and Executive Officers

 

See “Management”

6.

 

Executive Compensation

 

See “Management” and “Compensation Discussion and Analysis”

7.

 

Certain Relationships and Related Transactions, and Director Independence

 

See “Risk Factors,” “Management” and “Certain Relationships and Related Party Transactions”

8.

 

Legal Proceedings

 

See “Business—Legal and Regulatory Proceedings”

9.

 

Market Price of and Dividends on the Registrant’s Common Equity and Related Shareholder Matters

 

See “The Spin-Off,” “Dividend Policy,” “Security Ownership of Certain Beneficial Owners and Management” and “Description of Our Capital Stock”

10.

 

Recent Sales of Unregistered Securities

 

See “Description of Our Capital Stock”

11.

 

Description of Registrant’s Securities to be Registered

 

See “Description of Our Capital Stock”

12.

 

Indemnification of Directors and Officers

 

See “Description of Our Capital Stock” and “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”

13.

 

Financial Statements and Supplementary Data

 

See “Selected Historical Combined Financial Data” and “Index to Combined Financial Statements” and the financial statements referenced therein

 

 

 

 

2


 

 

 

 

 

 

Item
No.

 

Caption

 

Location in Information Statement

14.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None

15.

 

Financial Statements and Exhibits

 

(a) Combined Financial Statements

 

 

 

 

See “Index to Combined Financial Statements” and the financial statements referenced therein

 

 

 

 

(b) Exhibits

 

 

 

 

See the Exhibit Index of this Registration Statement on Form 10

3


 

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement on Form 10 to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

 

 

 

AdvanSix Inc.

     

 

 

 

 

 

 

 

 

By:

 

/s/ Erin N. Kane

 

 

 

 

 

 

 

Name:

 

Erin N. Kane

 

 

 

 

Title:

 

Chief Executive Officer

Dated: July 25, 2016

4


 

EXHIBIT INDEX

 

 

 

Exhibit
Number

 

Exhibit Description

  2.1

 

Form of Separation and Distribution Agreement between Honeywell International Inc. and AdvanSix Inc.**

  3.1

 

Form of Amended and Restated Certificate of Incorporation of AdvanSix Inc.

  3.2

 

Form of Amended and Restated By-laws of AdvanSix Inc.

10.1

 

Form of Transition Services Agreement between Honeywell International Inc. and AdvanSix Inc.**

10.2

 

Form of Tax Matters Agreement between Honeywell International Inc. and AdvanSix Inc.**

10.3

 

Form of Employee Matters Agreement between Honeywell International Inc. and AdvanSix Inc.**

10.4

 

Amended and Restated Caprolactam and Polymer Supply Agreement dated as of April 1, 2013, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.†

10.5

 

First Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of July 18, 2013, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.†

10.6

 

Second Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of November 15, 2013, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.†

10.7

 

Third Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of December 12, 2014, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.†

10.8

 

Fourth Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of January 13, 2016, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.†

10.9

 

Offer of Employment Letter between Honeywell International Inc. and Erin N. Kane, dated April 19, 2016.

10.10

 

Offer of Employment Letter between Honeywell International Inc. and Jonathan Bellamy, dated May 16, 2016.

10.11

 

Offer of Employment Letter between Honeywell International Inc. and Michael Preston, dated May 13, 2016.

10.12

 

Offer of Employment Letter between Honeywell International Inc. and John M. Quitmeyer, dated May 25, 2016.

21.1

 

List of subsidiaries of AdvanSix Inc.*

99.1

 

Preliminary Information Statement of AdvanSix Inc., subject to completion, dated July 25, 2016.

99.2

 

Pertinent pages from Honeywell International Inc.’s Proxy Statement, dated March 10, 2016, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934.††

99.3

 

Pertinent pages from the Annual Report of Honeywell International Inc. on Form 10-K for the fiscal year ended December 31, 2015, filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.††

 

 

*

 

To be filed by amendment.

 

**

 

Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission on a confidential basis upon request.

 

 

Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and the omitted portions have been filed separately with the Securities and Exchange Commission.

 

††

 

Previously filed on May 12, 2016.

5


Exhibit 2.1

 

 

 

SEPARATION AND DISTRIBUTION AGREEMENT

 

 

 

By and Between

 

 

 

HONEYWELL INTERNATIONAL INC.

 

 

 

and

 

 

 

ADVANSIX INC.

 

 

 

Dated as of         , 2016

 

 

 

TABLE OF CONTENTS

 

    Page  
       
ARTICLE I    
       
Definitions    
       
SECTION 1.01. Definitions 2  
       
ARTICLE II    
       
The Separation    
       
SECTION 2.01. Transfer of Assets and Assumption of Liabilities 16  
SECTION 2.02. Certain Matters Governed Exclusively by Ancillary Agreements 17  
SECTION 2.03. Termination of Agreements 18  
SECTION 2.04. Shared Contracts 19  
SECTION 2.05. Disclaimer of Representations and Warranties 19  
SECTION 2.06. Waiver of Bulk-Sale and Bulk-Transfer Laws 20  
       
ARTICLE III    
       
Credit Support    
       
SECTION 3.01. Replacement of Credit Support 20  
       
ARTICLE IV    
       
Actions Pending the Distribution    
       
SECTION 4.01. Actions Prior to the Distribution 21  
SECTION 4.02. Conditions Precedent to Consummation of the Distribution 22  
       
ARTICLE V    
       
The Distribution    
       
SECTION 5.01. The Distribution 23  
SECTION 5.02. Fractional Shares 24  
SECTION 5.03. Sole Discretion of Honeywell 24  
i
ARTICLE VI    
       
Mutual Releases; Indemnification    
       
SECTION 6.01. Release of Pre-Distribution Claims 24  
SECTION 6.02. Indemnification by AdvanSix 26  
SECTION 6.03. Indemnification by Honeywell 27  
SECTION 6.04. Indemnification Obligations Net of Insurance Proceeds and Third-Party Proceeds 27  
SECTION 6.05. Procedures for Indemnification of Third-Party Claims 28  
SECTION 6.06. Additional Matters 29  
SECTION 6.07. Remedies Cumulative 30  
SECTION 6.08. Survival of Indemnities 30  
SECTION 6.09. Limitation on Liability 30  
       
ARTICLE VII    
       
Access to Information; Confidentiality    
       
SECTION 7.01. Agreement for Exchange of Information; Archives 30  
SECTION 7.02. Ownership of Information 31  
SECTION 7.03. Compensation for Providing Information 32  
SECTION 7.04. Record Retention 32  
SECTION 7.05. Accounting Information 32  
SECTION 7.06. Limitations of Liability 33  
SECTION 7.07. Production of Witnesses; Records; Cooperation 33  
SECTION 7.08. Confidential Information 34  
       
ARTICLE VIII    
       
Insurance    
       
SECTION 8.01. Insurance 35  
       
ARTICLE IX    
       
Intellectual Property    
       
SECTION 9.01. Consent To Use Intellectual Property And Duty To Cooperate 38  
SECTION 9.02. Trade Secrets 42  
SECTION 9.03. Intellectual Property Cross-License; Freedom to Practice 42  
SECTION 9.04. Other Licenses 43  
SECTION 9.05. Scope 43  
SECTION 9.06. Third Party Licenses; Assignments 43  
ii
ARTICLE X    
       
Further Assurances and Additional Covenants    
       
SECTION 10.01. Further Assurances 44  
       
ARTICLE XI    
       
Termination    
       
SECTION 11.01. Termination 45  
SECTION 11.02. Effect of Termination 45  
       
ARTICLE XII    
       
Miscellaneous    
       
SECTION 12.01. Counterparts; Entire Agreement; Corporate Power 45  
SECTION 12.02. Governing Law; Jurisdiction 46  
SECTION 12.03. Assignability 46  
SECTION 12.04. Third-Party Beneficiaries 46  
SECTION 12.05. Notices 47  
SECTION 12.06. Severability 47  
SECTION 12.07. Publicity 48  
SECTION 12.08. Expenses 48  
SECTION 12.09. Headings 48  
SECTION 12.10. Survival of Covenants 48  
SECTION 12.11. Waivers of Default 48  
SECTION 12.12. Specific Performance 48  
SECTION 12.13. Amendments 49  
SECTION 12.14. Interpretation 49  
iii
Schedule I - Internal Transactions  
Schedule II - AdvanSix Equity Interests  
Schedule III - AdvanSix Assets  
Schedule IV - AdvanSix Liabilities  
Schedule V - AdvanSix Real Property  
Schedule VI - Commercial Agreements  
Schedule VII - Honeywell Retained Assets  
Schedule VIII - Honeywell Retained Liabilities  
Schedule IX - RCRA Corrective Actions  
Schedule X - Shared Contracts  
iv

SEPARATION AND DISTRIBUTION AGREEMENT, dated as of           , 2016, by and between HONEYWELL INTERNATIONAL INC., a Delaware corporation (“ Honeywell ”), and ADVANSIX INC., a Delaware corporation (“ AdvanSix ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I hereof.

 

R E C I T A L S

 

WHEREAS, the board of directors of Honeywell has determined that it is in the best interests of Honeywell and its shareholders to create a new publicly traded company that will operate the business of Honeywell Resins and Chemicals LLC (“ R&C LLC ”);

 

WHEREAS, in furtherance of the foregoing, the board of directors of Honeywell has determined that it is appropriate and desirable to transfer certain assets and liabilities, including all outstanding equity interests in R&C LLC, to AdvanSix, a wholly owned Subsidiary of Honeywell, on the terms and subject to the conditions of this Agreement and subsequently to distribute Honeywell’s entire interest in AdvanSix, by way of a dividend of stock to be made to holders of Honeywell Common Stock;

 

WHEREAS in furtherance of the foregoing, it is appropriate and desirable to effect the Spin-Off, as more fully described in this Agreement;

 

WHEREAS, AdvanSix has been incorporated solely for these purposes and has not engaged in activities except in preparation for the Spin-Off;

 

WHEREAS Honeywell and AdvanSix have prepared, and AdvanSix has filed with the Commission, the Form 10, which includes the Information Statement and sets forth appropriate disclosure concerning AdvanSix and the Distribution;

 

WHEREAS Honeywell and AdvanSix intend that certain of the Internal Transactions and the Distribution each qualify for its Intended Tax Treatment and for this Agreement to constitute a plan of reorganization within the meaning of Section 1.368-2(g) of the Treasury Regulations;

 

WHEREAS, following the Spin-Off and pursuant to and in connection with the plan of reorganization, Honeywell will use the proceeds of the Special Dividend to make Permitted Distributions; and

 

WHEREAS it is appropriate and desirable to set forth the principal corporate transactions required to effect the Spin-Off and certain other agreements that will govern certain matters relating to the Spin-Off and the relationship of Honeywell, AdvanSix and their respective Subsidiaries following the Distribution.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

 
2

ARTICLE I

 

Definitions

 

SECTION 1.01. Definitions. For the purposes of this Agreement, the following terms shall have the following meanings:

 

Action ” means any claim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any Federal, state, local, foreign or international arbitration or mediation tribunal.

 

AdvanSix ” has the meaning set forth in the preamble.

 

AdvanSix Assets ” means, without duplication, the following Assets:

 

(a)        all Assets held by the AdvanSix Group;

 

(b)        all interests in the capital stock of, or other equity interests in, the members of the AdvanSix Group (other than AdvanSix) and all other equity, partnership, membership, joint venture and similar interests set forth on Schedule II under the caption “Joint Ventures and Minority Investments”;

 

(c)        all Assets reflected on the AdvanSix Balance Sheet, and all Assets acquired after the date of the AdvanSix Balance Sheet that, had they been acquired on or before such date and owned as of such date, would have been reflected on the AdvanSix Balance Sheet if prepared in accordance with GAAP applied on a consistent basis, subject to any dispositions of such Assets subsequent to the date of the AdvanSix Balance Sheet;

 

(d)        the Assets listed or described on Schedule III;

 

(e)        the rights related to the AdvanSix Portion of any Shared Contract;

 

(f)        the AdvanSix Real Property;

 

(g)        all other Assets that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be assigned to or retained by, or allocated to, any member of the AdvanSix Group; and

 

(h)        all Assets held by a member of the Honeywell Group that are determined by Honeywell, in good faith, to be primarily related to or used or held for use primarily in connection with the business or operations of the AdvanSix Business.

 

Notwithstanding the foregoing, the AdvanSix Assets shall not include (i) any Honeywell Retained Assets, (ii) any Assets in respect of Taxes, which shall be governed exclusively by the

 
3

TMA or EMA, (iii) the rights related to the Honeywell Portion of Shared Contracts, (iv) any Assets determined by Honeywell, in good faith, to arise primarily from the business or operations of the Honeywell Business (unless otherwise expressly provided in this Agreement) and (v) Assets required by Honeywell to perform its obligations under the TSA.

 

AdvanSix Balance Sheet ” means the combined balance sheets of the Resins & Chemicals Business of Honeywell, including the notes thereto, as of          , 2016, included in the Information Statement.

 

AdvanSix Business ” means the businesses and operations as currently conducted by the AdvanSix Group, including as described in the Information Statement, in each case, whether such businesses and operations were conducted prior to, on or after the Distribution Date. For the avoidance of doubt, the AdvanSix Business does not include any terminated, divested or discontinued businesses, operations or properties of either Party or any member of its Group or any of their respective predecessors, in each case, as of the date hereof.

 

AdvanSix Common Stock ” means the common stock, $0.01 par value per share, of AdvanSix.

 

AdvanSix Credit Support Instruments ” has the meaning set forth in Section 3.01(b).

 

AdvanSix Entities ” means the entities, the equity, partnership, membership, joint venture or similar interests of which are set forth on Schedule II under the caption “Joint Ventures and Minority Investments”.

 

AdvanSix Group ” means (a) AdvanSix, (b) each Person that will be a Subsidiary of AdvanSix immediately prior to the Distribution, including R&C LLC and the other entities set forth on Schedule II under the caption “Subsidiaries”, and (c) each Person that becomes a Subsidiary of AdvanSix after the Distribution, including in each of cases (a), (b) and (c), any Person that is merged or consolidated with and into AdvanSix or any Subsidiary of AdvanSix.

 

AdvanSix HSE Liabilities ” means any HSE Liability, whether occurring or arising prior to, on or after the Distribution Date, to the extent (a) resulting from or otherwise relating to (i) any compliance or noncompliance with any HSE Law in connection with the operation of the AdvanSix Business or AdvanSix Asset, (ii) any Release of any Hazardous Material (y) at, on, under, from or to any AdvanSix Real Properties (regardless of the source, or location of the impact, of such Release) or (z) that is the subject of, or for which Remedial Actions are otherwise required to complete, in accordance with HSE Law or other demands of any Governmental Authority, the RCRA Corrective Actions (regardless of the source, or location of the impact, of such Release), including, in each of cases (y) and (z), any exposure to, or further Release to any other location of, such Hazardous Material, (iii) any Release, transportation, storage, disposal, treatment or

 
4

recycling (or arrangement for such activities) of Hazardous Material at any third-party location in connection with the operation of the AdvanSix Business (including any exposure to, or further Release to any other location of, such Hazardous Material), (iv) any exposure to Hazardous Materials (including those contained in any products manufactured, sold, distributed or marketed) in connection with the AdvanSix Business or AdvanSix Asset or (v) compliance with the requirements of any real property transfer law associated with the Distribution or (b) otherwise resulting from or relating to the AdvanSix Business or AdvanSix Asset.

 

AdvanSix Indemnitees ” has the meaning set forth in Section 6.03.

 

AdvanSix IP ” means the Intellectual Property included in the AdvanSix Assets.

 

AdvanSix Liabilities ” means, without duplication, the following Liabilities:

 

(a)        all Liabilities of the AdvanSix Group and the AdvanSix Entities;

 

(b)        all Liabilities to the extent relating to, arising out of or resulting from:

 

(i) the operation or conduct of the AdvanSix Business as conducted at any time prior to the Distribution (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority), which act or failure to act relates to the AdvanSix Business);

 

(ii) the operation or conduct of the AdvanSix Business or any other business conducted by AdvanSix or any other member of the AdvanSix Group at any time after the Distribution (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority)); or

 

(iii) the AdvanSix Assets;

 

(c)        all Liabilities reflected as liabilities or obligations on the AdvanSix Balance Sheet, and all Liabilities arising or assumed after the date of the AdvanSix Balance Sheet that, had they arisen or been assumed on or before such date and been existing obligations as of such date, would have been reflected on the AdvanSix Balance Sheet if prepared in accordance with GAAP applied on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the AdvanSix Balance Sheet;

 

(d)        all AdvanSix HSE Liabilities;

 

(e)        the Liabilities listed or described on Schedule IV;

 

(f)         the obligations related to the AdvanSix Portion of any Shared Contract;

 
5

(g)        all other Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed or retained by, or allocated to, any member of the AdvanSix Group; and

 

(h)        all Liabilities to the extent relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in, or incorporated by reference into, the Form 10 and any other documents filed with the Commission in connection with the Spin-Off or as contemplated by this Agreement, other than with respect to the Honeywell Disclosure Sections.

 

Notwithstanding the foregoing, the AdvanSix Liabilities shall not include (i) any Honeywell Retained Liabilities or any Divestiture HSE Liabilities, (ii) any Liabilities in respect of Taxes, which shall be governed exclusively by the TMA or EMA, (iii) any obligations related to the Honeywell Portion of any Shared Contract or (iv) any Liabilities determined by Honeywell, in good faith, to be primarily related to the business or operations of the Honeywell Business (unless otherwise expressly provided in this Agreement).

 

AdvanSix Marks ” means the Trademark Assets included in the AdvanSix Assets.

 

AdvanSix Portion ” has the meaning set forth in Section 2.04.

 

AdvanSix Real Property ” means the real property and real property interests identified on Schedule V, and any fixtures or appurtenances associated therewith.

 

AdvanSix Trade Secrets ” means the Trade Secrets included in the AdvanSix Assets.

 

Affiliate ” of any Person means a Person that controls, is controlled by or is under common control with such Person. As used herein, “control” of any entity means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise; provided , however , that (i) AdvanSix and the other members of the AdvanSix Group shall not be considered Affiliates of Honeywell or any of the other members of the Honeywell Group and (ii) Honeywell and the other members of the Honeywell Group shall not be considered Affiliates of AdvanSix or any of the other members of the AdvanSix Group.

 

Agent ” means the distribution agent appointed by Honeywell to distribute to the Record Holders, pursuant to the Distribution, the shares of AdvanSix Common Stock held by Honeywell.

 

Agreement ” means this Separation and Distribution Agreement, including the Schedules hereto.

 
6

Ancillary Agreements ” means the TSA, TMA, EMA, the Commercial Agreements and any other instruments, assignments, documents and agreements executed in connection with the implementation of the transactions contemplated by this Agreement.

 

Assets ” means all assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible or intangible, or accrued or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following:

 

(a)        all accounting and other books, records and files, whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, electronic recording or any other form;

 

(b)        all apparatus, computers and other electronic data processing equipment, fixtures, machinery, furniture, office and other equipment, including hardware systems, circuits and other computer and telecommunication assets and equipment, automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;

 

(c)        all inventories of materials, parts, raw materials, supplies, work-in-process and finished goods and products;

 

(d)        all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

 

(e)        all interests in any capital stock or other equity interests of any Subsidiary or any other Person; all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person; all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person; all other investments in securities of any Person; and all rights as a partner, joint venturer or participant;

 

(f)        all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other contracts, agreements or commitments and all rights arising thereunder;

 

(g)        all deposits, letters of credit, performance bonds and other surety bonds;

 

(h)        all written technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals and materials and analyses prepared by consultants and other third parties;

 

(i)        all Intellectual Property, and attorney opinions or reports related thereto concerning freedom-to-practice, technology due diligence and technology landscapes (whether held internally or by external counsel);

 

(j)        all contracts, agreements or commitments pursuant to which any license, option or similar right relating to Intellectual Property has been granted or the use of Intellectual

 
7

Property is materially restricted (excluding, for the avoidance of doubt, contracts terminated pursuant to the terms of this Agreement or any Ancillary Agreement);

 

(k)         all websites, databases , content, text, graphics, images, audio, video, data and other copyrightable works or other works of authorship including all translations, adaptations, derivations and combinations thereof, in each case to the extent not included in clause (i) of this definition;

 

(l)        all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, subscriber, customer and vendor data, correspondence and lists, product literature and other advertising and promotional materials, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, server and traffic logs, quality records and reports and other books, records, studies, surveys, reports, plans, business records and documents, in each case to the extent not included in clause (i) of this definition;

 

(m)        all prepaid expenses, trade accounts and other accounts and notes receivable (whether current or non-current);

 

(n)        all claims or rights against any Person arising from the ownership of any other Asset, all rights in connection with any bids or offers, all claims, causes in action, lawsuits, judgments or similar rights, all rights under express or implied warranties, all rights of recovery and all rights of setoff of any kind and demands of any nature, in each case whether accrued or contingent, whether in tort, contract or otherwise and whether arising by way of counterclaim or otherwise;

 

(o)        all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

 

(p)        all licenses (including radio and similar licenses), permits, approvals and authorizations that have been issued by any Governmental Authority and all pending applications therefor;

 

(q)        Cash, bank accounts, lock boxes and other deposit arrangements;

 

(r)        interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements; and

 

(s)        all goodwill as a going concern and other intangible properties.

 

Bank Debt Incurrence ” has the meaning set forth in Schedule I.

 

Cash ” means cash, cash equivalents, bank deposits and marketable securities, whether denominated in United States dollars or otherwise.

 

Cash Management Arrangements ” means all cash management arrangements pursuant to which Honeywell or its Subsidiaries automatically or manually sweep cash from, or

 
8

automatically or manually transfer cash to, accounts of AdvanSix or any member of the AdvanSix Group.

 

Commercial Agreements ” means the agreements set forth on Schedule VII.

 

Commission ” means the Securities and Exchange Commission.

 

Consents ” means any consents, waivers or approvals from, or notification requirements to, any Person other than a member of either Group.

 

Credit Support Instruments ” has the meaning set forth in Section 3.01(a).

 

D&O Policies ” has the meaning set forth in Section 8.01(e).

 

Determination ” has the meaning set forth in the TMA.

 

Distribution ” means the distribution by Honeywell to the Record Holders, on a pro rata basis, of all of the outstanding shares of AdvanSix Common Stock owned by Honeywell on the Distribution Date.

 

Distribution Date ” means the date, determined by Honeywell in accordance with Section 5.03, on which the Distribution occurs.

 

Domain Names ” means Internet domain names, including top level domain names and global top level domain names, URLs, user names, social media identifiers, handles and tags.

 

Domestic Formation ” has the meaning set forth in Schedule I.

 

Domestic Restructuring ” has the meaning set forth in Schedule I.

 

EMA ” means the Employee Matters Agreement dated as of the date of this Agreement by and between Honeywell and AdvanSix.

 

Exchange ” means the New York Stock Exchange.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

Expenses ” has the meaning set forth in Section 12.08.

 

First Post-Distribution Report ” has the meaning set forth in Section 12.07.

 

Foreign AdvanSix Subsidiaries ” means the foreign subsidiaries or foreign branch offices of AdvanSix set forth on Schedule I and any other foreign subsidiaries or foreign branch offices determined to be necessary to facilitate the Internal Transactions.

 

Formation ” has the meaning set forth in Schedule I.

 
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Form 10 ” means the registration statement on Form 10 filed by AdvanSix with the Commission to effect the registration of AdvanSix Common Stock pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time.

 

Governmental Approvals ” means any notices, reports or other filings to be given to or made with, or any Consents, registrations or permits to be obtained from, any Governmental Authority.

 

Governmental Authority ” means any Federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other legislative, judicial, regulatory, administrative or governmental authority.

 

Group ” means either the Honeywell Group or the AdvanSix Group, as the context requires.

 

Hazardous Materials ” means (i) any natural or artificial substance (whether solid, liquid, gas or other form of matter, noise, microorganism or electromagnetic field) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos-containing materials, perfluoroalkyl substances, urea formaldehyde foam insulation, carcinogens, endocrine disrupters, lead-based paint, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, greenhouse gases and ozone-depleting substances and (ii) any other chemical, material, substance or waste that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any HSE Law.

 

Honeywell ” has the meaning set forth in the preamble.

 

Honeywell Assets ” means (i) all Assets of the Honeywell Group, (ii) the Honeywell Retained Assets, (iii) any Assets held by a member of the AdvanSix Group determined by Honeywell, in good faith, to be primarily related to or used primarily in connection with the business or operations of the Honeywell Business, (iv) all interests in the capital stock, or other equity interests in, the members of the Honeywell Group (other than Honeywell) and (v) the rights related to the Honeywell Portion of any Shared Contract. Notwithstanding the foregoing, the Honeywell Assets shall not include (a) any Assets in respect of Taxes, which shall be governed exclusively by the TMA or EMA, (b) the AdvanSix Assets and (c) any Assets required by AdvanSix to perform its obligations under the TSA.

 

Honeywell Business ” means the businesses and operations as currently or formerly conducted by Honeywell and its predecessors and Subsidiaries other than the AdvanSix Business.

 
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Honeywell Common Stock ” means the common stock, $1.00 par value per share, of Honeywell.

 

Honeywell Credit Support Instruments ” has the meaning set forth in Section 3.01(a).

 

Honeywell Disclosure Sections ” means all information set forth in or omitted from the Form 10 or Information Statement to the extent relating to (a) the Honeywell Group, (b) the Honeywell Liabilities, (c) the Honeywell Assets or (d) the substantive disclosure set forth in the Form 10 relating to Honeywell’s board of directors’ consideration of the Spin-Off, including the section entitled “Reasons for the Spin-Off”.

 

Honeywell Divestiture HSE Liabilities ” means the HSE Liabilities resulting or arising from any businesses or properties that, as of the date hereof, were formerly owned and operated in connection with any of AdvanSix, the AdvanSix Group or the AdvanSix Business or any of their respective legal predecessors, including (a) "Environmental, Health and Safety Liabilities" as defined in and pursuant to Section 9.10 of the Facilities Purchase Agreement by and between Shaw Industries Group, Inc., Honeywell International Inc., Honeywell Intellectual Properties, Inc. and Honeywell Nylon LLC, dated as of August 31, 2005; (b) "Environmental, Health and Safety Liabilities" as defined in and pursuant to Section 12.8 of the Asset Purchase Agreement between Honeywell International Inc., Honeywell Nylon LLC, Honeywell Nylon Canada Inc., Polymeric Resources Corporation, Nylene Canada Inc., Nylene Realty Inc. and Nylene Holdings Inc., dated as of July 21, 2005; and (c) "Environmental, Health and Safety Liabilities" as defined in and pursuant to Section 12.5 of the Asset Purchase and Sale Agreement between Honeywell Specialty Materials (China) Co. Ltd. and China Holdings, LLC, dated as of October 26, 2006.

 

Honeywell HSE Liabilities ” means any HSE Liability, whether occurring or arising prior to, on or after the Distribution Date, to the extent (a) resulting from or otherwise relating to (i) any compliance or noncompliance with any HSE Law in connection with the operation of the Honeywell Business or Honeywell Asset, (ii) any Release of any Hazardous Material at, on, under, from or to any real property constituting a Honeywell Asset (including any exposure to, or further Release to any other location of, such Hazardous Material) (iii) any Release, offsite transportation, storage, disposal, treatment or recycling (or arrangement for such activities) of Hazardous Material in connection with the operation of the Honeywell Business (including any exposure to, or further Release to any other location of, such Hazardous Material), (iv) any exposure to Hazardous Materials (including those contained in any products currently or formerly manufactured, sold, distributed or marketed) in connection with the operation of the Honeywell Business or Honeywell Asset or (v) any Honeywell Divestiture HSE Liabilities or (b) otherwise resulting from or relating to the Honeywell Business or Honeywell Asset; provided that , in no case shall Honeywell HSE Liabilities include any AdvanSix HSE Liabilities.

 

Honeywell Group ” means Honeywell and each of its Subsidiaries, but excluding any member of the AdvanSix Group.

 

Honeywell Indemnitees ” has the meaning set forth in Section 6.02.

 

Honeywell IP ” means the Intellectual Property included in the Honeywell Assets.

 

Honeywell Liabilities ” means, without duplication, the following Liabilities:

 

(a)        all Liabilities of the Honeywell Group;

 

(b)        all Liabilities to the extent relating to, arising out of or resulting from:

 

(i) the operation or conduct of the Honeywell Business as conducted at any time prior to the Distribution (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority), which act or failure to act relates to the Honeywell Business);

 
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(ii) the operation or conduct of the Honeywell Business or any other business conducted by Honeywell or any other member of the Honeywell Group at any time after the Distribution (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority)); or

 

(iii) the Honeywell Assets;

 

(c)        the Honeywell Retained Liabilities;

 

(d)        all Honeywell HSE Liabilities

 

(e)        any obligations related to the Honeywell Portion of any Shared Contract;

 

(f)        any Liabilities determined by Honeywell, in good faith, to be primarily related to the business or operations of the Honeywell Business (unless otherwise expressly provided in this Agreement); and

 

(g)        all Liabilities to the extent relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to the Honeywell Disclosure Sections.

 

Notwithstanding the foregoing, the Honeywell Liabilities shall not include (x) any Liabilities in respect of Taxes, which shall be governed exclusively by the TMA or EMA or (y) the AdvanSix Liabilities.

 

Honeywell Marks ” means the Trademark Assets included in the Honeywell Assets.

 

Honeywell Portion ” has the meaning set forth in Section 2.04.

 

Honeywell Retained Assets ” means the Assets to be retained by the Honeywell Group set forth on Schedule VII.

 

Honeywell Retained Liabilities ” means the Liabilities to be retained by the Honeywell Group set forth on Schedule VIII.

 

Honeywell Trade Secrets ” means the Trade Secrets included in the Honeywell Assets.

 

 
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HSE Law ” means any Law or Governmental Approvals, or any standard used by a Governmental Authority pursuant to any Law or Governmental Approvals, relating to (i) pollution, (ii) protection or restoration of the indoor or outdoor environment or natural resources, (iii) the transportation, treatment, storage or Release of, or exposure to, hazardous or toxic materials, (iv) the registration, manufacturing, sale, labeling or distribution of hazardous or toxic materials or products containing such materials (including the REACH Directive and similar requirements), (v) process safety management or (vi) the protection of the public, worker health and safety or threatened or endangered species.

 

HSE Liabilities ” means all Liabilities relating to or arising under any applicable HSE Law or Governmental Approvals required or issued thereunder (including any such Liability for corrective actions, removal, remediation or cleanup costs, investigation, monitoring and/or sampling obligations or costs, response costs, financial assurance obligations or costs, natural resources damages, medical and other costs related to personal injuries, costs, fines, penalties or other sanctions).

 

Indemnifying Party ” has the meaning set forth in Section 6.04(a).

 

Indemnitee ” has the meaning set forth in Section 6.04(a).

 

Indemnity Payment ” has the meaning set forth in Section 6.04(a).

 

Information ” means information, whether or not patentable, copyrightable or protectable as a trade secret, in written, oral, electronic or other tangible or intangible forms, stored in any medium now known or yet to be created, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product) and other technical, financial, employee or business information or data, documents, correspondence, materials and files.

 

Information Statement ” means the Information Statement sent to the holders of Honeywell Common Stock in connection with the Distribution, as such Information Statement may be amended from time to time.

 

Insurance Proceeds ” means those monies:

 

(a)        received by an insured (or its successor-in-interest) from an insurance carrier;

 

(b)        paid by an insurance carrier on behalf of the insured (or its successor-in-interest); or

 
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(c)        received (including by way of setoff) from any third party in the nature of insurance, contribution or indemnification in respect of any Liability;

 

in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments), net of any costs or expenses incurred in the collection thereof and net of any Taxes resulting from the receipt thereof.

 

Intellectual Property ” means any and all intellectual property rights existing anywhere in the world associated with any and all (a) patents (including all reissues, divisionals, continuations, continuations-in-part, reexaminations, supplemental examinations, inter partes reviews, post-grant oppositions, covered business method reviews, substitutions and extensions thereof), patent registrations and applications, including provisional applications, statutory invention registrations, invention disclosures and inventions, (b) Trademark Assets, (c) copyrights, works of authorship (including all translations, adaptations, derivations and combinations thereof), mask works, designs and database rights, including, in each case, any registrations and applications for registration therefor, (d) Domain Names, (e) Software, (f) Trade Secrets and other confidential Information, (g) all tangible embodiments of the foregoing in whatever form or medium, and (h) any other legal protections and rights related to any of the foregoing.

 

Intended Tax Treatment ” has the meaning set forth in the TMA.

 

Intercompany Accounts ” has the meaning set forth in Section 2.03(a).

 

Intercompany Agreements ” has the meaning set forth in Section 2.03(a).

 

Internal Transactions ” has the meaning set forth on Schedule I.

 

Law ” means any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, government approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended.

 

Liabilities ” means any and all claims, debts, demands, actions, causes of action, suits, damages, fines, penalties, obligations, prohibitions, accruals, accounts payable, reckonings, bonds, indemnities and similar obligations, agreements, promises, guarantees, make-whole agreements and similar obligations, and other liabilities and requirements, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any Law, Action, threatened or contemplated Action or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this Agreement, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person. For the avoidance of doubt, Liabilities shall include attorneys’ fees, the costs and expenses of all assessments, judgments, settlements and compromises, and any and all other costs and expenses whatsoever reasonably incurred in connection with anything contemplated by

 
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the preceding sentence (including costs and expenses incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions).

 

Litigation Condition ” has the meaning set forth in Section 6.05(b).

 

Party ” means either party hereto, and “ Parties ” means both parties hereto.

 

Permitted Distributions ” has the meaning set forth in Schedule I.

 

Person ” means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability company, any other entity and any Governmental Authority.

 

Pre-Separation Insurance Claim ” means any (a) claim made against the AdvanSix Group or Honeywell Group and reported to the applicable insurer(s) prior to the Distribution Date in respect of an act or omission occurring prior to the Distribution Date that results in a Liability under a “claims-made-based” insurance policy of the Honeywell Group in effect prior to the Distribution Date or any extended reporting period thereof or (b) Action (whether made prior to, on or following the Distribution Date) in respect of a Liability occurring prior to the Distribution Date under an “occurrence-based” insurance policy of any member of the Honeywell Group in effect prior to the Distribution Date.

 

R&C Contribution ” has the meaning set forth in Schedule I.

 

RCRA Corrective Actions ” means the Remedial Actions and other requirements identified on Schedule IX.

 

REACH Directive ” means Regulation (EC) No. 1907/2006 on the Registration, Evaluation, Authorisation and Restriction of Chemicals, including any implementing legislation or regulations, in each case as may be amended.

 

Record Date ” means the close of business on the date determined by the Honeywell board of directors as the record date for determining the shares of Honeywell Common Stock in respect of which shares of AdvanSix Common Stock will be distributed pursuant to the Distribution.

 

Record Holders ” has the meaning set forth in Section 5.01(b).

 

Release ” means any actual or threatened release, spill, emission, discharge, flow (whether through constructed or natural ditches, pipes, watercourses, overland flows or other means of conveyance), leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration into or through the indoor or outdoor environment (including, ambient air, surface water, groundwater and surface or subsurface strata); provided, for the avoidance of doubt, mere vehicular transportation from an initial location to an offsite location, without more, shall not be deemed to constitute a Release from that initial location to the offsite location.

 

Remedial Actions ” means any investigation, remediation, cleanup, removal, use restriction, engineering control, institutional control, monitoring or other responsive actions, and any actions ancillary thereto.

 

Reorganization ” has the meaning set forth in Schedule I.

 
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Retained Information ” has the meaning set forth in Section 7.04.

 

Security Interest ” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer or other encumbrance of any nature whatsoever.

 

Separation ” means (a) the Internal Transactions, (b) any actions to be taken pursuant to Article II and (c) any other transfers of Assets and assumptions of Liabilities, in each case, between a member of one Group and a member of the other Group, provided for in this Agreement or in any Ancillary Agreement.

 

Share Authorization ” has the meaning set forth on Schedule I.

 

Share Issuance ” has the meaning set forth in Schedule I.

 

Shared Contract ” means any contract or agreement of any member of either Group that relates in any material respect to both the AdvanSix Business and the Honeywell Business including the contracts and agreements set forth on Schedule X; provided that the Parties may, by mutual consent, elect to include in, or exclude from, this definition any contract or agreement.

 

Special Dividend ” has the meaning set forth on Schedule I.

 

Software ” means any and all (a) computer programs and applications, including any and all software implementations of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, (d) all documentation including user manuals and other training documentation relating to any of the foregoing and (e) all tangible embodiments of the foregoing in whatever form or medium now known or yet to be created, including all disks, diskettes and tapes.

 

Spin-Off ” means the Separation and the Distribution.

 

Subsidiary ” of any Person means any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

  

Tax Opinion Representations ” has the meaning set forth in the TMA.

 
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Taxes ” has the meaning set forth in the TMA.

 

Third-Party Claim ” means any assertion by a Person (including any Governmental Authority) who is not a member of the Honeywell Group or the AdvanSix Group of any claim, or the commencement by any such Person of any Action, against any member of the Honeywell Group or the AdvanSix Group.

 

Third-Party Proceeds ” has the meaning set forth in Section 6.04(a).

 

TMA ” means the Tax Matters Agreement dated as of the date of this Agreement by and between Honeywell and AdvanSix.

 

Trade Secrets ” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing to the extent that the owner thereof has taken reasonable measures to keep such information secret and the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.

 

Trademark Assets ” means trademarks, service marks, trade names, logos, slogans, trade dress or other source identifiers, including any registration or any application for registration therefor, together with all goodwill associated therewith.

 

TSA ” means the Transition Services Agreement dated as of the date of this Agreement between Honeywell and AdvanSix.

 

ARTICLE II

The Separation

 

SECTION 2.01. Transfer of Assets and Assumption of Liabilities. (a) Prior to the Distribution, and subject to Section 2.01(e), the Parties shall cause the Internal Transactions to be completed.

 

(b)    Subject to Section 2.01(e), prior to the Distribution, the Parties shall, and shall cause their respective Group members to, execute such instruments of assignment and transfer and take such other corporate actions as are necessary to (i) transfer and convey to one or more members of the AdvanSix Group all of the right, title and interest of the Honeywell Group in, to and under all AdvanSix Assets not already owned by the AdvanSix Group, (ii) transfer and convey to one or more members of the Honeywell Group all of the right, title and interest of the AdvanSix Group in, to and under all Honeywell Assets not already owned by the Honeywell Group, (iii) cause one or more members of the AdvanSix Group to assume all of the AdvanSix Liabilities to the extent such Liabilities would otherwise remain obligations of any member of the Honeywell Group and (iv) cause one or more members of the Honeywell Group to assume all of the Honeywell Liabilities to the extent such Liabilities would otherwise remain obligations of any member of the AdvanSix Group, in each case of clauses (i) through (iv), in the

 
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manner contemplated by Schedule I. Notwithstanding anything to the contrary, neither Party shall be required to transfer any Information except as required by Article VII or any insurance policies which are the subject of Article VIII.

 

(c)    In the event that it is discovered after the Distribution that there was an omission of (i) the transfer or conveyance by AdvanSix (or a member of the AdvanSix Group) or the acceptance or assumption by Honeywell (or a member of the Honeywell Group) of any Honeywell Asset or Honeywell Liability, as the case may be, (ii) the transfer or conveyance by Honeywell (or a member of the Honeywell Group) or the acceptance or assumption by AdvanSix (or a member of the AdvanSix Group) of any AdvanSix Asset or AdvanSix Liability, as the case may be, or (iii) the transfer or conveyance by one Party (or any other member of its Group) to, or the acceptance or assumption by, the other Party (or any other member of its Group) of any Asset or Liability, as the case may be, that, had the Parties given specific consideration to such Asset or Liability prior to the Distribution, would have otherwise been so transferred, conveyed, accepted or assumed, as the case may be, pursuant to this Agreement or the Ancillary Agreements, the Parties shall use reasonable best efforts to promptly effect such transfer, conveyance, acceptance or assumption of such Asset or Liability. Any transfer, conveyance, acceptance or assumption made pursuant to this Section 2.01(c) shall be treated by the Parties for all purposes as if it had occurred immediately prior to the Distribution, except as otherwise required by applicable Law or a Determination.

 

(d)    In the event that it is discovered after the Distribution that there was a transfer or conveyance (i) by AdvanSix (or a member of the AdvanSix Group) to, or the acceptance or assumption by, Honeywell (or a member of the Honeywell Group) of any AdvanSix Asset or AdvanSix Liability, as the case may be, or (ii) by Honeywell (or a member of the Honeywell Group) to, or the acceptance or assumption by, AdvanSix (or a member of the AdvanSix Group) of any Honeywell Asset or Honeywell Liability, as the case may be, the Parties shall use reasonable best efforts to promptly transfer or convey such Asset or Liability back to the transferring or conveying Party or to rescind any acceptance or assumption of such Asset or Liability, as the case may be. Any transfer or conveyance made or acceptance or assumption rescinded pursuant to this Section 2.01(d) shall be treated by the Parties for all purposes as if such Asset or Liability had never been originally transferred, conveyed, accepted or assumed, as the case may be, except as otherwise required by applicable Law or a Determination.

 

(e)    To the extent that any transfer or conveyance of any Asset or acceptance or assumption of any Liability required by this Agreement to be so transferred, conveyed, accepted or assumed shall not have been completed prior to the Distribution, the Parties shall use reasonable best efforts to effect such transfer, conveyance, acceptance or assumption as promptly following the Distribution as shall be practicable. Nothing in this Agreement shall be deemed to require the transfer or conveyance of any Assets or the acceptance or assumption of any Liabilities which by their terms or operation of Law cannot be so transferred, conveyed, accepted or assumed; provided , however , that the Parties shall use reasonable best efforts to obtain any necessary Government Approvals and other Consents for the transfer, conveyance, acceptance or assumption (as applicable) of all Assets and Liabilities required by this Agreement to be so transferred, conveyed, accepted or assumed. In the event that any such transfer, conveyance, acceptance or assumption (as applicable) has not been completed effective as of and after the

 
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Distribution, the Party retaining such Asset or Liability shall thereafter hold such Asset for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and retain such Liability for the account, and at the expense, of the Party by whom such Liability should have been assumed or accepted pursuant to this Agreement, and take such other actions as may be reasonably requested by the Party to which such Asset should have been transferred or conveyed, or by whom such Liability should have been assumed or accepted, as the case may be, in order to place such Party, insofar as reasonably possible, in the same position as would have existed had such Asset or Liability been transferred, conveyed, accepted or assumed (as applicable) as contemplated by this Agreement, including possession, use, risk of loss, potential for gain and control over such Asset or Liability. As and when any such Asset or Liability becomes transferable, the Parties shall use reasonable best efforts to promptly effect such transfer, conveyance, acceptance or assumption (as applicable). Any transfer, conveyance, acceptance or assumption made pursuant to this Section 2.01(e) shall be treated by the Parties for all purposes as if it had occurred immediately prior to the Distribution, except as otherwise required by applicable Law or a Determination.

 

(f)    The Party retaining any Asset or Liability due to the deferral of the transfer and conveyance of such Asset or the deferral of the acceptance and assumption of such Liability pursuant to this Section 2.01 or otherwise shall not be obligated by this Agreement, in connection with this Section 2.01, to expend any money or take any action that would require the expenditure of money unless and to the extent the Party entitled to such Asset or the Party intended to assume such Liability advances or agrees to reimburse it for the applicable expenditures.

 

SECTION 2.02. Certain Matters Governed Exclusively by Ancillary Agreements. Each of Honeywell and AdvanSix agrees on behalf of itself and the members of its Group that, except as explicitly provided in this Agreement or any Ancillary Agreement, (a) the TMA shall exclusively govern all matters relating to Taxes between such parties (except to the extent that tax matters relating to employee and employee benefits-related matters are addressed in the EMA), (b) the EMA shall exclusively govern the allocation of Assets and Liabilities related to employee and employee compensation and benefits-related matters, including the outstanding awards (equity- and cash-based) under existing equity plans with respect to employees and former employees of members of both the Honeywell Group and the AdvanSix Group (except to the extent that employee compensation and benefits-related reimbursements are addressed in the TSA) (it being understood that any such Assets and Liabilities, as allocated pursuant to the EMA, shall constitute AdvanSix Assets, AdvanSix Liabilities, Honeywell Assets or Honeywell Liabilities, as applicable, hereunder and shall be subject to Article VI hereof), (c) the TSA shall exclusively govern all matters relating to the provision of certain services identified therein to be provided by each Party to the other on a transitional basis following the Distribution and (d) the Commercial Agreements shall exclusively govern all matters relating to the co-location, supply and/or other commercial arrangements expressly set forth therein.

 

SECTION 2.03. Termination of Agreements. (a) Except as set forth in Section 2.03(c) or as otherwise provided by the steps constituting the Internal Transactions, in furtherance of the releases and other provisions of Section 6.01, effective as of the R&C Contribution, AdvanSix and each other member of the AdvanSix Group, on the one hand, and Honeywell and each other member of the Honeywell Group, on the other hand, hereby terminate

 
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any and all agreements, arrangements, commitments and understandings, oral or written (“ Intercompany Agreements ”), including all intercompany accounts payable or accounts receivable (“ Intercompany Accounts ”), between such parties and in effect or accrued as of the R&C Contribution. No such terminated Intercompany Agreement or Intercompany Account (including any provision thereof that purports to survive termination) shall be of any further force or effect after the date of the R&C Contribution. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing. The Parties, on behalf of the members of their respective Groups, hereby waive any advance notice provision or other termination requirements with respect to any Intercompany Agreement.

 

(b)    In connection with the termination of Intercompany Accounts described in Section 2.03(a), each of Honeywell and AdvanSix shall cause each Intercompany Account between a member of the AdvanSix Group, on the one hand, and a member of the Honeywell Group, on the other hand, outstanding as of the close of business on the business day immediately prior to the date of the R&C Contribution to be settled on a net basis (whether via a dividend, a capital contribution, a combination of the foregoing or as otherwise agreed), in each case prior to the close of business on the date of the R&C Contribution; provided that all intercompany balances that are primarily accounting entries (and not reflective of amounts intended to be repaid), including in respect of any Cash balances or any Cash held in any centralized cash management system that are reflected in the accounting records of Honeywell and AdvanSix at such time, shall be eliminated. If after giving effect to such settlements, the Bank Debt Incurrence, the Special Dividend and the other Internal Transactions, the net amount of Cash held by the AdvanSix Group as of the time of the Distribution would not equal $         , the foregoing settlement shall be adjusted, or Honeywell and AdvanSix shall otherwise agree on a method of Cash transfer on the Distribution Date, such that the amount of Cash held by the AdvanSix Group immediately following the Distribution shall equal $        .

 

(c)    The provisions of Section 2.03(a) shall not apply to any of the following Intercompany Agreements or Intercompany Accounts (or to any of the provisions thereof): (i) this Agreement and the Ancillary Agreements (and each other Intercompany Agreement or Intercompany Account expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by either Party or any other member of its Group); (ii) any Intercompany Agreements to which any third party is a party, including any Shared Contracts; and (iii) any other Intercompany Agreements or Intercompany Accounts that this Agreement or any Ancillary Agreement expressly contemplates will survive the Distribution Date.

 

(d)    Each of Honeywell and AdvanSix shall, and shall cause their respective Subsidiaries to, take all necessary actions to remove each of AdvanSix and AdvanSix’s Subsidiaries from all Cash Management Arrangements to which it is a party, in each case prior to the close of business on the business day immediately prior to the Distribution Date.

 
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SECTION 2.04. Shared Contracts. The Parties shall, and shall cause the members of their respective Groups to, use their respective reasonable best efforts to work together (and, if necessary and desirable, to work with the third party to such Shared Contract) in an effort to divide, partially assign, modify and/or replicate (in whole or in part) the respective rights and obligations under and in respect of any Shared Contract, such that (a) a member of the AdvanSix Group is the beneficiary of the rights and is responsible for the obligations related to that portion of such Shared Contract relating to the AdvanSix Business (the “ AdvanSix Portion ”), which rights shall be a AdvanSix Asset and which obligations shall be a AdvanSix Liability and (b) a member of the Honeywell Group is the beneficiary of the rights and is responsible for the obligations related to such Shared Contract not relating to the AdvanSix Business (the “ Honeywell Portion ”), which rights shall be a Honeywell Asset and which obligations shall be a Honeywell Liability. If the Parties, or their respective Group members, as applicable, are not able to enter into an arrangement to formally divide, partially assign, modify and/or replicate such Shared Contract prior to the Distribution as contemplated by the previous sentence, then the Parties shall, and shall cause their respective Group members to, cooperate in any lawful arrangement to provide that, following the Distribution and until the earlier of five years after the Distribution Date and such time as the formal division, partial assignment, modification and/or replication of such Shared Contract as contemplated by the previous sentence is effected, a member of the AdvanSix Group shall receive the interest in the benefits and obligations of the AdvanSix Portion under such Shared Contract and a member of the Honeywell Group shall receive the interest in the benefits and obligations of the Honeywell Portion under such Shared Contract.

 

SECTION 2.05. Disclaimer of Representations and Warranties. Each of Honeywell (on behalf of itself and each other member of the Honeywell Group) and AdvanSix (on behalf of itself and each other member of the AdvanSix Group) understands and agrees that, except as expressly set forth in this Agreement, any Ancillary Agreement or the Tax Opinion Representations, no party to this Agreement, any Ancillary Agreement or any other agreement or document contemplated by this Agreement or any Ancillary Agreement is representing or warranting in any way as to any Assets or Liabilities transferred or assumed as contemplated hereby or thereby, as to the sufficiency of the Assets or Liabilities transferred or assumed hereby or thereby for the conduct and operations of the AdvanSix Business or the Honeywell Business, as applicable, as to any Governmental Approvals or other Consents required in connection therewith or in connection with any past transfers of the Assets or assumptions of the Liabilities, as to the value or freedom from any Security Interests of, or any other matter concerning, any Assets or Liabilities of such party, or as to the absence of any defenses or rights of setoff or freedom from counterclaim with respect to any claim or other Asset, including any accounts receivable, of any such Party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any Asset or thing of value upon the execution, delivery and filing hereof or thereof. Except as may expressly be set forth herein, any such Assets are being transferred on an “as is”, “where is” basis and the respective transferees shall bear the economic and legal risks that (a) any conveyance shall prove to be insufficient to vest in the transferee good and marketable title, free and clear of any Security Interest and (b) any necessary Governmental Approvals or other Consents are not obtained or that any requirements of Laws or judgments are not complied with.

 
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SECTION 2.06. Waiver of Bulk-Sale and Bulk-Transfer Laws . AdvanSix hereby waives compliance by each and every member of the Honeywell Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the AdvanSix Assets to any member of the AdvanSix Group. Honeywell hereby waives compliance by each and every member of the AdvanSix Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Honeywell Assets to any member of the Honeywell Group.

 

ARTICLE III

Credit Support

 

SECTION 3.01. Replacement of Credit Support. (a) AdvanSix shall use reasonable best efforts to arrange, at its sole cost and expense and effective on or prior to the Distribution Date, the replacement of all guarantees, covenants, indemnities, surety bonds, letters of credit or similar assurances or credit support (“ Credit Support Instruments ”) provided by or through Honeywell or any other member of the Honeywell Group for the benefit of AdvanSix or any other member of the AdvanSix Group (“ Honeywell Credit Support Instruments ”) with alternate arrangements that do not require any credit support from Honeywell or any other member of the Honeywell Group, and shall use reasonable best efforts to obtain from the beneficiaries of such Credit Support Instruments written releases (which in the case of a letter of credit or bank guarantee would be effective upon surrender of the original Honeywell Credit Support Instrument to the originating bank and such bank’s confirmation to Honeywell of cancelation thereof) indicating that Honeywell or such other member of the Honeywell Group will, effective upon the consummation of the Distribution, have no liability with respect to such Credit Support Instruments, in each case reasonably satisfactory to Honeywell.

 

(b)    Honeywell shall use reasonable best efforts to arrange, at its sole cost and expense and effective on or prior to the Distribution Date, the replacement of all Credit Support Instruments provided by or through AdvanSix or any other member of the AdvanSix Group for the benefit of Honeywell or any other member of the Honeywell Group (“ AdvanSix Credit Support Instruments ”) with alternate arrangements that do not require any credit support from AdvanSix or any other member of the AdvanSix Group, and shall use reasonable best efforts to obtain from the beneficiaries of such Credit Support Instruments written releases (which in the case of a letter of credit or bank guarantee would be effective upon surrender of the original AdvanSix Credit Support Instrument to the originating bank and such bank’s confirmation to AdvanSix of cancelation thereof) indicating that AdvanSix or such other member of the AdvanSix Group will, effective upon the consummation of the Distribution, have no liability with respect to such Credit Support Instruments, in each case reasonably satisfactory to AdvanSix.

 

(c)    Honeywell and AdvanSix shall provide each other with written notice of the existence of all Credit Support Instruments a reasonable period prior to the Distribution.

 
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ARTICLE IV

Actions Pending the Distribution

 

SECTION 4.01. Actions Prior to the Distribution. (a) Subject to the conditions specified in Section 4.02 and subject to Section 5.03, Honeywell and AdvanSix shall use reasonable best efforts to consummate the Distribution. Such efforts shall include taking the actions specified in this Section 4.01.

 

(b) Prior to the Distribution, Honeywell shall mail the Information Statement to the Record Holders.

 

(c) AdvanSix shall prepare, file with the Commission and use its reasonable best efforts to cause to become effective any registration statements or amendments thereto required to effect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the transactions contemplated by this Agreement or any of the Ancillary Agreements.

 

(d) Honeywell and AdvanSix shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution.

 

(e) AdvanSix shall prepare and file, and shall use reasonable best efforts to have approved prior to the Distribution, an application for the listing of the AdvanSix Common Stock to be distributed in the Distribution on the Exchange, subject to official notice of distribution.

 

(f) Prior to the Distribution, Honeywell shall have duly elected the individuals listed as members of the AdvanSix board of directors in the Information Statement, and such individuals shall be the members of the AdvanSix board of directors effective as of immediately after the Distribution; provided , however , that to the extent required by any Law or requirement of the Exchange or any other national securities exchange, as applicable, one independent director shall be appointed by the existing board of directors of AdvanSix prior to the date on which “when-issued” trading of the AdvanSix Common Stock begins on the Exchange and begin his or her term prior to the Distribution and shall serve on AdvanSix’s Audit Committee, Compensation Committee and Nominating and Governance Committee.

 

(g) Prior to the Distribution, Honeywell shall deliver or cause to be delivered to AdvanSix resignations, effective as of immediately after the Distribution, of each individual who will be an employee of any member of the Honeywell Group after the Distribution and who is an officer or director of any member of the AdvanSix Group immediately prior to the Distribution.

 

(h) Immediately prior to the Distribution, the Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws of AdvanSix, each in substantially the form filed as an exhibit to the Form 10, shall be in effect.

 

(i) Prior to the Distribution, AdvanSix shall make capital and other expenditures and operate its cash management, accounts payable and receivables collection

 
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systems in the ordinary course of business consistent with prior practice except as required in connection with the transactions contemplated by this Agreement and Ancillary Agreements.

 

(j) Honeywell and AdvanSix shall, subject to Section 5.03, take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 4.02 to be satisfied and to effect the Distribution on the Distribution Date.

 

SECTION 4.02. Conditions Precedent to Consummation of the Distribution. Subject to Section 5.03, as soon as practicable after the date of this Agreement, the Parties shall use reasonable best efforts to satisfy the following conditions prior to the consummation of the Distribution. The obligations of the Parties to consummate the Distribution shall be conditioned on the satisfaction, or waiver by Honeywell, of the following conditions:

 

(a) The board of directors of Honeywell shall have authorized and approved the Separation and Distribution and not withdrawn such authorization and approval, and shall have declared the dividend of AdvanSix Common Stock to Honeywell shareholders.

 

(b) Each Ancillary Agreement shall have been executed by each party to such agreement.

 

(c) The Commission shall have declared effective the Form 10, no stop order suspending the effectiveness of the Form 10 shall be in effect and no proceedings for that purpose shall be pending before or threatened by the Commission.

 

(d) The AdvanSix Common Stock shall have been accepted for listing on the Exchange or another national securities exchange approved by Honeywell, subject to official notice of issuance.

 

(e) Honeywell shall have received the written opinion of Cravath, Swaine & Moore LLP, which shall remain in full force and effect, that, subject to the accuracy of and compliance with the relevant Tax Opinion Representations, each of the applicable Internal Transactions and the Distribution should qualify for its Intended Tax Treatment.

 

(f) The Internal Transactions shall have been completed.

 

(g) No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution shall be in effect, and no other event outside the control of Honeywell shall have occurred or failed to occur that prevents the consummation of the Distribution.

 

(h) No other events or developments shall have occurred prior to the Distribution that, in the judgment of the board of directors of Honeywell, would result in the Distribution having a material adverse effect on Honeywell or the shareholders of Honeywell.

 

(i) The actions set forth in Sections 4.01(b), (f), (g) and (h) shall have been completed.

 
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(j) AdvanSix shall have delivered to Honeywell a certificate signed by the Chief Executive Officer of AdvanSix, dated as of the Distribution Date, certifying that AdvanSix has complied with Section 4.01(i).

 

The foregoing conditions are for the sole benefit of Honeywell and shall not give rise to or create any duty on the part of Honeywell or the Honeywell board of directors to waive or not waive such conditions or in any way limit the right of Honeywell to terminate this Agreement as set forth in Article XI or alter the consequences of any such termination from those specified in such Article. Any determination made by the Honeywell board of directors prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 4.02 shall be conclusive.

 

ARTICLE V

The Distribution

 

SECTION 5.01. The Distribution. (a) AdvanSix shall cooperate with Honeywell to accomplish the Distribution and shall, at the direction of Honeywell, use its reasonable best efforts to promptly take any and all actions necessary or desirable to effect the Distribution. Honeywell shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, distribution agent and financial, legal, accounting and other advisors for Honeywell. Honeywell or AdvanSix, as the case may be, will provide, or cause the applicable member of its Group to provide, to the Agent all share certificates and any information required in order to complete the Distribution.

 

(b) Subject to the terms and conditions set forth in this Agreement, (i) after completion of the Internal Transactions and on or prior to the Distribution Date, for the benefit of and distribution to the holders of Honeywell Common Stock as of the Record Date (“ Record Holders ”), Honeywell will deliver to the Agent all of the issued and outstanding shares of AdvanSix Common Stock then owned by Honeywell or any other member of the Honeywell Group and book-entry authorizations for such shares and (ii) on the Distribution Date, Honeywell shall instruct the Agent to distribute, by means of a pro rata dividend based on the aggregate number of shares of Honeywell Common Stock held by each applicable Record Holder, to each Record Holder (or such Record Holder’s bank or brokerage firm on such Record Holder’s behalf) electronically, by direct registration in book-entry form, the number of shares of AdvanSix Common Stock to which such Record Holder is entitled based on a distribution ratio determined by Honeywell in its sole discretion. The Distribution shall be effective at 11:59 p.m. New York City time on the Distribution Date. On or as soon as practicable after the Distribution Date, the Agent will mail to each Record Holder an account statement indicating the number of shares of AdvanSix Common Stock that have been registered in book-entry form in the name of such Record Holder.

 

SECTION 5.02. Fractional Shares. The Agent and Honeywell shall, as soon as practicable after the Distribution Date, (a) determine the number of whole shares and fractional shares of AdvanSix Common Stock allocable to each Record Holder, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions at then prevailing trading prices on behalf of holders who would otherwise be

 
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entitled to fractional share interests and (c) distribute to each such holder, or for the benefit of each beneficial owner, such holder’s or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of AdvanSix Common Stock after making appropriate deductions for any amount required to be withheld under applicable Tax Law and less any brokers’ charges, commissions or transfer Taxes. The Agent, in its sole discretion, will determine the timing and method of selling such fractional shares, the selling price of such fractional shares and the broker-dealer through which such fractional shares will be sold; provided , however , that the designated broker-dealer is not an Affiliate of Honeywell or AdvanSix. Neither Honeywell nor AdvanSix will pay any interest on the proceeds from the sale of fractional shares.

 

SECTION 5.03. Sole Discretion of Honeywell. Honeywell shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth below, Honeywell may at any time and from time to time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution.

 

ARTICLE VI

Mutual Releases; Indemnification

 

SECTION 6.01. Release of Pre-Distribution Claims. (a) Except as provided in Section 6.01(c) or elsewhere in this Agreement or the Ancillary Agreements, effective as of the Distribution, AdvanSix does hereby, for itself and each other member of the AdvanSix Group, their respective Affiliates, and to the extent it may legally do so, successors and assigns and all Persons who at any time on or prior to the Distribution have been shareholders, directors, officers, agents or employees of any member of the AdvanSix Group (in each case, in their respective capacities as such), remise, release and forever discharge Honeywell and the other members of the Honeywell Group, their respective Affiliates, successors and assigns, and all Persons who at any time on or prior to the Distribution have been shareholders, directors, officers, agents or employees of any member of the Honeywell Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all AdvanSix Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution, including in connection with the Spin-Off and all other activities to implement the Spin-Off. This Section 6.01(a) shall not affect Honeywell’s indemnification obligations with respect to Liabilities arising on or before the Distribution Date under Article Eleventh(2) of its Amended and Restated Certificate of Incorporation, as in effect on the date on which the event or circumstances giving rise to such indemnification obligation occur.

 
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(b) Except as provided in Section 6.01(c) or elsewhere in this Agreement or the Ancillary Agreements, effective as of the Distribution, Honeywell does hereby, for itself and each other member of the Honeywell Group, their respective Affiliates, and to the extent it may legally do so, successors and assigns and all Persons who at any time on or prior to the Distribution have been shareholders, directors, officers, agents or employees of any member of the Honeywell Group (in each case, in their respective capacities as such), remise, release and forever discharge AdvanSix, the other members of the AdvanSix Group, their respective Affiliates, successors and assigns, and all Persons who at any time on or prior to the Distribution have been shareholders, directors, officers, agents or employees of any member of the AdvanSix Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Honeywell Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution, including in connection with the Spin-Off and all other activities to implement the Spin-Off.

 

(c) Nothing contained in Section 6.01(a) or (b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any Intercompany Agreement or Intercompany Account that is specified in Section 2.03(c) not to terminate as of the Distribution, in each case in accordance with its terms. Nothing contained in Section 6.01(a) or (b) shall release any Person from:

 

(i) any Liability provided in or resulting from any agreement among any members of the Honeywell Group or the AdvanSix Group that is specified in Section 2.03(c) as not to terminate as of the Distribution, or any other Liability specified in such Section 2.03(c) as not to terminate as of the Distribution;

 

(ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

 

(iii) any Liability provided in or resulting from any other agreement or understanding that is entered into after the Distribution between one Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand;

 

(iv) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or any Ancillary Agreement for claims brought against the Parties, the members of their respective Groups or any of their respective directors, officers, employees or agents, by third Persons, which Liability shall be governed by the provisions of this Article VI or, if applicable, the appropriate provisions of the relevant Ancillary Agreement; or

 

(v) any Liability the release of which would result in the release of any Person not otherwise intended to be released pursuant to this Section 6.01.

 
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(d) AdvanSix shall not make, and shall not permit any other member of the AdvanSix Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Honeywell or any other member of the Honeywell Group, or any other Person released pursuant to Section 6.01(a), with respect to any Liabilities released pursuant to Section 6.01(a). Honeywell shall not make, and shall not permit any other member of the Honeywell Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against AdvanSix or any other member of the AdvanSix Group, or any other Person released pursuant to Section 6.01(b), with respect to any Liabilities released pursuant to Section 6.01(b).

 

(e) It is the intent of each of Honeywell and AdvanSix, by virtue of the provisions of this Section 6.01, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date, between or among AdvanSix or any other member of the AdvanSix Group, on the one hand, and Honeywell or any other member of the Honeywell Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Distribution Date), except as set forth in Section 6.01(c) or elsewhere in this Agreement or in any Ancillary Agreement. At any time, at the request of the other Party, each Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.

 

SECTION 6.02. Indemnification by AdvanSix. Subject to Section 6.04, AdvanSix shall indemnify, defend and hold harmless Honeywell, each other member of the Honeywell Group and each of their respective former and current directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Honeywell Indemnitees ”), from and against any and all Liabilities of the Honeywell Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

 

(a) the AdvanSix Liabilities, including the failure of AdvanSix or any other member of the AdvanSix Group or any other Person to pay, perform or otherwise promptly discharge any AdvanSix Liability in accordance with its terms;

 

(b) any breach by AdvanSix or any other member of the AdvanSix Group of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein (which shall be controlling); and

 

(c) any breach by AdvanSix of any of the representations and warranties made by AdvanSix on behalf of itself and the members of the AdvanSix Group in Section 12.01(c).

 

SECTION 6.03. Indemnification by Honeywell. Subject to Section 6.04, Honeywell shall indemnify, defend and hold harmless AdvanSix, each other member of the AdvanSix Group and each of their respective former and current directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ AdvanSix Indemnitees ”), from and against any and all Liabilities of the

 
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AdvanSix Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

 

(a) the Honeywell Liabilities, including the failure of Honeywell or any other member of the Honeywell Group or any other Person to pay, perform or otherwise promptly discharge any Honeywell Liability in accordance with its terms;

 

(b) any breach by Honeywell or any other member of the Honeywell Group of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein (which shall be controlling); and

 

(c) any breach by Honeywell of any of the representations and warranties made by Honeywell on behalf of itself and the members of the Honeywell Group in Section 12.01(c).

 

SECTION 6.04. Indemnification Obligations Net of Insurance Proceeds and Third-Party Proceeds. (a) The Parties intend that any Liability subject to indemnification or reimbursement pursuant to this Agreement will be net of (i) Insurance Proceeds that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability or (ii) other amounts recovered from any third party that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability (“ Third-Party Proceeds ”). Accordingly, the amount that either Party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification or reimbursement pursuant to this Agreement (an “ Indemnitee ”) will be reduced by any Insurance Proceeds or Third-Party Proceeds theretofore actually recovered by or on behalf of the Indemnitee from a third party in respect of the related Liability. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Liability (an “ Indemnity Payment ”) and subsequently receives Insurance Proceeds or Third-Party Proceeds in respect of such Liability, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if such Insurance Proceeds or Third-Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.

 

(b) An insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or have any subrogation rights with respect thereto by virtue of the indemnification provisions hereof, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a “wind-fall” ( i.e. , a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof. Each member of the Honeywell Group and AdvanSix Group shall use reasonable best efforts to seek to collect or recover any Insurance Proceeds and any Third-Party Proceeds to which such Person is entitled in connection with any Liability for which such Person seeks indemnification pursuant to this Article VI; provided , however , that such Person’s inability to collect or recover any such Insurance Proceeds or Third-Party Proceeds shall not limit the Indemnifying Party’s obligations hereunder.

 

(c) The calculation of any Indemnity Payments required by this Agreement shall be subject to Section 5.04 of the TMA.

 
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SECTION 6.05. Procedures for Indemnification of Third-Party Claims. (a) If an Indemnitee shall receive notice or otherwise learn of a Third-Party Claim with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as reasonably practicable, but no later than 30 days after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail. Notwithstanding the foregoing, the failure of any Indemnitee or other Person to give notice as provided in this Section 6.05(a) shall not relieve the related Indemnifying Party of its obligations under this Article VI, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice.

 

(b) The Indemnifying Party shall have the right, exercisable by written notice to the Indemnitee within 30 calendar days after receipt of notice from an Indemnitee in accordance with Section 6.05(a) (or sooner, if the nature of such Third-Party Claim so requires), to assume and conduct the defense of such Third-Party Claim in accordance with the limits set forth in this Agreement with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnitee; provided , however , that the Third-Party Claim primarily seeks (and continues to primarily seek) monetary damages and any claim for relief other than monetary damages as part of such Third-Party Claim is only incidental thereto (the condition set forth in this proviso, the “ Litigation Condition ”).

 

(c) If the Indemnifying Party elects not to assume the defense of a Third-Party Claim (or is not permitted to assume the defense of a Third-Party Claim as a result of the Litigation Condition not being met with respect thereto) in accordance with this Agreement, or fails to notify an Indemnitee of its election as provided in Section 6.05(b), such Indemnitee may defend such Third-Party Claim at the cost and expense of the Indemnifying Party.

 

(d) If the Indemnifying Party elects (and is permitted) to assume the defense of a Third-Party Claim in accordance with the terms of this Agreement, the Indemnitees shall, subject to the terms of this Agreement, cooperate with the Indemnifying Party with respect to the defense of such Third-Party Claim.

 

(e) If the Indemnifying Party elects (and is permitted) to assume the defense of a Third-Party Claim in accordance with the terms of this Agreement, the Indemnifying Party will not be liable for any additional legal expenses subsequently incurred by the Indemnitee in connection with the defense of the Third-Party Claim; provided , however , that if (i) the Litigation Condition ceases to be met or (ii) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third-Party Claim, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable costs or expenses paid or incurred in connection with such defense. The Indemnifying Party or the Indemnitee, as the case may be, shall have the right to participate in (but, subject to the prior sentence, not control), at its own expense, the defense of any Third-Party Claim that the other is defending as provided in this Agreement. In the event, however, that such Indemnitee reasonably determines that representation by counsel to the Indemnifying Party of both such Indemnifying Party and the Indemnitee could reasonably be expected to present such counsel with a conflict of interest, then the Indemnitee may employ separate counsel to represent or defend it in any such action or

 
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proceeding and the Indemnifying Party will pay the reasonable fees and expenses of such counsel.

 

(f) No Indemnifying Party shall consent to entry of any judgment or enter into any settlement of any Third-Party Claim without the consent of the applicable Indemnitee or Indemnitees; provided , however , that such Indemnitee(s) shall be required to consent to such entry of judgment or to such settlement that the Indemnifying Party may recommend if the judgment or settlement (i) contains no finding or admission of any violation of Law or any violation of the rights of any Person, (ii) involves only monetary relief which the Indemnifying Party has agreed to pay and (iii) includes a full and unconditional release of the Indemnitee. Notwithstanding the foregoing, in no event shall an Indemnitee be required to consent to any entry of judgment or settlement if the effect thereof is to permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against any Indemnitee.

 

(g) Whether or not the Indemnifying Party assumes the defense of a Third-Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the Indemnifying Party’s prior written consent (such consent not to be unreasonably withheld or delayed).

 

SECTION 6.06. Additional Matters. (a) Any claim on account of a Liability that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. A failure by an Indemnittee to give notice shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure. Such Indemnifying Party shall have a period of 30 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 30-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such 30-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such Party as contemplated by this Agreement.

 

(b) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

(c) In the event of an Action relating to a Liability that has been allocated to an Indemnifying Party pursuant to the terms of this Agreement or any Ancillary Agreement in which the Indemnifying Party is not a named defendant, if the Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant or add the Indemnifying Party as an additional named defendant, if at all practicable. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action and the Indemnifying Party shall fully indemnify the named defendant against all reasonable costs of defending the Action

 
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(including court costs, sanctions imposed by a court, attorneys’ fees, experts, fees and all other external expenses), the costs of any judgment or settlement and the cost of any interest or penalties relating to any judgment or settlement.

 

SECTION 6.07. Remedies Cumulative. The remedies provided in this Article VI shall be cumulative and, subject to the provisions of Article X, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

 

SECTION 6.08. Survival of Indemnities. The rights and obligations of each of Honeywell and AdvanSix and their respective Indemnitees under this Article VI shall survive the sale or other transfer by any Party or its Affiliates of any Assets or businesses or the assignment by it of any Liabilities.

 

SECTION 6.09. Limitation on Liability. Except as may expressly be set forth in this Agreement, none of Honeywell, AdvanSix or any other member of either Group shall in any event have any Liability to the other or to any other member of the other’s Group, or to any other Honeywell Indemnitee or AdvanSix Indemnitee, as applicable, under this Agreement (i) with respect to any matter to the extent that such Party seeking indemnification has engaged in any knowing violation of Law or fraud in connection therewith or (ii) for any indirect, special, punitive or consequential damages, whether or not caused by or resulting from negligence or breach of obligations hereunder and whether or not informed of the possibility of the existence of such damages; provided , however , that the provisions of this Section 6.09(ii) shall not limit an Indemnifying Party’s indemnification obligations hereunder with respect to any Liability any Indemnitee may have to any third party not affiliated with any member of the Honeywell Group or the AdvanSix Group for any indirect, special, punitive or consequential damages.

 

ARTICLE VII

Access to Information; Confidentiality

 

SECTION 7.01. Agreement for Exchange of Information; Archives. (a) Except in the case of an adversarial Action or threatened adversarial Action by either Honeywell or AdvanSix or a Person or Persons in its Group against the other Party or a Person or Persons in its Group, and subject to Section 7.01(b), each of Honeywell and AdvanSix, on behalf of its respective Group, shall provide, or cause to be provided, to the other Party, at any time after the Distribution, as soon as reasonably practicable after written request therefor, any Information relating to time periods on or prior to the Distribution Date in the possession or under the control of such respective Group, which Honeywell or AdvanSix, or any member of its respective Group, as applicable, reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on Honeywell or AdvanSix, or any member of its respective Group, as applicable (including under applicable securities Laws), by any national securities exchange or any Governmental Authority having jurisdiction over Honeywell or AdvanSix, or any member of its respective Group, as applicable, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, regulatory, litigation or other similar requirements or (iii) to comply with its obligations under this Agreement or any Ancillary Agreement. The receiving Party shall use any Information received pursuant to this

 
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Section 7.01(a) solely to the extent reasonably necessary to satisfy the applicable obligations or requirements described in clause (i), (ii) or (iii) of the immediately preceding sentence.

 

(b) In the event that either Honeywell or AdvanSix determines that the exchange of any Information pursuant to Section 7.01(a) could be commercially detrimental, violate any Law or agreement or waive or jeopardize any attorney-client privilege or attorney work product protection, such Party shall not be required to provide access to or furnish such Information to the other Party; provided , however , that both Honeywell and AdvanSix shall take all commercially reasonable measures to permit compliance with Section 7.01(a) in a manner that avoids any such harm or consequence. Both Honeywell and AdvanSix intend that any provision of access to or the furnishing of Information pursuant to this Section 7.01 that would otherwise be within the ambit of any legal privilege shall not operate as waiver of such privilege.

 

(c) Each of AdvanSix and Honeywell agrees, on behalf of itself and each member of the Group of which it is a member, not to disclose or otherwise waive any privilege or protection attaching to any privileged Information relating to a member of the other Group or relating to or arising in connection with the relationship between the Groups prior to the Distribution, without providing prompt written notice to and obtaining the prior written consent of the other (not to be unreasonably withheld or delayed).

 

(d) Honeywell and AdvanSix each agrees that it will only process personal data provided to it by the other Group in accordance with all applicable privacy and data protection Laws and obligations (including any applicable privacy policies of the AdvanSix Group or the Honeywell Group, as the case may be) and will implement and maintain at all times appropriate technical and organizational measures to protect such personal data against unauthorized or unlawful processing and accidental loss, destruction, damage, alteration and disclosure. In addition, each Party agrees to provide reasonable assistance to the other Party in respect of any obligations under privacy and data protection legislation affecting the disclosure of such personal data to the other Party and will not knowingly process such personal data in such a way to cause the other Party to violate any of its obligations under any applicable privacy and data protection legislation.

 

SECTION 7.02. Ownership of Information. Any Information owned by one Group that is provided to the requesting Party hereunder shall be deemed to remain the property of the providing Party. Except as specifically set forth herein, nothing herein shall be construed as granting or conferring rights of license or otherwise in any such Information.

 

SECTION 7.03. Compensation for Providing Information. Honeywell and AdvanSix shall reimburse each other for the reasonable costs, if any, in complying with a request for Information pursuant to this Article VII. Except as may be otherwise specifically provided elsewhere in this Agreement, such costs shall be computed in accordance with AdvanSix’s or Honeywell’s, as applicable, standard methodology and procedures.

 

SECTION 7.04. Record Retention. To facilitate the possible exchange of Information pursuant to this Article VII and other provisions of this Agreement, each Party shall use its reasonable best efforts to retain all Information in such Party’s possession relating to the other Party or its businesses, Assets or Liabilities, this Agreement or the Ancillary Agreements

 
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(the “ Retained Information ”) in accordance with its respective record retention policy as in effect on the date hereof or such longer or shorter period as required by Law, this Agreement or the Ancillary Agreements.

 

SECTION 7.05. Accounting Information. Without limiting the generality of Section 7.01 but subject to Section 7.01(b):

 

(a) Until the end of the first full fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards as required by Law for Honeywell to prepare consolidated financial statements or complete a financial statement audit for any period during which the financial results of the AdvanSix Group were consolidated with those of Honeywell), AdvanSix shall use its reasonable best efforts to enable Honeywell to meet its timetable for dissemination of its financial statements and to enable Honeywell’s auditors to timely complete their annual audit and quarterly reviews of financial statements. As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting, (i) AdvanSix shall authorize and direct its auditors to make available to Honeywell’s auditors, within a reasonable time prior to the date of Honeywell’s auditors’ opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of AdvanSix and (y) work papers related to such annual audits and quarterly reviews, to enable Honeywell’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of AdvanSix’s auditors as it relates to Honeywell’s auditors’ opinion or report and (ii) until all governmental audits are complete, AdvanSix shall provide reasonable access during normal business hours for Honeywell’s internal auditors, counsel and other designated representatives to (x) the premises of AdvanSix and its Subsidiaries and all Information (and duplicating rights) within the knowledge, possession or control of AdvanSix and its Subsidiaries and (y) the officers and employees of AdvanSix and its Subsidiaries, so that Honeywell may conduct reasonable audits relating to the financial statements provided by AdvanSix and its Subsidiaries; provided , however , that such access shall not be unreasonably disruptive to the business and affairs of the AdvanSix Group.

 

(b) Until the end of the first full fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards or as required by Law), Honeywell shall use its reasonable best efforts to enable AdvanSix to meet its timetable for dissemination of its financial statements and to enable AdvanSix’s auditors to timely complete their annual audit and quarterly reviews of financial statements. As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting, (i) Honeywell shall authorize and direct its auditors to make available to AdvanSix’s auditors, within a reasonable time prior to the date of AdvanSix’s auditors’ opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of Honeywell and (y) work papers related to such annual audits and quarterly reviews, to enable AdvanSix’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of Honeywell’s auditors as it relates to AdvanSix’s auditors’ opinion or report and (ii) until all governmental audits are complete, Honeywell shall provide reasonable access during normal business hours for AdvanSix’s internal auditors, counsel and other designated representatives to (x) the premises of Honeywell and its Subsidiaries and all Information (and duplicating rights) within the

 
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knowledge, possession or control of Honeywell and its Subsidiaries and (y) the officers and employees of Honeywell and its Subsidiaries, so that AdvanSix may conduct reasonable audits relating to the financial statements provided by Honeywell and its Subsidiaries; provided , however , that such access shall not be unreasonably disruptive to the business and affairs of the Honeywell Group.

 

(c) In order to enable the principal executive officer(s) and principal financial officer(s) (as such terms are defined in the rules and regulations of the Commission) of Honeywell to make any certifications required of them under Section 302 or 906 of the Sarbanes-Oxley Act of 2002, AdvanSix shall, within a reasonable period of time following a request from Honeywell in anticipation of filing such reports, cause its principal executive officer(s) and principal financial officer(s) to provide Honeywell with certifications of such officers in support of the certifications of Honeywell’s principal executive officer(s) and principal financial officer(s) required under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 with respect to Honeywell’s Quarterly Report on Form 10-Q filed with respect to the fiscal quarter during which the Distribution Date occurs (unless such quarter is the fourth fiscal quarter), each subsequent fiscal quarter through the third fiscal quarter of the year in which the Distribution Date occurs and Honeywell’s Annual Report on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs. Such certifications shall be provided in substantially the same form and manner as such AdvanSix officers provided prior to the Distribution (reflecting any changes in certifications necessitated by the Spin-Off or any other transactions related thereto) or as otherwise agreed upon between Honeywell and AdvanSix.

 

SECTION 7.06. Limitations of Liability. Neither Honeywell nor AdvanSix shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate in the absence of wilful misconduct by the providing Person. Neither Honeywell nor AdvanSix shall have any Liability to the other Party if any Information is destroyed after reasonable best efforts by AdvanSix or Honeywell, as applicable, to comply with the provisions of Section 7.04.

 

SECTION 7.07. Production of Witnesses; Records; Cooperation. (a) After the Distribution Date, except in the case of an adversarial Action or threatened adversarial Action by either Honeywell or AdvanSix or a Person or Persons in its Group against the other Party or a Person or Persons in its Group, each of Honeywell and AdvanSix shall take all reasonable steps to make available, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the Persons in its respective Group (whether as witnesses or otherwise) and any books, records or other documents within its control or that it otherwise has the ability to make available, to the extent that such Person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action or threatened or contemplated Action (including preparation for such Action) in which Honeywell or AdvanSix, as applicable, may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all reasonable out-of-pocket costs and expenses in connection therewith.

 
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(b) Without limiting the foregoing, Honeywell and AdvanSix shall use their reasonable best efforts to cooperate and consult to the extent reasonably necessary with respect to any Actions or threatened or contemplated Actions, other than an adversarial Action against the other Group.

 

(c) The obligation of Honeywell and AdvanSix to make available former, current and future directors, officers, employees and other personnel and agents or provide witnesses and experts pursuant to this Section 7.07 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to make available employees and other officers without regard to whether such individual or the employer of such individual could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 7.07(a)). Without limiting the foregoing, each of Honeywell and AdvanSix agrees that neither it nor any Person or Persons in its respective Group will take any adverse action against any employee of its Group based on such employee’s provision of assistance or information to each other pursuant to this Section 7.07.

 

(d) Upon the reasonable request of Honeywell or AdvanSix, in connection with any Action contemplated by this Article VII, Honeywell and AdvanSix will enter into a mutually acceptable common interest agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of either Group.

 

SECTION 7.08. Confidential Information. (a) Each of Honeywell and AdvanSix, on behalf of itself and each Person in its respective Group, shall hold, and cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives to hold, in strict confidence and not release or disclose, with at least the same degree of care, but no less than a reasonable degree of care, that it applies to its own confidential and proprietary information pursuant to policies in effect as of the Distribution Date, all Information concerning the other Group or its business that is either in its possession (including Information in its possession prior to the Distribution) or furnished by the other Group or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder, except, in each case, to the extent that such Information is (i) in the public domain through no fault of any member of the Honeywell Group or the AdvanSix Group, as applicable, or any of its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) later lawfully acquired from other sources by any of Honeywell, AdvanSix or its respective Group, directors, officers, employees, agents, accountants, counsel and other advisors and representatives, as applicable, which sources are not themselves bound by a confidentiality obligation to the knowledge of any of Honeywell, AdvanSix or Persons in its respective Group, as applicable, (iii) independently generated without reference to any proprietary or confidential Information of the Honeywell Group or the AdvanSix Group, as applicable, or (iv) required to be disclosed by Law; provided , however , that the Person required to disclose such Information gives the applicable Person prompt, and to the extent reasonably practicable, prior notice of such disclosure and an opportunity to contest such disclosure and shall use reasonable best efforts to cooperate, at the expense of the requesting Person, in seeking any reasonable protective arrangements requested by such Person. In the event that such appropriate protective order or other remedy is not obtained, the Person that is required to disclose such Information shall

 
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furnish, or cause to be furnished, only that portion of such Information that is legally required to be disclosed and shall use reasonable best efforts to ensure that confidential treatment is accorded such Information. Notwithstanding the foregoing, each of Honeywell and AdvanSix may release or disclose, or permit to be released or disclosed, any such Information concerning the other Group (x) to their respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information (who shall be advised of the obligations hereunder with respect to such Information), and (y) to any nationally recognized statistical rating organization as it reasonably deems necessary, solely for the purpose of obtaining a rating of securities or other debt instruments upon normal terms and conditions; provided , however , that the Party whose Information is being disclosed or released to such rating organization is promptly notified thereof.

 

(b) Without limiting the foregoing, when any Information concerning the other Group or its business is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each of Honeywell and AdvanSix will, promptly after request of the other Party, either return all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other Party, as applicable, that it has destroyed such Information, other than, in each case, any such Information electronically preserved or recorded within any computerized data storage device or component (including any hard-drive or database) pursuant to automatic or routine backup procedures generally accessible only by legal, information technology or compliance personnel.

 

ARTICLE VIII

Insurance

 

SECTION 8.01. Insurance. (a) Until the Distribution Date, Honeywell shall (i) cause the members of the AdvanSix Group and their respective employees, officers and directors to continue to be covered as insured parties under Honeywell’s policies of insurance in a manner which is no less favorable than the coverage provided for the Honeywell Group and (ii) permit the members of the AdvanSix Group and their respective employees, officers and directors to submit claims arising from or relating to facts, circumstances, events or matters that occurred prior to the Distribution Date to the extent permitted under such policies. With respect to policies currently procured by AdvanSix for the sole benefit of the AdvanSix Group, AdvanSix shall continue to maintain such insurance coverage through the Distribution Date in a manner no less favorable than currently provided. Without limiting any of the rights or obligations of the parties pursuant to the last sentence of this Section 8.01(a), Section 8.01(b) or Section 8.01(e), Honeywell and AdvanSix acknowledge that, as of immediately prior to the Distribution Date, Honeywell intends to take such action as it may deem necessary or desirable to remove the members of the AdvanSix Group and their respective employees, officers and directors as insured parties under any policy of insurance issued to any member of the Honeywell Group by any insurance carrier effective immediately prior to the Distribution Date. The AdvanSix Group will not be entitled on or following the Distribution Date, absent mutual agreement otherwise, to make any claims for insurance thereunder to the extent such claims are based upon facts, circumstances, events or matters occurring on or after the Distribution Date or to the extent any claims are made pursuant to any Honeywell claims-made policies on or after the Distribution Date. No member of the Honeywell Group shall be deemed to have made any representation or

 
37

warranty as to the availability of any coverage under any such insurance policy. Notwithstanding the foregoing, Honeywell shall, and shall cause the other members of the Honeywell Group to, use reasonable best efforts to take such actions as are necessary to cause all insurance policies of the Honeywell Group that immediately prior to the Distribution provide coverage to or with respect to the members of the AdvanSix Group and their respective employees, officers and directors to continue to provide such coverage with respect to acts, omissions or events occurring prior to the Distribution in accordance with their terms as if the Distribution had not occurred; provided , however , that in no event shall Honeywell be required to extend or maintain coverage under claims-made policies with respect to any claims first made against a member of the AdvanSix Group or first reported to the insurer on or after the Distribution Date.

 

(b) On and after the Distribution Date, the members of each of the Honeywell Group and the AdvanSix Group shall have the right to assert Pre-Separation Insurance Claims and the members of the AdvanSix Group shall have the right to participate with Honeywell to resolve Pre-Separation Insurance Claims under the applicable Honeywell insurance policies up to the full extent of the applicable and available limits of liability of such policy. Honeywell or AdvanSix, as the case may be, shall have primary control over those Pre-Separation Insurance Claims for which the Honeywell Group or the AdvanSix Group, respectively, bears the underlying loss, subject to the terms and conditions of the relevant policy of insurance governing such control. If a member of the AdvanSix Group is unable to assert a Pre-Separation Insurance Claim because it is no longer an “insured” under a Honeywell insurance policy, then Honeywell shall assert such claim in its own name and deliver the Insurance Proceeds to AdvanSix. Any Insurance Proceeds received by the Honeywell Group for members of the AdvanSix Group shall be for the benefit of the AdvanSix Group. Any Insurance Proceeds received for the benefit of both the Honeywell Group and the AdvanSix Group shall be distributed pro   rata based on the respective share of the underlying loss.

 

(c) With respect to Pre-Separation Insurance Claims, whether or not known or reported on or prior to the Distribution Date, AdvanSix shall, or shall cause the applicable member of the AdvanSix Group to, report such claims arising from the AdvanSix Business as soon as practicable to each of Honeywell and the applicable insurer(s), and AdvanSix shall, or shall cause the applicable member of AdvanSix Group to, individually, and not jointly, assume and be responsible (including, upon the request of Honeywell, by reimbursement to Honeywell for amounts paid or payable by it) for the reimbursement Liability (including any deductible, coinsurance or retention payment) related to its portion of the Liability, unless otherwise agreed in writing by Honeywell. Each of Honeywell and AdvanSix shall, and shall cause each member of the Honeywell Group and AdvanSix Group, respectively, to, cooperate and assist the applicable member of the AdvanSix Group and the Honeywell Group, as applicable, with respect to such claims. The applicable member of the AdvanSix Group shall provide to Honeywell any collateral (or a letter of credit in an amount equal to the value of such collateral) in respect of the reimbursement obligations as may reasonably be requested by the insurers and, upon the request of Honeywell, any other collateral required by the insurers in respect of insurance policies under which Pre-Separation Insurance Claims may be recoverable based upon Honeywell’s reasonable estimate of the proportion of the requested collateral attributable to claims that may be made by the AdvanSix Group. Honeywell agrees that Pre-Separation Insurance Claims of members of the AdvanSix Group shall receive the same priority as Pre-Separation Insurance Claims of members

 
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of the Honeywell Group and be treated equitably in all respects, including in connection with deductibles, retentions and coinsurance.

 

(d) Honeywell shall not be liable to AdvanSix for claims, or portions of claims, not reimbursed by insurers under any policy for any reason, including coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of any insurance carrier(s), policy limitations or restrictions (including exhaustion of limits), any coverage disputes, any failure to timely file a claim by any member of the Honeywell Group or any member of the AdvanSix Group or any defect in such claim or its processing. In the event that insurable claims of both Honeywell and AdvanSix (or the members of their respective Groups) exist relating to the same occurrence, the Parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense and shall not settle or compromise any such claim without the consent of the other (which consent shall not be unreasonably withheld or delayed subject to the terms and conditions of the applicable insurance policy). Nothing in this Section 8.01 shall be construed to limit or otherwise alter in any way the obligations of the Parties, including those created by this Agreement, by operation of Law or otherwise.

 

(e) On and after the Distribution Date, to the extent that any claims have been duly reported before the Distribution Date under the directors and officers liability insurance policies or fiduciary liability insurance policies (collectively, “ D&O Policies ”) maintained by members of the Honeywell Group, Honeywell shall not, and shall cause the members of the Honeywell Group not to, take any action that would limit the coverage of the individuals who acted as directors or officers of AdvanSix (or members of the AdvanSix Group) prior to the Distribution Date under any D&O Policies maintained by the members of the Honeywell Group. Honeywell shall, and shall cause the members of the Honeywell Group to, reasonably cooperate with the individuals who acted as directors and officers of AdvanSix (or members of the AdvanSix Group) prior to the Distribution Date in their pursuit of any coverage claims under such D&O Policies which could inure to the benefit of such individuals. Honeywell shall, and shall cause members of the Honeywell Group to, allow AdvanSix and its agents and representatives, upon reasonable prior notice and during regular business hours, to examine and make copies of the relevant D&O Policies maintained by Honeywell and members of the Honeywell Group pursuant to this Section 8.01(e). Honeywell shall provide, and shall cause other members of the Honeywell Group to provide, such cooperation as is reasonably requested by AdvanSix in order for AdvanSix to have in effect on and after the Distribution Date such new D&O Policies as AdvanSix deems appropriate with respect to claims reported on or after the Distribution Date. Except as provided in this Section 8.01(e), the Honeywell Group may, at any time, without liability or obligation to the AdvanSix Group, amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any “occurrence-based” insurance policy or “claims-made-based” insurance policy (and such claims will be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications); provided , however , that Honeywell will immediately notify AdvanSix of any termination of any insurance policy.

 

(f) The parties shall use reasonable best efforts to cooperate with respect to the various insurance matters contemplated by this Section 8.01.

 
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ARTICLE IX

Intellectual Property

 

SECTION 9.01. Consent To Use Intellectual Property And Duty To Cooperate. (a) AdvanSix (i) consents (on behalf of itself and each other member of the AdvanSix Group) to the use and registration of the Honeywell IP in the business and operations conducted by each member of the Honeywell Group and their Affiliates and respective licensees and (ii) agrees to use reasonable best efforts prior to, on and after the Distribution Date to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to effect the transfer, assignment, registration or any related recordation of the Honeywell IP contemplated by this Agreement, on a worldwide basis.

 

(b) Honeywell (i) consents (on behalf of itself and each other member of the Honeywell Group) to the use and registration of the AdvanSix IP in the business and operations conducted by each member of the AdvanSix Group and their Affiliates and respective licensees and (ii) agrees to use reasonable best efforts prior to, on and after the Distribution Date to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to effect the transfer, assignment, registration or any related recordation of the AdvanSix IP contemplated by this Agreement, on a worldwide basis.

 

(c) AdvanSix agrees that it will not, and agrees to cause each member of the AdvanSix Group not to (i) initiate any Action against any member of the Honeywell Group or its Affiliates for infringement, misappropriation or other violation of any AdvanSix IP, (ii) oppose, challenge, petition to cancel, contest or threaten in any way, or assist another party in opposing, challenging, petitioning to cancel, contesting or threatening in any way, any application or registration by the Honeywell Group or its Affiliates or their respective licensees for any Honeywell IP, the use of which is consistent with the use to which AdvanSix has consented under this Agreement or (iii) engage in any act, or purposefully omit to perform any act, that impairs or adversely affects the rights of Honeywell or any member of the Honeywell Group in and to any Honeywell IP, in each case for a period of five (5) years after the Distribution Date, without the prior written consent of Honeywell.

 

(d) Honeywell agrees that it will not, and agrees to cause each member of the Honeywell Group not to (i) initiate any Action against any member of the AdvanSix Group or its Affiliates for infringement, misappropriation or other violation of any Honeywell IP, (ii) oppose, challenge, petition to cancel, contest or threaten in any way, or assist another party in opposing, challenging, petitioning to cancel, contesting or threatening in any way, any application or registration by AdvanSix or its Affiliates or their respective licensees for any AdvanSix IP, the use of which is consistent with the use to which Honeywell has consented under this Agreement or (iii) engage in any act, or purposefully omit to perform any act, that impairs or adversely affects the rights of AdvanSix or any member of the AdvanSix Group in and to any AdvanSix IP, in each case for a period of five (5) years after the Distribution Date, without the prior written consent of AdvanSix.

 

(e) AdvanSix hereby acknowledges (on behalf of itself and each other member of the AdvanSix Group) Honeywell’s right, title and interest in and to the Honeywell IP, and will

 
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not in any way, directly or indirectly, do or cause to be done any act or thing contesting or in any way impairing or tending to impair any part of such right, title and interest within the business and operations of each member of the Honeywell Group and their Affiliates and respective licensees, or with respect to goods or services provided in connection with the business and operations conducted by each member of the Honeywell Group and their Affiliates and respective licensees, in each case for a period of five (5) years after the Distribution Date, without the prior written consent of Honeywell.

 

(f) Honeywell hereby acknowledges (on behalf of itself and each other member of the Honeywell Group) AdvanSix’s right, title and interest in and to the AdvanSix IP, and will not in any way, directly or indirectly, do or cause to be done any act or thing contesting or in any way impairing or tending to impair any part of such right, title and interest within the business and operations conducted by each member of the AdvanSix Group and their Affiliates and respective licensees, or with respect to goods or services provided in connection with the business and operations conducted by each member of the AdvanSix Group and their Affiliates and respective licensees, in each case for a period of five (5) years after the Distribution Date, without the prior written consent of AdvanSix.

 

(g) Prior to, on and after the Distribution Date, (i) Honeywell shall cooperate with AdvanSix, without any further consideration, but at the expense of AdvanSix, to obtain, or cause to be obtained, the Consents of any third parties necessary to effect the assignment, transfer or license of any AdvanSix IP contemplated under this Agreement or any Ancillary Agreement and (ii) AdvanSix shall cooperate with Honeywell, without any further consideration, but at the expense of Honeywell, to obtain, or cause to be obtained, the Consents of any third parties necessary to effect the assignment, transfer or license of any Honeywell IP contemplated under this Agreement or any Ancillary Agreement. If, for any reason, the assignment, transfer or license of any Intellectual Property assets or rights contemplated under this Agreement or any Ancillary Agreement is otherwise impossible or ineffective, Honeywell and AdvanSix shall, and shall cause each member of the Honeywell Group and the AdvanSix Group, respectively, to, use their reasonable best efforts to work together (and, if necessary and desirable, to work with any applicable third parties) in an effort to sublicense, divide, partially assign, modify and/or replicate (in whole or in part) the respective rights and obligations under and in respect of any planned assignment, transfer or license.

 

(h) Prior to, on and after the Distribution Date, Honeywell shall cooperate with AdvanSix, without any further consideration and at no expense to AdvanSix, to obtain, cause to be obtained or properly record the release of any outstanding liens or security interests attached to any AdvanSix IP and to take, or cause to be taken, all actions as AdvanSix may reasonably be requested to take in order to obtain, cause to be obtained or properly record such release.

 

(i) AdvanSix agrees not to use, and agrees to cause each member of the AdvanSix Group not to use, any of the Honeywell Marks, including any names, trademarks or domain names that incorporate the Honeywell Marks for any purpose, except where (i) the use is a use, otherwise than as a mark, of a member of the Honeywell Group’s individual name, or of the individual name of anyone in privity with the Honeywell Group, or of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of the Honeywell Group, or their geographic origin; or, (ii) if used as a mark, such use does not conflict

 
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with, and is unlikely to cause consumer confusion, dilute or tarnish with any Honeywell Marks, and is in no way contrary to the terms of this Article IX. Notwithstanding clauses (i) and (ii) of this Section 9.01(i) , AdvanSix agrees not to use, and agrees to cause each member of the AdvanSix Group not to use, any of the Honeywell Marks in a way that would reasonably be expected to dilute or tarnish the Honeywell Marks.

 

In the event that, as of the Distribution Date, Honeywell Marks prominently appear on any publicly available or promoted business or promotional materials used by any member of the AdvanSix Group or their Affiliates within the AdvanSix Business, AdvanSix shall remove and cease using, and shall cause each member of the AdvanSix Group to remove and cease using, such prominently appearing marks as soon as reasonably practical following the Distribution Date but in any event within 180 days of the Distribution Date or, with respect to products for sale produced prior to the Distribution Date on which any Honeywell Mark prominently appears, within 365 days of the Distribution Date; provided that AdvanSix shall promptly arrange for the destruction of any such products for sale produced prior to the Distribution Date that remain unsold following such 365-day period and on which any Honeywell Mark prominently appears.

 

Notwithstanding anything in this Agreement to the contrary, and without limiting the rights otherwise granted in this Section 9.01(i) , the AdvanSix Group shall have the right, at all times before, during and after the Distribution Date, to retain records and other historical or archived documents containing or referencing (i) the Honeywell Marks or (ii) any other Information previously held by the Honeywell Group, to the extent relating to the AdvanSix Business.

 

(j) Honeywell agrees not to use, and agrees to cause each member of the Honeywell Group not to use, any of the AdvanSix Marks, including any names, trademarks or domain names that incorporate the AdvanSix Marks for any purpose, except where (i) the use is a use, otherwise than as a mark, of a member of the AdvanSix Group’s individual name, or of the individual name of anyone in privity with the AdvanSix Group, or of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of the AdvanSix Group, or their geographic origin; or, (ii) if used as a mark, such use does not conflict with, and is unlikely to cause consumer confusion with, dilute or tarnish, any AdvanSix Marks, and is in no way contrary to the terms of this Article IX. Notwithstanding clauses (i) and (ii) of this Section 9.01(j) , Honeywell agrees not to use, and agrees to cause each member of the Honeywell Group not to use, any of the AdvanSix Marks in a way that would reasonably be expected to dilute or tarnish the AdvanSix Marks.

 

In the event that, as of the Distribution Date, AdvanSix Marks prominently appear on any publicly available or promoted business or promotional materials used by any member of the Honeywell Group or their Affiliates within the Honeywell Business, Honeywell shall remove and cease using, and shall cause each member of the Honeywell Group to remove and cease using, such prominently appearing marks as soon as reasonably practical following the Distribution Date but in any event within 180 days of the Distribution Date or, with respect to products for sale produced prior to the Distribution Date on which any AdvanSix Mark prominently appears, within 365 days of the Distribution Date; provided that Honeywell shall promptly arrange for the destruction of any such products for sale produced prior to the

 
42

Distribution Date that remain unsold following such 365-day period and on which any AdvanSix Mark prominently appears.

 

Notwithstanding anything in this Agreement to the contrary, and without limiting the rights otherwise granted in this Section 9.01(j) , the Honeywell Group shall have the right, at all times before, during and after the Distribution Date, to retain records and other historical or archived documents containing or referencing (i) the AdvanSix Marks or (ii) any other Information previously held by the AdvanSix Group, to the extent relating to the Honeywell Business.

 

(k) Each of Honeywell and AdvanSix believes its respective Trademark Assets are sufficiently distinctive and different to ensure consumers will not be confused as to source or sponsorship, and each agrees to employ its reasonable best efforts to use its respective marks in a manner that does not cause actual confusion or a likelihood of confusion as to source or sponsorship of its respective goods or services in its respective channels of trade. If, despite Honeywell’s and AdvanSix’s reasonable best efforts, such actual confusion shall be brought to the attention of either such party, such parties agree to consult regarding steps to be taken to mitigate or correct such actual confusion.

 

(l) Each of Honeywell and AdvanSix shall be responsible for policing, protecting and enforcing its own Intellectual Property. Notwithstanding the foregoing, each of Honeywell and AdvanSix will promptly give notice to the other of any known, actual or threatened, unauthorized use or infringement of the other Party’s Intellectual Property, including infringement of the other Party’s Trademark Assets, in each case for a period of five (5) years after the Distribution Date.

 

(m) Notwithstanding anything to the contrary in this Section 9.01 , (i) each member of the AdvanSix Group shall be permitted to challenge the validity or enforceability of Honeywell IP and (ii) each member of the Honeywell Group shall be permitted to challenge the validity or enforceability of AdvanSix IP, in each case solely in response to an Action initiated by a third party where failure to assert such challenge would reasonably be expected to materially prejudice the defending Party’s defense to such Action.

 

SECTION 9.02. Trade Secrets . (a) All AdvanSix Trade Secrets shall be in or shall be moved to the physical possession of the AdvanSix Group in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) prior to the Distribution Date. Within a commercially reasonable time after placing the AdvanSix Trade Secrets within the AdvanSix Group, Honeywell shall destroy or shall have destroyed any form or copy of AdvanSix Trade Secrets in the possession of Honeywell or any members of the Honeywell Group, other than AdvanSix Trade Secrets that were electronically preserved or recorded by an electronic backup system prior to the Distribution Date and remain within a secure, encrypted data backup system that is subject to industry practice defense, protection and access restriction measures. If any AdvanSix Trade Secrets are discovered to remain in the possession of the Honeywell Group after the Distribution Date, Honeywell shall move such AdvanSix Trade Secrets to the physical possession of the AdvanSix Group in tangible form and, at the request of AdvanSix, destroy or shall have destroyed any form or copy of such AdvanSix Trade Secrets as promptly as possible, and within no more than a commercially reasonable amount of time.

 
43

(b) All Honeywell Trade Secrets shall be in or shall be moved to the physical possession of the Honeywell Group in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) prior to the Distribution Date. Within a commercially reasonable time after placing the Honeywell Trade Secrets within the Honeywell Group, AdvanSix shall destroy or shall have destroyed any form or copy of Honeywell Trade Secrets in the possession of AdvanSix or any members of the AdvanSix Group, other than Honeywell Trade Secrets that were electronically preserved or recorded by an electronic backup system prior to the Distribution Date and remain within a secure, encrypted data backup system that is subject to industry practice defense, protection and access restriction measures. If any Honeywell Trade Secrets are discovered to remain in the possession of the AdvanSix Group after the Distribution Date, AdvanSix shall move such Honeywell Trade Secrets to the physical possession of the Honeywell Group in tangible form and, at the request of Honeywell, destroy or shall have destroyed any form or copy of such Honeywell Trade Secrets as promptly as possible, and within no more than a commercially reasonable amount of time.

 

SECTION 9.03. Intellectual Property Cross-License; Freedom to Practice . (a) The Parties acknowledge that through the course of a history of integrated operations they and the members of their respective Groups have each obtained knowledge of and access to Intellectual Property, including Trade Secrets, copyrighted content, proprietary know-how, and other Intellectual Property rights that are not otherwise governed expressly by this Agreement or any of the Ancillary Agreements or identified expressly in any of the schedules thereto (collectively, “ Shared Background IP ”). With regard to this Shared Background IP, the Parties seek to ensure that each has the freedom to use such Shared Background IP in the future. Hence, as of the Distribution Date, each Group hereby grants to the other Group a non-exclusive, royalty-free, fully-paid, perpetual, sublicenseable (solely to Subsidiaries of the grantee), worldwide license to use and exercise rights under any Shared Background IP (excluding Trademark Assets and the subject matter of any Ancillary Agreement) owned by such Group and used in the other Group’s businesses prior to the Distribution Date solely for use of the same type, of the same scope, and to the same extent as used by such Group prior to the Distribution Date in connection with such Group’s businesses or, in each case, the natural development thereof, including both internal business activities and distribution and sublicensing to Subsidiaries carried out in the ordinary course of business. Such license shall be and is on an “as-is, where-is” basis, and each Group hereby expressly disclaims all representations and warranties of any type or nature, provided that the disclaimer set forth in this Section 9.03(a) is expressly limited to this Section 9.03(a) and does not limit, supersede or modify any other representation or warranty set forth elsewhere in this Agreement or any other Ancillary Agreement.

 

(b) In the event any member of the Honeywell Group, in Honeywell’s reasonable judgment, requires a license under any AdvanSix IP in order to initiate and pursue any technical project in the ordinary course of the Honeywell Business, or any natural development thereof, the Parties shall negotiate in good faith to license such AdvanSix IP to the applicable member of the Honeywell Group on commercially reasonable terms. Notwithstanding anything to the contrary in Section 9.01 , if the Parties cannot reach agreement with respect to the terms of a license to AdvanSix IP pursuant to the immediately preceding sentence, the applicable member of the Honeywell Group shall be permitted to challenge the validity or enforceability of such AdvanSix IP (it being understood that such challenge is the sole remedy available to Honeywell

 
44

in the event AdvanSix does not grant such license, without regard to whether AdvanSix has negotiated in good faith).

 

(c) In the event any member of the AdvanSix Group, in AdvanSix’s reasonable judgment, requires a license under any Honeywell IP in order to initiate and pursue any technical project in the ordinary course of the AdvanSix Business, or any natural development thereof, the Parties shall negotiate in good faith to license such Honeywell IP to the applicable member of the AdvanSix Group on commercially reasonable terms. Notwithstanding anything to the contrary in Section 9.01 , if the Parties cannot reach agreement with respect to the terms of a license to Honeywell IP pursuant to the immediately preceding sentence, the applicable member of the AdvanSix Group shall be permitted to challenge the validity or enforceability of such Honeywell IP (it being understood that such challenge is the sole remedy available to AdvanSix in the event Honeywell does not grant such license, without regard to whether Honeywell has negotiated in good faith).

 

SECTION 9.04. Other Licenses. Honeywell hereby grants to the AdvanSix Group a limited, non-exclusive, royalty-free, fully-paid, perpetual, non-sublicenseable, worldwide license to all copyrighted or copyrightable standard procedures and other technical publications included the Honeywell IP used in the AdvanSix Business as of the Distribution Date. In the event that, as of the Distribution Date, Honeywell Marks prominently appear on any of the procedures or publications described in the immediately preceding sentence, AdvanSix shall remove, and shall cause each member of the AdvanSix Group to remove, such marks as soon as reasonably practical following the Distribution Date but in any event within 180 days of the Distribution Date.

 

SECTION 9.05. Scope. The geographic scope of this Article IX shall be worldwide.

 

SECTION 9.06. Third Party Licenses; Assignments. (a) Any license, assignment or other transfer of rights in the AdvanSix IP to a third party shall be accompanied by, and expressly made subject to, the licenses, covenants and restrictions provided in this Article IX (including, for the avoidance of doubt, any covenant not to assert or challenge Intellectual Property), provided , however , that the licenses, covenants and restrictions provided in this Article IX as applied to such license, assignment or other transfer of rights in the AdvanSix IP to a third party shall only apply with respect to the products, processes and services of the Specialty Products division and the UOP division of Honeywell.

 

(b) Any license, assignment or other transfer of rights in the Honeywell IP to a third party shall be accompanied by, and expressly made subject to, the licenses, covenants and restrictions provided in this Article IX (including, for the avoidance of doubt, any covenant not to assert or challenge Intellectual Property), provided , however , that the licenses, covenants and restrictions provided in this Article IX as applied to such license, assignment or other transfer of rights in the Honeywell IP to a third party shall only apply with respect to the products, processes and services of the Specialty Products division and the UOP division of Honeywell.

 

(c) Any license, assignment or other transfer of rights in any Intellectual Property in contravention of this Section 9.06 shall be null and void.

 
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ARTICLE X

Further Assurances and Additional Covenants

 

SECTION 10.01. Further Assurances. (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall, subject to Section 5.03, use reasonable best efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws and agreements to consummate and make effective the transactions contemplated by this Agreement.

 

(b) Without limiting the foregoing, prior to, on and after the Distribution Date, each Party shall cooperate with the other Party, without any further consideration, but at the expense of the requesting Party, (i) to execute and deliver, or use reasonable best efforts to execute and deliver, or cause to be executed and delivered, all instruments, including any instruments of conveyance, assignment and transfer as such Party may reasonably be requested to execute and deliver by the other Party, (ii) to make, or cause to be made, all filings with, and to obtain, or cause to be obtained, all Consents of any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, (iii) to obtain, or cause to be obtained, any Governmental Approvals or other Consents required to effect the Spin-Off and (iv) to take, or cause to be taken, all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and any transfers of Assets or assignments and assumptions of Liabilities hereunder and the other transactions contemplated hereby.

 

(c) On or prior to the Distribution Date, Honeywell and AdvanSix, in their respective capacities as direct and indirect shareholders of their respective Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by AdvanSix or any other Subsidiary of Honeywell, as the case may be, to effectuate the transactions contemplated by this Agreement.

 

(d) Prior to the Distribution, if either Party identifies any commercial or other service that is needed to ensure a smooth and orderly transition of its business in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the Parties will cooperate in determining whether there is a mutually acceptable arm’s-length basis on which the other Party will provide such service.

 

ARTICLE XI

Termination

 

SECTION 11.01. Termination. This Agreement may be terminated by Honeywell at any time, in its sole discretion, prior to the Distribution.

 
46

SECTION 11.02. Effect of Termination. In the event of any termination of this Agreement prior to the Distribution, neither Party (nor any of its directors or officers) shall have any Liability or further obligation to the other Party under this Agreement or the Ancillary Agreements.

 

ARTICLE XII

Miscellaneous

 

SECTION 12.01. Counterparts; Entire Agreement; Corporate Power. (a) This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. This Agreement may be executed by facsimile or PDF signature and a facsimile or PDF signature shall constitute an original for all purposes.

 

(b) This Agreement, the Ancillary Agreements and the Appendices, Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties with respect to the subject matter hereof other than those set forth or referred to herein or therein.

 

(c) Honeywell represents on behalf of itself and each other member of the Honeywell Group, and AdvanSix represents on behalf of itself and each other member of the AdvanSix Group, as follows:

 

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

 

(ii) this Agreement and each Ancillary Agreement to which it is a party has been (or, in the case of any Ancillary Agreement, will be on or prior to the Distribution Date) duly executed and delivered by it and constitutes, or will constitute, a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

SECTION 12.02. Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of Laws thereof. Each Party irrevocably consents to the exclusive jurisdiction, forum and venue of the Commercial Division of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York over any and all claims, disputes, controversies or disagreements between the Parties or any of their respective Subsidiaries, Affiliates, successors and assigns under or related to this Agreement or any document executed pursuant to this Agreement or any of the transactions contemplated hereby or thereby.

 
47

SECTION 12.03. Assignability. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise by either Party without the prior written consent of the other Party. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Notwithstanding the foregoing, either Party may assign this Agreement without consent in connection with (a) a merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such Party’s Assets, or (b) the sale of all or substantially all of such Party’s Assets; provided , however , that the assignee expressly assumes in writing all of the obligations of the assigning Party under this Agreement, and the assigning Party provides written notice and evidence of such assignment and assumption to the non-assigning Party. No assignment permitted by this Section 12.03 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

 

SECTION 12.04. Third-Party Beneficiaries. Except for the indemnification rights under this Agreement of any Honeywell Indemnitee or AdvanSix Indemnitee in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

SECTION 12.05. Notices. All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given when (a) delivered in person, (b) on the date received, if sent by a nationally recognized delivery or courier service or (c) upon the earlier of confirmed receipt or the fifth business day following the date of mailing if sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Honeywell, to:

Honeywell International Inc.
115 Tabor Road
Morris Plains, NJ 07950
Attn: Senior Vice President and General Counsel

e-mail: * * *

 

with a copy to:

 

Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attn: Eric L. Schiele

e-mail: * * *

 
48

If to AdvanSix, to:

AdvanSix Inc.

115 Tabor Road
Morris Plains, NJ 07950

Attn: General Counsel

e-mail: * * *

 

with a copy to:

 

Either Party may, by notice to the other Party, change the address to which such notices are to be given.

 

SECTION 12.06. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon any such determination, any such provision, to the extent determined to be invalid, void or unenforceable, shall be deemed replaced by a provision that such court determines is valid and enforceable and that comes closest to expressing the intention of the invalid, void or unenforceable provision.

 

SECTION 12.07. Publicity. Each of Honeywell and AdvanSix shall consult with the other, and shall, subject to the requirements of Section 7.08, provide the other Party the opportunity to review and comment upon, any press releases or other public statements in connection with the Spin-Off or any of the other transactions contemplated hereby and any filings with any Governmental Authority or national securities exchange with respect thereto, in each case prior to the issuance or filing thereof, as applicable (including the Information Statement, the Parties’ respective Current Reports on Form 8-K to be filed on the Distribution Date, the Parties’ respective Quarterly Reports on Form 10-Q filed with respect to the fiscal quarter during which the Distribution Date occurs, or if such quarter is the fourth fiscal quarter, the Parties’ respective Annual Reports on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs (each such Quarterly Report on Form 10-Q or Annual Report on Form 10-K, a “ First Post-Distribution Report ”)). Each Party’s obligations pursuant to this Section 12.07 shall terminate on the date on which such Party’s First Post-Distribution Report is filed with the Commission.

 

SECTION 12.08. Expenses. Except as expressly set forth in this Agreement or in any Ancillary Agreement, all third-party fees, costs and expenses payable or incurred by either the Honeywell Group or the AdvanSix Group in connection with the Spin-Off, whether payable or incurred prior to, on or following the Distribution Date (“ Expenses ”), will be borne and paid by Honeywell.

 
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SECTION 12.09. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

SECTION 12.10. Survival of Covenants. Except as expressly set forth in this Agreement, the covenants in this Agreement and the Liabilities for the breach of any obligations in this Agreement shall survive the Spin-Off and shall remain in full force and effect.

 

SECTION 12.11. Waivers of Default. No failure or delay of any Party (or the applicable member of its Group) in exercising any right or remedy under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default.

 

SECTION 12.12. Specific Performance. Subject to Section 5.03 and notwithstanding the procedures set forth in Article X, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the affected Party shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The other Party shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the remedies at Law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived.

 

SECTION 12.13. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each Party.

 

SECTION 12.14. Interpretation. Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires. The terms “hereof,” “herein” “and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the schedules hereto) and not to any particular provision of this Agreement. Article, Section or Schedule references are to the articles, sections and schedules of or to this Agreement unless otherwise specified. Any capitalized terms used in any Schedule to this Agreement or to any Ancillary Agreement but not otherwise defined therein shall have the meaning as defined in this Agreement or the Ancillary Agreement to which such Schedule is attached, as applicable. Any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, as permitted by Section 12.13. The word “including” and words of similar import when used in this Agreement

 
50

shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive.

 

IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.

 

  HONEYWELL INTERNATIONAL INC.  
     
    by  
       
      Name:  
      Title:  
         
  ADVANSIX INC.  
     
    by  
       
      Name:  
      Title:  
 

Exhibit 3.1

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ADVANSIX INC.

 

ADVANSIX INC., a corporation organized and existing under the laws of the State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:

 

1. The name of the corporation is AdvanSix Inc. The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on May 5, 2016 (as amended and in effect immediately prior to the adoption and effectiveness hereof, the “ Original Certificate of Incorporation ”).

 

2. This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and by the written consent of its sole stockholder in accordance with Section 228 of the General Corporation Law of the State of Delaware, and shall be effective as of 11:59 p.m. Eastern Daylight Time on               , 2016.

 

3. The Original Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

 

ARTICLE I

 

The name of the corporation (hereinafter called the “ Corporation ”) is AdvanSix Inc.

 

ARTICLE II

 

The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19801. The name of the Corporation’s registered agent at such address is Corporation Services Company.

 

ARTICLE III

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

 

ARTICLE IV

 

SECTION 1. The total number of shares of all classes of stock which the Corporation shall have authority to issue is                shares, consisting of (1)                shares of Preferred Stock, par value $0.01 per share (“ Preferred Stock ”), and (2)                shares of Common Stock, par value $0.01 per share (“ Common Stock ”). The number of authorized shares of either the Preferred Stock or the Common Stock may be increased or decreased (but not below

 

the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware (or any successor provision thereto), and no vote of the holders of either the Preferred Stock or the Common Stock voting separately as a class shall be required therefor.

 

SECTION 2. The Board of Directors of the Corporation (the “ Board of Directors ”) is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

 

SECTION 3. (a) Each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote; provided , however , that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) or pursuant to the General Corporation Law of the State of Delaware.

 

(b) Except as otherwise required by law, holders of a series of Preferred Stock, as such, shall be entitled only to such voting rights, if any, as shall expressly be granted to such holders by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to such series).

 

(c) Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, dividends may be declared and paid on the Common Stock at such times and in such amounts as the Board of Directors in its discretion shall determine.

 

(d) Upon the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of the Common Stock, as such, shall be entitled to receive the assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.

 

ARTICLE V

 

SECTION 1. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Except as otherwise fixed pursuant to the

2

terms of any outstanding series of Preferred Stock pursuant to this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to such series of Preferred Stock), the number of directors of the Corporation shall be fixed from time to time by the Board of Directors.

 

(b) The directors, other than those who may be elected by the holders of any series of Preferred Stock voting separately pursuant to this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to such series of Preferred Stock), shall be elected by the stockholders entitled to vote thereon at each annual meeting of the stockholders. In no event shall a decrease in the number of directors constituting the Board of Directors shorten the term of any incumbent director. From the effective date of this Amended and Restated Certificate of Incorporation until the election of the directors at the 2020 annual meeting of stockholders, the directors of the Corporation shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors has changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class. The initial assignment of directors to each such class shall be made by the Board of Directors. The term of office of the initial Class I directors shall expire at the 2017 annual meeting of stockholders, the term of office of the initial Class II directors shall expire at the 2018 annual meeting of stockholders and the term of office of the initial Class III directors shall expire at the 2019 annual meeting of stockholders. Each director elected at the 2017, 2018 or 2019 annual meeting of stockholders shall belong to the same class of the director whose term shall have then expired and who is being succeeded by such director. Each Class I director elected at the 2017 annual meeting of stockholders, each Class II director elected at the 2018 annual meeting of stockholders and each Class III director elected at the 2019 annual meeting of stockholders shall hold office until the 2020 annual meeting of stockholders and, in each case, until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Commencing with the 2020 annual meeting of stockholders, each director shall be elected annually and shall hold office until the next annual meeting of stockholders and until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Pursuant to such procedures, effective as of the conclusion of the 2020 annual meeting of stockholders, the Board of Directors will no longer be classified under Section 141(d) of the General Corporation Law of the State of Delaware and directors shall no longer be divided into three classes. The election of directors need not be by written ballot.

 

SECTION 2. Advance notice of nominations for the election of directors shall be given in the manner and to the extent provided in the By-laws of the Corporation.

 

SECTION 3. (a) Except as otherwise provided for or fixed by or pursuant to the provisions of this Amended and Restated Certificate of Incorporation relating to the rights of the holders of any outstanding series of Preferred Stock (including any Certificate of Designation relating to such series of Preferred Stock), newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from

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death, resignation, removal or other cause shall only be filled by the Board of Directors by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, or if not so filled, by the stockholders at the next annual meeting thereof. Any director elected in accordance with the first sentence of this Section 3 shall hold office for a term that shall coincide with the remaining term of the class such director is elected to and until such director’s successor shall have been duly elected and qualified or until his or her earlier resignation or removal.

 

(b) From the effective date of this Amended and Restated Certificate of Incorporation until the election of directors at the 2020 annual meeting of stockholders, any director or the entire Board of Directors may only be removed for cause, such removal to require the affirmative vote of shares representing at least a majority of the votes entitled to be cast by the then outstanding shares of all classes and series of capital stock of the Corporation entitled generally to vote on the election of directors of the Corporation. From and after the 2020 annual meeting of stockholders, any director or the entire Board of Directors may be removed with or without cause, and, in either case, such removal shall require the affirmative vote of shares representing at least a majority of the votes entitled to be cast by the then outstanding shares of all classes and series of capital stock of the Corporation entitled generally to vote on the election of directors of the Corporation. Notwithstanding the foregoing, whenever holders of outstanding shares of one or more series of Preferred Stock voting separately are entitled to elect directors of the Corporation pursuant to the provisions of this Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to such series of Preferred Stock), any such director of the Corporation so elected may be removed in accordance with this Amended and Restated Certificate of Incorporation (including such Certificate of Designation).

 

ARTICLE VI

 

Subject to the rights of the holders of any outstanding series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Except as otherwise required by law and subject to the rights of the holders of any outstanding series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors or as otherwise provided in the By-laws of the Corporation.

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ARTICLE VII

 

In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized to adopt, repeal, alter or amend the By-laws of the Corporation by the vote of a majority of the entire Board of Directors. In addition to any requirements of law and any other provision of this Amended and Restated Certificate of Incorporation (and notwithstanding the fact that a lesser percentage may be specified by law), the affirmative vote of the holders of at least 66 2/3% of the combined voting power of the then outstanding shares of all classes and series of capital stock of the Corporation entitled generally to vote in the election of directors of the Corporation, voting together as a single class, shall be required for stockholders to adopt, amend, alter or repeal any provision of the By-laws of the Corporation.

 

ARTICLE VIII

 

The Corporation reserves the right to amend, alter or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are subject to this reservation.

 

ARTICLE IX

 

SECTION 1. To the fullest extent that the General Corporation Law of the State of Delaware or any other law of the State of Delaware as it exists or as it may hereafter be amended permits the limitation or elimination of the liability of directors, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

 

SECTION 2. To the fullest extent that the General Corporation Law of the State of Delaware or any other law of the State of Delaware as it exists or as it may hereafter be amended permits, the Corporation may provide indemnification of (and advancement of expenses to) its current and former directors, officers and agents (and any other persons to which the General Corporation Law of the State of Delaware permits the Corporation to provide indemnification) through By-law provisions, agreements with such agents or other persons, votes of stockholders or disinterested directors or otherwise.

 

SECTION 3. No amendment to or repeal of any Section of this Article IX, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any action or proceeding accruing or arising, prior to such amendment, repeal or adoption of an inconsistent provision.

 

ARTICLE X

 

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder of the Corporation to the Corporation or the

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Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware (or any successor provision thereto) or as to which the General Corporation Law of the State of Delaware (or any successor provision thereto) confers jurisdiction on the Court of Chancery of the State of Delaware or (d) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, any other state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article X.

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Exhibit 3.2

 

ADVANSIX INC.

 

AMENDED AND RESTATED BY-LAWS

 

Effective as of               , 2016

 

ARTICLE I

 

Offices

 

SECTION 1. Registered Office. The registered office of AdvanSix Inc. (hereinafter, the “ Corporation ”) in the State of Delaware shall be at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19801, and the registered agent shall be Corporation Services Company, or such other office or agent as the Board of Directors of the Corporation (the “ Board ”) shall from time to time select.

 

SECTION 2. Other Offices. The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or outside of the State of Delaware, as the Board may from time to time determine or the business of the Corporation may require.

 

ARTICLE II

 

Meetings of Stockholders

 

SECTION 1. Place of Meeting. All meetings of the stockholders of the Corporation (the “ stockholders ”) shall be at a place, either within or outside of the State of Delaware, to be determined by the Board.

 

SECTION 2. Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such hour as shall from time to time be fixed by the Board. Any previously scheduled annual meeting of the stockholders may be postponed by action of the Board taken prior to the time previously scheduled for such annual meeting of the stockholders.

 

SECTION 3. Special Meetings. Except as otherwise required by law or the Amended and Restated Certificate of Incorporation of the Corporation (the “ Certificate ”), and subject to the rights of the holders of any outstanding series of Preferred Stock, special meetings of the stockholders for any purpose or purposes may be called only by the Chief Executive Officer or a majority of the entire Board. Only such business as is specified in the Corporation’s notice of any special meeting of stockholders shall come before such meeting. A special meeting shall be held at such place, on such date and at such time as shall be fixed by the Board.

 

SECTION 4. Notice of Meetings. Except as otherwise provided by law, notice of each meeting of the stockholders, whether annual or special, shall be given by the Corporation

 

not less than 10 days nor more than 60 days before the date of the meeting to each stockholder of record entitled to notice of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Each such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of the stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy without protesting, prior to or at the commencement of the meeting, the lack of proper notice to such stockholder, or who shall waive notice thereof as provided in Article X of these By-laws. Notice of adjournment of a meeting of the stockholders need not be given if the time and place to which it is adjourned are announced at such meeting, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjourned meeting.

 

SECTION 5. Quorum. Except as otherwise provided by law or by the Certificate, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote generally, present in person or by proxy, shall constitute a quorum at any meeting of the stockholders; provided , however , that in the case of any vote to be taken by classes or series, the holders of a majority of the votes entitled to be cast by the stockholders of a particular class or series, present in person or by proxy, shall constitute a quorum of such class or series.

 

SECTION 6. Adjournments. The chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders who are present in person or by proxy may adjourn the meeting from time to time whether or not a quorum is present. In the event that a quorum does not exist with respect to any vote to be taken by a particular class or series, the chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders of such class or series who are present in person or by proxy may adjourn the meeting with respect to the vote(s) to be taken by such class or series. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called.

 

SECTION 7. Order of Business. (a) At each meeting of the stockholders, the Chairman of the Board or, in the absence of the Chairman of the Board, the Chief Executive Officer or, in the absence of the Chairman of the Board and the Chief Executive Officer, such person as shall be selected by the Board, shall act as chairman of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.

 

(b) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the meeting or (ii) by any stockholder who is a holder of record at the time of the

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giving of the notice provided for in this Section 7, who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 7.

 

(c) For business properly to be brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation (the “ Secretary ”). To be timely, a stockholder’s notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting; provided , however , that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made; provided , further , that for the purpose of calculating the timeliness of stockholder notices for the 2017 annual meeting of stockholders, the date of the immediately preceding annual meeting shall be deemed to be April 25, 2016. To be in proper written form, a stockholder’s notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including, without limitation, the complete text of any resolutions proposed for consideration or any amendment to any Corporation document intended to be presented at the annual meeting) and the reasons for conducting such business at the annual meeting; (ii) the name and address of the stockholder proposing such business, as they appear on the Corporation’s books; (iii) the class or series and number of shares of the Corporation owned, directly or indirectly, beneficially and of record by the stockholder and any beneficial owner on whose behalf the business is proposed, and any of their respective affiliates or associates or other parties with whom they are acting in concert, as well as any derivative instrument or similar contract or agreement the value of or return on which is based on or linked to the value of or return of any of the Corporation’s securities; (iv) any material interest of the stockholder in such business; and (v) if the stockholder intends to solicit proxies in support of such stockholder’s proposal, a representation to that effect. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such stockholder’s proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; provided , however , that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation; and provided , further , that the foregoing shall not imply any obligation beyond that required by applicable law to include a stockholder’s proposal in a proxy statement prepared by management of the Corporation. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 7. The chairman of an annual meeting may refuse to permit any business to be brought before an annual meeting which fails to comply with the foregoing procedures or, in the case of a stockholder proposal, if the stockholder solicits proxies in support of such stockholder’s proposal without having made the representation required by clause (v) of the third preceding sentence.

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SECTION 8. List of Stockholders. It shall be the duty of the Secretary or other officer who has charge of the stock ledger to prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in such stockholder’s name. Such list shall be produced and kept available at the times and places required by law.

 

SECTION 9. Voting. (a) Except as otherwise provided by law or by the Certificate, each stockholder of record of any series of Preferred Stock shall be entitled at each meeting of the stockholders to such number of votes, if any, for each share of such stock as may be fixed in the Certificate or in the resolution or resolutions adopted by the Board providing for the issuance of such stock, and each stockholder of record of Common Stock shall be entitled at each meeting of the stockholders to one vote for each share of such stock, in each case, registered in such stockholder’s name on the books of the Corporation:

 

(i) on the date fixed pursuant to Section 6 of Article VII of these By-laws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or

 

(ii) if no such record date shall have been so fixed, then at the close of business on the day before the day on which notice of such meeting is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held.

 

(b) Each stockholder entitled to vote at any meeting of the stockholders may authorize not in excess of three persons to act for such stockholder by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting, but in any event not later than the time designated in the order of business for so delivering such proxies. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

 

(c) Except as otherwise required by law and except as otherwise provided in the Certificate or these By-laws, at each meeting of the stockholders, all corporate actions to be taken by vote of the stockholders shall be authorized by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy, and where a separate vote by class or series is required, a majority of the votes cast by the stockholders of such class or series who are present in person or represented by proxy shall be the act of such class or series.

 

(d) Unless required by law or determined by the chairman of the meeting to be advisable, the vote on any matter, including, without limitation, the election of directors, need not be by written ballot.

 

SECTION 10. Inspectors. The chairman of the meeting shall appoint one or more inspectors to act at any meeting of the stockholders. Such inspectors shall perform such duties as shall be required by law or specified by the chairman of the meeting. Inspectors need not be stockholders. No director or nominee for the office of director shall be appointed such inspector.

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SECTION 11. Public Announcements. For the purpose of Section 7 of this Article II and Section 2(d) of Article III, “ public announcement ” shall mean disclosure (i) in a press release reported by the Dow Jones Newswire, Business Wire, Reuters Information Service or any similar or successor news wire service or (ii) in a communication distributed generally to stockholders and in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor provisions thereto.

 

ARTICLE III

 

Board of Directors

 

SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate directed or required to be exercised or done by the stockholders.

 

SECTION 2. Number, Qualification and Election. (a) The number of directors constituting the Whole Board shall be determined in accordance with the Certificate. The term “ Whole Board ” shall mean the total number of authorized directors, whether or not there exist any vacancies or unfilled previously authorized directorships. The terms of office of directors shall be governed by the Certificate.

 

(b) Each director shall be at least 21 years of age. Directors need not be stockholders of the Corporation. No person shall qualify for service as a director of the Corporation if he or she is a party to any compensatory, payment, indemnification or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, or has received any such compensation or other payment from any person or entity other than the Corporation, in each case in connection with candidacy or service as a director of the Corporation, unless he or she discloses such compensatory, payment or other financial agreement, arrangement or understanding, or receipt of any such compensation or other payment, to the Corporation pursuant to the requirements and procedures set forth in Section 16(a) of this Article III as if such person were a Stockholder Nominee thereunder.

 

(c) In any uncontested election of directors, each person receiving a majority of the votes cast shall be deemed elected. For purposes of this paragraph, a “majority of the votes cast” shall mean that the number of votes cast “for” a director must exceed the number of votes cast “against” that director (with “abstentions” and “broker non-votes” not counted as a vote cast with respect to that director). In any contested election of directors, the persons receiving a plurality of the votes cast, up to the number of directors to be elected in such election, shall be deemed elected. Any incumbent director who fails to receive a majority of the votes cast in an uncontested election shall submit an offer to resign from the Board no later than two weeks after the certification by the Corporation of the voting results. An uncontested election is one in which the number of individuals who have been nominated for election as a director is equal to, or less than, the number of directors constituting the Whole Board. A contested election is one in which the number of persons nominated exceeds the number of directors to be elected as of

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the date that is 10 days prior to the date that the Corporation first mails its notice of meeting for such meeting to the stockholders.

 

(d) The Board shall consider the resignation offer and may either (i) accept the offer of resignation or (ii) reject the offer and seek to address the underlying cause(s) of the majority-withheld vote. While the Board may delegate to a committee the authority to assist the Board in its review of the matter, the Board shall decide whether to accept or reject the resignation offer within 90 days following the certification of the stockholder vote. Once the Board makes this decision, the Corporation will promptly make a public announcement of the Board’s decision in the manner described in Section 11 of Article II. If the Board rejects the offer of resignation, the public announcement will include a statement regarding the reasons for its decision.

 

(e) The chairman of the nominating and governance committee established pursuant to Section 1 of Article IV will have the authority to manage the Board’s review of the resignation offer. In the event it is the chairman of the nominating and governance committee who received a majority-withheld vote, the independent directors who did not receive majority-withheld votes shall select a director to manage the process, and that director shall have the authority otherwise delegated to the chairman of the nominating and governance committee by this Section 2 of Article III. Any director who tenders his or her offer of resignation as a result of a majority-withheld vote shall not participate in the committee’s or the Board’s deliberations or vote on whether to accept or reject the resignation offer.

 

(f) A majority of the members of the Board shall be persons determined by the Board to be independent directors. In order to determine that a director is independent pursuant to this Section 2, the Board shall make an affirmative determination that the director satisfies applicable regulatory and stock exchange listing requirements to be an independent director of the Corporation and that the director is free of any other relationship (with the Corporation and its consolidated subsidiaries (collectively, the “ Company ”) or otherwise) that would interfere with the exercise of independent judgment by such director. In making this determination, the Board shall consider all relevant facts and circumstances, including, without limitation, commercial, charitable and familial relationships that exist between the director and the Company, or between entities with which the director is affiliated and the Company. The Board may, from time to time, adopt categorical standards to guide its determinations regarding the materiality of any relationship.

 

SECTION 3. Notification of Nominations. (a) Subject to the rights of the holders of any outstanding series of Preferred Stock, nominations for the election of directors may be made by the Board or by any stockholder pursuant to this Section 3 who is a stockholder of record at the time of giving of the notice of nomination provided for in this Section 3 and who is entitled to vote for the election of directors. Any stockholder of record entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice of such stockholder’s intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at an annual meeting of the stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the

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date of the immediately preceding annual meeting; provided , however , that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made; provided , further , that for the purpose of calculating the timeliness of stockholder notices for the 2017 annual meeting of stockholders, the date of the immediately preceding annual meeting shall be deemed to be April 25, 2016 and (ii) with respect to an election to be held at a special meeting of the stockholders for the election of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees to be elected at such meeting. Each such notice shall set forth: (a) the name and address, as they appear on the Corporation’s books, of the stockholder who intends to make the nomination and the name and address of the person or persons to be nominated; (b) the class or series and number of shares of the Corporation owned, directly or indirectly, beneficially and of record by the stockholder and any beneficial owner on whose behalf the nomination is made, and any of their respective affiliates or associates or other parties with whom they are acting in concert, as well as any derivative instrument or similar contract or agreement the value of or return on which is based on or linked to the value of or return of any of the Corporation’s securities; (c) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote in the election of directors and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board; (f) the executed written consent of each nominee to serve as a director of the Corporation if so elected; and (g) if the stockholder intends to solicit proxies in support of such stockholder’s nominee(s), a representation to that effect. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure or if the stockholder solicits proxies in favor of such stockholder’s nominee(s) without having made the representations required by the immediately preceding sentence. If such stockholder does not appear or send a qualified representative to present such proposal at such meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Only such persons who are nominated in accordance with the procedures set forth in this Section 3 or Section 15 of this Article III shall be eligible to serve as directors of the Corporation.

 

(b) Notwithstanding anything in the immediately preceding paragraph of this Section 3 to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting of the stockholders is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board made by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a stockholder’s notice required by this Section 3 shall also be

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considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to or mailed to and received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

 

SECTION 4. Quorum and Manner of Acting. Except as otherwise provided by law, the Certificate or these By-laws, a majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. The chairman of the meeting or a majority of the directors present may adjourn the meeting to another time and place whether or not a quorum is present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.

 

SECTION 5. Place of Meeting. Subject to Sections 6 and 7 of this Article III, the Board may hold its meetings at such place or places, either within or outside of the State of Delaware, as the Board may from time to time determine, or as shall be specified or fixed in the respective notices or waivers of notice thereof.

 

SECTION 6. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board shall from time to time determine, at such locations as the Board may determine. If any day fixed for a regular meeting shall be a legal holiday under the laws of the place where the meeting is to be held, the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. No fewer than four meetings of the Board shall be held per year.

 

SECTION 7. Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board, the Chief Executive Officer or by a majority of the non-employee directors, and shall be held at such place, on such date and at such time as he, she or they, as applicable, shall fix.

 

SECTION 8. Notice of Meetings. Notice of regular meetings of the Board or of any adjourned meeting thereof need not be given. Notice of each special meeting of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such director’s residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telecopy or by electronic transmission or shall be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. Unless otherwise required by these By-laws, every such notice shall state the time and place but need not state the purpose of the meeting.

 

SECTION 9. Rules and Regulations. The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate or these By-laws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper.

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SECTION 10. Participation in Meeting by Means of Communications Equipment. Any one or more members of the Board or any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other or as otherwise permitted by law, and such participation in a meeting shall constitute presence in person at such meeting.

 

SECTION 11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in writing or as otherwise permitted by law and, if required by law, the writing or writings are filed with the minutes or proceedings of the Board or of such committee.

 

SECTION 12. Chairman. The Board of Directors shall annually select one of its members who is independent under the listing standards of the principal United States exchange upon which the shares of the Corporation are listed to be Chairman and shall fill any vacancy in the position of Chairman at such time and in such manner as the Board of Directors shall determine.

 

SECTION 13. Resignations. Any director of the Corporation may at any time resign by giving written notice to the Board, the Chairman of the Board, the Chief Executive Officer or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified therein, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

SECTION 14. Compensation. Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and such fees (payable in cash or stock-based compensation) for attendance at meetings of the Board or of committees of the Board, or both, as the Board or a committee thereof shall from time to time determine. In addition, each director shall be entitled to receive from the Corporation reimbursement for the reasonable expenses incurred by such person in connection with the performance of such person’s duties as a director. Nothing contained in this Section 14 shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving compensation therefor.

 

SECTION 15. Proxy Access. (a) The Corporation shall include in its proxy statement and on its form of proxy for an annual meeting of stockholders the name of, and the Required Information (as defined below) relating to, any nominee for election or reelection to the Board who satisfies the eligibility requirements in this Section 15 and Section 16 (a “ Stockholder Nominee ”) and who is identified in a notice that complies with Section 15(f) of this Article III and that is timely delivered pursuant to Section 15(g) of this Article III (the “ Stockholder Notice ”) by one or more stockholders acting on behalf of up to twenty stockholders who:

 

(i) elect at the time of delivering the Stockholder Notice to have such Stockholder Nominee included in the Corporation’s proxy materials;

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(ii) as of the date of the Stockholder Notice and the record date for determining stockholders entitled to vote at the annual meeting of stockholder, Own (as defined below in Section 15(c) of this Article III) and have Owned a number of shares that represents at least 3% of the outstanding shares of the Corporation entitled to vote in the election of directors (the “Required Shares”) and have Owned continuously the Required Shares (as adjusted for any stock splits, stock dividends or similar events) for at least three years; and

 

(iii) satisfy the additional requirements in these By-laws (such stockholder or stockholders, collectively, an “ Eligible Stockholder ”).

 

(b) For purposes of satisfying the Ownership requirement under Section 15(a) of this Article III:

 

(i) the outstanding shares of the Corporation Owned by one or more stockholders may be aggregated; provided that the number of stockholders and other beneficial owners whose ownership of shares is aggregated for such purpose shall not exceed twenty; and

 

(ii) two or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same employer, or (C) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended, shall, in each case, be treated as one stockholder.

 

(c) For purposes of this Section 15, an Eligible Stockholder “Owns” only those outstanding shares of the Corporation as to which the stockholder or group of stockholders possesses both:

 

(i) the full voting and investment rights pertaining to the shares, and

 

(ii) the full economic interest in (including, without limitation, the opportunity for profit and risk of loss on) such shares;

 

provided that the number of shares calculated in accordance with clauses (i) and (ii) of this Section 15(c) shall not include any shares:

 

(A) sold by such stockholder or any affiliate (as defined below in this Section 15(c)) in any transaction that has not been settled or closed, including, without limitation, any short sale;

 

(B) borrowed by such stockholder or any affiliate for any purposes or purchased by such stockholder or any affiliate pursuant to an agreement to resell; or

 

(C) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised

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would have, the purpose or effect of:

 

(i) reducing in any manner, to any extent or at any time in the future, such stockholder’s or any of its affiliates’ full right to vote or direct the voting of any such shares; and/or

 

(ii) hedging, offsetting or altering to any degree gain or loss arising from the full economic interest in such shares by such stockholder or affiliate.

 

A stockholder “Owns” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s Ownership of shares shall be deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement that is revocable at any time by the stockholder. A stockholder’s Ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares, provided that the stockholder has the power to recall such loaned shares on five business days’ notice and has recalled such loaned shares as of the date of the Stockholder Notice and through the date of the annual meeting of stockholders. The terms “Owned,” “Owning” and other variations of the word “Own” shall have correlative meanings. Whether outstanding shares of the Corporation are “Owned” for these purposes shall be determined by the Board.

 

For purposes of this Section 15, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

(d) No stockholder may be a member of more than one group of stockholders constituting an Eligible Stockholder under this Section 15.

 

(e) For purposes of this Section 15, the “Required Information” that the Corporation will include in its proxy materials is:

 

(i) the information concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy materials by the applicable requirements of the Exchange Act and the rules and regulations thereunder; and

 

(ii) if the Eligible Stockholder so elects, a written statement of the Eligible Stockholder, not to exceed 500 words, in support of its Stockholder Nominee, which must be provided at the same time as the Stockholder Notice for inclusion in the Corporation’s proxy materials for the annual meeting of stockholders (the “ Statement ”).

 

Notwithstanding anything to the contrary contained in this Section 15, the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes would violate any applicable law, rule, regulation or listing standard. Nothing in this Section 15 shall limit the Corporation’s ability to solicit against a stockholder nominee and include in its proxy materials its own statements relating to any Eligible Stockholder or Stockholder Nominee.

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(f) The Stockholder Notice shall set forth the information required under Section 3(a) of these By-laws and in addition shall include:

 

(i) the written consent of each Stockholder Nominee to being named in the Corporation’s proxy materials as a nominee and to serving as a director if elected;

 

(ii) a copy of the Schedule 14N that has been or concurrently is filed with the Securities and Exchange Commission under Exchange Act Rule 14a-18; and

 

(iii) the written agreement of the Eligible Stockholder (or in the case of a group, each stockholder whose shares are aggregated for purposes of constituting an Eligible Stockholder) addressed to the Corporation, setting forth the following additional agreements, representations and warranties:

 

(A) a certification as to the number of shares of the Corporation it Owns and has Owned continuously for at least three years as of the date of the Stockholder Notice and agreeing to continue to Own such shares through the date of the annual meeting for stockholders, which statement shall also be included in the written statements set forth in Item 4 of the Schedule 14N filed by the Eligible Stockholder with the Securities and Exchange Commission;

 

(B) the Eligible Stockholder’s agreement to provide the information required under Section 3(a) of this Article III and the written statements from the record holder and intermediaries as required under Section 15(h) of this Article III verifying the Eligible Stockholder’s continuous Ownership of the Required Shares through and as of the business day immediately preceding the date of the annual meeting of stockholders;

 

(C) the Eligible Stockholder’s representation and agreement that the Eligible Stockholder (including each member of any group of stockholders that together is an Eligible Stockholder under this Section 15):

 

(i) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not presently have such intent;

 

(ii) will provide facts, statements and other information in all communications with the Corporation and stockholders of the Corporation that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

 

(iii) has not nominated and will not nominate for election to the Board at the annual meeting of stockholders any person other than the Stockholder Nominee(s) being nominated pursuant to this Section 15;

 

(iv) has not engaged and will not engage in a, and has not been and will not be a “participant” (as defined in Item 4 of the Exchange Act Schedule 14A) in another person’s, “solicitation” within the meaning of Exchange Act Rule 14a-

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1(l), in support of the election of any individual as a director at the annual meeting of stockholders other than its Stockholder Nominee or a nominee of the Board; and

 

(v) will not distribute to any stockholder any form of proxy for the annual meeting of stockholders other than the form distributed by the Corporation.

 

(D) the Eligible Stockholder’s agreement to:

 

(i) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;

 

(ii) indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 15; provided , however that the indemnification by the Eligible Stockholder under this Section 15(f)(iii)(D)(ii) shall no longer be required or apply with respect to any acts or omissions by the Stockholder Nominee that occur after such Stockholder Nominee’s election to the Board;

 

(iii) comply with all other laws, rules, regulations and listing standards applicable to any solicitation in connection with the annual meeting of stockholders;

 

(iv) file all materials described below in Section 15(h)(iii) of this Article III with the Securities and Exchange Commission, regardless of whether any such filing is required under Exchange Act Regulation 14A, or whether any exemption from filing is available for such materials under Exchange Act Regulation 14A;

 

(v) provide to the Corporation prior to the annual meeting of stockholders such additional information as necessary or reasonably requested by the Corporation; and

 

(vi) promptly disclose to the Corporation if the Eligible Stockholder does not intend to continue to Own the Required Shares for at least one year following the annual meeting of stockholders; and

 

(iv) in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all such members with respect to the nomination and matters related thereto, including, without limitation, any withdrawal of the nomination.

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(g) To be timely under this Section 15, the Stockholder Notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at an annual meeting of the stockholders, not less than 120 days nor more than 150 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders; provided , however , that in the event that the date of the annual meeting of stockholders is more than 30 days earlier or more than 60 days later than such anniversary date, the Stockholder Notice to be timely must be so delivered or received not earlier than the 150th day prior to such annual meeting of stockholders and not later than the close of business on the later of the 120th day prior to such annual meeting of stockholders or the 10th day following the day on which public announcement of the date of such meeting is first made; provided , further , that for the purpose of calculating the timeliness of the Stockholder Notice for the 2017 annual meeting of stockholders, the date of the immediately preceding annual meeting of stockholders shall be deemed to be April 25, 2016 and (ii) with respect to an election to be held at a special meeting of the stockholders for the election of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees to be elected at such meeting. In no event shall any adjournment or postponement of an annual meeting of stockholders, or the announcement thereof, commence a new time period (or extend any time period) for the giving of the Stockholder Notice as described above. For purposes of Rule 14a-18 under the Exchange Act, the applicable “date specified by the registrant’s advance notice provision” shall be the date determined pursuant to this Section 15(g).

 

(h) An Eligible Stockholder (or in the case of a group, each stockholder whose shares are aggregated for purposes of constituting an Eligible Stockholder) must:

 

(i) within five business days after the date of the Stockholder Notice provide one or more written statements from the record holder(s) of the Required Shares and from each intermediary through which the Required Shares are or have been held, in each case during the requisite three-year holding period, verifying that the Eligible Stockholder Owns, and has Owned continuously for the preceding three years, the Required Shares;

 

(ii) include in the written statements provided pursuant to Item 4 of Schedule 14N filed with the Securities and Exchange Commission a statement certifying that it Owns and continuously has Owned the Required Shares for at least three years;

 

(iii) file with the Securities and Exchange Commission any solicitation or other communication relating to the current year annual meeting of stockholders, one or more of the Corporation’s directors or director nominees or any Stockholder Nominee, regardless of whether any such filing is required under Exchange Act Regulation 14A or whether any exemption from filing is available for such solicitation or other communication under Exchange Act Regulation 14A; and

 

(iv) as to any group of funds whose shares are aggregated for purposes of constituting an Eligible Stockholder, within five business days after the date of the Stockholder Notice, provide documentation reasonably satisfactory to the Corporation that demonstrates that the funds satisfy Section 15(b)(ii) of this Article III.

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(i) Within the time period specified in Section 15(iv) of this Article III for delivery of the Stockholder Notice, a Stockholder Nominee must deliver to the Secretary of the Corporation the questionnaire, representation and agreement set forth in Section 16 of this Article III.

 

(j) Notwithstanding anything to the contrary contained in this Section 15, the Corporation may omit from its proxy materials any Stockholder Nominee, and such nomination shall be disregarded and no vote on such Stockholder Nominee will occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation, if:

 

(i) the Secretary of the Corporation receives notice that a stockholder intends to nominate a person for election to the Board which stockholder does not elect to have its nominee(s) included in the Corporation’s proxy materials pursuant to this Section 15;

 

(ii) the Eligible Stockholder or Stockholder Nominee breaches any of its respective agreements, representations or warranties set forth in the Stockholder Notice or otherwise required by this Section 15, or if any of the information in the Stockholder Notice (or otherwise submitted pursuant to this Section 15) was not, when provided, true, correct and complete or the requirements of this Section 15 have otherwise not been met;

 

(iii) the Stockholder Nominee or the stockholder or group of stockholders (including any member thereof) who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act, in support of the election of any individual as a director at the meeting other than such Stockholder Nominee or a nominee of the Board;

 

(iv) the Stockholder Nominee (A) is not independent under the listing standards of the principal U.S. exchange upon which the shares of the Corporation are listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing the independence of the Corporation’s directors, including, without limitation, as set forth in Section 2(f) of Article III, (B) does not qualify as independent under the audit committee independence requirements set forth in the rules of the principal U.S. exchange on which shares of the Corporation are listed, as a “non-employee director” under Exchange Act Rule 16b-3 or as an “outside director” for the purposes of Section 162(m) of the Internal Revenue Code (or any successor provision), (C) is or has been, within the three years preceding the date the Corporation first mails to the stockholders its notice of the meeting that includes the Stockholder Nominee, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (D) is an officer, director or general partner of any legal entity where a fellow officer, director or general partner of such legal entity is an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (E) is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in a criminal proceeding within the 10 years preceding the date the Corporation first mails to the stockholders its notice of the meeting that includes the Stockholder Nominee,

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or (F) is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended; or

 

(v) the election of the Stockholder Nominee to the Board would cause the Corporation to be in violation of the Certificate, these By-laws or any applicable state or federal law, rule, regulation or listing standard.

 

Any such determination by the Board (or any other person or body authorized by the Board) shall be binding on the Corporation and its stockholders.

 

(k) The maximum number of Stockholder Nominees appearing in the Corporation’s proxy materials with respect to an annual meeting of stockholders pursuant to this Section 15 (including, without limitation, any Stockholder Nominee whose name was submitted for inclusion in the Corporation’s proxy materials for such annual meeting of stockholders but who is nominated by the Board as a Board nominee for such annual meeting of stockholders), together with:

 

(i) any nominees who were previously elected to the Board as (A) Stockholder Nominees pursuant to this Section 15 (including, without limitation, any Stockholder Nominee whose name was submitted for inclusion in the Corporation’s proxy materials for such prior annual meeting of stockholders but who was nominated by the Board as a Board nominee for such prior annual meeting of stockholders) or (B) a nominee of any stockholder in any other manner, in either case at any of the preceding two annual meetings of stockholders and who are re-nominated for election at such annual meeting of stockholders by the Board and

 

(ii) any Stockholder Nominee who was qualified for inclusion in the Corporation’s proxy materials for such annual meeting of stockholders but whose nomination is subsequently withdrawn,

 

shall not exceed the greater of (x) two or (y) 20% of the number of directors in office as of the last day on which a Stockholder Notice may be delivered pursuant to this Section 15 with respect to such annual meeting of stockholders, or if such amount as calculated in clause (y) of this Section 15(k) is not a whole number, the closest whole number below 20%; provided that if there is a vacancy on the Board and the number of directors is decreased prior to such annual meeting of stockholders, then the 20% of the number of directors shall be calculated based on the number of directors in office as of the date of such decrease in the number of directors. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 15 exceeds this maximum number, each Eligible Stockholder will select one Stockholder Nominee for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order of the number (largest to smallest) of shares of the Corporation each Eligible Stockholder disclosed as Owned in its respective Stockholder Notice submitted to the Corporation. If the maximum number is not reached after each Eligible Stockholder has selected one Stockholder Nominee, this selection process will continue as many times as necessary, following the same order each time, until the maximum number is reached.

 

(l) Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but either (i) withdraws from or

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becomes ineligible or unavailable for election at the annual meeting of stockholders, or (ii) does not receive at least 25% of the votes cast in favor of the Stockholder Nominee’s election, will be ineligible to be a Stockholder Nominee pursuant to this Section 15 for the next two annual meetings of stockholders.

 

SECTION 16. Submission of Questionnaire, Representation and Agreement. (a)At the request of the Corporation, the Stockholder Nominee must promptly, but in any event within five business days of such request, complete and deliver any questionnaires required of the Corporation’s directors and a written representation and agreement (the questionnaire, representation and agreement to be in the form provided by the Secretary upon written request) that such person:

 

(i) is not and will not become a party to:

 

(A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the person, if elected as a director of the Corporation, will act or vote on any issue or question (a “ Voting Commitment ”) that has not been disclosed to the Corporation; or

 

(B) any Voting Commitment that could limit or interfere with the person’s ability to comply, if elected as a director of the Corporation, with the person’s fiduciary duties under applicable law;

 

(ii) is not and will not become a party to any compensatory, payment, indemnification or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with candidacy or service as a director of the Corporation that has not been disclosed to the Corporation; and

 

(iii) in the person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, and any other Corporation policies and guidelines applicable to Corporation directors.

 

(b) The Corporation may request such additional information as necessary to permit the Board to determine if each Stockholder Nominee is independent under the listing standards of the principal U.S. exchange upon which the shares of the Corporation are listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing the independence of the Corporation’s directors.

 

ARTICLE IV

 

Committees of the Board of Directors

 

SECTION 1. Committees of the Board. The Board shall designate such committees as may be required by the listing standards of the

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principal United States exchange upon which the shares of the Corporation are listed and may from time to time designate other committees of the Board (including, without limitation, an executive committee), with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee.

 

SECTION 2. Conduct of Business. Any committee, to the extent allowed by law and provided in the resolution establishing such committee or the charter of such committee, shall have and may exercise all the duly delegated powers and authority of the Board in the management of the business and affairs of the Corporation. The Board shall have the power to prescribe the manner in which proceedings of any such committee shall be conducted. In the absence of any such prescription, any such committee shall have the power to prescribe the manner in which its proceedings shall be conducted. Unless the Board or such committee shall otherwise provide, regular and special meetings and other actions of any such committee shall be governed by the provisions of Article III applicable to meetings and actions of the Board. Each committee shall keep regular minutes and report on its actions to the Board.

 

ARTICLE V

 

Officers

 

SECTION 1. Number; Term of Office. The officers of the Corporation shall be elected by the Board and may consist of: a Chief Executive Officer, a President, a Chief Operating Officer, a Chief Financial Officer and one or more Vice Presidents (including, without limitation, Senior Vice Presidents) and a Treasurer, Secretary and Controller and such other officers and agents with such titles and such duties as the Board may from time to time determine, each to have such authority, functions or duties as in these By-laws provided or as the Board may from time to time determine, and each to hold office for such term as may be prescribed by the Board and until such person’s successor shall have been chosen and shall qualify, or until such person’s death or resignation, or until such person’s removal in the manner hereinafter provided. One person may hold the offices and perform the duties of any two or more of said officers; provided , however , that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Certificate or these By-laws to be executed, acknowledged or verified by two or more officers. The Board may require any officer or agent to give security for the faithful performance of such person’s duties.

 

SECTION 2. Removal. Subject to Section 13 of this Article V, any officer may be removed, either with or without cause, by the Board at any meeting thereof called for the purpose, by the Chief Executive Officer, or by any other superior officer upon whom such power may be conferred by the Board.

 

SECTION 3. Resignation. Any officer may resign at any time by giving notice to the Board, the Chief Executive Officer or the Secretary. Any such resignation shall take effect

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at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

SECTION 4. Chief Executive Officer. The Chief Executive Officer shall have general supervision and direction of the business and affairs of the Corporation, subject to the control of the Board, and shall report directly to the Board.

 

SECTION 5. President. The President shall perform such senior duties as he or she may agree with the Chief Executive Officer (if the position is held by an individual other than the Chief Executive Officer) or as the Board shall from time to time determine.

 

SECTION 6. Chief Operating Officer. The Chief Operating Officer shall perform such senior duties in connection with the operations of the Corporation as he or she may agree with the Chief Executive Officer or as the Board shall from time to time determine. The Chief Operating Officer shall, when requested, counsel with and advise the other officers of the Corporation.

 

SECTION 7. Chief Financial Officer. The Chief Financial Officer shall perform all the powers and duties of the office of the chief financial officer and in general have overall supervision of the financial operations of the Corporation. The Chief Financial Officer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer or as the Board may from time to time determine.

 

SECTION 8. Vice Presidents. Any Vice President shall have such powers and duties as shall be prescribed by his or her superior officer or the Board. A Vice President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer or as the Board may from time to time determine. A Vice President need not be an officer of the Corporation and shall not be deemed an officer of the Corporation unless elected by the Board.

 

SECTION 9. Treasurer. The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation; the deposit of all moneys and other valuables to the credit of the Corporation in depositories of the Corporation; borrowings and compliance with the provisions of all indentures, agreements and instruments governing such borrowings to which the Corporation is a party; the disbursement of funds of the Corporation and the investment of its funds; and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer or the Chief Financial Officer or as the Board may from time to time determine.

 

SECTION 10. Controller. The Controller shall be the chief accounting officer of the Corporation. The Controller shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the

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Chief Executive Officer or the Chief Financial Officer or as the Board may from time to time determine.

 

SECTION 11. Secretary. It shall be the duty of the Secretary to act as secretary at all meetings of the Board, of the committees of the Board and of the stockholders and to record the proceedings of such meetings in a book or books to be kept for that purpose; the Secretary shall see that all notices required to be given by the Corporation are duly given and served; the Secretary shall be custodian of the seal of the Corporation and when deemed necessary shall affix the seal or cause it to be affixed to all certificates of stock, if any, of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-laws; the Secretary shall have charge of the books, records and papers of the Corporation and shall see that the reports, statements and other documents required by law to be kept and filed are properly kept and filed; and in general shall perform all of the duties incident to the office of Secretary. The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer or as the Board may from time to time determine.

 

SECTION 12. Assistant Treasurers, Assistant Controllers and Assistant Secretaries. Any Assistant Treasurers, Assistant Controllers and Assistant Secretaries shall perform such duties as shall be assigned to them by the Board or by the Treasurer, Controller or Secretary, respectively, or by the Chief Executive Officer. An Assistant Treasurer, Assistant Controller or Assistant Secretary need not be an officer of the Corporation and shall not be deemed an officer of the Corporation unless elected by the Board.

 

SECTION 13. Additional Matters. The Chief Executive Officer, the President, the Chief Operating Officer and the Chief Financial Officer of the Corporation shall have the authority to designate employees of the Corporation to have the title of Vice President, Assistant Vice President, Assistant Treasurer, Assistant Controller or Assistant Secretary. Any employee so designated shall have the powers and duties determined by the officer making such designation. The persons upon whom such titles are conferred shall not be deemed officers of the Corporation unless elected by the Board or appointed by any duly elected officer or assistant officer authorized by the Board of Directors to appoint such person.

 

ARTICLE VI

 

Indemnification

 

SECTION 1. Right to Indemnification. The Corporation, to the fullest extent permitted or required by the General Corporation Law of the State of Delaware (the “ DGCL ”) or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), shall indemnify and hold harmless any person who is or was a director, officer or employee of the Corporation and who is or was involved in any manner (including, without limitation, as a party or a witness) or is

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threatened to be made so involved in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any action, suit or proceedings by or in the right of the Corporation to procure a judgment in its favor) (a “ Proceeding ”) by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (a “ Covered Entity ”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, against all expenses, liabilities and losses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by such person in connection with such Proceeding and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent of the Corporation or a Covered Entity; provided , however , that, except as provided in Section 4(d) of this Article VI with respect to an adjudication of entitlement to indemnification, the Corporation shall indemnify and hold harmless any such Indemnitee in connection with a Proceeding initiated by such Indemnitee (as defined below) only if such Proceeding was authorized by the Board. Any person entitled to indemnification as provided in this Section 1 is hereinafter called an “ Indemnitee ”. Any right of an Indemnitee to indemnification shall be a contract right and shall include the right to receive, prior to the conclusion of any Proceeding, payment of any expenses incurred by the Indemnitee in connection with such Proceeding, consistent with the provisions of the DGCL or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader rights to payment of expenses than such law permitted the Corporation to provide prior to such amendment), and the other provisions of this Article VI; provided that payment of expenses incurred by a person other than a director or officer of the Corporation prior to the conclusion of any Proceeding shall be made, unless otherwise determined by the Board, only upon delivery to the Corporation of an undertaking by or on behalf of such person to the same effect as any undertaking required to be delivered to the Corporation by any director or officer of the Corporation pursuant to the DGCL or other applicable law.

 

SECTION 2. Insurance, Contracts and Funding. The Corporation may purchase and maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or of any Covered Entity against any expenses, liabilities or losses as specified in Section 1 of this Article VI or incurred by any such director, officer, employee or agent in connection with any Proceeding referred to in Section 1 of this Article VI, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. The Corporation may enter into contracts with any director, officer, employee or agent of the Corporation or of any Covered Entity in furtherance of the provisions of this Article VI and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided or authorized in this Article VI.

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SECTION 3. Indemnification Not Exclusive Right. The right of indemnification provided in this Article VI shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled, and the provisions of this Article VI shall inure to the benefit of the heirs and legal representatives of any Indemnitee under this Article VI and shall be applicable to Proceedings commenced or continuing after the adoption of this Article VI, whether arising from acts or omissions occurring before or after such adoption.

 

SECTION 4. Advancement of Expenses; Procedures; Presumptions and Effect of Certain Proceedings; Remedies. In furtherance, but not in limitation, of the foregoing provisions, the following procedures, presumptions and remedies shall apply with respect to advancement of expenses and the right to indemnification under this Article VI:

 

(a) Advancement of Expenses. All reasonable expenses (including, without limitation, attorneys’ fees) incurred by or on behalf of the Indemnitee in connection with any Proceeding shall be advanced to the Indemnitee by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the expenses incurred by the Indemnitee and, if required by law or the provisions of this Article VI at the time of such advance, shall include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay the amounts advanced if ultimately it should be determined that the Indemnitee is not entitled to be indemnified against such expenses pursuant to this Article VI.

 

(b) Procedure for Determination of Entitlement to Indemnification. (i) To obtain indemnification under this Article VI, an Indemnitee shall submit to the Secretary a written request including such documentation and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification (the “ Supporting Documentation ”). The determination of the Indemnitee’s entitlement to indemnification shall be made not later than 60 days after receipt by the Corporation of the written request for indemnification together with the Supporting Documentation. The Secretary shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that the Indemnitee has requested indemnification.

 

(ii) The Indemnitee’s entitlement to indemnification under this Article VI shall be determined in one of the following ways: (A) by a majority vote of the Disinterested Directors (as hereinafter defined in Section 4(e) of this Article VI), whether or not they constitute a quorum of the Board, or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors; (B) by a written opinion of Independent Counsel (as hereinafter defined in Section 4(e) of this Article VI) if there are no Disinterested Directors or a majority of such Disinterested Directors so directs; (C) by the stockholders of the Corporation; or (D) as provided in Section 4(c) of this Article VI.

 

(iii) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4(b)(ii) of this Article VI, a majority of the Disinterested Directors shall select the Independent Counsel, but only an Independent Counsel to which the Indemnitee does not reasonably object.

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(c) Presumptions and Effect of Certain Proceedings. If the person or persons empowered under Section 4(b) of this Article VI to determine entitlement to indemnification shall not have been appointed or shall not have made a determination within 60 days after receipt by the Corporation of the request therefor, together with the Supporting Documentation, the Indemnitee shall be deemed to be, and shall be, entitled to indemnification unless (A) the Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (B) such indemnification is prohibited by law. The termination of any Proceeding described in Section 1 of this Article VI, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, adversely affect the right of the Indemnitee to indemnification or create a presumption that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal proceeding, that the Indemnitee had reasonable cause to believe that such conduct was unlawful.

 

(d) Remedies of Indemnitee. (i) In the event that a determination is made pursuant to Section 4(b) of this Article VI that the Indemnitee is not entitled to indemnification under this Article VI, (A) the Indemnitee shall be entitled to seek an adjudication of entitlement to such indemnification either, at the Indemnitee’s sole option, in (x) an appropriate court of the State of Delaware or any other court of competent jurisdiction or (y) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association and (B) any such judicial proceeding or arbitration shall be de novo and the Indemnitee shall not be prejudiced by reason of such adverse determination.

 

(ii) If a determination shall have been made or deemed to have been made, pursuant to Section 4(b) or (c) of this Article VI, that the Indemnitee is entitled to indemnification, the Corporation shall be obligated to pay the amounts constituting such indemnification within 45 days after such determination has been made or deemed to have been made and shall be conclusively bound by such determination unless (A) the Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (B) such indemnification is prohibited by law. In the event that (X) advancement of expenses is not timely made pursuant to Section 4(a) of this Article VI or (Y) payment of indemnification is not made within 45 days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to Section 4(b) or (c) of this Article VI, the Indemnitee shall be entitled to seek judicial enforcement of the Corporation’s obligation to pay to the Indemnitee such advancement of expenses or indemnification. Notwithstanding the foregoing, the Corporation may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction, contesting the right of the Indemnitee to receive indemnification hereunder due to the occurrence of an event described in sub-clause (A) or (B) of this clause (ii) (a “ Disqualifying Event ”); provided , however , that in any such action the Corporation shall have the burden of proving the occurrence of such Disqualifying Event.

 

(iii) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4(d) that the procedures

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and presumptions of this Article VI are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Corporation is bound by all the provisions of this Article VI.

 

(iv) In the event that the Indemnitee, pursuant to this Section 4(d), seeks a judicial adjudication of or an award in arbitration to enforce rights under, or to recover damages for breach of, this Article VI, or in the event of a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any expenses actually and reasonably incurred by the Indemnitee if the Indemnitee prevails in such judicial adjudication, arbitration or suit. If it shall be determined in such judicial adjudication, arbitration or suit that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by the Indemnitee in connection with such judicial adjudication , arbitration or action shall be prorated accordingly.

 

(e) Definitions. For purposes of this Article VI:

 

(i) “ Disinterested Director ” means a director of the Corporation who is not or was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee.

 

(ii) “ Independent Counsel ” means a law firm or a member of a law firm that neither presently is, nor in the past five years has been, retained to represent: (x) the Corporation or the Indemnitee in any matter material to either such party or (y) any other party to the Proceeding giving rise to a claim for indemnification under this Article VI. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of Delaware, would have a conflict of interest in representing either the Corporation or the Indemnitee in an action to determine the Indemnitee’s rights under this Article VI.

 

SECTION 5. Severability. If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or enforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

SECTION 6. Indemnification of Agents. Notwithstanding any other provision or provisions of this Article VI, the Corporation, to the fullest extent of the provisions of this Article VI with respect to the indemnification of directors, officers and employees of the Corporation or any Covered Entity, may indemnify any person other than a director, officer or

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employee of the Corporation or any Covered Entity, who is or was an agent of the Corporation or a Covered Entity and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director, officer, employee or agent of the Corporation or of a Covered Entity, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, against all expenses, liabilities and losses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by such person in connection with such Proceeding. The Corporation may also advance expenses incurred by such employee or agent in connection with any such Proceeding, consistent with the provisions of this Article VI with respect to the advancement of expenses of directors, officers and employees of the Corporation.

 

ARTICLE VII

 

Capital Stock

 

SECTION 1. Certificates for Shares and Uncertificated Shares. (a) The shares of stock of the Corporation shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or shall be represented by certificates, or a combination of both. To the extent that shares are represented by certificates, such certificates whenever authorized by the Board shall be in such form as shall be approved by the Board. The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Chief Operating Officer or by any Vice President, and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be facsimiles if countersigned by a transfer agent or registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue.

 

(b) The stock ledger and blank share certificates, if any, shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board.

 

SECTION 2. Transfer of Shares. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof, or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and if such shares are represented by a certificate, upon surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided , however , that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. The person in whose name shares are registered on the books of

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the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided , however , that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

 

SECTION 3. Registered Stockholders and Addresses of Stockholders. (a) The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

(b) Each stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be given to such person, and, if any stockholder shall fail to designate such address, corporate notices may be given to such person by mail directed to such person at such person’s post office address, if any, as the same appears on the stock record books of the Corporation or at such person’s last known post office address.

 

SECTION 4. Lost, Destroyed and Mutilated Certificates. The holder of any certificate representing any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of such certificate; the Corporation may issue to such holder a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction; the Board, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person’s legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

SECTION 5. Regulations. The Board may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of stock of each class and series of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated.

 

SECTION 6. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or entitled to receive payment of any

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dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.

 

SECTION 7. Transfer Agents and Registrars. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

 

ARTICLE VIII

 

Seal

 

The Board shall approve a suitable corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and shall be in the charge of the Secretary. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

ARTICLE IX

 

Fiscal Year

 

The fiscal year of the Corporation shall end on the 31st day of December in each year.

 

ARTICLE X

 

Waiver of Notice

 

Whenever any notice whatsoever is required to be given by these By-laws, by the Certificate or by law, the person entitled thereto may, either before or after the meeting or other matter in respect of which such notice is to be given, waive such notice in writing or as otherwise permitted by law, which shall be filed with or entered upon the records of the meeting or the records kept with respect to such other matter, as the case may be, and in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice.

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ARTICLE XI

 

Amendments

 

These By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by the stockholders or by the Board at any meeting thereof; provided , however , that notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such meeting of the stockholders or in the notice of such meeting of the Board and, in the latter case, such notice is given not less than 24 hours prior to the meeting. Unless a higher percentage is required by the Certificate, all such amendments must be approved by either the holders of 66 2/3% of the combined voting power of the outstanding shares of all classes and series of capital stock of the Corporation entitled generally to vote in the election of directors of the Corporation, voting as a single class, or by a majority of the Board.

 

ARTICLE XII

 

Miscellaneous

 

SECTION 1. Execution of Documents. The Board or any committee thereof shall designate the officers, employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, notes, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation and may authorize (including, without limitation, authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. Such delegation may be by resolution or otherwise and the authority granted shall be general or confined to specific matters, all as the Board or any such committee may determine. In the absence of such designation referred to in the first sentence of this Section, the officers of the Corporation shall have such power so referred to, to the extent incident to the normal performance of their duties.

 

SECTION 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or any committee thereof or any officer of the Corporation to whom power in respect of financial operations shall have been delegated by the Board or any such committee or in these By-laws shall select.

 

SECTION 3. Checks. All checks, drafts and other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board or of any committee thereof or by any officer of the Corporation to whom power in respect of financial operations shall have been delegated by the Board or any such committee thereof or as set forth in these By-laws.

 

SECTION 4. Proxies in Respect of Stock or Other Securities of Other Corporations. The Board or any committee thereof shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other

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corporation or other entity, and to vote or consent in respect of such stock or securities; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights.

 

SECTION 5. Subject to Law and Certificate of Incorporation. All powers, duties and responsibilities provided for in these By-laws, whether or not explicitly so qualified, are qualified by the provisions of the Certificate and applicable laws.

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Exhibit 10.1

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “ Agreement ”), dated as of            , 2016 (the “ Effective Date ”), by and between AdvanSix Inc., a Delaware corporation (“ AdvanSix ”), on behalf of itself and the other members of the AdvanSix Group, and Honeywell International Inc., a Delaware corporation (“ Honeywell ”), on behalf of itself and the other members of the Honeywell Group. AdvanSix and Honeywell shall collectively be referred to as the “ Parties ,” and each individually a “ Party . ” Each Party or any member of its Group providing services or occupancy rights hereunder shall be a “ Provider ,” and each Party or any member of its Group receiving services or occupancy rights hereunder shall be a “ Recipient .” The term the “ Business ” as used herein shall mean either the AdvanSix Business or the Honeywell Business, as applicable. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to such terms in the Separation Agreement (as defined below).

 

WHEREAS, in connection with the contemplated Spin-Off of AdvanSix and concurrently with the execution of this Agreement, Honeywell and AdvanSix are entering into a Separation and Distribution Agreement (the “ Separation Agreement ”);

 

WHEREAS, following the Spin-Off, each Party desires to provide to the other, and to receive from the other, certain services, subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I

 

SERVICES

 

SECTION 1.01. Services to be Provided to the AdvanSix Group.

 

(a) In General.

 

(i) Commencing immediately after the Distribution, and in accordance with the terms and conditions of this Agreement, Honeywell shall provide, or shall cause the applicable members of the Honeywell Group to provide, to AdvanSix or the applicable members of the AdvanSix Group in connection with

 

the conduct of the AdvanSix Business the services described on Schedule A hereto (the “ AdvanSix Services ”).

 

(ii) Honeywell may, in its sole discretion and without any written notice to AdvanSix engage, or cause the applicable members of the Honeywell Group to engage, one or more parties (including any third parties) to provide some or all of the AdvanSix Services; provided that (x) Honeywell shall be responsible for the performance or non-performance of any such parties and (y) such parties agree in writing to be bound by confidentiality provisions at least as restrictive to them as the terms of Section 6.01 of this Agreement.

 

(iii) Commencing immediately after the Distribution, and in accordance with the terms and conditions of this Agreement, Honeywell shall, and shall cause the applicable members of the Honeywell Group to, pay, perform, discharge and satisfy, as and when due, its and their respective obligations as Recipients under this Agreement.

 

SECTION 1.02. Services to be Provided to the Honeywell Group.

 

(a) In General.

 

(i) Commencing immediately after the Distribution, and in accordance with the terms and conditions of this Agreement, AdvanSix shall provide, or shall cause the applicable members of the AdvanSix Group to provide, to Honeywell or the applicable members of the Honeywell Group in connection with the conduct of the Honeywell Business the services described on Schedule B hereto (the “ Honeywell Services ” and, together with the AdvanSix Services, the “ Services ”).

 

(ii) AdvanSix may, in its sole discretion and without any written notice to Honeywell engage, or cause the applicable members of the AdvanSix Group to engage, one or more parties (including any Affiliates of the AdvanSix Group or any third parties) to provide some or all of the Honeywell Services; provided , that (x) AdvanSix shall be responsible for the performance or non-performance of any such parties and (y) such parties agree in writing to be bound by confidentiality provisions at least as restrictive to it as the terms of Section 6.01 of this Agreement.

 

(iii) Commencing immediately after the Distribution, and in accordance with the terms and conditions of this Agreement, AdvanSix shall, and shall cause the applicable members of the AdvanSix Group to, pay, perform, discharge and satisfy, as and when due, its and their respective obligations as Recipients under this Agreement.

 

SECTION 1.03. Service Coordinators. Honeywell and AdvanSix shall each nominate a representative to act as the primary contact person with respect to the performance of the Services (each, a “ Service Coordinator ”). Unless otherwise agreed upon by the Parties, all communications relating to this Agreement and to the Services

 

provided hereunder shall be directed to the Service Coordinators. Except as set forth on Schedule A or Schedule B , the initial Service Coordinators for Honeywell and AdvanSix, including relevant contact information, are set forth on Schedule C , respectively. Either Party may replace its Service Coordinator at any time by providing notice in accordance with Section 11.01 of this Agreement. The Service Coordinators will consult and coordinate with each other on a regular basis and no less frequently than monthly during the term of this Agreement.

 

SECTION 1.04. Standard of Performance. (a) Each Provider shall (and shall cause any party performing the Services on its behalf to) (i) perform its Services in compliance with applicable Law and (ii) use commercially reasonable efforts, skill and judgment in providing its Services hereunder, in a manner consistent with past practice up to one year prior to the Distribution Date (the standards identified in the preceding subclauses (i) and (ii), collectively the “ Service Standards ”). If the Provider has not provided such Services (or substantially similar services) during the one year prior to the Distribution Date, then the Services shall be performed in a competent and professional manner consistent with industry standards. The Services shall be used solely for the operation of the applicable Business for substantially the same purpose as used by the applicable Recipient immediately prior to the Distribution Date.

 

(b) Subject to Section 3.04, in the event of a material failure (the “ Material Failure ”) of a Provider to perform any of its Services in accordance with the Service Standards, the applicable Recipient will provide the Provider with written notice of such Material Failure, and the Provider will use commercially reasonable efforts to remedy such failure as soon as reasonably possible from the date of such notice. Without prejudice to the foregoing, if the Provider is not able to remedy a Material Failure within thirty (30) days of its receipt of written notice that a Material Failure has occurred, the dispute resolution procedures set forth in Section 11.10(a) will apply; provided , however , that in the event that the Executive Committee (as such term is defined in Section 11.10(a)) is unable to resolve the Dispute in accordance with Section 11.10(a), then the Recipient may obtain replacement services and the Provider shall pay the reasonable out-of-pocket cost of any such replacement services, less the amount the Recipient would have paid pursuant to this Agreement for such Services if performed by the Provider. If the Recipient chooses to obtain the replacement services, (i) the Recipient may terminate the affected Services upon notice and the Provider will no longer provide such Services to the Recipient, or (ii) after the Provider remedies the Material Failure, the Recipient may request that the Provider resume providing the affected Services.

 

SECTION 1.05. Cooperation. (a) Each Party and its Service Providers shall, and shall use commercially reasonable efforts to cause any party performing the Services on their behalf to, cooperate with the other Party and the other members of its Group in all matters relating to the provision and receipt of the Services and to minimize the expense, distraction and disturbance to the other Party’s business, and shall perform all obligations hereunder in good faith and in accordance with principles of fair dealing.

 

(b) Each Party and its Recipients will use commercially reasonable efforts to provide information and documentation reasonably required by each Provider to perform the Services, as applicable, in the manner they were provided in the ordinary course prior to the Distribution Date, and will use commercially reasonable efforts to make available, as reasonably requested by each Provider, sufficient resources and timely decisions, approvals and acceptances in order that each Provider may perform its obligations under the Agreement in a timely and efficient manner.

 

(c) Each Party and its Service Providers shall follow, and shall use commercially reasonable efforts to cause any party performing the services on their behalf to follow, the policies, procedures and practices, including all environmental policies, of the other Party and its Recipients applicable to the Services that are in effect as of the Distribution Date and of which such Party has been reasonably informed.

 

(d) A failure of any Recipient to act in accordance with this Section 1.05 that prevents any Provider from providing a Service hereunder shall relieve such Provider of its obligation to provide such Service until such time as the failure has been cured; provided , that such Provider has previously notified such Recipient in writing of such failure. Notwithstanding the foregoing, neither Party shall have any obligation to purchase, upgrade, enhance or otherwise modify any computer hardware, software or network environment currently used by such Party in connection with its Business, or to provide any support or maintenance services for any computer hardware, software or network environment that has been upgraded, enhanced or otherwise modified from the computer hardware, software or network environments that are currently used by such Party in connection with its Business.

 

(e) To the extent that any third-party proprietor of information or software to be disclosed or made available to any Recipient in connection with performance of the Services hereunder requires a specific form of non-disclosure agreement as a condition of its consent to use of the same for the benefit of the Recipient or to permit the Recipient access to such information or software, the Recipient will, as a condition to the receipt of such portion of the Services, execute (and will cause its employees and Affiliates to execute, if required) any such form.

 

(f) Within the first 45 days following the Distribution Date, the Parties may agree to include within the scope of this Agreement other services that have historically been provided to the AdvanSix Business by the Honeywell Group or the Honeywell Business by the AdvanSix Group, as applicable, in each case that are within the same functional categories as those listed on the Schedules (such services, the “ Other Services ”). If a Party identifies an Other Service it desires to use, it shall notify the other Party and the Parties shall discuss in good faith the terms under which such Other Services may be provided to the applicable Business by the relevant Group. If the Parties agree to include any Other Service within the scope of this Agreement, such Other Service shall be added to the relevant Schedule and shall be deemed to be a “Service” for all purposes hereunder, and the applicable Provider shall provide it pursuant to the terms of this Agreement. The charges for the Other Service will be determined on a basis consistent

 

with the methodology for determining the charges for other Services as provided in Section 4.01 of this Agreement.

 

SECTION 1.06. Migration Projects. Subject to Section 10.01(b), prior to the end of the applicable Term, each Provider will provide the Recipient, upon written request (the “ Project Work Request ”), with such reasonable support as may be necessary to migrate the Services to the Recipient’s internal organization or to a third party provider as set forth on Schedule E (the “ Project Work ”), including without limitation exporting and providing (subject to applicable Law) all relevant data and information of the applicable Recipient from the systems of the applicable Provider or any party performing the Services on its behalf; provided , however , for avoidance of doubt, that the Recipient shall bear any portion of the cost of Project Work associated with the setup of such Recipient’s data warehousing infrastructure or hosting environment. After the Provider receives the Project Work Request, the Parties shall meet to discuss and agree on the scope and cost of the Project Work, taking into consideration the Provider’s then-available resources. Where required for migrating the Services, Recipient’s Personnel will be granted reasonable access to the respective facilities of the Provider during normal business hours. Project Work may be out-sourced to external service partners (including those involving conversion programs or other programming, or extraordinary management supervision and/or coordination); provided that the Provider shall be responsible for the performance or non-performance of such partners. Each Party shall pay its internal and third party costs incurred in connection with all Project Work performed by such Party’s Personnel; provided that the Recipient shall bear the costs of all third party providers engaged in completing a Project Work.

 

SECTION 1.07. The Parties acknowledge that any Provider may make changes from time to time in the manner of performing Services if the Provider is making similar changes in performing the same or substantially similar Services for itself or other members of its Group; provided , however , that, unless expressly contemplated in Schedule A or Schedule B hereto, such changes shall not affect the Fees for such Service payable by the Recipient under this Agreement or decrease the manner, scope, time frame, nature or quality or level of the Services provided to the Recipient, except upon prior written approval of the Recipient.

 

SECTION 1.08. No Provider shall be authorized by, or shall have any responsibility under, this Agreement to manage the affairs of the business of any Recipient.

 

ARTICLE II

REAL ESTATE

 

SECTION 2.01. Occupancy Rights . Each Provider set forth on Schedule F , with respect to the location set forth on such Schedule opposite such Provider’s name (each, a “ Shared Real Property ”), hereby grants to the Recipient set forth on such Schedule opposite such Shared Real Property, a limited license for reasonable use and access to the space utilized by such Recipient or any member of its Group in the conduct of the Recipient’s Business as of the Distribution Date, for the sole purpose of transitioning the Recipient’s Business and in accordance with the terms, covenants and conditions of this Article II. The Recipient’s right to use and access the applicable Shared Real Property shall be consistent with the use and access afforded to the Recipient’s Business as of the Distribution Date. The Recipient’s use shall include the right to use the fixtures, improvements and furnishings located within the Shared Real Property consistent with such use as of the Distribution Date.

 

SECTION 2.02. Use . The Recipient shall use the applicable Shared Real Property (and the furnishings contained therein) for the same purposes as such Shared Real Property is utilized as of the Distribution Date and for no other purpose. The Shared Real Property may be occupied only by the Personnel of the applicable Recipient reasonably required in furtherance of the activities of the Recipient’s Business or the other purposes set forth in this Agreement. The Recipient shall be responsible for pickup and delivery of goods at any common shipping dock at any Shared Real Property, and any shipments shall include proper labeling to distinguish the Recipient’s goods from the Provider’s goods.

 

SECTION 2.03. License Fee . Each Recipient shall pay a monthly gross license fee for its Shared Real Property as set out on Schedule F (each, a “ Monthly License Fee ). The Monthly License Fee for each Shared Real Property shall be payable in advance on or before the first (1st) day of each calendar month of the term of the license. The Monthly License Fee for any period during the respective license term which is for less than one month shall be prorated.

 

SECTION 2.04. License Term . The license granted under this Article II will be effective as of immediately after the Distribution and will automatically expire at the earlier of (I) the end of the period set forth in Schedule F with respect to each Shared Real Property, or (II) the expiration date of the relevant underlying lease pertaining to each Shared Real Property (in which case the Provider shall provide to the Recipient written notice 30 days prior to such expiration).

 

SECTION 2.05. Access and Common Areas . Unless otherwise specified on Schedule F , the Recipient (including its Personnel) shall access the applicable Shared Real Property through existing employee entrances designated by the Provider. Access to any other areas (“ Other Areas ”) in, on or about the applicable Shared Real Property (including conference room(s), break area(s), designated smoking area(s), restroom(s), machine shop(s), shipping/receiving area(s) and cafeteria(s) other than to the extent located within the Shared Real Property) shall be as otherwise designated by the Provider

 

in its reasonable discretion. Except as otherwise expressly provided herein, the Recipient shall not access any other areas.

 

SECTION 2.06. Compliance with Sellers’ Policies . The Recipient shall comply with the Provider’s reasonable policies and procedures, security requirements and rules and regulations with respect to the applicable Shared Real Property and the Recipient’s occupancy of such Shared Real Property. Such policies may be changed from time to time upon reasonable prior notice at the applicable Provider’s sole reasonable discretion.

 

SECTION 2.07. Insurance . Each Party agrees, during the term of this license, to cause its Recipients under this Article II to carry and maintain (i) commercial general liability insurance with a single combined liability limit of $5,000,000 per occurrence and (ii) workers compensation/employer’s liability insurance with a liability limit of $1,000,000 per occurrence, and in the case of the policies described in clauses (i) and (ii), naming the applicable Provider (and other parties as may be reasonably required) as an additional insured, against liability with respect to accidents occurring on, in or about the applicable Shared Real Property or arising out of the use and occupancy of such Shared Real Property by the Recipient and its Personnel and visitors. All such insurance policies shall contain a waiver of subrogation in the applicable Provider’s favor. The Parties acknowledge that the Providers shall have no responsibility to insure or actively maintain any Recipient’s personal property, including any Recipient’s equipment and trade fixtures, located in the Shared Real Property. Notwithstanding the aforesaid liability limits, said limits shall not diminish or otherwise impact or affect the obligations of the Parties and their Recipients hereunder. The policy(s) maintained by the applicable Recipient shall be issued by a company licensed to do business in the country where the Shared Real Property is located and the applicable Recipient shall deposit a certificate evidencing the same with the applicable Provider on or before the Effective Date. During the term of the license granted in Section 2.01, the applicable Providers under this Article II shall maintain insurance policies for the Shared Real Property as in effect as of the Effective Date.

 

SECTION 2.08. Surrender . Upon the expiration or termination of the license granted under this Article II, each Recipient shall, at its sole cost and expense, (i) remove their personal property, equipment, trade fixtures and other goods and effects, and repair any damage to the Shared Real Property resulting from such removal, and (ii) otherwise quit and deliver up the Shared Real Property peaceably and quietly and in as good order and condition as the same were in on the Distribution Date, reasonable wear and tear, damage by fire and the elements excepted. In the event any Recipient fails to repair and perform the aforementioned facilities restoration and otherwise deliver the Shared Real Property as set forth above, the Provider or any member of its Group shall have the right to make said reasonable repairs and reasonably perform such facilities restoration, charge such Recipient or any member of its Group the reasonable costs of such repairs and restoration, and such Recipient or any member of its Group shall reimburse the Provider or the member of its Group, as applicable, within thirty (30) days of receipt of invoice. Any property left in the Shared Real Property after the expiration

 

or termination of the license granted under this Article II shall be deemed to have been abandoned and the property of the Providers to dispose of as the Providers deem expedient and at the sole cost and expense of the Recipients.

 

SECTION 2.09. License Rights . The rights granted herein in favor of each Recipient are in the nature of a license and shall not create any leasehold or other estate or possessory rights in Shared Real Property, and if the license granted under this Article II expires or is terminated, the Recipient shall vacate the Shared Real Property, and any occupancy or activity of the Recipient thereafter in the Shared Real Property shall be considered a trespass.

 

SECTION 2.10. Relocation . Each Provider shall have the right, at its cost, to relocate the applicable Recipient to other area(s) of each Shared Real Property by providing the Recipient reasonable advance notice, provided that such relocation does not reduce the rights of the Recipient or increase the obligations of the Recipient under this Agreement or unreasonably interrupt the day-to-day operations of the Recipient’s Business.

 

SECTION 2.11. Alterations . The Recipient shall not make any alterations, additions or improvements to the Shared Real Property.

 

SECTION 2.12. Controlling Provisions . In the event of a conflict between the terms of this Article II and any other provision in this Agreement with regard to the right to use the Shared Real Property specified in this Article II, the terms of Article II shall control. In the event of a conflict between the terms of this Agreement and the terms set forth on Schedule F attached hereto, the terms of Schedule F shall control.

 

ARTICLE III

 

LIMITATIONS

 

SECTION 3.01. General Limitations. Unless expressly provided otherwise herein: (i) the Providers shall be required to provide the Services hereunder only to the extent that such Services were provided to the applicable Business in the ordinary course prior to the Distribution Date and (ii) the Services provided by the Providers hereunder shall be available only for the purposes of conducting the applicable Business. Notwithstanding anything to the contrary in this Agreement, no Provider will be required to perform or cause to be performed any of the Services for the benefit of any other person other than the applicable Recipient or a member of such Recipient’s Group.

 

SECTION 3.02. Third-Party Limitations . (a) Nothing in this Agreement shall be deemed to require the provision of any Service by any Provider to any Recipient if the provision of such Service requires the consent, waiver or approval from, or notification to, any third party (including a Governmental Authority), whether under applicable Law, by the terms of any contract to which such Provider or other member of its Group is a party or otherwise, unless and until such consent, waiver or approval has

 

been obtained or such notification has been made. Furthermore, each Party acknowledges and agrees that the Services provided by a Provider through third parties or using third party Intellectual Property are subject to the terms and conditions of any applicable agreements between the Provider of such Service and such third parties (such agreements, the “ Third Party Agreements ”), as set forth on Schedule G . The Recipient will be responsible for obtaining, and shall pay all costs of obtaining, any consents, waivers or approvals and making any notifications that may be necessary (including under the Third Party Agreements or any new Third Party Agreements) to permit Services to be provided hereunder. Each Provider shall use commercially reasonably efforts to assist the Recipient in obtaining any necessary consent (including any necessary licenses, waivers or approvals and making any necessary notifications) in order to provide such Services under this Agreement (including with respect to the Third Party Agreements or any new Third Party Agreements; it being understood that each Recipient shall only be granted access to Third Party Agreements during the term of this Agreement, and upon expiration of the applicable service term shall procure its own standalone license with the applicable third party provider).

 

(b) The Provider will not be required to provide the Recipient access to such third party Intellectual Property or to use such third party Intellectual Property in the performance of Services if doing so would not be permitted by the applicable Third Party Agreements with such third parties.

 

SECTION 3.03. Compliance with Laws. (i) Neither Party shall provide, or cause to be provided, any Service to the extent that the provision of such Service would require such Party, the other members of its group or any of their respective Personnel to violate (a) any applicable Law, (b) any policies and/or procedures of such Party designed to respond to applicable Law, or (c) in any material respect, any other policies and/or procedures of such Party in existence on the Distribution Date. If a Party cannot provide a Service due to (c) above or because provision of such Service would require the consent, waiver or approval of any third-party (including a Governmental Authority) and such consent, waiver or approval has not been obtained prior to the Distribution, the Parties shall cooperate in good faith to identify an acceptable alternative arrangement to provide the affected Service sufficient for the purposes of the other Party and, if mutually agreed, the modified or alternative Service shall be added to the relevant Schedule and the Provider shall provide it pursuant to the terms of this Agreement; provided , that if the alternative arrangement results from (c) above, the Party providing such Service shall bear any additional costs resulting from such acceptable alternative arrangement.

 

SECTION 3.04. Force Majeure. The Parties shall use commercially reasonable efforts to provide, or cause to be provided, the Services without interruption. In the event that any Provider is wholly or partially prevented from, or delayed in, providing one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control (including acts of God, act of Governmental Authority, act of the public enemy or due to fire, explosion, accident, floods, embargoes, epidemics, war, acts of terrorism, nuclear disaster, civil unrest and/or riots, civil commotion, insurrection, severe or adverse weather conditions, lack of or

 

shortage of electrical power, malfunctions of equipment or software, or any other cause beyond the reasonable control of the Provider whose performance is affected by such event (each, a “ Force Majeure Event ”)), the Provider shall promptly give notice of any such Force Majeure Event to the Recipient and shall indicate in such notice the effect of such event on its ability to perform hereunder and the anticipated duration of such event. The Provider shall not be obligated to deliver the affected Services during such period, and the Recipient shall not be obligated to pay for any Services not delivered; provided that, for the duration of a Force Majeure Event, the Provider shall use commercially reasonable efforts to avoid or remove such Force Majeure Event, and shall use commercially reasonable efforts to resume its performance under this Agreement with the least practicable delay. If the suspension of the Provider’s performance continues for more than two (2) consecutive months as a result of a Force Majeure Event, the Recipient may terminate this Agreement with respect to the affected Service by giving written notice to the Provider.

 

SECTION 3.05. Title to Equipment; Management and Control; Reservation of Rights. (a) All procedures, methods, systems, strategies, tools, equipment, facilities and other resources used by any Provider in connection with the provision of Services (the “ Equipment ”) shall remain the property of such Provider and, except as otherwise provided herein, shall at all times be under the sole direction and control of such Provider.

 

(b) Except as otherwise expressly provided herein, management of and control over, the provision of the Services (including the determination or designation at any time of the Equipment, employees and other resources to be used in connection with the provision of the Services) shall reside solely with the Provider. All Personnel providing the Services will remain at all times, and be deemed to be, employees or representatives solely of the Provider responsible for providing such Services (or any parties performing the Services on its behalf) for all purposes, and not to be employees or representatives of the Recipient. Without limiting the generality of the foregoing, all labor matters relating to any employees of a Party shall be within the exclusive control of such Party, and the other Party shall take no action affecting such matters. Such Party shall provide for and pay the compensation and other benefits of such employees, including salary, health, accident and workers’ compensation benefits and all taxes and contributions which an employer is required to pay relating to the employment of employees. No Party shall be liable to the other Party or to any of its Personnel for such Party’s failure to perform its compensation, benefit or tax obligations. In no event shall either Party be obligated to maintain the employment of any specific employee; provided that such Party shall remain responsible for the performance of the Services in accordance with this Agreement.

 

SECTION 3.06. Interim Basis Only. Each Party acknowledges that the purpose of this Agreement is to provide Services to the other Party on an interim basis. Accordingly, at all times from and after the Distribution Date, each of Honeywell and AdvanSix shall, subject to the terms and conditions of this Agreement, use its respective commercially reasonable efforts to make or obtain any approvals, permits or licenses,

 

implement any computer systems and take, or cause to be taken, any and all other actions necessary or advisable for it to provide the Services for itself as soon as practicable after the date hereof and terminate this Agreement with respect to each Service prior to the Term for such Service set forth herein.

 

ARTICLE IV

 

PAYMENT

 

SECTION 4.01. Fees. In connection with each Service, each Recipient shall pay to the Provider (a) the fees as set forth in the applicable Schedule with respect to such Service, (b) any third party fees, costs and expenses which are charged to the Provider in connection with provision of the Services to the Recipient; and (c) any other fees as agreed to by the Parties in writing (collectively, the “ Fees ”). At the option of the Provider, it may elect to have one of the members of its Group provide a Service hereunder and submit an invoice for the applicable Fees to the Recipient on its behalf.

 

SECTION 4.02. Extension of Services. If, for any reason, the provision of any Services or access to any Shared Real Property extends beyond the applicable service period or access period set forth in the Schedules attached hereto, the Fees payable each month beyond the initial service period or access period with respect to such Services or access to such Shared Real Property shall be automatically and permanently increased by ten percent (10%).

 

SECTION 4.03. Billing and Payment Terms. (a) All amounts due under this Agreement shall be billed and paid for in the following manner (i) each Party shall invoice the other Party on a monthly basis (such invoice to set forth a description of the Services provided and reasonable documentation to support the charges thereon (including, where applicable, reasonable documentation as to such Party’s cost allocation and third party costs in respect of such charges), which invoice and documentation shall be in the same level of detail and in accordance with the procedures for invoicing as provided to the Provider’s other businesses) for all Services that such Party delivered or caused to be delivered during the preceding month, (ii) each such invoice shall be payable within 30 days after the date of the invoice and (iii) payment of all invoices in respect of the Services provided hereunder shall be made in U.S. Dollars.

 

(b) If any invoice is not paid in full within sixty (60) days after the date of the invoice, interest shall accrue on the unpaid amount at the annual rate equal to the “Prime Rate” as reported on the thirtieth day after the date of the invoice in The Wall Street Journal (or, if such day is not a business day, the first business day immediately after such day), calculated on the basis of a year of 360 days and the actual number of days elapsed between the end of the thirty (30)-day payment period and the actual payment date.

 

(c) If there is a Dispute (as defined in Section 11.10) between the Parties regarding the amounts shown as billed to a Recipient on any invoice, the relevant Provider shall, upon the written request of such Recipient, furnish such reasonable documentation to

 

substantiate the amounts billed including listings of the dates, times and amounts of the Services in question where applicable and practicable. Delivery of such documentation shall constitute written notice of a Dispute pursuant to Section 11.10, and the provisions of Section 11.10 shall apply to such Dispute. The Recipient may withhold any payments subject to a Dispute; provided , that any disputed payments, to the extent ultimately determined to be payable to the Provider, shall bear interest as set forth in Section 4.03(b).

 

SECTION 4.04. Sales Taxes. All consideration under this Agreement is exclusive of any sales, use, excise, transfer, value-added, goods or services, or similar Tax excluding all other T axes, including Taxes based upon or calculated by reference to income, receipts or capital or withholding Taxes ) imposed against or on Services (“ Sales Taxes ”) provided hereunder, and such Sales Taxes will be added to the Fees where applicable. Such Sales Taxes shall be separately stated on the relevant invoice to the Recipient. The Recipient shall be responsible for any such Sales Taxes and shall remit such Sales Taxes to the Provider (and such Provider shall remit such amounts to the applicable taxing authority) ; provided that (a) in the case of value-added Taxes, the Recipient shall not be obligated to pay such Taxes unless the Provider has issued to the Recipient a valid value-added tax (“ VAT ”) invoice in respect thereof, and (b) in the case of all Sales Taxes, the Recipient shall not be obligated to pay such Sales Taxes if and to the extent that the Recipient has provided any valid exemption certificates or other applicable documentation that would eliminate or reduce the obligation to collect and/or pay such Sales Taxes.

 

SECTION 4.05. No Offset. Except as set forth in Section 4.03(c), no Recipient shall withhold any payments to its Provider under this Agreement in order to offset payments due to such Recipient pursuant to this Agreement, the Separation Agreement, any Ancillary Agreement or otherwise, unless such withholding is mutually agreed by the Parties or is provided for in the final ruling of a court having jurisdiction pursuant to Section 11.10(c). Any required adjustment to payments due hereunder will be made as a subsequent invoice.

 

SECTION 4.06. Funding of Payroll. Payroll checks disbursed by or at the direction of Honeywell or a member of the Honeywell Group as part of the Services shall be funded in immediately available funds to an account as directed by Honeywell or such Group member on the day the checks are issued to employees of the Recipient; provided that the Recipient has received 48 hours’ advance written notice of the amount required. Direct deposit of payroll will be funded on payday (alternately referred to as the settlement date); provided that the Recipient has received 48 hours’ advanced written notice of the amount required.

 

SECTION 4.07. Customer Receipt Payments and Bank Account Transition Process. (a) For a period of twelve (12) months following the Distribution (“ Customer Receipt Payment Period ”), in the event any payments related to trade receivables intended for the AdvanSix Group or the Honeywell Group (the “ Intended Payee ”) is incorrectly received by any member of the other Group (the “ Customer Receipt Payee ”) such Customer Receipt Payee will, as soon as reasonably practicable, but

 

in no event in more than 10 Business Days following receipt of such payment, send the applicable Intended Payee through wire transfer an amount equal to the value of such payment (each, a “ Customer Receipt Payment ”).

 

(b) For each Customer Receipt Payment, the Customer Receipt Payee must provide the applicable customer(s) payment details to allow the Intended Payee to identify the customer(s) and the related transaction(s) associated with the Customer Receipt Payment, including each customer’s name, accounts receivable account number and payment amount. This information should be sent to the persons and addresses specified on Schedule H .

 

(c) The Intended Payee will pursue corrections to the banking details internally. If payments are not being sent to the correct bank account of the Intended Payee within thirty (30) days following the Distribution, the Customer Receipt Payee will send a letter to the respective customer every month, informing the customer of the need to use the correct bank account as designated by the Intended Payee. If payments continue to be incorrectly sent for eleven (11) months after the Distribution, the Customer Receipt Payee and the Intended Payee will send a final joint letter one month prior to the expiration of the Customer Receipt Payment Period.

 

(d) Each Party agrees to not send the other Party any Customer Receipt Payments from customers found on the U.S. Treasury Office of Foreign Assets Control’s Specially-designated Nationals List or from any countries with which U.S. persons are prohibited from conducting business. Each Party agrees to not accept Customer Receipt Payments made in cash. Each Party agrees to immediately notify the other Party of any Customer Receipt Payments falling within the scope of this Section 4.07(d) and to cooperate with the other Party in taking any action recommended by the other Party in connection with such Customer Receipt Payments.

 

(e) All Customer Receipt Payments made by any Customer Receipt Payee to any Intended Payee hereunder shall be made by a wire transfer of immediately available funds in U.S. Dollars to a bank account designated in writing by the Intended Payee entitled to receive payment. Customer Receipt Payments may be bundled or sent on a per payment basis.

 

(f) All bank fees incurred for transmitting Customer Receipt Payments pursuant to this Section 4.07 will be paid by the Intended Payee and may be deducted from the applicable Customer Receipt Payments sent to the Intended Payee by the Customer Receipt Payee.

 

ARTICLE V

 

ACCESS AND SECURITY

 

SECTION 5.01. Access; Work Policy.

 

(a) At all times during the Term, each Party shall provide, and shall cause its Affiliates and third parties to provide, the other Party and its Personnel reasonable ingress to and egress from its facilities and premises, and reasonable access to its equipment and Personnel, for any purpose connected with the delivery or receipt of Services hereunder, the exercise of any right under this Agreement or the performance of any obligations required by this Agreement. “ Personnel ” shall mean, with respect to any Party, the employees, directors, officers, agents, counsel, accountants, in-house attorneys, independent contractors and other professional consultants of (i) such Party, (ii) the Affiliates of such Party and (iii) any third parties engaged by such Party or its Affiliates to provide a Service.

 

(b) Each Party’s Personnel shall comply with the other Party’s safety and security regulations applicable to each specific site or facility while working at such site or facility. Except as otherwise agreed to by the Parties, each Party’s Personnel shall observe the working hours, working rules, and holiday schedules of the other Party while working on the premises of the other Party.

 

SECTION 5.02. Security Level; Additional Security Measures.

 

(a) The Parties shall work together to ensure that, when providing Services, they are each able to maintain their current level of physical and electronic security during the Term.

 

(b) Any Provider may take physical or information security measures that affect the manner in which Services are provided, so long as the substance or overall functionality of any affected Services remains the same as it was prior to the Distribution Date; provided , that the Recipient shall be given reasonable, prior written notice of any such physical or information security measures that are material.

 

SECTION 5.03. Security Breaches. In the event of a security breach that relates to the Services, the Parties shall, subject to any applicable Law, cooperate with each other regarding the timing and manner of (a) notification to their respective customers, potential customers, employees and/or agents concerning a breach or potential breach of security and (b) disclosures to appropriate Governmental Authorities.

 

SECTION 5.04. Systems Security. (a) If either Party or its Personnel will be given access to any of the computer systems or software of the other Party or any party performing the Services on its behalf (“ Systems ”) in connection with the performance of the Services, the accessing Party and its Personnel shall comply with all system security policies, procedures and requirements related to the Systems (as amended from time to time, the “ Security Regulations ”) in effect as of the Effective Date and of which such accessing Party or its Personnel has been reasonably informed, and will not tamper with, compromise or circumvent any security or audit measures employed by such the Party granting such access and its Personnel.

 

(b) Each Party and its Affiliates shall use commercially reasonable efforts to ensure that only those of their respective Personnel who are specifically authorized to

 

have access to the Systems of the other Party gain such access, and to prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including notifying its Personnel regarding the restrictions set forth in this Agreement and establishing appropriate policies designed to effectively enforce such restrictions.

 

(c) If, at any time, either Party determines that any Personnel of the other Party or its Affiliates has sought to circumvent, or has circumvented, its Security Regulations, that any unauthorized Personnel of the other Party or its Affiliates has accessed its Systems or that any Personnel of the other Party or its Affiliates has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software, such Party shall immediately terminate any such Personnel’s access to the Systems and immediately notify the other Party.

 

(d) Honeywell, AdvanSix and their respective Personnel, shall access and use only those Systems, and only such data and information within such Systems to which it has been granted the right to access and use. Any Party shall have the right to deny the Personnel of the other Party access to such Party’s Systems, after prior written notice and consultation with the other Party, in the event the Party reasonably believes that such Personnel pose a security concern.

 

SECTION 5.05. Records and Inspection Rights. During the term of this Agreement and for seven (7) years thereafter or in accordance with their respective corporate records retention policies, whichever is longer, each Party agrees to maintain accurate records arising from or related to any Service provided hereunder, including accounting records and documentation produced in connection with the provision of any Service. Upon reasonable written notice from a Recipient, the applicable Provider shall make available to such Recipient or its Personnel (i) at such Recipient’s sole expense, reasonable access to or, at such Provider’s expense, copies of, the records with respect to such Service during regular business hours, and (ii) electronic copies of any such records (to the extent such records have not been migrated to the Recipient), in which case the Recipient shall reimburse the Provider for reasonable out-of-pocket expenses incurred in providing the Recipient with any such electronic records.

 

ARTICLE VI

 

CONFIDENTIALITY

 

SECTION 6.01. Confidential Information . Each Party hereby acknowledges that confidential Information of such Party or members of its Group may be exposed to the Personnel of the other Party or its Group as a result of the activities contemplated by this Agreement. Each Party agrees, on behalf of itself and its Affiliates, that such Party’s obligation to use and keep confidential such Information of the other Party or its Group shall be governed by Sections 7.01(c) and 7.08 of the Separation Agreement.

 

ARTICLE VII

 

INTELLECTUAL PROPERTY AND DATA

 

SECTION 7.01. Ownership of Data and Intellectual Property. (a) Each Party shall own all data and information (i) provided by it to the other Party in connection with its receipt of Services or (ii) created by or for the other Party solely on behalf of it in relation to the provision of Services (collectively, “ Service Receiver Data ”).

 

(b) Upon the request of the Recipient, and at Recipient’s expense, any Service Receiver Data in possession of a Provider shall be promptly provided to the Recipient in the format in which such Provider maintains such data as of the time of such request; provided that the Provider may retain the relevant Service Receiver Data and provide a copy thereof to the Recipient: (i) if necessary for such Provider to continue to provide the Services during the Term; or (ii) if such Provider is unable to delete the Service Receiver Data from its archives using commercially reasonable efforts.

 

(c) All other data, information and Intellectual Property provided by each Party (including its Affiliates) and their respective licensors and information, content and software providers in connection with performance of the Services shall remain the property of such Party (or its Affiliates). Each Party hereby grants to the other Party and to its Affiliates and any third parties providing Services under this Agreement a nonexclusive, nontransferable, world-wide, royalty-free license, for the term of this Agreement, to use the Intellectual Property owned by the granting Party solely to the extent strictly necessary for the other Party to perform its obligations under, and for the granting Party to receive and use the Services as contemplated by, this Agreement, only to the extent of the interest held by the granting Party or its Affiliates.

 

(d) Subject to the terms of the Separation Agreement, each Provider acknowledges and agrees that it will acquire no right, title or interest (including any license rights or rights of use) to any work product resulting from the provision of Services hereunder for the Recipient’s exclusive use and such work product shall remain the exclusive property of the Recipient. To the extent title to any such work product vests in the Provider by operation of Law, each Party hereby assigns (and shall cause any such other Provider to assign) to the relevant Recipient all right, title and interest in and to such work product, and the Provider shall provide such assistance and execute such documents as the Recipient may reasonably request to assign to such Recipient all right, title and interest in and to such work product. Each Recipient acknowledges and agrees that it will acquire no right, title or interest (other than a non-exclusive, perpetual worldwide right of use) to any work product resulting from the provision of Services hereunder that is not for the Recipient’s exclusive use and such work product shall remain the exclusive property of the Provider.

 

ARTICLE VIII

 

LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTIES

 

SECTION 8.01. Limitation of Liabilities. (a) No Party or any of its Affiliates shall be liable (including any liability for the acts and omissions of its employees, agents and sub-contractors) to another Party or its Affiliates for Liabilities in connection with performing Services under this Agreement except with respect to direct damages arising out of such Party’s willful misconduct or gross negligence; provided that the foregoing limitation shall not apply to a Party’s breach of its obligations pursuant to Article IV or Article VI or to payments in respect of costs or expenses of third party service providers to the extent expressly provided in Section 1.04(b).

 

(b) Notwithstanding any other provision of this Agreement, no Party or any of its Affiliates shall be liable for any consequential, indirect or punitive damages or any damages that are not reasonably foreseeable or are speculative or remote, unless, in each case, such damages are recovered by a third party in a Third-Party Claim under Section 9.01 or Section 9.02 pursuant to an order entered against the indemnified Party or its Affiliates.

 

(c) Notwithstanding anything to the contrary in this Agreement, no Party or its Affiliates shall be liable for Liabilities incurred by the other Party or its Affiliates for any action taken or omitted to be taken by such first Party or its Affiliates under or in connection with this Agreement to the extent such action or omission arises from actions taken or omitted to be taken by, or the gross negligence or willful misconduct of, the other Party or its Affiliates or any authorized Personnel of the other Party or its Affiliates.

 

(d) Without limiting the rights under Section 11.10(d), in no event shall any Provider or its Affiliates be liable pursuant to Section 9.01 hereof for Liabilities in excess of the actual amounts payable by any Recipients or their Affiliates in connection with the Services provided hereunder plus an amount equal to the amount, if any, of any Insurance Proceeds or Third-Party Proceeds that are actually received by such Provider in accordance with Section 6.04 of the Separation Agreement, which shall apply, mutatis mutandis , herein.

 

SECTION 8.02. Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY EXPRESSLY DISCLAIMS, ANY AND ALL REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, INCLUDING WARRANTIES WITH RESPECT TO MERCHANTABILITY, OR SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT OF ANY SOFTWARE OR HARDWARE PROVIDED HEREUNDER, AND ANY WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE. NEITHER PARTY, AS A PROVIDER, MAKES ANY REPRESENTATION OR

 

WARRANTY THAT ANY SERVICE COMPLIES WITH ANY LAW, DOMESTIC OR FOREIGN.

 

ARTICLE IX
INDEMNIFICATION

 

SECTION 9.01. Indemnification by the Provider. Subject to the terms of Article VIII and this Article IX, from and after the Distribution Date.

 

(a) AdvanSix in its capacity as a Provider and on behalf of each member of its Group in its capacity as a Provider, shall indemnify, defend and hold harmless the Honeywell Indemnitees from and against any and all Liabilities arising from or in connection with the willful misconduct or gross negligence of AdvanSix or any member of its Group, in their capacity as a Provider, in connection with the provision of the Services.

 

(b) Honeywell in its capacity as a Provider and on behalf of each member of its Group in its capacity as a Provider, shall indemnify, defend and hold harmless the AdvanSix Indemnitees from and against any and all Liabilities arising from or in connection with the willful misconduct or gross negligence of Honeywell or any member of its Group, in their capacity as a Provider, in connection with the provision of the Services.

 

SECTION 9.02. Indemnification by the Recipient . Subject to the terms of Article VIII and this Article IX, from and after the Distribution Date,

 

(a) AdvanSix in its capacity as a Recipient and on behalf of each member of its Group in its capacity as a Recipient, shall indemnify, defend and hold harmless the Honeywell Indemnitees from and against any and all Liabilities arising from or in connection with or by reason of this Agreement or any Services provided by a member of the Honeywell Group hereunder except to the extent such Liabilities arise out of or in connection with the willful misconduct or gross negligence of Honeywell or any member of its Group, in their capacity as a Provider, in connection with the provision of the Services.

 

(b) Honeywell in its capacity as a Recipient and on behalf of each member of its Group in its capacity as a Recipient, shall indemnify, defend and hold harmless the AdvanSix Indemnitees from and against any and all Liabilities arising from or in connection with or by reason of this Agreement or any Services provided by a member of the AdvanSix Group hereunder except to the extent such Liabilities arise out of or in connection with the willful misconduct or gross negligence of AdvanSix or any member of its Group, in their capacity as a Provider, in connection with the provision of the Services.

 

SECTION 9.03. Exclusive Remedies; Procedures. Without limiting the rights under Section 11.10(d), the remedies and indemnities expressly provided in Section 1.04(b) (with respect to payment of costs associated with replacement services), Article VIII and this Article IX of this Agreement shall be the sole and exclusive

 

remedies of the Provider and its Affiliates and the Recipient and its Affiliates, as applicable, for any Liabilities of any kind or nature (including any diminution in value) regardless of the form of action through which such damages are sought ( e.g ., contract, warranty, tort (including negligence and strict liability) or otherwise) arising out of, in connection with or under this Agreement, or in respect of the Services or actions taken by, or omissions of, any Party in connection with the transactions contemplated hereby. The indemnification procedures in Section 6.05 of the Separation Agreement shall apply, mutatis mutandis , to any indemnification claim made under this Agreement.

 

ARTICLE X
TERM AND TERMINATION

 

SECTION 10.01. Term of Agreement. (a) Unless the Parties otherwise agree in writing, the term of this Agreement shall become effective on the Effective Date and shall remain in force until the earlier of (a) termination or expiration of all of the respective Terms and (b) termination in accordance with Section 10.02(a). “ Term ” shall mean, with respect to each of the Services or the license granted under Article II, the period of time beginning on the Effective Date and expiring on the date set forth in the applicable Schedule (it being understood that if such expiration date falls on any date other than the last day of the applicable month, the Recipient shall pay the Provider for the Services on a pro-rata basis with respect to such month), unless earlier terminated pursuant to Section 10.02(b). Notwithstanding anything to the contrary contained herein, if the Separation Agreement shall be terminated in accordance with its terms, this Agreement shall be automatically terminated and void ab initio with no further action by the Parties and shall be of no further force or effect. The obligation of any Party to make a payment for Services previously rendered shall not be affected by the expiration of the Term and shall continue until full payment is made.

 

(b) Notwithstanding Section 10.01(a), if a Provider does not complete any Project Work before the expiration of the Term, such Provider shall be required to continue the Project Work until its completion pursuant to the terms of Section 1.06.

 

SECTION 10.02. Termination. (a) Termination by Honeywell Group or AdvanSix . This Agreement may be terminated by either Party (the “ Terminating Party ”) upon written notice to the other Party (which notice, in case of material breach, shall specify the basis for such claim for breach of this Agreement), if:

 

(i) the other Party materially breaches this Agreement, the period for resolution of the Dispute relating to such breach set forth in Section 11.10(a) and (b) has expired and such breach is not cured, to the reasonable satisfaction of the Terminating Party, within thirty (30) days of written notice thereof; or

 

(ii) the other Party makes a general assignment for the benefit of creditors or becomes insolvent, or a receiver is appointed for, or a court approves reorganization or arrangement proceedings on, such Party.

 

(b) Partial Termination . Except as otherwise described in the Schedules hereto, any Recipient may, on thirty (30) days’ written notice to the applicable Provider, terminate its receipt of any Service; provided , however , that the Recipient shall continue to pay the Fees in respect of such Service for up to sixty (60) days after delivery of such written notice to the extent the Provider is unable to terminate third party commitments in respect of such Service without penalty prior to such date. Any termination notice delivered by the Recipient shall specify in detail the Service or Services to be terminated, and the effective date of such termination. Effective upon the termination of such Service, an appropriate reduction will be made in the aggregate Fees charged to the Recipient (on a pro rata basis for terminations occurring during the middle of any monthly period, except to the extent that such Services require the Provider to make expenditures on a per month basis (in which case the reduction will be applied beginning from the following month)).

 

SECTION 10.03. Effect of Termination. In the event that this Agreement is terminated for any reason:

 

(a) Each Party agrees and acknowledges that the obligations of each Party to provide the Services, or to cause the Services to be provided, hereunder shall immediately cease. Upon cessation of the Provider’s obligation to provide any Service, the Recipient shall stop using, directly or indirectly, such Service.

 

(b) Upon request, each Party shall, and shall cause its Affiliates to, return to the other Party all tangible personal property and books, records or files owned by such other Party or its Affiliates and third parties and used in connection with the provision of Services that are in their possession as of the termination date.

 

(c) The following matters shall survive the termination of this Agreement, including the rights and obligations of each Party thereunder, in addition to any claim for breach arising prior to termination: Section 2.03, Section 2.08, Article IV, Section 5.05, Article VI, Article VII, Article VIII, Article IX, the last sentence of Section 10.01(a), Section 10.01(b), this Section 10.03 and Article XI (other than Section 11.12).

 

ARTICLE XI
MISCELLANEOUS

 

SECTION 11.01. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be provided in the manner set forth in the Separation Agreement.

 

SECTION 11.02. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon any such determination, any such

 

provision, to the extent determined to be invalid, void or unenforceable, shall be deemed replaced by a provision that such court determines is valid and enforceable and that comes closest to expressing the intention of the invalid, void or unenforceable provision.

 

SECTION 11.03. Entire Agreement; Conflict with Separation Agreement. (b) This Agreement, the Separation Agreement, the other Ancillary Agreements and the Appendices, Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties with respect to the subject matter hereof other than those set forth or referred to herein or therein. The Parties agree that, in the event of a conflict between the terms of this Agreement and the Separation Agreement with respect to the subject matter hereof, the terms of this Agreement shall govern.

 

SECTION 11.04. Waivers. No failure or delay of any Party (or the applicable member of its Group) in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default.

 

SECTION 11.05. Third Party Rights . Except for the indemnification rights under this Agreement of any Honeywell Indemnitee or AdvanSix Indemnitee in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

SECTION 11.06. Assignability. This Agreement shall be assignable, in whole or in part, in accordance with the terms of Section 12.03 of the Separation Agreement.

 

SECTION 11.07. Binding Effect. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the successors and permitted assigns of the Parties hereto.

 

SECTION 11.08. Schedules. All Schedules attached hereto are incorporated herein and expressly made a part of this Agreement as though completely set forth herein. All references to this Agreement herein or in any of the Schedules shall be deemed to refer to this entire Agreement, including all Schedules.

 

SECTION 11.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of Laws thereof.

 

SECTION 11.10. Dispute Resolution (a) In the event of any dispute, controversy or claim (a “ Dispute ”) arising out of or relating to this Agreement (other than any Sections of this Agreement that contain their own dispute resolution mechanics, to which this Section 11.10 shall not apply), the Service Coordinators shall meet (by telephone or in person) no later than five (5) business days after receipt of notice by a Party of a request for resolution of a Dispute. The Service Coordinators shall enter into negotiations aimed at resolving any such Dispute. If the Service Coordinators are unable to reach a mutually satisfactory resolution of the Dispute within ten (10) business days after receipt of notice of the Dispute, the Dispute shall be referred to an Executive Committee comprised of specified transition leaders identified on Schedule C (the “ Executive Committee ”) from Honeywell and AdvanSix. The initial members of the Executive Committee, including relevant contact information, are set forth on Schedule C , and either Party may replace its Executive Committee members at any time with other members of similar seniority by providing written notice in accordance with Section 11.01. The Executive Committee will meet (by telephone or in person) during the next ten (10) business days and attempt to resolve the Dispute. In the event that the Executive Committee is unable to resolve the Dispute, then the Parties shall retain all rights with respect to remedies hereunder.

 

(b) If Honeywell and AdvanSix fail to resolve a Dispute within the periods provided under Section 11.10(a), such dispute shall, at the request of either Party hereto (a “ Mediation Request ”), be submitted to non-binding mediation in accordance with the then current Model Procedure for Mediation of the CPR Institute for Dispute Resolution (“ CPR ”), except as modified herein. The mediation shall be held in New York, New York. The Parties shall have 20 days from receipt by a Party of a Mediation Request to agree on a mediator. If no mediator has been agreed upon by the Parties within 20 days of receipt by a Party (or Parties) of a Mediation Request, then any Party may request (on written notice to the other Parties), that the CPR appoint a mediator in accordance with the Procedure. All mediation pursuant to this clause shall be confidential and shall be treated as compromise and settlement negotiations, and no oral or documentary representations made by the Parties during such mediation shall be admissible for any purpose in any subsequent proceedings. No Party hereto shall disclose or permit the disclosure of any information about the evidence adduced or the documents produced by the other Parties in the mediation proceedings or about the existence, contents or results of the mediation without the prior written consent of such other Parties except in the course of a judicial or regulatory proceeding or as may be required by Law or requested by a Governmental Authority or securities exchange. Before making any disclosure permitted by the preceding sentence, the Party intending to make such disclosure shall give the other Parties reasonable written notice of the intended disclosure and afford the other Parties a reasonable opportunity to protect its interests. If the Dispute has not been resolved within 60 days of the

 

appointment of a Mediator, or within 90 days of receipt by a Party of a Mediation Request (whichever occurs sooner), or within such longer period as the Parties may agree to in writing, then any Party may file an action on the Dispute in any court having jurisdiction in accordance with Section 11.10(c).

 

(c) Each Party irrevocably consents to the exclusive jurisdiction, forum and venue of the Commercial Division of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York over any and all claims, disputes, controversies or disagreements between the Parties or any of their respective Subsidiaries, Affiliates, successors and assigns under or related to this Agreement or any document executed pursuant to this Agreement or any of the transactions contemplated hereby or thereby. Each of AdvanSix and Honeywell hereby agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in Section 11.01, shall be effective service of process for any litigation brought against it in any such court. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT, THE SERVICES OR THE TRANSACTION CONTEMPLATED HEREBY.

 

(d) Notwithstanding anything herein to the contrary, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the affected Party shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The other Party shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the remedies at Law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived.

 

SECTION 11.11. Construction. The rules of interpretation set forth in Section 12.14 of the Separation Agreement are incorporated by reference into this Agreement, mutatis mutandis .

 

SECTION 11.12. Counterparts. This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. This Agreement may be executed by facsimile or PDF signature and a facsimile or PDF signature shall constitute an original for all purposes.

 

SECTION 11.13. Relationship of the Parties. Expect as specifically provided herein, neither Party shall act or represent or hold itself out as having authority to act as an agent or partner of the other Party or in any way bind or commit the other Party to any obligations or agreement. Nothing contained in this Agreement shall be

 

construed as creating a partnership, joint venture, agency, trust, fiduciary relationship or other association of any kind, each Party being individually responsible only for its obligations as set forth in this Agreement. The Parties’ respective rights and obligations hereunder shall be limited to the contractual rights and obligations expressly set forth herein on the terms and conditions set forth herein.

 

SECTION 11.14. Further Assurances. From time to time after the date hereof, without further consideration, each Party shall execute and deliver such formal license agreements as another Party may reasonably request to evidence any license provided for herein or contemplated hereby.

 

Signature Page Follows

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

  ADVANSIX inc.,
   
  by
     
    Name:
    Title:
     
  HONEYWELL INTERNATIONAL INC.,
     
  by
     
 

Exhibit 10.2

 

TAX MATTERS AGREEMENT (this “Agreement”), dated as of     , 2016, by and between Honeywell International Inc. , a Delaware corporation (“HII”), and AdvanSix, Inc., a Delaware corporation (“AdvanSix” and, together with HII, the “Parties”).

 

W I T N E S S E T H :

 

WHEREAS AdvanSix is a wholly-owned subsidiary of HII and a member of the affiliated group of which HII is the common parent;

 

WHEREAS, pursuant to the Separation Agreement, HII and AdvanSix have effected or agreed to effect (i) the Internal Transactions (the steps of which are described in Schedule I of the Separation Agreement) and (ii) the Distribution (together, the “Transactions”); and

 

WHEREAS the Parties intend that each of the applicable Transactions qualify for its Intended Tax Treatment;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties hereby agree as follows:

 

ARTICLE I

Definitions

 

SECTION 1.01. Definition of Terms. The following terms shall have the following meanings. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Separation Agreement.

 

10% Acquisition Transaction ” has the meaning set forth in Section 4.06.

 

Accounting Firm ” has the meaning set forth in Section 3.01(d).

 

Active Trade or Business ” means the active conduct (determined in accordance with Section 355(b) of the Code) of the trade or business described in the Tax Opinion Representations for purposes of satisfying the requirements of Section 355(b) of the Code as it applies to the Distribution with respect to AdvanSix.

 

AdvanSix ” has the meaning set forth in the preamble.

 

AdvanSix SAG ” has the meaning set forth in Section 4.03(a)(v).

 

AdvanSix Stock ” means (i) all classes or series of stock or other equity interests of AdvanSix and (ii) all other instruments properly treated as stock of AdvanSix for U.S. Federal income Tax purposes.

 
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AdvanSix Tax Group ” means (i) AdvanSix, (ii) any Person that is or was a Subsidiary of AdvanSix as of the Distribution or at any time prior to the Distribution and (iii) any Person that was a Subsidiary of one or more Persons described in clause (ii) at any time prior to the Distribution.

 

Agreement ” has the meaning set forth in the preamble.

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Determination ” means (i) any final determination of liability in respect of a Tax that, under applicable Law, is not subject to further appeal, review or modification through proceedings or otherwise (including the expiration of a statute of limitations or period for the filing of claims for refunds, amended Tax Returns or appeals from adverse determinations), including a “determination” as defined in Section 1313(a) of the Code or execution of an IRS Form 870AD, or (ii) the payment of Tax by a Party (or its Subsidiary) that is responsible for payment of that Tax under applicable Law, with respect to any item disallowed or adjusted by a Taxing Authority, as long as the responsible Party determines that no action should be taken to recoup that payment and the other Party agrees.

 

E&P ” has the meaning set forth in Section 2.02(b)(iv).

 

HII ” has the meaning set forth in the preamble.

 

HII Consolidated Group ” means any consolidated, combined, unitary or similar group of which (i) any member of the HII Tax Group is or was a member and (ii) any member of the AdvanSix Tax Group is or was a member.

 

HII Tax Group ” means HII and any Person that is or was a Subsidiary of HII as of the Distribution or at any time prior to the Distribution, excluding each member of the AdvanSix Tax Group.

 

Indemnifying Party ” means a Party that has an obligation to make an Indemnity Payment.

 

Indemnitee ” means a Party that is entitled to receive an Indemnity Payment.

 

Indemnity Payment ” means an indemnity payment contemplated by this Agreement and the Separation Agreement.

 

Intended Tax Treatment ” means, with respect to each of the applicable Transactions, the U.S. Federal income Tax consequences (if any) set forth for such Transaction in Appendix A.

 

IRS ” means the U.S. Internal Revenue Service.

 
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Ordinary Taxes ” means Taxes other than (i) Transaction Taxes and (ii) Transfer Taxes.

 

Parties ” has the meaning set forth in the preamble.

 

Pre-Distribution Tax Period ” means any taxable period (or portion thereof) that ends on or before the Distribution Date.

 

Proposed Acquisition Transaction ” has the meaning set forth in Section 4.03(b).

 

Protective Section 336(e) Election ” means, with respect to an entity, a protective election under Section 336(e) of the Code and Section 1.336-2(j) of the Regulations (and any similar provision of U.S. state or local Law for such jurisdictions as HII shall determine at its sole discretion) to treat the disposition of the Stock of such entity, pursuant to the Distribution, as a deemed sale of the assets of such entity in accordance with Section 1.336-2(h) of the Regulations (or any similar provision of U.S. state or local Law).

 

Records ” has the meaning set forth in Section 5.01.

 

Refund Recipient ” has the meaning set forth in Section 2.03.

 

Regulations ” means the Treasury regulations promulgated under the Code.

 

Restricted Period ” has the meaning set forth in Section 4.03(a).

 

Ruling ” means a private letter ruling (including any supplemental ruling) issued by the IRS in connection with the Transactions, whether granted prior to, on or after the date hereof.

 

Satisfactory Guidance ” has the meaning set forth in Section 4.04(b).

 

Separation Agreement ” means the Separation and Distribution Agreement dated as of the date of this Agreement by and between HII and AdvanSix, including the Schedules thereto.

 

Straddle Period ” has the meaning set forth in Section 2.05(b).

 

Subsidiary ” means, with respect to any Person, a corporation, partnership, association, limited liability company, trust or other form of legal entity in which such Person and/or one or more Subsidiaries of such Person has either (i) a majority ownership in the equity thereof; (ii) the power to elect, or to direct the election of, a majority of the board of directors or other analogous governing body of such entity; or (iii) the title or function of general partner or manager, or the right to designate the Person having such title or function.

 
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Tax Advisor ” means (i) for purposes of Section 5.06, a local Tax counsel or accountant of recognized national standing in the relevant jurisdiction and (ii) for all other purposes of this Agreement, a U.S. Tax counsel of recognized national standing.

 

Tax Attribute ” has the meaning set forth in Section 2.04.

 

Tax Contest ” means an audit, review, examination or other administrative or judicial proceeding, in each case by any Taxing Authority.

 

Tax Dispute ” has the meaning set forth in Section 5.06.

 

Tax Opinion Representations ” means representations regarding certain facts in existence at the applicable time made by HII and AdvanSix that serve as a basis for the Tax Opinion.

 

Tax Opinion ” means the written opinion of Cravath, Swaine & Moore LLP issued to HII to the effect that each of the applicable Transactions should qualify for its Intended Tax Treatment.

 

Tax Opinions/Rulings ” means (i) any Ruling and (ii) any opinion of a Tax Advisor relating to the Transactions, including those issued on the Distribution Date or to allow a party to take actions otherwise prohibited under Section 4.03(a) of this Agreement.

 

Tax Return ” means any return, declaration, statement, report, form, estimate or information return relating to, (i) for purposes of Article III, Taxes other than payroll and employment related Taxes and (ii) for all other purposes of this Agreement, Taxes, in each case, including any amendments thereto and any related or supporting information, required or permitted to be filed with any Taxing Authority.

 

Tax Return Preparer ” means (i) with respect to any Tax Return that HII is responsible for preparing under Section 3.01(a), HII, and (ii) with respect to any Tax Return that AdvanSix is responsible for preparing under Section 3.01(b), AdvanSix.

 

Taxes ” means all forms of taxation or duties imposed by any Governmental Authority, or required by any Governmental Authority to be collected or withheld, including charges, in each case, in the nature of a tax, together with any related interest, penalties and other additional amounts.

 

Taxing Authority ” means any Governmental Authority charged with the determination, collection or imposition of Taxes.

 

Transaction Tax Contest ” means a Tax Contest with the purpose or effect of determining or redetermining Transaction Taxes.

 

Transaction Taxes ” means all (i) Taxes imposed on HII, AdvanSix or any of their respective Subsidiaries resulting from the failure of any step of the Transactions

 
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to qualify for its Intended Tax Treatment, (ii) Taxes imposed on any third party resulting from the failure of any step of the Transactions to qualify for its Intended Tax Treatment for which HII, AdvanSix or any of their respective Subsidiaries is or becomes liable for any reason and (iii) reasonable, out-of-pocket legal, accounting and other advisory or court fees incurred in connection with liability for Taxes described in clause (i) or (ii).

 

Transactions ” has the meaning set forth in the recitals.

 

Transfer Taxes ” means all transfer, sales, use, excise, stock, stamp, stamp duty, stamp duty reserve, stamp duty land, documentary, filing, recording, registration, value-added and other similar Taxes (excluding, for the avoidance of doubt, any income, gains, profit or similar Taxes, however assessed).

 

Unqualified Tax Opinion ” has the meaning set forth in Section 4.04(d).

 

ARTICLE II

 

Allocation of Tax Liabilities and Tax Benefits

 

SECTION 2.01. HII Indemnification of AdvanSix. After the Distribution, HII shall be liable for, and shall indemnify and hold AdvanSix harmless from, the following Taxes, whether incurred directly by AdvanSix or indirectly through one of its Subsidiaries:

 

(a) Ordinary Taxes of HII and its Subsidiaries (which, for the avoidance of doubt, shall include AdvanSix and its Subsidiaries prior to the Distribution) for any taxable period; and

 

(b) Transaction Taxes;

 

in each case, other than Taxes for which AdvanSix is liable under Section 2.02.

 

SECTION 2.02. AdvanSix Indemnification of HII. After the Distribution, AdvanSix shall be liable for, and shall indemnify and hold HII harmless from, the following Taxes, whether incurred directly by HII or indirectly through one of its Subsidiaries:

 

(a) Ordinary Taxes of AdvanSix and its Subsidiaries, in each case, for any taxable period other than a Pre-Distribution Tax Period;

 

(b) Transaction Taxes attributable to:

 

(i) the failure to be true when made or deemed made of (A) any Tax Opinion Representation made by AdvanSix or (B) any representation made by AdvanSix, any Subsidiary or controlling shareholder of AdvanSix, any counterparty to any Proposed Acquisition Transaction or any of such

 
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counterparty’s Affiliates for purposes of obtaining a Ruling or an Unqualified Tax Opinion intended to be Satisfactory Guidance;

 

(ii) any action or omission by AdvanSix or any Subsidiary of AdvanSix in breach of the covenants set forth herein (including those in Section 4.03), in any other Ancillary Agreement or in the Separation Agreement;

 

(iii) the application of Section 355(e) or 355(f) of the Code to any of the Transactions by virtue of any acquisition (or deemed acquisition) of AdvanSix Stock (including newly issued AdvanSix Stock) or assets of AdvanSix or any Subsidiary of AdvanSix;

 

(iv) a determination that the Distribution was used principally as a device for the distribution of the earnings and profits (“E&P”) within the meaning of Section 355(a)(1)(B) of the Code if such determination was based in whole or in part on any sale or exchange of AdvanSix Stock or on any distribution on AdvanSix Stock occuring after the Distribution in excess of its E&P; or

 

(v) any other action or omission taken after the Distribution by AdvanSix or any Subsidiary of AdvanSix, except to the extent such action or omission is otherwise expressly required or permitted by this Agreement (other than under Section 4.04), any other Ancillary Agreement or the Separation Agreement; and

 

(c) Any and all Transfer Taxes incurred by the HII Tax Group or the AdvanSix Tax Group as a result of the Transactions.

 

SECTION 2.03. Refunds, Credits and Offsets. Subject to Section 2.04, if HII, AdvanSix or any of their respective Subsidiaries receives any refund of any Taxes for which the other Party is liable under Sections 2.01 and 2.02 (a “Refund Recipient”), such Refund Recipient shall pay to the other Party the entire amount of the refund (including interest, but net of any Taxes imposed with respect to such refund) within 10 business days of receipt or accrual; provided , however , that the other Party, upon the request of such Refund Recipient, shall repay the amount paid to the other Party (plus any penalties, interest or other charges imposed by the relevant Taxing Authority) in the event such Refund Recipient is required to repay such refund. In the event a Party would be a Refund Recipient but for the fact it applied a refund to which it would otherwise have been entitled against a Tax liability arising in a subsequent taxable period, then such Party shall be treated as a Refund Recipient and the economic benefit of so applying the refund shall be treated as a refund, and shall be paid within 10 business days of the due date of the Tax Return to which such refund is applied to reduce the subsequent Tax liability.

 

SECTION 2.04. Carrybacks. If a Tax Return of AdvanSix or any of its Subsidiaries for any taxable period ending after the Distribution Date reflects any net operating loss, net capital loss, excess Tax credit or other Tax attribute (a “Tax Attribute”), then AdvanSix or its applicable Subsidiary shall waive the right to carry back any such Tax Attribute to a Pre-Distribution Tax Period to the extent permissible under

 
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applicable Law. In the event that AdvanSix or any of its Subsidiaries does carry back a Tax Attribute to a Pre-Distribution Tax Period, then (i) no payment with respect to such carryback shall be due to AdvanSix or any of its Subsidiaries from HII and (ii) if AdvanSix or any of its Subsidiaries receives any refund, credit or offset of any Taxes in connection with such carryback, AdvanSix shall promptly pay to HII the full amount of such refund or the economic benefit of the credit or offset (including interest, but net of any Taxes imposed with respect to such refund).

 

SECTION 2.05. Straddle Periods. (a) HII and AdvanSix shall take all commercially reasonable actions necessary or appropriate to close the taxable year of each member of the AdvanSix Tax Group for all Tax purposes as of the end of the Distribution Date to the extent permitted by applicable Law.

 

(b) For any taxable period that includes (but does not end on) the Distribution Date (a “Straddle Period”), Taxes for the Pre-Distribution Tax Period shall be computed (i) in the case of Taxes imposed on a periodic basis (such as real, personal and intangible property Taxes), on a daily pro rata basis and (ii) in the case of other Taxes generally, as if the taxable period ended as of the close of business on the Distribution Date and, in the case of any such other Taxes that are attributable to the ownership of any equity interest in a partnership, other “flowthrough” entity or “controlled foreign corporation” (within the meaning of Section 957(a) of the Code or any comparable U.S. state or local or foreign Law), as if the taxable period of that entity ended as of the close of business on the Distribution Date (whether or not such Taxes arise in a Straddle Period of the applicable owner).

 

(c) HII shall be entitled to any deduction arising out of a liability of R&C LLC that may be treated as incurred in the Pre-Distribution Tax Period under the “recurring item exception” pursuant to Section 1.461-5 of the Regulations, and the Parties shall file all Tax Returns in a manner consistent therewith. AdvanSix shall pay (or cause to be paid) all such liabilities in the ordinary course consistent with the past practice of HII and R&C LLC.

 

ARTICLE III

 

Tax Returns, Tax Contests and Other Administrative Matters

 

SECTION 3.01. Responsibility for Preparing Tax Returns. (a) Except as described in Section 3.01(b), HII shall timely prepare or cause to be timely prepared any Tax Returns of the HII Tax Group and the AdvanSix Tax Group that are required or permitted to be filed for any taxable period beginning before the Distribution Date. If AdvanSix is responsible for filing any such Tax Return under Section 3.02(a), HII shall, subject to Section 3.01(c), promptly deliver such prepared Tax Return to AdvanSix reasonably in advance of the applicable filing deadline.

 

(b) AdvanSix shall timely prepare any Tax Returns of the AdvanSix Tax Group that are required or permitted to be filed for any taxable period beginning before the Distribution Date if such Tax Returns are listed on Schedule 3.01(b). If HII is

 
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responsible for filing any such Tax Return under Section 3.02(a), AdvanSix shall, subject to Section 3.01(c), promptly deliver such prepared Tax Return to HII reasonably in advance of the applicable filing deadline.

 

(c) Except as otherwise described on Schedule 3.01(c), to the extent that any Tax Return described in Section 3.01(a) or (b) is required to be filed by a Party other than the Tax Return Preparer or directly relates to matters for which another Party may have an indemnification obligation to the Tax Return Preparer or that may give rise to a refund to which that other Party would be entitled, under this Agreement, the Tax Return Preparer shall (i) prepare the relevant portions of the Tax Return on a basis consistent with past practice, except (A) as required by applicable Law or to correct any clear error, (B) as a result of changes or elections made on any Tax Return of a HII Consolidated Group that do not relate primarily to the AdvanSix Tax Group or (C) as mutually agreed by the Parties; (ii) notify the other Party of any such portions not prepared on a basis consistent with past practice; (iii) provide the other Party a reasonable opportunity to review the relevant portions of the Tax Return; and (iv) consider in good faith any reasonable comments made by the other Party.

 

(d) The Parties shall attempt in good faith to resolve any issues arising out of the review of any such Tax Return as soon as practically possible. If the Parties are unable to resolve their differences, then the Parties shall collectively select an independent accounting firm (the “Accounting Firm”) and shall instruct the Accounting Firm to use its best efforts to prepare the relevant portions of the Tax Return on behalf of the Tax Return Preparer in compliance with Section 3.01(c) as promptly as practically possible. All determinations of the Accounting Firm relating to the disputed items, absent fraud, shall be final and binding on the Parties. The fees and expenses of the Accounting Firm shall be borne by AdvanSix.

 

SECTION 3.02. Filing of Tax Returns and Payment of Taxes. (a) Each Party shall execute and timely file each Tax Return that it is responsible for filing under applicable Law and shall timely pay to the relevant Taxing Authority any amount shown as due on each such Tax Return. The obligation to make payments pursuant to this Section 3.02(a) shall not affect a Party’s right, if any, to receive payments under Section 3.02(b) or otherwise be indemnified under this Agreement.

 

(b) In addition to its obligations under Section 3.01(c), the relevant Tax Return Preparer shall, no later than 5 business days before the due date (including extensions) of any Tax Return described in Section 3.01(a) or (b), notify the other Party of any amount (or any portion of any such amount) shown as due on that Tax Return for which the other Party must indemnify the Tax Return Preparer under this Agreement. The other Party shall pay such amount to the Tax Return Preparer no later than the due date (including extensions) of the relevant Tax Return. A failure by an Indemnitee to give notice as provided in this Section 3.02(b) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure.

 
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(c) Neither AdvanSix nor any of its Subsidiaries shall file, amend, withdraw, revoke or otherwise alter any Tax Return of any HII Consolidated Group.

 

(d) Neither AdvanSix nor any of its Subsidiaries shall file, amend, withdraw, revoke or otherwise alter any Tax Return of AdvanSix or any of its Subsidiaries to the extent such Tax Return relates to the Pre-Distribution Tax Period without the prior written consent of HII, which consent shall not be unreasonably withheld or delayed.

 

SECTION 3.03. Tax Contests. (a) HII or AdvanSix, as applicable, shall, within 10 business days of becoming aware of any Tax Contest (including a Transaction Tax Contest) that could reasonably be expected to cause the other Party to have an indemnification obligation under this Agreement, notify the other Party of such Tax Contest and thereafter promptly forward or make available to the Indemnifying Party copies of notices and communications relating to the relevant portions of such Tax Contest. A failure by an Indemnitee to give notice as provided in this Section 3.03(a) (or to promptly forward any such notices or communications) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure.

 

(b) HII and AdvanSix each shall have the exclusive right to control the conduct and settlement of any Tax Contest, other than a Transaction Tax Contest, relating to any Tax Return that it is responsible for preparing pursuant to Section 3.01. Notwithstanding the foregoing, if the conduct or settlement of any portion or aspect of any such Tax Contest could reasonably be expected to cause a Party to have an indemnification obligation under this Agreement, then the Indemnitee shall not accept or enter into any settlement without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

 

(c) HII shall have the exclusive right to control the conduct and settlement of any Transaction Tax Contest, provided , that HII shall not accept or enter into any settlement relating to any Transaction Tax to the extent that AdvanSix is liable for such Transaction Tax pursuant to Section 2.02(b) without the consent of AdvanSix, which consent shall not unreasonably be withheld or delayed.

 

SECTION 3.04. Expenses. Each Party shall bear its own expenses in the course of any Tax Contest, other than expenses included in the definition of Transaction Taxes, which shall be governed by Article II.

 

ARTICLE IV

 

Tax Matters Relating to the Transactions

 

SECTION 4.01. Mutual Representations. Each Party represents that it knows of no fact, and has no plan or intention to take any action, that it knows or reasonably should expect, after consultation with a Tax Advisor, is inconsistent with the qualification of any step of the Transactions for its Intended Tax Treatment.

 
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SECTION 4.02. Mutual Covenants. (a) Each Party shall use its reasonable best efforts to cause the Tax Opinion to be issued, including by executing the Tax Opinion Representations requested by Cravath, Swaine & Moore LLP that are true and correct.

 

(b) Except as otherwise expressly required or permitted by the Separation Agreement, this Agreement or any other Ancillary Agreement, after the Distribution neither Party shall take or fail to take, or cause or permit its respective Subsidiaries to take or fail to take, any action, if such action or omission would be inconsistent with its Tax Opinion Representations or the Intended Tax Treatment.

 

SECTION 4.03. Restricted Actions. (a) Subject to Section 4.04, during the period beginning on the Distribution Date and ending on, and including, the last day of the two-year period following the Distribution Date (the “Restricted Period”), AdvanSix shall not (and shall not cause or permit any of its Subsidiaries to), in a single transaction or a series of transactions:

 

(i) enter into any Proposed Acquisition Transaction;

 

(ii) take any affirmative action that permits a Proposed Acquisition Transaction to occur by means of an agreement to which neither AdvanSix nor any of its Subsidiaries is a party (including by (A) redeeming rights under a shareholder rights plan, (B) making a determination that a tender offer is a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction or (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the Delaware General Corporate Law or any similar corporate statute, any “fair price” or other provision of AdvanSix’s charter or bylaws or otherwise);

 

(iii) liquidate or partially liquidate AdvanSix, whether by merger, consolidation or otherwise ( provided that, for the avoidance of doubt, a merger of another entity into AdvanSix or any of its Subsidiaries shall not constitute an action described in this Section 4.03(a)(iii));

 

(iv) cause or permit AdvanSix to cease to engage in the Active Trade or Business;

 

(v) sell or transfer 50% or more of the gross assets of the Active Trade or Business or 50% or more of the gross assets of the “separate affiliated group” (within the meaning of Section 355(b)(3)(B) of the Code) of AdvanSix (the “AdvanSix SAG”) held immediately before the Distribution ( provided , however , that the foregoing shall not apply to sales, transfers or dispositions of assets to any member of the AdvanSix SAG); or

 

(vi) redeem or otherwise repurchase (directly or indirectly) any AdvanSix Stock, except to the extent such redemptions or repurchases meet the

 
11

following requirements: (A) those redemptions or purchases are for business reasons unrelated to the Distribution, (B) AdvanSix Stock to be purchased is widely held, (C) those redemptions or purchases will be made on the open market and (D) the aggregate amount of those redemptions or purchases will be less than 20% of the total value of the outstanding AdvanSix Stock.

 

(b) (i) For purposes of this Agreement, “Proposed Acquisition Transaction” means any transaction or series of transactions (or any agreement, understanding or arrangement to enter into a transaction or series of transactions) as determined for purposes of Section 355(e) of the Code, in connection with which one or more Persons would (directly or indirectly) acquire, or have the right to acquire (including pursuant to an option, warrant or other conversion right), from any other Person or Persons, an interest in AdvanSix Stock that, when combined with any other acquisitions of AdvanSix Stock that occur after the Distribution (but excluding any other acquisition described in clause (ii)) comprises 40% or more of the value or the total combined voting power of all interests that are treated as outstanding equity in AdvanSix for U.S. Federal income Tax purposes immediately after such transaction or, in the case of a series of related transactions, immediately after any transaction in such series. For this purpose, any recapitalization, repurchase or redemption of AdvanSix Stock and any amendment to the certificate of incorporation (or other organizational documents) of AdvanSix shall be treated as an indirect acquisition of AdvanSix Stock by any shareholder to the extent such shareholder’s percentage interest in interests that are treated as outstanding equity in AdvanSix for U.S. Federal income Tax purposes increases by vote or value.

 

(ii) Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (x) the adoption by AdvanSix of a shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11, (y) transfers on an established market of AdvanSix Stock that are described in Safe Harbor VII of Section 1.355-7(d) of the Regulations or (z) issuances of AdvanSix Stock that satisfy Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Section 1.355-7(d) of the Regulations; provided , that such transaction or series of transactions shall constitute a Proposed Acquisition Transaction if meaningful factual diligence is necessary to establish that Section 4.03(b)(ii)(x), (y) or (z) applies.

 

(c) If AdvanSix merges or consolidates with another entity to form a new entity, references in this Agreement to AdvanSix shall be to that new entity and AdvanSix Stock shall refer to the capital stock or other relevant instruments or rights of that new entity.

 

(d) The provisions of this Section 4.03, including the definition of “Proposed Acquisition Transaction”, are intended to monitor compliance with Section 355 of the Code and shall be interpreted accordingly. Any clarification of, or

 
12

change in, Section 355 of the Code or the Regulations thereunder shall be incorporated into this Section 4.03 and its interpretation.

 

SECTION 4.04. Consent to Take Certain Restricted Actions. (a) AdvanSix may (and may cause or permit its Subsidiaries to) take an action otherwise prohibited under Section 4.03(a) if HII consents in writing, which consent shall be at HII’s sole discretion. For the avoidance of doubt, HII’s written consent pursuant to this Section 4.04(a) shall not in any way relieve AdvanSix of its indemnification obligations under Section 2.02(b).

 

(b) HII may, at its sole discretion and as a condition to granting its written consent pursuant to Section 4.04(a), require AdvanSix to provide Satisfactory Guidance; provided , however , the provision of Satisfactory Guidance shall not obligate HII to grant its written consent pursuant to Section 4.04(a).

 

(c) For purposes of this Agreement, “Satisfactory Guidance” means either a Ruling or an Unqualified Tax Opinion concluding that the proposed action will not cause any step of the Transactions to fail to qualify for its Intended Tax Treatment. Such Ruling or Unqualified Tax Opinion will constitute Satisfactory Guidance only if they are satisfactory to HII at its sole discretion in both form and substance, including with respect to any underlying assumptions or representations and any legal analysis contained therein.

 

(d) For purposes of this Agreement, “Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor that permits reliance by HII. The Tax Advisor, in issuing its opinion, shall be permitted to rely on the validity and correctness, as of the date given, of any previously issued Tax Opinions/Rulings, unless such reliance would be unreasonable under the circumstances, and shall assume that each of the applicable Transactions would have qualified for its Intended Tax Treatment if the action in question did not occur.

 

SECTION 4.05. Procedures Regarding Opinions and Rulings. (a) If AdvanSix notifies HII that it desires to take a restricted action described in Section 4.03(a) and HII requires Satisfactory Guidance as a condition to consenting to such restricted action pursuant to Section 4.04(b), HII shall use commercially reasonable efforts to expeditiously obtain, or assist AdvanSix in obtaining, such Satisfactory Guidance. Notwithstanding the foregoing, HII shall not be required to take any action pursuant to this Section 4.05(a) if, upon request, AdvanSix fails to certify that all information and representations relating to AdvanSix or any Subsidiary of AdvanSix in the relevant documents are true, correct and complete or fails to obtain certification from any counterparty to any Proposed Acquisition Transaction that all information and representations relating to such counterparty in the relevant documents are true, correct and complete. AdvanSix shall reimburse HII for all reasonable out-of-pocket costs and expenses incurred by HII or any Subsidiary of HII in obtaining Satisfactory Guidance within 10 business days after receiving an invoice from HII therefor.

 
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(b) Notwithstanding anything herein to the contrary, AdvanSix shall not seek a Ruling with respect to a Pre-Distribution Tax Period (whether or not relating to the Transactions) if HII determines that there is a reasonable possibility that such action could have a significant adverse impact on HII or any Subsidiary of HII.

 

SECTION 4.06. Notification and Certification Regarding Certain Acquisition Transactions. If AdvanSix proposes to enter into any 10% Acquisition Transaction or take any affirmative action to permit any 10% Acquisition Transaction to occur at any time during the 30-month period following the Distribution Date, AdvanSix shall undertake in good faith to provide HII, no later than 10 business days following the signing of any written agreement with respect to such 10% Acquisition Transaction or obtaining knowledge of the occurrence of any such 10% Acquisition Transaction that takes place without written agreement, with a written description of such transaction (including the type and amount of AdvanSix Stock to be acquired) and a brief explanation as to why AdvanSix believes that such transaction does not result in the application of Section 355(e) or 355(f) of the Code to the Transactions. For purposes of this Section 4.06, “10% Acquisition Transaction” means any transaction or series of transactions that would be a Proposed Acquisition Transaction if the percentage specified in the definition of Proposed Acquisition Transaction were 10% instead of 40%.

 

SECTION 4.07. Reporting. HII and AdvanSix shall (i) timely file any appropriate information and statements (including as required by Section 6045B of the Code and Section 1.355-5 and, to the extent applicable, Section 1.368-3 of the Regulations) to report each of the applicable Transactions as qualifying for its Intended Tax Treatment and (ii) absent a change of Law or an applicable Determination otherwise, not take any position on any Tax Return that is inconsistent with such qualification.

 

SECTION 4.08. Tax Treatment of Certain Amounts Paid Pursuant to the EMA. Amounts paid pursuant to the EMA shall be treated in the manner as described in the EMA.

 

SECTION 4.09. Protective Section 336(e) Election. (a) HII will make a Protective Section 336(e) Election with respect to the Distribution. Accordingly, the Parties agree that this Agreement constitutes a written, binding agreement to make a Protective Section 336(e) Election as contemplated by Section 1.336-2(h)(1)(i) of the Regulations. AdvanSix will cooperate with HII to facilitate the making of such election.

 

(b) If AdvanSix realizes a Tax benefit from the step-up in Tax basis resulting from a failure of the Distribution to qualify (in whole or in part) for its Intended Tax Treatment and the election described in Section 4.09(a), unless AdvanSix has indemnified HII for the resulting Transaction Taxes under Section 2.02(b), AdvanSix shall make quarterly payments to HII in an amount equal to 100 percent of the actual Tax savings if, as and when realized arising from the step-up in Tax basis resulting from the Protective Section 336(e) Election, determined on a “with and without” basis (treating any deductions or amortization attributable to the step-up in Tax basis resulting from the Protective Section 336(e) Election as the last items claimed for any taxable period,

 
14

including after the utilization of any available net operating loss carryforwards), net of any reasonable out-of-pocket expenses necessary to secure such Tax savings.

 

ARTICLE V

 

Procedural Matters

 

SECTION 5.01. Cooperation. Each Party shall cooperate with reasonable requests from the other Party in matters covered by this Agreement, including in connection with the preparation and filing of Tax Returns, the calculation of Taxes, the determination of the proper financial accounting treatment of Tax items and the conduct and settlement of Tax Contests. Such cooperation shall include:

 

(i) retaining until the expiration of the relevant statute of limitations (including extensions) of records, documents, accounting data, computer data and other information (“Records”) necessary for the preparation, filing, review, audit or defense of all Tax Returns relevant to an obligation, right or liability of either Party under this Agreement;

 

(ii) providing the other Party reasonable access to Records and to its personnel (ensuring their cooperation) and premises during normal business hours to the extent relevant to an obligation, right or liability of the other Party under this Agreement or otherwise reasonably required by the other Party to complete Tax Returns or to compute the amount of any payment contemplated by this Agreement; and

 

(iii) notifying the other Party prior to disposing of any relevant Records and affording the other Party the opportunity to take possession or make copies of such Records at its discretion.

 

SECTION 5.02. Interest. Any payments required pursuant to this Agreement that are not made within the time period specified in this Agreement shall bear interest from the end of that period. Interest required to be paid pursuant to this Agreement shall, unless otherwise specified, be computed at the rate and in the manner provided in the Code for interest on underpayments and overpayments, as applicable, for the relevant period.

 

SECTION 5.03. Indemnification Claims and Payments. (a) An Indemnitee shall be entitled to make a claim for payment with respect to Taxes under this Agreement when the Indemnitee determines that it is entitled to such payment and is able to calculate with reasonably accuracy the amount of such payment. Except as otherwise provided in Sections 3.02(b) and 3.03, the Indemnitee shall provide to the Indemnifying Party notice of such claim within 60 business days of the first date on which it so becomes entitled to make such claim. Such notice shall include a description of such claim and a detailed calculation of the amount claimed.

 
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(b) Except as otherwise provided in Sections 3.02(b) and 3.03, the Indemnifying Party shall make the claimed payment to the Indemnitee within 30 business days after receiving such notice, unless the Indemnifying Party reasonably disputes its liability for, or the amount of, such payment.

 

(c) A failure by an Indemnitee to give notice as provided in Section 3.02(b), 3.03 or 5.03(a) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure.

 

(d) Nothing in this Section 5.03 shall prejudice a Party’s right to receive payments pursuant to Section 3.02(b) or 3.03.

 

SECTION 5.04. Amount of Indemnity Payments. The amount of any Indemnity Payment shall be (i) reduced to take into account any Tax benefit actually realized by the Indemnitee resulting from the incurrence of the liability in respect of which the Indemnity Payment is made and (ii) increased to take into account any Tax cost actually realized by the Indemnitee resulting from the receipt of the Indemnity Payment, including any Tax cost arising from such Indemnity Payment having resulted in income or gain to either Party, for example, under Section 1.1502-19 of the Regulations, and any Taxes imposed on additional amounts payable pursuant to this clause (ii). For purposes of calculating the amount of any Tax benefit or Tax cost, the applicable Indemnitee shall be deemed to be subject to a 39% Tax rate in the taxable year in which such Tax benefit or Tax cost was realized and any Tax attributes of such Indemnitee shall be disregarded.

 

SECTION 5.05. Treatment of Indemnity Payments. Any Indemnity Payment (other than any portion of a payment that represents interest accruing after the Distribution Date) shall be treated by HII and AdvanSix for all Tax purposes as a distribution from AdvanSix to HII immediately prior to the Distribution (if made by AdvanSix to HII) or as a contribution from HII to AdvanSix immediately prior to the Distribution (if made by HII to AdvanSix), except as otherwise required by applicable Law or a Determination.

 

SECTION 5.06. Tax Disputes. Notwithstanding Section 6.07, this Section 5.06 shall govern the resolution of any dispute arising between the Parties in connection with this Agreement, other than a dispute (i) relating to liability for Transaction Taxes (ii) in which the amount of liability in dispute exceeds $20 million (a “Tax Dispute”) or (iii) relating to a Tax Return as described in Section 3.01(d). The Parties shall negotiate in good faith to resolve any Tax Dispute for 45 calendar days (unless earlier resolved). Upon notice of either Party after 45 calendar days, the matter will be referred to an Accounting Firm acceptable to both Parties. The Accounting Firm may, in its discretion, obtain the services of any third party necessary to assist it in resolving the Tax Dispute. The Parties shall instruct the Accounting Firm to furnish notice to each Party of its resolution of the Tax Dispute as soon as practicable, but in any event no later than 60 calendar days after its acceptance of the matter for resolution. Any such resolution by the Accounting Firm will be binding on the Parties and the Parties

 
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shall take, or cause to be taken, any action necessary to implement the resolution. All fees and expenses of the Accounting Firm shall be shared equally by the Parties. If, having determined that a Tax Dispute must be referred to an Accounting Firm, after 45 calendar days the Parties are unable to find an Accounting Firm willing to adjudicate the Tax Dispute in question and that the Parties in good faith find acceptable, then this Section 5.06 shall cease to apply to that Tax Dispute.

 

ARTICLE VI

 

Miscellaneous

 

SECTION 6.01. Termination. This Agreement will terminate without further action at any time before the Distribution upon termination of the Separation Agreement. If terminated, no Party will have any Liability of any kind to the other Party or any other Person on account of this Agreement, except as provided in the Separation Agreement.

 

SECTION 6.02. Applicability. This Agreement shall not apply before the Distribution.

 

SECTION 6.03. Survival. Except as expressly set forth in this Agreement, the covenants and indemnification obligations in this Agreement shall survive the Spin-Off and shall remain in full force and effect.

 

SECTION 6.04. Separation Agreement. The Parties agree that, in the event of a conflict between the terms of this Agreement and the Separation Agreement with respect to the subject matter hereof, the terms of this Agreement shall govern.

 

SECTION 6.05. Confidentiality. Each Party hereby acknowledges that confidential Information of such Party or its Subsidiaries may be exposed to employees and agents of the other Party or its Subsidiaries as a result of the activities contemplated by this Agreement. Each Party agrees, on behalf of itself and its Subsidiaries, that such Party’s obligations with respect to Information and data of the other Party or its Subsidiaries shall be governed by Section 7.08 of the Separation Agreement.

 

SECTION 6.06. Counterparts; Entire Agreement. (a) This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. This Agreement may be executed by facsimile or PDF signature and a facsimile or PDF signature shall constitute an original for all purposes.

 

(b) This Agreement, the Separation Agreement, the other Ancillary Agreements and the Appendices, Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no

 
17

agreements or understandings between the Parties with respect to the subject matter hereof other than those set forth or referred to herein or therein.

 

SECTION 6.07. Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Subject to Section 5.06, each Party irrevocably consents to the exclusive jurisdiction, forum and venue of the Commercial Division of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York over any and all claims, disputes, controversies or disagreements between the Parties or any of their respective Subsidiaries, Affiliates, successors and assigns under or related to this Agreement or any document executed pursuant to this Agreement or any of the transactions contemplated hereby or thereby.

 

SECTION 6.08. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.08.

 

SECTION 6.09. Assignability. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by either Party without the prior written consent of the other Party. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Notwithstanding the foregoing, either Party may assign this Agreement without consent in connection with (a) a merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such Party’s assets, or (b) the sale of all or substantially all of such Party’s assets; provided , however , that the assignee expressly assumes in writing all of the obligations of the assigning Party under this Agreement, and the assigning Party provides written notice and evidence of such assignment and assumption to the non-assigning Party. No assignment permitted by this Section 6.09 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

 
18

SECTION 6.10. Third-Party Beneficiaries. (a) The provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third Person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

SECTION 6.11. Notices. All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given when (a) delivered in person, (b) on the date received, if sent by a nationally recognized delivery or courier service or (c) upon the earlier of confirmed receipt or the fifth business day following the date of mailing if sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to HII, to:

 

Honeywell International Inc.

115 Tabor Road

Morris Plains, NJ 07950

Attn: Vice President, Tax and General Tax Counsel

e-mail: * * *

 

with a copy to:

 

Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attn:   Stephen L. Gordon, Esq.
           Lauren Angelilli, Esq.
e-mail: * * *

 

If to AdvanSix, to:

 

AdvanSix Inc.

115 Tabor Road

Morris Plains, NJ 07950

Attn: General Counsel

e-mail: * * *

 

with a copy to:

 

Either Party may, by notice to the other Party, change the address to which such notices are to be given.

 

SECTION 6.12. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent

 
19

jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon any such determination, any such provision, to the extent determined to be invalid, void or unenforceable, shall be deemed replaced by a provision that such court determines is valid and enforceable and that comes closest to expressing the intention of the invalid, void or unenforceable provision.

 

SECTION 6.13. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

SECTION 6.14. Waivers of Default. No failure or delay of either Party (or the applicable member of its Group) in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by either Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default.

 

SECTION 6.15. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, HII shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. AdvanSix shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the remedies at law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived. The Parties acknowledge and agree that the right of specific enforcement is an integral part of this Agreement and without that right, neither HII nor AdvanSix would have entered into this Agreement.

 

SECTION 6.16. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by either Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each Party.

 

SECTION 6.17. Interpretation. The rules of interpretation set forth in Section 12.14 of the Separation Agreement shall be incorporated by reference to this Agreement, mutatis mutandis . NOTWITHSTANDING THE FOREGOING, THE PURPOSE OF ARTICLE IV IS TO ENSURE THAT EACH OF THE APPLICABLE

 
20

TRANSACTIONS QUALIFIES FOR ITS INTENDED TAX TREATMENT AND, ACCORDINGLY, THE PARTIES AGREE THAT THE LANGUAGE THEREOF SHALL BE INTERPRETED IN A MANNER THAT SERVES THIS PURPOSE TO THE GREATEST EXTENT POSSIBLE.

 

SECTION 6.18. Compliance by Subsidiaries. The Parties shall cause their respective Subsidiaries to comply with this Agreement.

 
21

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

  HONEYWELL INTERNATIONAL INC.,
   
  by
     
    Name:
    Title:

 

  AdvanSix, Inc.,
   
  by
     
    Name:
    Title:
 

Exhibit 10.3

 

EMPLOYEE MATTERS AGREEMENT

 

By and Between

 

HONEYWELL INTERNATIONAL INC.

 

and

 

ADVANSIX INC.

 

Dated as of     , 2016

 

TABLE OF CONTENTS

 

    Page
     
ARTICLE I
     
DEFINITIONS
     
SECTION 1.01. Definitions 1
     
ARTICLE II
     
GENERAL PRINCIPLES
     
SECTION 2.01. AdvanSix Employees 5
SECTION 2.02. Collectively Bargained Employees 5
SECTION 2.03. Collective Bargaining Agreements 5
SECTION 2.04. Liabilities 5
SECTION 2.05. Benefit Plans 6
SECTION 2.06. Payroll Services 6
SECTION 2.07. No Change in Control 6
     
ARTICLE III
     
NON-EQUITY INCENTIVES
     
SECTION 3.01. AdvanSix Employee Incentives 6
     
ARTICLE IV
     
SERVICE CREDIT
     
SECTION 4.01. Honeywell Benefit Plans 7
SECTION 4.02. AdvanSix Benefit Plans 7
     
ARTICLE V
     
SEVERANCE
     
SECTION 5.01. Post-Distribution Severance 7
     
ARTICLE VI
     
CERTAIN WELFARE BENEFIT PLAN MATTERS; WORKERS’ COMPENSATION CLAIMS
     
SECTION 6.01. AdvanSix Welfare Plans 8
SECTION 6.02. Allocation of Welfare Benefit Claims 8
i
SECTION 6.03. Workers’ Compensation Claims 8
SECTION 6.04. COBRA 9
SECTION 6.05. Health Savings Account 9
SECTION 6.06. Flexible Spending Account 9
     
ARTICLE VII
     
LONG-TERM DISABILITY
     
SECTION 7.01. Benefits 10
SECTION 7.02. Return to Work 10
     
ARTICLE VIII
     
DEFINED BENEFIT PENSION PLAN
     
SECTION 8.01. Honeywell Defined Benefit Pension Plan 10
     
ARTICLE IX
     
DEFINED CONTRIBUTION PLAN
     
SECTION 9.01. AdvanSix 401(k) Plan 11
SECTION 9.02. 401(k) Rollover 11
SECTION 9.03. Employer 401(k) Plan Contributions 11
SECTION 9.04. Stock Considerations 12
SECTION 9.05. Limitation of Liability 12
     
ARTICLE X
     
NONQUALIFIED DEFERRED COMPENSATION
     
SECTION 10.01. Honeywell Nonqualified Deferred Compensation Plans 12
     
ARTICLE XI
     
VACATION
     
SECTION 11.01. Vacation 13
     
ARTICLE XII
     
LONG-Term Incentive COMPENSATION AWARDS
     
SECTION 12.01. AdvanSix Long-Term Incentive Plan 13
SECTION 12.02. Equity Award Adjustments 13
SECTION 12.03. Treatment of Incentive Awards Upon Distribution 13
SECTION 12.04. Incentive Award Reimbursement 14
ii
SECTION 12.05. Cooperation 14
SECTION 12.06. Treatment of Reimbursements 14
     
ARTICLE XIII
     
COOPERATION; ACCESS TO INFORMATION; LITIGATION; CONFIDENTIALITY
     
SECTION 13.01. Cooperation 15
SECTION 13.02. Access to Information; Litigation; Confidentiality 15
     
ARTICLE XIV
     
TERMINATION
     
SECTION 14.01. Termination 15
SECTION 14.02. Effect of Termination 16
     
ARTICLE XV
     
MISCELLANEOUS
     
SECTION 15.01. Incorporation of Indemnification Provisions of Separation Agreement 16
SECTION 15.02. Benefit Plan Indemnification 16
SECTION 15.03. Further Assurances 16
SECTION 15.04. Administration 16
SECTION 15.05. Third-Party Beneficiaries 16
SECTION 15.06. Employment Tax Reporting Responsibility 16
SECTION 15.07. Data Privacy 17
SECTION 15.08. Section 409A 17
SECTION 15.09. Confidentiality 17
SECTION 15.10. Additional Provisions 18
iii

EMPLOYEE MATTERS AGREEMENT (this “ Agreement ”), dated as of     , 2016, by and between HONEYWELL INTERNATIONAL INC., a Delaware corporation (“ Honeywell ”), and ADVANSIX, INC., a Delaware corporation (“ AdvanSix ”, and together with Honeywell, the “ Parties ”).

 

R E C I T A L S

 

WHEREAS the Parties have entered into the Separation and Distribution Agreement (the “ Separation Agreement ”) dated as of     , 2016, pursuant to which Honeywell intends to effect the Distribution; and

 

WHEREAS the Parties wish to set forth their agreements as to certain matters regarding employment, compensation and employee benefits.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01.           Definitions. For purposes of this Agreement, the following terms shall have the following meanings. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Separation Agreement unless otherwise indicated.

 

AdvanSix 401(k) Plan ” has the meaning set forth in Section 9.01 .

 

AdvanSix Benefit Plan ” shall mean any Benefit Plan sponsored, maintained or, unless such Benefit Plan is sponsored or maintained by a member of the Honeywell Group, contributed to by any member of the AdvanSix Group or to which any member of the AdvanSix Group is a party.

 

AdvanSix Employee ” shall mean, as of any applicable date, (a) each individual who is an employee of the AdvanSix Group as of immediately prior to the Distribution, including any individual who is not actively at work due to a leave of absence (including vacation, holiday, illness, injury, short-term disability but excluding, until such time as provided in Section 7.01 , any AdvanSix LTD Employee) from which such employee is permitted to return to active employment in accordance with the AdvanSix Group’s personnel policies, as in effect from time to time, or applicable Law and (b) each individual who becomes an active employee of the AdvanSix Group following the Distribution, but, in each case, excluding any Former AdvanSix Employee.

 

AdvanSix Incentive Payments ” has the meaning set forth in Section 3.01

 
2

AdvanSix Long-Term Incentive Plan ” has the meaning set forth in Section 12.01 .

 

AdvanSix LTD Employee ” shall mean any employee of the AdvanSix Group who, as of immediately prior to the Distribution, is receiving long-term disability benefits under the Honeywell LTD Plan.

 

AdvanSix Pre-Distribution HR Liabilities ” has the meaning set forth in Section 2.04 .

 

AdvanSix Welfare Plans ” has the meaning set forth in Section 6.01 .

 

AdvanSix Workers’ Compensation Plan ” has the meaning set forth in Section 6.03 .

 

Benefit Plan ” shall mean any plan, program, policy, agreement, arrangement or understanding that is an employment, consulting, deferred compensation, executive compensation, incentive bonus or other bonus, employee pension, profit sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation right, restricted stock, restricted stock unit, deferred stock unit, other equity-based compensation, severance pay, retention, change in control, salary continuation, life, death benefit, health, hospitalization, workers’ compensation, sick leave, vacation pay, disability or accident insurance or other employee compensation or benefit plan, program, agreement or arrangement, including any “employee benefit plan” (as defined in Section 3(3) of ERISA) (whether or not subject to ERISA) sponsored or maintained by such entity or to which such entity is a party.

 

COBRA ” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time, and any applicable similar state or local laws.

 

Code ” shall mean the U.S. Internal Revenue Code of 1986, as amended.

 

Collective Bargaining Agreements ” has the meaning set forth in Section 2.02 .

 

Employment Taxes ” shall mean all fees, Taxes, social insurance payments or similar contributions to a fund of a Governmental Authority with respect to wages or other compensation of an employee or other service provider.

 

ERISA ” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time.

 

Exchange ” means the New York Stock Exchange.

 

Former AdvanSix Employee ” shall mean, as of any applicable date, each individual who (a) as of immediately prior to such individual’s termination of

 
3

employment was an AdvanSix Employee and (b) as of such applicable date, is not employed by any member of the AdvanSix Group.

 

GPUs ” shall mean any growth plan units awarded using a 2014 or 2016 Growth Plan Agreement under the Honeywell 2011 Stock Incentive Plan.

 

Honeywell 401(k) Plan ” has the meaning set forth in Section 9.01 .

 

Honeywell Benefit Plan ” shall mean any Benefit Plan sponsored, maintained or, unless such Benefit Plan is sponsored or maintained by a member of the AdvanSix Group, contributed to by any member of the Honeywell Group or to which any member of the Honeywell Group is a party.

 

Honeywell Equity Plans ” shall mean the 2016 Stock Incentive Plan, the 2016 Stock Plan for Non-Employee Directors, the 2011 Stock Incentive Plan, the 2006 Stock Incentive Plan, the 2003 Stock Incentive Plan, the 2006 Stock Plan for Non-Employee Directors, the Stock Plan for Non-Employee Directors, each as amended from time to time, and any other stock option, stock incentive compensation plan or arrangement, including equity award agreements, that is a Honeywell Benefit Plan, as in effect as of the time relevant to the applicable provision of this Agreement.

 

Honeywell Flexible Spending Account ” shall mean any flexible spending arrangement under any cafeteria plan qualifying under Section 125 of the Code that is a Honeywell Benefit Plan.

 

Honeywell Health Savings Account ” shall mean any health savings account under a health savings account plan that is a Honeywell Benefit Plan.

 

Honeywell LTD Plan ” shall mean any long-term disability plan that is a Honeywell Benefit Plan.

 

Honeywell Nonqualified Deferred Compensation Plans ” shall mean the Salary and Incentive Award Deferral Plan for Selected Employees, the Deferred Compensation Plan for Non-Employee Directors, the Supplemental Non-Qualified Savings Plan for Highly Compensated Employees, the Supplemental Pension Plan, the Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, the Supplemental Defined Benefit Retirement Plan, the Nonqualified Supplemental Retirement Plan, each as amended from time to time, and any other nonqualified deferred compensation plan or arrangement (including individual arrangements) that is a Honeywell Benefit Plan, as in effect as of the time relevant to the applicable provision of this Agreement.

 

Honeywell Pension Plan ” has the meaning set forth in Section 8.01 .

 

Honeywell Welfare Plan ” shall mean each Welfare Plan that is a Honeywell Benefit Plan.

 
4

Honeywell Workers’ Compensation Plan ” shall mean any workers’ compensation plan that is a Honeywell Benefit Plan.

 

Reimbursement Award ” means the unvested portion of any award granted under any Honeywell Equity Plan that (i) was unvested as of immediately prior to the Distribution Date, (ii) was held by an AdvanSix Employee (or AdvanSix LTD Employee who becomes an AdvanSix Employee prior to the applicable Reimbursement Event) as of the Distribution Date and (iii) becomes vested after the Distribution Date in accordance with Section 12.03 .

 

Reimbursement Event ” means, after the Distribution Date, (i) the vesting of any Reimbursement Award that is a restricted stock award or similar award of tangible property, (ii) the settlement of any Reimbursement Award that is a restricted stock unit or similar full-value share-based incentive award (excluding any restricted stock award) or cash-based incentive award (including any GPUs) or (iii) the exercise of any Reimbursement Award that is a stock option or stock appreciation right.

 

Subsidiary ” of any Person shall mean any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided , however , that, solely for purposes of this Agreement, AdvanSix and its Subsidiaries shall not be considered Subsidiaries of Honeywell (or members of the Honeywell Group) prior to, on or after the Distribution.

 

Tax Return ” shall have the meaning set forth in the TMA.

 

Taxes ” shall have the meaning set forth in the TMA.

 

Taxing Authority ” shall have the meaning set forth in the TMA.

 

TMA ” shall mean the Tax Matters Agreement dated as of the date of this Agreement by and between Honeywell and AdvanSix.

 

TSA ” shall mean the Transition Services Agreement dated as of the date of this Agreement by and between Honeywell and AdvanSix.

 

Vesting Date ” has the meaning set forth in Section 12.03 .

 

Welfare Plan ” shall mean each Benefit Plan that provides life insurance, health care, dental care, accidental death and dismemberment insurance, disability, severance, vacation or other group welfare or fringe benefits.

 

Welfare Plan Date ” has the meaning set forth in Section 6.01 .

 
5

Workers’ Compensation Event ” shall mean the event, injury, illness or condition giving rise to a workers compensation claim with respect to an AdvanSix Employee or Former AdvanSix Employee.

 

Workers’ Compensation Plan Date ” has the meaning set forth in Section 6.03 .

 

ARTICLE II

 

GENERAL PRINCIPLES

 

SECTION 2.01.           AdvanSix Employees. All AdvanSix Employees as of immediately prior to the Distribution shall continue to be employees of the AdvanSix Group immediately following the Distribution. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement or any of the Ancillary Agreements, including this Agreement, shall result in any AdvanSix Employee, AdvanSix LTD Employee or Former AdvanSix Employee being deemed to have incurred a termination of employment or being eligible to receive severance benefits, solely as a result of the Distribution.

 

SECTION 2.02.           Collectively Bargained Employees. All provisions contained in this Agreement providing for the treatment of compensation and benefits in connection with the Distribution shall apply equally to any employee who is covered by any collective bargaining, works council or other labor union contract or labor arrangement (collectively, “ Collective Bargaining Agreements ”), except to the extent that any such agreement specifically provides for the compensation or benefits contemplated by such provision and, in each such case, such agreement shall apply rather than the terms of this Agreement.

 

SECTION 2.03.           Collective Bargaining Agreements. As of the Distribution, AdvanSix shall, and shall cause the members of the AdvanSix Group as appropriate to, adopt and assume any Collective Bargaining Agreement covering any of the AdvanSix Employees immediately prior to the Distribution, subject to any agreed upon changes required by the transition of such Collective Bargaining Agreement to AdvanSix or applicable Law, and recognize the works councils, labor unions and other employee representatives that are party to such Collective Bargaining Agreements; provided that, any compensation or benefits that were, prior to the Distribution, provided to AdvanSix Employees under the Collective Bargaining Agreements through the Honeywell Benefit Plans shall, to the extent such compensation and benefits are still required to be provided under the Collective Bargaining Agreements on and after the Distribution, be provided as mutually agreed with such works councils, labor unions and other employee representatives through the AdvanSix Benefit Plans as set forth in this Agreement.

 

SECTION 2.04.           Liabilities. Except as otherwise provided in this Agreement, (a) the members of the Honeywell Group shall be responsible for all actual or potential employment and employee compensation and benefits-related Liabilities

 
6

incurred prior to the Distribution that relate to AdvanSix Employees and Former AdvanSix Employees (and each of their respective dependents and beneficiaries), excluding any such Liabilities that AdvanSix retains or assumes pursuant to applicable Law in connection with the Distribution (collectively, with all other such Liabilities that the AdvanSix Group retains or assumes in connection with this Agreement, the “AdvanSix Pre-Distribution HR Liabilities ”) and (b) the members of the AdvanSix Group shall be responsible for (i) all actual or potential employment and employee compensation and benefits-related Liabilities incurred on or after the Distribution that relate to AdvanSix Employees and Former AdvanSix Employees (and each of their respective dependents and beneficiaries) and (ii) the AdvanSix Pre-Distribution HR Liabilities. AdvanSix shall pay or provide all AdvanSix Pre-Distribution HR Liabilities in the ordinary course and at a time or times consistent with the past practice of the Honeywell Group.

 

SECTION 2.05.           Benefit Plans. Except as otherwise specifically provided in this Agreement or as may otherwise be provided in accordance with the TSA, as of the Distribution, each AdvanSix Employee (and each of their respective dependents and beneficiaries) shall cease active participation in, and each member of the AdvanSix Group shall cease to be a participating employer in, all Honeywell Benefit Plans, and, as of such time, AdvanSix shall, or shall cause its Subsidiaries to, have in effect such corresponding AdvanSix Benefit Plans as are necessary to comply with its obligations pursuant to this Agreement. As of immediately following the Distribution, except as otherwise specifically provided in this Agreement, (a) Honeywell shall, or shall cause one or more members of the Honeywell Group to, retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to all Honeywell Benefit Plans, and (b) AdvanSix shall, or shall cause one of the members of the AdvanSix Group to, retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to all AdvanSix Benefit Plans.

 

SECTION 2.06.           Payroll Services. Except as may otherwise be provided in accordance with the TSA, prior to, on and after the Distribution, the members of the AdvanSix Group shall be solely responsible for providing payroll services to the AdvanSix Employees and Former AdvanSix Employees.

 

SECTION 2.07.           No Change in Control. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement or any of the Ancillary Agreements, including this Agreement, constitutes a “change in control,” “change of control” or similar term, as applicable, within the meaning of any Honeywell Benefit Plan or AdvanSix Benefit Plan, including the AdvanSix Long-Term Incentive Plan.

 

ARTICLE III

 

NON-EQUITY INCENTIVES

 

SECTION 3.01.           AdvanSix Employee Incentives. Unless otherwise provided for in an individual agreement with an AdvanSix Employee to which Honeywell is a party, on and after the Distribution, AdvanSix shall assume and be solely

 
7

responsible for Liabilities with respect to any annual bonus or other cash-based incentive or retention awards (other than GPUs, which shall be treated in accordance with Article XII ) under any Benefit Plan to any AdvanSix Employee, AdvanSix LTD Employee or Former AdvanSix Employee, including, for the avoidance of doubt, any such awards with respect to the year in which the Distribution occurs (the “ AdvanSix Incentive Payments ”). AdvanSix shall be responsible for determining the amounts of all AdvanSix Incentive Payments that have not been determined prior to the Distribution, including the extent to which established performance criteria (as interpreted by AdvanSix, in its sole discretion) have been met, and shall pay all AdvanSix Incentive Payments no later than the times provided for under the applicable Benefit Plan. For the avoidance of doubt, any determinations made prior to the Distribution regarding the amounts of any AdvanSix Incentive Payments shall be subject to Honeywell’s prior written approval.

 

ARTICLE IV

 

SERVICE CREDIT

 

SECTION 4.01.           Honeywell Benefit Plans. Except as may otherwise be provided in accordance with the TSA and except as otherwise provided in Section 12.03 , service of AdvanSix Employees and Former AdvanSix Employees, on and after the Distribution, with any member of the AdvanSix Group or any other employer, as applicable, other than any member of the Honeywell Group, shall not be taken into account for any purpose under any Honeywell Benefit Plan.

 

SECTION 4.02.           AdvanSix Benefit Plans. Unless prohibited by applicable Law, AdvanSix shall, and shall cause its Subsidiaries to, credit service accrued by each AdvanSix Employee with, or otherwise recognized for purposes of any Benefit Plan by, any member of the Honeywell Group or the AdvanSix Group on or prior to the Distribution for purposes of (a) eligibility and vesting under each AdvanSix Benefit Plan under which service is relevant in determining eligibility or vesting, (b) determining the amount of severance payments and benefits (if any) payable under each AdvanSix Benefit Plan that provides severance payments or benefits and (c) determining the number of vacation days to which each such employee shall be entitled following the Distribution, in the case of clauses (a), (b) and (c), (i) to the same extent recognized by the relevant members of the Honeywell Group or AdvanSix Group or the corresponding Honeywell Benefit Plan or AdvanSix Benefit Plan immediately prior to the later of the Distribution Date and the date such employee ceases participating in the applicable Honeywell Benefit Plan in accordance with the TSA and (ii) except to the extent such credit would result in a duplication of benefits for the same period of service.

 

ARTICLE V

 

SEVERANCE

 

SECTION 5.01.           Post-Distribution Severance. The AdvanSix Group shall be solely responsible for all Liabilities, including all severance or other separation payments and benefits, relating to the termination or alleged termination of any AdvanSix

 
8

Employee’s or Former AdvanSix Employee’s employment that occurs on or after the Distribution. For the avoidance of doubt, such Liabilities shall include any employer-paid portion of any Employment Taxes.

 

ARTICLE VI

 

CERTAIN WELFARE BENEFIT PLAN MATTERS; WORKERS’ COMPENSATION CLAIMS

 

SECTION 6.01.           AdvanSix Welfare Plans. Without limiting the generality of Section 2.05 , effective as of the Distribution or such later date as agreed to between Honeywell and AdvanSix in accordance with the TSA (such applicable date, the “ Welfare Plan Date ”), AdvanSix shall establish Welfare Plans (collectively, the “ AdvanSix Welfare Plans ”) to provide welfare benefits to the AdvanSix Employees (and their dependents and beneficiaries) and as of the applicable Welfare Plan Date, each AdvanSix Employee (and his or her dependants and beneficiaries) shall cease active participation in the corresponding Honeywell Welfare Plan. For the avoidance of doubt, for purposes of this Article VI , the term “AdvanSix Employees” shall be deemed to include any Former AdvanSix Employee who was receiving welfare benefits in connection with his or her termination of employment from a member of the Honeywell Group or the AdvanSix Group as of the applicable Welfare Plan Date.

 

SECTION 6.02.           Allocation of Welfare Benefit Claims. (a) The members of the Honeywell Group shall retain all Liabilities in accordance with the applicable Honeywell Welfare Plan for all reimbursement claims (such as medical and dental claims) and for all non-reimbursement claims (such as life insurance claims), in each case, incurred by AdvanSix Employees and Former AdvanSix Employees (and each of their respective dependents and beneficiaries) under such plans prior to the applicable Welfare Plan Date and (b) the members of the AdvanSix Group shall retain all Liabilities in accordance with the AdvanSix Welfare Plans for all reimbursement claims (such as medical and dental claims) and for all non-reimbursement claims (such as life insurance claims), in each case, incurred by AdvanSix Employees and Former AdvanSix Employees (and each of their respective dependents and beneficiaries) on or after the Applicable Welfare Plan Date; provided that, AdvanSix shall reimburse Honeywell in accordance with the TSA for Liabilities incurred under clause (a) between the Distribution Date and the applicable Welfare Plan Date. For purposes of this Section 6.02 , a benefit claim shall be deemed to be incurred as follows: (i) health, dental, vision, employee assistance program and prescription drug benefits (including in respect of any hospital confinement), upon provision of such services, materials or supplies; and (ii) life, accidental death and dismemberment and business travel accident insurance benefits, upon the death, cessation of employment or other event giving rise to such benefits.

 

SECTION 6.03.           Workers’ Compensation Claims. In the case of any workers’ compensation claim of any AdvanSix Employee or Former AdvanSix Employee in respect of his or her employment with the Honeywell Group or the AdvanSix Group, such claim shall be covered (a) under the applicable Honeywell Workers’ Compensation

 
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Plan if the Workers’ Compensation Event occurred prior to the Distribution, (b) under a workers’ compensation plan of the AdvanSix Group (each, an “ AdvanSix Workers’ Compensation Plan ”) if the Workers’ Compensation Event occurs on or after the Distribution and the related claim is submitted after the date AdvanSix has established a workers’ compensation plan (the “ Workers’ Compensation Plan Date ”) and (c) under the applicable Honeywell Workers’ Compensation Plan if the Workers’ Compensation Event occurs on or after the Distribution and the related claim is submitted prior to the Workers Compensation Plan Date; provided that, AdvanSix shall reimburse Honeywell in accordance with the TSA for Liabilities incurred under clause (c) between the Distribution Date and the applicable Welfare Plan Date. If the Workers’ Compensation Event occurs over a period both preceding and following the Distribution, the claim shall be jointly covered under the Honeywell Workers’ Compensation Plan and the AdvanSix Workers’ Compensation Plan and shall be equitably apportioned between them based upon the relative periods of time that the Workers’ Compensation Event transpired preceding and following the Distribution; provided that, if a claim in respect of such Workers’ Compensation Event is submitted prior to the Workers’ Compensation Plan Date, then such claim shall be covered under the Honeywell Workers’ Compensation Plan and AdvanSix shall appropriately reimburse Honeywell in accordance with the TSA.

 

SECTION 6.04.           COBRA. In the event that an AdvanSix Employee or Former AdvanSix Employee (a) was receiving, or was eligible to receive, continuation health coverage pursuant to COBRA on or prior to the applicable Welfare Plan Date, Honeywell and the Honeywell Welfare Plans shall be responsible for all Liabilities to such employee (or his or her eligible dependents) in respect of COBRA; or (b) becomes eligible to receive continuation health coverage pursuant to COBRA following the applicable Welfare Plan Date, AdvanSix and the AdvanSix Welfare Plans shall be responsible for all Liabilities to such employee (or his or her eligible dependents) in respect of COBRA; provided that, AdvanSix shall reimburse Honeywell in accordance with the TSA for Liabilities incurred under clause (a) between the Distribution Date and the applicable Welfare Plan Date. AdvanSix shall indemnify, defend and hold harmless the members of the Honeywell Group from and against any and all Liabilities relating to, arising out of or resulting from COBRA provided by AdvanSix, or the failure of AdvanSix to meet its COBRA obligations, to AdvanSix Employees, Former AdvanSix Employees and their respective eligible dependents.

 

SECTION 6.05.           Health Savings Account. Without limiting the generality of Sections 2.04, 2.05 and 13.01 and subject to Section 15.09 , Honeywell and AdvanSix shall use commercially reasonable efforts to cooperate in administering any Honeywell Health Savings Account in connection with the Distribution in accordance with the terms of the applicable Honeywell Benefit Plan, including by exchanging any necessary participant records and engaging recordkeepers, administrators, providers, insurers and other third parties.

 

SECTION 6.06.           Flexible Spending Account. Without limiting the generality of Sections 2.04, 2.05 and 13.01 and subject to Section 15.09 , Honeywell and AdvanSix shall use commercially reasonable efforts to cooperate in administering any Honeywell Flexible Spending Account in connection with the Distribution in accordance

 
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with the terms of the applicable Honeywell Benefit Plan, including by exchanging any necessary participant records and engaging recordkeepers, administrators, providers, insurers and other third parties.

 

ARTICLE VII

 

LONG-TERM DISABILITY

 

SECTION 7.01.           Benefits. Except as otherwise specifically provided in this Agreement and subject to Section 7.02 , on and after the Distribution, the AdvanSix LTD Employees shall be deemed to be employees of the Honeywell Group for purposes of this Agreement, including participation in the Honeywell LTD Plans.

 

SECTION 7.02.           Return to Work. To the extent required by applicable AdvanSix policies, as in effect from time to time, and applicable Law, AdvanSix shall, or shall cause its Subsidiaries to, employ any AdvanSix LTD Employee at such time, if any, as such AdvanSix LTD Employee is ready to return to active employment, and from and after such time, such employee shall no longer be deemed an employee of the Honeywell Group and shall be deemed an AdvanSix Employee for purposes of this Agreement; provided that, if such AdvanSix LTD Employee presents himself or herself for active employment and is not employed by a member of the AdvanSix Group due to applicable AdvanSix policies, and if such AdvanSix LTD Employee’s employment is terminated by a member of the Honeywell Group within a reasonable time thereafter, AdvanSix shall indemnify the Honeywell Group for all Liabilities incurred in connection with such termination.

 

ARTICLE VIII

 

DEFINED BENEFIT PENSION PLAN

 

SECTION 8.01.           Honeywell Defined Benefit Pension Plan. Notwithstanding Section 2.05 or any other provision of this Agreement to the contrary, following the Distribution, the Honeywell Group shall retain sponsorship of the Honeywell International Inc. Retirement Earnings Plan (the “ Honeywell Pension Plan ”) and all assets and Liabilities arising out of or relating to the Honeywell Pension Plan, including those relating to AdvanSix Employees, AdvanSix LTD Employees and Former AdvanSix Employees. Following the date of this Agreement, Honeywell and AdvanSix shall use commercially reasonable efforts to cooperate in administering the Honeywell Pension Plan in connection with providing benefits to AdvanSix Employees and Former AdvanSix Employees in accordance with the terms of the Honeywell Pension Plan, including by exchanging any necessary participant records and engaging recordkeepers, administrators, providers, insurers and other third parties.

 
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ARTICLE IX

 

DEFINED CONTRIBUTION PLAN

 

SECTION 9.01.           AdvanSix 401(k) Plan. Effective as of the Distribution, AdvanSix shall establish a defined contribution plan that includes a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (the “ AdvanSix 401(k) Plan ”) providing benefits to the AdvanSix Employees participating in any qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code sponsored by any member of the Honeywell Group (collectively, the “ Honeywell 401(k) Plans ”) as of the Distribution.

 

SECTION 9.02.           401(k) Rollover. As of the Distribution, the Honeywell Group shall permit each AdvanSix Employee to elect, and the AdvanSix Group shall cause the AdvanSix 401(k) Plan to accept, in accordance with applicable Law and the terms of the Honeywell 401(k) Plans and the AdvanSix 401(k) Plan, a rollover of the account balances (including earnings through the date of transfer and promissory notes evidencing all outstanding loans) of such AdvanSix Employee under the Honeywell 401(k) Plans, if such rollover is elected in accordance with applicable Law and the terms of the Honeywell 401(k) Plan and by such employee. Upon completion of a transfer of the account balances of any AdvanSix Employee, as described in this Section 9.02 , AdvanSix and the AdvanSix 401(k) Plan shall be responsible for all Liabilities of the Honeywell Group under the Honeywell 401(k) Plan with respect to any AdvanSix Employee or Former AdvanSix Employee whose account balance was transferred to the AdvanSix 401(k) Plan (and his or her respective beneficiaries), and the Honeywell Group and the Honeywell 401(k) Plan shall have no Liabilities to provide such participants (or any of their beneficiaries) with benefits under the Honeywell 401(k) Plan. In the event that the elections by AdvanSix Employees pursuant to this Section 9.02 in connection with the Distribution result in a mass rollover, Honeywell and AdvanSix shall use commercially reasonable efforts to cooperate to effect such mass rollover, including by exchanging any necessary participant records and engaging recordkeepers, administrators, providers, insurers and other third parties.

 

SECTION 9.03.           Employer 401(k) Plan Contributions. The Honeywell Group shall remain responsible for making all employer contributions under the Honeywell 401(k) Plan with respect to any AdvanSix Employees or Former AdvanSix Employees relating to periods prior to the Distribution; provided that, prior to the rollover of any AdvanSix Employee’s or Former AdvanSix Employee’s account pursuant to Section 9.02 , the Honeywell Group shall make all employer contributions with respect to such AdvanSix Employee or Former AdvanSix Employee required under the Honeywell 401(k) Plan for periods of time prior to the Distribution. Any such contributions that are unvested as of the Distribution shall be treated in accordance with the terms of the Honeywell 401(k) Plan. On and after the Distribution, the AdvanSix Group shall be responsible for all employer contributions under the AdvanSix 401(k) Plan with respect to any AdvanSix Employees or Former AdvanSix Employees.

 
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SECTION 9.04.           Stock Considerations. Following the Distribution, AdvanSix Employees and Former AdvanSix Employees shall not be permitted to acquire shares of Honeywell Common Stock in any stock fund under the AdvanSix 401(k) Plan.

 

SECTION 9.05.           Limitation of Liability. For the avoidance of doubt, Honeywell shall have no responsibility for any failure of AdvanSix to properly administer the AdvanSix 401(k) Plan in accordance with its terms and applicable Law, including any failure to properly administer the accounts of AdvanSix Employees, Former AdvanSix Employees and their respective beneficiaries, including accounts rolled over in accordance with Section 9.02 , in such AdvanSix 401(k) Plan.

 

ARTICLE X

 

NONQUALIFIED DEFERRED COMPENSATION

 

SECTION 10.01.           Honeywell Nonqualified Deferred Compensation Plans. The Honeywell Group shall retain all assets and all Liabilities arising out of or relating to the Honeywell Nonqualified Deferred Compensation Plans related to any AdvanSix Employee or Former AdvanSix Employee (and their respective beneficiaries) in connection with his or her service prior to the Distribution, including the obligation to make all payments or distributions in respect of such Liabilities in accordance with the terms of the applicable Honeywell Nonqualified Deferred Compensation Plan. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement or any of the Ancillary Agreements, including this Agreement, will trigger a payment or distribution of compensation under the Honeywell Nonqualified Deferred Compensation Plans to any AdvanSix Employee or Former AdvanSix Employee (and their respective beneficiaries) and, consequently, that the payment or distribution of any compensation to which any AdvanSix Employee or Former AdvanSix Employee (and their respective beneficiaries) is entitled under the Honeywell Nonqualified Deferred Compensation Plans will occur upon the time or times provided for under the applicable Honeywell Nonqualified Deferred Compensation Plans and such AdvanSix Employee’s or Former AdvanSix Employee’s deferral elections. Following the payment or distribution of such amounts to the AdvanSix Employees, Former AdvanSix Employees or their respective beneficiaries, the members of the Honeywell Group shall have no actual or potential Liabilities relating to, arising out of or resulting from the participation of the AdvanSix Employees and Former AdvanSix Employees in the Honeywell Nonqualified Deferred Compensation Plans. Following the date of this Agreement, Honeywell and AdvanSix shall use commercially reasonable efforts to cooperate in administering the Honeywell Nonqualified Deferred Compensation Plans for purposes of satisfying any obligations relating to the participation of any AdvanSix Employee or Former AdvanSix Employee, including by exchanging any necessary participant records and engaging recordkeepers, administrators, providers, insurers and other third parties.

 
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ARTICLE XI

 

VACATION

 

SECTION 11.01.           Vacation. Upon the Distribution, the AdvanSix Group shall assume and be solely responsible for all Liabilities for vacation accruals and benefits with respect to each AdvanSix Employee; provided , however , that (a) for purposes of determining the number of vacation days to which such employee shall be entitled following the Distribution, AdvanSix and its Subsidiaries shall assume and honor all vacation days accrued or earned but not yet taken by such employee, if any, as of the Distribution, and (b) to the extent such employee is entitled under any applicable Law or any policy of his or her respective employer that is a member of the Honeywell Group, as the case may be, to be paid for any vacation days accrued or earned but not yet taken by such employee as of the Distribution, AdvanSix shall assume and be solely responsible for the Liability to pay for such vacation days.

 

ARTICLE XII

 

LONG-Term Incentive COMPENSATION AWARDS

 

SECTION 12.01.           AdvanSix Long-Term Incentive Plan. Prior to the Distribution, Honeywell shall cause AdvanSix to adopt a long-term incentive plan or program, to be effective immediately prior to the Distribution (the “ AdvanSix Long-Term Incentive Plan ”) and Honeywell shall approve the AdvanSix Long-Term Incentive Plan as the sole stockholder of AdvanSix.

 

SECTION 12.02.           Equity Award Adjustments. Each outstanding equity award granted under the Honeywell Equity Plans held by any individual as of the Distribution shall be adjusted in accordance with the resolutions adopted by the Management Development and Compensation Committee of Honeywell in connection with the Distribution. Equity awards that are covered by this Section 12.02 shall not be exercisable and/or settled during a period beginning on a date prior to the Distribution Date determined by Honeywell in its sole discretion, and continuing until the adjustments made pursuant to such resolutions are completed, as determined by Honeywell in its sole discretion.

 

SECTION 12.03.           Treatment of Incentive Awards Upon Distribution. Notwithstanding anything in this Agreement, the Honeywell Equity Plans or an award agreement to the contrary, any awards under the Honeywell Equity Plans held by AdvanSix Employees (including GPUs) shall remain outstanding through the following applicable date (each, a “ Vesting Date ”): (a) in the case of stock options, through March 2017; (b) in the case of restricted stock units, through the end of July 2017; and (c) in the case of GPUs, to the end of March 2017. Such awards shall otherwise remain subject to the terms of the applicable Honeywell Equity Plan and the applicable award agreement; provided , however , that service with the AdvanSix Group through such vesting date shall count as service with the Honeywell Group for purposes of vesting under such awards. Any award, or portion of any award, that does not become vested on or prior to the applicable Vesting Date shall be forfeited.

 
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SECTION 12.04.           Incentive Award Reimbursement. Following the Distribution, Honeywell may, from time to time, deliver to AdvanSix a summary (a “ Reimbursement Invoice ”) of all Reimbursement Events that have occurred on or after the date of the previous Reimbursement Invoice or, in the case of the first Reimbursement Invoice delivered to AdvanSix, the Distribution Date. Such Reimbursement Invoice shall also include an amount equal to the aggregate value of all expenses incurred on or after the Distribution by the Honeywell Group, as determined by Honeywell in its reasonable discretion and consistent with past practice, with respect to the Reimbursement Awards identified in such Reimbursement Invoice, and within ten (10) days following the delivery of such Reimbursement Invoice, AdvanSix shall make a cash payment to Honeywell equal to such aggregate value.

 

SECTION 12.05.           Cooperation. For so long as any equity award in respect of Honeywell Common Stock is outstanding and held by an AdvanSix Employee or Former AdvanSix Employee, the Honeywell Group and the AdvanSix Group shall reasonably cooperate in the exchange of information and take any action necessary to administer such equity awards following the Distribution, including the following: (i) AdvanSix shall notify Honeywell in writing within five (5) days of any change in employment status (including but not limited to termination of employment), (ii) the Parties shall exchange any information necessary to satisfy their obligations under Section 12.04 , (iii) the Parties shall take any steps necessary to ensure that the employee-paid portion of any Taxes (including any Employment Taxes) required to be withheld upon the exercise or vesting of any such equity award is withheld by or paid over to, as applicable, the applicable Party responsible for remitting such amount to the appropriate Taxing Authority as promptly as reasonably practicable, (iv) AdvanSix will provide payroll information to Honeywell in respect of AdvanSix Employees and Former AdvanSix Employees, including year-to-date amounts withheld for Federal Insurance Contribution Act Taxes, Medicare Taxes and supplemental compensation, (v) other than with respect to the Reimbursement Awards, any U.S. Federal, state and local income Tax deduction arising as a result of the exercise, vesting or settlement of any equity award held by an AdvanSix Employees or Former AdvanSix Employee adjusted pursuant to Section 12.02 will be claimed by a member of the Honeywell Group; provided , however , that if a deduction claimed by a member of the Honeywell Group pursuant to this Section 12.05 is disallowed by a Taxing Authority for any reason, a member of the AdvanSix Group shall amend its Tax Return to claim such deduction and pay to Honeywell an amount equal to the tax benefit actually realized by the AdvanSix Group resulting from such deduction; provided further that Honeywell, upon the request of AdvanSix, shall repay any amount paid to Honeywell under the immediately preceding proviso (plus any interest imposed by the relevant Taxing Authority) in the event AdvanSix is required to surrender such tax benefit and (vi) the Parties will cooperate following the Distribution, so that the value of any tax benefit actually realized by any member of the Honeywell Group in connection with the vesting, settlement or exercise of any Reimbursement Award will be transferred to AdvanSix following the Distribution.

 

SECTION 12.06.           Treatment of Reimbursements . Any cash payment made by AdvanSix to Honeywell in respect of any award settled in or exercised for Honeywell Common Stock pursuant to this Article XII shall be treated by Honeywell and

 
15

AdvanSix for all Tax purposes as purchase price or partial purchase price for the shares of Honeywell Common Stock equal to the value of any such cash payment, and not as a distribution from AdvanSix to Honeywell immediately prior to the Distribution or as consideration for any property contributed to AdvanSix in connection with the transactions contemplated by the Separation Agreement. Any cash payment made by Honeywell to AdvanSix pursuant to this Article XII shall be treated for all Tax purposes as a contribution from Honeywell to AdvanSix immediately prior to the Distribution.

 

ARTICLE XIII

 

COOPERATION; ACCESS TO INFORMATION; LITIGATION; CONFIDENTIALITY

 

SECTION 13.01.           Cooperation. Following the date of this Agreement, the Parties shall, and shall cause their respective Subsidiaries to, use commercially reasonable efforts to cooperate with respect to any employee compensation or benefits matters that either Party reasonably determines require the cooperation of the other Party in order to accomplish the objectives of this Agreement. Without limiting the generality of the preceding sentence, (a) Honeywell, AdvanSix and their respective Subsidiaries shall cooperate in connection with any audits of any Benefit Plan with respect to which such Party may have Information, (b) Honeywell, AdvanSix and their respective Subsidiaries shall cooperate in connection with any audits of their respective payroll services (whether by a Governmental Authority in the U.S. or otherwise) in connection with the services provided by one Party to the other Party and (c) Honeywell, AdvanSix and their respective Subsidiaries shall cooperate in good faith in connection with the notification and consultation with labor unions and other employee representatives of employees of the Honeywell Group and the AdvanSix Group. With respect to each Benefit Plan, the obligations of the Honeywell Group and the AdvanSix Group to cooperate pursuant to this Section 13.01 or any other provision of this Agreement shall remain in effect until the later of (i) the date all audits of such Benefit Plan with respect to which a Party may have Information have been completed, (ii) the date the applicable statute of limitations with respect to such audits has expired and (ii) the date the Honeywell Group discharges all obligations to AdvanSix Employees, Former AdvanSix Employees and their respective beneficiaries under such Benefit Plan.

 

SECTION 13.02.           Access to Information; Litigation; Confidentiality. Except as would be inconsistent with Section 13.01 or any other provision of this Agreement relating to cooperation, Article VII of the Separation Agreement is hereby incorporated into this Agreement mutatis mutandi .

 

ARTICLE XIV

 

TERMINATION

 

SECTION 14.01.           Termination. This Agreement may be terminated by Honeywell at any time, in its sole discretion, prior to the Distribution; provided , however , that this Agreement shall automatically terminate upon the termination of the Separation Agreement in accordance with its terms.

 
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SECTION 14.02.           Effect of Termination. In the event of any termination of this Agreement prior to the Distribution, none of the Parties (or any of its directors or officers) shall have any Liability or further obligation to any other Party under this Agreement.

 

ARTICLE XV

 

MISCELLANEOUS

 

SECTION 15.01.           Incorporation of Indemnification Provisions of Separation Agreement. In addition to the specific indemnification provisions in this Agreement, Article VI of the Separation Agreement is hereby incorporated into this Agreement mutatis mutandi .

 

SECTION 15.02.           Benefit Plan Indemnification. If the Parties determine that AdvanSix is unable to establish any AdvanSix Benefit Plan as of the Distribution Date that it is required under this Agreement to establish by the Distribution Date, then, to the extent provided on Schedule 15.02, AdvanSix shall indemnify, defend and hold harmless each of the Honeywell Indemnitees from and against any and all Liabilities of the Honeywell Indemnitees relating to, arising out of or resulting from participation by any AdvanSix Employee or Former AdvanSix Employee on or after the Distribution Date in any such Honeywell Benefit Plan set forth on Schedule 15.02 due to the failure to timely establish such AdvanSix Benefit Plan or Plans, subject to any other terms and conditions set forth on such Schedule.

 

SECTION 15.03.           Further Assurances. Article X of the Separation Agreement is hereby incorporated into this Agreement mutatis mutandi.

 

SECTION 15.04.           Administration. AdvanSix hereby acknowledges that Honeywell has provided or will provide administration services for certain AdvanSix Benefit Plans and AdvanSix agrees to assume responsibility for the administration and administration costs of such plans and each other AdvanSix Benefit Plan. The Parties shall cooperate in good faith to complete such transfer of responsibility on commercially reasonable terms and conditions effective no later than the Distribution or the applicable Welfare Plan Date or Workers’ Compensation Plan Date.

 

SECTION 15.05.           Third-Party Beneficiaries. Except as otherwise may be provided in the Separation Agreement with respect to the rights of any Honeywell Indemnitee or AdvanSix Indemnitee, (a) the provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

SECTION 15.06.           Employment Tax Reporting Responsibility. To the extent applicable, the Parties hereby agree to follow the alternate procedure for U.S.

 
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Employment Tax withholding as provided in Section 5 of Rev. Proc. 2004-53, I.R.B. 2004-35. Accordingly, except as otherwise provided in Sections 12.04 or 12.05 , the members of the Honeywell Group shall not have any Employment Tax reporting responsibilities, and the members of the AdvanSix Group shall have full Employment Tax reporting responsibilities, for AdvanSix Employees on and after the Distribution.

 

SECTION 15.07.           Data Privacy. The Parties agree that any applicable data privacy laws and any other obligations of the AdvanSix Group and the Honeywell Group to maintain the confidentiality of any Information relating to employees in accordance with applicable Law shall govern the disclosure of Information relating to employees among the Parties under this Agreement. Honeywell and AdvanSix shall ensure that they each have in place appropriate technical and organizational security measures to protect the personal data of the AdvanSix Employees and Former AdvanSix Employees. Additionally, each Party shall sign any documentation as may be required to comply with applicable data privacy Laws.

 

SECTION 15.08.           Section 409A. Honeywell and AdvanSix shall cooperate in good faith and use reasonable best efforts to ensure that the transactions contemplated by the Separation Agreement and the Ancillary Agreements, including this Agreement, will not result in adverse tax consequences under Section 409A of the Code to any AdvanSix Employee or Former AdvanSix Employee (or any of their respective beneficiaries), in respect of their respective benefits under any Benefit Plan.

 

SECTION 15.09.           Confidentiality. (a) Each of Honeywell and AdvanSix, on behalf of itself and each Person in its respective Group, shall, and shall cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives to, hold, in strict confidence and not release or disclose, with at least the same degree of care, but no less than a reasonable degree of care, that it applies to its own confidential and proprietary Information pursuant to policies in effect as of the Distribution, all Information concerning the other Group or its business that is either in its possession (including Information in its possession prior to the Distribution) or furnished by the other Group or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder, except, in each case, to the extent that such Information is (i) in the public domain through no fault of any member of the Honeywell Group or the AdvanSix Group, as applicable, or any of its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) later lawfully acquired from other sources by any of Honeywell, AdvanSix or its respective Group, employees, directors or agents, accountants, counsel and other advisors and representatives, as applicable, which sources are not themselves bound by a confidentiality obligation to the knowledge of any of Honeywell, AdvanSix or Persons in its respective Group, as applicable, regarding such Information (iii) independently generated without reference to any proprietary or confidential Information of the Honeywell Group or the AdvanSix Group, as applicable, or (iv) required to be disclosed by applicable Law; provided , however , that the Person required to disclose such Information gives the applicable Person prompt, and to the extent reasonably practicable,

 
18

prior notice of such disclosure and an opportunity to contest such disclosure and shall use commercially reasonable efforts to cooperate, at the expense of the requesting Person, in seeking any reasonable protective arrangements requested by such Person. In the event that such appropriate protective order or other remedy is not obtained, the Person that is required to disclose such Information shall furnish, or cause to be furnished, only that portion of such Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such Information. Notwithstanding the foregoing, each of Honeywell and AdvanSix may release or disclose, or permit to be released or disclosed, any such Information concerning the other Group (A) to their respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information (who shall be advised of the obligations hereunder with respect to such Information) and (B) to any nationally recognized statistical rating agency as it reasonably deems necessary, solely for the purpose of obtaining a rating of securities upon normal terms and conditions; provided , however , that the Party whose Information is being disclosed or released to such rating agency is promptly notified thereof.

 

(b)          Without limiting the foregoing, when any Information concerning the other Group or its business is no longer needed for the purposes contemplated by this Agreement, each of Honeywell and AdvanSix shall, promptly after request of the other Party, either return all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other Party, as applicable, that it has destroyed such Information (and used commercially reasonable efforts to destroy all such Information electronically preserved or recorded within any computerized data storage device or component (including any hard-drive or database)).

 

SECTION 15.10.           Additional Provisions. Sections 12.01 to 12.14 of the Separation Agreement are hereby incorporated into this Agreement mutatis mutandi.

 

[SIGNATURE PAGE TO FOLLOW]

 
 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

 

  HONEYWELL INTERNATIONAL INC.,
     
  by  
     
    Name:
    Title:

 

  ADVANSIX INC.,
     
  by  
     
    Name:
    Title:
 

Exhibit 10.4

 

Confidential Treatment Requested by AdvanSix Inc.

 

AMENDED AND RESTATED
CAPROLACTAM AND POLYMER SUPPLY AGREEMENT

 

This Amended and Restated Caprolactam and Polymer Supply Agreement (this “Agreement”) is made as of April 1, 2013, by and between Honeywell Resins & Chemicals LLC, a Delaware limited liability company f/k/a Honeywell Nylon, LLC (“Seller”), and Shaw Industries Group, Inc., a Georgia corporation (“Buyer”).

 

WHEREAS, pursuant to the Facilities Purchase Agreement dated August 31, 2005, by and between Honeywell International Inc., Honeywell Intellectual Properties Inc. and Seller (collectively the “Honeywell Group”), and Buyer, the Honeywell Group has sold to Buyer certain assets constituting its Columbia, Clemson and Anderson facilities (the “Columbia Facility”, the “Clemson Facility”, and the “Anderson Facility” respectively) (the Columbia Facility, the Clemson Facility and the Anderson Facility shall be referred to herein collectively as the “Facilities”);

 

WHEREAS, contemporaneously with the consummation of the transactions contemplated by the aforementioned Facilities Purchase Agreement, Buyer and Seller executed and delivered that certain Caprolactam and Polymer Supply Agreement dated as of October 29, 2005 (as amended, the “Prior Agreement”); and

 

WHEREAS, Buyer and Seller desire to amend and restate the Prior Agreement, and in connection therewith, Buyer desires for a period of time to obtain supplies of caprolactam and polymer for its facilities, including, without limitation, a supply of caprolactam for the Columbia and Clemson Facilities and other polymer producing facilities, and a supply of polymer for various fiber producing locations owned by or affiliated with Buyer; and

 

WHEREAS, Buyer desires to supply to Seller and Seller desires to purchase from Buyer washwater produced in the Columbia and Clemson Facilities for a period of time.

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:

 

DEFINITIONS

 

For the purposes of this Agreement, when capitalized, the following terms, whether singular or plural, have the meanings specified in this section:

 

“Affiliate” indicates a relationship to a specified person, firm, corporation, partnership, limited liability company, association or entity, and means any person, firm, corporation, partnership, limited liability company, association or entity that, directly or indirectly or through one or more intermediaries, controls, is controlled by or is under common control with such person, firm, corporation, partnership, limited liability company, association or entity.

 

“Agreement”, as defined in the recitals hereof, shall include all Exhibits and Schedules hereto, as the same may be amended by the parties from time to time.

1

Confidential Treatment Requested by AdvanSix Inc.

 

“Anderson Facility” is defined in the recitals hereof.

 

“Annual Planning Forecast” is defined in Article 3.1(b).

 

“Buyer” is defined in the recitals hereof.

 

“Caprolactam Adder Amount” is defined in Article 2.1.

 

“Caprolactam Index Amount” is defined in Schedule 2.1(I).

 

“Clemson Facility” is defined in the recitals hereof.

 

“Columbia Facility” is defined in the recitals hereof.

 

“Confidential Information” is defined in Article 7.1.

 

“Effective Date” means the date first set forth hereinabove.

 

“[ * * * ] Caprolactam” means caprolactam meeting the specifications set out on Exhibit A attached hereto.

 

“Facilities” is defined in the recitals hereof.

 

“Fiscal Month”, “Fiscal Quarter”, and “Fiscal Year” depends on the month or quarter in question, as follows: a fiscal year-end is the Saturday closest to December 31 each year. Fiscal quarters are comprised of 13 weeks each, whereby there are 5 weeks for the first fiscal month, 4 weeks for the second fiscal month, and 4 weeks for the third fiscal month. Further, once every 7 years, the fourth quarter has 5 weeks in its last month. For the purpose of this Agreement, the first Fiscal Month and first Fiscal Quarter of Fiscal Year 2013 commenced on December 30, 2012.

 

“Forecast” is defined in Article 3.1(a) hereof.

 

“Governmental Body” means any federal, state, local, municipal, foreign, or other government; or governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal).

 

[ * * * ]

 

“Initial Term” is defined in Article 6.1 hereof.

 

“Limited Performance Warranty” is defined in Article 5.1(a)(ii) hereof.

 

“[ * * * ] Polymer” means polymer meeting the specifications set out in Exhibit B attached hereto.

 

[ * * * ]

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[ * * * ]

 

“Maximum Volume” is defined in Article 1.2 hereof.

 

“Minimum Volume” is defined in Article 1.2 hereof.

 

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

 

“Polymer” means [ * * * ] Polymer.

 

“Polymer Adder” is defined in Article 2.2 hereof.

 

“Polymer Index Amount” is defined in Schedule 2.1(II) hereto.

 

“Prior Agreement” is defined in the recitals hereof.

 

“Product” is defined in Article 1.5 hereof.

 

“Product Warranty” is defined in Article 5.1 hereof.

 

“Renewal Term” is defined in Article 6.1 hereof.

 

“Seller” is defined in the recitals hereof.

 

“Specifications” is defined in Article 5.1(a)(i) hereof.

 

“Term” is defined in Article 6.1 hereof.

 

“Washwater” means all washwater produced in the production of polymer in the manufacturing processes at the Columbia Facility and the Clemson Facility during the Term.

 

ARTICLE I - SALE AND PURCHASE

 

1.1.       Amendment and Restatement . This Agreement supersedes and replaces in its entirety the Prior Agreement, as amended, as in effect immediately prior hereto.

 

1.2.       Purchase and Sale of Product . During the term of this Agreement, except as provided in Articles 1.3 and 1.4 below, Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, each Fiscal Year, for use and consumption by Buyer and its Affiliates, a minimum of [ * * * ] ([ * * * ]) pounds of Product (the “Minimum Volume”), and a maximum of [ * * * ] ([ * * * ]) pounds of Product (the “Maximum Volume”), including:

 

(a) a minimum of [ * * * ] ([ * * * ]) and a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year (or a pro rata amount thereof in any partial Fiscal Year during the Term) of Polymer [ * * * ].
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(b) a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year of [ * * * ] Caprolactam.

 

(c) [ * * * ]

 

(d) At the sole option of Buyer, Buyer may provide caprolactam Product to a third party designated by Buyer, for further processing into polymer or fiber; it being acknowledged that any such caprolactam may not be sold to such third party.

 

Nothing in this Agreement is intended to imply any geographical limitation, and Buyer shall not be restricted to use of any Product at any particular Facility, but may use any Product in any of its facilities, whether presently owned, or expanded, purchased or constructed after the Effective Date.

 

1.3.       2013 Volume Adjustment . Notwithstanding Article 1.2 of this Agreement, between July 1, 2013, through December 31, 2013 (i) the annual Minimum Volume shall be [ * * * ] ([ * * * ]) pounds of Product, and (ii) the annual Maximum Volume shall be [ * * * ] ([ * * * ]) pounds of Product. Under Article 1.2(a) of the Agreement, the minimum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) and the maximum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) from July 1, 2013 through December 31, 2013.

 

1.4.       Further Volume Adjustments . Notwithstanding any of the foregoing contained in this Agreement, overall volume ranges of Product to be purchased by the Buyer during the periods described in the Agreement may be amended, with respect to any [ * * * ] ([ * * * ])-month period, to reflect an increase or decrease in the annualized rate in an amount not to exceed [ * * * ] ([ * * * ]) pounds, with [ * * * ] ([ * * * ]) days prior written notice by the Buyer to Seller; provided, however, that under no circumstance shall the Buyer be entitled to purchase Product at an annualized rate of more than [ * * * ] ([ * * * ]) pounds. In the event of any such amendment, notwithstanding the provisions of the Agreement, such range of annualized rate of Product to be purchased by the Buyer established by such an amendment shall remain in effect until such time, if any, that the Buyer shall again exercise its rights under and subject to this Article 1.4 to further increase or decrease in the minimum and/or maximum annualized rate of Product to be purchased by the Buyer then-in-effect in an amount not to exceed [ * * * ] ([ * * * ]) pounds.

 

1.5.       Product Definition . [ * * * ] Caprolactam, [ * * * ] and [ * * * ] Polymer shall be referred to herein collectively as “Product”. The parties agree that, at Seller’s sole discretion, Seller may, upon giving written notice to Buyer, [ * * * ].

 

1.6.       Planned Outages . The parties recognize that each will from time to time have a planned manufacturing outage at one or more of its facilities and those outages will affect the supply or purchase volumes in such months. The parties agree to inform each other of such planned outages as far in advance as possible by means of the communications referenced in Article III. Buyer shall use all reasonable efforts to store Product in

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inventory at its facilities and to manage its downstream inventory during such outages. Seller shall use all reasonable efforts to increase its rate of supply immediately before and after such outages. In the event of a planned outage, unplanned outage or shortage of supply of a raw or intermediate material produced by Seller and not covered by the Caprolactam Index Amount, during the period of the outage Seller may offer Buyer the choice of purchasing Product at a negotiated price or to forego the volume of Product impacted by the outage or shortage. Intermediate material can be, but is not limited to, ammonia, sulfuric acid or oleum. If Buyer decides to forego the volume of Product impacted by the shortage, the volume of Product foregone shall be applied against the volume purchase requirements in Article 1.2 of this Agreement. The period of the negotiated price is only for the period of the outage suffered by Seller.

 

1.7.       No Resale . All Product supplied hereunder shall be solely for internal consumption by Buyer and its Affiliates to make fiber, and Buyer shall not resell any Product acquired from Seller to any Person other than Affiliates of Buyer during the Term. Buyer is expressly permitted to make, use and/or sell special polymers or resins if Buyer is using: (i) Buyer’s know-how (other than know-how licensed from Seller) and (ii) caprolactam obtained from a source other than Seller.

 

1.8.       Washwater Supply . During the Term, Buyer shall supply to Seller and Seller shall purchase from Buyer the Washwater. Such Washwater shall contain on average for each Fiscal Year during the Term at least [ * * * ] percent ([ * * * ]%) monomer equivalent caprolactam.

 

ARTICLE II - PRICING

 

2.1.       Caprolactam Pricing . The price for each pound of [ * * * ] Caprolactam shall be the sum of (x) [ * * * ] ([ * * * ]) plus (y) the Caprolactam Index Amount (as defined in Schedule 2.1(I)), which, may be a positive or a negative amount, plus (z) the Caprolactam Adder Amount. The Caprolactam Adder Amount shall be: (i) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, (ii) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, and (iii) for the period of [ * * * ], through the last day of the Term, [ * * * ] ([ * * * ]) per pound of Product.

 

2.2.       Polymer Pricing . The price for each pound of [ * * * ] Polymer shall be [ * * * ] ([ * * * ]) (the “Polymer Adder”) above the [ * * * ] Caprolactam price (calculated pursuant to Article 2.1 above) for such Fiscal Month, plus the Polymer Index Amount (as defined in Schedule 2.1(II)), which, may be a positive or a negative amount.

 

2.3.       Pricing Above Maximum Volume . The pricing of any volumes purchased by the Buyer in excess of the Maximum Volume in a Fiscal Year will be separately negotiated by Buyer and Seller at the time of purchase. In any Fiscal Year, Seller is not obligated to sell any quantity of Product in excess of the Maximum Volume.

 

2.4.       Washwater Pricing . The price for each pound of Washwater shall be equal to (A) the percentage of caprolactam contained in such pound multiplied by the price per pound of [ * * * ] Caprolactam (calculated pursuant to Article 2.1 above) in effect from

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time to time under this Agreement, minus (B) [ * * * ] ([ * * * ]). The percentage of caprolactam contained in a pound of Washwater shall be calculated by Seller at its Hopewell facility, and shall include only monomer equivalent caprolactam, with no credit being given for any oligomers present in the Washwater. If in any Fiscal Year the average percentage of caprolactam in all Washwater supplied that year is not at least [ * * * ] percent ([ * * * ]%), then Seller may invoice Buyer for an increased pro-rata share of its caprolactam recovery costs commensurate with the actual percentage of caprolactam contained in Washwater during the year.

 

2.5.       Payment Terms . Seller shall issue monthly consolidated invoices for Product actually delivered to Buyer, with a credit for Washwater based on the pricing above (which invoice will show the percentage of caprolactam recovered from the Washwater), within three (3) days after the end of each Fiscal Month during the Term. Seller shall also issue regular statements setting forth the percentage of recycled caprolactam contained in the caprolactam [ * * * ] purchased by Buyer hereunder. All such invoices will be submitted to the attention of Buyer’s Corporate Accounts Payable Department. Subject to review and confirmation by Buyer (including, without limitation, Buyer’s reconciliation of Washwater shipped with the amount of Washwater shown on Seller’s invoice), such review and confirmation to be completed and any disagreements therewith raised in writing within seven (7) business days after receipt of Seller’s invoice, each invoice issued pursuant to this Agreement shall be payable by wire transfer on or before the [ * * * ] ([ * * * ]) [ * * * ] following the end of the month covered by such invoice.

 

2.6.       Taxes, Duties, Etc . Seller’s pricing for the Product, and Buyer’s pricing for the Washwater, [ * * * ]. Buyer is responsible for [ * * * ]. Seller is responsible for [ * * * ]. If Seller is required to impose, levy, collect, withhold or assess any such taxes, duties or charges on any transaction involving the sale of the Product under this Agreement, then in addition to the purchase price, Seller will [ * * * ]. If Buyer is required to impose, levy, collect, withhold or assess any such taxes, duties or charges on any transaction involving the sale of Washwater under the terms of this Agreement, then in addition to the purchase price, Buyer will [ * * * ]. The last three sentences of this Article 2.6 will survive expiration or any termination of this Agreement.

 

2.7.       Payments . Payment hereunder shall be made in lawful money of the United States. Buyer shall pay each invoice as and when due without right of set-off, except with respect to Washwater, as set forth on the invoice, and except with respect to a dispute specifically involving the invoice.

 

ARTICLE III - PLANNING PROCESS; FORECASTS

 

3.1.       Forecasts and Communications .

 

(a) On or before the fifteenth (15 th ) day of each calendar month, Buyer shall provide to Seller a written forecast (the “Forecast”) of the types and quantities of Product that it wishes to purchase during each of the next six Fiscal Months. The parties shall then hold a meeting or teleconference within two (2) business days of receipt by Seller of the Forecast to resolve issues and finalize the Forecast. The first [ * * * ] ([ * * * ]) months of the Forecast shall be binding on the parties as long as such Forecasts
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otherwise comply with the terms of this Agreement; provided , however , the binding Forecast with respect to the [ * * * ] month may vary by as much as [ * * * ] percent ([ * * * ]%) of the total caprolactam Forecasted and [ * * * ] percent ([ * * * ]%) of the total Polymer Forecasted. The [ * * * ] months of the Forecast shall be for planning purposes only and shall not constitute a firm purchase order for such quantities of Product. In addition, the parties shall regularly communicate their planned outages to each other as far in advance as practicable prior to such outages, and shall include in such communications the timing and expected duration of such outages.

 

(b) In addition to the monthly Forecasts described in Article 3.1(a), Buyer shall provide to Seller, no later than September of each year, a nonbinding forecast of the quantities of the Product that it wishes to purchase during each month of the following Fiscal Year (the “Annual Planning Forecast”). No later than September of each year, the parties agree to meet to discuss and negotiate in good faith regarding the allocation and timing of Product as set forth in the Annual Planning Forecast, with the mutual goal that the monthly Forecasts described in Article 3.1(a) will be based on volumes of Product and production schedules that are commercially reasonable for supply by Seller to Buyer. For avoidance of doubt, when determining what is “commercially reasonable” for purposes of this Article 3.1(b), the parties shall specifically consider Seller’s remelt capabilities, Buyer’s and Seller’s inventory storage capabilities, Buyer’s and Seller’s planned outages, and the seasonality of Seller’s Hopewell facility’s ability to supply polymer.

 

3.2.       Purchase Orders; Acceptance .

 

(a) Buyer shall issue purchase orders for Product, and each such purchase order shall constitute a firm commitment of Buyer. A purchase order shall include the Product ordered, the quantity, the requested delivery date, the delivery or ship-to location and payment terms. Seller shall accept such purchase order within two (2) business days, as long as it includes a lead time of fourteen (14) days and otherwise complies with the terms of this Agreement.

 

(b) The issuance or failure to issue purchase orders shall in no way alter any obligation or right of either party hereunder, including any obligation or right contained in Article I or II.

 

ARTICLE IV - DELIVERIES

 

4.1.       Deliveries . All deliveries of [ * * * ] Caprolactam shall be [ * * * ] (Incoterms 2010) Seller’s Hopewell facility (as modified by Article 4.2 below). All deliveries of [ * * * ] Polymer shall be [ * * * ] (Incoterms 2010) Seller’s Chesterfield facility (as

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modified by Article 4.2 below). All deliveries of Washwater shall be [ * * * ] (Incoterms 2010) the Columbia and Clemson Facilities (as modified by Article 4.2 below).

 

4.2.       Freight .

 

(a) For all deliveries of Product hereunder, Seller shall load the goods, and (i) with respect to polymer, Buyer shall select the carrier and pay the freight on all deliveries of such Product, and (ii) with respect to caprolactam, Seller shall select the carrier, prepay the freight and add the cost of such freight to the invoice (including the costs of leasing and maintaining railcars). If Seller provides its own rail car service, then such service shall be provided at a price not to exceed the current rail rates for the applicable commodity. Notwithstanding the provisions contained in Article 3.2(b), Seller will indicate plainly the Buyer purchase order number on all bills of lading, invoices and freight bills. Each shipment must contain a record showing Seller’s name, contents of the shipment and Buyer purchase order number. Buyer will arrange for between [ * * * ] ([ * * * ]) and [ * * * ] ([ * * * ]) [ * * * ] to sit at Seller’s Chesterfield facility to enable continuous loading of [ * * * ] Polymer at such facility for the polymers.

 

(b) Buyer shall load the goods, and Seller shall select the carrier and pay the freight on, all deliveries of Washwater.

 

4.3.       Title . Title to and risk of loss in Product and Washwater shall in all cases transfer upon delivery pursuant to Article 4.1.

 

4.4.       Lot Size . All deliveries of Product pursuant to this Agreement shall be by means of rail cars or trucks. All deliveries of Washwater pursuant to this Agreement shall be by means of trucks. If Buyer desires that some Product be packaged in boxes and Seller agrees, Buyer shall bear all direct costs of such packaging.

 

4.5.       Weights and Measurements . Seller’s weights and measurements taken at the shipping facility shall govern unless proven to be in error. Variations of [ * * * ] percent ([ * * * ]%) or less from the weight or quantity of any shipment shall be disregarded. Buyer shall be solely responsible for removing all Product from railcars and trucks, as applicable. Seller shall be solely responsible for removing all Washwater from railcars and trucks, as applicable, and in no event shall Seller be entitled to heel credits from Buyer.

 

4.6.       Demurrage . Buyer agrees to pay all demurrage or detention charges that are incurred for railcars or trucks that sit at any of Buyer’s facilities (including holding areas dedicated to but immediately outside such facilities) except for those arising solely as a result of Seller’s investigation of a claim pursuant to Article 5.6 hereof. For railcars coming from the Hopewell facility at a reasonably regular schedule, demurrage charges will be charged at actual documented cost for each day after the third day that a railcar sits at any of Buyer’s facilities (including holding areas dedicated to but immediately

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outside such facilities). For trucks arranged by Seller, demurrage charges of actual documented costs will be charged for each quarter of an hour in excess of two hours that a truck sits at any of Buyer’s facilities (including holding areas dedicated to but immediately outside such facilities).

 

ARTICLE V - REPRESENTATIONS; WARRANTIES; LIMITATION OF LIABILITY

 

5.1.       Representations and Warranties regarding Product . Seller represents and warrants to Buyer as follows (the “Product Warranty”):

 

(a) Product . With respect to each sale of Product, Seller warrants as follows:

 

(i) The Product shall conform to the applicable specifications [ * * * ] (the “Specifications”), as modified from time to time as provided in this Agreement. Except as otherwise provided in this Article V, and except to the extent that any third-party claims regarding injury to person or property may relate to the Specifications, Buyer’s sole remedy for breach of this warranty shall be replacement of the nonconforming Product.

 

(ii) The gels and insolubles that are constituent elements of the polymer Product, and any organic contaminants and insolubles in the caprolactam Product that are outside the applicable Specifications, will not cause a statistically significant loss of efficiency or yield in Buyer’s polymer or spinning processes (the “Limited Performance Warranty”). If Buyer determines that there has been a statistically significant loss of efficiency or yield in its polymerization or spinning processes using the Product, Buyer shall (A) notify Seller within forty-eight (48) hours of the relevant reduction in efficiency or yield and (B) shall permit Seller full and immediate access to inspect the Product and the spinning operation or polymerization operation, as applicable, in order to determine the root cause of the problem. In the event that the loss of efficiency or yield is determined to have been caused by a breach of the Limited Performance Warranty, Seller’s liability will be limited to the purchase price of replacement material plus [ * * * ] ([ * * * ]) of the actual cost of the lost spinning line efficiency or yield or the lost polymerization line efficiency or yield, as applicable.

 

(b) Seller warrants that Product delivered hereunder does not infringe the claims of any US patent extant as of the date of delivery covering the Product itself but does not warrant against infringement by reason of the use thereof in combination with other materials or in the operation of any process or otherwise. With respect to any third party claim for infringement covered by the patent infringement warranty in this Article, Seller agrees to defend Buyer, at Seller’s cost and expense, and to
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indemnify Buyer in connection with any settlement with respect to such claim or any final judgment awarded by a court of competent jurisdiction from which no appeal can be or has been taken, provided that: (1) Buyer gives Seller prompt written notice of any such claim; (2) Buyer tenders the defense of the claim to Seller and gives Seller sole and full control of the defense (including the appointment and supervision of legal counsel), settlement, appeal or other disposition of the claim; (3) Buyer provides reasonable assistance and cooperation to Seller in the investigation, defense and disposition of such claim; and (4) Buyer does not settle the claim without Seller’s prior written consent, not to be unreasonably withheld. Notwithstanding anything in this Agreement to the contrary including Article 5.5, in no event shall Honeywell’s liability under this Article 5.1(b) exceed the purchase price of the Product giving rise to such claim.

 

5.2.       General Representations and Warranties .

 

(a) Buyer represents and warrants to Seller that Buyer owns all right, title and interest in and to the Washwater, and the Washwater will, upon sale to Seller, be free and clear of any liens or other encumbrances.

 

(b) Seller represents and warrants to Buyer as follows:

 

(i) Title . Seller owns all right, title and interest in and to the Product, and the Product will, upon sale to Buyer, be free and clear of any liens or other encumbrances.

 

(ii) Compliance with Law . Seller is, and at all times during the term of this Agreement will be, in substantial compliance with all applicable federal, state and local laws, rules and regulations, including, without limitation, environmental laws, equal employment opportunities laws, wage and hour laws, OSHA, and any other laws or regulations pertaining to employment, workplace safety or the environment. Any Product provided pursuant to this Agreement, and the manufacture of such Product, will substantially comply with all such laws, rules and regulations as are in effect at the time that such Product is manufactured by Seller.

 

(iii) Supply of Product . Seller is, and throughout the Term will be, capable of providing Buyer with sufficient quantities of Product pursuant to this Agreement to enable Buyer to satisfy its Minimum Amount purchase obligations pursuant to this Agreement.

 

(c) Certificate of Analysis . Seller will provide a Certificate of Analysis, in a mutually agreed form, setting forth a compositional analysis for a sampling of deliveries of Product hereunder at the point of loading.
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5.3.       Covenants and Agreements . Seller covenants and agrees to and with the Buyer as follows:

 

(a) Insurance . With respect to the Product furnished under this Agreement, Seller will at all times during the Term, maintain and keep in full force and effect reasonable and customary insurance (including, for such purposes, reasonable self-insurance) with respect to its workers, equipment and activities in connection with the manufacture, production, distribution and supply of the Product.

 

(b) Testing and Quality Control . Buyer shall have the right at all times during the performance of this Agreement to request that Seller perform reasonable tests and inspections from time to time to assure that the Product conforms to the Product Warranty and applicable legal requirements. From time to time, upon Buyer’s reasonable request, Seller will provide Buyer with such data, specifications, test results, test methodologies, sampling schedules, and other documents and information as may enable Buyer to assure that the Product conforms to the Product Warranty and applicable legal requirements. Buyer shall make the results of all such tests and inspections available to Seller at Seller’s request. Both parties acknowledge that Buyer’s ability to request tests for certain aspects of compliance does not release or diminish in any way Seller’s obligations under the Product Warranty or applicable legal requirements.

 

(c) Seller will provide a technically-competent coordinator to communicate and coordinate issues between Seller’s factories and Buyer. Such coordinator will help resolve technical issues, Product questions, and other similar issues relating to the use of the Product in any Buyer product using the Product. The parties agree to hold monthly meetings with each other, including several technically-relevant people from Seller’s Chesterfield plant and from Seller’s Hopewell plant. The location of such meetings will alternate between a Seller site and Buyer site. During such meetings, the parties shall review data and performance, set action plans, and evaluate improvement opportunities by jointly looking at Seller and Buyer processes. Seller shall run sample runs related to such improvement opportunities at Buyer’s reasonable request; provided , however , if such samples are in quantities larger than one hundred pounds (100 lbs.) per sample, then Buyer shall pay for such samples.

 

(d) The parties will record any modifications agreed to with respect to a Product, pursuant to an improvement process referred to in Article 5.3(c) above in writing and, if necessary, will amend the Specifications set forth herein and in the Exhibits to this Agreement accordingly. To the extent that such modifications result in any cost increases or decreases to Seller, the parties agree to negotiate in good faith to determine any appropriate price adjustments for the Product.
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(e) Notice of Delay . Unless otherwise agreed by the parties, [ * * * ] for deliveries related to this Agreement. At the outset of any delay from any cause, including Force Majeure, Seller shall immediately notify Buyer in writing of the delay or anticipated delay and shall undertake to shorten the delay by all reasonable means.

 

(f) Certificate of Origin .

 

(i) For each Product that qualifies for preferential tariff rates based on originating status under a bilateral or multilateral trade treaty (including, without limitation, under the North American Free Trade Agreement (“NAFTA”), the Central American Free Trade Agreement (“CAFTA”) or any other bilateral or multilateral trade treaty that may come into existence during the Term of this Agreement), Seller agrees, at Buyer’s request, to provide Buyer with a Certificate of Origin to enable such Product to qualify for such preferential tariff rate. Upon request from Buyer, Seller shall also provide to Buyer copies of any vendors’ certificates of origin upon which any Certificate of Origin provided by Seller is based.

 

(ii) Seller shall provide the Certificate of Origin with respect to a Product prior to first shipment of such Product to Buyer. If Seller cannot provide a Certificate of Origin prior to the first shipment due to a vendor’s failure to provide a Certificate of Origin, Seller shall so notify Buyer (in accordance with Article 9.1) whereupon Seller shall have no liability to Buyer, but Buyer shall have the option to elect to have the shipment shipped without a Certificate of Origin or to delay (for a reasonable time, taking into account Seller’s inventory storage capability) the shipment until a Certificate of Origin can be obtained. Notwithstanding the foregoing, unless Seller receives written notice from Buyer to the contrary, Seller shall use all commercially reasonable efforts to provide Buyer with a qualifying Certificate of Origin as soon as possible.

 

(iii) Seller may revoke a Certificate of Origin in the event that a Product covered by a Certificate of Origin issued by Seller will no longer qualify for originating status under the applicable rules of origin. Any such revocation shall be made in writing to Buyer (in accordance with Article 9.1) at least sixty (60) days prior to the first shipment of such non-qualifying Product to Buyer. Notwithstanding the foregoing, unless Seller receives written notice from Buyer to the contrary, Seller shall use all commercially reasonable efforts to provide Buyer with a qualifying Certificate of Origin as soon as possible.
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(iv) Seller agrees to [ * * * ] Buyer with respect to all expenditures Buyer incurs (including, but not limited to, applicable foreign jurisdiction customs duties, customs penalties, taxes, interest, and reasonable legal and other professional fees, including reimbursement of same by Buyer to its customers) arising solely and directly as a result of [ * * * ]; provided, however, Seller’s obligation [ * * * ] under this Article 5.3(f) shall not apply to [ * * * ].

 

5.4.       No Other Warranties .      EXCEPT FOR THE PRODUCT WARRANTY EXPRESSLY PROVIDED ABOVE IN ARTICLE 5.1, WITH RESPECT TO EACH SALE OF PRODUCT, SELLER MAKES NO OTHER REPRESENTATION, GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE REGARDING THE PRODUCT AND, IN PARTICULAR AND WITHOUT LIMITATION, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, WHETHER USED SINGLY OR IN COMBINATION WITH OTHER SUBSTANCES OR IN ANY PROCESS OR OTHERWISE. WITH RESPECT TO EACH SALE OF THE WASHWATER PROVIDED BY BUYER TO SELLER, BUYER MAKES NO REPRESENTATION, GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE REGARDING THE WASHWATER AND, IN PARTICULAR AND WITHOUT LIMITATION, BUYER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, WHETHER USED SINGLY OR IN COMBINATION WITH OTHER SUBSTANCES OR IN ANY PROCESS OR OTHERWISE.

 

5.5.      EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, [ * * * ], IN NO CIRCUMSTANCE SHALL SELLER OR BUYER BE LIABLE UNDER THIS AGREEMENT FOR DAMAGES FOR ANY LOSS OF USE, INTERRUPTION OF BUSINESS OR LOST PROFITS, OR ANY OTHER SPECIAL, EXEMPLARY, INCIDENTAL, INDIRECT, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OF ANY KIND.

 

5.6.       Claims before Use of Product . Buyer agrees to call Seller’s Technical Service Representative immediately upon discovering any claim it may have related to any shipment (such as a claim on account of weight, quality, loss of or damage to Product), and to give Seller written notice quantifying the claim, if it be for non-delivery or shipment loss, within [ * * * ] ([ * * * ]) [ * * * ] of the date of delivery of the Product (or due date of delivery in the event of a non-delivery) or [ * * * ] ([ * * * ]) [ * * * ] if the claim be for weight, or [ * * * ] ([ * * * ]) [ * * * ] if the claim be for quality that is reasonably discoverable within such [ * * * ] period. Such notice shall include therein the specific order and shipment or invoice number as well as the specific nature and basis of the claim. Except as otherwise provided in this Agreement, failure of Buyer to give written notice of a claim for non-delivery or shipment loss within [ * * * ] ([ * * * ]) [ * * * ], or a claim for weight within [ * * * ] ([ * * * ]) [ * * * ], or a claim for quality

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that is reasonably discoverable within [ * * * ] ([ * * * ]) [ * * * ]; shall constitute a waiver by Buyer of all such claims in respect to that shipment; provided , however , any other claims under the Product Warranty, including, without limitation, the Limited Performance Warranty, shall not be waived by the expiration of such [ * * * ] period. No claim for shortage can be asserted unless it is greater than [ * * * ] percent ([ * * * ]%) of the gross weight of the applicable shipment. Claims for bulk shipments must be supported by certified scale tickets and Seller shall have the opportunity to have an independent weighing by a certified independent agency, in which event the results of such independent weighing, if it occurs, shall govern. Buyer shall retain any Product for which it has submitted a claim and shall make the Product available for inspection by a representative of Seller. Within five (5) days of receipt of written notice from Buyer, Seller shall complete an investigation of the claim and recommend to Buyer a resolution of the claim.

 

(a) Upon agreement of the parties on a resolution of a claim for weight or loss, Seller shall issue a credit memo (if applicable) in the appropriate amount against Buyer’s account.

 

(b) In instances where Seller provides Buyer with Product that fails to conform to any Specification, and such defect is determined prior to Buyer’s use of the Product in production, Buyer will notify Seller of such defect and inquire whether it should return such Product to Seller or dispose of such Product. Seller will reply to such inquiry within [ * * * ] ([ * * * ]) [ * * * ] after receipt of such inquiry; however, if Seller does not reply within such [ * * * ] ([ * * * ]) [ * * * ] period, Buyer may then determine, in Buyer’s sole discretion, whether to return or dispose of such Product. Seller will reimburse Buyer for Buyer’s out-of-pocket costs to return or dispose of such Product and, at Seller’s expense, shall repair or replace such Product as soon as commercially practicable.

 

5.7.       Time Limitations . Any action for breach of this Agreement, other than a claim for non-payment, and any claim for indemnification based on a third-party claim, must be commenced within [ * * * ] ([ * * * ]) [ * * * ] of the timely assertion of a claim, or it shall be barred. However, nothing in this Section 5.7 shall operate to extend the otherwise applicable statute of limitations governing any claim.

 

ARTICLE VI - TERM AND TERMINATION

 

6.1.       Term . This Agreement shall commence as of the Effective Date and shall continue until December 31, [ * * * ] (the “Initial Term”). Following the Initial Term, this Agreement shall automatically renew year to year commencing January 1, [ * * * ] (each, a “Renewal Term”), unless terminated by written notice provided by either party to the other party at least [ * * * ] ([ * * * ]) [ * * * ] before the applicable expiration date of the Initial Term or any Renewal Term thereof. The Initial Term and all Renewal Terms or any portion thereof shall be referred to as the “Term”.

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Confidential Treatment Requested by AdvanSix Inc.

 

6.2.       Termination for Breach or Insolvency . A party shall be entitled to terminate this Agreement in the event that:

 

(a) the other party is in material breach of any of the provisions of this Agreement and does not either (i) cure such breach within thirty (30) days after the date of written notice of the breach provided by the non-breaching party, or, (ii) if cure cannot be accomplished within thirty (30) days, begin such cure within thirty (30) days and proceed diligently to effect such cure thereafter; or

 

(b) the other party (i) ceases to function as a going concern, (ii) makes an assignment for the benefit of its creditors, (iii) becomes the subject of any proceeding under applicable bankruptcy, receivership, insolvency or similar laws instituted by or against the other party, which proceeding is not dismissed as to the other party within sixty (60) days after it has been instituted, or (iv) liquidates or dissolves.

 

6.2.       Effect of Termination . Upon termination, all rights and obligations of the parties under this Agreement will immediately cease and terminate and each party will have no obligation to the other with respect to this Agreement, except that each party shall pay to the other party the unpaid price for Product or Washwater, as applicable, properly shipped prior to cancellation, and each party shall remain liable for any breach of this Agreement, occurring prior to the effective date of termination.

 

6.3.       Survival . Articles 2.5-2.7, 5.1, 5.2(a)-(b), 5.3(f), 5.4-5.7, 6.3, 7.1, 9.1-9.3, and 9.12 shall survive termination or expiration of this Agreement for the periods set forth in such Articles, or, if no periods are set forth in such Articles, for periods reasonably sufficient to give effect to the intents thereof.

 

ARTICLE VII - CONFIDENTIALITY

 

7.1.       Confidentiality . All confidential and/or proprietary information or documentation, regardless of its form (“Confidential Information”), of either party which is disclosed to, is acquired by or comes into the possession of, the other party hereto through operation of this Agreement shall be held in confidence by the other party (including its Affiliates) and shall be protected against unauthorized disclosure to the same extent and in the same manner as such party protects its own confidential or proprietary information. Confidential Information of a party includes information of third parties which that party possesses under an obligation of confidence, and also includes information regarding a party’s business operations, technology and processes which may be gleaned by observation thereof while on such party’s premises. Except as otherwise expressly permitted by this Agreement, neither party shall use any Confidential Information of the other party except for purposes of this Agreement. Neither party shall disclose, publish, release, transfer or otherwise make available Confidential Information of the other party in any form to, or for the use or benefit of, any person or entity, or duplicate or reproduce the same, without such other party’s prior written approval. Each party shall, however, be permitted to disclose relevant aspects of the other party’s

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Confidential Treatment Requested by AdvanSix Inc.

 

Confidential Information to its directors, managers, officers, agents, consultants, advisors, employees and authorized representatives and to the directors, managers, officers, agents, consultants, advisors, employees and authorized representatives of its Affiliates, to the extent that such disclosure is reasonably necessary to the performance of its duties and obligations under this Agreement or to protect such party’s rights under this Agreement, provided that such party shall take all reasonable measures to ensure that Confidential Information of the other party is not disclosed or duplicated in contravention of the provisions of this Agreement by any such director, manager, officer, agent, consultant, advisor, employee or authorized representative. The obligations in this Article 7.1 shall not restrict any disclosure by either party of the other party’s Confidential Information pursuant to any applicable law, or in compliance with the order of any governmental or regulatory authority of competent jurisdiction, provided that the disclosing party will notify the other party promptly of the request or requirement so that the other party may seek an appropriate protective order or waive compliance with the provisions of this Article 7.1. If, in the absence of a protective order or the receipt of a waiver hereunder, such disclosing party is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, the disclosing party may disclose the Confidential Information, as applicable, to the tribunal; provided , however , that the disclosing party shall use its reasonable efforts to obtain, at the reasonable request of the other party and at the sole expense of such other party, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as such other party shall designate. Breach of this Article 7.1 by the receiving party shall result in irreparable damage to the disclosing party, and the disclosing party shall be entitled to equitable relief in the event of such breach. The obligations of this Article 7.1 shall not apply with respect to information that (i) can be demonstrably shown to have been in the possession of the receiving party, without obligation of confidentiality, at the time of disclosure by the disclosing party or to have been independently developed by the receiving party without use of or reliance upon information disclosed by the disclosing party hereunder; (ii) is at the time of such disclosure in the public domain, or thereafter comes into the public domain from a third party and through no fault of the receiving party; or (iii) shall have lawfully come into the possession of the receiving party from a third party having no obligation of confidentiality with respect thereto.

 

ARTICLE VIII - FORCE MAJEURE

 

8.1.       Force Majeure . Seller will use commercially reasonable efforts to ensure that its contracts with third party suppliers enable Seller to obtain raw materials of sufficient quality and quantity to fulfill its obligations under this Agreement in a timely manner, including, without limitation, providing Product that strictly conforms to its Specifications. Failure of Seller to make or of Buyer to take any delivery (or portions thereof) of Product when due, if occasioned by (a) an act of God or the public enemy, fire, explosion, perils of the sea, flood, drought, war, riot, sabotage, accident, embargo; or (b) without limiting the foregoing circumstances, any circumstance of like or different character beyond the reasonable control of the party so failing; or (c) interruption of or delay in transportation, inadequacy or shortage or failure of normal sources of supply of materials that could not have been reasonably avoided; or (d) breakdowns or labor

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Confidential Treatment Requested by AdvanSix Inc.

 

trouble from whatever cause arising and whether or not the demand of the employees involved are reasonable and within said party’s power to concede; or (e) compliance by Seller or Buyer with any order, action, direction or request of any governmental officer, department, agency, authority or committee thereof (including any direction or order materially restricting or limiting the selling price of the Product or of any material produced in conjunction therewith or in connection with which such materials are used, which renders it impracticable for Seller or Buyer to make a reasonable profit on such production or use); to the extent that any such circumstance arises or becomes a material factor after the date hereof, shall not subject such party to any liability to the other and, at the option of either party, the total quantity to be delivered will be reduced by the quantity of the delivery or deliveries (or portions thereof) so omitted. If due to a Force Majeure Seller’s supply of the Product specified herein shall be insufficient to meet all requirements, Seller shall have the right, at its option and without liability, to apportion its available sales supply among its customers to which it has binding contractual commitments, including its affiliated divisions and companies, as long as Buyer is not treated less equitably in such allocation than other such customers.

 

ARTICLE IX - MISCELLANEOUS

 

9.1.       Notices . All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, by facsimile or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered personally or by facsimile, or if mailed, five (5) Business Days after the date of mailing. For the purposes hereof, the addresses, telephone numbers and facsimile numbers of the relevant parties (until notice of a change thereof, served as provided in this Article) are as follows:

 

If to Seller: Vice President and General Manager
Honeywell Resins & Chemicals LLC
101 Columbia Road
Morristown, NJ 07962
Telephone:      973-455-3426
Fax:                 973-455-5521
   
With a copy to: General Counsel, Resins & Chemicals
Honeywell International Inc.
101 Columbia Road
Morristown, NJ 07962
Telephone:      973-455-2204
Fax:                 973-455-5350
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Confidential Treatment Requested by AdvanSix Inc.

 

If to Buyer: Shaw Industries Group, Inc.
616 E. Walnut Avenue
P.O. Drawer 2128
Dalton, Georgia 30722-2128
Attention: Frederick L. Hooper, III
Telephone:      706-275-1099
Fax:                 706-275-1442
   
With a copy (which shall not constitute notice) to:
   
  Bryan Cave LLP
One Atlantic Center, Fourteenth Floor
1201 West Peachtree Street, N.E.
Atlanta, Georgia 30309-3488
Attention: Thomas R. McNeill
Telephone:      404-572-6681
Fax:                 404-572-6999

 

9.2.       Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflict of laws principles. Seller and Buyer expressly exclude the United Nations Convention on Contracts for the International Sale of Goods from this transaction.

 

9.3.       Dispute Resolution .

 

(a) In the event of a dispute between the parties arising out of or relating to the subject matter of this Agreement, the parties shall first use their commercially reasonable efforts to resolve such dispute among themselves. If the parties are unable to use their reasonable efforts to resolve the dispute within thirty (30) calendar days of the initiation of such procedure, the dispute shall be settled by arbitration as hereinafter provided which shall be the sole and exclusive procedure for the resolution of any such dispute. Within ten (10) calendar days after receipt of written notice from one party that it is submitting the matter to arbitration, each party shall designate in writing one arbitrator to resolve the dispute who shall, in turn, jointly select a third arbitrator within twenty (20) calendar days of their designation or if they fail to do so, with the third arbitrator to be selected as promptly as practicable in accordance with the procedure established by the American Arbitration Association at such time. The arbitrators so designated shall each be a lawyer experienced in commercial and business affairs who is not an employee, consultant, officer or director of any party or any Affiliate of any party and who has not received any compensation, directly or indirectly, from any Party hereto or any Affiliate of any Party during the two (2) year period preceding the notice of arbitration. The arbitration shall be governed by the rules of the American Arbitration Association. The arbitrators shall have sole discretion with regard to the admissibility of evidence. The
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Confidential Treatment Requested by AdvanSix Inc.

 

  arbitration panel shall have the right to grant equitable relief in its discretion, and to award claims for specific performance. The right of each party to move for preliminary injunction or other temporary relief before any court having jurisdiction to preserve its rights hereunder shall remain unaffected. The arbitrators shall use their best efforts to rule on each disputed issue within thirty (30) calendar days after the completion of the hearings. The determination of the arbitrators as to the resolution of any dispute shall be binding and conclusive upon all parties hereto. All rulings of the arbitrators shall be in writing, with the reasons for the ruling given, and shall be delivered to the parties hereto. Each party shall pay the fees of its respective designated arbitrator and its own costs and expenses of the arbitration. The fees of the third arbitrator shall be paid fifty percent (50%) by each of the parties. Any arbitration pursuant to this Article 9.3 shall be conducted in English in New York, New York. Any arbitration award may be entered in and enforced by any court having jurisdiction thereof and the parties hereby consent and commit themselves to the jurisdiction of the courts of any competent jurisdiction for purposes of the enforcement of any arbitration award.

 

(b) Without limitation of the foregoing, Seller and Buyer hereby submit to the non-exclusive jurisdiction of the state and federal courts of general jurisdiction in New York, New York in respect of the enforcement of any such arbitration award and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the enforcement of such award, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such courts or that such award may not be enforced in or by such courts or that its property is exempt or immune from execution, that the action, suit or proceeding is brought in an inconvenient forum, or that the venue of the action, suit or proceeding is improper. Service of process with respect thereto may be made upon any party by mailing a copy thereof by registered or certified mail, postage prepaid, to such party at its address as provided in Article 9.1 hereof, provided that service of process may be accomplished in any other manner permitted by applicable law.

 

9.4.       Modification . This Agreement may only be amended or modified in a writing signed by the party against whom enforcement of such amendment or modification is sought. No provision set forth in any purchase order, order confirmation form or any other writing pertaining to an order placed under this Agreement which is inconsistent with or in addition to the provisions of this Agreement shall be binding on either party except as set forth in this Article.

 

9.5.       Waiver . Any of the terms or conditions of this Agreement may be waived at any time by the party entitled to the benefit thereof, but only by a writing signed by the party waiving such terms or conditions. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive any party’s rights at any time to enforce strict compliance thereafter with every term or

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Confidential Treatment Requested by AdvanSix Inc.

 

condition of this Agreement for any other breath or failure to comply with the terms and conditions of this Agreement.

 

9.6.       Severability . The invalidity of any portion of this Agreement shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by law.

 

9.7.       Entire Agreement . This Agreement, constitutes the entire agreement between the parties with respect to the matters covered hereby, and supersedes any and all previous written, oral or implied understandings between them with respect to such matters, including any and all blanket purchase orders extant for the purchase of caprolactam.

 

9.8.       Assignment; Successors and Assigns; No Third Party Rights . This Agreement may not be assigned by operation of law or otherwise, and any attempted assignment shall be null and void. Notwithstanding the foregoing, either party may without further consent of the other party assign its rights under this Agreement (a) in connection with the transfer or sale of (i) all or substantially all of the assets of such party relating to this Agreement, or (ii) in the case of Seller, with respect to its rights and obligations to supply Polymer, all or substantially all of the assets of Seller relating to Seller’s Polymer production facility and business at Seller’s Chesterfield facility, or, with respect to its rights and obligations to supply caprolactam, all or substantially all of the assets of Seller relating to Seller’s caprolactam facility and business at Seller’s Hopewell facility, or (iii) in the case of Buyer, all or substantially all of the assets of Buyer relating to one or more of the Facilities and the business at any such Facility, (b) pursuant to the merger or consolidation of such party with a third party, or (c) to any Affiliate of the assigning party. [ * * * ] This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives. Any such successor or assign shall assume all of the party’s obligations under this Agreement and shall be fully bound by the terms and conditions of this Agreement; provided , however , any such assignment shall not relieve the assigning party of any obligations arising from this Agreement. This Agreement shall be for the sole benefit of the parties to this Agreement and their respective successors, assigns and legal representatives and is not intended, nor shall be construed, to give any person, other than the parties hereto and their respective successors, assigns and legal representatives, any legal or equitable right, remedy or claim hereunder.

 

9.9.       No Strict Construction; Headings . Each of Seller and Buyer acknowledges that this Agreement has been prepared jointly by the parties hereto, and shall not be strictly construed against either party. The headings in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement.

 

9.10.       Exhibits . All Exhibits attached hereto are incorporated herein and expressly made a part of this Agreement as though completely set forth herein. All references to this Agreement herein or in any Exhibits shall be deemed to refer to this entire Agreement, including all Exhibits.

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9.11.       Controlling Terms . The terms hereof shall apply notwithstanding any different or additional terms set forth in any invoices, purchase orders, bills of lading, or any other documents used by either party in connection with performance of this transaction. All said different or additional terms are void and shall not apply to the transaction described in this agreement.

 

9.12.       Publicity . No press release or other public announcement or publicity regarding the existence of this Agreement or its contents or the transactions contemplated hereby shall be made by either of the parties hereto or any of their respective Affiliates, officers, directors, employees, representatives or agents, without the prior approval of the other party hereto, in any case, as to form, content, timing and manner of distribution and publication; provided , however , nothing in this Article 9.12 shall prohibit any party from (a) making any public announcement required by law or the rules of any stock exchange so long as such party consults with the other party as to the form, content, timing and manner of distribution and publication, (b) enforcing its rights hereunder, or (c) disclosing this Agreement or its contents or the transactions contemplated hereby to those persons whose approval, agreement or opinion, as the case may be, is required for consummation of the transactions contemplated hereby. Notwithstanding anything written herein, either party shall have the right to disclose the terms of this Agreement to a third party who is a potential purchaser of one or more of the parties’ facilities as long as such disclosure is made pursuant to a nondisclosure agreement signed by the receiving third party and providing that the receiving third party will observe confidentiality requirements that are at least as restrictive regarding the disclosure of the existence, terms and provisions of this Agreement as the nondisclosure obligations under this Agreement, including, without limitation, Article 7.1 hereof, of the parties hereto.

 

9.13.       Further Assurances . Upon the reasonable request of a party, the other party will execute and deliver such other documents and instruments as may be required to effectuate completely the terms, conditions, and purposes of this Agreement.

 

9.14.       Relationship of Parties . The parties acknowledge that they are independent contractors and no other relationship, including partnership, joint venture, employment, franchise, master/servant or principal/agent is intended by this Agreement. Neither party shall have the right to bind or obligate the other.

 

9.15.       Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

[ The Remainder of this Page has been Intentionally Left Blank ]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered on its behalf by its duly authorized representative, as of the Effective Date.

 

HONEYWELL RESINS & CHEMICALS, LLC   SHAW INDUSTRIES GROUP, INC.
     
By:   /s/ Qamar S. Bhatia   By:   /s/ Gerald R. Embry
         
Name:  Qamar S. Bhatia     Gerald R. Embry
         
Title: VP/GM, Resins and Chemicals     Vice President, Administration
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EXHIBIT A

 

[ * * * ] CAPROLACTAM SPECIFICATIONS

 

Product Name

 

Molten Caprolactam, [ * * * ]

Specification Number

[ * * * ]

Formula

 

CH 2 (CH 2 ) 4 NHCO
  [_____________]

Molecular Weight

 

113.16

Date Issued

 

11/1/05

Supersedes

 

6/30/05

Page

 

1 of 1

         
Parameters Value Test Method
     
Color, APHA   [ * * * ] max. QALAC-0001
     
Permanganate Index (ISO)   [ * * * ] max. QALAC-0002
     
Permanganate Number Seconds   [ * * * ] min. QALAC-0009
     
Water, %   [ * * * ] max. QALAC-0005
     
Iron (as Fe), ppm   [ * * * ] max. QALAC-0011
     
Volatile Base (as NH 3 ), ppm   [ * * * ] max. QALAC-0012
     
Volatile Base (as NH 3 ), meq/kg   [ * * * ] max. QALAC-0012
     
Free Alkalinity, meq/kg   [ * * * ] max. QALAC-0006
     
Free Acidity, meq/kg   [ * * * ] max. QALAC-0006
     
Ash, ppm   [ * * * ] max. QALAC-0007
     
Transmittance @ 290nm, %   [ * * * ] min. QALAC-00033
     
Note: Specification values shown are those at the time of shipment as determined by the test methods listed.
 

Confidential Treatment Requested by AdvanSix Inc.

 

EXHIBIT B

 

[ * * * ] POLYMER SPECIFICATIONS

 

DATE: 8/30/04

 

PRODUCT: [ * * * ] CHIP

 

  Specification of Properties   
   
Form Pellets/Chips
   
Color Transparent
   
Viscosity (FAV) [ * * * ]
   
% EXTRACTABLES [ * * * ]
   
% MOISTURE [ * * * ]
 

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EXHIBIT C

 

[ * * * ]

 

[ * * * ]

 

[ * * * ]

 

  [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
 

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EXHIBIT D

 

[ * * * ]

 

[ * * * ]

 

  [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ] [ * * * ]
   
[ * * * ]  
   
[ * * * ]  
 

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EXHIBIT E

 

[ * * * ]

 

[* * *]

 

[ * * * ]

[ * * * ]

 

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

         
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [* * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ] [ * * * ] [ * * * ]
     
[ * * * ]
 
 

Confidential Treatment Requested by AdvanSix Inc.

 

SCHEDULE 2.1(I)

 

CAPROLACTAM INDEX AMOUNT

 

I.        The calculation of the Caprolactam Index Amount (CIA) for Product sold through the Term of the Agreement shall be calculated according to the following:

 

         [ * * * ]

 

II.       [ * * * ]

 

III.      For any price publication where this Schedule requires the use of a posted price for the month or the quarter containing the month, the published price as of the last Monday of the preceding month shall be used for the applicable calculation; provided that the Parties shall make a true-up adjustment based on the final published number for the month, which adjustment shall occur in the month following the month and at the end of such quarter.

 

IV.     [ * * * ]

 

V.      In the event that any of the above indices shall cease to be published, or that the published prices shall cease to represent the market conditions, in the good faith opinion of either party, then either party may notify the other of the need for reconsideration. Thereafter, the parties shall meet to determine in good faith an appropriate adjustment to the published index, or an alternative index that is more reflective of the intent of the parties. If the parties are unable to determine in good faith an appropriate adjustment or alternative index, then either party may submit the limited issue of what is an appropriate adjustment to the published index or an appropriate alternative index to binding arbitration pursuant to Article 9.3 of this Agreement. In such binding arbitration, the standard to be applied by the arbitrator shall be to choose an adjustment or alternative index such that the Caprolactam Index Amount and/or Polymer Index Amount continues to be reflective of changes in Seller’s cost basis related to the challenged or absent index.

 

Confidential Treatment Requested by AdvanSix Inc.

 

SCHEDULE 2.1(II)

 

POLYMER INDEX AMOUNT

 

The Polymer Index Amount shall be equal to the amount, in cents per pound, derived from the following calculation:

 

PIA = [ * * * ]

 

Wherein the definitions of [ * * * ], [ * * * ], and [ * * * ] shall be as set forth as shown in Schedule 2.1(I) hereto.

 

In the term ([ * * * ]) of the PIA calculation, if [ * * * ] is less than [ * * * ] then the value of [ * * * ] shall be used as the numerator of the calculation.

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Attachment I

 

[ * * * ]
Feb-13]
 
   
[ * * * ] Honeywell Volume Pounds [ * * * ]
     
  [ * * * ] Revenue Dollars $[ * * * ]
  [ * * * ] Freight & Distribution Dollars [ * * * ]
  Resulting Dollars $[ * * * ]
     
  [ * * * ] Price ($/Lb) $[ * * * ]
   
       
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Attachment II

 

[ * * * ]

 

Jun-13

 

     
     
Products
[ * * * ]
Volume
Price ($/short ton)
[ * * * ]%
$[ * * * ]
     
[ * * * ] Volume
Price ($/short ton)
[ * * * ]%
$[ * * * ]
     
[ * * * ] Volume
Price ($/short ton)
[ * * * ]%
$[ * * * ]
     
Average Price ($/short ton) $ [ * * * ]
     
     
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Attachment III

 

Honeywell Actual $/[ * * * ]

 

  Total Spend [ * * * ] $/ [ * * * ]
J une 2004 Base $ [ * * * ] [ * * * ] $ [ * * * ]
       
Q3 2010      
       
July $ [ * * * ] [ * * * ] $ [ * * * ]
       
August $ [ * * * ] [ * * * ] $ [ * * * ]
       
September $ [ * * * ] [ * * * ] $ [ * * * ]
       
[ * * * ] Q3 2010     $ [ * * * ]
AVG
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Confidential Treatment Requested by AdvanSix Inc.

 

Attachment IV

 

[ * * * ] to:                                             04-2012

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

[ * * * ]

 

  [ * * * ] [ * * * ]  
Rates [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]  
Total $  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  
Cars [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]  
Net of transfers         [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]  
$ per car  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  $      [ * * * ]  
Honeywell
Shipments
                    Total Cars
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
[ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
                  Cars [ * * * ] $ [ * * * ]
                  Tons/Car [ * * * ]  
                       
                    AVG $/Car $ [ * * * ]
                    AVG $/Ton $ [ * * * ]
                       
6

Confidential Treatment Requested by AdvanSix Inc.

 

Attachment V

 

[[ * * * ] Letterhead]

 

January 14, 2010

 

Honeywell International Incorporated
Attn: Mr. Humberto Caldelas
905 East Randolph Road
P.O. Box 761
Hopewell, VA 23860

 

Re: [ * * * ] Contract

 

Dear Mr. Caldelas:

 

The calculated contract prices effective January 1, 2010 will be as follows:

 

(A)      $[ * * * ] per thousand pounds of [ * * * ] delivered
(B)      $[ * * * ] [ * * * ] (Mar, Apr, May, Sep, Oct, Nov, Dec)
(C)      $[ * * * ] [ * * * ] (Jan, Feb, Jun, Jul, Aug)

 

The prices on the attached schedule are calculated using the [ * * * ].

 

If you have any questions please contact me at 704-672-2885.

 

Sincerely,

 

Stephen M. Sweeney
Manager, Fuels & Materials

 

Attachment

 

cc: Mr. M. Williams

7

Confidential Treatment Requested by AdvanSix Inc.

 

Attachment VI

 

[ * * * ]

 

  [* * * ] Feb-13  

 

  Cents Per
Pound

of [ * * * ]
  Total costs   Cost
components
  Pounds    
                   
Price Variance [ * * * ]      $         [ * * * ]       [ * * * ]    
                   
                   
             $         [ * * * ]   [ * * * ]    
             $         [ * * * ]   [ * * * ]    
                   
Shipping Cost [ * * * ]      $         [ * * * ]            
                   
                   
                   
                   
                   
[ * * * ] [ * * * ]      $         [ * * * ]   [ * * * ]%   [ * * * ]      $         [ * * * ]
             $         [ * * * ]   [ * * * ]    
             $                    -   [ * * * ]    
[ * * * ] [ * * * ]      $         [ * * * ]            
  [ * * * ]   Per Pound of [ * * * ]        
   [ * * * ]                
  [ * * * ]   Per Pound of [ * * * ]        
  [ * * * ]                
  [ * * * ]   Per Pound of [ * * * ]        
                   
  Summary                
     $          [ * * * ]   Total Cost Increase            
  [ * * * ]   Total [ * * * ] Pounds        
  [ * * * ]   [ * * * ] on [ * * * ]            
  [ * * * ]   [ * * * ] on [ * * * ]            
  [ * * * ]   [ * * * ] on [ * * * ]        
8

Exhibit 10.5

 

Confidential Treatment Requested by AdvanSix Inc.

 

FIRST AMENDMENT
TO AMENDED AND RESTATED
CAPROLACTAM AND POLYMER SUPPLY AGREEMENT

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED CAPROLACTAM AND POLYMER SUPPLY AGREEMENT (this “ Amendment ”) is entered into as of July 18, 2013, by and between Honeywell Resins & Chemicals LLC, a Delaware limited liability company f/k/a Honeywell Nylon , LLC (“ Seller ”), and Shaw Industries Group, Inc., a Georgia corporation (“ Buyer ”).

 

Recitals

 

WHEREAS, on April 1, 2013, Seller and Buyer entered into that certain Amended and Restated Caprolactam and Polymer Supply Agreement (the “ Agreement ”);

 

WHEREAS, the parties desire to amend certain provisions of the Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Agreement

 

NOW, THEREFORE , in consideration of the mutual terms, conditions and other agreements set forth herein, the parties, intending to be legally bound hereby, agree as follows:

 

1.         Section 1.2 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 1.2, as follows:

 

“1.2      Purchase and Sale of Product .

 

(a)       During the term of this Agreement, except as provided in Articles 1.2(b), 1.3 and 1.4 below, Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, each Fiscal Year, for use and consumption by Buyer and its Affiliates, a minimum of [ * * * ] ([ * * * ]) pounds of Product (the “ Minimum Volume ”), and a maximum of [ * * * ] ([ * * * ]) pounds of Product (the “ Maximum Volume ”), including:

 

(i)       a minimum of [ * * * ] ([ * * * ]) and a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year (or a pro rata amount thereof in any partial Fiscal Year during the Term) of Polymer [ * * * ].

 

(ii)      a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year of [ * * * ] Caprolactam.

 

(iii)      [ * * * ]

1

Confidential Treatment Requested by AdvanSix Inc.

 

(iv)     At the sole option of Buyer, Buyer may provide caprolactam Product to a third party designated by Buyer, for further processing into polymer or fiber; it being acknowledged that any such caprolactam may not be sold to such third party.

 

(b)       In addition to the purchase obligations set forth in Section 1.2(a) above, during the period from July 1, 2013, through December 31, 2013 (the “ Supplemental Product Term ”), Buyer shall purchase from Seller, and Seller shall sell to Buyer, a minimum of [ * * * ] ([ * * * ]) pounds and a maximum of [ * * * ] ([ * * * ]) pounds of Product (the “ 2013 Supplemental Volume ”) in such mix of [ * * * ] Caprolactam and [ * * * ] polymer as Buyer may designate in the applicable Forecast, with such mix being subject to the commercially reasonable capacity of Seller, as well as any commercially reasonable needs and priorities of Buyer; provided, however, that upon the conclusion of the Supplemental Product Term, [ * * * ] ([ * * * ]) of the 2013 Supplemental Volume shall have been [ * * * ] Caprolactam and ([ * * * ]) of the 2013 Supplemental Volume shall have been [ * * * ] polymer; provided, further, however, that upon agreement by both parties, [ * * * ] can be substituted for [ * * * ].

 

Nothing in this Agreement is intended to imply any geographical limitation, and Buyer shall not be restricted to use of any Product at any particular Facility, but may use any Product in any of its facilities, whether presently owned, or expanded, purchased or constructed after the Effective Date.”

 

2.         Section 2.1 of the Agreement is amended by adding the following to the end of Section 2.1, as follows:

 

“The price for each pound of [ * * * ] Caprolactam included in the 2013 Supplemental Volume shall be the sum of (A) [ * * * ] ([ * * * ]) plus (B) the Caprolactam Index Amount (as defined in Schedule 2.1(I)), which, may be a positive or a negative amount.”

 

3.         Section 2.2 of the Agreement is amended by adding the following to the end of Section 2.2, as follows:

 

“The price for each pound of [ * * * ] Polymer included in the 2013 Supplemental Volume shall be [ * * * ] ([ * * * ]) above the price for [ * * * ] Caprolactam included in the 2013 Supplemental Volume (calculated pursuant to Article 2.1 above) for such Fiscal Month, plus the Polymer Index Amount (as defined in Schedule 2.1(II)), which, may be a positive or a negative amount.”

 

4.         All capitalized terms used, but not defined, herein shall have the meaning set forth in the Agreement.

2

Confidential Treatment Requested by AdvanSix Inc.

 

5.        This Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

 

6.        Except as expressly modified in this Amendment, the Agreement remains in full force and effect. The Agreement and this First Amendment together constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all prior agreements or understandings between the Parties as to the subject matter hereof.

 

[ The Remainder of this Page has been Intentionally Left Blank ]

3

Confidential Treatment Requested by AdvanSix Inc.

 

IN WITNESS WHEREOF, the parties have executed this First Amendment to Caprolactam and Polymer Supply Agreement as of the date first above written.

 

HONEYWELL RESINS & CHEMICALS, LLC   SHAW INDUSTRIES GROUP, INC.
         
By:  /s/ Qamar S. Bhatia   By:  /s/ Gerald R. Embry
   Qamar S. Bhatia      Gerald R. Embry
   Vice President and General Manager      Vice President, Administration
4

Exhibit 10.6

 

Confidential Treatment Requested by AdvanSix Inc.

 

SECOND AMENDMENT
TO AMENDED AND RESTATED
CAPROLACTAM AND POLYMER SUPPLY AGREEMENT

 

THIS SECOND AMENDMENT TO AMENDED AND RESTATED CAPROLACTAM AND POLYMER SUPPLY AGREEMENT (this “ Amendment ”) is entered into as of November 15, 2013, by and between Honeywell Resins & Chemicals LLC, a Delaware limited liability company f/k/a Honeywell Nylon, LLC (“ Seller ”), and Shaw Industries Group, Inc., a Georgia corporation (“ Buyer ”).

 

Recitals

 

WHEREAS, on April 1, 2013, Seller and Buyer entered into that certain Amended and Restated Caprolactam and Polymer Supply Agreement (as amended, the “ Agreement ”);

 

WHEREAS, the parties desire to amend certain provisions of the Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Agreement

 

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties, intending to be legally bound hereby, agree as follows:

 

1.         Section 1.2 of the Agreement is amended by adding the following to the end of Section 1.2, as follows:

 

“(c)  In addition to the purchase obligations set forth in Section 1.2(a) and Section 1.2(b) above, during the period from January 1, 2014, through December 31, 2015, Buyer shall purchase from Seller, and Seller shall sell to Buyer, [ * * * ] ([ * * * ]) pounds of Product (the “2014/2015 Supplemental Volume”) per calendar year, all of which Product shall be [ * * * ] Caprolactam.”

 

2.         Section 2.1 of the Agreement is amended by adding the following to the end of Section 2.1, as follows:

 

“The price for each pound of [ * * * ] Caprolactam included in the 2014/2015 Supplemental Volume shall be the sum of (A) [ * * * ] ([ * * * ]) plus (B) the Caprolactam Index Amount (as defined in Schedule 2.1(I)), which, may be a positive or a negative amount.”

 

3.         All capitalized terms used, but not defined, herein shall have the meaning set forth in the Agreement.

1

Confidential Treatment Requested by AdvanSix Inc.

 

4.        This Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

 

5.         Except as expressly modified in this Second Amendment, the Agreement remains in full force and effect. The Agreement, the First Amendment to Amended and Restated Caprolactam and Polymer Supply Agreement between the Seller and Buyer dated July 18, 2013, and this Second Amendment, together constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all prior agreements or understandings between the Parties as to the subject matter hereof.

 

[The Remainder Of This Page Has Been Intentionally Left Blank]

2

Confidential Treatment Requested by AdvanSix Inc.

 

IN WITNESS WHEREOF, the parties have executed this Second Amendment to Caprolactam and Polymer Supply Agreement as of the date first above written.

 

HONEYWELL RESINS & CHEMICALS, LLC   Shaw Industries Group, Inc.
     
By:    /s/ Qamar S. Bhatia   By:     /s/ Gerald R. Embry
    Qamar S. Bhatia       Gerald R. Embry
    Vice President and General Manager       Vice President, Administration
3

Exhibit 10.7

 

Confidential Treatment Requested by AdvanSix Inc.

 

THIRD AMENDMENT
TO AMENDED AND RESTATED
CAPROLACTAM AND POLYMER SUPPLY AGREEMENT

 

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CAPROLACTAM AND POLYMER SUPPLY AGREEMENT (this “ Amendment ”) is entered into as of December 12, 2014, by and between Honeywell Resins & Chemicals, LLC, a Delaware limited liability company f/k/a Honeywell Nylon, LLC (“ Seller ”), and Shaw Industries Group, Inc., a Georgia corporation (“ Buyer ”).

 

Recitals

 

WHEREAS, on April 1, 2013, Seller and Buyer entered into that certain Amended and Restated Caprolactam and Polymer Supply Agreement (as amended, the “ Agreement ”);

 

WHEREAS, the parties desire to amend certain provisions of the Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Agreement

 

NOW, THEREFORE , in consideration of the mutual terms, conditions and other agreements set forth herein, the parties, intending to be legally bound hereby, agree as follows:

 

1.         Section 1.2 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 1.2, as follows:

 

“1.2   Purchase and Sale of Product . During the term of this Agreement, except as provided in Articles 1.3, 1.4 and 1.9 below, Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, each Fiscal Year, for use and consumption by Buyer and its Affiliates, a minimum of [ * * * ] ([ * * * ]) pounds of Product (the “Minimum Volume”), and a maximum of [ * * * ] ([ * * * ]) pounds of Product (the “Maximum Volume”), including:

 

(a)        a minimum of [ * * * ] ([ * * * ]) and a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year (or a pro rata amount thereof in any partial Fiscal Year during the Term) of Polymer [ * * * ].

 

(b)        a maximum of [ * * * ] ([ * * * ]) pounds per Fiscal Year of [ * * * ] Caprolactam.

 

(c)        [ * * * ]

 

(d)        At the sole option of Buyer, Buyer may provide caprolactam Product to a third party designated by Buyer, for further processing into polymer or fiber; it being acknowledged that any such caprolactam may not be sold to such third party.

1

Confidential Treatment Requested by AdvanSix Inc.

 

Nothing in this Agreement is intended to imply any geographical limitation, and Buyer shall not be restricted to use of any Product at any particular Facility, but may use any Product in any of its facilities, whether presently owned, or expanded, purchased or constructed after the Effective Date.”

 

2.         Section 1.4 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 1.4, as follows:

 

“1.4       Further Volume Adjustments . Notwithstanding any of the foregoing contained in this Agreement, overall volume ranges of Product to be purchased by the Buyer during the periods described in the Agreement may be amended, with respect to any [ * * * ] ([ * * * ])-month period, to reflect an increase or decrease in the annualized rate in an amount not to exceed [ * * * ] ([ * * * ]) pounds, with [ * * * ] ([ * * * ]) days prior written notice by the Buyer to Seller; provided, however, that under no circumstance shall the Buyer be entitled to purchase Product at an annualized rate of less than [ * * * ] ([ * * * ]) nor more than [ * * * ] ([ * * * ]) pounds. In the event of any such amendment, notwithstanding the provisions of the Agreement, such range of annualized rate of Product to be purchased by the Buyer established by such an amendment shall . remain in effect until such time, if any, that the Buyer shall again exercise its rights under and subject to this Article 1.4 to further increase or decrease in the minimum and/or maximum annualized rate of Product to be purchased by the Buyer then-in-effect in an amount not to exceed [ * * * ] ([ * * * ]) pounds.”

 

3.         A new Section 1.9 of the Agreement is hereby added, as follows:

 

“1.9       2015 Volume Adjustment . Notwithstanding Article 1.2 of this Agreement, between January 1, 2015, through December 31, 2015, (i) the annual Minimum Volume shall be [ * * * ] ([ * * * ]) pounds of Product, and (ii) the annual Maximum Volume shall be [ * * * ] ([ * * * ]) pounds of Product. Under Article 1.2(a) of the Agreement, the minimum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) and the maximum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) from January 1, 2015, through December 31, 2015.”

 

4.         Section 2.1 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 2.1, as follows:

 

“2.1       Caprolactam Pricing . The price for each pound of [ * * * ] Caprolactam shall be the sum of (x) [ * * * ] ([ * * * ]) plus (y) the Caprolactam Index Amount (as defined in Schedule 2.1(I)), which, may be a positive or a negative amount, plus (z) the Caprolactam Adder Amount. The Caprolactam Adder Amount shall be: (i) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, (ii) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, and (iii) for the period of [ * * * ], through the last day of the Term, [ * * * ] ([ * * * ]) per pound of Product.”

 

5.         A new Section 2.8 of the Agreement is hereby added, as follows:

 

“2.8       Volume Incentive .

2

Confidential Treatment Requested by AdvanSix Inc.

 

(a)      For the period beginning January 1, 2015, through the last day of the Term, if Buyer purchases Product at an annualized rate of [ * * * ] ([ * * * ]) pounds or more during any Fiscal Month or any Fiscal Quarter, the price for each pound of Product purchased during such Fiscal Month or Fiscal Quarter shall be reduced by [ * * * ] ([ * * * ]) per pound of Product.

 

(b)      For the purpose of the calculations set forth in Section 2.8(a), an annualized rate of [ * * * ] pounds ([ * * * ]) is equivalent to (i) [ * * * ] ([ * * * ]) pounds in a four-week Fiscal Month, (ii) [ * * * ] ([ * * * ]) pounds in a five-week Fiscal Month, and (iii) [ * * * ] ([ * * * ]) pounds in a Fiscal Quarter.

 

(c)      In the event of any overpayment by Buyer for Product resulting from the application of the above-referenced discount, such overpayment shall be refunded by Seller to Buyer within thirty (30) days following the end of the applicable Fiscal Month or Fiscal Quarter, as the case may be, by either, at the option of Seller, (i) a credit on the next regular invoice for Product, or (ii) in cash or immediately available funds.

 

6.         All capitalized terms used, but not defined, herein shall have the meaning set forth in the Agreement.

 

7.         This Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

 

8.         Except as expressly modified in this Amendment, the Agreement remains in full force and effect. The Agreement and this Amendment together constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all prior agreements or understandings between the Parties as to the subject matter hereof.

 

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3

Confidential Treatment Requested by AdvanSix Inc.

 

IN WITNESS WHEREOF , the parties have executed this Third Amendment to Caprolactam and Polymer Supply Agreement as of the date first above written.

 

HONEYWELL RESINS & CHEMICALS, LLC   SHAW INDUSTRIES GROUP, INC.
     
By:    /s/ Erin Kane   By:    /s/ Hal Long
    Erin Kane       Hal Long
    Vice President and General Manager       Executive Vice President Operations
4

Exhibit 10.8

 

Confidential Treatment Requested by AdvanSix Inc.

 

FOURTH AMENDMENT
TO AMENDED AND RESTATED
CAPROLACTAM AND POLYMER SUPPLY AGREEMENT

 

THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CAPROLACTAM AND POLYMER SUPPLY AGREEMENT (this “ Amendment ”) is entered into as of January 13, 2016, by and between Honeywell Resins & Chemicals, LLC, a Delaware limited liability company f/k/a Honeywell Nylon, LLC (“ Seller ”), and Shaw Industries Group, Inc., a Georgia corporation (“ Buyer ”).

 

Recitals

 

WHEREAS, on April 1, 2013, Seller and Buyer entered into that certain Amended and Restated Caprolactam and Polymer Supply Agreement (as amended, the “ Agreement ”);

 

WHEREAS, the parties desire to amend certain provisions of the Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Agreement

 

NOW, THEREFORE , in consideration of the mutual terms, conditions and other agreements set forth herein, the parties, intending to be legally bound hereby, agree as follows:

 

1.           Section 1.8 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 1.8, as follows:

 

“1.8. Washwater Supply . During the Fiscal Year 2016, Buyer shall supply to Seller and Seller shall purchase from Buyer the Washwater. Such Washwater shall contain on average for each Fiscal Year during the Term at least [ * * * ] percent ([ * * * ]%) monomer equivalent Caprolactam. [ * * * ]

 

(a) [ * * * ]

 

(b) [ * * * ]

 

(c) [ * * * ]

 

[ * * * ]

 

2.           Section 1.9 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 1.9, as follows:

 

“1.9      [ * * * ] Volume Adjustment . Notwithstanding Article 1.2 of this Agreement, between [ * * * ], through [ * * * ], (i) the annual Minimum Volume shall be [ * * * ] ([ * * * ]) pounds of Product, and (ii) the annual Maximum Volume shall be [ * * * ] ([ * * * ]) pounds of Product. Under Article 1.2(a) of the Agreement, the minimum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) and the maximum annual volume for Polymer shall be [ * * * ] pounds ([ * * * ]) from [ * * * ], through [ * * * ].”

1

Confidential Treatment Requested by AdvanSix Inc.

 

3.           Section 2.1 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 2.1, as follows:

 

“2.1       Caprolactam Pricing . The price for each pound of [ * * * ] Caprolactam shall be the sum of (x) [ * * * ] ([ * * * ]) plus (y) the Caprolactam Index Amount (as defined in Schedule 2.1(I)), which, may be a positive or a negative amount, plus (z) the Caprolactam Adder Amount. The Caprolactam Adder Amount shall be: (i) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, (ii) for the period of [ * * * ], through [ * * * ], [ * * * ] ([ * * * ]) per pound of Product, and (iii) for the period of [ * * * ], through the last day of the Term, [ * * * ] ([ * * * ]) per pound of Product.”

 

4.           DEFINITIONS of “Fiscal Month”. “Fiscal Quarter”, and “Fiscal Year” are deleted in its entirety, and inserted in lieu thereof are new DEFINITIONS of “Fiscal Month”. “Fiscal Quarter”, and “Fiscal Year”, as follows:

 

“Fiscal Month”, “Fiscal Quarter”, and “Fiscal Year” depends on the month or quarter in question, as follows: a fiscal year end is December 31 each year. Fiscal Quarters are comprised of 13 weeks each, whereby there are 4 weeks for the first fiscal month, 4 weeks for the second fiscal month, and 5 weeks for the third fiscal month. Once every 7 years the fourth quarter has 6 weeks in its last month. For the purpose of this agreement, the first Fiscal Month and the first Fiscal Quarter and Fiscal Year commences on January 1 of each year.

 

5.           Section 2.4 of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new Section 2.4, as follows:

 

2.4. Washwater Pricing . The price for each pound of Washwater shall be equal to (A) the percentage of Caprolactam contained in such pound multiplied by the price per pound of [ * * * ] Caprolactam (calculated pursuant to Article 2.1) in effect from time to time under this Agreement, minus (B) [ * * * ] ([ * * * ]). The percentage of Caprolactam contained in a pound of Washwater shall be calculated by Seller at its Hopewell facility, using Seller’s test method QALAC-0029 (Attachment I to this Amendment) or other mutually agreed method and shall include only monomer equivalent Caprolactam, with no credit being given for any oligomers present in the Washwater. If in any Fiscal Year the average percentage of Caprolactam in all Washwater supplied that year is not at least [ * * * ] ([ * * * ]), then Seller may invoice Buyer for an increased pro-rata share of its Caprolactam recovery costs commensurate with the actual percentage of Caprolactam contained in Washwater during the year.

 

6.           Paragraph 9 of Schedule 2.1(I) section I of the Agreement is deleted in its entirety, and inserted in lieu thereof is a new paragraph 9 of Schedule 2.1(I) section I, as follows:

 

[ * * * ]

 

7.           All capitalized terms used, but not defined, herein shall have the meaning set forth in the Agreement.

 

8.           This Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

2

Confidential Treatment Requested by AdvanSix Inc.

 

9.             Except as expressly modified in this Amendment, the Agreement remains in full force and effect. The Agreement and this Amendment together constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all prior agreements or understandings between the Parties as to the subject matter hereof.

 

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Confidential Treatment Requested by AdvanSix Inc.

 

IN WITNESS WHEREOF , the parties have executed this Fourth Amendment to Caprolactam and Polymer Supply Agreement as of the date first above written.

 

HONEYWELL RESINS & CHEMICALS, LLC   Shaw Industries Group, Inc.
     
By:    /s/ Erin Kane   By:    /s/ Hal Long
     Erin Kane        Hal Long
     Vice President and General Manager        Executive Vice President Operations
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Confidential Treatment Requested by AdvanSix Inc.

 

Attachment I

 

HOPEWELL PLANT

 

Quality Assurance Analytical Procedure Number   QALAC-0029
Subject:   The determination of Caprolactam in Dilute Caprolactam, Wash Water, and Caprolactam (Lactam) Inventory Samples. Number   R-7
Supersedes: QALAC-0029 R-6
March 13, 2009
Date       June 19, 2012
Dept Mgt. Approval Dale Nesselrodt   Approval Signature Available on Master Copy Page       1 of 8

 

1.0 PURPOSE

This analytical procedure describes the method for the determination of Caprolactam in Dilute Caprolactam, Wash Water, and Caprolactam (Lactam) Inventory Samples.

 

2.0 SCOPE

This procedure applies to the analysis of Caprolactam in Dilute Caprolactam, Wash Water, and Caprolactam (Lactam) Inventory samples from the Caprolactam process at the Hopewell Plant Lactam.

 

3.0 DEFINITIONS

None

 

4.0   SAFETY ISSUES/EQUIPMENT

Standard hand and eye protection is required.

 

5.0 SPECIAL TOOLS/EQUIPMENT/MATERIALS

5.1          Special Tools/Equipment:

5.1.1 Glassware associated with standard analytical analysis

5.1.2 Agilent 6890 gas chromatograph, or
equivalent, equipped with a Flame Ionization Detector
(FID).

5.1.3 Agilent VP-Class Data Collection System, or equivalent
  5.1.4 10µL syringe or Agilent 7683B Series Automatic           Liquid Sampler (ALS)
5.1.5 A balance capable of weighing to ± 0.01 grams
5.1.6 A magnetic stirring motor and a magnetic stirring bar
5.1.7 4 - 8 oz. sample bottles with caps, or 150 mL Erlenmeyer flasks with stoppers/caps
 

Confidential Treatment Requested by AdvanSix Inc.

 

NOTE: Glassware used is to be clean, unbroken, and of adequate size and volume capacity to perform this procedure. Adhering to these conditions, and dependent upon availability, technicians are empowered to select and use glassware for the completion of this procedure.

5.2 Materials:

5.2.3 Diethyl phthalate (C 6 H 4 )-1,2-(CO 2 C 2 H 3 ) 2 , reagent grade

5.2.4 Methanol (CH 3 OH), reagent grade

5.2.5 Distilled water

5.2.6 Acetone, for syringe washing

 

NOTE: Purity of Reagents - Reagent grade chemicals will be used in all tests. Unless otherwise indicated, it is intended that all reagents will conform to the specifications of the Committee on Analytical Reagents of the American Chemical Society, where such specifications are available.

Purity of Water - Reference to water shall be understood to mean reagent water conforming to the specifications for reagent water (ASTM Designation D 1193).

 

6.0 PROCEDURE

 

6.1 Preparation of Diethyl Phthalate Internal Standard.

 

6.1.1 Transfer 600 ± 0.2 g of Diethyl Phthalate to a 20-L carboy, or equivalent.

 

6.1.2 Dilute to the 20-L mark with reagent grade Methanol.

 

6.1.3 Insert a paddle mixer wand attached to a variable speed, electric mixer. Stir the solution until all of the Diethyl Phthalate goes into solution.

 

6.1.4 Keep the solution in the 20-L carboy. Use as needed.

 

6.1.5 Label the solution as follows:

 

6.1.5.1 Diethyl Phthalate Internal Standard

 

6.1.5.2 Preparation date

 

6.1.5.3 Expiration date (3 months from preparation date)

 

6.1.5.4 Preparer’s initials

 

6.2 Preparation of Calibration Standard.

 

NOTE: The calibration standard solution batch size may be increased or decreased as desired by multiplying (or dividing) the components by the same factor. For example, in step 6.2.4, 4 g of solution may be used as long as 96 g of DEP internal standard solution is added to the standard solution. Select an appropriately sized mixing container.

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Confidential Treatment Requested by AdvanSix Inc.

 

6.2.1 Transfer 50 ± 0.2 g finished product Caprolactam (VT-297/360 or flake Lactam) to an 8 oz. sample bottle.

 

6.2.2 Transfer 50 ± 0.2 g of distilled water to the sample bottle.

 

6.2.3 Cap the sample bottle and shake vigorously to thoroughly mix the solution.

 

6.2.4 Transfer 2.00 g of the resulting solution into a 4-oz bottle, or equivalent. Record the weight to the nearest 0.01 g.

6.2.5 Transfer 48.00 g of the Diethyl Phthalate Internal Standard (prepared in 6.1) into the 4-oz bottle. Record the weight to the nearest 0.01 g.

 

6.2.6 Cap the bottle and shake vigorously to thoroughly mix the contents.

 

NOTE: The percentage of Caprolactam in this standard corresponds to 100% Caprolactam. Dilution is necessary for accurate quantitation on the gas chromatograph.

 

6.2.7 Prepare a nominal 50% QA check standard sample by the following procedure:

6.2.7.1  Transfer 1.00 g of the calibration solution prepared in step 6.2.6 into a 4-oz bottle. Record the weight to the nearest 0.01 g.

6.2.7.2  Transfer 1.00 g of distilled water into the 4-oz bottle. Record the weight to the nearest 0.01 g.

6.2.7.3  Transfer 48.00 g of Diethyl Phthalate Internal Standard solution in to the 4-oz bottle. Record the weight to the nearest 0.01 g. Cap and shake vigorously.

 

6.3 Preparation of Sample

 

6.3.1 Obtain the necessary Caprolactam sample. Shake the sample bottle vigorously to thorough homogenize the sample.

 

NOTE: Wash water samples from Chesterfield are brought over to the lab in 4-oz sample bottles as each shipment arrives at the Hopewell Plant. A biweekly composite is prepared on Sunday evenings and Wednesday mornings. The composites are prepared by thoroughly shaking each individual sample and transferring 2-oz of the homogenized sample into a composite bottle. The remaining individual samples are retained until all analyses are complete and permission to dispose of the samples is obtained from laboratory supervision. An 8-oz aliquot of the completed composite sample is secured and retained for future reference, if needed. Place the retained composite sample in the solutions lab where the solutions technician can record and store the retain sample in its proper storage location. At least three Chesterfield wash water samples must be present to prepare a composite. If there are fewer than three samples present, then save the samples until the next composite period.

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Confidential Treatment Requested by AdvanSix Inc.

 

6.3.2 Transfer 1.00 g of the Lactam sample into an 4-oz bottle. Record the weight to the nearest 0.01 g.

 

NOTE: Perform this step immediately after shaking the sample when analyzing Wash Water. Otherwise, the solids may settle to the bottom of the sample bottle and a non representative sample will be obtained.

 

6.3.3 Transfer 1.00 g of distilled water and 48.00 g of the Diethyl Phthalate Internal Standard into the 4-oz bottle. Record the weight of the distilled water and internal standard to the nearest 0.01 g.

 

6.3.4 Cap the bottle and shake vigorously to thoroughly mix the sample.

 

6.3.5 Repeat steps 6.3.1 - 6.3.4 for each inventory, wash water or dilute caprolactam sample.

 

6.4 Method Calibration

 

6.4.1 Obtain the calibration standard prepared in 6.2.

 

6.4.2 Following the manufacturer’s instructions, configure the CLASS-VP Data collection system to report the results by Internal Standard calibration using the method program defined for this analysis. Refer to the current method settings in the GC Reference. Enter the standardization and QA check sample data and preparation weights into the sequence table.

 

6.4.3 Prepare an Agilent 6890 gas chromatograph (or equivalent) to operate under the following conditions.

 

      Column: 4’ x 1/4” x 2mm I.D. (or 4mm ID) glass, packed with Tenax GC 60/80 mesh Packed column or 15 m x 0.53 mm x 1.0 micron RTX-WAX Capillary column or equivalent.
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Confidential Treatment Requested by AdvanSix Inc.

 

    Detector:  Flame Ionization  
       
    Injection Port Temperature: 320 °C
       
    Detector Temperature: 350 °C
       
    Column Oven Temperature: 270 °C Isothermal
       
    Carrier Gas: Adjustable to obtain suitable component resolution and analysis tune. (nominally 30 mL/min for Packed columns and 5 mL/min for Capillary columns Helium flow)

 

NOTE: The chromatographic conditions are to be optimized for the best separation and sensitivity for the sample being analyzed. Refer to current chromatographic conditions in the GC Reference for the particular sample being analyzed.

 

6.4.4 Using an ALS, equipped with a 10 µL syringe, inject 1 µL of Calibration standard into the gas chromatograph and allow the Data collection software operate until the completion of the scan.

 

6.4.5 Clean the syringe after injecting each standard according to the following procedures:

 

6.4.5.1 Allow for ALS systems to automatically clean syringes after injection. Verify that all solvent vials are full and waste vials are empty for ALS systems.

 

6.4.6 Determine the Caprolactam peak of the scan using the appropriate GC Reference and compare the results of the scan to the known value of the standard.

 

6.4.7 Follow the standard department procedure for the method calibration of the gas chromatograph, as stated in QADP-0008. If the first injection falls outside of ± 1% of the known value of the internal standard, two successive injections of the standard must be obtained which agree within ± 1% of the known values(s) of the internal standard before the method is considered to be calibrated. The QA check sample result must be within ± 2% of the expected prepared concentration value.

 

6.5 Sample Analysis
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Confidential Treatment Requested by AdvanSix Inc.

 

6.5.1 Following the manufacturer’s instructions, configure the CLASS-VP Data collection system to report the sample results by Internal Standard calibration using the method program defined for this analysis. Refer to the current method settings in the GC Reference. Enter the sample information and preparation weights into the sequence table.

 

6.5.2 Using an ALS, equipped with a 10 µL syringe, inject 1 µL of each sample into the gas chromatograph operating as described in Step 6.4.3 and allow the Data collection software operate until the completion of the scan.

 

6.5.3 After injecting the sample, clean the syringe according to the steps described in 6.4.5.

 

6.5.4 Using the CLASS-VP Software (as described in Step 6.4.2) determine the Caprolactam concentration in units of percent.

 

6.6           Calculations

 

6.6.1 Report the Caprolactam concentration to the nearest 0.1%. Results are to be reported to the nearest 0.1% with values of less than 0.1% reported as <0.1%.

 

6.6.1.1 Report results directly from the data report from the Class-VP software.
6

Confidential Treatment Requested by AdvanSix Inc.

 

Attachment II

 

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[ * * * ]       $ [ * * * ]       $ [ * * * ]       $ [ * * * ]
                               
Shipping Cost     [ * * * ] $ [ * * * ]     [ * * * ] $ [ * * * ]     [ * * * ] $ [ * * * ]
                               
                               
[ * * * ]     [ * * * ] $ [ * * * ]     [ * * * ] $ [ * * * ]     [ * * * ] $ [ * * * ]
                               
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[ * * * ]                 $         $  
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Per Pound of [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
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Per Pound of [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
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Per Pound of [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
                               
                               
      Summary         Summary         Summary    
  Total Cost Increase      $           [ * * * ]          $             [ * * * ]          $           [ * * * ]    
  Total [ * * * ] Pounds       [ * * * ]         [ * * * ]         [ * * * ]    
  [ * * * ] on [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
  [ * * * ] on [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
  [ * * * ] on [ * * * ]     [ * * * ]         [ * * * ]         [ * * * ]    
                             .  
                               
                               
                 Quarter Weighted Average          
                [ * * * ]              
 

Exhibit 10.9

April 19, 2016

Ms. Erin Kane
115 Tabor Road
Morris Plains, New Jersey

Dear Erin:

I am pleased to confirm our offer to you to become the President and Chief Executive Officer of SPINCO (the “Company”), a wholly owned subsidiary of Honeywell International Inc. (“Honeywell”) that may be spun off as an independent public company on or about November 15, 2016 (the actual spin off date is hereinafter referred to as the “Separation Date”). This offer is contingent on a successful completion of the spin. The Company will initially be based in Morris Plains, New Jersey. Until the Separation Date, you will report directly to Darius Adamczyk. The effective date of your promotion will be the Separation Date (“Effective Date”), subject to the terms and conditions of this letter agreement (“Agreement”).

In connection with your new role, you will be entitled to the following compensation and benefits package:

COMPENSATION

Base Salary : As of the Effective Date, your annual base salary will be increased to $600,000. After the Separation Date, your base salary shall adjusted by the Company’s Board of Directors from time to time.

Annual Incentive Compensation From the Company : Your initial target incentive compensation opportunity with the Company will be 100% of your annual cash base salary earnings during the year. For 2016, you will be eligible for an incentive compensation award from the Company for post-Separation Date earnings. Company incentive compensation awards are paid in the first quarter of the following year.

Annual Incentive Compensation From Honeywell : You will receive a 2016 incentive compensation award from Honeywell equal to 40% of your cash base salary earnings up through the Separation Date. Honeywell incentive compensation awards are paid in the first quarter of the following year.

Honeywell Growth Plan Units: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will receive the second full installment of your award for the 2014-2015 Growth Plan performance cycle, payable as at the time awards are paid to other Growth Plan participants, anticipated to be in the first quarter of 2017. You will forfeit your 2016-2017 Growth Plan performance award.

    Page 1 of 3
 

Honeywell Stock Options: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will be treated as being employed by Honeywell through March 1, 2017 solely for purposes of determining your vested rights to any Honeywell stock options. Any Honeywell stock options that have not vested as of March 1, 2017 shall be forfeited. Moreover, you will have three (3) years from the Separation Date to exercise any vested Honeywell stock options.

Honeywell Restricted Stock Units: Notwithstanding anything in the Stock Incentive Plan and governing award agreements to the contrary, you shall be treated as being employed by the Company through July 31, 2017 solely for purposes of determining your vested rights to any Honeywell restricted stock units. Any Honeywell restricted stock units that have not vested as of July 31, 2017 shall be forfeited.

Sign-On Long-Term Incentive Awards From the Company: You will be granted $6,683,587 worth of Company restricted stock units as of the Effective Date. These restricted stock units will vest three years from the Effective Date, assuming you are still employed by the Company as of such date. This sign-on grant is made up of $5,625,000 in a “founder’s grant” plus $1,058,587 to replace forfeited Honeywell equity and growth plan units.

Annual Long-Term Incentive Awards From the Company: You will be eligible for annual equity awards with an initial target of 375% of your Base Salary. The size and mix of future awards will be determined by the Company’s Board of Directors. The terms of all long-term incentive awards will be governed by the terms of the applicable stock plan and the relevant award agreements.

OTHER EXECUTIVE BENEFITS

You will also be entitled to the following Executive Benefits:

· Welfare and Retirement : As provided to other employees of the Company (to be determined).
· Vacation : As provided to other senior executives of the Company (to be determined).
· Excess Liability Insurance : As provided to other senior executives of the Company (to be determined).
· Executive Severance : 12 months of base salary continuation (based on plan provisions to be determined).

STOCK OWNERSHIP GUIDELINES FOR COMPANY OFFICERS

As an Executive Officer of the Company, you will be required to hold a multiple of your annual base salary in Company shares (to be determined by the Company) in accordance with the Company’s Stock Ownership Guidelines.

    Page 2 of 3
 

INTELLECTUAL PROPERTY AND NON-COMPETITION AGREEMENTS

As a condition of this employment offer, you will be required to execute, in a form substantially similar to the corresponding Honeywell agreements, (i) the Company’s intellectual property agreement, and (ii) the Company’s noncompete agreement for senior executives” (“Noncompete Agreement”), prior to the Separation Date.

ACCEPTANCE OF OFFER

Please indicate your acceptance of this offer by signing this letter in the space provided and returning it to me.

If you have any questions or need any further information about our offer, please contact me directly.

Congratulations,

Mark James
Honeywell International Inc.
Senior Vice President
Human Resources, Procurement and Communications

Read and Accepted:

/s/ Erin Kane   April 19, 2016
ERIN KANE   Date

All businesses experience changing conditions. Accordingly, we reserve the right to change work assignments, reporting relationshi ps and staffing levels to meet business needs, and your employment with Honeywell will be on an “at will” basis. This means that there is no guarantee of employment for any specific period, and either you, the Company or Honeywell (as applicable) may terminate your employment at any time.

 

    Page 3 of 3

Exhibit 10.10

 

May 16, 2016

 

Mr. Jonathan Bellamy
1944 E Sky Harbor Circle
Phoenix, AZ 85034

 

Dear Jon:

 

I am pleased to confirm our offer to you to become the Chief Human Resources Officer of AdvanSix (the “Company”), a wholly owned subsidiary of Honeywell International Inc. (“Honeywell”) that may be spun off as an independent public company on or about November 15, 2016 (the actual spin off date is hereinafter referred to as the “Separation Date). This offer is contingent on a successful completion of the spin. The Company will initially be based in or near Morris Plains, New Jersey. You will continue to serve as D&S VP of HR until the earlier of the Separation Date and the appointment of your successor in D&S. During this interim period you will also support Erin Kane in planning for the AdvanSix separation. Upon your succession into the new role you will report to Erin Kane. The effective date of your promotion will be the Separation Date (“Effective Date”), subject to the terms and conditions of this letter agreement (“Agreement”).

 

In connection with your new role, you will be entitled to the following compensation and benefits package:

 

COMPENSATION

 

Base Salary: As of the Effective Date, your annual base salary will be increased to $330,000. After the Separation Date, your base salary shall adjusted by the Company’s Board of Directors from time to time.

 

Annual Incentive Compensation From the Company: Your initial target incentive compensation opportunity with the Company will be 60% of your annual cash base salary earnings during the year. For 2016, you will be eligible for an incentive compensation award from the Company for post-Separation Date earnings. Company incentive compensation awards are paid in the first quarter of the following year.

 

Annual Incentive Compensation From Honeywell: You will receive a 2016 incentive compensation award from Honeywell equal to 35% of your cash base salary earnings up through the Separation Date. Honeywell incentive compensation awards are paid in the first quarter of the following year.

 

Honeywell Growth Plan Units: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will receive the second full installment of your award for the 2014-2015 Growth Plan performance cycle, payable as at the time awards are paid to other Growth Plan participants, anticipated to be in the first quarter of 2017. You will forfeit your 2016-2017 Growth Plan performance award.

Page 1 of 3
 

Honeywell Stock Options: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will be treated as being employed by Honeywell through March 1, 2017 solely for purposes of determining your vested rights to any Honeywell stock options. Any Honeywell stock options that have not vested as of March 1, 2017 shall be forfeited. Moreover, you will have three (3) years from the Separation Date to exercise any vested Honeywell stock options.

 

Honeywell Restricted Stock Units: Notwithstanding anything in the Stock Incentive Plan and governing award agreements to the contrary, you shall be treated as being employed by the Company through July 31, 2017 solely for purposes of determining your vested rights to any Honeywell restricted stock units. Any Honeywell restricted stock units that have not vested as of July 31, 2017 shall be forfeited.

 

Sign-On Long-Term Incentive Awards From the Company: You will be granted $925,000 worth of Company restricted stock units as of the Effective Date. These restricted stock units will vest three years from the Effective Date, assuming you are still employed by the Company as of such date. This sign-on grant is made up of $660,000 in a “founder’s grant” plus $265,000 to replace forfeited Honeywell equity and growth plan units.

 

Annual Long-Term Incentive Awards From the Company: You will be eligible for annual equity awards with an initial target of 100% of your Base Salary. The size and mix of future awards will be determined by the Company’s Board of Directors. The terms of all long-term incentive awards will be governed by the terms of the applicable stock plan and the relevant award agreements.

 

OTHER EXECUTIVE BENEFITS

 

You will also be entitled to the following Executive Benefits:

 

· Welfare and Retirement: As provided to other employees of the Company (to be determined).

 

· Vacation: As provided to other senior executives of the Company (to be determined).

 

· Excess Liability Insurance: As provided to other senior executives of the Company (to be determined).

 

· Executive Severance: 12 months of base salary continuation (based on plan provisions to be determined).

 

STOCK OWNERSHIP GUIDELINES FOR COMPANY OFFICERS

 

As an Executive Officer of the Company, you will be required to hold a multiple of your annual base salary in Company shares (to be determined by the Company) in accordance with the Company’s Stock Ownership Guidelines.

Page 2 of 3
 

INTELLECTUAL PROPERTY AND NON-COMPETITION AGREEMENTS

 

As a condition of this employment offer, you will be required to execute, in a form substantially similar to the corresponding Honeywell agreements, (i) the Company’s intellectual property agreement, and (ii) the Company’s noncompete agreement for senior executives” (“Noncompete Agreement”), prior to the Separation Date.

 

ACCEPTANCE OF OFFER

 

Please indicate your acceptance of this offer by signing this letter in the space provided and returning it to me.

 

If you have any questions or need any further information about our offer, please contact me directly.

 

Congratulations,

 

/s/ Erin Kane
Erin Kane
AdvanSix
President and Chief Executive Officer

 

Cc: Mark James

 

Read and Accepted:    
     
/s/ Jonathan Bellamy   17 May 2016
Jonathan Bellamy   Date

 

All businesses experience changing conditions. Accordingly, we reserve the right to change work assignments, reporting relationships and staffing levels to meet business needs, and your employment with Honeywell will be on an at will basis. This means that there is no guarantee of employment for any specific period, and either you, the Company or Honeyweli (as applicable) may terminate your employment at any time.

Page 3 of 3

Exhibit 10.11

 

May 13, 2016

 

Mr. Michael Preston
50 E Algonquin Rd
Des Plaines, IL 60017-5016

 

Dear Michael:

 

I am pleased to confirm our offer to you to become the Chief Financial Officer of AdvanSix (the “Company”), a wholly owned subsidiary of Honeywell International Inc. (“Honeywell”) that may be spun off as an independent public company on or about November 15, 2016 (the actual spin off date is hereinafter referred to as the “Separation Date”). This offer is contingent on a successful completion of the spin. The Company will initially be based in or near Morris Plains, New jersey. You will continue to serve as CFO of UOP until the earlier of the Separation Date and the appointment of your successor in UOP. During this interim period you will also support Erin Kane in planning for the AdvanSix separation. Upon your succession into the new role you will report to Erin Kane. The effective date of your promotion will be the Separation Date (“Effective Date”), subject to the terms and conditions of this letter agreement (“Agreement”).

 

In connection with your new role, you will be entitled to the following compensation and benefits package:

 

COMPENSATION

 

Base Salary: As of the Effective Date, your annual base salary will be increased to $400,000. After the Separation Date, your base salary shall adjusted by the Company’s Board of Directors from time to time.

 

Annual Incentive Compensation From the Company: Your initial target incentive compensation opportunity with the Company will be 70% of your annual cash base salary earnings during the year. For 2016, you will be eligible for an incentive compensation award from the Company for post-Separation Date earnings. Company incentive compensation awards are paid in the first quarter of the following year.

 

Annual Incentive Compensation From Honeywell: You will receive a 2016 incentive compensation award from Honeywell equal to 35% of your cash base salary earnings up through the Separation Date. Honeywell incentive compensation awards are paid in the first quarter of the following year.

 

Honeywell Growth Plan Units: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will receive the second full installment of your award for the 2014-2015 Growth Plan performance cycle, payable as at the time awards are paid to other Growth Plan participants, anticipated to be in the first quarter of 2017. You will forfeit your 2016-2017 Growth Plan performance award.

Page 1 of 3
 

Honeywell Stock Options: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan’) and governing award agreements to the contrary, you will be treated as being employed by Honeywell through March 1, 2017 solely for purposes of determining your vested rights to any Honeywell stock options. An Honeywell stock options that have not vested as of March 1, 2017 shall be forfeited. Moreover, you will have three (3) years from the Separation Date to exercise any vested Honeywell stock options.

 

Honeywell Restricted Stock Units: Notwithstanding anything in the Stock Incentive Plan and governing award agreements to the contrary, you shall be treated as being employed by the Company through July 31, 2017 solely for purposes of determining your vested rights to any Honeywell restricted stock units. Any Honeywell restricted stock units that have not vested as of July 31, 2017 shall be forfeited.

 

Sign-On Long-Term Incentive Awards From the Company: You will be granted $2,281,000 worth of Company restricted stock units as of the Effective Date. These restricted stock units will vest three years from the Effective Date, assuming you are still employed by the Company as of such date. This sign-on grant is made up of $1,200,000 in a “founder’s grant” plus $1,081,000 to replace forfeited Honeywell equity and growth plan units.

 

Annual Long Term Incentive Awards From the Company: You will be eligible for annual equity awards with an initial target of 150% of your Base Salary. The size and mix of future awards will be determined by the Company’s Board of Directors. The terms of all long-term incentive awards will be governed by the terms of the applicable stock plan and the relevant award agreements.

 

OTHER EXECUTIVE BENEFITS

 

You will also be entitled to the following Executive Benefits:

 

· Welfare and Retirement: As provided to other employees of the Company (to be determined).

 

· Vacation: As provided to other senior executives of the Company (to be determined).

 

· Excess Liability Insurance: As provided to other senior executives of the Company (to be determined).

 

· Executive Severance: 12 months of base salary continuation (based on plan provisions to be determined).

 

STOCK OWNERSHIP GUIDELINES FOR COMPANY OFFICERS

 

As an Executive Officer of the Company, you will be required to hold a multiple of your annual base salary in Company shares (to be determined by the Company) in accordance with the Company’s Stock Ownership Guidelines.

Page 2 of 3
 

INTELLECTUAL PROPERTY AND NON-COMPETITION AGREEMENTS

 

As a condition of this employment offer, you will be required to execute, in a form substantially similar to the corresponding Honeywell agreements, (i) the Company’s intellectual property agreement, and (ii) the Company’s noncompete agreement for senior executives” (“Noncompete Agreement”), prior to the Separation Date.

 

ACCEPTANCE OF OFFER

 

Please indicate your acceptance of this offer by signing this letter in the space provided and returning it to me.

 

If you have any questions or need any further information about our offer, please contact me directly.

 

Congratulations,

 

/s/ Erin Kane
Erin Kane
AdvanSix

 

President and Chief Executive Officer

 

Cc: Mark James; Tom Szlosek

 

Read and Accepted:    
     
/s/ Michael Preston   5/16/16
Michael Preston   Date

 

All businesses experience changing conditions. Accordingly, we reserve the right to change work assignments, reporting relationships and staffing levels to meet business needs, and your employment with Honeywell will be on an at will basis. This means that there is no guarantee of employment for any specific period, and either you, the Company or Honeyweli (as applicable) may terminate your employment at any time.

Page 3 of 3

Exhibit 10.12

 

May 25, 2016

 

Mr. Hans Quitmeyer
1985 Douglas Drive
North Golden Valley, MN 55422

 

Dear Hans:

 

I am pleased to confirm our offer to you to become the General Counsel of AdvanSix (the “Company”), a wholly owned subsidiary of Honeywell International Inc. (“Honeywell”) that may be spun off as an independent public company on or about November 15, 2016 (the actual spin off date is hereinafter referred to as the “Separation Date”). This offer is contingent on a successful completion of the spin. The Company will initially be based in or near Morris Plains, New Jersey. You will continue to serve as VP GC of ACS until the earlier of the Separation Date and the appointment of your successor in ACS. During this interim period you will also support Erin Kane in planning for the AdvanSix separation. Upon your succession into the new role you will report to Erin Kane. The effective date of your promotion will be the Separation Date (“Effective Date”), subject to the terms and conditions of this letter agreement (“Agreement”).

 

In connection with your new role, you will be entitled to the following compensation and benefits package:

 

COMPENSATION

 

Base Salary: As of the Effective Date, your annual base salary will be increased to $500,000. After the Separation Date, your base salary shall adjusted by the Company’s Board of Directors from time to time.

 

Annual Incentive Compensation From the Company: Your initial target incentive compensation opportunity with the Company will be 75% of your annual cash base salary earnings during the year. For 2016, you will be eligible for an incentive compensation award from the Company for post-Separation Date earnings. Company incentive compensation awards are paid in the first quarter of the following year.

 

Annual Incentive Compensation From Honeywell: You will receive a 2016 incentive compensation award from Honeywell equal to 50% of your cash base salary earnings up through the Separation Date. Honeywell incentive compensation awards are paid in the first quarter of the following year.

 

Honeywell Growth Plan Units: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will receive the second full installment of your award for the 2014-2015 Growth Plan performance cycle, payable as at the time awards are paid to

Page 1 of 3
 

other Growth Plan participants, anticipated to be in the first quarter of 2017. You will forfeit your 2016-2017 Growth Plan performance award.

 

Honeywell Stock Options: Notwithstanding anything in the Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the “Stock Incentive Plan”) and governing award agreements to the contrary, you will be treated as being employed by Honeywell through March 1, 2017 solely for purposes of determining your vested rights to any Honeywell stock options. Any Honeywell stock options that have not vested as of March 1, 2017 shall be forfeited. Moreover, you will have three (3) years from the Separation Date to exercise any vested Honeywell stock options.

 

Honeywell Restricted Stock Units: Notwithstanding anything in the Stock Incentive Plan and governing award agreements to the contrary, you shall be treated as being employed by the Company through July 31, 2017 solely for purposes of determining your vested rights to any Honeywell restricted stock units. Any Honeywell restricted stock units that have not vested as of July 31, 2017 shall be forfeited.

 

Sign-On Long-Term Incentive Awards From the Company: You will be granted $2,387,000 worth of Company restricted stock units as of the Effective Date. These restricted stock units will vest three years from the Effective Date, assuming you are still employed by the Company as of such date. This sign-on grant is made up of $1,500,000 in a “founder’s grant” plus $887,000 to replace forfeited Honeywell equity and growth plan units.

 

Annual Long-Term Incentive Awards From the Company: You will be eligible for annual equity awards with an initial target of 150 % of your Base Salary. The size and mix of future awards will be determined by the Company’s Board of Directors. The terms of all long-term incentive awards will be governed by the terms of the applicable stock plan and the relevant award agreements.

 

OTHER EXECUTIVE BENEFITS

 

You will also be entitled to the following Executive Benefits:

 

· Welfare and Retirement: As provided to other employees of the Company (to be determined).

 

· Vacation: As provided to other senior executives of the Company (to be determined).

 

· Excess Liability Insurance: As provided to other senior executives of the Company (to be determined).

 

· Executive Severance: 12 months of base salary continuation (based on plan provisions to be determined).
Page 2 of 3
 

STOCK OWNERSHIP GUIDELINES FOR COMPANY OFFICERS

 

As an Executive Officer of the Company, you will be required to hold a multiple of your annual base salary in Company shares (to be determined by the Company) in accordance with the Company’s Stock Ownership Guidelines.

 

INTELLECTUAL PROPERTY AND NON-COMPETITION AGREEMENTS

 

As a condition of this employment offer, you will be required to execute, in a form substantially similar to the corresponding Honeywell agreements, (i) the Company’s intellectual property agreement, and (ii) the Company’s noncompete agreement for senior executives” (“Noncompete Agreement”), prior to the Separation Date.

 

ACCEPTANCE OF OFFER

 

Please indicate your acceptance of this offer by signing this letter in the space provided and returning it to me.

 

If you have any questions or need any further information about our offer, please contact me directly.

 

Congratulations,

 

/s/ Erin Kane
Erin Kane
AdvanSix

President and Chief Executive Officer

 

Cc: Mark James; Kate Adams

 

Read and Accepted:    
     
/s/ John M. (“Hans”) Quitmeyer   31 May 2016
Hans Quitmeyer   Date

 

All businesses experience changing conditions. Accordingly, we reserve the right to change work assignments, reporting relationships and staffing levels to meet business needs, and your employment with Honeywell will be on an “at will” basis. This means that there is no guarantee of employment for any specific period, and either you, the Company or Honeywell (as applicable) may terminate your employment at any time.

Page 3 of 3

Exhibit 99.1

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SUBJECT TO COMPLETION, DATED JULY 25, 2016

INFORMATION STATEMENT

AdvanSix Inc.

115 Tabor Road
Morris Plains, NJ 07950

Common Stock
(par value $0.01)

We are sending you this Information Statement in connection with the spin-off by Honeywell International Inc., or “Honeywell,” of its wholly owned subsidiary, AdvanSix Inc., or “AdvanSix.” To effect the spin-off, Honeywell will distribute all of the shares of AdvanSix common stock on a pro rata basis to the holders of Honeywell common stock. We expect that the distribution of AdvanSix common stock will be tax-free to holders of Honeywell common stock for U.S. Federal income tax purposes, except for cash that stockholders receive in lieu of fractional shares.

If you are a record holder of Honeywell common stock as of the close of business on   , which is the record date for the distribution, you will be entitled to receive   shares of AdvanSix common stock for every   shares of Honeywell common stock you hold on that date. Honeywell will distribute the shares of AdvanSix common stock in book-entry form, which means that we will not issue physical stock certificates. The distribution agent will not distribute any fractional shares of AdvanSix common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata to each holder (net of any required withholding for taxes applicable to each holder) who would otherwise have been entitled to receive a fractional share in the distribution.

The distribution will be effective as of   p.m., New York City time, on   . Immediately after the distribution becomes effective, AdvanSix will be an independent, publicly traded company.

Honeywell’s stockholders are not required to vote on or take any other action to approve the spin-off. We are not asking you for a proxy, and request that you do not send us a proxy. Honeywell stockholders will not be required to pay any consideration for the shares of AdvanSix common stock they receive in the spin-off, and they will not be required to surrender or exchange their shares of Honeywell common stock or take any other action in connection with the spin-off.

Honeywell currently owns all of the outstanding shares of AdvanSix common stock. Accordingly, no trading market for AdvanSix common stock currently exists. We expect, however, that a limited trading market for AdvanSix common stock, commonly known as a “when-issued” trading market, will develop as early as two trading days prior to the record date for the distribution, and we expect “regular-way” trading of AdvanSix common stock will begin on the first trading day after the distribution date. We intend to list AdvanSix common stock on the New York Stock Exchange under the symbol “ASIX.”

In reviewing this Information Statement, you should carefully consider the matters described in the section entitled “Risk Factors” beginning on page 6 of this Information Statement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.

This Information Statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this Information Statement is   .


 

TABLE OF CONTENTS

 

 

 

 

 

Page

SUMMARY

 

 

 

1

 

RISK FACTORS

 

 

 

6

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

 

 

19

 

THE SPIN-OFF

 

 

 

20

 

DIVIDEND POLICY

 

 

 

28

 

CAPITALIZATION

 

 

 

29

 

SELECTED HISTORICAL COMBINED FINANCIAL DATA

 

 

 

30

 

UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

 

 

 

31

 

BUSINESS

 

 

 

37

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

 

47

 

MANAGEMENT

 

 

 

57

 

COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

61

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

 

69

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

 

 

70

 

DESCRIPTION OF OUR CAPITAL STOCK

 

 

 

75

 

WHERE YOU CAN FIND MORE INFORMATION

 

 

 

79

 

INDEX TO COMBINED FINANCIAL STATEMENTS

 

 

 

F-1

 

i


 

SUMMARY

In this Information Statement, unless the context otherwise requires:

 

 

“AdvanSix,” “we,” “our” and “us” refer to AdvanSix Inc. and its consolidated subsidiaries after giving effect to the Spin-Off, and

 

 

“Honeywell” refers to Honeywell International Inc. and its consolidated subsidiaries.

The transaction in which Honeywell will distribute to its stockholders all of the shares of our common stock is referred to in this Information Statement as the “Distribution.” The transaction in which we will be separated from Honeywell is sometimes referred to in this Information Statement as the “Spin-Off.” Prior to Honeywell’s distribution of the shares of our common stock to its stockholders, Honeywell will undertake a series of internal transactions, following which AdvanSix will hold, directly or through its subsidiaries, the businesses constituting Honeywell’s Resins and Chemicals business, and related operations, which we refer to as the “AdvanSix Business.” We refer to this series of internal transactions, which is described in more detail under “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement,” as the “Internal Transactions.”

Summary

We are a leading manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce engineered plastics, fibers, filaments and films that, in turn, are used in such end-products as automotive and electronic components, carpets, sports apparel, fishing nets and food and industrial packaging. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell caprolactam, ammonium sulfate fertilizer, acetone and other intermediate chemicals, all of which are produced as part of the Nylon 6 resin manufacturing process.

Our integrated manufacturing process, scale and the quantity and range of our co-products make us one of the most efficient manufacturers in our industry. We consistently focus on and invest in improving production yields from our various manufacturing processes to build on our leading cost position. Our global logistics infrastructure supports our commercial mission by ensuring a reliable intraplant supply chain and consistent and timely delivery to our customers while maximizing our distribution resources and our operating efficiency. In addition, we strive to understand the product applications and end-markets into which our products are sold, which helps us upgrade the quality, chemical properties or packaging of our products in ways to attract price premiums and greater demand.

All of our manufacturing plants are located in the United States. We serve approximately 500 customers globally located in more than 40 countries. For the years ended December 31, 2015, 2014 and 2013, we had sales of $1,329.4 million, $1,790.4 million and $1,766.6 million, respectively. For the three months ended March 31, 2016 and 2015, we had sales of $299.8 million and $310.2 million, respectively.

On May 12, 2016, Honeywell announced plans for the complete legal and structural separation of the AdvanSix Business from Honeywell. Honeywell has regularly reviewed its businesses to confirm that Honeywell’s resources are being put to use in a manner that is in the best interests of Honeywell and its stockholders. In reaching the decision to pursue the Spin-Off, Honeywell considered a range of potential structural alternatives for the AdvanSix Business, including a sale of the AdvanSix Business, and concluded that the Spin-Off is the most attractive alternative for enhancing stockholder value.

Following the Spin-Off, we will have a more focused business that will be better positioned to invest more in growth opportunities and execute our strategic plans. The Spin-Off will allow our management team to devote its focused time and attention to the corporate strategies and policies that are based specifically on the needs of our business. We plan to create incentives for our management and employees that are more closely tied to business performance and our stockholders’ expectations, which will help us attract and retain highly qualified personnel.

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Additionally, we believe the Spin-Off will help align our shareholder base with the characteristics and risk profile of our business.

Following the Spin-Off, we expect our common stock to trade under the ticker symbol “ASIX” on the New York Stock Exchange.

Questions and Answers about the Spin-Off

The following provides only a summary of the terms of the Spin-Off. You should read the section entitled “The Spin-Off” below in this Information Statement for a more detailed description of the matters described below.

Q:   What is AdvanSix Inc.?

 

A:

  We are a leading manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce engineered plastics, fibers, filaments and films that, in turn, are used in such end-products as automotive and electronic components, carpets, sports apparel, fishing nets and food and industrial packaging. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell other products, such as caprolactam, ammonium sulfate, phenol and acetone, all of which are produced as part of our Nylon 6 resin manufacturing process.

Our competitive strengths include the following:

 

 

Largest single-site producer of caprolactam;

 

 

Low-cost position driven by favorable geographical location, integrated manufacturing footprint and high utilization rates;

 

 

Global reach of our sales and marketing capabilities;

 

 

Technical know-how, customer intimacy and application development capabilities; and

 

 

Diverse revenue sources from the sale of fertilizer, acetone and other co-products.

Our business strategies include the following:

 

 

Build on our low-cost leadership position;

 

 

Leverage our research and development (“R&D”) investments and applications expertise;

 

 

Make selective investments to produce higher value products;

 

 

Pursue a highly selective acquisition strategy; and

 

 

Use toll manufacturers to produce higher margin AdvanSix-developed specialty products.

Q:   What is the Spin-Off?

 

A:

  The Spin-Off is the method by which we will separate from Honeywell. In the Spin-Off, Honeywell will distribute to its stockholders all the outstanding shares of our common stock. Following the Spin-Off, we will be an independent, publicly traded company, and Honeywell will not retain any ownership interest in us.

Q:   Who will serve as the executive officers and directors of AdvanSix following the Spin-Off?

 

A:

 

Erin N. Kane, the current vice president and general manager of Honeywell’s Resins and Chemicals business, is expected to serve as the Chief Executive Officer of AdvanSix. Michael Preston, the current chief financial officer of Honeywell UOP, is expected to serve as the Senior Vice President and Chief Financial Officer of AdvanSix. John M. Quitmeyer, the current vice president and general counsel of Honeywell’s Automation and Control Solutions business, is expected to serve as the Senior Vice President, General Counsel and Corporate Secretary of AdvanSix. Jonathan Bellamy, the current vice president of human resources of the Defense and Space business of Honeywell’s Aerospace division, is expected to serve as the Chief Human

2


 

 

 

 

Resources Officer of AdvanSix. Messrs. Preston, Quitmeyer and Bellamy have not previously provided services to the AdvanSix Business. See “Management” for more information on the executive officers of AdvanSix following the Spin-Off.

     

We currently expect that, upon completion of the Spin-Off, our Board will consist of seven members, including Erin N. Kane and Paul E. Huck. We expect a majority of our Board to satisfy the independence standards established by the Sarbanes-Oxley Act of 2002 and the applicable rules of the Securities Exchange Commission and the New York Stock Exchange. Additional information regarding our Board will be provided in subsequent amendments to this Information Statement. See “Management—Our Board of Directors Following the Spin-Off and Director Independence” for more information on our Board following the Spin-Off.

Q:   Will the number of Honeywell shares I own change as a result of the Spin-Off?

 

A:

  No, the number of shares of Honeywell common stock you own will not change as a result of the Spin-Off.

Q:   What will I receive in the Spin-Off in respect of my Honeywell common stock?

 

A:

  As a holder of Honeywell common stock, you will receive a dividend of   shares of our common stock for every   shares of Honeywell common stock you hold on the Record Date (as defined below). The distribution agent will distribute only whole shares of our common stock in the Spin-Off. See “The Spin-Off—Treatment of Fractional Shares” for more information on the treatment of the fractional share you may be entitled to receive in the Distribution. Your proportionate interest in Honeywell will not change as a result of the Spin-Off. For a more detailed description, see “The Spin-Off.”

Q:   What is being distributed in the Spin-Off?

 

A:

  Honeywell will distribute approximately   shares of our common stock in the Spin-Off, based on the approximately   shares of Honeywell common stock outstanding as of   . The actual number of shares of our common stock that Honeywell will distribute will depend on the total number of shares of Honeywell common stock outstanding on the Record Date. The shares of our common stock that Honeywell distributes will constitute all of the issued and outstanding shares of our common stock immediately prior to the Distribution. For more information on the shares being distributed in the Spin-Off, see “Description of Our Capital Stock—Common Stock.”

Q:   What is the record date for the Distribution?

 

A:

  Honeywell will determine record ownership as of the close of business on   , which we refer to as the “Record Date.”

Q:   When will the Distribution occur?

 

A:

  The Distribution will be effective as of   p.m., New York City time, on   , which we refer to as the “Distribution Date.” On or shortly after the Distribution Date, the whole shares of our common stock will be credited in book-entry accounts for Honeywell stockholders entitled to receive the shares in the Distribution. See “—How will Honeywell distribute shares of our common stock?” for more information on how to access your book-entry account or your bank, brokerage or other account holding our common stock you receive in the Distribution on and following the Distribution Date.

Q:   Do I have a choice whether to participate in the Distribution?

 

A:

 

All holders of Honeywell’s common stock as of the Record Date will participate in the Distribution. You are not required to take any action in order to participate, but we urge you

3


 

 

 

  to read this Information Statement carefully. Holders of Honeywell common stock on the Record Date will not need to pay any cash or deliver any other consideration, including any shares of Honeywell common stock, in order to receive shares of our common stock in the Distribution. In addition, no stockholder approval of the Distribution is required. We are not asking you for a vote and request that you do not send us a proxy card.

Q:   Is the completion of the Spin-Off subject to the satisfaction or waiver of any conditions?

 

A:

 

Yes, the completion of the Spin-Off is subject to the satisfaction, or the Honeywell Board’s waiver, of the following conditions:

 

 

the Honeywell Board shall have approved the Internal Transactions and Distribution and not withdrawn such approval, and shall have declared the dividend of our common stock to Honeywell stockholders;

 

 

the ancillary agreements contemplated by the Separation and Distribution Agreement shall have been executed by each party to those agreements;

 

 

the SEC shall have declared effective our Registration Statement on Form 10, of which this Information Statement is a part, under the Exchange Act, and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the Securities and Exchange Commission;

 

 

our common stock shall have been accepted for listing on the New York Stock Exchange or another national securities exchange approved by Honeywell;

 

 

Honeywell shall have received the written opinion of Cravath, Swaine & Moore LLP, which shall remain in full force and effect that, subject to the accuracy of and compliance with certain representations, warranties and covenants, the Distribution should qualify for nonrecognition of gain and loss under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”);

 

 

the Internal Transactions (as described in “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”) shall have been completed;

 

 

no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect, and no other event outside the control of Honeywell shall have occurred or failed to occur that prevents the consummation of the Distribution;

 

 

no other events or developments shall have occurred prior to the Distribution Date that, in the judgment of the Honeywell Board, would result in the Distribution having a material adverse effect on Honeywell or its stockholders;

 

 

prior to the Distribution Date, this Information Statement shall have been mailed to the holders of Honeywell common stock as of the Record Date;

 

 

Honeywell shall have duly elected the individuals to be listed as members of our post-Distribution Board in this Information Statement; and

 

 

immediately prior to the Distribution Date, our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, each in substantially the form filed as an exhibit to the Registration Statement on Form 10 of which this Information Statement is a part, shall be in effect.

     

Any of the above conditions may be waived by the Honeywell Board to the extent such waiver is permitted by law. In addition, Honeywell may at any time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution. See “The Spin-Off—Conditions to the Spin-Off” for more information.

4


 

Q:   How will Honeywell distribute shares of our common stock?

 

A:

  On the Distribution Date, Honeywell will release the shares of our common stock to the distribution agent to distribute to Honeywell stockholders.

Q:   What are the U.S. Federal income tax consequences to me of the Distribution?

 

A:

  For U.S. Federal income tax purposes, no gain or loss should be recognized by, or be includible in the income of, a U.S. Holder (as defined in “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off”) as a result of the Distribution, except with respect to any cash received by Honeywell stockholders in lieu of fractional shares. After the Distribution, Honeywell stockholders should allocate their basis in their Honeywell common stock held immediately before the Distribution between their Honeywell common stock and our common stock in proportion to their relative fair market values on the date of Distribution.

See “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the potential tax consequences to you of the Spin-Off.

Q:   Does AdvanSix intend to pay cash dividends?

 

A:

 

Once the Spin-Off is effective, we will be evaluating whether to pay cash dividends to our stockholders. The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Among the items we will consider when establishing a dividend policy will be the capital intensive nature of our business and opportunities to retain future earnings for use in the operation of our business and to fund future growth. Additionally, the terms of the indebtedness we intend to incur in connection with the Spin-Off may limit our ability to pay cash dividends. See “Dividend Policy” for more information.

Q:   Will AdvanSix incur any debt prior to or at the time of the Distribution?

 

A:

 

In connection with the Spin-Off, we intend to incur indebtedness in the aggregate principal amount of approximately $         million in the form of term loans, of which approximately $          million in net proceeds will be distributed to Honeywell prior to the consummation of the Spin-Off. We also intend to enter into a revolving facility to be available for our working capital and other cash needs. Additional information regarding our indebtedness following the Spin-Off will be provided in subsequent amendments to this Information Statement.

Q:   How will our common stock trade?

 

A:

 

Currently, there is no public market for our common stock. We intend to list our common stock on the New York Stock Exchange under the symbol “ASIX.”

We anticipate that trading in our common stock will begin on a “when-issued” basis as early as two trading days prior to the Record Date for the Distribution and will continue up to and including the Distribution Date. “When-issued” trading in the context of a spin-off refers to a sale or purchase made conditionally on or before the Distribution Date because the securities of the spun-off entity have not yet been distributed. “When-issued” trades generally settle within four trading days after the Distribution Date. On the first trading day following the Distribution Date, any “when-issued” trading of our common stock will end and “regular-way” trading will begin. Regular-way trading refers to trading after the security has been distributed and typically involves a trade that settles on the third full trading day following the date of the trade. See “The Spin-Off—Trading Prior to the Distribution Date” for more information. We cannot predict the trading prices for our common stock before, on or after the Distribution Date.

Q:   Will the Spin-Off affect the trading price of my Honeywell common stock?

 

A:

  Following the Distribution, the equity value of Honeywell will no longer reflect the value of the AdvanSix Business. There can be no assurance that, following the Distribution, the combined trading prices of the Honeywell common stock and our common stock will equal or exceed what the trading price of Honeywell common stock would have been in the absence of the Spin-Off.

5


 

RISK FACTORS

You should carefully consider all of the information in this Information Statement and each of the risks described below, which we believe are the principal risks that we face. Some of the risks relate to our business, others to the Spin-Off. Some risks relate principally to the securities markets and ownership of our common stock.

Any of the following risks could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this Information Statement.

Risks Relating to Our Business

Difficult and volatile conditions in the overall economy, particularly in the United States but also globally, and in the capital, credit and commodities markets could adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations could be adversely affected by difficult global economic conditions and significant volatility in the capital, credit and commodities markets and in the overall economy. Difficult and volatile conditions in the United States and globally could affect our business in a number of ways. For example:

 

 

weak economic conditions, especially in our key markets, could reduce demand for our products, impacting our sales and margins;

 

 

as a result of the recent volatility in commodity prices, we may encounter difficulty in achieving sustained market acceptance of past or future price increases;

 

 

under difficult market conditions, there can be no assurance that access to credit or the capital markets would be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on reasonable terms, or at all; and

 

 

market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could result in decreased sales and earnings for us.

The industry in which we operate is highly competitive and experiences cyclicality which can cause significant fluctuations in our cash flows. These industry dynamics may adversely affect our business, financial condition and results of operations.

The industry in which we operate is highly competitive. Competition in the nylon resin industry is based on a number of factors such as price, product quality and service. We face significant competition from major international and regional competitors. Our competitors may improve their competitive position in our core markets by successfully introducing new products or innovations in their manufacturing processes or improving their cost structures. If we are unable to keep pace with our competitors’ product and manufacturing process innovations or cost position improvements, our business, financial condition and results of operations could be adversely affected.

Our historical operating results reflect the cyclical and sometimes volatile nature of the caprolactam, Nylon 6 resin and ammonium sulfate industries. We experience cycles of fluctuating supply and demand for each of the products we sell which result in changes in selling prices. Periods of high demand, tight supply and increasing operating margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of oversupply and declining prices. For example, the global market for Nylon 6 resin and caprolactam has undergone significant change in the past five years as Chinese manufacturers have entered the market and increased global supply at a time when demand has remained relatively stable, causing a decline in price and product margins. According to PCI Nylon, a third-party source, as of December 31, 2015, Chinese manufacturers account for 43% and 36% of Nylon 6 resin and caprolactam global capacity, respectively, whereas they accounted for only 26% and 12%, respectively, as of December 31, 2010. As a result of the increased capacity and competitive intensity, the margins for Nylon 6 resin and caprolactam have declined in recent years to historic lows. We have little or no ability to influence prices in these markets. Decreases in the average selling prices of our products could have an

6


 

adverse effect on our profitability. While we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expense, we cannot assure you that these efforts will be sufficient to offset fully the effect of possible decreases in pricing on operating results. Because of the cyclical nature of our businesses, we cannot assure you that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in our operating results.

Moreover, historically, information about our business and operations was presented as part of the broader Honeywell corporate organization. As an independent, publicly traded company, we will be required to publicly provide more detailed information about our business and operations, including financial information and material contract terms. This information will be accessible to our customers, suppliers and competitors, each of which may factor the new information into their commercial dealings with us or the markets in which we operate. The use of such information by third parties in the marketplace could have an adverse effect on our business, financial condition and results of operations.

Any significant unplanned downtime or material disruption at one of our production facilities or logistics operations may adversely affect our business, financial condition and results of operations, and the age of our manufacturing facilities increases the risk for unplanned downtime, which may be significant.

We seek to run our complex production facilities on a nearly continuous basis for maximum efficiency and rely on the integrity of our logistics operations for the uninterrupted operations of business. While we have continued to make significant annual capital improvements at our manufacturing plants, operational issues have occurred in the past and may occur in the future, which could cause damage to our manufacturing and production equipment and ancillary facilities. Unplanned interruptions in our production capabilities adversely affect our production costs, product lead times and earnings during the affected period.

We seek to mitigate the risk of unplanned downtime through regularly scheduled maintenance both for major and minor repairs at all of our production facilities. We also utilize maintenance and mechanical integrity programs and maintain an appropriate buffer inventory of intermediate chemicals necessary for our manufacturing process, which are intended to mitigate the extent of any production losses as a result of unplanned downtime. However, unplanned outages may still occur or we may not have enough intermediate chemical inventory at any given time to offset such production losses. Moreover, taking our production facilities offline for regularly scheduled repairs can be an expensive and time-consuming operation and there is a significant risk that delays during the repair process may cause unplanned downtime as well. Any such unplanned downtime at any of our production facilities may adversely affect our business, financial condition and results of operations.

Our production facilities and logistics operations are also subject to the risk of catastrophic loss and material disruptions due to unanticipated events such as fires, explosion, severe weather conditions, earthquake or other natural disasters, personal injury or major accidents, acts of terrorism, prolonged power failures, chemical spills or other operational and logistical problems that we or a third-party on which we rely may experience. Depending on the nature, extent and length of any operational interruption due to any such event, the results could adversely affect our business, financial condition and results of operations.

Raw material price fluctuations and the ability of key suppliers to meet delivery requirements can increase the cost of our products and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities.

The cost of raw materials, including cumene, natural gas and sulfur, is a key element in the cost of our products. Our inability to offset material price inflation through increased prices to customers, formula-based or long-term fixed price contracts with suppliers, productivity actions or commodity hedges could adversely affect our business, financial condition and results of operations.

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Although we believe that our sources of supply for raw materials are generally robust, it is difficult to predict what effects shortages of raw materials or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long lead-time products during periods of fluctuating demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations and damage to customer relationships.

When possible we have purchased, and we plan to continue to purchase, raw materials, including cumene, natural gas and sulfur, through negotiated medium- or long-term contracts. To the extent that we have been able to achieve favorable terms in our existing negotiated contracts, we may not be able to renew such contracts at the current terms or at all, and this may adversely impact our results of operations. To the extent that the markets for our raw materials significantly change, we may be bound by the terms of our existing supplier contracts and obligated to purchase such raw materials at disadvantaged terms as compared to other market participants.

Our operations require substantial capital and we may not be able to obtain additional capital that we need in the future on favorable terms or at all.

Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, upgrade and improve our manufacturing capabilities, implement further marketing and sales activities, fund ongoing R&D activities, satisfy regulatory and environmental compliance obligations and meet general working capital needs. Our capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology and R&D projects and the status and timing of these developments.

We have historically relied on Honeywell for assistance in satisfying our capital requirements. After the Spin-Off, we will not be able to rely on the earnings, assets or cash flow of Honeywell and Honeywell will not provide funds to finance our capital requirements. As a result, after the Distribution, we will be responsible for obtaining and maintaining sufficient working capital and other funds to satisfy our cash requirements. We may need to seek additional capital in the future and debt or equity financing may not be available to us on terms we find acceptable, if at all. After the Spin-Off, our access to and cost of debt financing will be different from the access to and cost of debt financing prior to the separation from Honeywell. If we incur additional debt or raise equity through the issuance of our preferred stock, the terms of the debt or our preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. If we raise funds through the issuance of additional common equity, your ownership in us would be diluted. Also, regardless of the terms of our debt or equity financing, our agreements and obligations under the Tax Matters Agreement that address compliance with Section 355(e) of the Code may limit our ability to issue stock. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Tax Matters Agreement.” We believe that, at the time of the Spin-Off, we will have adequate capital resources to meet our projected operating needs, capital expenditures and other cash requirements. However, we may need additional capital resources in the future and if we are unable to obtain sufficient resources for our operating needs, capital expenditures and other cash requirements for any reason, our business, financial condition and results of operations could be adversely affected.

Our operations are dependent on numerous required permits and approvals.

We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities. In addition, any expansion of our operations is dependent upon securing the necessary environmental or other permits or approvals.

A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to revoke or substantially modify an existing material permit or approval, could have an adverse effect on our ability to continue operations at the affected facility and on our business, financial condition and results of operations.

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The loss of one or more of our significant customers could adversely affect our business, financial condition and results of operations.

Our business depends on significant customers, many of whom have been doing business with us for decades, and the loss of one or several significant customers may have an adverse effect on our business, financial condition and results of operations. Additionally, our significant customers have the ability to influence pricing and other contract terms. Such influence could increase after the completion of the Spin-Off as our customers may gain access to information that we otherwise in the past would not have publicly disclosed but are required to disclose as a public company.

In 2015, our ten largest customers accounted for approximately 40% of our total sales. Our largest customer is Shaw Industries Group, Inc. (“Shaw”), one of the world’s largest consumers of caprolactam and Nylon 6 resin. We sell Nylon 6 resin and caprolactam to Shaw under a long-term contract. In 2015, 2014 and 2013, our sales to Shaw were 16%, 19% and 17%, respectively, of our total sales. We typically sell to our other customers under short-term contracts with one- to two-year terms or by purchase orders.

If our sales to any of our significant customers were to decline, we may not be able to find other customers to purchase the excess supply of our products. The loss of one or several of our significant customers, or a significant reduction in purchase volume by any of them or significant unfavorable changes to pricing or other terms in contracts with any of them, could have an adverse effect on our business, financial condition and results of operations. We are also subject to credit risk associated with customer concentration. If one or more of our largest customers were to become bankrupt or insolvent, or otherwise were unable to pay for our products, we may incur significant write-offs of accounts that may have an adverse effect on our business, financial condition and results of operations.

We are subject to risks related to adverse trade policies imposed against exports from the United States in certain important markets for our products.

We are subject to a series of antidumping investigations initiated by China’s Ministry of Commerce (“MOFCOM”) covering the import of caprolactam and Nylon 6 resin into China. As a result of these investigations, significant antidumping duties were imposed on our products. In addition, the Mexican government initiated an antidumping investigation on imports of ammonium sulfate into Mexico from the United States which resulted in antidumping duties being imposed on this product. These duties are currently still in place and must be paid by our customers in these countries to purchase our products, placing us at a significant competitive disadvantage in those markets.

In each case, we diligently evaluated our commercial and legal options to defend these investigations and their subsequent sunset reviews. Historically, we have successfully mitigated these risks through geographical mix management so that imposition of duties does not materially affect our business results. However, such duties could have an adverse effect on the sales of key product lines and affect our business performance in the future. For more information regarding the investigations, see “Business—Legal and Regulatory Proceedings—Antidumping Actions.”

There can be no assurance that any governmental or international trade body in the future will not institute trade policies or remedies that are adverse to exports from the United States. Any significant changes in international trade policies, practices or trade remedies, especially those instituted in our target markets or markets where our major customers are located, could potentially increase the price of our products relative to our competitors or decrease our customers’ demand for our products, which in turn may adversely affect our business, financial condition and results of operations.

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We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or liability, which could adversely affect our business, financial condition and results of operations.

Various federal, state, local and foreign governments regulate the discharge of materials into the environment and can impose substantial fines and criminal sanctions for violations and require installation of costly equipment or operational changes to limit emissions and/or decrease the likelihood of accidental hazardous substance releases. If we are found to be in violation of these laws or regulations, we may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations. See “Business—Regulation and Environmental Matters” for more information on the environmental laws and regulations to which we are subject.

Primarily because of our past operations at our current manufacturing locations and other locations used in our operations as currently conducted, we may be subject to potentially material liabilities related to the remediation of environmental hazards and to claims of personal injuries or property damages that may have been or may be caused by hazardous substance releases and exposures or other hazardous conditions. Lawsuits, claims and costs involving these matters may arise in the future. In addition, changes in laws, regulations and enforcement of policies, the discovery of previously unknown contamination or information related to individual sites, the establishment of stricter state or federal toxicity standards with respect to certain contaminants or the imposition of new clean-up requirements or remedial techniques could require us to incur additional costs in the future that would have a negative effect on our business, financial condition and results of operations.

Additionally, there are substantial uncertainties as to the nature, stringency and timing of any future regulations or changes in regulations, including greenhouse gas (“GHG”) and water nutrient regulations. More stringent regulations, especially of GHGs, may require us to make changes in our operating activities that would increase our operating costs, reduce our efficiency, limit our output, require us to make capital improvements to our facilities, increase our costs for or limit the availability of energy, raw materials or transportation or otherwise adversely affect our business, financial condition and results of operations. If enacted, more stringent GHG limitations are likely to have a significant impact on us because our production facilities emit GHGs such as carbon dioxide and nitrous oxide and because natural gas, a fossil fuel, is a primary raw material used in our production process. In addition, to the extent that GHG restrictions are not imposed in countries where our competitors operate or are less stringent than regulations that may be imposed in the United States, our competitors may have cost or other competitive advantages over us.

There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized as having, a toxicological or health-related impact on the environment or on our customers or employees, which could potentially result in us incurring liability in connection with such characterization and the associated effects of any toxicological or health-related impact. If such a discovery or characterization occurs, we may incur increased costs in order to comply with new regulatory requirements or the relevant materials or products, including products of our customers incorporating our materials or products, may be recalled or banned. Changes in laws and regulations, or their interpretation, and our customers’ perception of such changes or interpretations may also affect the marketability of certain of our products. Additionally, sales of acetone, which is a List II Chemical under the Toxic Substance Control Act (“TSCA”), are regulated by the Drug Enforcement Act. This classification subjects us to periodic audits by the Drug Enforcement Administration and ongoing restrictions on our acetone sales activities.

Due to concerns related to terrorism, we are subject to various security laws including the Maritime Transportation Security Act of 2002 (“MTSA”) and the Chemical Facilities Anti-Terrorism Standards (“CFATS”) regulation. Our Frankford and Hopewell facilities are regulated facilities under CFATS and MTSA due to the nature of our operations and the proximity of the facilities to the adjacent waterways. Federal, state, local and foreign governments could implement new or impose more stringent regulations affecting the security of our plants, terminals and warehouses or the transportation and use of fertilizers or other chemicals. These regulations could result in higher

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operating costs or limitations on the sale of our products and could result in significant unanticipated costs, lower sales and reduced profit margins. It is possible that federal, state, local and foreign governments could impose additional limitations on the use, sale or distribution of chemicals that we produce and sell, thereby limiting our ability to manufacture or sell those products, or that illicit use of our products could result in liability for us.

Hazards associated with chemical manufacturing, storage and transportation could adversely affect our business, financial condition and results of operations.

There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These hazards could lead to an interruption or suspension of operations and have an adverse effect on the productivity and profitability of a particular manufacturing facility or on us as a whole. While we endeavor to provide adequate protection for the safe handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of sabotage and performance by third parties, and as a result we could face potential hazards such as piping and storage tank leaks and ruptures, mechanical failure, employee exposure to hazardous substances and chemical spills and other discharges or releases of toxic or hazardous substances or gases.

These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines, work stoppage injunctions, lawsuits by injured persons, damage to our public reputation and brand and diminished product acceptance. If such actions are determined adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow to offset any associated costs. Such outcomes could adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations could be adversely affected by litigation and other commitments and contingencies.

We face risks arising from various unasserted and asserted litigation matters, including, but not limited to, product liability and claims for third-party property damage or personal injury stemming from alleged environmental or other torts. We have noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental or other torts without claiming present personal injuries. We also have noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public.

Various factors or developments can lead to changes in current estimates of liabilities such as a final adverse judgment, significant settlement or changes in applicable law. An adverse outcome or unfavorable development in any one or more of these matters could be material to our financial results and could adversely impact the value of any of our brands that are associated with any such matters.

In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses, and issue guarantees of third-party obligations. Additionally, we will be required to indemnify Honeywell for amounts related to liabilities allocated to, or assumed by, us under each of the Separation and Distribution Agreement, the Employee Matters Agreement and the Tax Matters Agreement. If we were required to make payments, such payments could be significant and could exceed the amounts we have accrued with respect thereto, adversely affecting our business, financial condition and results of operations.

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Our inability to successfully acquire and integrate other businesses, assets, products or technologies or realize the financial and strategic goals that were contemplated at the time of any transaction could adversely affect our business, financial condition and results of operations.

We actively evaluate acquisitions and strategic investments in businesses, products or technologies that we believe could complement or expand our business or otherwise offer growth or cost-saving opportunities. From time to time, we may enter into letters of intent with companies with which we are negotiating for potential acquisitions or investments, or as to which we are conducting due diligence. An investment in, or acquisition of, complementary businesses, products or technologies in the future could materially decrease the amount of our available cash or require us to seek additional equity or debt financing. We may not be successful in negotiating the terms of any potential acquisition, conducting thorough due diligence, financing the acquisition or effectively integrating the acquired business, product or technology into our existing business and operations. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or customer issues.

Additionally, in connection with any acquisitions we complete, we may not achieve the synergies or other benefits we expected to achieve, and we may incur unanticipated expenses, write-downs, impairment charges or unforeseen liabilities that could negatively affect our business, financial condition and results of operations, have difficulty incorporating the acquired businesses, disrupt relationships with current and new employees, customers and vendors, incur significant debt or have to delay or not proceed with announced transactions. Further, contemplating or completing an acquisition and integrating an acquired business, product or technology could divert management and employee time and resources from other matters.

Failure to protect our intellectual property could adversely affect our business, financial condition and results of operations.

Intellectual property rights, including patents, trade secrets, confidential information, trademarks, tradenames and trade dress, are important to our business. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used. However, we may be unable to obtain protection for our intellectual property in such key jurisdictions. Although we own and have applied for numerous patents and trademarks, we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented, and rendered unenforceable or otherwise compromised. If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our business, financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third-party intellectual property rights.

We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position. While we maintain policies and internal security measures to protect our trade secrets and other intellectual property, failure to protect this intellectual property could negatively affect our future performance and growth.

Some of our workforce is represented by labor unions so our business could be harmed in the event of a prolonged work stoppage.

Approximately 700 of our employees are unionized, which represents approximately 64% of our employee-base as of December 31, 2015. We cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate successor agreements without impacting our financial condition. In addition, the presence of unions may limit our flexibility in dealing with our workforce. We may experience work stoppages, which could negatively impact our ability to

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manufacture our products on a timely basis, which could negatively impact our business, financial condition and results of operations.

We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could adversely affect our business, financial condition and results of operations.

Due to the complex nature of our manufacturing business, our future performance is highly dependent upon the continued services of our key engineering personnel, scientists and executive officers, the development of additional management personnel and the hiring of new qualified engineering, manufacturing, marketing, sales and management personnel for our operations. Competition for qualified personnel in our industry is intense, and we may not be successful in attracting or retaining qualified personnel. The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel, could negatively affect our business, financial condition and results of operations.

Risks Relating to the Spin-Off

The Spin-Off could result in significant tax liability to Honeywell and its stockholders.

Completion of the Spin-Off is conditioned on Honeywell’s receipt of a written opinion of Cravath, Swaine & Moore LLP to the effect that the Distribution should qualify for non-recognition of gain and loss under Section 355 of the Code. Honeywell can waive receipt of the tax opinion as a condition to the completion of the Spin-Off.

The opinion of counsel does not address any U.S. state or local or foreign tax consequences of the Spin-Off. The opinion assumes that the Spin-Off will be completed according to the terms of the Separation and Distribution Agreement and relies on the facts as stated in the Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this Information Statement and a number of other documents. In addition, the opinion is based on certain representations as to factual matters from, and certain covenants by Honeywell and us. The opinion cannot be relied on if any of the assumptions, representations or covenants is incorrect, incomplete or inaccurate or is violated in any material respect.

The opinion of counsel is not binding on the Internal Revenue Service or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. Honeywell has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. Federal income tax consequences of the Spin-Off.

If the Distribution were determined not to qualify for non-recognition of gain and loss under Section 355(e) of the Code, U.S. Holders could be subject to tax. In this case, each U.S. Holder who receives our common stock in the Distribution would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in (1) a taxable dividend to the U.S. Holder to the extent of that U.S. Holder’s pro rata share of Honeywell’s current and accumulated earnings and profits; (2) a reduction in the U.S. Holder’s basis (but not below zero) in Honeywell common stock to the extent the amount received exceeds the stockholder’s share of Honeywell’s earnings and profits; and (3) a taxable gain from the exchange of Honeywell common stock to the extent the amount received exceeds the sum of the U.S. Holder’s share of Honeywell’s earnings and profits and the U.S. Holder’s basis in its Honeywell common stock. See below and “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off”.

We could have an indemnification obligation to Honeywell if the Distribution were determined not to qualify for non-recognition treatment, which could adversely affect our business, financial condition and results of operations.

If, due to any of our representations being untrue or our covenants being breached, it were determined that the Distribution did not qualify for non-recognition of gain and loss under Section

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355 of the Code, we could be required to indemnify Honeywell for the resulting taxes and related expenses. Any such indemnification obligation could adversely affect our business, financial condition and results of operations.

In addition, Section 355(e) of the Code generally creates a presumption that the Distribution would be taxable to Honeywell, but not to stockholders, if we or our stockholders were to engage in transactions that result in a 50% or greater change by vote or value in the ownership of our stock during the four-year period beginning on the date that begins two years before the date of the Distribution, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions giving effect to such a change in ownership. If the Distribution were taxable to Honeywell due to such a 50% or greater change in ownership of our stock, Honeywell would recognize gain equal to the excess of the fair market value of our common stock distributed to Honeywell stockholders over Honeywell’s tax basis in our common stock and we generally would be required to indemnify Honeywell for the tax on such gain and related expenses. Any such indemnification obligation could adversely affect our business, financial condition and results of operations. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Tax Matters Agreement”.

We intend to agree to numerous restrictions to preserve the non-recognition treatment of the Spin-Off, which may reduce our strategic and operating flexibility.

We intend to agree in the Tax Matters Agreement to covenants and indemnification obligations that address compliance with Section 355 of the Code and preserve the tax-free nature of the Spin-Off. These covenants will include certain restrictions on our activity unless Honeywell gives its consent for us to take a restricted action, which Honeywell is permitted to grant or withhold at its sole discretion. These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and might discourage or delay a strategic transaction that our stockholders may consider favorable. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Tax Matters Agreement”.

We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.

We believe that, as an independent, publicly traded company, we will be able to, among other things, design and implement corporate strategies and policies that are targeted to our business, better focus our financial and operational resources on those specific strategies, create effective incentives for our management and employees that are more closely tied to our business performance, provide investors more flexibility and enable us to achieve alignment with a more natural stockholder base and implement and maintain a capital structure designed to meet our specific needs. We may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. The completion of the Spin-Off will require significant amounts of our management’s time and effort, which may divert management’s attention from operating and growing our business. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition and results of operations could be adversely affected.

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent, publicly traded company, and we may experience increased costs after the Spin-Off.

We have historically operated as part of Honeywell’s corporate organization, and Honeywell has provided us with various corporate functions. Following the Spin-Off, Honeywell will have no obligation to provide us with assistance other than the transition and other services described under “Certain Relationships and Related Party Transactions”. These services do not include every service that we have received from Honeywell in the past, and Honeywell is only obligated to provide the transition services for limited periods following completion of the Spin-Off. Accordingly, following the Spin-Off, we will need to provide internally or obtain from unaffiliated third parties the services

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we currently receive from Honeywell. These services include legal, accounting, information technology, human resources and other infrastructure support, the effective and appropriate performance of which are critical to our operations. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from Honeywell. Because our business has historically operated as part of the wider Honeywell organization, we may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently, or may incur additional costs that could adversely affect our business. If we fail to obtain the quality of services necessary to operate effectively or incur greater costs in obtaining these services, our business, financial condition and results of operations may be adversely affected.

We have no recent operating history as an independent, publicly traded company, and our historical combined financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

We derived the historical combined financial information included in this Information Statement from Honeywell’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future. This is primarily because of the following factors:

 

 

Prior to the Spin-Off, we operated as part of Honeywell’s broader corporate organization, and Honeywell performed various corporate functions for us. Our historical combined financial information reflects allocations of corporate expenses from Honeywell for these and similar functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent publicly traded company.

 

 

We will enter into transactions with Honeywell that did not exist prior to the Spin-Off, such as Honeywell’s provision of transition services, which will cause us to incur new costs.

 

 

Our historical combined financial information does not reflect changes that we expect to experience in the future as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our business. As part of Honeywell, we enjoyed certain benefits from Honeywell’s operating diversity, size, purchasing power, borrowing leverage and available capital for investments, and we will lose these benefits after the Spin-Off. As an independent entity, we may be unable to purchase goods, services and technologies, such as insurance and health care benefits and computer software licenses, or access capital markets on terms as favorable to us as those we obtained as part of Honeywell prior to the Spin-Off. In addition, our historical combined financial data do not include an allocation of interest expense comparable to the interest expense we will incur as a result of the Internal Transactions and the Spin-Off, including interest expense in connection with the incurrence of indebtedness at AdvanSix.

Following the Spin-Off, we will also be responsible for the additional costs associated with being an independent, publicly traded company, including costs related to corporate governance, investor and public relations and public reporting. While we have been profitable as part of Honeywell, we cannot assure you that our profits will continue at a similar level when we are an independent, publicly traded company. For additional information about our past financial performance and the basis of presentation of our Combined Financial Statements, see “Selected Historical Combined Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical Combined Financial Statements and the Notes thereto included elsewhere in this Information Statement.

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We expect to incur new indebtedness concurrently with or prior to the Distribution, and the degree to which we will be leveraged following completion of the Distribution could adversely affect our business, financial condition and results of operations.

In connection with the Spin-Off, we intend to incur indebtedness in the aggregate principal amount of approximately $         million in the form of term loans, of which approximately $         million in net proceeds will be distributed to Honeywell prior to the consummation of the Spin-Off. We also intend to enter into a revolving facility to be available for our working capital and other cash needs. Additional information regarding our indebtedness following the Spin-Off will be provided in subsequent amendments to this Information Statement. We have historically relied upon Honeywell to fund our working capital requirements and other cash requirements. After the Distribution, we will not be able to rely on the earnings, assets or cash flow of Honeywell and Honeywell will not provide funds to finance our working capital or other cash requirements. As a result, after the Distribution, we will be responsible for servicing our own debt and obtaining and maintaining sufficient working capital and other funds to satisfy our cash requirements. After the Spin-Off, our access to and cost of debt financing will be different from the historical access to and cost of debt financing under Honeywell. Differences in access to and cost of debt financing may result in differences in the interest rate charged to us on financings, as well as the amount of indebtedness, types of financing structures and debt markets that may be available to us.

Our ability to make payments on and to refinance our indebtedness, including the debt incurred in connection with the Spin-Off, as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

The terms of the new indebtedness we expect to incur concurrently in connection with the Distribution will restrict our current and future operations, particularly our ability to incur debt that we may need to fund initiatives in response to changes in our business, the industries in which we operate, the economy and governmental regulations.

We expect that the terms of the indebtedness we expect to incur in connection with the Distribution will include a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our long-term best interests. These may restrict our and our subsidiaries’ ability to take some or all of the following actions:

 

 

incur or guarantee additional indebtedness or sell disqualified or preferred stock;

 

 

pay dividends on, make distributions in respect of, repurchase or redeem capital stock;

 

 

make investments or acquisitions;

 

 

sell, transfer or otherwise dispose of certain assets;

 

 

create liens;

 

 

enter into sale/leaseback transactions;

 

 

enter into agreements restricting the ability to pay dividends or make other intercompany transfers;

 

 

consolidate, merge, sell or otherwise dispose of all or substantially all of our or our subsidiaries’ assets;

 

 

enter into transactions with affiliates;

 

 

prepay, repurchase or redeem certain kinds of indebtedness;

 

 

issue or sell stock of our subsidiaries; and/or

 

 

significantly change the nature of our business.

As a result of all of these restrictions, we may be limited in how we conduct our business and pursue our strategy, unable to raise additional debt financing to operate during general economic or

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business downturns or unable to compete effectively or to take advantage of new business opportunities.

A breach of any of these covenants, if applicable, could result in an event of default under the terms of this indebtedness. If an event of default occurs, the lenders would have the right to accelerate the repayment of such debt and the event of default or acceleration may result in the acceleration of the repayment of any other debt to which a cross-default or cross-acceleration provision applies. Furthermore, the lenders of this indebtedness may require that we pledge our assets as collateral as security for our repayment obligations. If we were unable to repay any amount of this indebtedness when due and payable, the lenders could proceed against any such collateral. In the event our creditors accelerate the repayment of our borrowings, we may not have sufficient assets to repay such indebtedness, which could adversely affect our business, financial condition and results of operations.

Risks Relating to Our Common Stock and the Securities Market

No market for our common stock currently exists and an active trading market may not develop or be sustained after the Spin-Off. Following the Spin-Off our stock price may fluctuate significantly.

There is currently no public market for our common stock. We intend to apply to list our common stock on the New York Stock Exchange. We anticipate that before the Distribution Date, trading of shares of our common stock will begin on a “when-issued” basis and this trading will continue up to and including the Distribution Date. However, an active trading market for our common stock may not develop as a result of the Spin-Off or may not be sustained in the future. The lack of an active market may make it more difficult for stockholders to sell our shares and could lead to our share price being depressed or volatile.

We cannot predict the prices at which our common stock may trade after the Spin-Off. The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:

 

 

actual or anticipated fluctuations in our results of operations due to factors related to our business;

 

 

success or failure of our business strategies;

 

 

competition and industry capacity;

 

 

changes in interest rates and other factors that affect earnings and cash flow;

 

 

our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed;

 

 

our ability to retain and recruit qualified personnel;

 

 

our quarterly or annual earnings, or those of other companies in our industry;

 

 

announcements by us or our competitors of significant acquisitions or dispositions;

 

 

changes in accounting standards, policies, guidance, interpretations or principles;

 

 

the failure of securities analysts to cover our common stock after the Spin-Off;

 

 

changes in earnings estimates by securities analysts or our ability to meet those estimates;

 

 

the operating and stock price performance of other comparable companies;

 

 

investor perception of our company and our industry;

 

 

overall market fluctuations unrelated to our operating performance;

 

 

results from any material litigation or government investigation;

 

 

changes in laws and regulations (including tax laws and regulations) affecting our business;

 

 

changes in capital gains taxes and taxes on dividends affecting stockholders; and

 

 

general economic conditions and other external factors.

Furthermore, our business profile and market capitalization may not fit the investment objectives of some Honeywell stockholders and, as a result, these Honeywell stockholders may sell their shares of our common stock after the Distribution. See “—Substantial sales of our common stock may occur in connection with the Spin-Off, which could cause our stock price to decline.” Low

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trading volume for our stock, which may occur if an active trading market does not develop, among other reasons, would amplify the effect of the above factors on our stock price volatility.

Substantial sales of our common stock may occur in connection with the Spin-Off, which could cause our stock price to decline.

Honeywell stockholders receiving shares of our common stock in the Distribution generally may sell those shares immediately in the public market. It is likely that some Honeywell stockholders, including some of its larger stockholders, will sell their shares of our common stock received in the Distribution if, for reasons such as our business profile or market capitalization as an independent company, we do not fit their investment objectives, or, in the case of index funds, we are not a participant in the index in which they are investing. The sales of significant amounts of our common stock or the perception in the market that this will occur may decrease the market price of our common stock.

We will evaluate whether to pay cash dividends on our common stock in the future, and the terms of our indebtedness will limit our ability to pay dividends on our common stock.

Once the Spin-Off is effective, we will be evaluating whether to pay cash dividends to our stockholders. The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Among the items we will consider when establishing a dividend policy will be the capital intensive nature of our business and opportunities to retain future earnings for use in the operation of our business and to fund future growth. Additionally, the terms of the indebtedness we intend to incur in connection with the Spin-Off may limit our ability to pay cash dividends. For more information, see “Dividend Policy”. There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends.

Your percentage ownership in AdvanSix may be diluted in the future.

Your percentage ownership in AdvanSix may be diluted in the future because of common stock-based equity awards that we expect to grant to our directors, officers and other employees. Prior to completion of the Spin-Off, we expect to approve an incentive plan that will provide for the grant of common stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments that we may make in the future or as necessary to finance our ongoing operations.

Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware law may discourage takeovers.

Several provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-laws and Delaware law may discourage, delay or prevent a merger or acquisition that is opposed by our Board. These include, among others, provisions that:

 

 

provide for staggered terms for directors on our Board for a period following the Spin-Off;

 

 

do not permit our stockholders to act by written consent and require that stockholder action must take place at an annual or special meeting of our stockholders;

 

 

establish advance notice requirements for stockholder nominations and proposals;

 

 

limit the persons who may call special meetings of stockholders; and

 

 

limit our ability to enter into business combination transactions with certain stockholders.

These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of AdvanSix, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price. See “Description of Our Capital Stock—Certain Provisions of Delaware Law, Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws” for more information.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Information Statement contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and our business and financial results. Forward-looking statements often include words such as “anticipates”, “estimates”, “expects”, “projects”, “intends”, “plans”, “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Our principal risks and uncertainties are set forth in the section entitled “Risk Factors” above.

Any forward-looking statements made by us in this Information Statement speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

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THE SPIN-OFF

Background

On May 12, 2016, Honeywell announced plans for the complete legal and structural separation of the AdvanSix Business from Honeywell. To effect the separation, Honeywell is undertaking the Internal Transactions described under “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”.

Following the Internal Transactions, Honeywell will distribute all of its equity interest in us, consisting of all of the outstanding shares of our common stock, to holders of Honeywell’s common stock on a pro rata basis. Following the Spin-Off, Honeywell will not own any equity interest in us, and we will operate independently from Honeywell. No approval of Honeywell’s stockholders is required in connection with the Spin-Off, and Honeywell’s stockholders will not have any appraisal rights in connection with the Spin-Off.

Completion of the Spin-Off is subject to the satisfaction, or the Honeywell Board’s waiver, to the extent permitted by law, of a number of conditions. In addition, Honeywell may at any time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution. For a more detailed discussion, see “—Conditions to the Spin-Off”.

Reasons for the Spin-Off

Honeywell has regularly reviewed its businesses to confirm that Honeywell’s resources are being put to use in a manner that is in the best interests of Honeywell and its stockholders. In reaching the decision to pursue the Spin-Off, Honeywell considered a range of potential structural alternatives for the AdvanSix Business, including a sale of the AdvanSix Business, and concluded that the Spin-Off is the most attractive alternative for enhancing stockholder value. As part of this evaluation, Honeywell considered a number of factors, including the following potential benefits:

 

 

Strategic Clarity and Flexibility . Following the Spin-Off, Honeywell and AdvanSix will each have a more focused business and be better positioned to invest more in growth opportunities and execute strategic plans best suited to its respective business. The Spin-Off will also allow AdvanSix to enhance its strategic flexibility to respond to industry dynamics.

 

 

Focused Management . The Spin-Off will allow the management of each of Honeywell and AdvanSix to devote its time and attention to the development and implementation of corporate strategies and policies that are based primarily on the specific business characteristics of their respective companies.

 

 

Management Incentives . The Spin-Off will enable AdvanSix to create incentives for its management and employees that are more closely tied to its business performance and stockholder expectations, which will help AdvanSix attract and retain qualified personnel.

 

 

Stockholder Flexibility . The Spin-Off will allow investors to make independent investment decisions with respect to Honeywell and AdvanSix and will enable AdvanSix to achieve alignment with a more natural stockholder base. Investment in one or the other company may appeal to investors with different goals, interests and concerns.

In determining whether to effect the Spin-Off, Honeywell considered the costs and risks associated with the transaction, including the costs associated with preparing AdvanSix to become an independent, publicly traded company, the risk of volatility in our stock price immediately following the Spin-Off due to sales by Honeywell’s stockholders whose investment objectives may not be met by our common stock, the time it may take for us to attract our optimal stockholder base, the possibility of disruptions in our business as a result of the Spin-Off and the risk that the combined trading prices of our common stock and Honeywell’s common stock after the Spin-Off may drop below the trading price of Honeywell’s common stock before the Spin-Off. Honeywell also considered the loss of synergies and scale from operating as one company, including sharing corporate overhead expenses and AdvanSix benefiting from Honeywell’s operating diversity, size, purchasing power, borrowing leverage and available capital for investments, the anticipated loss of which is not reasonably quantifiable. Notwithstanding these costs and risks, taking into account the

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factors discussed above, Honeywell determined that the Spin-Off provided the best opportunity to achieve the above benefits and enhance stockholder value.

When and How You Will Receive AdvanSix Shares

Honeywell will distribute to its stockholders, as a pro rata dividend,   shares of our common stock for every   shares of Honeywell common stock outstanding as of   , the Record Date of the Distribution.

Prior to the Distribution, Honeywell will deliver all of the issued and outstanding shares of our common stock to the distribution agent.   will serve as distribution agent in connection with the Distribution and as transfer agent and registrar for our common stock.

If you own Honeywell common stock as of the close of business on   , the shares of our common stock that you are entitled to receive in the Distribution will be issued to your account as follows:

 

 

Registered stockholders . If you own your shares of Honeywell common stock directly through Honeywell’s transfer agent, Wells Fargo Stockholder Services, you are a registered stockholder. In this case, the distribution agent will credit the whole shares of our common stock you receive in the Distribution by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as is the case in the Distribution. You will be able to access information regarding your book-entry account holding the AdvanSix shares at   or by calling   .

Commencing on or shortly after the Distribution Date, the distribution agent will mail to you an account statement that indicates the number of whole shares of our common stock that have been registered in book-entry form in your name. We expect it will take the distribution agent up to two weeks after the Distribution Date to complete the distribution of the shares of our common stock and mail statements of holding to all registered stockholders.

 

  Street name or beneficial stockholders . If you own your shares of Honeywell common stock beneficially through a bank, broker or other nominee, the bank, broker or other nominee holds the shares in “street name” and records your ownership on its books. In this case, your bank, broker or other nominee will credit your account with the whole shares of our common stock that you receive in the Distribution on or shortly after the Distribution Date. We encourage you to contact your bank, broker or other nominee if you have any questions concerning the mechanics of having shares held in “street name”.

If you sell any of your shares of Honeywell common stock on or before the Distribution Date, the buyer of those shares may in some circumstances be entitled to receive the shares of our common stock to be distributed in respect of the Honeywell shares you sold. See “—Trading Prior to the Distribution Date” for more information.

We are not asking Honeywell stockholders to take any action in connection with the Spin-Off. We are not asking you for a proxy and request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your shares of Honeywell common stock for shares of our common stock. The number of outstanding shares of Honeywell common stock will not change as a result of the Spin-Off.

Treatment of Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock in connection with the Spin-Off. Instead, the distribution agent will aggregate all fractional shares into whole shares and sell the whole shares in the open market at prevailing market prices on behalf of Honeywell stockholders entitled to receive a fractional share. The distribution agent will then distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata to these holders (net of any required withholding for taxes applicable to each holder). We anticipate that the distribution agent will make these sales in the “when-issued” market, and “when-issued”

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trades will generally settle within four trading days following the Distribution Date. See “—Trading Prior to the Distribution Date” for additional information regarding “when-issued” trading. The distribution agent will, in its sole discretion, without any influence by Honeywell or us, determine when, how, through which broker-dealer and at what price to sell the whole shares. The distribution agent is not, and any broker-dealer used by the distribution agent will not be, an affiliate of either Honeywell or us.

The distribution agent will send to each registered holder of Honeywell common stock entitled to a fractional share a check in the cash amount deliverable in lieu of that holder’s fractional share as soon as practicable following the Distribution Date. We expect the distribution agent to take about two weeks after the Distribution Date to complete the distribution of cash in lieu of fractional shares to Honeywell stockholders. If you hold your shares through a bank, broker or other nominee, your bank, broker or nominee will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales. No interest will be paid on any cash you receive in lieu of a fractional share. The cash you receive in lieu of a fractional share will generally be taxable to you for U.S. Federal income tax purposes. See “—Material U.S. Federal Income Tax Consequences of the Spin-Off” below for more information.

Material U.S. Federal Income Tax Consequences of the Spin-Off

Consequences to U.S. Holders of Honeywell common stock

The following is a summary of the material U.S. Federal income tax consequences to holders of Honeywell common stock in connection with the Distribution. This summary is based on the Code, the Treasury Regulations promulgated under the Code and judicial and administrative interpretations of those laws, in each case as in effect and available as of the date of this Information Statement and all of which are subject to change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below.

This summary is limited to holders of Honeywell common stock that are U.S. Holders, as defined immediately below, that hold their Honeywell common stock as a capital asset. A “U.S. Holder” is a beneficial owner of Honeywell common stock that is, for U.S. Federal income tax purposes:

 

 

an individual who is a citizen or a resident of the United States;

 

 

a corporation, or other entity taxable as a corporation for U.S. Federal income tax purposes, created or organized under the laws of the United States or any state thereof or the District of Columbia;

 

 

an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or

 

 

a trust if (1) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (2) in the case of a trust that was treated as a domestic trust under law in effect before 1997, a valid election is in place under applicable Treasury Regulations.

This summary does not discuss all tax considerations that may be relevant to stockholders in light of their particular circumstances, nor does it address the consequences to stockholders subject to special treatment under the U.S. Federal income tax laws, such as:

 

 

dealers or traders in securities or currencies;

 

 

tax-exempt entities;

 

 

banks, financial institutions or insurance companies;

 

 

real estate investment trusts, regulated investment companies or grantor trusts;

 

 

persons who acquired Honeywell common stock pursuant to the exercise of employee stock options or otherwise as compensation;

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stockholders who own, or are deemed to own, 10% or more, by voting power or value, of Honeywell equity;

 

 

stockholders owning Honeywell common stock as part of a position in a straddle or as part of a hedging, conversion or other risk reduction transaction for U.S. Federal income tax purposes;

 

 

certain former citizens or long-term residents of the United States;

 

 

stockholders who are subject to the alternative minimum tax;

 

 

persons who own Honeywell common stock through partnerships or other pass-through entities; or

 

 

persons who hold Honeywell common stock through a tax-qualified retirement plan.

This summary does not address any U.S. state or local or foreign tax consequences or any estate, gift or other non-income tax consequences.

If a partnership, or any other entity treated as a partnership for U.S. Federal income tax purposes, holds Honeywell common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership is urged to consult its own tax advisor as to its tax consequences.

YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION.

General

Completion of the Spin-Off is conditioned upon Honeywell’s receipt of a written opinion of Cravath, Swaine & Moore LLP, counsel to Honeywell, to the effect that the Distribution should qualify for nonrecognition of gain and loss under Section 355 of the Code. The opinion will be based on the assumption that, among other things, the representations made, and information submitted, in connection with it are accurate. If the Distribution qualifies for this treatment and subject to the qualifications and limitations set forth herein (including the discussion below relating to the receipt of cash in lieu of fractional shares), for U.S. Federal income tax purposes:

 

 

no gain or loss should be recognized by, or be includible in the income of, a U.S. Holder as a result of the Distribution, except with respect to any cash received in lieu of fractional shares;

 

 

the aggregate tax basis of the Honeywell common stock and our common stock held by each U.S. Holder immediately after the Distribution should be the same as the aggregate tax basis of the Honeywell common stock held by the U.S. Holder immediately before the Distribution, allocated between the Honeywell common stock and our common stock in proportion to their relative fair market values on the date of the Distribution (subject to reduction upon the deemed sale of any fractional shares, as described below); and

 

 

the holding period of our common stock received by each U.S. Holder should include the holding period of their Honeywell common stock, provided that such Honeywell common stock is held as a capital asset on the date of the Distribution.

U.S. Holders that have acquired different blocks of Honeywell common stock at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregate adjusted tax basis among, and the holding period of, shares of our common stock distributed with respect to such blocks of Honeywell common stock.

If a U.S. Holder receives cash in lieu of a fractional share of common stock as part of the Distribution, the U.S. Holder will be treated as though it first received a distribution of the fractional share in the Distribution and then sold it for the amount of cash actually received. Provided the fractional share is considered to be held as a capital asset on the date of the Distribution, the U.S. Holder will generally recognize capital gain or loss measured by the difference between the cash received for such fractional share and the U.S. Holder’s tax basis in that fractional share, as determined above. Such capital gain or loss will be long-term capital gain or loss if the

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U.S. Holder’s holding period for the Honeywell common stock is more than one year on the date of the Distribution.

The opinion of counsel will not address any U.S. state or local or foreign tax consequences of the Spin-Off. The opinion will assume that the Spin-Off will be completed according to the terms of the Separation and Distribution Agreement and will rely on the facts as stated in the Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this Information Statement and a number of other documents. In addition, the opinion will be based on certain representations as to factual matters from, and certain covenants by, Honeywell and us. The opinion cannot be relied on if any of the assumptions, representations or covenants is incorrect, incomplete or inaccurate or are violated in any material respect.

The opinion of counsel will not be binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. Honeywell has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. Federal income tax consequences of the Spin-Off.

If the Distribution were determined not to qualify for non-recognition of gain and loss, the above consequences would not apply and U.S. Holders could be subject to tax. In this case, each U.S. Holder who receives our common stock in the Distribution would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in:

 

 

a taxable dividend to the U.S. Holder to the extent of that U.S. Holder’s pro rata share of Honeywell’s current and accumulated earnings and profits;

 

 

a reduction in the U.S. Holder’s basis (but not below zero) in Honeywell common stock to the extent the amount received exceeds the stockholder’s share of Honeywell’s earnings and profits; and

 

 

a taxable gain from the exchange of Honeywell common stock to the extent the amount received exceeds the sum of the U.S. Holder’s share of Honeywell’s earnings and profits and the U.S. Holder’s basis in its Honeywell common stock.

Backup Withholding and Information Statement

Payments of cash in lieu of a fractional share of our common stock may, under certain circumstances, be subject to “backup withholding”, unless a U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the requirements of the backup withholding rules. Corporations will generally be exempt from backup withholding, but may be required to provide a certification to establish their entitlement to the exemption. Backup withholding is not an additional tax, and it may be refunded or credited against a U.S. Holder’s U.S. Federal income tax liability if the required information is timely supplied to the IRS.

Treasury Regulations require each Honeywell stockholder that, immediately before the Distribution, owned 5% or more (by vote or value) of the total outstanding stock of Honeywell to attach to such stockholder’s U.S. Federal income tax return for the year in which the Distribution occurs a statement setting forth certain information related to the Distribution.

Consequences to Honeywell

The following is a summary of the material U.S. Federal income tax consequences to Honeywell in connection with the Spin-Off that may be relevant to holders of Honeywell common stock.

As discussed above, completion of the Spin-Off is conditioned upon Honeywell’s receipt of a written opinion of Cravath, Swaine & Moore LLP, counsel to Honeywell, to the effect that the Distribution should qualify for nonrecognition of gain and loss under Section 355 of the Code. If the Distribution qualifies for nonrecognition of gain and loss under Section 355 of the Code, no gain or loss should be recognized by Honeywell as a result of the Distribution (other than income or gain arising from any imputed income or other adjustment to Honeywell, us or our respective subsidiaries

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if and to the extent that the Separation and Distribution Agreement or any ancillary agreement is determined to have terms that are not at arm’s length). The opinion of counsel is subject to the qualifications and limitations as are set forth above under “—Consequences to U.S. Holders of Honeywell common stock”.

If the Distribution were determined not to qualify for non-recognition of gain and loss under Section 355 of the Code, then Honeywell would recognize gain equal to the excess of the fair market value of our common stock distributed to Honeywell stockholders over Honeywell’s tax basis in our common stock.

Indemnification Obligation

If, due to any of our representations being untrue or our covenants being breached, it were determined that the Distribution did not qualify for non-recognition of gain and loss under Section 355 of the Code, we could be required to indemnify Honeywell for taxes resulting from the recognition of gain described above and related expenses. In addition, current tax law generally creates a presumption that the Distribution would be taxable to Honeywell, but not to holders, if we or our stockholders were to engage in transactions that result in a 50% or greater change by vote or value in the ownership of our stock during the four-year period beginning on the date that begins two years before the date of the Distribution, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions giving effect to such a change in ownership. If the Distribution were taxable to Honeywell due to such a 50% or greater change in ownership of our stock, Honeywell would recognize gain equal to the excess of the fair market value of our common stock distributed to Honeywell stockholders over Honeywell’s tax basis in our common stock and we generally would be required to indemnify Honeywell for the tax on such gain and related expenses.

Results of the Spin-Off

After the Spin-Off, we will be an independent, publicly traded company. Immediately following the Spin-Off, we expect to have approximately   beneficial holders of shares of our common stock and approximately   shares of our common stock outstanding, based on the number of Honeywell stockholders and shares of Honeywell common stock outstanding on   . The actual number of shares of our common stock Honeywell will distribute in the Spin-Off will depend on the actual number of shares of Honeywell common stock outstanding on the Record Date, which will reflect any issuance of new shares or exercises of outstanding options pursuant to Honeywell’s equity plans, and any repurchase of Honeywell shares by Honeywell under its common stock repurchase program, on or prior to the Record Date. Shares of Honeywell common stock held by Honeywell as treasury shares will not be considered outstanding for purposes of, and will not be entitled to participate in, the Distribution. The Spin-Off will not affect the number of outstanding shares of Honeywell common stock or any rights of Honeywell stockholders. However, following the Distribution, the equity value of Honeywell will no longer reflect the value of the AdvanSix Business. There can be no assurance that the combined trading prices of the Honeywell common stock and our common stock will equal or exceed what the trading price of Honeywell common stock would have been in absence of the Spin-Off.

Before our separation from Honeywell, we intend to enter into a Separation and Distribution Agreement and several other agreements with Honeywell related to the Spin-Off. These agreements will govern the relationship between us and Honeywell up to and after completion of the Spin-Off and allocate between us and Honeywell various assets, liabilities, rights and obligations, including employee benefits, environmental, intellectual property and tax-related assets and liabilities. We describe these arrangements in greater detail under “Certain Relationships and Related Party Transactions—Agreements with Honeywell”.

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Listing and Trading of Our Common Stock

As of the date of this Information Statement, we are a wholly owned subsidiary of Honeywell. Accordingly, no public market for our common stock currently exists, although a “when-issued” market in our common stock may develop prior to the Distribution. See “—Trading Prior to the Distribution Date” below for an explanation of a “when-issued” market. We intend to list our shares of common stock on the New York Stock Exchange under the symbol “ASIX”. Following the Spin-Off, Honeywell common stock will continue to trade on the New York Stock Exchange under the symbol “HON”.

Neither we nor Honeywell can assure you as to the trading price of Honeywell common stock or our common stock after the Spin-Off, or as to whether the combined trading prices of our common stock and the Honeywell common stock after the Spin-Off will equal or exceed the trading prices of Honeywell common stock prior to the Spin-Off. The trading price of our common stock may fluctuate significantly following the Spin-Off. See “Risk Factors—Risks Relating to Our Common Stock and the Securities Market” for more detail.

The shares of our common stock distributed to Honeywell stockholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the Spin-Off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act of 1933, or the “Securities Act”, or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(a)(1) of the Securities Act or Rule 144 thereunder.

Trading Prior to the Distribution Date

We expect a “when-issued” market in our common stock to develop as early as two trading days prior to the Record Date for the Distribution and continue up to and including the Distribution Date. “When-issued” trading refers to a sale or purchase made conditionally on or before the Distribution Date because the securities of the spun-off entity have not yet been distributed. If you own shares of Honeywell common stock at the close of business on the Record Date, you will be entitled to receive shares of our common stock in the Distribution. You may trade this entitlement to receive shares of our common stock, without the shares of Honeywell common stock you own, on the “when-issued” market. We expect “when-issued” trades of our common stock to settle within four trading days after the Distribution Date. On the first trading day following the Distribution Date, we expect that “when-issued” trading of our common stock will end and “regular-way” trading will begin.

We also anticipate that, as early as two trading days prior to the Record Date and continuing up to and including the Distribution Date, there will be two markets in Honeywell common stock: a “regular-way” market and an “ex-distribution” market. Shares of Honeywell common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common stock in the Distribution. Shares that trade on the ex-distribution market will trade without an entitlement to receive shares of our common stock in the Distribution. Therefore, if you sell shares of Honeywell common stock in the regular-way market up to and including the Distribution Date, you will be selling your right to receive shares of our common stock in the Distribution. However, if you own shares of Honeywell common stock at the close of business on the Record Date and sell those shares on the ex-distribution market up to and including the Distribution Date, you will still receive the shares of our common stock that you would otherwise be entitled to receive in the Distribution.

If “when-issued” trading occurs, the listing for our common stock is expected to be under a trading symbol different from our regular-way trading symbol. We will announce our “when-issued” trading symbol when and if it becomes available. If the Spin-Off does not occur, all “when-issued” trading will be null and void.

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Conditions to the Spin-Off

We expect that the Separation will be effective on the Distribution Date, provided that the following conditions shall have been satisfied or waived by Honeywell:

 

 

the Honeywell Board shall have approved the Internal Transactions and Distribution and not withdrawn such approval, and shall have declared the dividend of our common stock to Honeywell stockholders;

 

 

the ancillary agreements contemplated by the Separation and Distribution Agreement shall have been executed by each party to those agreements;

 

 

the SEC shall have declared effective our Registration Statement on Form 10, of which this Information Statement is a part, under the Exchange Act, and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;

 

 

our common stock shall have been accepted for listing on the New York Stock Exchange or another national securities exchange approved by Honeywell;

 

 

Honeywell shall have received the written opinion of Cravath, Swaine & Moore LLP, which shall remain in full force and effect that, subject to the accuracy of and compliance with certain representations, warranties and covenants, the Distribution should qualify for non-recognition of gain and loss under Section 355 of the Code;

 

 

the Internal Transactions (as described in “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”) shall have been completed;

 

 

no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect, and no other event outside the control of Honeywell shall have occurred or failed to occur that prevents the consummation of the Distribution;

 

 

no other events or developments shall have occurred prior to the Distribution Date that, in the judgment of the Honeywell Board, would result in the Distribution having a material adverse effect on Honeywell or its stockholders;

 

 

prior to the Distribution Date, this Information Statement shall have been mailed to the holders of Honeywell common stock as of the Record Date;

 

 

Honeywell shall have duly elected the individuals to be listed as members of our post-Distribution Board in this Information Statement; and

 

 

immediately prior to the Distribution Date, our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, each in substantially the form filed as an exhibit to the Registration Statement on Form 10 of which this Information Statement is a part, shall be in effect.

Any of the above conditions may be waived by the Honeywell Board to the extent such waiver is permitted by law. If the Honeywell Board waives any condition prior to the effectiveness of the Registration Statement on Form 10, of which this Information Statement Forms a part, and the result of such waiver is material to Honeywell stockholders, we will file an amendment to the Registration Statement on Form 10, of which this Information Statement forms a part, to revise the disclosure in the Information Statement accordingly. In the event that Honeywell waives a condition after this Registration Statement becomes effective and such waiver is material, we would communicate such change to Honeywell’s stockholders by filing a Form 8-K describing the change.

The fulfillment of the above conditions will not create any obligation on Honeywell’s part to complete the Spin-Off. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the approval for listing of our common stock and the SEC’s declaration of the effectiveness of the Registration Statement, in connection with the Distribution. Honeywell may at any time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution.

27


 

DIVIDEND POLICY

Once the Spin-Off is effective, we will be evaluating whether to pay cash dividends to our stockholders. The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Among the items we will consider when establishing a dividend policy will be the capital intensive nature of our business and opportunities to retain future earnings for use in the operation of our business and to fund future growth. Additionally, the terms of the indebtedness we intend to incur in connection with the Spin-Off may limit our ability to pay cash dividends. There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence the payment of dividends.

28


 

CAPITALIZATION

The following table sets forth our cash and capitalization as of March 31, 2016, on a historical basis and on an as adjusted basis to give effect to the Spin-Off and the transactions related to the Spin-Off, as if they occurred on March 31, 2016. You should review the following table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical Combined Financial Statements and the accompanying Notes thereto included elsewhere in this Information Statement.

 

 

 

 

 

 

March 31, 2016

 

 

 

Historical

 

As adjusted

(Dollars in thousands)

 

 

 

 

Cash

 

 

$

 

 

 

 

$

 

     

 

 

 

 

 

 

Capitalization

 

 

 

 

Indebtedness:

 

 

 

 

Current debt

 

 

$

 

 

 

 

$

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

Total indebtedness

 

 

 

 

 

 

Equity:

 

 

 

 

Invested equity

 

 

$

 

530,991

   

 

$

 

Common Stock, par value $0.01

 

 

   

 

Additional paid in capital

 

 

   

 

Accumulated other comprehensive loss

 

 

 

(2,623

)

 

 

 

 

 

 

 

 

Total equity

 

 

 

528,368

   

 

 

 

 

 

 

Total capitalization

 

 

$

 

859,540

   

 

$

 

 

 

 

 

 

 

 

 

We have not yet finalized our post-Spin-Off capitalization. Adjusted financial information reflecting our post-Spin-Off capitalization will be included in an amendment to this Information Statement.

29


 

SELECTED HISTORICAL COMBINED FINANCIAL DATA

The following tables present certain selected historical combined financial information as of and for each of the years in the five-year period ended December 31, 2015 and as of March 31, 2016 and for the three months ended March 31, 2016 and 2015. The selected historical combined financial data as of December 31, 2015 and 2014, and for each of the years in the three-year period ended December 31, 2015, are derived from our historical audited Combined Financial Statements included elsewhere in this Information Statement. The selected historical combined financial data as of December 31, 2013, 2012 and 2011 and for the years ended December 31, 2012 and 2011 are derived from our unaudited combined financial information that is not included in this Information Statement. The selected historical combined financial data as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are derived from our unaudited Combined Financial Statements included elsewhere in this Information Statement. The unaudited Combined Financial Statements have been prepared on the same basis as the audited Combined Financial Statements and, in the opinion of our management, include all adjustments, consisting of only ordinary recurring adjustments, necessary for a fair statement of the information set forth in this Information Statement.

The selected historical combined financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical Combined Financial Statements and the accompanying Notes thereto included elsewhere in this Information Statement. For each of the periods presented, our business was wholly owned by Honeywell. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly traded company during the periods presented. In addition, our historical combined financial information does not reflect changes that we expect to experience in the future as a result of our separation from Honeywell, including changes in the financing, operations, cost structure and personnel needs of our business. Further, the historical combined financial information includes allocations of certain Honeywell corporate expenses, as described in “Note 3—Related Party Transactions with Honeywell” to the historical Combined Financial Statements. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that we would have incurred if we had operated as an independent, publicly traded company or of the costs expected to be incurred in the future.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months
Ended March 31,

 

Year Ended December 31,

 

2016

 

2015

 

2015

 

2014

 

2013

 

2012

 

2011

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Statement of Operations Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

$

 

299,831

   

 

$

 

310,229

   

 

$

 

1,329,409

   

 

$

 

1,790,372

 

 

 

$

 

1,766,586

   

$

 

1,788,669

   

$

 

1,481,924

 

Net Income

 

 

 

27,395

   

 

 

3,061

   

 

 

63,776

   

 

 

83,858

   

 

 

118,746

   

 

 

166,155

   

 

 

165,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months
Ended March 31,

 

As of December 31,

 

2016

 

2015

 

2014

 

2013

 

2012

 

2011

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Selected Balance Sheet Information:

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

$

 

859,540

 

 

 

$

 

840,986

 

 

 

$

 

823,048

   

$

 

733,981

   

$

 

650,523

   

$

 

650,673

 

Total liabilities

 

 

 

331,172

   

 

 

361,916

   

 

 

406,293

   

 

 

313,407

   

 

 

303,721

   

 

 

265,472

 

Total equity

 

 

 

528,368

   

 

 

479,070

   

 

 

416,755

   

 

 

420,574

   

 

 

346,802

   

 

 

385,201

 

30


 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements of AdvanSix consist of the unaudited pro forma combined statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 and an unaudited pro forma combined balance sheet as of March 31, 2016. The unaudited pro forma condensed financial statements have been derived from our historical Combined Financial Statements included elsewhere in this Information Statement, and are not intended to be a complete presentation of our financial position or results of operations had the transactions contemplated by the Separation and Distribution Agreement and related agreements occurred as of the dates indicated. The unaudited pro forma combined financial statements should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical Combined Financial Statements and the accompanying Notes included elsewhere in this Information Statement.

The unaudited pro forma combined statements of operations for the three months ended March 31, 2016 and for the year ended December 31, 2015 reflect our results as if the Spin-Off and related transactions described below had occurred as of January 1, 2015. The unaudited pro forma combined balance sheet as of March 31, 2016 reflects our results as if the Spin-Off and related transactions described below had occurred as of such date.

The unaudited pro forma combined financial statements give effect to the following:

 

 

the contribution by Honeywell to us, pursuant to the Separation and Distribution Agreement, of all the assets and liabilities that comprise our business;

 

 

the anticipated post-Distribution capital structure, consisting of (i) the incurrence of approximately $         million of indebtedness and the making of the approximately $         million cash distribution to Honeywell and (ii) the issuance of up to approximately   shares of our common stock to holders of Honeywell common stock. This number of shares is based upon the number of Honeywell common shares outstanding on   and a distribution ratio of   shares of our common stock for every   shares of Honeywell common stock held on the record date of the Distribution. This distribution ratio is used solely for purposes of preparing the unaudited pro forma combined financial statements and does not reflect the actual number of shares of our common stock that will be issued to Honeywell and distributed in the Distribution; and

 

 

the impact of, and transactions contemplated by, the Separation and Distribution Agreement, Employee Matters Agreement, Tax Matters Agreement and other agreements related to the Distribution between us and Honeywell and the provisions contained therein.

The unaudited pro forma combined financial statements are subject to the assumptions and adjustments described in the accompanying notes that reflect the expected impacts of events directly attributable to the Spin-Off and that are factually supportable and, for purposes of statements of operations, are expected to have a continuing impact on us. Our management believes that these assumptions and adjustments are reasonable under the circumstances and given the information available at this time. However, these adjustments are subject to change as we and Honeywell finalize the terms of the Separation and Distribution Agreement and the other agreements related to the Distribution. The unaudited pro forma combined financial statements are provided for illustrative and informational purposes only and are not necessarily indicative of our future results of operations or financial condition as an independent, publicly traded company.

The operating expenses reported in our historical combined statements of operations include allocations of certain Honeywell costs. These costs include the allocation of all Honeywell corporate costs, shared services and other related costs that benefit us.

As a stand-alone public company, we expect to incur additional recurring costs. Our preliminary estimates of the additional recurring costs expected to be incurred annually are approximately   . The significant assumptions involved in determining our estimates of recurring costs of being a stand-alone public company include:

 

 

costs to perform financial reporting, tax, regulatory compliance, corporate governance, treasury, legal, internal audit and investor relations activities;

31


 

 

 

compensation, including equity-based awards, and benefits with respect to new and existing positions;

 

 

insurance premiums;

 

 

depreciation and amortization related to information technology infrastructure investments; and

 

 

the type and level of other costs expected to be incurred.

No pro forma adjustments have been made to our financial statements to reflect the additional costs and expenses described above because they are projected amounts based on estimates and would not be factually supportable.

We currently estimate expenses that we will incur during our transition to being a stand-alone public company to be approximately   . We have not adjusted the accompanying unaudited pro forma combined statements of operations for these estimated expenses as they are not expected to have an ongoing impact on our operating results. We anticipate that substantially all of these expenses will be incurred within   months of the Distribution. These expenses primarily relate to the following:

 

 

accounting, tax and other professional costs pertaining to our separation and establishment as a stand-alone public company;

 

 

compensation, such as modifications to certain bonus awards, upon completion of the separation;

 

 

relocation costs;

 

 

recruiting and relocation costs associated with hiring key senior management personnel new to our company;

 

 

costs related to establishing our new brand in the marketplace; and

 

 

costs to separate information systems.

Due to the scope and complexity of these activities, the amount of these costs could increase or decrease materially and the timing of incurrence could change.

32


 

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Historical as
Reported

 

Pro Forma
Adjustments
(1)

 

Notes

 

As Adjusted

Sales

 

 

$

 

299,831

   

 

$

 

        

   

 

(i

)

 

 

 

$

 

        

 

Costs and expenses:

 

 

 

 

 

 

 

 

Costs of goods sold

 

 

 

245,558

   

 

 

 

 

 

Selling, general and administrative expenses

 

 

 

11,379

   

 

 

 

 

 

Other non-operating, net

 

 

 

(658

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

256,279

   

 

 

 

 

 

Income from Operations

 

 

 

 

 

 

 

 

Interest expense

 

 

   

 

 

 

(e

)

 

 

 

Other expense, net

 

 

   

 

 

 

 

 

Income before taxes

 

 

 

43,552

   

 

 

 

 

 

Income taxes

 

 

 

16,157

   

 

 

 

(a

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

$

 

27,395

   

 

$

   

 

 

 

$

 

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

(g

)

 

 

 

$

 

 

 

Diluted

 

 

 

 

 

 

(h

)

 

 

 

$

 

 

 

Weighted-average number of shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

(g

)

 

 

 

 

 

Diluted

 

 

 

 

 

 

(h

)

 

 

 

 

 

 

 

(1)

 

The change in our cost structure related to our company becoming an independent, publicly traded company is not reflected above.

See accompanying notes to the unaudited pro forma combined financial statements.

33


 

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Historical as
Reported

 

Pro Forma
Adjustments
(1)

 

Notes

 

As Adjusted

Sales

 

 

$

 

1,329,409

   

 

$

 

        

   

 

(i

)

 

 

 

$

 

        

 

Costs and expenses:

 

 

 

 

 

 

 

 

Costs of goods sold

 

 

 

1,179,651

   

 

 

 

 

 

Selling, general and administrative expenses

 

 

 

52,398

   

 

 

 

 

 

Other non-operating, net

 

 

 

(2,877

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,229,172

   

 

 

 

 

 

Income from Operations

 

 

 

 

 

 

 

 

Interest expense

 

 

   

 

 

 

(e

)

 

 

 

Other expense, net

 

 

   

 

 

 

 

 

Income before taxes

 

 

 

100,237

   

 

 

 

 

 

Income taxes

 

 

 

36,461

   

 

 

 

(a

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

$

 

63,776

   

 

$

   

 

 

 

$

 

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

(g

)

 

 

 

$

 

 

 

Diluted

 

 

 

 

 

 

(h

)

 

 

 

$

 

 

 

Weighted-average number of shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

(g

)

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

(h

)

 

 

 

 

 

 

 

 

(1)

 

The change in our cost structure related to our company becoming an independent, publicly traded company is not reflected above.

See accompanying notes to the unaudited pro forma combined financial statements.

34


 

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2016

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Historical As
Reported

 

Pro Forma
Adjustments
(1)

 

Notes

 

As Adjusted

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

 

   

 

$

 

        

   

 

(b

)

 

 

 

$

 

        

 

Accounts receivable—net

 

 

 

145,585

   

 

 

 

 

 

Inventories

 

 

 

138,243

   

 

 

 

 

 

Deferred income taxes

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

 

3,678

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

 

287,506

   

 

 

 

 

 

Property, plant and equipment—net

 

 

 

530,550

   

 

 

 

 

 

Goodwill

 

 

 

15,005

   

 

 

 

(c

)

 

 

 

Other assets

 

 

 

26,479

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

$

 

859,540

   

 

$

   

 

 

 

$

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

 

163,999

   

 

$

   

 

 

 

$

 

Accrued liabilities

 

 

 

17,829

   

 

 

 

(c

)

 

 

 

Current portion of long-term debt

 

 

   

 

 

 

(f

)

 

 

 

Deferred income and customer advances

 

 

 

20,036

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

 

201,864

   

 

 

 

 

 

Deferred income taxes

 

 

 

125,459

   

 

 

 

 

 

Long-term debt

 

 

   

 

 

 

(f

)

 

 

 

Other liabilities

 

 

 

3,849

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

331,172

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONTINGENCIES (Note 8 )

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

Invested equity

 

 

 

530,991

   

 

 

 

(d

)(c)

 

 

 

Accumulated other comprehensive income

 

 

 

(2,623

)

 

 

 

 

 

 

 

Total equity

 

 

 

528,368

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

 

$

 

859,540

   

 

$

   

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

The change in our cost structure related to our company becoming an independent, publicly traded company is not reflected above.

See accompanying notes to the unaudited pro forma combined financial statements.

35


 

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

(a)

 

This adjustment was calculated by applying the statutory tax rate to the pre-tax pro forma adjustments and reflects the estimated tax effects of $         and $         for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively.

 

(b)

 

Represents adjustments to cash as follow:

 

 

 

(Dollars in thousands)

 

 

Cash received from incurrence of debt

 

 

$

 

        

 

Cash distribution to Honeywell

 

 

Cash paid for debt issuance costs

 

 

 

 

 

Total pro forma adjustment to cash

 

 

$

 

 

 

 

 

(c)

 

Reflects an adjustment to assets and liabilities reflected in our historical Combined Financial Statements that will not be retained after the distribution which is comprised of a reserve for a remediation claim related to a former location of our business.

 

(d)

 

Represents the reclassification of Honeywell’s net investment in us, which was recorded in parent company equity, into additional paid-in-capital and common stock to reflect the assumed issuance of approximately   outstanding shares of our common stock at a par value of $0.01 pursuant to the Separation and Distribution Agreement immediately prior to the Spin-Off. We have assumed the number of outstanding shares of our common stock based on the number of shares of Honeywell common stock outstanding on   and a distribution ratio of   shares of our common stock for every         shares of Honeywell common stock.

 

(e)

 

Represents adjustments to interest expense resulting from the assumed incurrence of $         million of indebtedness in connection with the Spin-Off as follows:

 

 

 

 

 

 

 

For the Three
Months Ended
March 31,

 

For the
Year Ended
December 31,

 

2016

 

2015

(Dollars in thousands)

 

 

 

 

Interest expense on assumed $         million term loan with an assumed interest rate of          %

 

 

$

 

        

   

 

$

 

        

 

Amortization of debt issuance costs

 

 

 

 

Annual administration fees

 

 

 

 

 

 

 

 

 

Total pro forma adjustment to interest expense

 

 

$

   

 

$

 

 

 

 

 

 

A 1/8% variance in the assumed interest rate on the debt incurrence would change the annual interest expense by $         .

 

(f)

 

Reflects the assumed incurrence of $         million of indebtedness described in note (e) above and a cash amortization payment equal to   % of the aggregate principal amount on the term loan due by the one-year anniversary of the incurrence thereof.

 

(g)

 

Pro forma basic earnings per share (EPS) and pro forma weighted-average basic number of shares outstanding are based on the number of Honeywell weighted-average shares outstanding for the three months ended March 31, 2016, and for the year ended December 31, 2015, adjusted for a distribution ratio of   shares of AdvanSix common stock for   shares of Honeywell common stock outstanding.

 

(h)

 

Pro forma diluted EPS and pro forma weighted-average diluted number of shares outstanding give effect to the potential dilution from common shares related to equity awards granted under Honeywell’s stock-based compensation program. While the actual impact on a go-forward basis will depend on various factors, we believe the estimate yields a reasonable approximation of the future potentially dilutive impact of AdvanSix’s equity plans.

 

(i)

 

Supply agreements will be put in place to sell certain products to Honeywell that were previously an intercompany transaction. The proforma adjustment reflects the margin based on the negotiated agreement that will be in place at time of the Distribution. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Ongoing Commercial Arrangements—Supply Arrangements”.

36


 

BUSINESS

Introduction

We are a leading manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce engineered plastics, fibers, filaments and films that, in turn, are used in such end-products as automotive and electronic components, carpets, sports apparel, fishing nets and food and industrial packaging. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell the following other products, all of which are produced as part of the Nylon 6 resin manufacturing process:

 

 

Caprolactam . Caprolactam is the key chemical compound used in the production of Nylon 6 resin. In recent years, approximately 50% of the caprolactam we have produced at our facility in Hopewell, Virginia has been shipped to our facility in Chesterfield, Virginia to manufacture Nylon 6 resin. We market and sell the caprolactam that is not consumed internally in Nylon 6 resin production to customers who manufacture polymer resins or use caprolactam to produce nylon fibers, films and other nylon products. Our Hopewell manufacturing facility is the world’s largest single-site producer of caprolactam as of December 31, 2015.

 

 

Ammonium sulfate fertilizer . Ammonium sulfate fertilizer is a co-product of the caprolactam manufacturing process. Because of our Hopewell facility’s size and scale, we are the world’s largest single-site producer of ammonium sulfate fertilizer as of December 31, 2015. We market and sell ammonium sulfate fertilizer primarily to North American and South American resellers and customers who use the product to grow high-quality crops.

 

 

Acetone and other intermediate chemicals . We manufacture, market and sell a number of other chemical co-products that are derived from the chemical processes within our integrated supply chain. Most significant is acetone which is used by our customers in the production of adhesives, paints, coatings, solvents, herbicides and other engineered plastic resins. Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene (“AMS”), cyclohexanone, methyl ethyl ketoxime (“MEKO”), cyclohexanol, acetaldehyde oxime, 2-pentanone oxime, sulfuric acid, ammonia and carbon dioxide.

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As depicted on the following chart, our manufacturing process is fully backward integrated. We use cumene, a chemical compound produced from benzene and propylene, to manufacture phenol and its co-products, acetone and AMS, at our Frankford plant. The majority of the phenol we manufacture is further processed at our Hopewell facility through an integrated series of unit operations which also consume natural gas and sulfur, to produce caprolactam and its co-product ammonium sulfate. Our caprolactam is then shipped to our Chesterfield plant, where it is polymerized into Nylon 6 resin.

Our integrated manufacturing process, scale and the quantity and range of our co-products make us one of the most efficient manufacturers in our industry. We consistently focus on and invest in improving production yields from our various manufacturing processes to build on our leading cost position. Our global logistics infrastructure supports our commercial mission by ensuring a reliable intraplant supply chain and consistent and timely delivery to our customers while maximizing our distribution resources and our operating efficiency. In addition, we strive to understand the product applications and end-markets into which our products are sold, which helps us upgrade the quality, chemical properties or packaging of our products in ways to attract price premiums and greater demand.

All of our manufacturing plants and operations are located in the United States. We serve approximately 500 customers globally located in more than 40 countries. For the years ended December 31, 2015, 2014 and 2013, we had sales of $1,329.4 million, $1,790.4 million and $1,766.6 million and net income of $63.8 million, $83.9 million and $118.7 million, respectively. For the years ended December 31, 2015, 2014 and 2013, our sales to customers located outside the United States were $355.8 million, $502.3 million and $533.5 million, respectively. For the three months ended March 31, 2016 and 2015, we had sales of $299.8 million and $310.2 million, respectively, of which $72.0 million and $80.0 million were to customers located outside the United States. Net income for the periods was $27.4 million and $3.1 million, respectively.

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The following charts illustrate the breakdown of our sales by product category and by region, measured by the destination of each sale, for the year ended December 31, 2015:

 

 

 

 

Competitive Strengths

Our competitive strengths include the following:

Largest Single-Site Producer of Caprolactam . We operate the world’s largest single-site caprolactam production facility, which is a competitive advantage in our highly fragmented industry. Our scale provides operating leverage and the opportunity to achieve stronger business performance than our competitors in several ways. Most fundamentally, our large scale enables us to spread fixed and overhead costs across more pounds of production, thereby enabling us to produce caprolactam at a lower per pound price than our competitors. In addition, the scale of our operations benefits our procurement activities for raw materials and services. Large scale also helps drive our sales. Our reputation as one of the world’s largest and most reliable producers of caprolactam, Nylon 6 resin, and associated chemical intermediates, encourages potential customers to approach us for security of their supply requirements.

Low Cost Position Driven by Favorable Geographical Location, Integrated Manufacturing Footprint and High Utilization Rates. Our access to lower cost raw materials, backward integrated manufacturing facilities and high plant utilization rates help us maintain our position as the world’s lowest cost producer of caprolactam. First, the location of our manufacturing operations in the United States affords us access to the world’s lowest cost natural gas, which is a key raw material needed to manufacture the ammonia used in the production of caprolactam as well as the source of power for our manufacturing operations. By contrast, a significant number of our competitors are located in other geographic locations where energy prices are substantially higher. Second, we are fully backward integrated into several key feedstock materials necessary to produce caprolactam and Nylon 6 resin, particularly phenol, ammonia and oleum/sulfuric acid, which we believe is distinctive in our industry. Backward integration contributes to higher operating margins by lowering raw material transportation, handling and storage costs. It also enables us to remain flexible, while diversifying and maximizing sales from co-products. Our maintenance excellence and mechanical integrity programs have been in place for several years to support stable and high operating rates. Finally, our long-term customer relationships and contracts enable us to maintain high plant utilization rates, which, along with our large scale, provide significant operating leverage. Many contracts are structured with price formulas to help protect our financial performance from certain raw material price fluctuations.

Global Reach. The global reach of our sales and marketing capabilities enables us to compete everywhere nylon resin, caprolactam and ammonium sulfate are consumed. Our sales, marketing, technical and procurement staff reside in eight countries, and in 2015 approximately 27% of our sales were outside the United States. Our freight and logistics capabilities and terminal locations position us well to serve global markets, including the dock and loading facility at our Hopewell facility which is capable of serving ocean-going freight vessels. Our global reach enables us to arbitrage geographic price variations to ensure we are receiving the highest value for our products.

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Technical Know-how, Customer Intimacy and Application Development Capabilities. Our global reach and intimate knowledge of customers and end-market applications for nylon resin combined with our technical know-how enables us to develop specialty nylon resin products that are often valued higher by customers compared to commodity resin products. We have a R&D organization consisting of nearly 50 scientists and engineers with advanced degrees in polymer synthesis, catalysis and chemical and polymer engineering. In June 2015, we expanded our capabilities to test and scale production of copolymer Nylon 6/6.6 resin, used in food packaging films and other applications. In addition to our R&D facility in Colonial Heights, Virginia, we have also invested in an R&D facility located in Shanghai, China that specializes in working with caprolactam and nylon resin customers to develop products for specialty applications. For example, we used the expertise in our Shanghai laboratory to develop a Nylon 6 resin formulation specifically tailored for fishing line and net applications used by commercial fisherman across Southeast Asia.

Diverse Revenue Sources from the Sale of Fertilizer, Acetone and Other Co-products. Due to our specific chemical manufacturing processes, backward integration and scale, we produce ammonium sulfate fertilizer, acetone and a wide range of other chemical co-products that enable us to diversify our revenue sources outside of the caprolactam and nylon resin markets. Most significantly, for every pound of caprolactam, we produce approximately four pounds of ammonium sulfate, a fertilizer used by farmers around the world. For the past two decades we have employed agronomists to educate growers and retailers in the Americas on the yield value of using ammonium sulfate fertilizer on key crops including corn, coffee, sugar and cotton. Sales of ammonium sulfate in 2015 were $338.4 million and represented 25% of our total 2015 sales. Sales of acetone also help us diversify our revenue sources. We are among the most significant suppliers of acetone to a variety of end-markets in North America. Sales of acetone in 2015 were $182.1 million and represented 14% of our total 2015 sales. In addition to fertilizer and acetone, other co-products from our manufacturing process include merchant phenol, AMS, cyclohexanone, cyclohexanol, sulfuric acid, ammonia, MEKO and carbon dioxide. The diversity of our co-product sales mitigates, to some extent, the cyclicality in the caprolactam and nylon resin markets.

Business Strategies

Our business strategies include the following:

Build on Our Low Cost Leadership Position. Through our size, access to low cost raw materials, backward integration and high utilization rates, we intend to continue expanding operating margins by continuing to lower our Nylon 6 resin and caprolactam production costs. Our focus on operational excellence and continuing productivity improvements will be concentrated on the following:

 

 

selective investments to increase production volume through asset reliability, flexibility and capacity. For example, by investing in intermediate chemical buffer storage capacity, we can continue to produce Nylon 6 resin, caprolactam and ammonium sulfate even when the targeted production units are offline for routine maintenance or when there is an unplanned interruption in production;

 

 

energy and direct material yield reduction initiatives aimed at increasing plant productivity, lowering costs and improving asset utilization; and

 

  further deployment of improved procurement processes, competitive bidding and supplier diversification to reduce raw material costs.

Leverage our R&D Investments and Applications Expertise. Our customers typically buy caprolactam and nylon resin for compounding or extruding with additives and other materials, to increase strength or flexibility or to add color to make the resin more suitable for use in their end products such as textiles, packaging and industrial materials. We intend to leverage our R&D investments, customer intimacy and product applications know-how to develop new formulations of resin products to better serve our customers and increase the value of our resin products portfolio. For example, engineered plastics that utilize Nylon 6 and Nylon 6.6 resin are being increasingly used in automobiles to reduce weight as automobile manufacturers strive to meet stricter fuel efficiency

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standards. We intend to work with our customers serving this market to develop resin products specifically tailored for these product applications. Likewise, we are working to develop and sell nylon resin products with differentiated characteristics for wire and cable applications and flexible food packaging. Another area of attention for our R&D initiatives will be nylon resin processing technologies that can produce existing types of high value resins at lower costs.

Selective Investments to Produce Higher Value Products. Historically, a significant portion of the Nylon 6 resin we produced was sold as a commodity product and, as a result, was subject to cyclicality. Over the past several years, we have invested in capabilities to increase the value of our product portfolio. For example, we recently announced the installation of a new production line at our Chesterfield facility that is capable of producing multiple grades of higher value Nylon 6 resin as well as copolymer Nylon 6/6.6 resin, both of which are used in engineered plastics for the automotive industry, films for food packaging, as well as other higher value applications. Similarly, we will explore other investments that will enable us to produce higher value co-products that meet the exacting specifications of customers in certain high value industries.

Pursue a Highly Selective Acquisition Strategy. We expect to seek strategic acquisitions and alliances to supplement our organic sales by broadening our customer base, expanding our geographic reach and developing our technology and product portfolios. For example, we intend to evaluate the potential acquisition of, on a select basis, businesses that would enable us to produce higher value resin products, including copolymers, or would improve our access to certain geographic regions. With respect to higher value resin products, we will seek potential acquisition targets that offer specialized compounding or extruding capabilities in areas such as engineered plastics for automotive products or multilayer film technologies for packaging.

Use of Toll Manufacturers to Produce Higher Margin AdvanSix-Developed Specialty Products. We are adept at using our technical know-how and customer intimacy to develop products that blend our nylon resin with other types of nylon and non-nylon resin products and additives to produce higher value products. Where we do not have the in-house manufacturing capabilities to produce these products, we intend to contract with third-party compounders to toll manufacture for us. By utilizing third-party toll manufacturing arrangements to either divert nylon resin away from more commoditized end-markets or expand the geographic end-markets available to us, we intend to increase sales and expand our operating margins.

Industry Overview

Nylon Resins and Caprolactam. According to PCI Nylon, the global demand for Nylon 6 resin as of December 31, 2015 was approximately 5,020 kMT, spanning a variety of end-uses such as engineered automotive plastics, carpets, textiles, industrial filament and food and industrial films. The market growth typically tracks global growth but varies by end-use. Some of these end-markets, such as engineered automotive plastics, are experiencing increased demand due to trends in light weighting to meet stricter fuel efficiency standards. We expect this trend of increasing demand to continue as our customers find new uses for Nylon 6 resin, both within existing and new end-markets.

Generally, prices for Nylon 6 resin and caprolactam reflect supply and demand as well as the value of the basic raw materials used in the production of caprolactam, primarily benzene, and, depending on the manufacturing process utilized, natural gas and sulfur. The price of benzene is a key driver of caprolactam prices because it is the common chemical compound used in the petrochemical derivatives, such as phenol and cyclohexane, which are the key feedstock materials for caprolactam depending on a given plant’s manufacturing technology. As a result, the global prices for caprolactam are typically set as a spread over the price of benzene. Generally, Nylon 6 resin prices track the cyclicality of caprolactam prices, although, to the extent Nylon 6 resin producers are able to manufacture specialized nylon resin products, prices set above the spread are achievable.

The global market for Nylon 6 resin and caprolactam has undergone significant change in the past five years as Chinese manufacturers have entered the market and increased global supply at a time when demand has remained relatively stable. As a result of the increased capacity and

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competitive intensity, the margins for Nylon 6 resin and caprolactam have declined in recent years to historic lows.

Ammonium Sulfate and Other Chemical Intermediates. Our ammonium sulfate fertilizer products are primarily sold in North and South America. Ammonium sulfate is used as a nitrogen fertilizer on key crops that benefit from sulfur micronutrients and, as of December 31, 2015, accounts for approximately 4% of the global market for nitrogen fertilizer. Urea is one global price driver for all nitrogen fertilizers, including ammonium sulfate, and urea pricing has been under pressure recently due to the loosening of Chinese government export policies and the growth of both Chinese and broader global production capacity. A second global price driver for ammonium sulfate fertilizer is the price of future deliveries of crops, including corn, wheat and coffee, which are impacted by general trends in the agricultural industry.

Our chemical intermediates are used as key inputs for a variety of end-market products including construction materials, paints and coatings, packaging and consumer applications. The prices for our chemical intermediates generally correlate to the prices of their underlying raw materials.

Competition

Competition across all of our product offerings is based on a variety of factors such as price, reliability of supply, product innovation and quality. Other competitive factors include breadth of product line, R&D efforts and technical and managerial capability. While our competitive position varies among our products, we believe we are a significant competitor in each of our major product classes. The global market for Nylon 6 resin and caprolactam is highly fragmented, and we compete with integrated manufacturers, such as BASF Corporation, Sinopec Limited, DOMO Chemicals GmbH, LANXESS AG and Ube Industries, Ltd., which also manufacture many of the same co-products as us. We also compete with manufacturers that only produce polymer resins, such as Li Peng Enterprise Co. Ltd. and Zig Sheng Industrial Co., Ltd. Regarding our co-products, we also compete with synthetic manufacturers of agricultural fertilizers, such as Pasadena Commodities International, and phenol producers, such as Ineos Capital Limited. A number of our products are sold in a market with many competitors, some of which have substantial financial resources and significant technological capabilities. Additionally, our competitors include companies that have global operations as well as those operating only within specific geographic regions.

Product Overview

Nylon 6 Resin

We manufacture our Nylon 6 resin in our Chesterfield plant. As of December 31, 2015, we had the capacity to produce approximately 440 million pounds of Nylon 6 resin per year. We sell our Nylon 6 resin globally, primarily under the Aegis ® brand name. In addition, we use our Nylon 6 resin to produce nylon films at a facility located in Pottsville, Pennsylvania, which we primarily sell to our customers under the Capran ® brand name. In 2015, our Nylon 6 resin products generated $359.8 million of sales. In 2015, 2014 and 2013, Nylon 6 sales were 27%, 25% and 25% of our total sales, respectively.

In June 2015, we expanded our capabilities at our Chesterfield facility to test and scale-up production of various copolymer resins, including Nylon 6/6.6 resin, that can be tailored to our customers’ requirements. As of December 31, 2015, the Chesterfield facility is the only manufacturing site in North America to produce high Nylon 6 content, Nylon 6/6.6 resin. Copolymer resins are used in product applications requiring higher levels of processing, melting points and strengths such as food packaging films and engineering plastics.

Caprolactam

We produce caprolactam, the key monomer used in the production of Nylon 6 resin, at our Hopewell plant using phenol we produce at our Frankford plant and sulfur and natural gas we

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obtain from third-party suppliers. In 2015, caprolactam generated $237.9 million of sales. In 2015, 2014 and 2013, caprolactam sales were 18%, 21% and 21% of our total sales, respectively.

Ammonium Sulfate

Ammonium sulfate fertilizer is a co-product of the integrated caprolactam manufacturing process. For each pound of caprolactam that we manufacture we produce approximately four pounds of ammonium sulfate. Our competitors in the caprolactam market typically produce only approximately two pounds or less of ammonium sulfate for each pound of caprolactam. In 2015, we had an annual production capacity of approximately 3,300 million pounds of ammonium sulfate. We sell ammonium sulfate under the brand name Sulf-N ® . In 2015, our ammonium sulfate products generated $338.4 million of sales. In 2015, 2014 and 2013, ammonium sulfate sales were 25%, 20% and 22% of our total sales, respectively.

Chemical Intermediates

We produce and sell our chemical intermediates to a range of customers for use in many different types of end-products. In 2015, our chemical intermediates products generated $393.2 million of sales, of which $301.5 million, or 77%, came from sales of phenol, acetone and AMS, and $91.7 million, or 23%, came from sales of our other chemical intermediates. In 2015, 2014 and 2013, chemical intermediate sales were 30%, 34% and 32% of our total sales, respectively.

Our Frankford plant has an annual production capacity of approximately 680 million pounds of acetone, as of December 31, 2015. All of our acetone is sold to customers for use in end-products such as adhesives, paints, coatings, solvents, herbicides and other engineered plastic resins. Acetone is also used by our customers as a key raw material in the production of a variety of other chemicals.

Phenol is a key chemical intermediate of caprolactam, and we produce all of the phenol we use in our caprolactam manufacturing process at our Frankford plant. As of December 31, 2015, we had an annual production capacity of approximately 1,100 million pounds of phenol, approximately 75% of which is typically used in our production of caprolactam and other co-products in Hopewell, and approximately 25% of which we sell to customers for use in their product applications. Our customers use phenol to produce a variety of end-products such as resins, epoxies and bisphenolA.

We also produce and sell AMS, MEKO, cyclohexanone, cyclohexanol, acetaldehyde oxime and 2-pentanone oxime. We use some of these products in our manufacturing process and also sell them to customers for use in end-products such as resins, inks, paints, coatings and agricultural chemical intermediates and detergents.

Raw Materials

The primary raw material used in our manufacturing process is cumene, which is produced from benzene and propylene by our suppliers. We purchase from a number of suppliers to ensure security of supply and optimal terms for this key raw material. Other important raw materials we use in our manufacturing process are sulfur and natural gas, which we use to produce caprolactam. We purchase sulfur and natural gas from a diverse set of suppliers.

Historically, we have not experienced any problems renewing contracts with our suppliers or obtaining sufficient quantities of cumene, sulfur, natural gas or any of our other key raw materials. Global supply and demand can significantly impact the price of our key raw materials and historically prices have been cyclical. We continually seek to reduce costs of key raw materials and do not foresee any material constraints in the near term resulting from pricing or availability.

Sales, Marketing and Distribution

We have a global sales force with long-standing relationships with our customers and deep expertise with our products, product applications and end-markets. We predominantly sell directly to our customers, primarily under contracts but also through spot transactions under purchase orders.

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All of our products are supported by our global logistics capability that we employ to ensure reliable and timely delivery to our customers while maximizing distribution resources and efficiency.

Customers

Globally, we serve approximately 500 customers in a wide variety of industries. In 2015, our ten largest customers accounted for approximately 40% of our total sales. Our largest customer is Shaw Industries Group, Inc., one of the world’s largest consumers of caprolactam and Nylon 6 resin. In 2015, 2014 and 2013, our sales to Shaw were 16%, 19% and 17%, respectively, of our total sales. We sell Nylon 6 resin and caprolactam to Shaw under a long-term contract. We typically sell to our other customers under short-term contracts, with one- to two-year terms, or by purchase orders. We generally experience low customer turnover.

Seasonality

Except for our ammonium sulfate fertilizer products, which are influenced by seasonal growing patterns in North and South America, sales of most of our products are subject to minimal or no seasonality. Due to these seasonal sales cycles, we occasionally build up higher inventory balances because the production volumes are tied to caprolactam production, not seasonal demand for fertilizers.

Research and Development; Intellectual Property

We believe success in our industry is driven by technological strength and innovation. Our R&D activities focus equally on improving our chemical manufacturing processes to increase efficiency, capacity and productivity and lower costs and innovating for new product applications.

We benefit from numerous patents and trademarks that we own. We sell our Nylon 6 resin under the Aegis ® brand name, our nylon films under the Capran ® brand name and our ammonium sulfate fertilizer under the Sulf-N ® brand name. Chemical intermediates are also sold under the brand names of Nadone ® , Naxol ® and EZ-Blox Ô . We also benefit from technology covered by trade secrets, including know-how and other proprietary information relating to many of our products, processes and technologies. We do not consider any individual patent, trademark or any licensing or distribution rights related to a specific process or product to be of material importance in relation to our total business. In our judgment, our intellectual property rights are adequate for the conduct of our business. We intend to continue taking steps as necessary to protect our intellectual property, including, when appropriate, filing patent applications for inventions that are deemed important to our business.

We conduct R&D at technology centers, employing approximately 50 researchers. We use space at Honeywell’s technology centers in the United States in Colonial Heights, Virginia and in Shanghai, China. For the years ended December 31, 2015, 2014 and 2013, our R&D expenses were approximately $12.5 million, $12.4 million and $11.5 million, respectively.

Employees

As of December 31, 2015, we employ approximately 1,100 people, of which approximately 400 are salaried employees and approximately 700 are hourly employees. Approximately 700 of our employees are covered under collective bargaining agreements that expire between 2017 and 2019. We have had no strikes or work stoppages during the last five years. We believe that our employee relations are generally good.

Regulation and Environmental Matters

We are subject to various federal, state, local and foreign government requirements regarding protection of human health and the environment. Compliance with these laws and regulations results in higher capital expenditures and costs. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage, and of

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resulting financial liability, in connection with our business. Some risk of environmental damage is, however, inherent in some of our operations and products, as it is with other companies engaged in similar businesses.

We are and have been engaged in the handling, manufacture, use and disposal of many substances classified as hazardous by one or more regulatory agencies. It is possible that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could bring into question our current or past handling, manufacture, use or disposal of these substances.

Among other environmental laws and regulations, we are subject to the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or the “Federal Superfund law”), the Resource Conservation and Recovery Act (“RCRA”) and similar state, foreign and global laws for management and remediation of hazardous materials, the Clean Air Act (“CAA”) and the Clean Water Act, for protection of air and water resources, the TSCA, for regulation of chemicals in commerce and reporting of potential known adverse effects, and numerous other federal, state, local and foreign laws and regulations governing materials transport and packaging, under which we may be designated as a potentially responsible party that may be liable for cleanup costs associated with current operating sites and various hazardous waste sites.

In July 2013, a consent decree was finalized among the United States, the Commonwealth of Virginia and AdvanSix regarding alleged violations of the CAA and the air operating permit at our manufacturing facility in Hopewell, Virginia. In the consent decree, we agreed to pay a civil penalty of $3 million and, among other things, install certain pollution control and other equipment in accordance with a schedule ending in 2019. In October 2015, a consent order was finalized between the Virginia Water Control Board and AdvanSix regarding alleged violations of Hopewell’s Virginia Pollutant Discharge Elimination System permit and other discharge requirements. In the consent order, we agreed to pay a civil penalty of $300,000 and, among other things, take corrective action with respect to process sewers and sumps at our Hopewell facility in accordance with a schedule ending in 2018.

Our business may be impacted by pending climate change legislation, regulation or international treaties or accords in the foreseeable future. We will continue to monitor emerging developments in this area.

See “Risk Factors—We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or liability, which could adversely affect our business, financial condition and results of operations.”

Our accounting policy for environmental expenditures is discussed in “Note 2—Summary of Significant Accounting Policies” to the audited Combined Financial Statements included elsewhere in this Information Statement. We continuously seek to improve our environment, health and safety performance. We have expended funds to comply with environmental laws and regulations and expect to continue to do so in the future.

Our Frankford and Hopewell facilities are regulated facilities under CFATS and the MTSA due to the nature of our operations and the proximity of the facilities to the adjacent waterways. As a result, we are required to comply with numerous regulations administered by the Department of Homeland Security, including the development and implementation of compliant security procedures and protocols. Additionally, sales of acetone, which is a List II Chemical under the TSCA, are regulated by the Drug Enforcement Act. This classification subjects us to audits by the Drug Enforcement Administration and ongoing restrictions on our sales activities with respect to acetone.

Legal and Regulatory Proceedings

We may, from time to time, be involved in litigation arising from our operations in the normal course of business or otherwise.

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Antidumping Actions

On April 29, 2009, MOFCOM initiated an antidumping investigation on imports of Nylon 6 resin into China from the United States. On April 22, 2010, MOFCOM issued a final determination imposing a definitive antidumping duty of 36.2%. The measure was to remain in effect for five years from April 22, 2010. On April 22, 2016, MOFCOM extended the duties for an additional five-year period.

On April 22, 2010, MOFCOM initiated an antidumping investigation on imports of caprolactam into China from the United States. On October 18, 2011, MOFCOM issued a final determination imposing a definitive antidumping duty of 3.6%. The measure was to remain in effect for five years from October 22, 2011. MOFCOM is expected to issue a notice to the Chinese domestic industry providing an opportunity to request an expiry review to extend the duties for an additional five-year period.

On August 12, 2014, the Mexican government initiated an antidumping investigation on imports of ammonium sulfate into Mexico from the United States. On October 9, 2015, the Mexican government issued a final determination imposing a definitive antidumping duty of $0.0759 per kilogram, effective October 10, 2015. On November 6, 2015, Honeywell filed an appeal to a bi-national panel under the North American Free Trade Agreement.

Properties

We will lease our corporate headquarters, which will be located in   . We also own three production facilities located in Frankford, Pennsylvania, Chesterfield, Virginia and Hopewell, Virginia. In addition, we use space at Honeywell’s production facility in Pottsville, Pennsylvania and technology centers for R&D in Colonial Heights, Virginia and Shanghai, China. Honeywell uses space in our Chesterfield, Virginia manufacturing site. We intend to enter into one or more site sharing and services agreements or transition agreements with Honeywell under which we and Honeywell will allow each other to use certain shared R&D facilities and manufacturing sites for specified fees. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Ongoing Commercial Agreements”.

We consider the manufacturing facilities and technology centers and the other properties that we own or lease to be in good condition and generally suitable for the purposes for which they are used. Our manufacturing facilities are maintained through ongoing capital investments, regular maintenance and equipment upgrades. We believe our facilities are adequate for our current operations.

Other Information

We are a Delaware corporation that was incorporated on May 4, 2016. Our principal executive offices are located at 115 Tabor Road, Morris Plains, NJ 07950. Our telephone number is (973) 455-2000. Our website address is   . Information contained on, or connected to, our website or Honeywell’s website does not and will not constitute part of this Information Statement or the Registration Statement on Form 10 of which this Information Statement is a part.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

Business Trends

We produce and sell our Nylon 6 resin and caprolactam as commodity products and also produce and sell our Nylon 6 resin as a specialized resin product. The production of these products is capital intensive, requiring ongoing investments in improving plant reliability, expanding production capacity and achieving higher quality in our resin products. Our results of operations are primarily driven by production volume and the spread between the prices of our products and the costs of the underlying raw materials built into the market-based pricing model we use for most of our products. The global prices for nylon resin are typically set as a spread over the price of caprolactam, which in turn is set as a spread over benzene because cumene and other petrochemicals derived from benzene are the key feedstock material for caprolactam. This price spread has historically experienced cyclicality as a result of global changes in supply and demand. Generally, Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin manufacturers, like AdvanSix, are able to formulate and produce specialized nylon resin products. Our specialized Nylon 6 products and copolymer resin products are typically valued at a higher level than commodity resin products.

Since 2011, commodity resin prices have experienced a cyclical period of downturn as the global market has experienced large increases in supply without a commensurate increase in demand. Most of this supply increase has come from Chinese manufacturers entering the market, although many of our other competitors have also announced recent increases in production capacity. As a result, our margins for Nylon 6 resin and caprolactam have declined in recent years to historic lows. We believe that, in addition to the anticipated upswing that has historically followed periods of oversupply and declining prices, certain trends in the Nylon 6 resin industry are beginning to bolster an increase in demand. Certain end markets that we serve, such as the automotive and electronic components industry, have recently increased demand for Nylon 6 resin by finding new uses for this material in a range of components. Additionally, one of our strategies is to continue developing specialty resin and copolymer products that will obtain higher market value.

Our ammonium sulfate is used by customers as a nitrogen-based fertilizer. Global prices for ammonium sulfate fertilizer are influenced by the price of urea, which is the most widely used source of nitrogen-based fertilizer in the world. Urea pricing has been under pressure recently due to the loosening of urea export restrictions by the Chinese government and the growth of both Chinese and broader global production capacity. A secondary global price driver for ammonium sulfate fertilizer is the price of future deliveries of crops, including corn, wheat and coffee, which are impacted by general trends in the agricultural industry.

We produce ammonium sulfate fertilizer as part of our manufacturing process continuously throughout the year, but sales experience quarterly cyclicality based on the timing and length of the growing seasons in North and South America. See “Business—Seasonality” for more information on the cyclicality of ammonium sulfate fertilizer sales.

The sales we derive from all of our products are impacted by scheduled and unplanned plant outages. We seek to run our production facilities on a nearly continuous basis for maximum efficiency and several of our intermediate products are key feedstock materials for other products in our integrated manufacturing chain. From time to time, we schedule outages to conduct routine and major maintenance at our facilities. In addition, we may experience unplanned interruptions. See “Risk Factors—Any significant unplanned downtime or material disruption at one of our production facilities or logistics operations may adversely affect our business, financial condition and results of operations, and the age of our manufacturing facilities increases the risk for unplanned downtime, which may be significant” for more information. When either scheduled or unplanned outages occur, our results of operations are affected.

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Basis of Presentation

The accompanying historical Combined Financial Statements were derived from the consolidated financial statements and accounting records of Honeywell. These financial statements reflect the combined historical results of operations, financial position and cash flows of the AdvanSix Business, as they were historically managed in conformity with accounting principles generally accepted in the United States. Our historical combined financial information does not reflect changes that we expect to experience in the future as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our business.

In the second quarter of 2016, Honeywell decided to include an additional product line, within the nylon resins product category, in the AdvanSix Business. This has been accounted for as a change in reporting entity and therefore, we have retroactively reflected the historical carrying values and the related activities of this product line in all periods within our historical Combined Financial Statements including related allocations. Subsequent to the preliminary filing with the Securities and Exchange Commission of the Registration Statement on Form 10, of which this Information Statement forms a part, which included our Combined Financial Statements, management determined that it had incorrectly accounted for certain revenue transactions. The Combined Statements of Operations and Combined Balance Sheets for the periods presented, specifically 2014 and 2015, have been corrected to reflect the immaterial revisions to revenue. For additional information, see “Note 1—Organization, Operations and Basis of Presentation” in the Notes accompanying the historical audited Combined Financial Statements included elsewhere in this Information Statement.

Our historical Combined Financial Statements include certain expenses of Honeywell which were allocated to us for certain functions, including legal, accounting, information technology, human resources and other infrastructure support. The cost of these services has been allocated to us on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues, headcount or other relevant measures. We consider these allocations to be a reasonable reflection of the benefits we received for all periods presented. However, these allocations may not be indicative of the actual expenses we would have incurred as an independent public company or of the costs we will incur in the future, and may differ substantially from the allocations we will agree to in the various separation agreements described under “Certain Relationships and Related Party Transactions”.

Subsequent to the completion of the Spin-Off, we expect to incur expenditures consisting of employee-related costs, costs to start up certain stand-alone functions and information technology systems, and other one-time transaction related costs. Recurring stand-alone costs include establishing the internal audit, treasury, investor relations, tax and corporate secretary functions as well as the annual expenses associated with running an independent publicly traded company including listing fees, compensation of non-employee directors, related board of director fees and other fees and expenses related to insurance, legal and external audit. Recurring stand-alone costs that differ from historical allocations may have an impact on profitability and operating cash flows but we believe the impact will not be significant. As a stand-alone public company, we do not expect our recurring stand-alone corporate costs to be materially higher than the expenses historically allocated to us from Honeywell. We believe our cash flow from operations will be sufficient to fund our corporate expenses.

Certain of our eligible hourly and salaried employees participate in a defined benefit pension plan sponsored by Honeywell. When we become a stand-alone, independent entity, these employees will remain entitled to the benefits under this plan accrued prior to the Spin-Off. The plan liabilities of our employees accrued prior to the Spin-Off will remain at Honeywell. In addition, since Honeywell is retaining the liability for accrued benefits under this plan in the period prior to the Spin-Off, we do not record an asset or liability to recognize the funded status of these plans in our historical Combined Financial Statements included elsewhere in this Information Statement. The pension expense related to the participation of our employees in this plan for the years ended December 31, 2015, 2014 and 2013 was $10.2 million, $9.2 million and $9.6 million, respectively. These costs are reported in “cost of goods sold” and in “selling, general and administrative

48


 

expenses” in our historical Combined Financial Statements included elsewhere in this Information Statement, depending on the functions of the employees to whom the pension costs relate.

We have not yet finalized our post-Spin-Off capitalization. We intend to incur indebtedness in the aggregate principal amount of approximately $         million in the form of term loans, of which approximately $         million in net proceeds will be distributed to Honeywell prior to the consummation of the Spin-Off. We also intend to enter into a revolving facility to be available for our working capital and other cash needs. Additional information regarding our indebtedness following the Spin-Off will be provided in subsequent amendments to this Information Statement. See “Liquidity and Capital Resources” for more information on our capitalization plan.

We will assume all environmental, health and safety (“EHS”) liabilities and compliance obligations related to the past and future operation of our business as currently conducted, as well as all EHS liabilities associated with our three current manufacturing locations, including any EHS liabilities under governmental cleanup programs or related to any past contamination or conditions at such properties. Honeywell will retain all EHS other liabilities related to former business locations or the operation of our former businesses. Although we have ongoing environmental remedial obligations at certain of our facilities, in the past three years, our remediation costs have not been material, and we do not expect our remediation costs to address known obligations to be material for 2016. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”.

Consolidated Results of Operations for the Three Months Ended March 31, 2016 and 2015

(Dollars in thousands)

Sales

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2016

 

2015

Sales

 

 

$

 

299,831

   

 

$

 

310,229

 

% change compared with prior period

 

 

 

(3.4

%)

 

 

 

The change in sales is attributable to the following:

 

 

 

 

 

Three Months Ended
March 31,
2016 versus 2015

Volume

 

 

 

16.3

%

 

Price

 

 

 

(19.4

)%

 

Other

 

 

 

(0.3

)%

 

 

 

 

 

 

 

 

(3.4

)%

 

 

 

 

Sales decreased for the three months ended March 31, 2016 compared to the prior period by $10.4 million or approximately 3.4% primarily driven by lower prices of the raw materials used to manufacture our intermediate chemicals, caprolactam and polymer resins and pricing pressure in these end-markets (approximately 19.0% unfavorable impact). In this industry, prices for the end products are usually based on a spread over the raw material prices. As the price of cumene, which is a key feedstock material for our products, dropped significantly period over period, the corresponding sales also dropped. The decrease was partially offset by volume improvement across our product lines driven by improved plant performance (approximately 16.1% favorable impact) primarily related to the absence of unplanned plant outages in the three months ended March 31, 2016 as compared to the same period in the prior year.

Cost of Goods Sold

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2016

 

2015

Cost of products and services sold

 

 

$

 

245,558

   

 

$

 

294,683

 

% change compared with prior period

 

 

 

(16.7

%)

 

 

 

Gross margin percentage

 

 

 

18.1

%

 

 

 

 

5.0

%

 

49


 

Cost of products and services sold decreased for the three months ended March 31, 2016 compared to the prior period by $49.1 million or approximately 16.7% primarily due to improved plant operating performance in the three months ended March 31, 2016 as compared to the same period in the prior year (approximately 7.6% favorable impact), a drop in raw materials prices, particularly cumene and natural gas (approximately 3.3% favorable impact) and the termination of a long-term supply agreement (approximately 5.2% favorable impact).

Gross margin percentage increased by 13.1% for the three months ended March 31, 2016 compared to the prior period primarily due to the net impact of declining market pricing (approximately 19.4% unfavorable impact), offset by the benefits from termination of a long-term supply agreement (approximately 5.0% favorable impact) and improved plant operating performance and lower raw material costs (approximately 26.6% favorable impact).

Selling, General and Administrative Expenses

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2016

 

2015

Selling, general and administrative expenses

 

 

$

 

11,379

   

 

$

 

11,387

 

% of sales

 

 

 

3.8

%

 

 

 

 

3.7

%

 

Changes in the selling, general and administrative expenses were not material for the three months ended March 31, 2016 compared to the prior period.

Tax Expense

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2016

 

2015

Tax expense

 

 

$

 

16,157

   

 

$

 

1,745

 

Effective tax rate

 

 

 

37.1

%

 

 

 

 

36.3

%

 

Changes in the tax expense during the three months ended March 31, 2016 compared to the prior period were primarily driven by the increase in income before taxes.

The effective tax rate increased by 0.8 percent for the three months ended March 31, 2016 compared to the prior period primarily due to a gain recognized in the three months ended March 31, 2016 related to the termination of a long-term supply agreement that was taxed at a higher rate than the estimated annual effective tax rate.

The effective tax rates for the three months ended March 31, 2016 and 2015 were higher than the U.S. Federal statutory rate of 35% due to state taxes, partially offset by U.S. manufacturing incentives.

Net Income

As a result of the factors described above, our net income was $27.4 million for the three months ended March 31, 2016, as compared to $3.1 million for the prior period.

Consolidated Results of Operations for the Years Ended December 31, 2015, 2014 and 2013

(Dollars in thousands)

Sales

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2013

Sales

 

 

$

 

1,329,409

   

 

$

 

1,790,372

   

 

$

 

1,766,586

 

% change compared with prior period

 

 

 

(25.7

)%

 

 

 

 

1.3

%

 

 

 

The change in sales is attributable to the following:

 

 

 

 

 

 

 

2015 versus 2014

 

2014 versus 2013

Volume

 

 

 

(2.5

)%

 

 

 

 

3.7

%

 

Price

 

 

 

(23.2

)%

 

 

 

 

(2.4

)%

 

 

 

 

(25.7

)%

 

 

 

 

1.3

%

 

50


 

2015 compared with 2014

Sales decreased in 2015 compared with 2014 by $461.0 million or approximately 25.7% primarily driven by lower prices of the raw materials used to manufacture our intermediate chemicals, caprolactam and polymer resins (approximately 23.2% unfavorable impact). In this industry, prices for the end products are usually based on a spread over the raw material prices. As the price of cumene, which is a key feedstock material for our products, dropped significantly year over year, the corresponding sales also dropped. A secondary driver of this decrease was unplanned plant outages (approximately 2.5% unfavorable impact).

2014 compared with 2013

Sales increased in 2014 compared to 2013 by $23.8 million or approximately 1.3%. This was driven by increased sales volume of ammonium sulfate fertilizer products in 2014 due to higher ammonium sulfate fertilizer inventory balances at the end of 2013 (approximately 2.5% favorable impact) and higher plant production rates for intermediates chemicals (approximately 1.2% favorable impact). Sales were impacted by lower pricing in ammonium sulfate fertilizer products (approximately 4.3% unfavorable impact) partially offset by higher pricing primarily in the caprolactam and resins products (approximately 1.9% favorable impact).

Cost of Goods Sold

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2013

Cost of products and services sold

 

 

$

 

1,179,651

   

 

$

 

1,607,028

   

 

$

 

1,530,705

 

% change compared with prior period

 

 

 

(26.6

)%

 

 

 

 

5.0

%

 

 

 

Gross margin percentage

 

 

 

11.3

%

 

 

 

 

10.2

%

 

 

 

 

13.4

%

 

2015 compared with 2014

Cost of goods sold decreased in 2015 compared with 2014 by $427.4 million or approximately 26.6% primarily due to a drop in raw materials prices, particularly cumene and natural gas (approximately 25.5% impact), and lower sales volume due to unplanned plant outages (approximately 1.1% impact).

Gross margin percentage increased in 2015 compared with 2014 by 1.0% primarily due to the net impact of pricing over raw material costs (approximately 1.8% favorable impact) offset by unfavorable production volumes (approximately 0.8% unfavorable impact).

2014 compared with 2013

Cost of goods sold increased in 2014 compared with 2013 by $76.3 million or approximately 5.0% primarily due to higher costs of natural gas and cumene (approximately 4.0% unfavorable impact) and higher utility and maintenance costs (approximately 1.0% unfavorable impact).

Gross margin percentage decreased in 2014 compared with 2013 by approximately 3.1% primarily due to a drop in ammonium sulfate fertilizer prices compounded by higher raw materials costs (approximately 6.0% unfavorable net impact), offset by improved production volumes (approximately 2.8% favorable impact).

Selling, General and Administrative Expenses

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2013

Selling, general and administrative expense

 

 

$

 

52,398

   

 

$

 

53,931

   

 

$

 

53,416

 

% of sales

 

 

 

3.9

%

 

 

 

 

3.0

%

 

 

 

 

3.0

%

 

Changes in the selling, general and administrative expenses were not material in 2015 compared with 2014 or 2014 compared with 2013.

Tax Expense

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2013

Income taxes

 

 

$

 

36,461

   

 

$

 

48,189

   

 

$

 

65,547

 

Effective tax rate

 

 

 

36.4

%

 

 

 

 

36.5

%

 

 

 

 

35.6

%

 

51


 

Changes in the tax expense were not material in 2015 compared with 2014 or 2014 compared with 2013.

For discussion of income taxes and the effective income tax rate, see “Note 4—Income Taxes” in the Notes accompanying the audited Combined Financial Statements included elsewhere in this Information Statement.

The effective income tax rates for 2015, 2014 and 2013 are higher than the U.S. Federal statutory rate of 35.0% primarily due to state taxes, partially offset by U.S. manufacturing incentives.

Net Income

2015 compared with 2014

As a result of the factors described above, our net income was $63.8 million in 2015, as compared to $83.9 million in 2014.

2014 compared with 2013

As a result of the factors described above, our net income was $83.9 million in 2014, as compared to $118.7 million in 2013.

Liquidity and Capital Resources

Liquidity

Current Liquidity

Our cash flows from operations have been distributed to Honeywell on a periodic basis, and we have historically relied on Honeywell to fund our cash requirements. We believe that cash balances, together with a portion of the cash proceeds from the indebtedness we intend to incur in connection with the Spin-Off, and operating cash flows will provide adequate funds to support our current annual operating plan.

Our principal source of liquidity is our cash flows generated from operating activities, which provides us with the ability to meet the majority of our short-term funding requirements. Our operating cash flows are affected by capital requirements, production volume (which is impacted by scheduled and unplanned plant outages), the prices of our raw materials and general economic and industry trends.

We monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities.

Future Liquidity

On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, capital expenditures and environmental compliance costs, strategic acquisitions, employee benefit obligations and interest payments. Our ability to fund these needs will depend, in part, on our ability to generate or raise cash in the future, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.

Following the Spin-Off, our capital structure and sources of liquidity will change significantly from our historical capital structure and sources of liquidity. We will no longer participate in cash management and funding arrangements with Honeywell. Instead, our ability to fund our capital needs will depend on our ongoing ability to generate cash from operations and access to credit and capital markets. We believe that our future cash from operations, together with our access to funds on hand and credit and capital markets, will provide adequate resources to fund our operating and financing needs.

52


 

We will assume all EHS liabilities and compliance obligations related to the past and future operations of our business, as well as all EHS liabilities associated with our three current manufacturing locations and the other locations used in our current operations, including any cleanup or other liabilities related to any contamination that may have occurred at such properties in the past. Honeywell will retain all EHS liabilities related to former business locations or the operation of our former businesses. See “Certain Relationships and Related Party Transactions—Agreements with Honeywell—Separation and Distribution Agreement”. Although we have ongoing environmental remedial obligations at certain of our facilities, in the past three years, our remediation costs have not been material, and we do not expect our remediation costs to address known obligations to be material for 2016.

We intend to incur indebtedness in the aggregate principal amount of approximately $         million in the form of term loans, of which approximately $         million in net proceeds will be distributed to Honeywell prior to the consummation of the Spin-Off. We also intend to enter into a revolving facility to be available for our working capital and other cash needs. We will require cash to fund interest payments in respect of this indebtedness and borrowings under the revolving credit facility.

We expect that our primary cash requirements in 2016 will primarily be to fund capital expenditures. See “—Capital Expenditures” for more information.

Cash Flow Summary for the Three Months Ended March 31, 2016 and 2015

Our cash flows from operating, investing and financing activities for the three months ended March 31, 2016 and 2015, as reflected in the unaudited Combined Financial Statements included elsewhere in this Information Statement, are summarized as follows:

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2016

 

2015

(Dollars in thousands)

 

 

 

 

Cash provided by (used for):

 

 

 

 

Operating activities

 

 

$

 

4,042

   

 

$

 

32,691

 

Investing activities

 

 

 

(24,829

)

 

 

 

 

(26,885

)

 

Financing activities

 

 

 

20,787

   

 

 

(5,806

)

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

$

 

   

 

$

 

 

 

 

 

 

 

Cash provided by operating activities decreased by $28.7 million primarily due to (1) a $52.0 million unfavorable impact from working capital, (2) a $10.0 million increase in other assets and liabilities primarily driven by an increase in non-current assets at our Hopewell facility, partially offset by a $24.3 million increase in net income and a $8.1 million increase in deferred income taxes.

Cash used for investing activities decreased by $2.1 million primarily due to a decrease in capital expenditures of $2.1 million.

Cash provided by financing activities increased by $26.6 million primarily due to $26.4 million net increase in invested equity.

Cash Flow Summary for the Years Ended December 31, 2015, 2014 and 2013

Our cash flows from operating, investing and financing activities for the years ended December 31, 2015, 2014 and 2013, as reflected in the audited Combined Financial Statements included elsewhere in this Information Statement, are summarized as follows:

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

(Dollars in thousands)

 

 

 

 

 

 

Cash provided by (used for):

 

 

 

 

 

 

Operating activities

 

 

$

 

101,536

   

 

$

 

188,424

   

 

$

 

119,995

 

Investing activities

 

 

 

(98,230

)

 

 

 

 

(102,200

)

 

 

 

 

(74,338

)

 

Financing activities

 

 

 

(3,306

)

 

 

 

 

(86,224

)

 

 

 

 

(45,657

)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

 

 

 

 

 

53


 

2015 compared with 2014

Cash provided by operating activities decreased by $86.9 million primarily due to (1) a $35.7 million decrease in customer advances driven by timing (see “Note 2—Summary of Significant Accounting Policies” in the Notes accompanying the audited Combined Financial Statements included elsewhere in this Information Statement), (2) a $22.2 million unfavorable impact from working capital, (3) a $20.1 million decrease in net income and (4) a decrease in deferred taxes of $7.0 million driven by the impact of accelerated tax depreciation.

Cash used for investing activities decreased by $4.0 million primarily due to a decrease in capital expenditures of $4.2 million.

Cash used for financing activities increased by $82.9 million primarily due to a $83.1 million net decrease in invested equity.

2014 compared with 2013

Cash provided by operating activities increased by $68.4 million due to (1) a $72.6 million favorable impact from working capital and (2) a $28.4 million increase in customer advances driven by timing (see “Note 2—Summary of Significant Accounting Policies” in the Notes accompanying the audited Combined Financial Statements included elsewhere in this Information Statement), partially offset by a $34.9 million decrease in net income.

Cash used for investing activities increased by $27.9 million primarily due to an increase in capital expenditures of $27.5 million related to ongoing annual expenses, regulatory compliance investments and production and capacity expansion.

Cash used for financing activities increased by $40.6 million primarily due to a $40.5 million net increase in invested equity.

Contractual Obligations and Probable Liability Payments

Following is a summary of our significant contractual obligations and probable liability payments at December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments by Period

 

Total

 

2016

 

2017-2018

 

2019-2020

 

Thereafter

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Capitalized leases

 

 

$

 

862

 

 

 

$

 

194

 

 

 

$

 

232

 

 

 

$

 

201

 

 

 

$

 

235

 

Interest payments on capitalized leases

 

 

 

76

 

 

 

 

19

 

 

 

 

30

 

 

 

 

19

 

 

 

 

8

 

Minimum operating lease payments

 

 

 

106

 

 

 

 

9

 

 

 

 

14

 

 

 

 

6

 

 

 

 

77

 

Purchase obligations (1)

 

 

 

210

 

 

 

 

71

 

 

 

 

59

 

 

 

 

80

 

 

 

 

 

Estimated environmental compliance costs (2)

 

 

 

4,008

 

 

 

 

3,212

 

 

 

 

753

 

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual obligations and probable liability payments

 

 

$

 

5,262

 

 

 

$

 

3,505

 

 

 

$

 

1,088

 

 

 

$

 

349

 

 

 

$

 

320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Purchase obligations are entered into with various vendors in the normal course of business, are consistent with our expected requirements and primarily relate to cumene, oleum, sulfur and natural gas.

 

(2)

 

The payment amounts in the table only reflect the environmental compliance costs which are probable and reasonably estimable as of December 31, 2015.

Capital Expenditures

Our operations are capital intensive, requiring ongoing investments that have consisted, and are expected to continue to consist, primarily of capital expenditures required to improve equipment reliability, expand production capacity and comply with environmental and safety regulations.

The following table summarizes ongoing and expansion capital expenditures:

54


 

 

 

 

 

 

 

 

 

 

 

 

Three Months
Ended March 31,

 

Years Ended December 31,

 

2016

 

2015

 

2014

 

2013

(Dollars in thousands)

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

$

 

24,626

   

 

$

 

97,144

   

 

$

 

101,382

   

 

$

 

73,912

 

Capital expenditures decreased $4.2 million from 2014 to 2015 primarily due to lower replacement maintenance capital expenditures at our Hopewell plant and lower environmental compliance costs, offset in large part by higher capacity expansion investments at our Chesterfield facility and costs associated with the installment of a new pilot plant line at our Colonial Heights facility.

Capital expenditures increased $27.5 million from 2013 to 2014 primarily due to higher replacement maintenance capital expenditures and infrastructure costs at our Hopewell facility, higher capacity investments at our Chesterfield facility and increased environmental compliance costs.

Capital expenditures were $24.6 million for the three months ended March 31, 2016. For the remainder of 2016, we expect our total capital expenditures to be between approximately $75.0 million and $85.0 million. For 2017, we expect our total capital expenditures to be between approximately $95.0 million and $105.0 million. Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, expand production capacity and comply with environmental and safety regulations. For the remainder of 2016 and for 2017, we expect our capital expenditures related to environmental compliance to be approximately $20.0 million and $27.0 million, respectively.

Off-Balance Sheet Arrangements

As of March 31, 2016 and December 31, 2015, we do not have any off-balance sheet arrangements or financing activities with special-purpose entities.

Critical Accounting Policies

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies discussed below to be critical to the understanding of our financial statements.

Commodity Price Risk Management —Our sales prices and costs of goods sold are closely aligned to prices for commodities such as crude oil and natural gas. We primarily mitigate our exposure to commodity price risk through the use of long-term, fixed-price contracts with our suppliers and formula price agreements with suppliers and customers. We also mitigate unexpected volatility in natural gas prices through derivative financial instruments in the form of forward commodity contracts with third parties designated as hedges. We measure our derivative financial instruments on a quarterly basis by obtaining the best available independent market quotations or market transactions in either the listed or over-the-counter markets, both of which are level 2 within the fair value hierarchy.

Inventory Adjustments —Substantially all of the business’s inventories are valued at the lower of cost or market using the last-in, first-out method. We review our inventory balances at least quarterly, and more frequently if required by market conditions, to determine whether the carrying amount of inventories exceeds their fair market value with any excess carrying amount above market prices adjusted in the period identified. This review process incorporates current industry and customer-specific trends, current operating plans, historical price activity and selling prices expected to be realized. Inventories are presented net of adjustments recorded for slow-moving, excess or obsolete inventory based on management’s consideration of pertinent factors, such as product aging, current and future customer demand and market conditions. The recoverability of inventory balances is reviewed on a quarterly basis.

55


 

Long-Lived Assets (including Tangible and Finite-Lived Intangible Assets) —The determination of useful lives (for depreciation/amortization purposes) and whether or not tangible and intangible assets are impaired involves the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. We evaluate the recoverability of the carrying amount of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be fully recoverable. The principal factors in considering when to perform an impairment review are as follows:

 

 

significant under-performance, such as declines in sales, earnings or cash flows, of our products in relation to expectations;

 

 

annual operating plans or five-year strategic plans that indicate an unfavorable trend in operating performance of our products;

 

 

significant negative industry or economic trends; or

 

 

significant changes or planned changes in our use of the assets.

Once it is determined that an impairment review is necessary, recoverability of assets is measured by comparing the carrying amount of the asset grouping to the estimated future undiscounted cash flows. If the carrying amount exceeds the estimated future undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is then measured as the difference between the carrying amount of the asset grouping and its fair value. We endeavor to utilize the best information available to measure fair value, which is usually either market prices (if available) with respect to level 1 or level 2 of the fair value hierarchy, or an estimate of the future discounted cash flow with respect to level 3 of the fair value hierarchy. The key estimates in our discounted cash flow analysis include expected industry growth rates, our assumptions as to volume, selling prices and costs, and the discount rate selected.

Market Risk Management

See “Note 9—Financial Instruments and Fair Value Measures” and “Note 7—Financial Instruments and Fair Value Measures” in the Notes accompanying the audited and unaudited Combined Financial Statements, respectively, included elsewhere in this Information Statement for a discussion relating to market risk.

Other Matters

Litigation and Environmental Matters

See “Note 10—Commitments and Contingencies” and “Note 7—Commitments and Contingencies” in the Notes accompanying the audited and unaudited Combined Financial Statements, respectively, included elsewhere in this Information Statement.

Recent Accounting Pronouncements

See “Note 2—Summary of Significant Accounting Policies” and “Note 2—Recent Accounting Pronouncements” in the Notes accompanying the audited and unaudited Combined Financial Statements, respectively, included elsewhere in this Information Statement.

56


 

MANAGEMENT

The following table presents information, as of July 25, 2016, concerning our executive officers and directors following the Spin-Off, including a five-year employment history. We are in the process of identifying additional individuals to serve on our Board following the Spin-Off, and we expect to provide details regarding these individuals in an amendment to this Information Statement.

 

 

 

 

 

Name

 

Age

 

Position with AdvanSix

Erin N. Kane

 

 

 

39

   

Director and Chief Executive Officer

Paul E. Huck

 

 

 

66

   

Director

Jonathan Bellamy

 

 

 

50

   

Chief Human Resources Officer

Michael Preston

 

 

 

45

   

Senior Vice President and Chief Financial Officer

John M. Quitmeyer

 

 

 

65

   

Senior Vice President, General Counsel and Corporate Secretary

Ms. Erin N. Kane

Ms. Kane has been vice president and general manager of Honeywell Resins and Chemicals since October 2014. She joined Honeywell in 2002 as a Six Sigma Blackbelt of Honeywell’s Specialty Materials business. In 2004, she was named product marketing manager of Honeywell’s Specialty Additives business. From 2006 until 2008, Ms. Kane served as global marketing manager of Honeywell’s Authentication Technologies business, and in 2008 she was named global marketing manager of Honeywell’s Resins and Chemicals business. In 2011, she was named business director of chemical intermediates of Honeywell’s Resins and Chemicals business. Prior to joining Honeywell, Ms. Kane held Six Sigma and process engineering positions at Elementis Specialties and Kvaerner Process. Ms. Kane brings to the Board her knowledge of AdvanSix’s business and industry experience and expertise.

Mr. Paul E. Huck

Mr. Huck was the chief financial officer of Air Products and Chemicals, a global industrial gas and chemical company, from 2004 until his retirement in 2013. Prior to that, he served as Air Products and Chemicals’ corporate controller from 1994 until 2004. Mr. Huck joined Air Products and Chemicals in 1979 as a financial analyst and held various positions, including manager of project control, controller of the equipment division, controller of the chemicals group and controller of the environmental and energy systems group. Before joining Air Products and Chemicals, Mr. Huck was an officer in the U.S. Navy.

Mr. Huck has served on the Board of Orion Engineered Carbons S.A. since 2014. He also serves on various non-profit boards. Mr. Huck formerly served as a director of NewPage Corporation.

Mr. Huck will bring to the Board over 30 years of leadership and financial and accounting experience in the chemical industry.

Mr. Jonathan Bellamy

Mr. Bellamy has been vice president of human resources of the Defense and Space business of Honeywell’s Aerospace division since 2015. He joined Honeywell in 1997 as human resources manager of the Turbo Technologies division. From March 2000 until February 2003, Mr. Bellamy served as human resources manager, then regional director of Honeywell’s Turbo Technologies division. From February 2003 until December 2004, he served as director of human resources of Honeywell Transportation Systems, Asia. From December 2004 until November 2005, Mr. Bellamy served as global human resources director of Honeywell’s Friction Materials division. From November 2005 until July 2010, Mr. Bellamy served as corporate human resources director. From 2010 to 2015, he was vice president of human resources of Honeywell UOP. Prior to joining Honeywell, Mr. Bellamy held human resources and operations positions at BTR Brook Hansen and N.S.K./RHP Bearings.

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Mr. Michael Preston

Mr. Preston has been chief financial officer of Honeywell UOP since 2013. He joined Honeywell in 2001 as manager of Investor Relations. In 2003, he was named director of Business Analysis and Planning for Honeywell. From 2005 until 2008, Mr. Preston served as a director of Financial Planning and Analysis of the Performance Materials & Technologies division (“PMT”), and in 2008 he was named chief financial officer of PMT’s Fluorine Products business. In 2012, Mr. Preston was named vice president of Business Analysis and Planning for Honeywell. Prior to joining Honeywell, Mr. Preston held investor relations consulting positions at Thomson Financial and Kissel-Blake.

Mr. John M. Quitmeyer

Mr. Quitmeyer has been vice president and general counsel of Honeywell’s Automation and Control Solutions strategic business group since 2005. He joined Honeywell in 1997 as general counsel of Honeywell’s safety restraint business. From 1997 until 1998, Mr. Quitmeyer served as general counsel of Honeywell’s automotive products group. From 1998 until 2000, Mr. Quitmeyer served as general counsel of Honeywell’s consumer products group. From 2000 until 2002, Mr. Quitmeyer was Honeywell’s chief litigation counsel. From 2002 until 2005, Mr. Quitmeyer served as general counsel of Honeywell’s Specialty Materials business. Prior to joining Honeywell, Mr. Quitmeyer was a litigation partner at Rogers & Wells.

Our Board of Directors Following the Spin-Off and Director Independence

Immediately following the Spin-Off, we expect that our Board will comprise seven directors. The New York Stock Exchange rules require that the Board have a majority of independent directors, and we plan for our Board to consist of a majority of independent directors at the time of the Spin-Off. Our Amended and Restated By-laws will provide that the chairman of our Board will be an independent director.

Committees of the Board

Effective upon the completion of the Spin-Off, our Board will have the following committees, each of which will operate under a written charter that will be posted on our website prior to the Spin-Off.

Audit Committee

The Audit Committee will be established in accordance with Section 3(a)(58)(A) and Rule 10A-3 under the Exchange Act. The responsibilities of our Audit Committee will be more fully described in our Audit Committee charter. We anticipate that our Audit Committee, among other duties, will oversee:

 

 

management’s conduct of our financial reporting process (including the development and maintenance of systems of internal accounting and financial controls);

 

 

the integrity of our financial statements;

 

 

our compliance with legal and regulatory requirements;

 

 

the qualifications and independence of our outside auditor;

 

 

the performance of our internal audit function;

 

 

the outside auditor’s annual audit of our financial statements; and

 

 

the preparation of certain reports required by the rules and regulations of the SEC.

The Audit Committee will have at least three members and will consist entirely of independent directors, each of whom will meet the independence requirements set forth in the listing standards of the New York Stock Exchange, Rule 10A-3 under the Exchange Act and our Audit Committee charter. Each member of the Audit Committee will be financially literate, and at least one member of the Audit Committee will have accounting and related financial management expertise and satisfy the criteria to be an “audit committee financial expert” under the rules and regulations of the SEC,

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as those qualifications are interpreted by our Board in its business judgment. The initial members of the Audit Committee will be determined prior to the Spin-Off.

Compensation Committee

The responsibilities of our Compensation Committee will be more fully described in our Compensation Committee charter, and we anticipate that they will include, among other duties:

 

 

determining and approving the compensation of our Chief Executive Officer;

 

 

reviewing and approving the compensation of our other executives;

 

 

overseeing the administration and determination of awards under our compensation plans; and

 

 

preparing any report on executive compensation required by the rules and regulations of the SEC.

The Compensation Committee will consist entirely of independent directors, each of whom will meet the independence requirements set forth in the listing standards of the New York Stock Exchange, Rule 10C-1 under the Exchange Act and our Compensation Committee charter. The members of our Compensation Committee will be “non-employee directors” (within the meaning of Rule 16b-3 under the Exchange Act) and “outside directors” (within the meaning of Section 162(m) of the Code). The initial members of our Compensation Committee will be determined prior to the Spin-Off.

Nominating and Governance Committee

The responsibilities of our Nominating and Governance Committee will be more fully described in our Nominating and Governance Committee charter, and we anticipate that they will include, among other duties:

 

 

overseeing our corporate governance practices;

 

 

reviewing and recommending to our Board amendments to our by-laws, certificate of incorporation, committee charters and other governance policies;

 

 

reviewing and making recommendations to our Board regarding the structure of our various board committees;

 

 

identifying, reviewing and recommending to our Board individuals for election to the Board;

 

 

adopting and reviewing policies regarding the consideration of candidates for our Board proposed by stockholders and other criteria for membership on our Board;

 

 

overseeing the Chief Executive Officer succession planning process, including an emergency succession plan;

 

 

reviewing the leadership structure for our Board;

 

 

overseeing our Board’s annual self-evaluation; and

 

 

overseeing and monitoring general governance matters, including communications with stockholders and regulatory developments relating to corporate governance.

The Nominating and Governance Committee will consist entirely of independent directors, each of whom will meet the independence requirements set forth in the listing standards of the New York Stock Exchange and our Nominating and Governance Committee charter. The initial members of the Nominating and Governance Committee will be determined prior to the Spin-Off.

Code of Business Ethics

Prior to the completion of the Spin-Off, we will adopt a written code of business ethics that is designed to deter wrongdoing and to promote, among other things:

 

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

 

the protection of the confidentiality of our non-public information;

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the responsible use of and control over our assets and resources;

 

 

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and other regulators and in our other public communications;

 

 

compliance with applicable laws, rules and regulations; and

 

 

accountability for adherence to the code and prompt internal reporting of any possible violation of the code.

Director Nomination Process

Our initial Board will be selected through a process involving both Honeywell and us. The initial directors who will serve after the Spin-Off will begin their terms at the time of the Distribution, with the exception of one independent director who will begin his or her term prior to the date on which “when-issued” trading of our common stock commences on the New York Stock Exchange and will serve on our Audit Committee, Compensation Committee and Nominating and Governance Committee.

Communications with Non-Management Members of the Board of Directors

Generally, it is the responsibility of our management to speak for us in communications with outside parties, but we intend to set forth, in our corporate governance policies, certain processes by which stockholders and other interested third parties may communicate with non-management members of our Board.

Director Compensation

We expect to adopt a compensation program for our non-employee directors effective upon the completion of the Spin-Off that consists of a combination of annual cash retainer fees and equity-based compensation. Directors who are also employees of AdvanSix will not receive any additional compensation for their service as a director. We have not yet paid any compensation to our non-employee directors.

Cash Compensation

Under the expected program, non-employee directors will receive $80,000 per year as an annual cash retainer for their service on the Board. In addition, non-employee directors will receive additional retainers for the following roles:

 

 

The Independent Chairman of the Board will receive $60,000 per year.

 

 

The Chair of the Audit Committee will receive $20,000 per year and each other member of the Audit Committee will receive $10,000 per year;

 

 

The Chair of the Compensation Committee will receive $15,000 per year and each other member of the Compensation Committee will receive $7,500 per year;

 

 

The Chair of the Nominating and Governance Committee will receive $10,000 per year and each other member of the Nomination and Governance Committee will receive $5,000 per year;

All directors will also be reimbursed for reasonable travel, lodging and related expenses incurred in attending Board meetings.

Equity Compensation

Under the expected program, each non-employee director will be automatically eligible for annual equity award grants in the form of full-value stock awards with a grant-date fair value of approximately $80,000.

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COMPENSATION DISCUSSION AND ANALYSIS

As discussed above, we are currently part of Honeywell and not an independent company, and our Compensation Committee has not yet been formed. Decisions about our executive compensation and benefits to date have been made by the Management Development and Compensation Committee of the Honeywell Board (the “Honeywell Compensation Committee”) and Honeywell senior management. Accordingly, this Compensation Discussion and Analysis (“CD&A”) focuses on Honeywell’s compensation and benefit programs and decisions for 2015. Following the Spin-Off, we expect that our Compensation Committee will review our executive compensation and benefit programs and determine the appropriate compensation and benefits for our executives, and accordingly our executive compensation and benefits programs following the Spin-Off may not be the same as those discussed below.

For purposes of this CD&A and the disclosure that follows, Erin N. Kane, who currently serves as our vice president and general manager of Honeywell Resins and Chemicals, and is expected to serve as our Chief Executive Officer following the Spin-Off, is our sole “Named Executive Officer”. Since our other executive officers will have joined AdvanSix after year end 2015, they will not have been executive officers of AdvanSix in 2015 and, therefore, will be omitted from the discussion below.

Honeywell’s Executive Compensation Philosophy and Approach

Honeywell’s executive compensation and benefit programs are designed to support the creation of stockholder value through four key objectives: (1) attract and retain world-class leadership talent; (2) drive performance that creates stockholder value; (3) pay for superior results and sustainable growth; and (4) manage risk through oversight and compensation design. In setting total compensation to meet these key objectives, Honeywell seeks to achieve the optimal balance between (1) fixed and variable (or “at-risk”) pay elements, (2) short- and long-term pay elements and (3) cash and equity-based elements.

The factors applicable to our Named Executive Officer that generally shape Honeywell’s assessment of compensation and help achieve Honeywell’s key objectives include: (1) compensation history, in total and for each element of compensation; (2) operational and financial performance for Honeywell and each strategic business group (“SBG”) (including Performance Materials and Technologies (“PMT”), the SBG of which we are a part); (3) leadership potential; (4) Honeywell performance relative to the competitive marketplace; (5) performance record; (6) relative level of responsibility within Honeywell and the impact of Ms. Kane’s position on Honeywell’s performance; (7) trends and best practices in executive compensation; and (8) industry and macroeconomic conditions.

Details on Program Elements and Related 2015 Compensation Decisions

Base Salary

Base salaries are intended to attract and compensate high-performing and experienced leaders and are determined based on scope of responsibility and years of experience, with reference to market data (but are not targeted to a specific competitive position). In 2015, based on Ms. Kane’s strong performance record, experience and leadership potential, Honeywell’s senior management raised Ms. Kane’s base salary from a rate of $211,500 to $275,000 annually, effective March 31, 2015.

Short-Term Incentive Awards (“ICP”)

Short-term incentive awards are intended to motivate and reward executives for achieving annual corporate, SBG and functional goals in key areas of financial and operational performance. In 2015, our Named Executive Officer participated in Honeywell’s ICP program, on the same basis as other similarly situated executives of Honeywell. The maximum annual ICP award that Ms. Kane could receive in 2015 as a percentage of base salary was capped at 150% of Ms. Kane’s notional ICP target. Ms. Kane received a 2015 ICP payment of $97,000 (determined from a baseline award of

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40% of base salary), based on the performance of Honeywell and PMT, supplemental factors that were considered by Honeywell’s Compensation Committee and Ms. Kane’s individual performance. For more information on the ICP program, including how Honeywell determined payouts for 2015 based on Honeywell’s performance and other factors considered relevant by the Honeywell Compensation Committee, please see the section entitled “Executive Compensation—Compensation Program Description—Annual Incentive Compensation Plan (“ICP”),” which is deemed incorporated by reference herein from the pertinent pages of Honeywell’s 2016 Proxy Statement attached as Exhibit 99.2 to the Registration Statement on Form 10 of which this Information Statement forms a part.

Long-Term Incentive Compensation

Stock Options and RSUs: Stock option awards are long-term incentives intended to motivate and reward executives for making strategic decisions and taking actions that drive year-over-year improvements in company performance that translate into future increases in stock price. Stock options are directly aligned with the interests of Honeywell’s stockholders because executives only realize value if the stock price appreciates.

RSUs represent a right to receive Honeywell common stock only if certain conditions are met (e.g., continued employment through a specific date or the attainment of certain performance conditions). RSU awards are intended to reward executives for improvements in company performance and are linked with stockholder value since the value of RSU awards rises or falls with Honeywell’s stock price. RSUs are also intended to encourage retention as they generally vest after a period of three years.

Honeywell generally grants annual stock options and RSUs in February of each year during an open trading window period following the release of Honeywell’s financial results for the preceding fiscal year. In determining the size of equity awards, Honeywell considers an executive’s prior year performance, his or her potential to contribute to the future performance of Honeywell and his or her SBG and the vested and unvested equity held by the applicable executive. In 2015, Ms. Kane received 8,000 stock options with an exercise price of $103.90 and a grant date value of $17.23 that vest in equal 25% installments over a four-year period and 1,340 RSUs with a grant date value of $103.90 that cliff-vest at the end of a three-year period.

In connection with the Spin-Off, any Honeywell equity compensation awards, including Honeywell stock options and RSUs, held by AdvanSix employees will continue to be eligible to vest in accordance with their original vesting schedule based on continued service with AdvanSix from the date of the Spin-Off through, in the case of stock options, March 1, 2017 and, in the case of RSUs, the end of July 2017. Such awards will otherwise generally be treated as provided in the incentive compensation plan under which such equity was awarded and the award agreements governing such awards. Any remaining unvested equity that does not become vested on or prior to such vesting date will be forfeited.

Growth Plan: The Growth Plan provides performance-contingent, cash-based, longer-term incentive awards (“GPUs”) to focus executives on achievement of objective, two-year financial metrics that are aligned with Honeywell’s long-term targets then in effect. The operational focus of the Growth Plan adds balance to Honeywell’s executive compensation programs and is intended to complement stock options and RSUs, which reward stock price appreciation.

The Growth Plan consists of two-year, non-overlapping performance cycles (e.g., 2014-2015), with payout of any earned amounts occurring 50% in March of each of the following years (i.e., 2016 and 2017). At the end of the 2014-2015 performance cycle, Honeywell and PMT performance resulted in a calculated payout of 141% of target, so that our Named Executive Officer earned a total potential payout of $162,150, based on the 1,150 GPUs (each with a target value of $100) awarded to Ms. Kane in 2014. For more information on the Growth Plan, including the methodology for determining payouts for the 2014-2015 cycle based on Honeywell’s performance, please see the section entitled “Executive Compensation—Compensation Program Description—Long-Term Incentive Compensation—Growth Plan,” which is deemed incorporated by reference herein from the

62


 

pertinent pages of Honeywell’s 2016 Proxy Statement attached as Exhibit 99.2 to the Registration Statement on Form 10 of which this Information Statement forms a part.

In connection with the Spin-Off, any Honeywell GPUs held by AdvanSix employees will continue to be eligible to vest in accordance with their original vesting schedule based on continued service with AdvanSix from the date of the Spin-Off through the end of March 2017. Such awards will otherwise be treated as provided in the incentive compensation plan under which such GPUs were awarded and the award agreements governing such awards. Any remaining unvested GPUs that do not become vested on or prior to such vesting date will be forfeited.

Other Honeywell Compensation & Benefit Programs

In addition to the annual and long-term compensation programs described above, Honeywell provides its executives with the benefits, retirement plans and limited perquisites summarized below.

Severance Benefits—Honeywell Severance Plan for Senior Executives

In 2015, our Named Executive Officer was eligible to participate in Honeywell’s Severance Plan for Senior Executives (the “Severance Plan”), which provides for certain severance payments and benefits upon termination of employment without cause. The triggering events that would have resulted in the severance payments and benefits and the amount of those payments and benefits were selected to provide the participating executives with financial protection upon loss of employment in order to support Honeywell’s executive retention goals. Benefits provided under the Severance Plan are conditioned on the executive executing a full release of claims and certain non-competition and non-solicitation covenants in favor of Honeywell. In 2015, our Named Executive Officer was not eligible to receive additional or enhanced severance payments or benefits in connection with a change in control under the Severance Plan. The compensation that could be received by our Named Executive Officer in connection with various termination scenarios is set forth in the section of this Information Statement entitled “Potential Payments upon Termination or Change in Control”.

Retirement Plans and Nonqualified Deferred Compensation Plans

In 2015, our Named Executive Officer was eligible to participate in Honeywell’s competitive broad-based plans including a defined benefit pension plan and a 401(k) savings plan that provides matching contributions. Honeywell also maintains an unfunded supplemental retirement plan to replace the portion of an executive’s pension benefit that cannot be paid under the broad-based plan because of IRS limitations as well as certain nonqualified deferred compensation plans to permit retirement savings in a tax-efficient manner in excess of amounts that can be deferred under the 401(k) savings plan due to IRS limitations. Consistent with the long-term focus of the executive compensation program, matching contributions are treated as if invested in Honeywell common stock. The material terms of these plans are explained in detail in the sections of this Information Statement entitled “Pension Benefits—Fiscal Year 2015” and “Nonqualified Deferred Compensation—Fiscal Year 2015”.

Benefits and Perquisites

In 2015, our Named Executive Officer was eligible to participate in Honeywell-wide benefits such as life, medical, dental, accidental death and disability insurance that are competitive with other similarly-sized companies. Our Named Executive Officer participated in these programs on the same basis as the rest of Honeywell’s salaried employees. In 2015, Honeywell maintained excess liability coverage for management personnel, including our Named Executive Officer.

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AdvanSix’s Anticipated Executive Compensation Programs

Overview

As described above, our Compensation Committee will not be established until the Spin-Off and therefore has not established a specific set of objectives or principles for our compensation programs following the Spin-Off. The executive compensation programs in place at the time of the Spin-Off will be those established by Honeywell on our behalf. Following the Spin-Off, our Compensation Committee will review each of the elements of our compensation programs. We believe that the Spin-Off will enable us to offer our key employees compensation directly linked to the performance of our business, which we expect will enhance our ability to attract, retain and motivate qualified personnel and serve the interests of our stockholders.

AdvanSix Chief Executive Officer Employment Letter

On April 19, 2016, Ms. Kane and Honeywell entered into a letter agreement to provide that Ms. Kane would become our Chief Executive Officer, effective upon the Spin-Off. Under the terms of the agreement, Ms. Kane will receive a starting salary of $600,000 and will have an annual target incentive opportunity of 100% of annual base salary. For 2016, Ms. Kane will receive an annual incentive award from Honeywell for the period prior to the Spin-Off equal to 40% of Ms. Kane’s 2016 base salary earnings during such period and will be eligible to receive an annual incentive award from AdvanSix for the period following the Spin-Off based on Ms. Kane’s 2016 base salary earnings during such period, as described in the preceding sentence. For the period following the Spin-Off, Ms. Kane will be eligible to receive long-term incentive compensation opportunities with a target value equal to 375% of Ms. Kane’s annual base salary and will be entitled to participate in the benefit programs that we will offer to our employees generally.

The agreement also provides that at the time of the Spin-Off Ms. Kane will receive a special one-time “founders grant” of AdvanSix RSUs with a grant date value equal to 250% of Ms. Kane’s annual target long-term incentive compensation opportunity and a grant of AdvanSix RSUs with a grant date value equal to approximately $1 million, in order to replace Honeywell equity awards and GPUs forfeited in connection with the Spin-Off. Honeywell determined that the founders grant was in AdvanSix’s best interest, in order to: (1) attract and retain a talented Chief Executive Officer who was familiar with both Honeywell and AdvanSix, and could therefore provide effective guidance and leadership before, during and after the Spin-Off; (2) appropriately align Ms. Kane’s interests with those of AdvanSix’s stockholders and provide a strong incentive to increase stockholder value following the Spin-Off; and (3) recognize Ms. Kane’s commitment to AdvanSix and our stockholders, which is demonstrated by Ms. Kane’s willingness to depart Honeywell at a time of exciting and unprecedented growth and opportunity in order to exclusively devote Ms. Kane’s knowledge and talents to AdvanSix at this critical stage in its development as a new public company.

Compensation and Benefits of AdvanSix’s Other Executive Officers

In May 2016, each of Michael Preston, John M. Quitmeyer and Jonathan Bellamy entered into a letter agreement with Honeywell to provide that Messrs. Preston, Quitmeyer and Bellamy would become, respectively, our Senior Vice President and Chief Financial Officer, Senior Vice President, General Counsel and Chief Human Resources Officer, effective upon the Spin-Off. None of Messrs. Preston, Quitmeyer and Bellamy has previously provided services to the AdvanSix Business. Under the terms of the agreement, the executives will receive the following starting salaries and annual target incentive opportunities as a percentage of base salary: Mr. Preston, $400,000 and 70%, Mr. Quitmeyer, $500,000 and 75%, and Mr. Bellamy, $330,000 and 60%. For 2016, Messrs. Preston, Quitmeyer and Bellamy will receive an annual incentive award from Honeywell for the period prior to the Spin-Off equal to, respectively, 35%, 50% and 35% of the executive’s 2016 base salary earnings during such period and will be eligible to receive an annual incentive award from AdvanSix for the period following the Spin-Off based on his 2016 base salary earnings during such period, as described in the preceding sentence. For the period following the Spin-Off, the executives will be

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eligible to receive long-term incentive compensation opportunities with a target value equal to a percentage of his annual base salary, 150% in the case of Messrs. Preston and Quitmeyer and 100% in the case of Mr. Bellamy, and will be entitled to participate in the benefit programs that we will offer to our employees generally.

The agreements also provide that at the time of the Spin-Off, each of the executives will receive a special one-time “founders grant” of AdvanSix RSUs with a grant date value equal to 200% of his annual target long-term incentive compensation opportunity and a grant of AdvanSix RSUs with a grant date value equal to approximately $1,100,000 for Mr. Preston, $900,000 for Mr. Quitmeyer and $300,000 for Mr. Bellamy, in order to replace Honeywell equity awards and GPUs forfeited in connection with the Spin-Off.

AdvanSix Equity Incentive Plan

In connection with the Spin-Off, Honeywell intends to establish an equity incentive plan on our behalf for the benefit of our officers, employees and directors, and which we will use to provide equity-based incentives to such individuals, aligning their interests with those of our stockholders. However, the terms and conditions of such plan have not yet been determined, and therefore cannot be described here. When available, a description will be provided in a subsequent amendment to this Information Statement.

Risk Oversight and Other Compensation Considerations

In connection with the Spin-Off, we expect to adopt policies for our executives intended to guard against excessive risk-taking, including: (1) stock ownership guidelines requiring them to hold a multiple of annual base salary in AdvanSix shares, ensuring alignment with stockholders’ long-term interests; (2) a “clawback” policy (which will meet applicable SEC or exchange requirements) to recoup and/or cancel incentive compensation under certain circumstances such as a significant financial restatement; and (3) prohibitions on pledging and hedging our securities.

Section 162(m) of the Code does not currently restrict our ability to take any federal income tax deductions for our executives’ compensation. Following the Spin-Off, our Compensation Committee will consider Section 162(m) of the Code when designing and implementing our compensation programs, but will maintain flexibility to authorize payments that might not be deductible. Our executive compensation has not been the subject of a stockholder advisory vote. However, to the extent applicable, our Compensation Committee will consider the results of advisory votes following the Spin-Off and the views expressed by our stockholders.

2015 SUMMARY COMPENSATION TABLE

The following tables provide information concerning compensation paid by Honeywell for fiscal year 2015 to our Named Executive Officer. Since our other executive officers will have joined AdvanSix after year end 2015, they will not have been executive officers of AdvanSix in 2015 and, therefore, will be omitted from the tables below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officer and
Principal Position

 

Year

 

Salary
($)
(1)

 

Bonus
($)

 

Stock
Awards
($)
(2)

 

Option
Awards
($)
(3)

 

Non-Equity
Incentive Plan
Compensation
($)
(4)

 

Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
(5)

 

All Other
Compensation
($)
(6)

 

Total
Compensation

 

Erin N. Kane,
Chief Executive Officer

 

 

 

2015

 

 

 

$

 

259,125

 

 

 

$

 

97,000

 

 

 

$

 

139,266

 

 

 

$

 

137,840

 

 

 

$

 

162,150

 

 

 

$

 

33,428

 

 

 

$

 

14,112

 

 

 

$

 

842,921

 

 

 

(1)

 

Based on a base salary rate of $211,500 through March 31, 2015 and a base salary rate of $275,000 thereafter.

 

(2)

 

For RSU awards made in 2015, the grant date fair value per share was $103.90 per share, calculated as the average of the high and low share price of one share of Honeywell common stock on the grant date in accordance with FASB ASC Topic 718. A discussion of the assumptions used in the valuation of RSU awards made in fiscal year 2015 may be found in Note 18 of the Notes to the Financial Statements in Honeywell’s Form 10-K for the year ended December 31, 2015, which is incorporated by reference herein from the pertinent pages attached as Exhibit 99.3 to the Registration Statement on Form 10 of which this Information Statement forms a part.

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(3)

 

2015 amounts reflect the aggregate grant date fair value of annual stock option awards computed in accordance with FASB ASC Topic 718, using the Black-Scholes option-pricing model at the time of grant, with the expected-term input derived from a risk-adjusted Monte Carlo simulation model that considers historical exercise behavior and probability-weighted movements in Honeywell’s stock price over time. 2015 annual stock options were awarded on February 26, 2015 with a Black-Scholes value of $17.23 per share. A discussion of the assumptions used in the valuation of option awards made in fiscal year 2015 may be found in Note 18 of the Notes to the Financial Statements in Honeywell’s Form 10-K for the year ended December 31, 2015, which is incorporated by reference herein from the pertinent pages attached as Exhibit 99.3 to the Registration Statement on Form 10 of which this Information Statement forms a part.

 

(4)

 

2015 amounts reflect the full earned award under the Growth Plan with respect to the 2014-2015 performance cycle, reported in a single year as required by applicable SEC rules.

 

(5)

 

2015 values represent the aggregate change in the present value of Ms. Kane’s accumulated benefit under Honeywell’s pension plans from December 31, 2014 to December 31, 2015.

 

(6)

 

For 2015, all other compensation consists of Honeywell matching contributions to Ms. Kane’s deferred compensation accounts.

GRANTS OF PLAN-BASED AWARDS—FISCAL YEAR 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officer

 

Grant
Date

 

All Other
Stock Awards:
Number of
Shares of
Stock or
Units
(#)

 

All Other
Option Awards:
Number of
Securities
Underlying
Options
(#)

 

Exercise
Base Price
of Option
Awards
($/Sh)

 

Closing Price on
Date of Grant
of Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Stock
and Option
Awards

 

Erin N. Kane

 

 

 

2/26/2015

 

 

 

 

 

 

8,000

 

 

 

$

 

103.90

 

 

 

$

 

103.64

 

 

 

$

 

137,840

 

 

 

 

 

 

2/26/2015

 

 

 

 

1,340

 

 

 

 

 

 

 

 

 

$

 

139,226

 

 

OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officer

 

Grant Date

 

Option Awards

 

Stock Awards (2)

 

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Option
Exercise
Price
($)

 

Option
Expiration
Date

 

Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)

 

Market Value
of Shares
or Units
of Stock
That Have
Not Vested
($)

 

Erin N. Kane

 

 

 

2/26/2015

 

 

 

 

 

 

 

 

8,000

 

 

 

$

 

103.90

 

 

 

 

2/25/2025

 

 

 

 

1,369

 

 

 

$

 

141,787

 

 

 

 

 

 

 

 

7/25/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,579

 

 

 

$

 

267,107

 

 

 

 

 

 

 

2/27/2014

 

 

 

 

1,000

 

 

 

 

3,000

 

 

 

$

 

93.97

 

 

 

 

2/26/2024

 

 

 

 

698

 

 

 

$

 

72,292

 

 

 

 

 

 

 

 

2/27/2013

 

 

 

 

1,500

 

 

 

 

1,500

 

 

 

$

 

69.77

 

 

 

 

2/26/2023

 

 

 

 

793

 

 

 

$

 

82,131

 

 

 

 

 

 

 

7/25/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,165

 

 

 

$

 

224,229

 

 

 

 

 

 

 

 

2/29/2012

 

 

 

 

1,500

 

 

 

 

750

 

 

 

$

 

59.87

 

 

 

 

2/28/2022

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Option grants vest in four annual installments on the first four anniversaries of the grant date at the rate of 25% per year.

 

(2)

 

RSU grants vest in full on the third anniversary of the grant date, except that the RSUs granted on July 25, 2012 will vest 50% on each of the fifth and seventh anniversaries of the grant date and the RSUs granted on July 25, 2014 will vest 33.3% on each of the third, fifth and seventh anniversaries of the grant date. Includes dividend equivalents granted through December 31, 2015 that were reinvested as additional unvested RSUs that will vest based on the same vesting schedule of the RSUs to which they relate.

OPTION EXERCISES AND STOCK VESTED—FISCAL YEAR 2015

 

 

 

 

 

 

 

 

 

Named Executive Officer

 

Option Awards

 

Stock Awards

 

Number of Shares
Acquired on
Exercise
(#)

 

Value Realized
on Exercise
($)

 

Number of Shares
Acquired on
Vesting
(#)

 

Value Realized
on Vesting
($)

 

Erin N. Kane

 

 

 

 

 

 

 

 

 

 

 

1,054

 

 

 

$

 

107,174

 

 

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PENSION BENEFITS—FISCAL YEAR 2015

The following table provides summary information about the pension benefits that have been earned by Ms. Kane under two pension plans, the Honeywell International Inc. Supplemental Executive Retirement Plan (the “Honeywell SERP”) and the Honeywell International Inc. Retirement Earnings Plan (the “Honeywell REP”). The Honeywell REP is a tax-qualified pension plan in which a significant portion of Honeywell’s U.S. employees participate and which, as a broad-based pension plan, is subject to tax requirements that impose dollar limitations on the benefits that can be provided. To make up for these limitations, Honeywell provides supplemental pension benefits through the Honeywell SERP.

 

 

 

 

 

 

 

Named Executive Officer

 

Plan Name

 

Number of Years
of Credited
Service
(#)

 

Present Value of
Accumulated
Benefits
($)
(1)

 

Erin N. Kane (1)

 

Honeywell REP

 

 

 

13.063

 

 

 

$

 

192,659

 

 

 

 

 

 

Honeywell SERP

 

 

 

13.063

 

 

 

$

 

31,245

 

 

 

 

 

Total

 

 

 

 

 

 

$

 

223,904

 

 

 

(1)

 

For both the Honeywell REP and the Honeywell SERP, the formula that is used to determine the amount of pension benefits for Ms. Kane under the Honeywell REP and the Honeywell SERP is as follows: lump sum equal to (1) 6% of final average compensation (annual average compensation for the five calendar years out of the previous ten calendar years that produces highest average) times (2) credited service. For purposes of this formula, annual compensation includes base pay, short-term incentive compensation in the year paid, payroll-based rewards and recognition and lump sum incentives.

NONQUALIFIED DEFERRED COMPENSATION—FISCAL YEAR 2015

The following table provides information on Honeywell’s defined contribution or other plans that during 2015 provided for deferrals of compensation on a basis that is not tax-qualified. These include the Honeywell Supplemental Savings Plan (the “Honeywell SS Plan”), which Ms. Kane has participated in since 2014. All deferred compensation amounts are unfunded and unsecured obligations of Honeywell and are subject to the same risks as any of Honeywell’s general obligations. Additional details about these plans can be found in the section entitled “Executive Compensation—Nonqualified Deferred Compensation-Fiscal Year 2015—Honeywell Supplemental Savings Plan,” which is deemed incorporated by reference herein from the pertinent pages of Honeywell’s 2016 Proxy Statement attached as Exhibit 99.2 to the Registration Statement on Form 10 of which this Information Statement forms a part.

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officer

 

Plan

 

Executive
Contributions
in last FY
($)
(1)

 

Registrant
Contributions
in last FY
($)
(1)

 

Aggregate
Earnings
in last FY
($)
(1)

 

Aggregate
Withdrawals/
Distributions
($)

 

Aggregate
Balance
at last FYE
($)
(1)

 

Erin N. Kane

 

 

 

Honeywell SS Plan

 

 

 

 

 

 

 

 

 

 

 

$

 

485.74

 

 

 

 

 

 

 

$

 

13,101

 

 

 

(1)

 

The amounts reported in the contributions and earnings columns are not reported in the “2015 Summary Compensation Table”.

Summary of Potential Payments and Benefits—Termination Events

The table below summarizes the payments and benefits that would have become payable to Ms. Kane in connection with certain terminations of employment and/or a Honeywell Change in Control. Assuming such events occurred on December 31, 2015, Ms. Kane would have been entitled to severance and other benefits having the following estimated aggregate value: (1) termination by Honeywell without cause, $206,976; (2) termination due to death or disability, $1,061,971; and (3) in connection with a Honeywell Change in Control, (a) termination without cause by Ms. Kane with good reason, $1,365,947 and (b) if Ms. Kane’s employment had not terminated, $750,077. Cause, good reason and Honeywell Change in Control have the meanings assigned to them in the applicable plan.

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Benefit

 

Amount and terms of payments

 

Severance
Payments

   

Nine months of base salary, paid in cash installments for such period, upon an involuntary termination without cause.

 

 

Payment conditioned upon a general release in favor of Honeywell, compliance with non-disclosure and non-solicitation of employees and customers covenants and refraining from certain other misconduct.

 

 

Not enhancements in connection with a Honeywell Change in Control.

 

Annual Bonus for the Year of Termination

   

Only payable outside of the ordinary course if a Honeywell Change in Control has occurred.

 

 

Prorated ICP bonus is payable for the year in which a Honeywell Change in Control occurs.

 

 

Based on achievement of Pre-Established ICP goals and the Honeywell Compensation Committee’s assessment of other relevant criteria for the period ending on the Honeywell Change in Control.

 

 

Paid at the time ICP awards are typically paid to Honeywell executives, but only if the employee is actively employed on the payment date or has been involuntarily terminated other than for cause or with good reason.

 

Equity-Based Awards

   

Vest in full in the event of death or disability.

 

 

Awards granted prior to April 2014 would vest in full upon a Honeywell Change in Control.

 

 

Awards granted after April 2014 that are assumed by the successor in a Honeywell Change in Control would only vest if a participant’s employment is terminated by the successor without cause or by the participant with good reason within two years following the Honeywell Change in Control.

 

Growth Plan Awards

   

In the event of death or disability, the 2014-2015 GPUs would be paid out, in full, based on actual performance determined at the end of the performance cycle and payment would be made no later than the 15th day of the third month following the end of the performance cycle.

 

 

In the event of a Honeywell Change in Control, the 2014-2015 GPUs would be payable in full based on actual performance. Payment would be made in a lump sum within 90 days of the Honeywell Change in Control.

 

Certain Benefits and Perquisites

   

Health and welfare coverage is continued during the severance period at active employee contribution rates.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of the date of this Information Statement, Honeywell beneficially owns all the outstanding shares of our common stock. After the Spin-Off, Honeywell will not own any shares of our common stock. The following table provides information regarding the anticipated beneficial ownership of our common stock at the time of the Distribution by:

 

 

each of our stockholders whom we believe (based on the assumptions described below) will beneficially own more than 5% of our outstanding common stock;

 

 

each of our directors following the Spin-Off;

 

 

each of our named executive officers as defined in Item 402(A)(3) of Regulation S-K; and

 

 

all of our directors and executive officers following the Spin-Off as a group.

Except as otherwise noted below, we based the share amounts on each person’s beneficial ownership of Honeywell common stock on   , giving effect to a distribution ratio of   shares of our common stock for every   shares of Honeywell common stock he, she or it held.

Except as otherwise noted in the footnotes below, each person or entity identified in the table has sole voting and investment power with respect to the securities he, she or it holds.

Immediately following the Spin-Off, we estimate that   shares of our common stock will be issued and outstanding, based on the approximately   shares of Honeywell common stock outstanding on   . The actual number of shares of our common stock outstanding following the Spin-Off will be determined on   , the Record Date.

 

 

 

 

 

Name

 

Amount and Nature of
Beneficial Ownership

 

Percentage of Class

Directors and Named Executive Officers:

 

 

 

 

Paul E. Huck

 

 

 

 

 

*

 

Erin N. Kane

 

 

 

 

 

*

 

Michael Preston

 

 

 

 

 

*

 

All directors and executive officers as a Group (   persons):

 

 

 

 

Principal Stockholders:

 

 

 

 

BlackRock, Inc. (1)

 

 

 

45,037,592

 

 

 

 

5.8

%

 

55 East 52nd Street

 

 

 

 

New York, NY 10022

 

 

 

 

The Vanguard Group (2)

 

 

 

41,688,512

 

 

 

 

5.4

%

 

100 Vanguard Blvd.

 

 

 

 

Malvern, PA 19355

 

 

 

 

 

 

*

 

Represents beneficial ownership of less than one percent of the outstanding common stock.

 

(1)

 

Based on a Schedule 13G/A filed by BlackRock Inc. with the SEC on January 26, 2016. BlackRock Inc. has sole voting power in respect of 38,134,550 shares and sole dispositive power in respect of 45,031,272 shares.

 

(2)

 

Based on a Schedule 13G filed by Vanguard Group Inc. with the SEC on February 11, 2016. The Vanguard Group and certain related entities have sole voting power in respect of 1,428,719 shares and sole dispositive power in respect of 40,175,758 shares.

69


 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Agreements with Honeywell

In order to govern the ongoing relationships between us and Honeywell after the Spin-Off and to facilitate an orderly transition, we and Honeywell intend to enter into agreements providing for various services and rights following the Spin-Off, and under which we and Honeywell will agree to indemnify each other against certain liabilities arising from our respective businesses. The following summarizes the terms of the material agreements we expect to enter into with Honeywell.

Separation and Distribution Agreement

We intend to enter into a Separation and Distribution Agreement with Honeywell before the Distribution. The Separation and Distribution Agreement will set forth our agreements with Honeywell regarding the principal actions to be taken in connection with the Spin-Off. It will also set forth other agreements that govern aspects of our relationship with Honeywell following the Spin-Off.

Transfer of Assets and Assumption of Liabilities

The Separation and Distribution Agreement will identify certain transfers of assets and assumptions of liabilities that are necessary in advance of our separation from Honeywell so that we and Honeywell retain the assets of, and the liabilities associated with, our respective businesses. The Separation and Distribution Agreement generally provides that the assets comprising our business will consist of those owned or held by us or those primarily related to our current business and operations. The liabilities we will assume in connection with the Spin-Off will generally consist of those related to the past and future operations of our business, including our three current manufacturing locations and the other locations used in our current operations. Honeywell will retain assets and assume liabilities related to former business locations or the operation of our former business. The Separation and Distribution Agreement will also provide for the settlement or extinguishment of certain liabilities and other obligations between us and Honeywell.

Internal Transactions

The Separation and Distribution Agreement will describe certain actions related to our separation from Honeywell that will occur prior to the Distribution such as the formation of our subsidiaries and certain other internal restructuring actions to be taken by us and Honeywell, including the contribution by Honeywell to us of the assets and liabilities that comprise our business.

Intercompany Arrangements

All agreements, arrangements, commitments and understandings, including most intercompany accounts payable or accounts receivable, between us, on the one hand, and Honeywell, on the other hand, will terminate effective as of the date on which Honeywell contributes to us the assets and liabilities that comprise our business, except specified agreements and arrangements that are intended to survive the Distribution.

Credit Support

We will agree to use reasonable best efforts to arrange, prior to the Distribution, for the replacement of all guarantees, covenants, indemnities, surety bonds, letters of credit or similar assurances of credit support currently provided by or through Honeywell or any of its affiliates for the benefit of us or any of our affiliates.

Representations and Warranties

In general, neither we nor Honeywell will make any representations or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in

70


 

connection with these transfers or assumptions, the value or freedom from any lien or other security interest of any assets transferred, the absence of any defenses relating to any claim of either party or the legal sufficiency of any conveyance documents. Except as expressly set forth in the Separation and Distribution Agreement, all assets will be transferred on an “as is”, “where is” basis.

Further Assurances

The parties will use reasonable best efforts to effect any transfers contemplated by the Separation and Distribution Agreement that have not been consummated prior to the Distribution as promptly as practicable following the Distribution Date. In addition, the parties will use reasonable best efforts to effect any transfer or re-transfer of any asset or liability that was improperly transferred or retained as promptly as practicable following the Distribution.

The Distribution

The Separation and Distribution Agreement will govern Honeywell’s and our respective rights and obligations regarding the proposed Distribution. Prior to the Distribution, Honeywell will deliver all the issued and outstanding shares of our common stock to the distribution agent. Following the Distribution Date, the distribution agent will electronically deliver the shares of our common stock to Honeywell stockholders based on the distribution ratio. The Honeywell Board may, in its sole and absolute discretion, determine the Record Date, the Distribution Date and the terms of the Spin-Off. In addition, Honeywell may at any time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution.

Conditions

The Separation and Distribution Agreement will also provide that several conditions must be satisfied or, to the extent permitted by law, waived by Honeywell in its sole and absolute discretion before the Distribution can occur. For further information about these conditions, see “The Spin-Off—Conditions to the Spin-Off”.

Exchange of Information

We and Honeywell will agree to provide each other with information reasonably necessary to comply with reporting, disclosure, filing or other requirements of any national securities exchange or governmental authority, for use in judicial, regulatory, administrative and other proceedings and to satisfy audit, accounting, litigation and other similar requests. We and Honeywell will also agree to use reasonable best efforts to retain such information in accordance with our respective record retention policies as in effect on the date of the Separation and Distribution Agreement. Each party will also agree to use its reasonable best efforts to assist the other with its financial reporting and audit obligations.

Intellectual Property Restrictions and Licenses

We will agree not to assert our intellectual property rights against Honeywell or (with limited exceptions) act to impair Honeywell’s intellectual property rights, and Honeywell will agree not to assert its intellectual property rights against us or (with limited exceptions) act to impair our intellectual property rights, in each case for a period of five years. We will grant to Honeywell, and Honeywell will grant to us, a perpetual royalty-free license to certain intellectual property that has historically been shared between us and Honeywell and we will agree to negotiate a commercial license with Honeywell under other intellectual property rights in the event either we or Honeywell determine such rights are necessary in order to pursue new projects in the ordinary course of business. These restrictions and licenses will be binding on future licensees or assignees of our and Honeywell’s intellectual property rights.

71


 

Termination

The Honeywell Board, in its sole and absolute discretion, may terminate the Separation and Distribution Agreement at any time prior to the Distribution.

Release of Claims

We and Honeywell will each agree to release the other and its affiliates, successors and assigns, and all persons that prior to the Distribution have been the other’s stockholders, directors, officers, members, agents and employees, and their respective heirs, executors, administrators, successors and assigns, from any claims against any of them that arise out of or relate to events, circumstances or actions occurring or failing to occur or any conditions existing at or prior to the time of the Distribution. These releases will be subject to exceptions set forth in the Separation and Distribution Agreement.

Indemnification

We and Honeywell will each agree to indemnify the other and each of the other’s current, former and future directors, officers and employees, and each of the heirs, administrators, executors, successors and assigns of any of them, against certain liabilities incurred in connection with the Spin-Off and our and Honeywell’s respective businesses. The amount of either Honeywell’s or our indemnification obligations will be reduced by any insurance proceeds the party being indemnified receives. The Separation and Distribution Agreement will also specify procedures regarding claims subject to indemnification.

Transition Services Agreement

We intend to enter into a Transition Services Agreement pursuant to which Honeywell will provide us, and we will provide Honeywell, with specified services for a limited time to help ensure an orderly transition following the Distribution. The Transition Services Agreement will specify the calculation of our costs for these services.

The cost of these services will be negotiated between us and Honeywell and may not necessarily be reflective of prices that we could have obtained for similar services from an independent third-party.

Tax Matters Agreement

We intend to enter into a Tax Matters Agreement with Honeywell that will govern the respective rights, responsibilities and obligations of Honeywell and us after the Distribution with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests).

The Tax Matters Agreement will generally provide that Honeywell will indemnify us for taxes relating to tax periods prior to the Distribution. In addition, the Tax Matters Agreement will provide that we will be required to indemnify Honeywell for any taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal income tax law where such taxes result from (a) breaches of covenants and representations we make and agree to in connection with the Spin-Off, (b) the application of certain provisions of U.S. federal income tax law to these transactions or (c) any other action or omission we take after the Distribution that gives rise to these taxes. Honeywell will have the exclusive right to control the conduct of any audit or contest relating to these taxes, but will not be permitted to settle any such audit or contest without our consent (which we may not unreasonably withhold or delay).

The Tax Matters Agreement will impose certain restrictions on us and our subsidiaries (including restrictions on share issuances, redemptions or repurchases, business combinations, sales of assets, and similar transactions) that will be designed to address compliance with Section 355 of the Code and preserve the tax-free nature of the Spin-Off. These restrictions will apply for the two-year period after the Distribution. Under the Tax Matters Agreement, these restrictions will apply unless

72


 

Honeywell gives its consent for us to take a restricted action, which it is permitted to grant or withhold at its sole discretion. These restrictions may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and might discourage or delay a strategic transaction that our stockholders may consider favorable.

Employee Matters Agreement

We intend to enter into an Employee Matters Agreement with Honeywell that will address employment and employee compensation and benefits matters. The Employee Matters Agreement will address the allocation and treatment of assets and liabilities relating to employees and compensation and benefit plans and programs in which our employees participated prior to the Spin-Off. In general, Honeywell will generally retain all employment and employee compensation and benefits-related liabilities that relate to periods prior to the Spin-Off, and we will generally be responsible for all employment and employee compensation and benefits-related liabilities relating to our employees and other service providers that relate to periods on and following the Spin-Off. Specifically, Honeywell will retain assets and liabilities with respect to our employees under the Honeywell pension plan and the Honeywell nonqualified and deferred compensation plans. Generally, each of our employees will cease active participation in Honeywell compensation and benefit plans as of the Spin-Off, with the exception of any continued participation pursuant to the terms of the Transition Services Agreement. The Employee Matters Agreement also provides that we will establish certain compensation and benefit plans for the benefit of our employees following the Spin-Off, including a 401(k) savings plan, which will accept direct rollovers of account balances from the Honeywell 401(k) savings plan for any of our employees who elect to do so. Honeywell long-term incentive compensation awards, including stock options, RSUs and GPUs, held by AdvanSix employees will be treated as described in “Compensation Discussion and Analysis—Details on Program Elements and Related 2015 Compensation Decisions—Long-Term Incentive Compensation”.

Ongoing Commercial Agreements

In addition to the above agreements, we intend to enter into various other agreements with Honeywell and its subsidiaries that are intended to continue post-Distribution subject to their existing terms or terms and conditions to be negotiated and agreed to. Except for the agreements described below, we do not consider our ongoing commercial arrangements with Honeywell to be material.

Co-Location Arrangements

We intend to enter into one or more site sharing and services agreements or transition agreements with Honeywell under which we and Honeywell will allow each other to use certain shared R&D facilities and manufacturing sites for specified fees, and provide to each other specified services in connection with these arrangements such as potable water supply, access to electricity, site security and other similar services. We have not yet finalized all of the terms of these agreements, and we intend to include additional details on the terms of these agreements in an amendment to this Information Statement.

Supply Arrangements

We intend to supply Honeywell’s requirements for acetaldehyde oxime and 2-pentanone oxime under a multi-year supply agreement. Both products are currently manufactured in Hopewell, Virginia. No additional production equipment or expansions are required to supply these products to Honeywell. The two chemicals are sold by Honeywell’s Specialty Chemicals business unit primarily into the agricultural and sealant sectors. We have not yet finalized the terms of this agreement, and we intend to include additional details on the terms of this agreement in an amendment to the Information Statement.

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Other Arrangements

Prior to the Spin-Off, we have had various other arrangements with Honeywell, including arrangements whereby Honeywell has provided us with finance, human resources, legal, information technology, general insurance, risk management and other corporate functions as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview—Basis of Presentation”.

As described in more detail in “—Separation and Distribution Agreement” above, these arrangements, other than those contemplated pursuant to the Transition Services Agreement, will generally be terminated in connection with the Spin-Off. We do not consider these arrangements with Honeywell to be material.

Policy and Procedures Governing Related Party Transactions

Prior to the completion of the Spin-Off, our Board will adopt a written policy regarding the review, approval and ratification of transactions with related persons. We anticipate that this policy will provide that our Nominating and Governance Committee review each of AdvanSix’s transactions involving an amount exceeding $120,000 and in which any “related person” had, has or will have a direct or indirect material interest. In general, “related persons” are our directors, director nominees, executive officers and stockholders beneficially owning more than 5% of our outstanding common stock and immediate family members or certain affiliated entities of any of the foregoing persons. We expect that our Nominating and Governance Committee will approve or ratify only those transactions that are fair and reasonable to AdvanSix and in our and our stockholders’ best interests.

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DESCRIPTION OF OUR CAPITAL STOCK

General

Prior to the Distribution, Honeywell, as our sole stockholder, will approve and adopt our Amended and Restated Certificate of Incorporation, and our Board will approve and adopt our Amended and Restated By-laws. The following summarizes information concerning our capital stock, including material provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated By-laws and certain provisions of Delaware law. You are encouraged to read the forms of our Amended and Restated Certificate of Incorporation and our Amended and Restated By-laws, which are filed as exhibits to our Registration Statement on Form 10, of which this Information Statement is a part, for greater detail with respect to these provisions.

Distribution of Securities

During the past three years, we have not sold any securities, including sales of reacquired securities, new issues, securities issued in exchange for property, services or other securities, and new securities resulting from the modification of outstanding securities that were not registered under the Securities Act.

Authorized Capital Stock

Immediately following the Spin-Off, our authorized capital stock will consist of   shares of common stock, par value $0.01 per share.

Common Stock

Shares Outstanding

Immediately following the Spin-Off, we estimate that approximately   shares of our common stock will be issued and outstanding, based on approximately   shares of Honeywell common stock outstanding as of   . The actual number of shares of our common stock outstanding immediately following the Spin-Off will depend on the actual number of shares of Honeywell common stock outstanding on the Record Date, and will reflect any issuance of new shares or exercise of outstanding options pursuant to Honeywell’s equity plans and any repurchases of Honeywell shares by Honeywell pursuant to its common stock repurchase program, in each case on or prior to the Record Date.

Dividends

Holders of shares of our common stock will be entitled to receive dividends when, as and if declared by our Board at its discretion out of funds legally available for that purpose, subject to the preferential rights of any preferred stock that may be outstanding . The timing, declaration, amount and payment of future dividends will depend on our financial condition, earnings, capital requirements and debt service obligations, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. Additionally, the terms of the indebtedness we intend to incur in connection with the Spin-Off may limit our ability to pay cash dividends. Our Board will make all decisions regarding our payment of dividends from time to time in accordance with applicable law . See “Dividend Policy” and “Risk Factors—Risks Relating to Our Common Stock and the Securities Market—We cannot assure you that we will pay dividends on our common stock, and our indebtedness will limit our ability to pay dividends on our common stock.”

Voting Rights

The holders of our common stock will be entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders.

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Other Rights

Subject to the preferential liquidation rights of any preferred stock that may be outstanding, upon our liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our stockholders.

Fully Paid

The issued and outstanding shares of our common stock are fully paid and non-assessable . Any additional shares of common stock that we may issue in the future will also be fully paid and non-assessable.

The holders of our common stock will not have preemptive rights or preferential rights to subscribe for shares of our capital stock.

Preferred Stock

Our Amended and Restated Certificate of Incorporation will authorize our Board to designate and issue from time to time one or more series of preferred stock without stockholder approval. Our Board may fix and determine the preferences, limitations and relative rights of each series of preferred stock. There are no present plans to issue any shares of preferred stock.

Certain Provisions of Delaware Law, Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws

Amended and Restated Certificate of Incorporation and Amended and Restated By-laws

Certain provisions in our proposed Amended and Restated Certificate of Incorporation and our proposed Amended and Restated By-laws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our Board and in the policies formulated by our Board and to discourage certain types of transactions that may involve an actual or threatened change of control.

 

 

Classified board. Our Amended and Restated Certificate of Incorporation will provide that, until the annual stockholder meeting in the year that is three years after the Spin-Off, our Board will be divided into three classes, with each class consisting, as nearly as may be possible, of one-third of the total number of directors. The directors designated as Class I directors will have terms expiring at the first annual meeting of stockholders following the Distribution, which we expect to hold in 2017. The directors designated as Class II directors will have terms expiring at the following year’s annual meeting, which we expect to hold in 2018, and the directors designated as Class III directors will have terms expiring at the following year’s annual meeting, which we expect to hold in 2019. Commencing with the first annual meeting following the Distribution, directors elected to succeed those directors whose terms then expire will be elected for a term of office to expire at the 2020 annual meeting. Beginning at the 2020 annual meeting, all of our directors will stand for election each year for annual terms, and our board will therefore no longer be divided into three classes. Before our Board is declassified, it would take at least two elections of directors for any individual or group to gain control of our Board. Accordingly, while the classified board is in effect, these provisions could discourage a third-party from initiating a proxy contest, making a tender offer or otherwise attempting to control us.

 

 

Removal. Our Amended and Restated Certificate of Incorporation will provide that (i) prior to our Board being declassified as discussed above, our stockholders may remove directors only for cause and (ii) after our Board has been fully declassified, our stockholders may remove directors with or without cause. Removal will require the affirmative vote of holders of at least a majority of our voting stock.

76


 

 

 

Blank Check Preferred Stock. Our Amended and Restated Certificate of Incorporation will authorize our Board to designate and issue, without any further vote or action by the stockholders, up to   million shares of preferred stock from time to time in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of the series, and the preferences and relative, participating, optional and other rights, if any, and any qualifications, limitations or restrictions, of the shares of such series. The ability to issue such preferred stock could discourage potential acquisition proposals and could delay or prevent a change in control.

 

 

No Stockholder Action by Written Consent. Our Amended and Restated Certificate of Incorporation will expressly exclude the right of our stockholders to act by written consent. Stockholder action must take place at an annual meeting or at a special meeting of our stockholders.

 

 

Special Stockholder Meetings. Our Amended and Restated Certificate of Incorporation and our Amended and Restated By-laws will provide that only our Chief Executive Officer and a majority of our directors will be able to call a special meeting of stockholders. Stockholders will not be permitted to call a special meeting or to require our Board to call a special meeting.

 

 

Requirements for Advance Notification of Stockholder Nominations and Proposals. Under our Amended and Restated By-laws, stockholders of record will be able to nominate persons for election to our Board or bring other business constituting a proper matter for stockholder action only by providing proper notice to our secretary. In the case of annual meetings, proper notice must be given, generally between 90 and 120 days prior to the first anniversary of the prior year’s annual meeting. In the case of special meetings, proper notice must be given no earlier than the 90th day prior to the relevant meeting and no later than the later of the 60th day prior to such meeting or the 10th day following the public announcement of the meeting. Such notice must include, among other information, the name and address of the stockholder giving the notice, a representation that such stockholder is a holder of record of our common stock as of the date of the notice, certain information regarding such stockholder’s beneficial ownership of our securities and any derivative instruments based on or linked to the value of or return on our securities as of the date of the notice, certain information relating to each person whom such stockholder proposes to nominate for election as a director or a brief description of any other business such stockholder proposes to bring before the meeting and the reason for conducting such business and a representation as to whether such stockholder intends to solicit proxies.

 

 

Cumulative Voting. The Delaware General Corporation Law (“DGCL”) provides that stockholders are denied the right to cumulate votes in the election of directors unless the company’s certificate of incorporation provides otherwise. Our Amended and Restated Certificate of Incorporation will not provide for cumulative voting.

 

 

Amendments to Certificate of Incorporation and By-Laws. The DGCL provides that the affirmative vote of holders of a majority of a company’s voting stock then outstanding is required to amend the company’s certificate of incorporation unless the company’s certificate of incorporation provides a higher threshold, and our Amended and Restated Certificate of Incorporation will not provide for a higher threshold. Our Amended and Restated Certificate of Incorporation will provide that our Amended and Restated By-Laws may be amended by our Board or by the affirmative vote of holders of at least two-thirds of our voting stock.

Delaware Takeover Statute

We are subject to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder.

77


 

Limitation on Liability of Directors and Indemnification of Directors and Officers

Delaware law authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors, and our Amended and Restated Certificate of Incorporation will include such an exculpation provision. Our Amended and Restated By-Laws and Amended and Restated Certificate of Incorporation will include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors, officers or employees for monetary damages for actions taken as a director, officer, employee or agent of AdvanSix, or for serving at the AdvanSix request as a director, officer, employee or agent at another corporation or enterprise, as the case may be. Our Amended and Restated By-Laws and Amended and Restated Certificate of Incorporation will also provide that we must indemnify and advance reasonable expenses to our directors, officers and employees, subject to our receipt of an undertaking from the indemnified party as may be required under the DGCL. Our Amended and Restated By-Laws will expressly authorize us to carry directors’ and officers’ insurance to protect AdvanSix, its directors, officers and employees for some liabilities.

The limitation of liability and indemnification provisions that will be included in our Amended and Restated By-Laws and Amended and Restated Certificate of Incorporation may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against our directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. However, these provisions will not limit or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a director’s duty of care. The provisions will not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any of our directors, officers or employees for which indemnification is sought.

Exclusive Forum

Our Amended and Restated Certificate of Incorporation will provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery located within the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of AdvanSix, any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder of AdvanSix to AdvanSix or AdvanSix’s stockholders, any action asserting a claim arising pursuant to the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery located in the State of Delaware or any action asserting a claim governed by the internal affairs doctrine. However, if the Court of Chancery within the State of Delaware does not have jurisdiction, the action may be brought in any other state or federal court located within the State of Delaware.

Transfer Agent and Registrar

We have not yet determined who the transfer agent and registrar for our common stock will be, but we expect to do so prior to the Spin-Off and will provide further information in an amendment to this Information Statement.

Listing

We intend to list our common stock on the New York Stock Exchange under the symbol “ASIX.”

78


 

WHERE YOU CAN FIND MORE INFORMATION

We have filed a Registration Statement on Form 10 with the SEC with respect to the shares of our common stock that Honeywell’s stockholders will receive in the Distribution as contemplated by this Information Statement. This Information Statement is a part of, and does not contain all the information set forth in, the Registration Statement and the other exhibits and schedules to the Registration Statement. For further information with respect to us and our common stock, please refer to the Registration Statement, including its other exhibits and schedules. Statements we make in this Information Statement relating to any contract or other document are not necessarily complete, and you should refer to the exhibits attached to the Registration Statement for copies of the actual contract or document. You may review a copy of the Registration Statement, including its exhibits and schedules, at the SEC’s public reference room, located at 100 F Street, N.E., Washington, D.C. 20549, as well as on the Internet website maintained by the SEC at www.sec.gov. Please call the SEC at 1-800-SEC-0330 for more information on the public reference room. Information contained on any website we refer to in this Information Statement does not and will not constitute a part of this Information Statement or the Registration Statement on Form 10 of which this Information Statement is a part.

As a result of the Spin-Off, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with the Exchange Act, we will file periodic reports, proxy statements and other information with the SEC.

You may request a copy of any of our filings with the SEC at no cost by writing us at the following address:

Investor Relations
AdvanSix Inc.
115 Tabor Road
Morris Plains, NJ 07950
(973) 455-2000

We intend to furnish holders of our common stock with annual reports containing financial statements prepared in accordance with United States generally accepted accounting principles and audited and reported on by an independent registered public accounting firm.

79


 

INDEX TO COMBINED FINANCIAL STATEMENTS

 

 

 

Audited Annual Combined Financial Statements:

 

 

Report of Independent Registered Public Accounting Firm

 

 

 

F-2

 

Combined Statements of Operations for the Three Years Ended December 31, 2015

 

 

 

F-3

 

Combined Statements of Comprehensive Income for the Three Years Ended December 31, 2015

 

 

 

F-4

 

Combined Balance Sheets at December 31, 2015 and 2014

 

 

 

F-5

 

Combined Statements of Cash Flows for the Three Years Ended December 31, 2015

 

 

 

F-6

 

Combined Statements of Equity for the Three Years Ended December 31, 2015

 

 

 

F-7

 

Notes to Combined Financial Statements

 

 

 

F-8

 

Unaudited Interim Combined Financial Statements:

 

 

Combined Statements of Operations for the Three Months Ended March 31, 2016 and 2015 (unaudited)

 

 

 

F-20

 

Combined Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015 (unaudited)

 

 

 

F-21

 

Combined Balance Sheets at March 31, 2016 and December 31, 2015 (unaudited)

 

 

 

F-22

 

Combined Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (unaudited)

 

 

 

F-23

 

Notes to Combined Financial Statements (unaudited)

 

 

 

F-24

 

F-1


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Honeywell International Inc.:

In our opinion, the accompanying combined balance sheets and the related combined statements of operations, comprehensive income, equity and cash flows present fairly, in all material respects, the financial position of the Resins & Chemicals Business of Honeywell International Inc. at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Florham Park, NJ
March 14, 2016, except for the effect of the inclusion of an additional product line within the Resins & Chemicals Business of Honeywell International Inc. and the revision as discussed in Note 1 to the combined financial statements, as to which the date is July 25, 2016

F-2


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Sales

 

 

$

 

1,329,409

   

 

$

 

1,790,372

   

 

$

 

1,766,586

 

Costs, expenses and other:

 

 

 

 

 

 

Costs of goods sold

 

 

 

1,179,651

   

 

 

1,607,028

   

 

 

1,530,705

 

Selling, general and administrative expenses

 

 

 

52,398

   

 

 

53,931

   

 

 

53,416

 

Other non-operating, net

 

 

 

(2,877

)

 

 

 

 

(2,634

)

 

 

 

 

(1,828

)

 

 

 

 

 

 

 

 

 

 

 

 

1,229,172

   

 

 

1,658,325

   

 

 

1,582,293

 

Income before taxes

 

 

 

100,237

   

 

 

132,047

   

 

 

184,293

 

Income taxes

 

 

 

36,461

   

 

 

48,189

   

 

 

65,547

 

 

 

 

 

 

 

 

Net income

 

 

$

 

63,776

   

 

$

 

83,858

   

 

$

 

118,746

 

 

 

 

 

 

 

 

The Notes to Combined Financial Statements are an integral part of this Statement.

F-3


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Net income

 

 

$

 

63,776

   

 

$

 

83,858

   

 

$

 

118,746

 

Foreign exchange translation adjustment

 

 

 

(1,390

)

 

 

 

 

(283

)

 

 

 

 

552

 

Commodity hedges

 

 

 

2,865

   

 

 

(1,332

)

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

 

1,475

   

 

 

(1,615

)

 

 

 

 

548

 

 

 

 

 

 

 

 

Comprehensive income

 

 

$

 

65,251

   

 

$

 

82,243

   

 

$

 

119,294

 

 

 

 

 

 

 

 

The Notes to Combined Financial Statements are an integral part of this Statement.

F-4


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED BALANCE SHEETS

(Dollars in thousands)

 

 

 

 

 

 

 

December 31,

 

2015

 

2014

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

 

$

 

 

 

 

$

 

 

Accounts and other receivables—net

 

 

 

127,545

   

 

 

167,334

 

Inventories

 

 

 

150,231

   

 

 

155,252

 

Deferred income taxes

 

 

 

   

 

 

6,448

 

Other current assets

 

 

 

4,443

   

 

 

2,623

 

 

 

 

 

 

Total current assets

 

 

 

282,219

   

 

 

331,657

 

Property, plant, equipment—net

 

 

 

527,542

   

 

 

468,761

 

Goodwill

 

 

 

15,005

 

 

 

 

15,005

 

Other assets

 

 

 

16,220

   

 

 

7,625

 

 

 

 

 

 

Total assets

 

 

$

 

840,986

   

 

$

 

823,048

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

 

$

 

192,733

   

 

$

 

232,775

 

Accrued liabilities

 

 

 

25,114

   

 

 

24,775

 

Deferred income and customer advances

 

 

 

25,207

   

 

 

31,989

 

 

 

 

 

 

Total current liabilities

 

 

 

243,054

   

 

 

289,539

 

Deferred income taxes

 

 

 

114,910

   

 

 

111,445

 

Other liabilities

 

 

 

3,952

   

 

 

5,309

 

 

 

 

 

 

Total liabilities

 

 

$

 

361,916

   

 

$

 

406,293

 

 

 

 

 

 

CONTINGENCIES (Note 10 )

 

 

 

 

EQUITY

 

 

 

 

Invested equity

 

 

 

482,809

   

 

 

421,969

 

Accumulated other comprehensive loss

 

 

 

(3,739

)

 

 

 

 

(5,214

)

 

 

 

 

 

 

Total equity

 

 

 

479,070

   

 

 

416,755

 

 

 

 

 

 

Total liabilities and equity

 

 

$

 

840,986

   

 

$

 

823,048

 

 

 

 

 

 

The Notes to Combined Financial Statements are an integral part of this Statement.

F-5


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

 

$

 

63,776

   

 

$

 

83,858

   

 

$

 

118,746

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

 

36,410

   

 

 

33,608

   

 

 

37,234

 

Loss on sale of assets

 

 

 

1,308

   

 

 

1,688

   

 

 

1,312

 

Deferred income taxes

 

 

 

9,913

   

 

 

16,958

   

 

 

6,874

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

 

38,399

   

 

 

10,657

   

 

 

(29,798

)

 

Inventories

 

 

 

5,021

   

 

 

(27,034

)

 

 

 

 

(20,955

)

 

Accounts payable

 

 

 

(38,689

)

 

 

 

 

43,346

   

 

 

5,096

 

Accrued liabilities

 

 

 

500

   

 

 

(2,167

)

 

 

 

 

(329

)

 

Deferred income and customer advances

 

 

 

(6,783

)

 

 

 

 

28,956

   

 

 

525

 

Other assets and liabilities

 

 

 

(8,319

)

 

 

 

 

(1,446

)

 

 

 

 

1,290

 

Net cash provided by operating activities

 

 

 

101,536

   

 

 

188,424

   

 

 

119,995

 

Cash flows from investing activities:

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

 

(97,144

)

 

 

 

 

(101,382

)

 

 

 

 

(73,912

)

 

Other investing activities

 

 

 

(1,086

)

 

 

 

 

(818

)

 

 

 

 

(426

)

 

Net cash (used for) investing activities

 

 

 

(98,230

)

 

 

 

 

(102,200

)

 

 

 

 

(74,338

)

 

Cash flows from financing activities:

 

 

 

 

 

 

Net (decrease) in invested equity

 

 

 

(2,936

)

 

 

 

 

(86,060

)

 

 

 

 

(45,525

)

 

Other financing activities

 

 

 

(370

)

 

 

 

 

(164

)

 

 

 

 

(132

)

 

Net cash (used for) financing activities

 

 

 

(3,306

)

 

 

 

 

(86,224

)

 

 

 

 

(45,657

)

 

Net increase (decrease) in cash and cash equivalents

 

 

   

 

   

 

 

Cash and cash equivalents at beginning of period

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of period

 

 

$

 

   

 

$

 

   

 

$

 

 

 

 

 

 

 

 

 

Supplemental non-cash investing activities:

 

 

 

 

 

 

Capital expenditures included in Accounts Payable

 

 

$

 

22,282

   

 

$

 

23,634

   

 

$

 

20,987

 

 

 

 

 

 

 

 

The Notes to Combined Financial Statements are an integral part of this Statement.

F-6


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF EQUITY

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Invested
Equity

 

Accumulated
Other
Comprehensive
Loss

 

Total
Equity

Balance at December 31, 2012

 

 

$

 

350,949

   

 

$

 

(4,146

)

 

 

 

$

 

346,803

 

Net income

 

 

 

118,746

   

 

 

 

 

118,746

 

Foreign exchange translation adjustments

 

 

 

 

 

548

   

 

 

548

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

548

   

 

 

548

 

Change in invested equity

 

 

 

(45,525

)

 

 

 

 

 

 

(45,525

)

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

 

 

424,170

   

 

 

(3,598

)

 

 

 

 

420,572

 

Net income

 

 

 

83,858

   

 

 

 

 

83,858

 

Foreign exchange translation adjustments

 

 

 

 

 

(283

)

 

 

 

 

(283

)

 

Commodity hedges

 

 

 

 

 

(1,333

)

 

 

 

 

(1,333

)

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

(1,616

)

 

 

 

 

(1,616

)

 

Change in invested equity

 

 

 

(86,059

)

 

 

 

 

 

 

(86,059

)

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 

 

 

421,969

   

 

 

(5,214

)

 

 

 

 

416,755

 

Net income

 

 

 

63,776

   

 

 

 

 

63,776

 

Foreign exchange translation adjustments

 

 

 

 

 

(1,390

)

 

 

 

 

(1,390

)

 

Commodity hedges

 

 

 

 

 

2,865

   

 

 

2,865

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

1,475

   

 

 

1,475

 

Change in invested equity

 

 

 

(2,936

)

 

 

 

 

 

 

(2,936

)

 

 

 

 

 

 

 

 

Balance at December 31, 2015

 

 

$

 

482,809

   

 

$

 

(3,739

)

 

 

 

$

 

479,070

 

 

 

 

 

 

 

 

The Notes to Combined Financial Statements are an integral part of this Statement.

F-7


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)

Note 1. Organization, Operations and Basis of Presentation

The Resins & Chemicals business (“Resins & Chemicals”, “the Business”, “we” or “our”) of Honeywell International Inc. (“Honeywell” or the “Parent”) is an integrated manufacturer of a variety of intermediate materials, primarily including nylon resins, caprolactam, ammonium sulfate fertilizers and other chemical intermediates, which represented approximately 27%, 25% and 25%, 18%, 21% and 21%, 25%, 20% and 22% and 30%, 34% and 32% of our total 2015, 2014 and 2013 sales, respectively. These materials are used by Resins & Chemicals’ customers to produce a variety of products, including carpet, textiles, engineering plastics, industrial filament, packaging applications and high-value crops. Resins & Chemicals is a single reportable segment and is primarily located in North America, operating through three integrated manufacturing sites located in Frankford, Pennsylvania, Hopewell, Virginia and Chesterfield, Virginia.

We evaluated segment reporting in accordance with ASC 280. We concluded that AdvanSix operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”) to make decisions about resource allocation and performance assessment. Resins & Chemicals’ operations are managed as one integrated process spread across three manufacturing sites, including centralized supply chain and procurement functions. The production process is dependent upon one key raw material, cumene, as the input to the manufacturing of all finished goods produced for sale through the sales channels and end markets the Business serves. Production rates and output volumes are managed across all three plants jointly to align with the overall Business operating plan. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Business’s products.

These Combined Financial Statements were derived from the consolidated financial statements and accounting records of Honeywell. These Combined Financial Statements reflect the combined historical results of operations, financial position and cash flows of Resins & Chemicals as they were historically managed in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the second quarter of 2016, Honeywell decided to include an additional product line, within the nylon resins product category, in the AdvanSix business subject to the Spin-Off transaction. This has been accounted for as a change in reporting entity and therefore, we have retroactively reflected the historical carrying values and the related activities of this product line in all periods within our Combined Financial Statements, including related allocations. The impact to the Combined Statement of Operations for 2015 was a $37,000 increase to Revenue, $41,000 increase to Cost of goods sold and a $4,000 decrease to Net income. The impact to the Combined Balance sheet for 2015 was a $19,000 increase to Assets and a $5,000 increase to Liabilities. The impact to the Combined Statement of Operations for 2014 was a $39,000 increase to Revenue, $39,000 increase to Cost of goods sold and a $2,000 decrease to Net income. The impact to the Combined Balance sheet for 2014 was a $20,000 increase to Assets and a $8,000 increase to Liabilities. The impact to the Combined Statement of Operations for 2013 was a $42,000 increase to revenue, $42,000 increase to cost of goods sold and a $3,000 decrease to net income.

Subsequent to the initial Form 10 filing, which included the Company’s Combined Financial Statements, management determined that it had incorrectly accounted for certain revenue transactions. The Combined Statements of Operations and Combined Balance Sheets for the periods presented, specifically 2014 and 2015, have been corrected to reflect an immaterial revision to Revenue. The revision is not material to the previously issued Combined Financial Statements, however the Company has corrected the previously issued Combined Financial Statements. Related amounts within the footnotes have been corrected to reflect these changes as well. The impact to the Combined Statement of Operations for 2015 was a $9,200 reduction to Revenue and a $9,000 reduction to Cost of goods sold. The impact to the Combined Statement of Operations for 2014 was a $320 reduction to Revenue and a $280 reduction to Cost of goods sold.

F-8


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

All intracompany transactions have been eliminated. As described in Note 3, all significant transactions between the Business and Honeywell have been included in these Combined Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these transactions is reflected in the Combined Statements of Cash Flows as a financing activity and in the Combined Balance Sheets as invested equity.

Honeywell uses a centralized approach to cash management and financing of its operations. The majority of the Business’s cash is transferred to Honeywell daily and Honeywell funds its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Business would have been able to finance its operations had it been a stand-alone business separate from Honeywell during the periods presented. Cash transfers to and from Honeywell’s cash management accounts are reflected within invested equity.

The Combined Financial Statements include certain assets and liabilities that have historically been held at the Honeywell corporate level but are specifically identifiable or otherwise allocable to Resins & Chemicals. The cash and cash equivalents held by Honeywell at the corporate level are not specifically identifiable to Resins & Chemicals and therefore were not allocated for any of the periods presented. Honeywell third-party debt and the related interest expense have not been allocated for any of the periods presented as Honeywell’s borrowings were not directly attributable to Resins & Chemicals.

Honeywell provides certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business. The cost of these services has been allocated to the Business on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues, headcount or other relevant measures. When not specifically identifiable, legal and accounting costs were allocated on the basis of revenues, information technology and human resources were allocated on the basis of headcount and other infrastructure support was allocated on the basis of revenue. The Business and Honeywell consider these allocations to be a reasonable reflection of the benefits received by the Business. However, the financial information presented in these Combined Financial Statements may not reflect the combined financial position, operating results and cash flows of the Business had the Business been a separate stand-alone entity during the periods presented. Actual costs that would have been incurred if the Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both we and Honeywell consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Business during the periods presented.

Note 2. Summary of Significant Accounting Policies

Principles of Combination —The Resins & Chemicals Combined Financial Statements have been prepared on a standalone basis and include operating units of Honeywell and wholly owned direct and indirect subsidiaries and entities in which Honeywell has a controlling financial interest. Any equity investments that we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee’s activities are accounted for using the equity method.

Cash and Cash Equivalents —Cash and cash equivalents include cash on hand and on deposit and highly liquid, temporary cash investments with an original maturity to the Business of three months or less.

Commodity Price Risk Management —Our exposure to market risk for commodity prices can result in changes in our cost of production. We primarily mitigate our exposure to commodity price risk through the use of long-term, fixed-price contracts with our suppliers and formula price agreements with suppliers and customers. Our customer agreements provide for price adjustments

F-9


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

based on relevant market indices and raw material prices, and generally they do not include take-or-pay terms. Instead, each customer agreement, the majority of which have a term of at least one year, is typically determined by monthly or quarterly volume estimates. We also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several commodities. Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings when the hedged transaction is recognized.

Inventory Adjustments —Substantially all of the Business’s inventories are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method. The Business includes spare and other parts in inventory which are used in support of production or production facilities operations and are valued based on weighted average cost.

Property, Plant, Equipment —Property, plant, equipment are recorded at cost, including any asset retirement obligations, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 30 to 50 years for buildings and improvements and 7 to 40 years for machinery and equipment. Our machinery and equipment includes (1) assets used in short production cycles or subject to high corrosion, such as instrumentation, controls and insulation systems with useful lives up to 15 years, (2) standard plant assets, such as boilers and railcars, with useful lives ranging from 15 to 30 years and (3) major process equipment that can be used for long durations with effective preventative maintenance and repair, such as cooling towers, compressors, tanks and turbines with useful lives ranging from 30 to 40 years. Recognition of the fair value of obligations associated with the retirement of tangible long-lived assets is required when there is a legal obligation to incur such costs. Upon initial recognition of a liability, the cost is capitalized as part of the related long-lived asset and depreciated over the corresponding asset’s useful life.

Long-Lived Assets —The Business evaluates the recoverability of the carrying amount of long-lived assets (including property, plant and equipment and intangible assets with determinable lives) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Business evaluates events or changes in circumstances based on a number of factors including operating results, business plans and forecasts, general and industry trends, and economic projections and anticipated cash flows. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its fair value and are recognized in the Business’s Combined Statements of Operations. The Business also evaluates the estimated useful lives of long-lived assets if circumstances warrant and revises such estimates based on current events.

Goodwill —Goodwill is subject to impairment testing annually as of March 31, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. We completed our annual goodwill impairment test as of March 31, 2015 and determined that there was no impairment as of that date. The Business had goodwill of $15,005 as of December 31, 2015 and 2014.

Sales Recognition —Sales are recognized when persuasive evidence of an arrangement exists, product delivery has occurred, pricing is fixed or determinable, and collection is reasonably assured. Resins & Chemicals is a ship and bill operation recognizing revenue when title transfers at FOB shipping point. For domestic sales, title transfers at point of shipment. For international sales, title transfers at point of shipment or from the port of departure to the customer’s location. Outbound shipping costs are incurred by Resins & Chemicals and included as freight expense in Costs of goods sold in the Combined Statements of Operations.

F-10


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

Environmental —The Business accrues costs related to environmental matters when it is probable that we have incurred a liability related to a contaminated site and the amount can be reasonably estimated.

Deferred Income and Customer Advances —Resins & Chemicals has an annual pre-buy program for ammonium sulfate that is classified as Deferred income and customer advances in the Combined Balance Sheets. Customers pay cash in advance to reserve capacity for ammonium sulfate to guarantee product availability during peak planting season. The Business recognizes a customer advance when cash is received for the advanced buy. Revenue is then recognized and the customer advance is relieved upon title transfer of ammonium sulfate.

Trade Receivables and Allowance for Doubtful Accounts —Trade accounts receivables are recorded at the invoiced amount as a result of transactions with customers. The Business maintains allowances for doubtful accounts for estimated losses as a result of customer’s inability to make required payments. The Business estimates anticipated losses from doubtful accounts based on days past due, as measured from the contractual due date, historical collection history and incorporates changes in economic conditions that may not be reflected in historical trends for example, customers in bankruptcy, liquidation or reorganization. Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of the particular conditions of the account, including time intervals since last collection, customer performance against agreed upon payment plans, success of outside collection agencies activity, solvency of customer and any bankruptcy proceedings.

Research and Development —The Business conducts research and development (“R&D”) activities, which consist primarily of the development of new products and product applications. R&D costs are charged to expense as incurred. Such costs are included in Costs of goods sold and were $12,807, $13,003, and $13,446 for the years ended December 31, 2015, 2014, and 2013, respectively.

Pension Benefits —Our employees participate in a defined benefit pension plan (the “Shared Plan”) sponsored by Honeywell which includes participants of other Honeywell subsidiaries and operations. We account for our participation in the Shared Plan as multiemployer benefit plan. Accordingly, we do not record an asset or liability to recognize the funded status of the Shared Plan. The related pension expense is allocated to the Business based on annual service cost of active participants and reported within Costs of goods sold and Selling, general and administrative expenses in the Combined Statements of Operations. The pension expense related to our participation in the Shared Plan for the years ended December 31, 2015, 2014 and 2013 was $10,215, $9,249 and $9,643, respectively.

Foreign Currency Translation —Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year-end exchange rates. Sales, costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss in our Combined Financial Statements.

Income Taxes —Income taxes as presented are calculated on a separate tax return basis modified to apply the benefits-for-loss approach and may not be reflective of the results that would have occurred if tax returns were filed on a stand-alone basis. The Business’s U.S. and non-U.S. operations have been included in the Honeywell consolidated or combined returns in various jurisdictions. Under the benefits-for-loss approach the Business assumes that in the event a tax attribute is utilized on a consolidated or combined return with Honeywell, the Business has realized the benefits of the tax attribute and records the utilization as a current benefit and a transfer to Honeywell.

F-11


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

In general, we do not maintain taxes payable to/from Honeywell and the Business. Accordingly, the Business is deemed to settle the annual current tax balances immediately with the legal tax-paying entities in the respective jurisdictions.

Significant judgment is required in evaluating tax positions. We establish additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, Honeywell and its subsidiaries are examined by various federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become known.

Invested Equity —Invested equity represents the accumulation of our net earnings over time, including share-based compensation expense recorded, cash transferred to and from Honeywell, and net intercompany receivables and payables between the Business and Honeywell. Share-based compensation expense relates to stock options and restricted stock units awarded to key employees of the Business as part of Honeywell’s incentive compensation plans. Such share-based compensation expense was $562, $469 and $406 for the years ended December 31, 2015, 2014 and 2013, respectively.

Use of Estimates —The preparation of the Business’s Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Combined Financial Statements and related disclosures in the accompanying notes. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the Combined Financial Statements in the period they are determined to be necessary.

Recent Accounting Pronouncements —We consider the applicability and impact of all recent accounting standards updates (“ASU’s”). ASU’s not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the combined financial position or results of operations.

In February 2016, the FASB issued a new standard on accounting for leases which requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018 (early adoption is permitted). The new standard should be applied under a modified retrospective approach. We are evaluating the impact of the new standard on our Combined Financial Statements and related disclosures.

In November 2015, the FASB issued guidance to simplify the presentation of deferred income taxes by permitting classification of all deferred tax assets and liabilities as noncurrent on the Combined Balance Sheets. The Business has elected to early adopt the guidance on a prospective basis effective with the Combined Balance Sheets as of December 31, 2015. This is a change from the Business’s historical presentation whereby certain deferred tax assets and liabilities were classified as current and the remainder were classified as non-current. Adoption of the guidance resulted in a reclassification of $8,470 from current assets within the Combined Balance Sheets as of December 31, 2015.

In May 2014, the FASB issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The

F-12


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The effective date was deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date—interim and annual periods beginning on or after December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the impact of the amended guidance on our Combined Financial Statements and related disclosures.

Note 3. Related Party Transactions with Honeywell

The Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Honeywell.

Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business. The cost of these services has been allocated to the Business on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues, headcount or other relevant measures. When not specifically identifiable, legal and accounting costs were allocated on the basis of revenues, information technology and human resources were allocated on the basis of headcount and other infrastructure support was allocated on the basis of revenue. The Business and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Business. During the years ended December 31, 2015, 2014 and 2013, Resins & Chemicals was allocated $49,292, $57,171 and $56,846, respectively, of general corporate expenses incurred by Honeywell and such amounts are included within Costs of goods sold and Selling, general and administrative expenses in the Combined Statements of Operations. Also included in the Combined Statements of Operations are costs related to shared facilities and related expenses. As certain expenses reflected in the Combined Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had Resins & Chemicals operated on a stand-alone basis.

All significant intercompany transactions between the Business and Honeywell have been included in these Combined Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. Sales to Honeywell during the years ended December 31, 2015, 2014 and 2013 were $9,071, $8,585, and $2,238, respectively. Of these sales, $7,736, $8,362 and $0 were sold to Honeywell at zero margin during the years ended December 31, 2015, 2014 and 2013, respectively. Costs of goods sold to Honeywell during the years ended December 31, 2015, 2014, and 2013 were $288, $378, and $282, respectively. Purchases from Honeywell during the years ended 2015, 2014 and 2013 were $4,694, $5,140 and $4,295, respectively. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Statements of Cash Flows as a financing activity and in the Combined Balance Sheets as invested equity.

Honeywell uses a centralized approach to cash management and financing of its operations. The Business’s cash is transferred to Honeywell daily and Honeywell funds its operating and investing activities as needed. Net transfers to and from Honeywell are included within invested equity on the Combined Statements of Equity. The components of the net transfers to and from Honeywell as of December 31, 2015, 2014 and 2013 are as follows:

F-13


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Cash pooling and general financing activities

 

 

$

 

(84,312

)

 

 

 

$

 

(187,975

)

 

 

 

$

 

(169,975

)

 

Sales to Honeywell

 

 

 

(9,071

)

 

 

 

 

(8,585

)

 

 

 

 

(2,238

)

 

Purchases from Honeywell

 

 

 

4,694

   

 

 

5,140

   

 

 

4,295

 

Corporate allocations

 

 

 

49,292

   

 

 

57,171

   

 

 

56,846

 

Income tax expense

 

 

 

36,461

   

 

 

48,189

   

 

 

65,547

 

 

 

 

 

 

 

 

Net decrease in invested equity

 

 

$

 

(2,936

)

 

 

 

$

 

(86,060

)

 

 

 

$

 

(45,525

)

 

 

 

 

 

 

 

 

Note 4. Income Taxes

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Income before taxes

 

 

 

 

 

 

U.S.

 

 

$

 

103,115

   

 

$

 

132,852

   

 

$

 

180,852

 

Non-U.S.

 

 

 

(2,878

)

 

 

 

 

(805

)

 

 

 

 

3,441

 

 

 

 

 

 

 

 

 

 

 

$

 

100,237

   

 

$

 

132,047

   

 

$

 

184,293

 

 

 

 

 

 

 

 

Income taxes

Income taxes consist of:

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

Current Provision:

 

 

 

 

 

 

Federal

 

 

$

 

23,023

   

 

$

 

26,502

   

 

$

 

48,567

 

State

 

 

 

4,241

   

 

 

4,875

   

 

 

9,070

 

Non-U.S.

 

 

 

(716

)

 

 

 

 

(146

)

 

 

 

 

1,036

 

 

 

 

 

 

 

 

 

 

$

 

26,548

   

 

$

 

31,231

   

 

$

 

58,673

 

 

 

 

 

 

 

 

Deferred Provision:

 

 

 

 

 

 

Federal

 

 

$

 

8,372

   

 

$

 

14,333

   

 

$

 

5,929

 

State

 

 

 

1,527

   

 

 

2,614

   

 

 

1,081

 

Non-U.S.

 

 

 

14

 

 

 

 

11

 

 

 

 

(136

)

 

 

 

 

 

 

 

 

 

 

 

 

9,913

   

 

 

16,958

   

 

 

6,874

 

 

 

 

 

 

 

 

 

 

$

 

36,461

   

 

$

 

48,189

   

 

$

 

65,547

 

 

 

 

 

 

 

 

The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

 

2013

U.S. federal statutory income tax rate

 

 

 

35.0

%

 

 

 

 

35.0

%

 

 

 

 

35.0

%

 

U.S. state income taxes

 

 

 

3.7

%

 

 

 

 

3.7

%

 

 

 

 

3.6

%

 

Manufacturing incentives

 

 

 

(2.6

%)

 

 

 

 

(2.3

%)

 

 

 

 

(3.1

%)

 

Tax rate differential on non-U.S. earnings

 

 

 

0.3

%

 

 

 

 

0.1

%

 

 

 

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

36.4

%

 

 

 

 

36.5

%

 

 

 

 

35.6

%

 

 

 

 

 

 

 

 

F-14


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

The effective tax rate decreased by 0.1 percentage points in 2015 compared to 2014. The year over year decrease was primarily attributable to increased benefits from manufacturing incentives. The effective tax rate was higher than the U.S. federal statutory rate of 35% primarily due to state taxes, partially offset by U.S. manufacturing incentives.

The effective tax rate increased by 0.9 percentage points in 2014 compared to 2013. The year over year increase was primarily attributable to fewer manufacturing incentives due to a decrease of overall income. The effective tax rate was higher than the U.S. federal statutory rate of 35% primarily due to state taxes, partially offset by U.S. manufacturing incentives.

Deferred tax assets (liabilities)

The tax effects of temporary differences which give rise to future income tax benefits and expenses are as follows:

 

 

 

 

 

 

 

December 31,

 

2015

 

2014

Deferred tax assets:

 

 

 

 

Deferred tax assets:

 

 

 

 

Accruals and reserves

 

 

$

 

5,673

   

 

$

 

6,180

 

Inventory

 

 

 

4,520

   

 

 

1,724

 

Other

 

 

 

184

   

 

 

215

 

 

 

 

 

 

Total deferred tax assets

 

 

$

 

10,377

   

 

$

 

8,119

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

Property, plant & equipment

 

 

$

 

(123,574

)

 

 

 

$

 

(112,185

)

 

Intangibles

 

 

 

(1,713

)

 

 

 

 

(931

)

 

Total deferred tax liabilities

 

 

 

(125,287

)

 

 

 

 

(113,116

)

 

 

 

 

 

 

Net deferred taxes

 

 

$

 

(114,910

)

 

 

 

$

 

(104,997

)

 

 

 

 

 

 

The vast majority of the net deferred taxes are related to U.S. operations. There were no material tax loss or tax credit carryforwards at December 31, 2015 or December 31, 2014.

U.S. federal income taxes have not been provided on undistributed earnings of the Business’s non-U.S. subsidiaries as it is our intention to reinvest these earnings into the respective subsidiaries. At December 31, 2015 we have not provided for U.S. federal income and non-U.S. withholding taxes on approximately $7,758 of such earnings of our non-U.S. operations. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability.

For the years ended December 31, 2015 and 2014 there were no unrecognized tax benefits recorded by the Business.

Note 5. Accounts and Other Receivables—Net

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

Accounts receivables

 

 

$

 

129,402

   

 

$

 

165,705

 

Other

 

 

 

1,018

   

 

 

2,174

 

 

 

 

 

 

 

 

 

130,420

   

 

 

167,879

 

Less—allowance for doubtful accounts

 

 

 

(2,875

)

 

 

 

 

(545

)

 

 

 

 

 

 

Total accounts and other receivables—net

 

 

$

 

127,545

   

 

$

 

167,334

 

 

 

 

 

 

F-15


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 6. Inventories

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

Raw materials

 

 

$

 

75,666

   

 

$

 

95,534

 

Work in progress

 

 

 

56,025

   

 

 

64,813

 

Finished goods

 

 

 

35,508

   

 

 

38,527

 

Spares and other

 

 

 

21,528

   

 

 

20,717

 

 

 

 

 

 

 

 

 

188,727

   

 

 

219,591

 

Reduction to LIFO cost basis

 

 

 

(38,496

)

 

 

 

 

(64,339

)

 

 

 

 

 

 

Total inventories

 

 

$

 

150,231

   

 

$

 

155,252

 

 

 

 

 

 

Note 7. Property, Plant, Equipment—Net

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

Land and improvements

 

 

$

 

6,599

   

 

$

 

6,599

 

Machinery and equipment

 

 

 

1,102,087

   

 

 

1,034,822

 

Buildings and improvements

 

 

 

152,765

   

 

 

144,467

 

Construction in progress

 

 

 

74,544

   

 

 

68,360

 

 

 

 

 

 

 

 

 

1,335,995

   

 

 

1,254,248

 

Less—accumulated depreciation

 

 

 

(808,453

)

 

 

 

 

(785,487

)

 

 

 

 

 

 

Total property, plant, equipment—net

 

 

$

 

527,542

   

 

$

 

468,761

 

 

 

 

 

 

Depreciation expense was $35,703, $33,065 and $36,637 for the years ended December 31, 2015, 2014 and 2013, respectively.

Note 8. Lease Commitments

The Business has entered into agreements to lease land, buildings and equipment. The operating leases have initial terms of up to 5 years with some containing renewal options subject to customary conditions.

Future minimum lease payments under operating leases having an initial or remaining non-cancellable lease terms in excess of one year are as follows:

 

 

 

 

 

At December 31,

 

2015

2016

 

 

$

 

9,285

 

2017

 

 

 

7,440

 

2018

 

 

 

6,029

 

2019

 

 

 

3,768

 

2020

 

 

 

2,440

 

Thereafter

 

 

 

76,860

 

 

 

 

Total

 

 

$

 

105,822

 

 

 

 

Rent expense was $15,984, $14,625 and $13,607 for the years ended December 31, 2015, 2014 and 2013, respectively.

F-16


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 9. Financial Instruments and Fair Value Measures

Credit and Market Risk —Financial instruments, including derivatives, expose the Business to counterparty credit risk for non-performance and to market risk related to changes in commodity prices. The Business manages its exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. The Business’s counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such derivative instruments. The Business monitors the impact of market risk on the fair value and cash flows of its derivative and other financial instruments considering reasonably possible changes in exchange rates and restricts the use of derivative financial instruments to hedging activities.

The Business continually monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. The Business has one major customer that accounts for approximately 16% of the Accounts and other receivables—net balance.

Commodity Price Risk Management —The Business exposure to market risk for commodity prices can result in changes in the cost of production. We primarily mitigate our exposure to commodity price risk through the use of long-term, fixed-price contracts with our suppliers and formula price agreements with suppliers and customers. We also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of natural gas. Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings when the hedged transaction is recognized. At December 31, 2015 and 2014, we had contracts with notional amounts of $18,726 and $40,657, respectively, related to natural gas forward commodity agreements.

Fair Value of Financial Instruments —The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB’s guidance classifies the inputs used to measure fair value into the following hierarchy:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or

Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or

Inputs other than quoted prices that are observable for the asset or liability

Level 3 Unobservable inputs for the asset or liability

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Business’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2015 and 2014:

 

 

 

 

 

 

 

Years Ended December 31,

 

2015

 

2014

Liabilities:

 

 

 

 

Forward commodity contracts

 

 

$

 

6,481

 

 

 

$

 

3,365

 

 

 

 

 

 

The forward commodity contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2 of the fair value hierarchy.

F-17


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

The carrying value of accounts receivables and payables contained in the Combined Balance Sheets approximates fair value.

Note 10. Commitments and Contingencies

The Business is subject to a number of lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of the Business or other third parties in the normal and ordinary course of business, including matters relating to commercial transactions. A liability is recognized for any contingency that is probable of occurrence and reasonably estimable. The Business continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.

Given the uncertainty inherent in such lawsuits, investigations and disputes, the Business does not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters. Considering the Business’s past experience and existing accruals, the Business does not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on the Business’s combined financial position, results of operations or cash flows. Potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the Business to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on the Business’s combined results of operations or operating cash flows in the periods recognized or paid.

Note 11. Geographic Areas and Major Customers—Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (1)
Years Ended December 31,

 

Long-lived Assets (2)
December 31,

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

United States

 

 

$

 

1,307,541

   

 

$

 

1,760,059

   

 

$

 

1,725,951

   

 

$

 

527,278

   

 

$

 

468,429

   

 

$

 

399,083

 

Other International

 

 

 

21,868

   

 

 

30,313

   

 

 

40,635

   

 

 

264

   

 

 

332

 

 

 

 

402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

1,329,409

   

 

$

 

1,790,372

   

 

$

 

1,766,586

   

 

$

 

527,542

   

 

$

 

468,761

   

 

$

 

399,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Sales between geographic areas approximate market and are not significant. Sales are classified according to their country of origin. Included in U.S. sales are export sales of $350,301, $480,358 and $505,519 for the years ended December 31, 2015, 2014 and 2013, respectively.

 

(2)

 

Long-lived assets are comprised of property, plant and equipment—net.

Our largest customer is Shaw Industries Group Inc. (“Shaw”), one of the world’s largest consumers of caprolactam and Nylon 6 resin. We sell Nylon 6 resin and caprolactam to Shaw under a long-term contract. In 2015, 2014 and 2013, our sales to Shaw were 16%, 19% and 17%, respectively, of our total sales. We typically sell to our other customers under short-term contracts with one- to two-year terms or by purchase orders.

Note 12. Subsequent Events

The Combined Financial Statements of the Business are derived from the financial statements of Honeywell, which issued its annual financial statements for the year ended December 31, 2015 on February 12, 2016. Accordingly, the Business has evaluated transactions or other events for consideration as recognized subsequent events in the annual financial statements through February 12, 2016. Additionally, the Business has evaluated transactions and other events that

F-18


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)

occurred through the issuance of these Combined Financial Statements, March 14, 2016, for purposes of disclosure of unrecognized subsequent events. No significant subsequent events were noted.

Subsequent Events—Unaudited

On May 12, 2016, Honeywell announced plans for the complete legal and structural separation of the AdvanSix Business from Honeywell. Honeywell will distribute all of its equity interest in AdvanSix, consisting of all of the outstanding shares of our common stock, to holders of Honeywell’s common stock on a pro rata basis. Following the Spin-Off, Honeywell will not own any equity interest in AdvanSix, and it will operate independently from Honeywell. No approval of Honeywell’s stockholders is required in connection with the Spin-Off, and Honeywell’s stockholders will not have any appraisal rights in connection with the Spin-Off.

Completion of the Spin-Off is subject to the satisfaction, or the Honeywell Board’s waiver, of a number of conditions. In addition, Honeywell has the right not to complete the Spin-Off if, at any time, the Honeywell Board determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Honeywell or its stockholders or is otherwise not advisable.

F-19


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF OPERATIONS

(Dollars in thousands)
(Unaudited)

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2016

 

2015

Sales

 

 

$

 

299,831

   

 

$

 

310,229

 

Costs, expenses and other:

 

 

 

 

Costs of goods sold

 

 

 

245,558

   

 

 

294,683

 

Selling, general and administrative expenses

 

 

 

11,379

   

 

 

11,387

 

Other non-operating, net

 

 

 

(658

)

 

 

 

 

(647

)

 

 

 

 

 

 

 

 

 

 

256,279

   

 

 

305,423

 

Income before taxes

 

 

 

43,552

   

 

 

4,806

 

Income taxes

 

 

 

16,157

   

 

 

1,745

 

 

 

 

 

 

Net income

 

 

$

 

27,395

   

 

$

 

3,061

 

 

 

 

 

 

The Notes to the Combined Financial Statements are an integral part of this statement.

F-20


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)
(Unaudited)

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2016

 

2015

Net income

 

 

$

 

27,395

   

 

$

 

3,061

 

Foreign exchange translation adjustment

 

 

 

7

   

 

 

(53

)

 

Commodity hedges

 

 

 

(65

)

 

 

 

 

874

 

Other comprehensive income (loss), net of tax

 

 

 

(58

)

 

 

 

 

821

 

 

 

 

 

 

Comprehensive income

 

 

$

 

27,337

   

 

$

 

3,882

 

 

 

 

 

 

The Notes to the Combined Financial Statements are an integral part of this statement.

F-21


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED BALANCE SHEETS

(Dollars in thousands)
(Unaudited)

 

 

 

 

 

 

 

March 31,
2016

 

December 31,
2015

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

 

$

 

   

 

$

 

 

Accounts and other receivables—net

 

 

 

145,585

   

 

 

127,545

 

Inventories

 

 

 

138,243

   

 

 

150,231

 

Other current assets

 

 

 

3,678

   

 

 

4,443

 

 

 

 

 

 

Total current assets

 

 

 

287,506

   

 

 

282,219

 

Property, plant, equipment—net

 

 

 

530,550

   

 

 

527,542

 

Goodwill

 

 

 

15,005

   

 

 

15,005

 

Other assets

 

 

 

26,479

   

 

 

16,220

 

 

 

 

 

 

Total assets

 

 

$

 

859,540

   

 

$

 

840,986

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

 

$

 

163,999

   

 

$

 

192,733

 

Accrued liabilities

 

 

 

17,829

   

 

 

25,114

 

Deferred income and customer advances

 

 

 

20,036

   

 

 

25,207

 

 

 

 

 

 

Total current liabilities

 

 

 

201,864

   

 

 

243,054

 

Deferred income taxes

 

 

 

125,459

   

 

 

114,910

 

Other liabilities

 

 

 

3,849

   

 

 

3,952

 

 

 

 

 

 

Total liabilities

 

 

 

331,172

   

 

 

361,916

 

CONTINGENCIES (Note 8)

 

 

 

 

EQUITY

 

 

 

 

Invested equity

 

 

 

530,991

   

 

 

482,809

 

Accumulated other comprehensive loss

 

 

 

(2,623

)

 

 

 

 

(3,739

)

 

 

 

 

 

 

Total equity

 

 

 

528,368

   

 

 

479,070

 

 

 

 

 

 

Total liabilities and equity

 

 

$

 

859,540

   

 

$

 

840,986

 

 

 

 

 

 

The Notes to the Combined Financial Statements are an integral part of this statement.

F-22


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
COMBINED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
(Unaudited)

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

Net income

 

 

$

 

27,395

   

 

$

 

3,061

 

Adjustments to reconcile net income to net cash (used for) provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

 

9,788

   

 

 

8,932

 

Loss on sale of assets

 

 

 

415

   

 

 

317

 

Deferred income taxes

 

 

 

10,548

   

 

 

2,478

 

Changes in assets and liabilities:

 

 

 

 

Accounts and other receivables

 

 

 

(18,033

)

 

 

 

 

36,599

 

Inventories

 

 

 

11,988

   

 

 

18,975

 

Accounts payable

 

 

 

(17,098

)

 

 

 

 

(26,765

)

 

Accrued liabilities

 

 

 

(7,088

)

 

 

 

 

(8,059

)

 

Deferred income and customer advances

 

 

 

(5,169

)

 

 

 

 

(4,167

)

 

Other assets and liabilities

 

 

 

(8,704

)

 

 

 

 

1,320

 

Net cash (used for) provided by operating activities

 

 

 

4,042

   

 

 

32,691

 

Cash flows from investing activities:

 

 

 

 

Expenditures for property, plant and equipment

 

 

 

(24,626

)

 

 

 

 

(26,726

)

 

Other investing activities

 

 

 

(203

)

 

 

 

 

(159

)

 

Net cash (used for) investing activities

 

 

 

(24,829

)

 

 

 

 

(26,885

)

 

Cash flows from financing activities:

 

 

 

 

Net increase (decrease) in invested equity

 

 

 

20,787

   

 

 

(5,600

)

 

Other financing activities

 

 

   

 

 

(206

)

 

Net cash provided by (used for) financing activities

 

 

 

20,787

   

 

 

(5,806

)

 

Net increase (decrease) in cash and cash equivalents

 

 

   

 

 

Cash and cash equivalents at beginning of period

 

 

   

 

 

 

 

 

 

 

Cash and cash equivalents at the end of period

 

 

$

 

   

 

$

 

 

 

 

 

 

 

Supplemental non-cash investing activities:

 

 

 

 

Capital expenditures included in Accounts Payable

 

 

$

 

11,526

   

 

$

 

12,717

 

 

 

 

 

 

The Notes to the Combined Financial Statements are an integral part of this statement.

F-23


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)
(Unaudited)

Note 1. Organization, Operations and Basis of Presentation

The Resins & Chemicals business (“Resins & Chemicals”, “the Business”, “we” or “our”) of Honeywell International Inc. (“Honeywell” or “the Parent”) is an integrated manufacturer of a variety of intermediate materials, primarily including, nylon resins, caprolactam, ammonium sulfate fertilizers, and other chemical intermediates, which represented approximately 29% and 26%, 17% and 17%, 24% and 23%, and 30% and 34% of our sales for the three months ended March 31, 2016 and 2015, respectively. These materials are used by Resins & Chemicals customers to produce a variety of products, including carpet, textiles, engineering plastics, industrial filament, packaging applications and high-value crops. Resins & Chemicals is a single reportable segment and is primarily located in North America, operating through three integrated manufacturing sites located in Frankford, Pennsylvania, Hopewell, Virginia and Chesterfield, Virginia.

The Combined Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim periods. The Combined Financial Statements should be read in conjunction with the audited Combined Financial Statements of the Resins and Chemicals business included herein.

We evaluated segment reporting in accordance with ASC 280. We concluded that AdvanSix operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”) to make decisions about resource allocation and performance assessment. Resins & Chemicals’ operations are managed as one integrated process spread across three manufacturing sites, including centralized supply chain and procurement functions. The production process is dependent upon one key raw material, cumene, as the input to the manufacturing of all finished goods produced for sale through the sales channels and end markets the Business serves. Production rates and output volumes are managed across all three plants jointly to align with the overall Business operating plan. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Business’s products.

These Combined Financial Statements were derived from the consolidated financial statements and accounting records of Honeywell. These Combined Financial Statements reflect the combined historical results of operations, financial position and cash flows of Resins & Chemicals as they were historically managed in conformity with U.S. GAAP. In the second quarter of 2016, Honeywell decided to include an additional product line, within the nylon resins product category, in the AdvanSix business subject to the Spin-Off transaction. This has been accounted for as a change in reporting entity as all entities involved were under common control and therefore, we have retroactively reflected the historical carry values and the related activities of this product line in all periods within our Combined Financial Statements.

All intracompany transactions have been eliminated. As described in Note 3, all significant transactions between the Business and Honeywell have been included in these Combined Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these transactions is reflected in the Combined Statements of Cash Flows as a financing activity and in the Combined Balance Sheets as invested equity.

Honeywell uses a centralized approach to cash management and financing of its operations. The majority of the Business’s cash is transferred to Honeywell daily and Honeywell funds its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Business would have been able to finance its operations had it been a stand-alone business separate

F-24


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)
(Unaudited)

from Honeywell during the periods presented. Cash transfers to and from Honeywell’s cash management accounts are reflected within invested equity.

The Combined Financial Statements include certain assets and liabilities that have historically been held at the Honeywell corporate level but are specifically identifiable or otherwise allocable to Resins & Chemicals. The cash and cash equivalents held by Honeywell at the corporate level are not specifically identifiable to Resins & Chemicals and therefore were not allocated for any of the periods presented. Honeywell third-party debt and the related interest expense have not been allocated for any of the periods presented as Honeywell’s borrowings were not directly attributable to Resins & Chemicals.

Honeywell provides certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business. The cost of these services has been allocated to the Business on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues, headcount or other relevant measures. When not specifically identifiable, legal and accounting costs were allocated on the basis of revenues, information technology and human resources were allocated on the basis of headcount and other infrastructure support was allocated on the basis of revenue. The Business and Honeywell consider these allocations to be a reasonable reflection of the benefits received by the Business. However, the financial information presented in these Combined Financial Statements may not reflect the combined financial position, operating results and cash flows of the Business had the Business been a separate stand-alone entity during the periods presented. Actual costs that would have been incurred if the Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both we and Honeywell consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Business during the periods presented.

Note 2. Recent Accounting Pronouncements

We consider the applicability and impact of all recent accounting standards updates (“ASU’s”). ASU’s not listed below were assessed and determined to be either not applicable or are expected to have immaterial impact on the combined financial position or results of operations.

In March 2016, the FASB issued amended guidance related to employee share-based payment accounting. The guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled and will be applied on a prospective basis. The guidance also requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity, and can be applied retrospectively or prospectively. The guidance increases the amount companies can withhold to cover income taxes on awards without triggering liability classification for shares used to satisfy statutory income tax withholding obligations and requires application of a modified retrospective transition method. The amended guidance will be effective for interim and annual periods beginning after December 15, 2016; early adoption is permitted if all provisions are adopted in the same period. We are evaluating the impact of the amended guidance on our Combined Financial statements and related disclosures.

In February 2016, the FASB issued a new standard on accounting for leases which requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018 (early adoption is permitted). The new standard should be applied under a modified retrospective approach. We are

F-25


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)
(Unaudited)

evaluating the impact of the new standard on our Combined Financial Statements and related disclosures.

In May 2014, the FASB issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The effective date was deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date—interim and annual periods beginning on or after December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the impact of the amended guidance on our Combined Financial Statements and related disclosures.

Note 3. Related Party Transactions with Honeywell

The Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Honeywell.

Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business. The cost of these services has been allocated to the Business on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues, headcount or other relevant measures. When not specifically identifiable, legal and accounting costs were allocated on the basis of revenues, information technology and human resources were allocated on the basis of headcount and other infrastructure support was allocated on the basis of revenue. The Business and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Business. During the three months ended March 31, 2016 and 2015, Resins & Chemicals was allocated $10,740 and $11,672, respectively, of general corporate expenses incurred by Honeywell and such amounts are included within Costs of goods sold and Selling, general and administrative expenses in the Combined Statements of Operations. Also included in the Combined Statements of Operations are costs related to shared facilities and related expenses. As certain expenses reflected in the Combined Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had Resins & Chemicals operated on a stand-alone basis.

All significant intercompany transactions between the Business and Honeywell have been included in these Combined Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. Sales to Honeywell during the three months ended March 31, 2016 and 2015 were $1,540 and $2,974, respectively. Of these sales, $1,525 and $2,869 were sold to Honeywell at zero margin during the three months ended March 31, 2016 and 2015, respectively. Costs of goods sold to Honeywell during the three months ended March 31, 2016 and 2015 were $1,537 and $2,932, respectively. Purchases from Honeywell during the three months ended March 31, 2016 and 2015 were $1,192 and $996, respectively. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Statements of Cash Flows as a financing activity and in the Combined Balance Sheets as invested equity.

Honeywell uses a centralized approach to cash management and financing of its operations. The Business’s cash is transferred to Honeywell daily and Honeywell funds its operating and investing

F-26


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)
(Unaudited)

activities as needed.Net transfers to and from Honeywell are included within invested equity on the Combined Statements of Equity. The components of the net transfers to and from Honeywell as of March 31, 2016 and 2015 are as follows:

 

 

 

 

 

 

 

Three months Ended
March 31,

 

2016

 

2015

Cash pooling and general financing activities

 

 

$

 

(102,126

)

 

 

 

$

 

(5,841

)

 

Sales to Honeywell

 

 

 

(1,540

)

 

 

 

 

(2,974

)

 

Purchases from Honeywell

 

 

 

1,192

   

 

 

996

 

Corporate allocations

 

 

 

10,740

   

 

 

11,672

 

Income tax expense

 

 

 

16,157

   

 

 

1,745

 

 

 

 

 

 

Net increase/(decrease) in invested equity

 

 

$

 

(75,577

)

 

 

 

$

 

(5,598

)

 

 

 

 

 

 

Note 4. Income Taxes

 

 

 

 

 

 

 

Three months Ended
March 31,

 

2016

 

2015

Tax expense

 

 

$

 

16,157

   

 

$

 

1,745

 

Effective tax rate

 

 

 

37.1

%

 

 

 

 

36.3

%

 

The effective tax rate increased by 0.8 percent for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 primarily due to a gain recognized in Q1 2016 related to the termination of a long-term supply agreement that was taxed at a higher rate than the estimated annual effective tax rate.

The effective tax rates for the three months ended March 31, 2016 and 2015 were higher than the U.S. federal statutory rate of 35% due to state taxes, partially offset by manufacturing incentives.

Note 5. Accounts and Other Receivables—Net

 

 

 

 

 

 

 

March 31,
2016

 

December 31,
2015

Accounts receivables

 

 

$

 

130,106

   

 

$

 

129,402

 

Other

 

 

 

18,474

   

 

 

1,018

 

 

 

 

 

 

 

 

 

148,580

   

 

 

130,420

 

Less—allowance for doubtful accounts

 

 

 

(2,995

)

 

 

 

 

(2,875

)

 

 

 

 

 

 

Total accounts and other receivables—net

 

 

$

 

145,585

   

 

$

 

127,545

 

 

 

 

 

 

F-27


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)
(Unaudited)

Note 6. Inventories

 

 

 

 

 

 

 

March 31,
2016

 

December 31,
2015

Raw materials

 

 

$

 

66,568

   

 

$

 

75,666

 

Work in progress

 

 

 

42,880

   

 

 

56,025

 

Finished goods

 

 

 

33,263

   

 

 

35,508

 

Spares and other

 

 

 

21,857

   

 

 

21,528

 

 

 

 

164,568

   

 

 

188,727

 

 

 

 

 

 

Reduction to LIFO cost basis

 

 

 

(26,325

)

 

 

 

 

(38,496

)

 

 

 

 

 

 

Total inventories

 

 

$

 

138,243

   

 

$

 

150,231

 

 

 

 

 

 

Note 7. Financial Instruments and Fair Value Measures

Our credit, market and commodity price risk management policies are described in Note 9, Financial Instruments and Fair Value Measures, of Notes to Combined Financial Statements in our 2015 Combined Financial Statements.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Business’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2016 and December 31, 2015:

 

 

 

 

 

 

 

March 31,
2016

 

December 31,
2015

Liabilities:

 

 

 

 

Forward commodity contracts

 

 

$

 

2,170

   

 

$

 

6,481

 

The forward commodity contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2 of the fair value hierarchy.

The carrying value of accounts receivables and payables contained in the Combined Balance Sheets approximates fair value.

Note 8. Commitments and Contingencies

The Business is subject to a number of lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of the Business or other third parties in the normal and ordinary course of business, including matters relating to commercial transactions. A liability is recognized for any contingency that is probable of occurrence and reasonably estimable. The Business continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.

Given the uncertainty inherent in such lawsuits, investigations and disputes, the Business does not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters. Considering the Business’s past experience and existing accruals, the Business does not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on the Business’s combined financial position, results of operations or cash flows. Potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the Business to pay damage

F-28


 

RESINS & CHEMICALS BUSINESS OF HONEYWELL INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, unless otherwise noted)
(Unaudited)

awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on the Business’s combined results of operations or operating cash flows in the periods recognized or paid.

Note 9. Subsequent Events

The Combined Financial Statements of the Business are derived from the financial statements of Honeywell, which issued its unaudited quarterly financial statements for the three and six months ended June 30, 2016 on July 22, 2016. Accordingly, the Business has evaluated transactions or other events for consideration as recognized subsequent events in the unaudited quarterly financial statements through July 22, 2016. Additionally, the Business has evaluated transactions and other events that occurred through the issuance of these Combined Financial Statements, July 25, 2016, for purposes of disclosure of unrecognized subsequent events. No significant subsequent events were noted.

F-29